Prospects for EU-Moldova Economic Relations

Abstract

In recent years, external links of the Republic of Moldova have been determined by the influence of two geopolitical blocks, the Commonwealth of Independent States (CIS) and the European Union (EU). Moldova is currently a member of the CIS, largely as a result of historical economic and political ties.However, despite the strong ties with the CIS, relations with the EU are becoming increasingly important particularly with regard to the economic situation in the country. Following the 2007 EU enlargement, Moldova will directly border the EU community, as a result of the border with Romania, making strong relations with the EU even more important. Further, there are a large number of inhabitants of Moldova who possess Romanian passports which will necessitate increased Moldova-EU cooperation.This study analyzes the current situation in Moldova and presents scenarios for future economic integration of Moldova with the European Union. It is expected that these findings will be used in the formulation of Moldovan economic policy, particularly while drafting the next framework agreement with the EU.The report begins with the presentation of recent economic trends in Moldova. The year 2005 was the fifth successive year of high economic growth, marking the country’s recovery after a deep and prolonged recession during the 1990s. Chapter 1 analyzes the effects of recently proposed and implemented macroeconomic policies, as well as a discussion of some of the structural changes that have taken place during the last five years.Chapter 2 provides a background of EU-Moldova relations. It presents the economic aspects of the Partnership and Cooperation Agreement (PCA), the main document to date regulating relations between the EU and Moldova. This is followed by a discussion of the Moldovan role in the EU Neighborhood Policy and a description of bilateral trade relations, including Moldovan participation in the Balkan trade integration that will lay the groundwork for increasingly in-depth economic relations with the EU. Additionally, special attention is given to Transnistria and EU involvement in integrating this breakaway region into the Moldovan economy. As a partner in the EU European Neighborhood Policy, in early 2005, Moldova signed the Action Plan that aims to bring the country closer to the EU. In fact, this Action Plan is a precondition for tightening relations between Moldova and the EU. For this reason, the team of researchers decided to conduct an independent assessment of the stages of fulfillment of the economic provisions of the EU-Moldova Action Plan, which is presented in chapter 3. Chapter 4 describes prospects for future EU-Moldova economic relations. First, the author evaluates the bilateral positions of Moldova with respect to various countries, the readiness to integrate with the EU and the expectations of further EU integration. Second, the most feasible stages of integration are presented, which include trade liberalization, resulting in the implementation of a free trade area, economic integration of Transnistria and fewer restrictions on movement of labor. These steps should be supported by the new financial possibilities that would open under the new European Partnership and Neighborhood Instrument.Finally, current attitudes towards the integration with the EU and EU economic principles given by Moldovan economic actors are presented in chapter 5. These are the results of an opinion poll that was conducted among 200 representatives of business, public administration and academics in Moldova in the autumn of 2006. The report concludes with a set of recommendations.This report was prepared by a team of Polish and Moldovan experts. The authors are grateful for the support and assistance received from the following institutions: the Ministry of the Economy and Trade of the Republic of Moldova, the Ministry of Foreign Affairs and European Integration of the Republic of Moldova, and the Embassy of the Republic of Poland in Chisinau. This report was made possible due to the financial support provided by the Ministry of Foreign Affairs of Poland.