EU Macro-Financial Assistance

On August 31, 2021, the Georgian government announced that it was rejecting microfinance assistance provided by the European Union to deal with the Covid Pandemic because the country is experiencing economic growth and wants to reduce its foreign debt. If we look at the official figures, today the state foreign debt of Georgia is 8.002 billion dollars.[1] Although the government says it is reducing its foreign debt, the Georgian government has borrowed GEL 4 billion from January to July 2021[2]  and has not taken such an initiative before.

According to a survey conducted by the National Democratic Institute (NDI) in August 2021, 41% of the Georgian population surveyed named the most important jobs, 38% – poverty and 29% inflation. However, the poverty rate has increased even more than in the previous study. According to the survey, 59% of respondents consider unemployment to be the main economic problem in the country, 42% – rising prices, and 19% – poverty. When asked if they received any financial assistance during the coronavirus pandemic, 52% said the assistance was sufficient, while 48% said the assistance was not sufficient. 52% evaluate the activities of the current government as bad, 36% as good, and 9% do not know the answer. 45% of respondents think that the vaccination process in Georgia is going badly.[3] In such a situation, how convincing is the government’s claim that it is reducing its foreign debt and therefore refusing the macro-financial assistance of the EU?

Signing of the April 19 agreement mediated by the European Union

Let’s review the developments prior to the said announcement by the government. As you know, on April 19, 2021, after a long facilitation and mediation, the “Georgian Dream” and the opposition parties signed a compromise document of the agreement.[4] The agreement provided for the resolution of politicized justice issues, the adoption of an amnesty law, electoral reform, judicial reform, the revision of the rule of electing Supreme Court judges, the distribution of power in parliamentary committees, and calling early elections if the Georgian Dream will receive less than 43% support in the local elections. The agreement was joined by parties and individual elected members of parliament. The document was not signed by the United National Movement, but then the party entered parliament.The agreement provided for the timing of the changes and the parliament began to make legislative changes.

Leaving the April 19 agreement by the Georgian Dream

On July 28, 2021, the Georgian Dream announced that it was annulling the agreement. According to Irakli Kobakhidze, chairman of the Georgian Dream, given that more than half of the opposition lawmakers did not sign the document 100 days after the April 19 agreement, it is clear that he has exhausted himself and, consequently, it has been annulled. He also noted that our international partners do not consider it necessary to strongly urge the radical opposition to sign the document and participate in its implementation, and that the unilateral commitment to the April 19 agreement is offensive to their party and such unprincipledness will not be forgiven by their constituents. According to Irakli Kobakhidze, by releasing political prisoners, amending the Electoral Code, delaying the process of electing Supreme Court judges and drafting an amnesty bill for the events of June 19-21, 2019, the ruling party faithfully fulfilled each point of the April 19 agreement.[5] In fact, it was clear that the ruling party was failing to meet its commitments and, in the wake of the loss of public confidence in the run-up to the election, withdrew the agreement on the grounds of opposition fault.

Georgian Government ‘Refuses EU Assistance’

On August 31, 2021, the Prime Minister of Georgia, Irakli Gharibashvili, announced that the government had decided to refrain from taking a 75 million euro loan from the European Union.[6] He also added that the issue has acquired a very large political load. Therefore, in order to avoid any insinuations, the government does not rule out, we have also decided to refrain from borrowing the second part of assistance.[7] The statement of the Prime Minister was preceded by the statement of the Chairman of the ruling party Irakli Kobakhidze, who noted that the macro-financial assistance of the European Union has practically no financial burden. The economic situation in the country is different and an additional “billion GEL has been accumulated in the budget compared to the forecast, there is a high rate of economic growth, 12.7% was the first 6 months, while the forecast was not even half that.” He also pointed out that everything is up to the EU, the Georgian dream will act in accordance with the objective interests of the country and strategic partners, and the assessment of the refusal of EU financial assistance will be a complete speculation.[8] This was a continuation of the decision taken on July 28, 2021, thus the ruling party for the second time openly refused to cooperate with the EU.

The reaction of the opposition and the ruling party to the decision

Opposition parties have strongly criticized the Prime Minister’s statement on EU[9]  assistance and sent a special letter to the EU and NATO. [10] The United National Movement joined the April 19 agreement. [11] The statements were made by the officials who are formally responsible for the European integration process in the country. In particular, the Georgian Foreign Minister noted that the Georgian government has made changes in the field of justice and in some parts the EU says that this is insufficient and in his opinion, there are different perceptions between Tbilisi and Brussels and the implementation of judicial reform largely fulfilled the recommendations of the Venice Commission. He explained that borrowing additional debt of 75 million euros from the EU would be unjustified in the light of the fact that the economy has a very positive dynamics. Such action should not be considered as if the country is changing its foreign policy course and plans to deviate from the course of EU integration.[12] Maka Bochorishvili, the chairperson of the Parliamentary Committee on European Integration, said that she is not a financier and cannot assess the issue, she trusts the decision of the part of the government that works on the budget and finances.[13]

Georgian President Salome Zurabishvili has criticized the Georgian Dream for refusing EU assistance. He said that no matter how much our economy grows, even double-digit, it still does not cancel the social and human damage that Covid has done to our population, and the reduction of which was directly served by the 75 million euro (or 300 million GEL) loan. It is unclear what causes the reduction of international debt to become more of a priority than the crisis situation of its own citizens today. Until the result of double-digit growth is reflected in the welfare of society, the logic of refusing help is hard to understand.[14] The president’s statement may be seen as an attempt to formalize the position of a person formally involved in negotiations with the EU, but as many experts and observers have rightly pointed out, the president himself was involved in judicial changes (such as appointing a Justice Council member, legislative process, etc.) and it was better to make a statement about the failure of judicial reform. For this reason, Georgia has not received macro-financial support from the European Union, although we have not heard such an assessment from the President.

The issue was also raised by a Georgian non-governmental organizations, which said that the refusal of EU assistance was an open declaration of Georgia’s deviation from the Euro-Atlantic course. The signatory organizations are concerned about the Georgian Prime Minister’s statement that the government is “refraining” from receiving 75 million euros in EU aid, which is an unequivocal refusal to implement reforms in the judicial sector and an open declaration of Georgia’s deviation from the Euro-Atlantic course.[15]

The most noteworthy were the explanations of the Prime Minister of Georgia, which were followed by harsh criticism of the government’s policy. Gharibashvili made statements of a purely populist nature, damaging the country, when he said that “the European Parliament is not my leader, our leader is the Georgian people.” “If they (MEPs) are really interested in clarifying the situation and the essence of the case, they should find out and not make superficial statements.”[16] Moreover, he said, “We went through 4 waves of judicial reform, which actually made it accountable and opened up this system. In addition, I would like to remind everyone that the current judicial system in Georgia is much ahead of the current judicial system of the current EU member states. This is confirmed by studies, including EU surveys. Judicial reform will continue”.[17] Such assessments are an integral part of Russian propaganda, often used by top officials of the Russian Federation, when they say that they have a sovereign democracy, the EU can not interfere in the internal affairs, and so on. Unfortunately, the same statements are often repeated by the highest political officials of Georgia, which is always used against Georgia by the Russian Federation.

Reaction of the Russian Federation

The Russian Federation was quick to respond to the decision made by the Georgian government to assist the EU. Speaking on September 1, Russian Foreign Minister Sergei Lavrov told students at the Moscow State Institute of International Relations that Moscow is ready to have normal neighborly relations with Georgia at any time, if it so wishes, provided that Tbilisi does not draw a Russian card to maintain Western protection. Lavrov also noted that Russia planned to introduce a visa-free regime for Georgian citizens, but changed this decision because he could not receive an apology from Tbilisi after the rallies against the occupation in June 2019.[18]

Georgia’s unequivocal position is that when the Russian Federation occupies 20% of our country, any negotiations with them are impossible until Russia withdraws its armed forces from the territory of Georgia, withdraws the recognition decision and completes the occupation. However, it is also clear that the Russian Federation is always trying to use all the wrong steps taken by the Georgian government towards the EU to its advantage against Georgia.

Agreement with the State Security Committee of the Republic of Belarus

Against the background of such a development of relations with the EU, another issue is noteworthy. An intergovernmental agreement on cooperation between the State Security Committee of Belarus and the State Security Service of Georgia entered into force on August 1, 2021. The document was officially published on the website of the relevant Belarusian authority on 13 August. According to the agreement, the parties agree to exchange information regularly, to cooperate operatively in the fight against various crimes, Including issues related to the fight against international and transnational organized crime against terrorism, corruption and other state security.[19] The agreement was signed by the parties in 2016. The Government of Georgia has adopted a resolution on the approval and entry into force of the Agreement on August 6, 2020.[20]

This fact provoked a completely understandable protest both in Georgia and in our Western partners. The Georgian government seems to be refusing EU assistance and signing a parallel agreement with Lukashenko’s authoritarian regime. Former United States Ambassador to Georgia Ian Kelly has called Georgia’s agreement with the Belarusian Security Service “shameful.” The ambassador wrote on Twitter that the Georgian Govt recently withdrew from an agreement brokered by the EU – if they don’t from this, it will be another sign that their priorities lie elsewhere.[21] The issue was also addressed in the European Parliament. MEP Viola von Cramon called the agreement signed by Georgia with the Belarusian Security Service dangerous. He wrote on twitter: “Very scary indeed. Why does #Georgia implement an agreement after 5 yrs in a situation where everyone else in the world gave up the cooperation with Belarus? GEO government must respect human rights &not extradite journalists & HR defenders to Lukashenka.”[22] Former Lithuanian Foreign Minister Linas Linkevicius, who has always been a strong supporter of Georgia, wrote: “It is hard to believe: has Georgia signed an agreement with the Belarusian CGB? I can not believe it, at least I think it is a joke. If true, it means only one thing – Georgia’s path to the EU and NATO will be very vague.[23] Georgia’s partners point out that the country’s government is returning the country to Moscow’s orbit.[24] In parallel with such criticism, the State Security Service said that the agreement with Belarus does not oblige it to act against state interests.[25]

There is no doubt that the implementation of such an agreement with the Belarusian special services poses a threat to the Georgian state. If we take into account the Russian-Belarusian integration processes, it can literally be equivalent to cooperation with the special services of the Russian Federation. Dissatisfied with the Belarusian opposition, authoritarian regimes, including Belarusian citizens living in Georgia, who saw the threat that they might be extradited by the Georgian government to Belarus, expressed dissatisfaction with the agreement.

What actually happened to EU macro-financial assistance?

In April 2020, to overcome the Covid-Pandemic crisis, at the request of the Government of Georgia, the European Union decided on May 26, 2020, to provide macro-financial assistance to Georgia in the amount of 150 million euros. It was a soft loan (about 0.12 %) for a period of 15 years. The amount was provided in two tranches, of which Georgia received 75 million at the end of 2020, and the other 75 million depended on the European Commission’s assessment of Georgia’s fulfillment of a precondition, the main one being the reform of the justice system. The agreement explicitly states that Georgia: (A) Strengthen the criteria for transparency and merit-based selection in the appointment of judges to the courts of first instance and appellate courts. In particular, by publishing the rationale for the appointment of judges, taking into account the criteria of unity and competence; B) submit to the Parliament a draft law on appointments to the Supreme Court in accordance with the conclusion of the Venice Commission of June 24, 2019; C) refrain from making appointments within the current rules of the Supreme Court; D) adopt legislation that will implement the functioning of the Constitutional Court of Georgia from June 2019 by developing rules related to the publication of court decisions.[26]

As we can see, receiving this assistance depended on the implementation of judicial reform and the fulfillment of the terms of the April 19 agreement. The President of the European Council Charles Michel made this statement at a special briefing on July 19, 2021 at an international conference in Batumi.[27] Later, on August 23, 2021, the President of the European Council, Charles Michel, wrote on Twitter after a meeting with the Prime Minister of Georgia, Irakli Gharibashvili, in Ukraine that reforms are now more necessary than ever. He also pointed out that the deadline for the expected macro-financial assistance is approaching and it is time for the Georgian government to show that it is committed to the agreement, especially in the area of ​​reforms.[28] Already on August 31, the European Union, in response to a statement by the Prime Minister, stated that it respects the decision of the Georgian authorities not to request a second part of macro-financial assistance, but adds: That Georgia has not been able to adequately meet its macro-financial assistance requirements and, in particular, has increased the independence, accountability and quality of the judiciary.[29]

Thus, the statement of the Georgian authorities that they refused EU assistance due to the reduction of the country’s foreign debt is not true. In fact, the Georgian government did not fulfill the preconditions signed in this document, received a number of warnings and was finally expected to suspend assistance from the European Union. Although the Georgian government has stated that it has “faithfully” fulfilled its obligations, according to all EU assessments, the Georgian government has not fulfilled these obligations. That is why, as many experts point out, the Georgian government somehow got ahead of the EU and made a statement that would have been less damaging to it in the run-up to the elections.

In fact, Georgian citizens should be aware that the government has not received the assistance provided to them by the European Union to defeat the covid-19 pandemic. At this time the country is in the worst economic and epidemic situation. Every day 86 people die from the coronavirus. Such action of the Government of Georgia has significantly damaged Georgia’s international reputation and it will negatively affect relations with the EU, other international institutions, investors. In the future, Georgia will definitely need international support, including financial. The country will not be able to meet the challenges independently on the path of European integration, democratic transformation and economic development.

In the conditions of such development, the ambition of the Georgian government to apply for EU membership in 2024 looks unserious. The application can be made at any time, but if the country does not implement the reforms envisaged in the EU integration agenda, including the areas of justice, strengthening democratic institutions and human rights, which are fundamental values ​​of the EU, this application will further complicate the integration process. Georgia needs to prepare properly and make tangible changes in the coming years.

Malkhaz Nakashidze

Jean Monnet Chair

Batumi, September 6, 2021

[1] Who owes Georgia, Kommersant, 2021-08-29, <https://bit.ly/3n4wawt> [6.09.2021] 

[2] Consolidated Budget Revenues of Georgia, Reporting Period: 01/01 / 2021-01 / 08/2021, 2021 Treasury, <https://bit.ly/38JRcs0> [6.09.2021] 

[3] Public Opinion in Georgia, results of the August 2020 telephone survey, commissioned by NDI and CRRC Georgia <https://bit.ly/3n6NXmz> [6.09.2021] 

[4] A way ahead for Georgia, April 19, 2021 <https://bit.ly/3n9wCcP> [6.09.2021] 

[5] Georgian Dream announces the cancellation of the April 19 agreement, 28.07.2021, <https://bit.ly/3DMpqt4> [6.09.2021] 

[6] PM: We are determined to refrain from taking an EU loan, 31/08/2021 <https://civil.ge/ka/archives/437861> [6.09.2021] 

[7] Gharibashvili Says Government Will “Refrain” from Receiving € 75 Million EU Assistance, 31 August 2021, <https://bit.ly/3kZCNxm> [6.09.2021] 

[8] Irakli Kobakhidze, Chairman of the Georgian Dream, evaluates the current political processes in the program “Daily News”, 30-08-2021, <https://bit.ly/3h7CnEe> [6.09.2021] 

[9] Opposition criticizes PM’s statement on EU aid, 31/08/2021 <https://civil.ge/ka/archives/437952> [6.09.2021] 

[10] Opposition parties appeal to EU and NATO, VOA, September 02, 2021 <https://bit.ly/3tgZ5yo> [6.09.2021] 

[11] UNM Signs Charles Michel Agreement, Nika Melia Extraordinary Statement, September 1, 2021, <https://bit.ly/2YtSBB4> [6.09.2021] 

[12] Zalkaliani supports decision to refuse EU loan, 02/09/2021, <https://bit.ly/2YlhjmW> [6.09.2021] 

[13] Chairman of the European Integration Committee on EU Assistance: I am not a Financier, 03 September 2021 <https://bit.ly/3h21VTe> [6.09.2021] 

[14] The President of Georgia – the announced refusal to accept an EU loan is an incomprehensible step, 02.09.2021, <https://bit.ly/3yNl2WQ> [6.09.2021] 

[15] Refusal of EU Assistance is an Open Declaration of Georgia’s Euro-Atlantic Deviation, August 31, 2021, <https://bit.ly/2WOBLwl> [6.09.2021] 

[16] Commentary by Irakli Gharibashvili, September 1, 2021, <https://bit.ly/3n8ZLVw> [6.09.2021] 

[17] Our court is far ahead of the EU judiciary – Prime Minister, September 1, 2021, <https://bit.ly/3h7Hc07> [6.09.2021] 

[18] Statement by the Minister of Foreign Affairs of the Russian Federation Sergey Lavrov, 1 September 2021 <https://www.youtube.com/watch?v=SPfWacmgluo&t=3116s> [6.09.2021] 

[19] Соглашение о сотрудничестве между Комитетом государственной безопасности Республики Беларусь и Службой государственной безопасности Грузии,  Национальный правовой Интернет-портал Республики Беларусь, 13.08.2021, 3/3870  <https://bit.ly/3DJtaM1> [6.09.2021] 

[20] Resolution of the Government of Georgia №479, August 6, 2020, on the Approval and Entry into Force of the Agreement between the State Security Service of Georgia and the State Security Committee of the Republic of Belarus, enters into force, 07/08/2020,  <https://bit.ly/3h7if58> [6.09.2021] 

[21] Ian Kelly, Shameful indeed. The Georgian Govt recently withdrew from an agreement brokered by the EU – if they don’t from this, it will be another sign that their priorities lie elsewhere. August 14, 2021 <https://bit.ly/3n3NnWK> [6.09.2021] 

[22] Viola von Cramon, 14 აგვისტო, 2021  <https://bit.ly/3zTlmFe> [6.09.2021] 

[23] Linas Linkevicius, August 14, 2021 <https://bit.ly/2YlgRVM> [6.09.2021] 

[24] Georgia Turns Its Back on the West The ruling Georgian Dream party is taking Tbilisi into Moscow’s orbit while eroding democratic institutions, AUGUST 20, 2021 <https://bit.ly/3kYYEFc> [6.09.2021] 

[25] SUS claims agreement with Belarus does not oblige action against state interests August 16, 2021 <https://bit.ly/3A0xrsh> [6.09.2021] 

[26] Macro-financial assistance, MFA in the context of the COVID-19 pandemic, 22 April 2020, <https://bit.ly/3n58l7V> [6.09.2021] 

[27] Press statement by President Michel Press statement by Charles MICHEL, President of the European Council, during his visit to Georgia on 19 July 2021, in Batumi, <https://bit.ly/3DZQKnU> [6.09.2021] 

[28] Charles Michel, Underlined to prime minister Gharibashvili that reforms are as needed as ever August 24, 2021 <https://bit.ly/3yLRSYc> [6.09.2021] 

[29] Statement by Julien Cramp, Acting Head of the EU Delegation, on the notification of the Government of Georgia in connection with the refusal to request macro-financial assistance in the amount of 75 million euros, 31/08/2021 <https://bit.ly/3DHRJZJ>[6.09.2021]