The paper deals with the prospects of economic recovery and growth of Libya after the suspension of the UN sanctions. Here, the risks and chances of Libya's participation in the so-called `Barcelona Process' are viewed. Based on the results of a similar study for Egypt and an empirical analysis of Libya's trade performance, the findings suggest that the Libyan-EU trade is characterized on the one hand by a high gravity, and on the other, by a strong dissimilarity, making economic integration difficult. Free-trade, as a stand-alone measure, would not be necessarily conducive to Libya, however, the secondary effects of free trade, fueled by enhanced incentive to pursue courageous structural reforms could have important effects on the international economic competitiveness of Libya, a dire need with a view to the limited crude oil resources.

Libya's dependence on its oil export revenues has largely characterized the development process since the 1960s. A number of different phases is to be distinguished—the policies of the Kingdom, the surplus redistributive policies under the revolutionary government until 1981, the US trade boycott and the declining revenues during the 1980s, the UN sanctions and further deteriorating growth prospects during the 1990s and presently the opening-up of Libya after lifting the UN sanctions.A lot has been researched about the importance of the oil revenues for Libya and there has been a consensus that the structural dependence on this asset is the national source of wealth but also a major factor of economic uncertainty. The study discuses how the chance of economic liberalization and the recent efforts of reintegration after the end of the UN sanctions could be used to sustainably absorb the oil revenues. The strategy of enhanced trade integration with the EU is the focal point of the study. An important question is whether joining the Barcelona Process and the European Neighborhood Program will be beneficial for economic development of Libya.

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