1.We, the members of the Peace Implementation Council, met in Madrid on 15/16 December where we reviewed progress in implementing the Peace Agreement in Bosnia and Herzegovina. We identified what still needed to be done to make the peace self- sustaining, and agreed on a work programme to achieve this. We approved the following Declaration, and an accompanying detailed operational Annex.

2. We note with satisfaction that Bosnia and Herzegovina has taken great strides forward in the last year. The basic institutions of the State, both political and economic, have been established. Key laws, including on foreign investment, privatisation and property, are now in place. Freedom of movement across the country has substantially improved. Fundamental reform of the media is well underway, and is helping to create a more democratic society. Elections have demonstrated a trend towards growing pluralism and tolerance.

3.This success is encouraging. A lasting peace within Bosnia and Herzegovina is starting to take root. We reaffirm that the Peace Agreement is the basis of freedom and democracy in Bosnia and Herzegovina and urge its people to join hands with us in implementing it in full. We remain determined to build a self-sustaining peace in  Bosnia and Herzegovina together on the basis of the Peace Agreement.

4. But there is still much work to be done. Bosnia and Herzegovina's structure remains fragile. Without the scaffolding of international support, it would collapse. In order to create a self-sustaining state of BiH, action is needed in particular on: inter-ethnic tolerance and reconciliation; the development of effective common institutions with powers clearly delineated from those of the Entities; and an open and pluralistic political life. The growth of organised crime also represents a serious threat to BiH, and is completely incompatible with BiH's integration into Europe.

5. Following the end of the 'consolidation period,' the next two years will be vital in strengthening the peace process and building democratic and market-oriented institutions, with the authorities in BiH increasingly assuming greater responsibility for the functions now undertaken or coordinated by the international community. We recognise the continued need for an international presence in Bosnia and Herzegovina -- both civil and military -- to help build the peace. We express our gratitude to the men and women of SFOR for their service in the cause of peace. SFOR's presence continues to remain essential -- both to keep the peace and to provide the secure environment needed for civilian implementation. The Council also reconfirms its determination to apply conditionality to international reconstruction assistance, both by applying positive incentives and excluding non - compliant actors.

6. We say to everyone in Bosnia and Herzegovina: Yours is now one of the most assisted countries in the world. International assistance is at its height. It will

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