The European Union (EU) has repeatedly warned the Georgian government that it would suspend € 75 million in non-compliance with the terms of its next tranche of macro-financial assistance, including its commitment to judicial reform.
On August 31, the European Union said in response to the authorities that the request would be met and that Georgia would no longer receive another tranche of macro-financial assistance. It was also reiterated that the necessary conditions for receiving this amount had not been met and that future assistance would be appropriate for progress.
- What does it mean to refuse EU aid?
- What is the financial and political burden of macro-financial assistance to Georgia?
- What problems might arise in the future?
The leaders of the Georgian Dream say that they are giving up the next tranche of the European Union, 75 million euros, because they have accumulated money in the budget, the economy is developing and the country no longer needs to borrow.
This decision was somehow announced by the party chairman on August 30, Irakli Kobakhidze; And on August 31, the Prime Minister, Irakli Gharibashvili, said that the refusal to help was already a decided issue.
The Prime Minister named two reasons:
- “This issue has acquired a great political load. Therefore, in order to avoid any insinuations, the government does not rule out, we are also determined to refrain from borrowing the second part “;
- “The main argument, the main motive is that we have gradually started to reduce the foreign debt.”
The EU did not hesitate to respond and a statement was made on behalf of Brussels at the EU Delegation in Tbilisi on the evening of 31 August.
The Acting Head of the EU Delegation, Julien Cramp, has made it clear that the government’s request will be met and that Georgia will no longer receive money to fight the pandemic. “The welfare of the citizens of Georgia should have been consumed.”
It was also stated that Georgia still failed to meet the conditions set for receiving this money and that future assistance would depend on further progress in the reforms:
“While the EU remains fully committed to supporting Georgia ‘s reforms under the EU – Georgia Association Agreement, EU assistance will continue to depend on the progress made in implementing key reforms.”
Experts say that the 75 million euros of the EU should not be considered as a separate amount.
Opponents also do not believe that a country whose foreign debt has exceeded the 60% of GDP per capita has long since begun to change and rectify its policies through the EU.
Zurab Japaridze, the leader of Girchi – More Freedom, posted a post on the social network, according to which the Georgian government took 4 billion GEL in new foreign debt from January to July.
Foxes and grapes?
As RFE / RL confirmed to RFE / RL, the terms of the EU macro-financial assistance are set out in a loan agreement between the Ministry of Finance and the EU in 2020, and one of the conditions is related to the law on the appointment of judges.
The appointment of judges has become one of the main contentious issues in recent months between the Georgian Dream and its international partners, as was the case with the Charles Michel Agreement.
The Georgian Dream has not stopped the process of appointing judges and has repeatedly stated that it has already fulfilled all the conditions required of it by its international partners.
All this was added to the unilateral “cancellation” of the “Charles Michel Agreement” on July 28. One of the main demands of this document was “ambitious judicial reform”.
Georgia should receive another EU tranche at the end of September. “Dream” was not going to back down and it was already becoming clear to experts that Georgia would most likely not be able to receive this money.
Consequently, the refusal of EU money has been compared by many to the story of foxes and grapes today – when you can not get something and you believe that it would not be useful to you.
What does the dream say and what will happen next?
“Today you can shake hands with the European Union, shake hands with something, but it will have its corresponding political price … It weakens the Georgian state very much” – Tengiz Pkhaladze, Senior Researcher at the European Center for International Political Economy (ECIPE), Secretary of Foreign Affairs of the fourth President of Georgia, told Radio Liberty.
According to him, such an attitude towards the EU “will at least hinder the country’s progress” on the road to the EU and NATO.
Pkhaladze finds it difficult to explain all this rationally:
- “Why should we try to ruin the relationship with a strategic partner, when the government has ambitiously announced that it will apply for EU membership in 2024, it turns out”;
- “From the outside it all looks very bad … it damages the country’s reputation and hence the further actions of international partners”;
- “EU assistance is not only financial, it is a huge political support for issues that serve the development of the country, be it free trade, visa-free travel or numerous projects implemented in Georgia. “Another important issue is the policy of non-recognition of the occupied territories.”
Opponents of the government often point out that the Georgian Dream is trying to mobilize the electoral forces of the violent ultra-radical forces that the public saw as a hunter of journalists on the streets on July 5.
These groups have a clearly negative attitude towards their international partners, justifying the double destruction of the EU flag on Rustaveli Avenue, and saying that the West is not helping Georgia in any way.
The main messages that were spread on social networks today in support of the government’s decision are as follows:
- The sooner Georgia escapes the financial shackles, hence the political vassal, will stand on its own two feet;
- For the first time I felt proud to be like the self-respecting nation of Vasha Irakli and the whole team. Work hard and we will have everything;
- It is very good so it should continue to gradually remove the dependence on others.
Ramaz Gerliani, president of the Center for Economic Transformation, tells us that EU money cannot be considered a loan because of its low interest rate.
According to him, this assistance has repeatedly played a crucial role in Georgia’s progress.
Unlike the Georgian government, Guerlain thinks that the country’s economy is still in a difficult day, so we will definitely need 75 million euros from the EU today or tomorrow.
“In general, the budget is mostly filled with loans and then spent incorrectly, and today there may not be a need to take additional loans … but this approach – we do not need, we do not want – is not right … This money is for macro-stability as a currency “For the stability of the exchange rate, as well as for protection against the budget deficit and, of course, it is important in terms of inflation.” Tells Guerlain.
Economists explain that the amount of macro-financial assistance goes directly to the treasury and is spent from there; The € 75 million conversion could have a significant positive impact on the GEL exchange rate. This process also affects product prices.