Transcript European Union - Economy, Society, & Polity

THE EUROPEAN UNION:
ECONOMY, SOCIETY, AND
POLITY
by
Andrés Rodríguez-Pose
London School of Economics
Oxford University Press
ISBN 0-19-874286-X
Part III
POLITY
Chapter 6
Enlargement
Introduction
• The fall of the Berlin Wall in November 1989
marked the beginning of the end of the postWWII polarized world
• Countries to the East of former the Iron Curtain
looked immediately towards the prosperous and
democratic West
• Membership of the EU became an indicator of
future stability and prosperity for central and
eastern European countries (CEECs)
• The EU, despite a warm welcome, was somewhat
slow to react:
– Because of the economic, social and political situation of
countries in CEE
– Because of the degree of internal restructuring needed in
order to accommodate new members
Change in central and
eastern Europe
• The fall of the Berlin Wall in November 1989
symbolically marked the beginning of a process
of radical transformation in CEE
• This process entailed different types of transition
– Political transition: From one-party states to democratic
regimes
– Economic transition: From centrally planned socialist
economies to capitalist systems
– Identity transition: Represented by changes in national
allegiances
– Diplomatic transition: Integration or reintegration into a
‘Western-dominated’ international system
Different transitions in
central and eastern Europe
• Political transition:
– From communist one-party states to democratic
regimes
• Successful in the Czech Republic, Hungary, Poland,
Slovenia, and, increasingly, Slovakia
• Baltic states close to that stage (question marks about
the treatment of minorities)
• Right track, but early stages: Bulgaria, Romania, and,
increasingly, Croatia
• Still far away: Russia, the Ukraine, Yugoslavia,
Albania
• Plain dictatorships: Belarus
Different transitions in central
and eastern Europe (II)
• Economic transition:
– Mammoth economic changes
– Serious difficulties in the passage from centrallyplanned to free-market systems
• Wholesale reform of how the economy is run
• Change in the attitudes and habits of economic agents
• End of central planning, of state support and subsidies
to basic industries
• Introduction of market institutions such as competition
and profit
• End of full employment and employment for life
• Introduction of ‘real’ trade
Different transitions in central
and eastern Europe (III)
• Economic transition (II):
– Two alternative approaches
transition:
to
economic
• Shock therapy: Rapid demise of socialist economic
institutions and their replacement by market
institutions (Poland and Hungary, to a lesser extent)
• Gradual and incremental transition: step by step
change of institutions (Czech Republic)
– No system has yielded magical results
• Loss of economic weight of most CEECs
– Severe recession in the early 1990s
– Steep rise in unemployment
• Transition to capitalism has often implied the loss of
one generation’s worth of income (Fischer, Sahay, and
Végh, 1997)
Different transitions in central
and eastern Europe (IV)
• Economic transition (III):
– Weak economic situation across CEECs
• The republics of the former USSR have been
especially hard hit
• Although candidate countries, Turkey and the
European republics of the former USSR together have
a population which is similar to that of the EU-15, the
size of their economies put together represents less
than the joint size of the Dutch and Spanish economies
• The GDP per capita of candidate countries is lower
than that of the poorest member states in EU-15
– Economic transition is proving more complicated
that political transition
• Few CEECs have managed to achieve a full transition
to a market economy
Evolution of GDP
‘First wave’ countries
‘Second wave’ countries
15
15
EU15
5
EU15
5
CZE
-5
BGR
EST
-5
HUN
-15
LVA
LTU
POL
-15
SVN
-25
ROM
-25
SVK
-35
1991
1992
1993
1994
1995
1996
1997
1991
1992
1993
1994
1995
1996
1997
Turkey
Ex-Soviet countries
10
15
5
EU15
-5
BLR
MDA
-15
5
EU15
0
TUR
RUS
UKR
-25
-5
-10
-35
1991
1992
1993
1994
1995
1996
1997
1991
1992
1993
1994
1995
1996
1997
GDP in CEECs with respect to the EU
1991
1994
1997
100.00
100.00
100.00
‘First wave’
Czech Republic
Estonia
Hungary
Poland
Slovenia
2.73
0.63
0.08
0.56
1.24
0.22
2.73
0.58
0.06
0.53
1.35
0.22
2.96
0.61
0.06
0.54
1.53
0.23
‘Second wave’
Bulgaria
Latvia
Lithuania
Romania
Slovakia
1.07
0.17
0.14
0.14
0.40
0.22
0.88
0.15
0.08
0.08
0.37
0.20
0.88
0.12
0.08
0.09
0.36
0.22
Turkey
1.83
1.91
2.21
Ex-Soviet
Moldova
Belarus
Russian Federation
Ukraine
9.16
0.08
0.35
6.67
2.06
5.87
0.04
0.25
4.40
1.19
4.96
0.03
0.24
3.84
0.85
EU15
Source: Own elaboration with World Bank World Development Indicators (2000) data.
GDP per capita in CEECs
1980
1986
1992
1996
1997
100.00
100.00
100.00
100.00
100.00
‘First wave’
Czech Republic
Estonia
Hungary
Poland
Slovenia
43.96
38.51
-
64.68
43.55
33.39
-
51.16
25.19
35.50
27.34
53.72
51.94
23.41
34.26
30.58
56.72
50.70
25.28
34.73
31.45
56.92
‘Second wave’
Bulgaria
Latvia
Lithuania
Romania
Slovakia
27.37
34.00
34.00
-
29.19
35.73
34.76
-
24.96
21.74
26.68
21.50
36.09
21.41
18.28
19.97
23.01
37.40
19.34
19.01
20.36
20.79
38.16
Turkey
27.37
28.31
30.32
29.88
30.63
Former Yugoslavia
Croatia
Macedonia
-
-
23.70
20.55
23.80
15.94
25.32
15.48
Ex-Soviet
Moldova
Belarus
Russian Federation
Ukraine
-
-
13.16
31.27
33.35
23.29
7.42
21.66
21.71
11.25
7.24
23.40
21.08
10.56
EU15
Source: Own elaboration with World Bank World Development Indicators (2000) data.
Different transitions in central
and eastern Europe (V)
• Identity transition:
– From being citizens of a state to being citizens of
another (in some case with little or no historical
tradition):
• Former East Germans, becoming citizens of a united
Germany
• Former Czechoslovakians, becoming Czech and
Slovak citizens
• Former Soviets citizens, being divided into 15
independent republics.
• Collapse of the former Yugoslavia
– National identity still not well defined:
• Especially in states with little historical tradition
(Belarus, Bosnia-Hercegovina, Macedonia, Moldova)
• In states with large minorities
Different transitions in central
and eastern Europe (VI)
• Diplomatic transition:
– Failure of regional co-operation after the
collapse of communism:
• Lack of success of regional co-operation: the Central
European Free Trade Area (CEFTA) never really got
off the ground
• Commonwealth of Independent States (CIS) in the
former USSR with little economic and political clout
– Integration or reintegration of CEECs into a
‘Western-dominated’ international system:
• From the Warsaw Pact to NATO
• Integration in international organizations
economic content: IMF, OECD, WTO
• Membership of the EU as the ultimate goal
with
Enlargement and European
integration
• EU engaged during the 1990s in the widening vs.
deepening debate:
– Deepening: Steaming ahead with greater
economic and political integration and reform
before opening the gates to new members
• Consequences: It becomes more difficult for candidate
countries to join, as the acquis communautaire
expands considerably
– Widening: Allow candidate countries in first
and then undertake reforms
• Consequences: The consensus to proceed with
economic and political integration becomes more
difficult
Enlargement and European
integration (II)
• The position each country adopted has depended
on their future vision of the EU, as well as on
internal political considerations
– France, Benelux, Spain, and Portugal on the deepening
side
– Britain on the widening side, because of the deeply-rooted
Euroscepticism in the country
– Germany, Italy, and Greece in two minds: pro-widening,
but wanting at the same time to deepen the EU
– Admission of Austria, Finland, and Sweden in 1995
reinforced the pro-widening camp
• Initial decisions favoured the deepening agenda
– Process of enlargement has been slow and relatively ad
hoc
– Introduction of criteria in the 1993 Copenhagen summit
Enlargement and European
integration (III)
• ‘Copenhagen criteria’ 1993:
– stable institutions guaranteeing democracy, the rule of law,
the protection of minorities, and human rights;
– a functioning market economy, capable of coping with an
increasingly competitive market pressure
– an institutional framework capable of assuming the
obligations of the acquis communautaire in its entirety.
• Enlargement, however, played second fiddle to
economic and political integration until the
implementation of the single currency
• It is only since the arrival of the Euro that
enlargement has become the EU’s greatest
priority
Enlargement for candidate
countries
• For candidate countries the EU is regarded as
guaranteeing:
– Democratic stability
– Economic prosperity
• But it also implies:
– Swallowing the bitter pill of thorough economic,
institutional, and political reform
– Economic reform may have important implications for
economies that are, as a general rule, much poorer that
previous candidates
– Greater need for adjustment than in previous enlargements
as a result of the growth of the acquis communautaire in
recent years
Enlargement for the EU
• Enlargement will increase the heterogeneity of
the EU and therefore requires a rethinking of
European institutions and policies
– The Treaty of Rome was originally devised for six member
states, enlargement to twenty five or more members
implies a thorough revision of the Treaty…
– And a thorough revision of the current institutional
framework…
– And of the decision-making rules
– Enlargement has also important budgetary implications
• Thorough revision of main EU policies (agricultural,
structural, and cohesion)
– Enlargement may revive the large flows of east-west
migration of the early 1990s
Conclusion
• Enlargement will transform the EU
– It will increase political and economic stability across
Europe
– It will increase the budgetary burden on the EU if no
thorough reform of current policies is undertaken
– It may lead to institutional paralysis without thorough
reform
– It will tilt the balance of power in the EU, probably in
Germany’s favour
• A successful enlargement requires a thorough
reform of:
– The economies, policies, and institutions of applicant
countries
– A thorough institutional and policy reform in the EU itself