Can Europe strengthen its market through regional integration?

Integrating the Western Balkans into Europe’s energy and industrial networks would improve competitiveness and strengthen economic and strategic resilience of the EU and the region

Europe’s competitiveness depends increasingly on diversifying supply chains and securing production closer to home. For the Western Balkans, this state of affairs presents a chance to position themselves as cost-effective, geographically proximate and politically aligned alternatives – a compelling possibility.

What would the Western Balkans get in return? For the region, the EU single market is a gateway to scale, offering access to a harmonised customer base that can drive growth and job creation. Yet, financing remains a challenge: Capital markets in the region are fragmented and shallow, access to equity and private debt is limited. Regulatory gaps, informal economies and perceived risk further constrain investment. To achieve critical mass and scalable opportunities, market integration with the European Union is therefore essential.

The recent EU Western Balkans investment conferences in Albania and Montenegro, hosted by Prime Ministers Edi Rama and Milojko Spajić, highlighted the region’s growing strategic relevance. European Commission President Von der Leyen reinforced this message, stating that the time to invest in the Western Balkans is now. During the forum in Tirana, letters of intent were signed for projects worth around €400 million in the fields of AI, clean energy and the automotive industry. In Montenegro, nine memorandums of cooperation and an investment declaration were signed, laying the groundwork for future investments in energy, transport, infrastructure and innovation.

Creating a platform for energy market integration and innovation

To unlock this potential, the region should advance in its energy transition, foster innovation and accelerate digitalisation. But the rewards are high: Integrating the Western Balkans more firmly into Europe’s energy and industrial networks would not only improve competitiveness but also strengthen the overall economic and strategic resilience of the EU and the entire region.

The region’s strategic location – bridging Türkiye, the Caucasus and Southeastern Europe – positions it as a hub for energy supply, and domestic potential in hydro, solar and wind should therefore be further exploited. Improving cross-border electricity interconnections would allow for surplus sharing, peak load management, and greater flexibility in times of crisis. Market integration and regulatory alignment through EU market coupling and harmonised permitting would unlock investment and reduce risk.

As the EU bank for international partnerships and development, the European Investment Bank (EIB) is taking concrete steps to unlock the region’s potential and support its integration. In partnership with the European Commission, it is deploying blended finance tools with EU grants and technical assistance to develop key infrastructure projects. This improves the financing conditions for such projects, improving their economic viability and relieving pressure on public funds.

Helping small companies ride the wave

The private sector is also set to play a major role in the green transition and digitalisation. One urgent need is to create better financing conditions that allow innovative and early-stage companies to boost high-tech solutions. Building a regional ecosystem for startups takes more than capital – it takes institutions, investors and a conducive regulatory environment. At the same time, digital transformation and skills development will be essential for integrating new AI technologies into the region’s e-services, industries and SMEs.

The EIB encourages local firms to make sustainable investment in these areas through guarantees and risk-sharing products, as well as initiatives like the forthcoming Innovation and Green Transformation Facility. These resources help small businesses which are credit constrained to access liquidity. They also offer commercial banks capital relief and lower concentration risk, allowing them to lend more, creating a virtuous cycle.

The momentum is building

The European Union’s €6 billion Growth Plan for the Western Balkans marks a pivotal step in advancing regional integration, tied to the implementation of national reform agendas. The plan is designed to accelerate the region’s integration into the single market, supported by initiatives like digital innovation hubs, SEPA and Green Lanes, facilitating smoother transfer of knowledge, capital and goods.

Further momentum was gained on 16 October, when Western Balkan economy ministers, under the Berlin Process, endorsed a comprehensive package of 11 regional initiatives. Spanning green finance, tourism branding, social security coordination and investment facilitation, these measures form part of the Action Plan for a Common Regional Market.

EU Member States must now consider how to strategically direct investments to reduce vulnerabilities and strengthen resilience as the Western Balkans increasingly become an extension of Europe’s economic security. These countries are not merely neighbours; they are an essential part of Europe’s future.