06/09/2021 keta

What Threats Does the Rejection of the EU Financial Assistance Contain for Georgia?

Photo: European Union

Nino Samkharadze[1]

[This publication was produced with the financial support of the Open Society Georgia Foundation. The views, opinions and statements expressed by the authors and those providing comments are theirs only and do not necessarily reflect the position of the Foundation. Therefore, the Open Society Georgia Foundation is not responsible for the content of the information material].

After meeting with Georgia’s Prime Minister Irakli Gharibashvili, the President of the European Council Charles Michel gave a reminder of the conditionality of the EU financial assistance on his own Twitter account.  A few days later the leaders of Georgian Dream stated that a decision had been made that Georgia might reject Brussel’s macro-financial assistance.

The government is trying to justify its approach within a macro-political context, although there is another point of view – that they made this decision before the EU could act first and apply the conditionality principle. It appears that the ruling party aspires to maintaining power and in order to achieve this goal it is ready to endanger even the country’s strategic partnership relations.

Therefore, it is interesting to examine what threats are linked to this government decision, the path of democratic development in Georgia and its European integration, and what might be the motives behind the approach of the ruling party.

What Are the Risks Caused by Rejecting the EU Financial Assistance?

Rejecting macro-financial assistance, for a country with such a complicated geopolitical location and political-economic reality as Georgia, implies many risks, in terms of political as well from the financial and security standpoints.

  • The government’s decision, especially against the background that Georgia’s reputation has already been damaged,  will inflict even more harm to views of its political trustworthiness in Brussels and will practically end the ambition of submitting a formal application for EU membership by 2024. With this gesture, the Georgian Dream basically confirmed the lack of interest in any intensive cooperation with Brussels. Additionally, the country, seen as the flagman of the Eastern Partnership, is gradually losing this status and the rejection of macro-financial assistance will once again emphasize this. Against this background, Members of the European Parliament periodically spread messages about “EU-Georgian relations being on the verge of a breakup”. This time prospects for the relations look to be distinctly in favor of such a breakup.
  • Besides, the decision of the Georgian Dream is basically a demonstration that the Georgian government didn’t carry out and, as it appears, doesn’t want to carry out the obligations it took on under the memorandum with the EU. This is confirmed by Brussel’s stated position about the decision of the Georgian Dream: according to the statement, Georgia failed to meet the conditions for issuing Considering this background, the government’s decision to reject the support indicates the immaturity of the political class, because ultimately the ruling political elite doesn’t understand what political price the country will have to pay as a result of carrying out significantly flawed judicial, electoral or other types of reforms.
  • Moreover, it has become absolutely clear that the government is in deep conflict with European values: Georgian Dream basically refuses to work under the EU Conditionality Principle, which means that it doesn’t have the goodwill to get closer to European standards of democracy. As a result, if before Georgia was aspiring to be a hopeful Democracy in the region and was attracting the West, this picture will gradually change. Turning its back on the values of international democratic society automatically implies a contradiction of the values of NATO and the USA.

We can also discuss the short-term and long-term losses in terms of financial and practical standpoints:

  • The claim of the government that it’s not alarming to reject EUR 75 million from the EU because of the background of recent economic growth in the country, is unconvincing. The part of the financial aid that Georgia was supposed to receive in September was intended to support the country in its fight against the pandemic. At this stage of the pandemic, when Georgia has especially severe indicators, rejecting the above-mentioned support reduces resources in terms of fighting against COVID. Especially given the fact that the conditions of the financial support are so favorable (percentage and the dates of return) that it’s almost similar to the grant part of the support.
  • In the long-term, it will be less likely to receive support in the future from the EU MFA Programme. The EU issues macro-financial assistance within multiple stages: it should have been the fourth time granting aid for Georgia since 2008. If the government rejects the assistance, it will for sure be reflected negatively in the EU’s decision-making in terms of issuing the fifth and next stages of the financial support. At the same time, according to some pundits’, this one-time rejection will reduce ratings of the reliability of the investment environment and in the long-term will cause even heavier economic loss. Ultimately, the decision of the Georgian Dream can inflict a bigger financial loss to the country than is visible at first glance.

What Message Does the Decision of the Government Contain Before the Elections?

According to the official position of the leaders of Georgian Dream, the objective is to reduce the external debt of Georgia, which by itself is not a bad objective. Currently, Georgia’s state debt has risen to GEL 31.57 billion, of which external debt from the various international organizations and countries is GEL 25.7 billion. As it seems, the government decided to use the issue of the external debt in the pre-election period as the excuse to avoid the application of the EU conditionality principle in Georgia. Additionally, through this step the Georgian Dream tries to attract the attention of the euro skeptical voters, which is a dangerous game for the Europeanisation of Georgia, as well as its strategic objectives, after the events of July, 2021.

In conclusion, it can be said that the government’s decision is unreasonable, and on the other end of the more or less unconvincing economic explanation there is Georgia’s declared strategic objective – Euro-Atlantic integration and Europeanisation. The approach of the leaders of the Georgian Dream, to attribute less political meaning to their decision, shows us that the party cannot properly evaluate the political price of this event. This indicates the aspirations of the ruling party to maintain power at any cost at the upcoming elections, even at the cost of the deterioration of relations with strategic international partners.

[1] Junior Analyst at the Georgian Institute of Politics (GIP)

, , ,