April 28, 2004

A "BIG" day for the European experiment

MABB is a registered TM.


A big day, perhaps "the biggest" yet since Maastricht 1992, is rapidly approaching for the European Union (EU). On May 1, 2004, ten central European countries (Estonia, Latvia, Lithuania, Poland, Czech Republic, Slovakia, Slovenia, Hungary, Malta and at least the Greek part of Cyprus) will join the European Union as new members. European enlargement has come a long way since 1951.

As it can be expected, it is no easy feat. Enlargement comes with its dose of troubles. But, that is just what it's exciting about observing this once in a life-time process. We can actually observe, live, how the EU takes shape. How do the Europeans deal with the immense challenges they get confronted as they move forward towards this "experiment" called European Union.

So, what does the addition of 10 new members mean for the EU? Well, we know one thing. The 15 old members are not waiting eagerly and with open arms for their new partners in life. Nor the new countries are joining with the same enthusiasm as when they first applied. Nevertheless, there is an air of optimism for the latter.

Of the many challenges they must face, immigration is the one that is ever present in the minds of all Europeans alike. This is the number one topic, especially for the biggest members (France, Germany, Italy and Britain). The average EU citizen thinks that as soon as these 10 nations join the club, there will be millions of immigrants moving west, where it is thought life is better. Proponents of enlargement, of course, beg to differ. They argue that some people undoubtedly will migrate, but the majority will, at least think about it very hard. Currently the new member's economies are growing at a fast pace (about 3 per cent). Proponents suggest that the new member countries will substantially raise their living standards in a relatively short time, which will make it harder for people to want to migrate and thus leave home.

Having said that, practically, it will be much harder for people to migrate from one country to another. Even though, the EU has as a core principle the free mobility of labor and people, most of the member countries will, in fact, maintain restrictions for migration, at least for the first two years.

A couple of issues closely attached to migration, is the economy and jobs. European integrationists argue that an enlarged EU will, in fact, grow economically faster and thus create more opportunities for Europeans. One just has to look at the size of the new total market (450 million people representing about 18 per cent of the world trade). The opportunities for investment and commerce with the new economies is also a strong incentive. The EU has budgeted to spend 40 billion euros on the new member states for the next three years. This money is bound to return to the EU in the form of investment and commerce among member countries. Another form of influx of money for the new members, specially for countries like Poland, will be the agricultural subsidies. The EU pays about 47 Bn in agricultural subsidies to its members. Although, the new members, in the beginning, will only get 25 per cent of what the old members get, the sums are set to be equaled by 2013. This is expected to play a big role in the new members, because they have a bigger agricultural base, compared to the other countries.

Job creation will indeed be the major question. Will enlargement be conducive to job creation or not? Europeans are betting that increase trade and commerce among the old and new members will translate into jobs all over Europe. Sceptics are willing to bet that jobs will not materialize in the near future, at least not in the old member countries. In fact some even argue that the trend will be downward, with unemployment rates increasing in the EU-15 due to investment in the new member countries. Cheaper labor might provide strong incentives for companies to move east.

One other lingering issue is the Euro. Since January 2002, the core countries of the EU received the Euro (the new European currency) with scepticism. However, the new countries will have to wait at least two years after the official admission to the EU. In order for any country to be able to adopt the Euro as their own currency, they have to fully participate in the EMU (European Monetary Union) exchange mechanism and fulfill the Maasthicht criteria. Researchers say that this could take up to 5 years, with the earliest time being 2009.

Lastly, the planned European Constitution has proven to be harder to realize than many had thought. After last December's collapse of talks, where a dispute over the distribution of power in the EU Council of Ministers between Germany and France on one hand, and Poland and Spain on the other, one more attempt will be endeavoured on June 2004. And, even if this time agreement is achieved, the respective legislatures will have to ratify it in each member countriy. This has become a sticky point dividing the union.

Once all is said and done on May 1, the process will not be complete. The new countries will have continue to work hard to comply with the requirements to become a member. What will they do, is enjoy some of the perks, of belonging to such a club. It will be interesting to see how all this turns out in the next few years.

BBC ; Europa ; European political resources ; Financial Times ; Economist ; EU in the US ; Eurostat