Regional Integration and Fiscal Harmonization in Southeast Europe

Abstract

The establishment of free trade area in Southeast Europe on the basis of CEFTA 2006 as an isolated event is not likely to have a substantial positive effect on the economic development of the region. Recent strategic theoretical and empirical studies show that short-term economic implications of regional integration between developing countries in terms of growth and foreign direct investment are ambiguous. Macroeconomic and fiscal stabilization through coordinated efforts with respect to tax and customs harmonization can play more significant role in the economic stabilization in the SEE region than regional trade integration alone. The paper contains an analysis of the changes in trade between the SEE -6 countries and Bulgaria (current EU member state, former member of CEFTA and part of a free trade zone in SEE until the end of 2006) for the period 2006 till 2014. One of the main conclusions of the paper is that a roadmap of the SEE countries for achieving sustainable growth is needed. The roadmap for sustainable growth can be the next step after the liberalization of trade towards achieving genuine regional economic integration in the Western Balkans in parallel with the process of EU accession.