Thank you Mr. Chairman.

Let me begin by emphasizing that the Stability Pact truly welcomes the forthcoming entry into force of the Energy Community Treaty, which marks the success of the Athens Process.

The Energy Community Treaty not only provides a basis for a stable and continuous energy supply, a prerequisite for economic development and social stability, but will also further strengthen cooperation among the countries of South East Europe, a key political objective of the stabilisation process of the region.

It is also a major building block of a emerging regional economic strategy, which includes a free trade agreement, infrastructure, a regional investment framework, a regional broadband market and, of course, efforts to address crime and corruption. Put simply, this treaty gives regional cooperation true credibility.

Let me highlight three major energy issues or challenges facing the region.

First, I would like to stress that one of the main goals of the Treaty is to enhance security of supply, including the coordination of mutual assistance between Parties in case of serious disturbance to energy networks or in case of external disruptions.

Last winter, the lack of coordination between countries affected by the gas dispute between Ukraine and Gazprom magnified unwanted side effects. Gas shortages in South Eastern Europe were indeed made worse by “beggar thy neighbor” policies. 

If next winter is as difficult as last year, gas and electricity supplies could again come under threat.   Due to underinvestment in Russia’s gas infrastructure, soaring domestic demand in Russia, or other reasons, Gazprom might not be able to meet demand in South Eastern Europe fully.

Moreover, electricity supplies could also be adversely affected by the planned decommissioning of units III and IV of the Kozloduy nuclear power plant in Bulgaria. Once these two nuclear reactors are retired, Bulgaria’s ability to export electricity will be severely constrained.

The Stability Pact therefore urges the countries of the region -- but also those who play a role in their energy supply chain -- to devise, as soon as possible, a solidarity emergency plan to address potential gas and electricity shortages. 

In particular, we support Commissioner Piebalg’s statement and urge the governments to complete by the end of August the planning of their gas and electricity needs over the coming winter period and to appoint national co-ordinators to facilitate and expedite coordination between countries. In case of energy shortages, we ask, as did Commissioner Piebalgs, the governments address the needs of the population first and the needs of industry second.

Secondly, we want to emphasize the importance of proceeding with the restructuring process of the energy sector, the interconnection of energy markets and opening up to competition in order to attract international funding.

The World Bank has earmarked an Adjustable Programmatic Loan (or APL) of USD one billion which is waiting for the right investment opportunities to come.

Whether these opportunities should be made possible through privatisations or legal unbundling is up to the governments to decide, provided that, at the end of the day, power utilities are managed in a professional and market-oriented manner.

In addition to the post-Kozloduy nuclear project in Bulgaria, the World Bank’s Generation Investment Study (GIS) highlights the potential of major deposits of high quality lignite, particularly those in Serbia and Kosovo.   We believe that the governments involved should bring creative thinking and a commitment to a regional approach to their work this year -- and not delay until 2007 -- to begin the project development phase of these two important opportunities.

Both undertakings are huge, complex, and demand the most modern technological, environmental, and management know-how available today to succeed in a reasonable time span.    In the case of Kosovo, the project is absolutely critical to Kosovo’s medium-term and long-term economic future. 

Thirdly, the Stability Pact would like to stress again the need to address the socio-economic impact of implementation of the Energy Community Treaty. On the one hand, restructuring in the energy sector could mean lay-offs while new pricing and payment collection policies may create an issue of affordability for the most vulnerable segments of the population. Social cohesion remains a key factor of political stability and must underpin economic development.

Ladies and gentlemen, you have created a tremendous building block for the regional economy, one that also sends a clear and positive political message to the wider investment community. 

We look forward to working closely with you to ensure that the Treaty achieves the maximum benefit for the regional economy and the people of South East Europe.

Thank you.