Georgia, Moldova, to sign key EU pact on June 27

Georgia will sign a key trade and political pact with the European Union in Brussels on June 27, at the same time with Moldova. This was reconfirmed today by Commission president Jose Manuel Barroso, at a press conference with Georgian Prime Minister Irakli Garibashvili. 

The two signed today a financing agreement. It will help a number of core Georgian institutions central for implementing the Association Agreement, including the Deep and Comprehensive Free Trade Area (DCFTA), and the Visa Liberalisation and Readmission Agreements. Through this programme, which will be carried out over five years, the European Union will allocate up to €19 million to following Georgian institutions: Public Service Development Agency, National Food Agency, Georgian Agency for Standards and Metrology, Georgian Accreditation Centre, Parliament of Georgia, Public Defender's Office and the State Audit Office to support the legislative alignment process to EU standards and the provisions of the Association Agreement. Georgia will contribute €550 000 to this programme.

European Council President Herman Van Rompuy had already visited Tbilisi on 14 May, making a similar statement and calling the signing of an Association Agreement with Georgia an "important milestone."

The pact with both Georgia and Moldova was agreed in principle in November at an Eastern Partnership summit in Vilnius. Following Georgian and Moldovan ratification of the Association Agreement, provisional application could start by 1 October 2014.

The EU assistance to Georgia amounted to €452 million from 2007 - 2013. Georgia is an important transit country for the gas and oil from Azerbaijan, and the European Commission welcomed the intention of Georgia to accede to the Energy Community Treaty.

Both Georgia and Moldova are feeling the consequences of the Ukraine crisis. The European Bank for Reconstruction and Development (EBRD) said last week in a report that Ukraine’s crisis is having a negative impact not only on the Ukrainian and Russian economies, but also across much of Eastern Europe and the Caucasus. The geopolitical situation is making foreign investment in the region appear riskier and also is reducing the demand for exports.

In Warsaw on May 14, at the bank’s annual board meeting, EBRD economists forecast that Ukraine will slump into deep recession this year and that sanctions against Russia over its role in the Ukraine crisis will contribute to economic stagnation there. But the EBRD also is downgraded its growth forecasts for Belarus, Moldova, Armenia, Azerbaijan, and Georgia.

Moldova had an 8.9 percent growth rate in 2013. But the EBRD now predicts growth will slow to 2 percent in 2014.

Armenia’s growth forecast for 2014 has been downgraded from 3.5 percent in 2013 to about 3 percent for 2014.

Azerbaijan saw growth of 5.8 percent in 2013. But oil production fell at the start of 2014. The EBRD says even if oil production manages to rebound, growth for 2014 will be about 3.5 percent.

In Georgia, despite an expected export boost from the signing of a EU Association Agreement in June, the growth forecast has been reduced to 4 percent for 2014 and 2015 due to lower regional export demand in connection with the Ukraine-Russia crisis.