Summary: April 29, 2005: Enlargement one year on: state of play / elements d'analyse (Brussels)
In the run up to the May 1, 2004 enlargement - which saw the EU grow to 25 members from 15, with over 450 million citizens - pessimists warned that it could end in political and economic disaster.
One year on, although new and old members still face substantial political and economic challenges, the emerging trends are very positive.
For the 10 new members:
- In economic terms, the gains are clear. The new EU members saw gross domestic product rise 5 per cent last year, from 3.7 per cent in 2003. Economists forecast a further increase of more than 4 per cent in 2005 - more than twice the rate of the EU 15.
- The figures speak for themselves. Latvia is estimated to have grown 8.5% in 2004 - the highest rate in the EU - compared with an EU average of 2.4%. Lithuania, Estonia, Slovakia and Poland also fared well at 6.7%, 6.2% 5.5% and 5.3% respectively. Overall, the forecasts are for continued strong growth - and above the EU average for 2005 and 2006 - with the exception of Malta. (source: Commission's spring economic forecasts)
- The administrative problems with payments of EU farm aid have been less than anticipated. For example, figures show that 1.4m farmers in Poland successfully applied for direct payments. The European Commission's Eurostat agency estimates that average farm incomes in the 10 new member states have risen by more than 50 per cent in 2004.
- Meanwhile EU structural and cohesion funds have poured in boosting investment in outdated infrastructure. In 2004, over €1.3 billion has been paid to the 10 new member states.
- In fact, all the new members were net beneficiaries of the EU budget last year. According to provisional data, the EU-10 contributed €3.2 billion to the EU budget while the overall payments they received were almost €6 billion. The overall balance in their favour was €2.8 billion. This represents a huge investment, beyond infrastructure, with money going into research, promoting enterprise, environmental protection, tourism, training, democracy building and innovation.
- And the boost effect of enlargement can be seen in other ways. Tourists are flocking to the region. Cities like Ljublijana in Slovenia reported a surge in foreign guests (up 23%) compared to the previous year. While, in the other direction, students and young people from the 10 have seized the opportunity to travel with ease and study and learn languages abroad.
- And in the political sphere, events in Ukraine reminded east Europeans of the security benefits of EU membership.
- Gloomy predictions about "cultural domination" or "second class citizenship" in the EU institutions have not proved true. The new 10 have more than held their own. They have integrated fully as equal members of the Union.Overall, opinion polls show east Europeans now feel more positive about accession than they did a year ago.
For the EU 15:
But the arrival of 10 new members has been beneficial for the old Member States as well as the new. Enlargement has proved to be a win-win.
- Accession has boosted trade. Imports and exports between the EU 15 and EU 10 have risen substantially since accession. As the economies of the EU 10 expanded, companies, traders and farmers from the EU-15 are doing good business with the new member states.
- In fact the benefits of enlargement for the EU 15 have been felt for over a decade. As standards of living and the economies of the 10 new members were boosted by the prospect of enlargement, the volume of Euro-area exports to the new Member States increased 140% between 1993 and 2003.
- This includes trade in farm products. Early trends indicate that new Member States have increased their imports of high value-added products from the EU-15.
- As enlargement has boosted foreign direct investment generally in the EU 10, companies from the 15 are among the biggest investors. Austria, for example, is the now the biggest foreign investor in Slovenia, Romania and Bulgaria and the third biggest foreign investor in Hungary, Slovakia and the Czech Republic.
- Eurostat figures show that companies in the EU 15 invested €13.8 billion in the 10 new Member States in 2004, a substantial increase from the €7 billion invested in 2003. Yet this is lower than the amounts invested in the years before accession (17.2 billion Euro in 2001) and a fraction only of the total investment between the EU 15 themselves (€156 billion in 2004).
- Companies in the EU 15 are now reaping the benefits of their investments of recent years. Eurostat figures show that the EU15 income balance with the ten new member States (which includes mainly net investment income or return on investment) increased to €7.5 billion in 2004 from €5.3 billion in 2003 and €2.5 billion in 2002.
- Looking at the big picture, the estimates are for EU enlargement to increase gross domestic product for the EU 15 by 0.7 per cent over the next decade.
- Just as important as the positive economic trends is the fact that none of the doomsday forecasts of a year ago been realised.
- Most importantly, the fears that the accession of 10 new countries to the European Union, and the freedom granted to their citizens to come and work in the EU 15 would be a disaster leading to a "great exodus" from the east have not been realised. This is true both for countries like Britain, Sweden and Ireland and who opened their labour markets fully from May 1st 2004 and for Member States who chose to use "transition periods" - where the labour market was opened but with special conditions
for work permits for Eastern Europeans.
- In fact none of the predicted disaster scenarios have happened - not the un-precedent surges of cheap imports, the mass migration flows or the health scares from substandard food. None of the 3 safeguard clauses for economics disturbances, the internal market or justice and home affairs have been invoked. This repeats the pattern of previous enlargements, particularly when Spain and Portugal joined in 1986, where the safeguards to deal with overwhelming levels of economic imports and
immigration were built into the treaties to respond to public concern and never used.
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