Tunisia formally became a Privileged Partner of the EU under a political agreement signed during the Tenth Association Council meeting in Luxembourg on 14 April.

Reflecting the EU's solid support for its transition process since the January 2011 revolution and following a slew of visits from senior EU officeholders and ministers, the partnership is set in the framework of a new 2014-2017 Action Plan flanked by access for Tunisia to a range of EU programmes. There is also the commitment to negotiate a Deep and Comprehensive Free Trade Agreement  – which an independent Sustainability Impact Assessment found would generate significant economic benefits for Tunisia. Free trade in industrial goods already began in 2008 under the 1998 Association Agreement.

A few days after this Council the European Parliament approved a  €300 million loan. In an exclusive interview with this paper the EU's Representative to Tunisia, Laura Baeza explained that  “this loan resulted from an exceptional request to the Parliament from the European Commission – which had in fact proposed €250 million. Disbursement in three phases is conditional on implementation by Tunisia of extensive economic reforms previously agreed with the International Monetary Fund.”

“Our two overriding priorities are to facilitate the consolidation of a democratic state with efficient government and to develop the interior regions – abandoned by the Ben Ali regime. In fact, our support to the transition process started immediately after the revolution when the EU doubled its aid from €300 million for four years to €545 millions for three years.  Tunisia was the first beneficiary of the SPRING instrument, created by the EU in response to the Arab Spring to encourage countries to immediately pursue the path of democratic transition.”

The EU programming period is divided into two stages - 2014-2015 and 2016-2020 – the latter enabling alignment with the priorities determined by the government to take office after the general elections due at the end of this year.

“Projects currently underway total  €650 million worth of grants”, Ms. Baeza continued. “These include 54 projects carried out by civil society organisations under the unique  €16 million Civil Society Support Programme (CSSP) accompanied by a specific €7 million project to bring civil society and public bodies closer together throughout Tunisia through the opening of six regional offices.

“We have supported the establishment of a regulatory framework for microfinance and subsequent emerging initiatives which will enable thousands of jobs to be created in the most disadvantaged regions. We are also contributing to the four-year €217.5 million Priority Programme for the Integration of Working-class Districts co-financed by the French Development Agency employing local people to  construct roads,  provide sanitation and lighting systems in 119 districts  (out of a national total of 1,400), thus improving the living conditions for 700,000 people.

 “Last year on the initiative of the European Commissioner for Enterprise and Industry, Italo Tajani and the then Tunisian Minister of Industry, a 30 member EU-Tunisia Business Council was set up comprising top executives and associations to work and lobby on policy issues such as investment rules, human resources, transport.”

Other multilateral organisations supporting Tunisia's transition are the United Nations family, the World Bank Group, the African Development Bank and the International Monetary Fund. Current total financing outstanding topped $8 billion in 2013. Bilateral aid from France and Germany totalled another $1.5 billion.

UN's Resident Coordinator Mounir Tabet, told this paper that the UN family had recently finalised a five-year programme starting in 2015 building on current wide ranging activities. “These include activities supporting the work of the National Constituent Assembly, organising the forthcoming elections, justice and anti-corruption measures, promoting human rights, gender equality, social protection, training women electoral candidates, police, journalists. We are also assisting the government in setting up a participatory and regionally based planning process which will link needs to coordinated inputs from ministries, donors, the private sector. Generating decent jobs within the framework of sustainable development, agriculture, climate change, disaster preparedness have emerged as key challenges.”

The International Monetary Fund's $1.7 billion stand-by arrangement (loan) concluded in 2013 is conditional on implementation of sweeping economic reforms which include wage freezes, subsidy cuts to be balanced by support measures for the 1.5 million Tunisians (15 per cent of the population) below the poverty line. This programme is strongly criticised by civil society groups and trade unions for condemning the nation to Greek-style austerity, trapping it into increasing indebtedness. Many advocate a debt moratorium and refusal to repay 'odious debts' racked up by the 29-year Ben Ali dictatorship.

Official documents state that in 2012 Tunisia's external debt stock totalled $26 billion, with an annual repayment of $2bn, its debt to GDP ratio remaining just under 50 per cent.  Between 2011 and August 2013 Standard and Poor progressively reduced Tunisia's sovereign rating down to B/B thus reducing its financing sourcing while increasing its borrowing costs.  In December it announced that it would no longer issue ratings at the request of the government, adding that “the outlook remained negative".

The IMF mission to Tunisia this March reported that “short-term risks to the outlook for the Tunisian economy remain significant, particularly in case of a lengthy political transition period, heightened security tensions, or a worsening of the economic outlook for Tunisia’s main trading partners. Immediate action is needed to control fiscal and external deficits, reduce the banking sector’s increasing vulnerabilities, and generate more rapid and inclusive growth that can absorb unemployment and reduce social and economic disparities. The implementation of a tight monetary policy and a more flexible exchange rate policy are essential to preserve macroeconomic stability. “

The report added that due to weak exports and low tourism revenues, the current account deficit may reach 7.2 percent of GDP in 2014 while the budget deficit could widen to 8 percent of GDP and will mainly be financed through external sources. 

Foreign direct investment flows continue to sag while Tunisia slipped five places in the Doing Business 2013 ranking, from 45th to 50th, losing 43 places down to 83rd rank in the World Economic Forum’s Global Competitiveness August 2013 list.

During recent official visits to the Gulf, USA and France, Tunisia's embattled head of government, Mehdi Joumaa found much sympathy and varying concrete support.  

French President Hollande announced his intention to host a donors'/investors' conference in September under UN auspices. President Obama reaffirmed the two nations' strategic partnership, announced a second $500 million loan guarantee, financial aid for the elections, heightened security cooperation, meetings in Tunis on 16 June of the bilateral Trade and Investment Framework Agreement Council and in the autumn of the U.S.-Maghreb Entrepreneurship Conference. Gulf countries reportedly offered sympathy but no hard commitments.