Ladies and Gentlemen,
Dear Friends,

This conference brings together many of us who have grappled for years with the Balkan dramas.
I very much agree with the conference organisers that the 10th anniversary of the Dayton
Agreement is a good occasion to reflect on what happened then - but also to draw some lessons for
the future.

The wars in the former Yugoslavia scarred a generation of European political leaders, myself
included. They reached their nadir in the conflict that raged for 4 years on the territory of Bosnia
and Herzegovina. It was Bosnia that lay at the heart of these wars. And it was Bosnia that suffered
most.

The price of nationalist extremism and of our collective failure to end the fighting, has been high:
up to 150,000 deaths; 2 million refugees and displaced persons - nearly half the population - and a
society torn apart.

During the summer of 1995, inside what we call the ’international community’ a consensus had
firmed up that the madness had to stop. If necessary by coercive diplomacy.

And that is what happened, first when UNPROFOR and then NATO took action that Summer. And
then at Dayton itself when an agreement was reached to end the war. It brought peace, yes. An end
to the nightmare, yes. But a peace that came late and that was full of painful compromises.

I remember those days vividly. Spain had the Presidency of the EU in the second half of 1995. As
Foreign Minister, my main goal was to end the bloodshed. And as NATO Secretary General, my
main pre-occupation was to oversee the implementation of the military aspects of the Dayton/Paris
Agreement.

Dayton confirmed Bosnia and Herzegovina’s external borders and created a framework in which
post-war recovery could begin. Sceptics decried the Agreement’s weaknesses and loopholes.
Doubters thought it would never work. Certainly, it contained provisions that could be - and were -
exploited by the opponents of reform.

Nevertheless, the Agreement has stood the test of time. It ended the war and laid the foundation for
peace. The NATO-led IFOR and SFOR worked in tandem with the Peace Implementation Council
and the UN-mandated Office of High Representative.

Bosnia and Herzegovina ten years on

Immediately after Dayton, there were clear imperatives: to build the peace and get the country up
and running. This was an enormous task.

The state barely existed. Its central institutions met only under international pressure and achieved
little on their own. There was no common currency, no common licence plate, no common identity
card, no flag and no national anthem.

When the guns fell silent, Bosnia and Herzegovina had three armies and over 400,000 men under
arms. It had three secret services, spying on each other, on their own people, and on the
international community.

There was no freedom of movement between the Republika Srpska and the Bosnian-Croat
Federation - sometimes not even between neighbouring communities. Sixty-five percent of all
houses were heavily damaged. The regular economy was shattered. Organised crime was gaining
ground.

So our task was great. But we managed. We as a collective: the EU, the UN, the US and NATO.
But above all, the Bosnian people themselves.

Bosnia and Herzegovina has made enormous progress since 1995. Peace and security have become
entrenched, even if many pitfalls remain. The risk of a return to violence is low and international
troop levels reflect this. IFOR deployed 60,000 troops in 1995. Today, EUFOR is doing its job with
just over 6,000 troops.

Bosnia’s state institutions remain weak but they are getting on with the business of government.

There are only 16,000 soldiers left. At the end of this year, they will be brought under a single statelevel
system of command and control. Bosnia and Herzegovina also has a single state-level secret
service and a single "FBI", known as SIPA.

Over one million displaced persons and refugees have returned, a great number to places where they
will be in the minority. This is a remarkable testimony to the courage and tenacity of this country’s
people. There is now freedom of movement throughout the country.

At long last, the economic situation has started to improve. Bosnia and Herzegovina is becoming a
single economic space and an easier place to invest, with a single taxation and customs system. It
has the most stable currency in the region.

True, poverty and unemployment remain high. But the economy is growing around 5.6 percent -
faster than any other economy in the Balkans. Inflation stands at 0.5 percent. Jobs are created
through investment and business development, not only - as in the early years - through short and
medium-term international aid. Foreign direct investment is up 25 percent since last year.

With the support of the EU and others, the judiciary is being strengthened and the country’s
fragmented police forces are being reformed. Within five years, there will be a single police service,
drawn on the basis of technical, not political, criteria.

Finally, there has been progress on co-operation with the Tribunal in The Hague. Today, only five
of those indicted for crimes committed in Bosnia and Herzegovina are still at large. The Bosnian
Serb authorities have transferred, or assisted Belgrade in the transfer, of 12 indicted people this
year, compared to zero in the nine preceding years.

All this is proof of the progress of the past ten years. The reasons for this success have been threefold:
unity of purpose; a long-term commitment; and a comprehensive approach to peace building
that includes conditionality.

Let us be clear: European Union engagement has been central to this success. European aid
financed the bulk of the reconstruction effort and continues to be the main source of institution and
capacity building programmes today.

Our police mission has been working for the past three years to establish sustainable policing
arrangements, under Bosnian ownership, and bringing them up to European standards.

EUFOR took over from NATO in a seamless transition one year ago. It has moved quickly to
demonstrate its readiness to take on existing as well as new security challenges - including
organised crime and the support networks of war criminals.

Paddy Ashdown, who is double-hatted as High Representative and EU Special Representative, has
done a terrific job in giving political direction to these efforts, and in communicating the Union’s
advice to the Bosnian authorities.

So European Union engagement on the ground has been vital. But in recent years, the prospect of
eventual EU membership has been the overwhelming transformational force in Bosnian politics.
That has been the decisive factor.

The European perspective as driver of essential reforms.

This week - today in fact - we are finally starting negotiations on a Stabilisation and Association
Agreement.

We in Brussels tend to give bureaucratic and off-putting names to much of what we do. But the
political significance of this decision is enormous. It represents a major step forward on Bosnia’s
path towards its eventual destination: EU membership.

My message today is that Dayton achieved what it was meant to do. But now we are entering a new
phase. It is time to move beyond the Dayton set-up.

The current system of government is unsustainable. To integrate itself progressively with the
European Union, Bosnia and Herzegovina needs stronger state-institutions. To deliver the benefits
that its citizens deserve, it needs to cut the cost of government. No state can win the loyalty of its
citizens if it spends 70 percent of their taxes on government and only 30 percent on services.

It is also time to change the form of the international community’s engagement. The Peace
Implementation Council has said it is ready to phase out the Bonn Powers and move to a mission
led by an EU Special Representative, perhaps as early as the 2006 elections.

This is a step in the right direction. Bosnia and Herzegovina’s journey to Europe can only be led by
responsible local forces, not by outside players.

While Bosnia is ready for the next phase, this does not mean that the EU or the international
community should disengage. Bosnia and Herzegovina still needs concerted support, including that
of EUFOR, the EU Police Mission, and non-EU actors.

Bosnia and Herzegovina is not yet a "normal" pre-accession country. It is a country recovering from
a devastating war and that trauma still marks the body politic.

The leadership’s consensus on moving towards Europe is not yet matched by a similar consensus
about the country’s constitutional future. We, the international community, must remain engaged -
and we will.

Indeed, I am convinced that the coming years will require a renewed focus by the European Union
on the Balkans. This includes Bosnia but also, of course, Kosovo, Serbia-Montenegro, FYROM and
the rest of the Western Balkans.

This focus should leverage the prospect of EU accession, combining it with proactive political
engagement.

It is good that all countries are taking the next step on their journey towards Europe. But the
Western Balkans are far from finished business. More than other regions, this is a European
responsibility. We cannot afford to fail.

Dear friends, let me end with some final thoughts. For one of the purposes of today’s conference is
to draw some lessons. I would like to offer the following five:

First, a clear lesson from the Balkan dramas is that when the EU, the US and NATO are united and
work together, we can achieve great results. That has been the story of the past ten years. The
opposite, as the war itself illustrated all too clearly, is also true.

Linked to this is the point that we Europeans have to be willing and able to act ourselves to tackle
security situations where we feel more strongly or differently than the US does.

I expect that European and US views will continue to coincide on almost everything - as is the case
today. But you cannot be certain. And it is wise to take a side bet on the possibility that there may
be circumstances where we want or need to do something on our own. That, amongst others, is a
solid reason behind the ESDP.

Second, it is possible to end conflict through intervention and then build a state out of the ashes of
war. Bosnia and Herzegovina proved both the nation-building sceptics and the isolationists wrong.
This is important to bear in mind as we grapple with the aftermath of crises on our doorstep - or
indeed when new ones appear on the horizon.

But, and this is the third conclusion, peace building is a long-term and expensive affair. We need to
be ready for the long haul and flexible as to the nature of our engagement. IFOR initially started
with a one-year mandate. In the beginning, the international community’s reconstruction plans for
Bosnia spanned a five-year period. We now know that assistance will be needed for many more
years to come.

Fourth, a close relationship between the military and civilians aspects of peace implementation is
essential. There can be no simple sequencing of "military first and civilians after." Both are needed
from day one - and both depend on one another from day one.

Rupert Smith’s book, The Utility of Force, makes a number of very pertinent points about the need
for a coherent political strategy if crisis-management operations are work. I recommend it to
everyone.

Fifth and finally, there is a lesson for European foreign policy. There is no point denying that the
war in Bosnia and Herzegovina was a dismal low for Europe. But look where we are today. We are
united around a single, comprehensive strategy for the region. The Western Balkans are now one of
the success stories in EU foreign policy. And it is recognised as such around the world.

Indeed, this points to one of Europe’s key strengths. After every setback, we re-group, learn the
lessons and emerge stronger.

Of course, there is no room for complacency. Europe bears a special responsibility for the Balkans -
for its past and its future. Enormous challenges remain, not least in Kosovo. But we should draw
strength and inspiration from what we have accomplished, as we prepare for the next part of the
journey in Bosnia and other parts of the region.

Thank you very much.

Ref: S382/05