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2.4 EU Enlargement 2004


Academic Research paper and Study of the Economy of Romania and Romanian Business

Eastern EU Enlargement has been “a central pillar in Europe’s post-Cold War architecture” (Baldwin et al. 1997: 125). The typical argument for Eastern EU Enlargement (EEUE) is that peace, prosperity and sta­bility in Western Europe can be maintained or even enhanced by promoting it all over Europe (cf. EC 2006 a). As often pointed out, Eastern European Enlargement, the fifth enlargement, has been the most ambi­tious one; concerning the number of both the countries and the population joining the European Union. In particular, the acceding countries had very different political, economical and social back­grounds compared to the EU-15 (cf. EC 2006 b: 1). It was the first one reunifying countries from the former European blocs which were divided by the Iron Curtain for nearly half a century (cf. ibid: 13). Eastern Enlargement’s foundations were laid in 1993 on the Copenhagen summit of the European Council (ECO) where the well-known Copenhagen criteria were settled and an invitation to apply for membership was made. The process of integration into the EU was de­signed as having two steps. First, the acceding countries should be integrated into the EU Sin­gle Market and only afterwards into the European Monetary Union (cf. Breuss 2002: 247). As step two was taken yet only by one NMS and this paper is mainly concerned about real convergence it will be dealt with the impact of the integration into the Single Market, only.

Eastern EU Enlargement 2004

Negotiations for the fifth enlargement were conducted from 1998 to 2003, when accession treaties were signed for Cyprus, Czechia, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia (EC 2006 b: 14). In the case of Bulgaria and Romania negotiations lasted until 2004 (their accession treaties were signed in 2005; NewsIn 2008: 134). The first ten countries joined the European Union in 2004, Bulgaria and Romania followed in 2007.

Breuss (2002: 249f.) stressed “several asymmetries” between the OMS and the NMS: first, a bloc of rich countries had to integrate a bloc of still poor countries and second, a large bloc integrated a small one. In addition, the labor productivity differed notably. Baldwin et al. (1997: 129f.) argued that this could be due to a bad capital stock, which might be changed easily taking the “high level of education in the CEECs” (ibid) into account (higher than in the south). Some differences between the OMS and the 2004 joiners are illustrated in Table 2‑2. While the population of the EU-8 accounted for some 16.5 % of the EU-25 population real EU-8 GDP did not reach more than 7.5 % of the real EU-25 GDP in 1995. Real GDP per capita in the CEECs reached on average a share of 44 % of the EU-15 level.

Table 2.2: Population and GDP for the OMS and the NMS
All figures for 1995

EU-8

NMS 2004

EU-15

EU-25

Population (Millions)

74.20

75.32

372.26

447.58

% of EU-15 Population

19.93

20.23

120.23

% of EU-25 Population

16.58

16.83

83.17

Real GDP (Billions, Int-$)

578.41

595.24

7,258.63

7,853.87

Percent of EU-15 GDP

7.97

8.20

108.20

Percent of EU-25 GDP

7.36

7.58

92.42

Real GDP per capita (mean, Int-$)

8,639

9,857

19,683

15,753

% of EU-15 GDP per capita

43.89

50.08

80.03

% of EU-25 GDP per capita

54.85

62.58

124.95

Source: PWT 6.2; own table, own calculations

Baldwin et al. (ibid) also called attention to several sectoral differences between the EU-15 and the CEECs (mainly concerning the role of agriculture) and the asymmetric importance of trade between the two blocs: while trade with the EU-15 is crucial to the CEECs, trade with them is marginal to the EU-15. Accordingly, the impact of integration always was esti­mated as considerable for the CEECs but on average as marginal for the EU-15 (cf. EC 2006 b: 1). On the other hand, this average is composed of very different levels of importance to separate EU-15 Member States (cf. Breuss 2002: 245). “Unevenly distributed” gains (Baldwin et al. 1997: 167) of Enlargement can be expected as countries like Finland, Austria and Greece have export shares of more than 11 % to the CEECs while the EU-15-average is about 4 %. The export share to the CEECs is even lower for Portugal, Spain and the UK (less than 2 %). For the first two even negative impacts were taken into account.

Footnotes

[1] These are in short democracy, market economy and acquis communautaire (Breuss 2002: 245). Further specifica­tions (like rule of law, human rights and the like, which are subsumed here under the point “democ­racy”, are mentioned in EC 2006 b: 13f.).

[2] It should be added, though, that the NMS are monitored according to the Convergence (Maastricht) criteria of the Stability and Growth Pact (SGP), too. Their progresses are tracked as for all other candidate countries, which did not adopt the Euro yet, via “convergence programs”. These are annually updated presentation of their me­dium-term fiscal programs. Euro-countries are monitored likewise but in their case the respective documents are termed “stability program” (EC 2008 a: 2).

[3] In general foreign trade is more important to the CEECs. Exports plus imports account on average for 93 % of GDP in the CEECs but only to 55 % in the EU-15 (cf. EC 2006: 2).

[4] Germany having an export share of 8 % to the CEECs has to be accounted to the first group, too.