Theme: The recent EU enlargement taking in ten new members creates fresh expectations within the Continent that will influence community thinking during the next few years.
Summary: The Europe that goes from the Atlantic to the Urals comprises 47 countries. Following the signing of the Treaty of Rome, six states took the initial step to build a community in order to create a climate of peace and prosperity capable of meeting the global challenges of the future as then perceived. From that moment until the present day, the Union has not ceased to expand and deepen its structures and, in the process, it has become one of the most powerful institutions in the world.
Between 2004 and 2007, twelve new countries will accede to the EU in the most significant enlargement the Union has so far undertaken. It is an enlargement of great historical significance that corrects one of the most ill-fated chapters of the 20th century. The inclusion of states still suffering from deficiencies inherited from the political and economic bloc to which they belonged for more than four decades will pose many problems in the economic sphere.
Analysis: On 1 May 2004, ten countries acceded to the European Union. On 1 January 2007, it is likely that a further two, Bulgaria and Romania, will join them. In the past few months, there have been mixed feelings of satisfaction and fear, both among the new member states and among the fifteen who are taking them in, in the face of the challenges that lie ahead. It must be borne in mind that there has never been an enlargement involving so many countries nor one in which the existing differences between the old and the new members have been so pronounced. The new arrivals are wondering, to varying degrees, whether or not they will be able successfully to enforce the rules of the world’s most powerful economic club.
The present fifteen member states –some of whom are not going through the best of times– have their fears about the wave of migration that might be unleashed, about the commercial challenges posed by the highly competitive products of the new member countries and about the delocation of investments that might be involved. In anticipation of the costs that a wider and statistically poorer Europe will generate, some members are proposing that the community budget should remain at around 1% of the joint GDP. The following pages will analyse what this fifth enlargement really means and try to show to what degree the fears and expectations aroused are justified.
Since the signing of the Treaty of Rome in 1957 by the six founding members of the EEC, the Community has undergone five enlargements. The first took in two developed, Atlantic countries, both members of NATO (the United Kingdom and Denmark) and a third neutral country (Ireland), which, at the time, lagged economically some way behind, although it is now among the Continent’s most prosperous countries. The three together accounted for an area of 356,000 square kilometres and a population of 69 million people.
In 1981 and 1985, there were two further enlargements that brought in three Mediterranean countries, also members of NATO, whose development was below that of the average for the rest of the Union. In territorial terms, this enlargement amounted to 717,500 square kilometres and an extra 62 million people.
The fourth enlargement in 1993 involved three neutral, developed countries –one belonging to Central Europe (Austria) and two Nordic countries (Sweden and Finland)–. The three totalled 22 million people and a surface area of 833,000 square kilometres.
Between 2004 and 2007, the fifth enlargement will involve 106 million inhabitants and 1.08 million square kilometres. Which countries are acceding? What will they represent to the EU as a whole? And what are the advantages and possible future disadvantages of this fifth enlargement?
The present intake of new members represents the biggest enlargement so far undertaken. In the past, enlargement involved either one country (the case of Greece), two countries (Spain and Portugal) or three countries (in the two remaining cases). Now twelve countries are to be admitted. Together, they represent 34% of the EU’s total territory and their populations will increase the community’s by 28%.
The new members include three countries that were part of the former Soviet Union (the three Baltic states), six countries that were members of the Warsaw Pact and Comecon (those of Eastern and Central Europe), one that was part of the Yugoslav Federation (Slovenia) and two Mediterranean island nations (Cyprus and Malta).
Despite being the biggest enlargement ever undertaken in terms of numbers, the economic weight of the twelve new countries is slight, given the retarded development many of them suffered during their long association with communism. The twelve countries together account for only 5% of the EU’s GDP, that is to say, as a whole they have approximately the same GDP as Spain.
The apparent disadvantages of the present enlargement –for Europe in general and for Spain in particular– can be summed up in the following points:
• Large-scale migrations in search of better labour markets. Germany and Austria were the countries that showed the greatest concern with this issue, perhaps because of their greater geographical proximity to the new member states and the existence of an already abundant work force in those two countries. Spain did not view the chapter on the Free Movement of Workers with special concern, for two reasons: (1) The seven-year transition period imposed upon our country at the time of our accession to the EEC was fresh in the memory and the effects of that period were quickly cancelled out by the prompt return of our own emigrants as soon as suitable working conditions were to be found in Spain; and (2) our extremely low birth-rate means that we lose a total of 250,000 inhabitants per year, and this decrease can only be effectively countered by an adequate intake of immigrants. Spain has recently signed agreements on immigration flows with the two most populated candidate or member states in the group (Poland and Romania), and, like the rest of Europe, Spain will have to control any other demographic movements that may occur, particularly from outside the Union, converting it into a multiracial environment.
• Maintenance of the Regional Policy –with its consequent payment of contributions for the Cohesion or Structural Funds by the richest members– for a greater length of time. In the Spanish case, fears had been expressed that with the accession of the new member states, there would be a statistical re-alignment that would automatically convert us into one of the rich countries and thus we would lose our right to these funds. The truth is that Spain would have reached the threshold of 90% of community GDP by the year 2007 and therefore, regardless of enlargement, it would no longer be able to draw on the Cohesion Funds –a fact that would be viewed as a success for our economy–.
The community fear of having to continue, for many years to come, to pay the contributions needed for the new members is however firmly grounded. The twelve countries involved in this fifth enlargement are currently growing at an average annual rate of 3.8%. If the EU were to maintain its current annual growth rate of 2%, the convergence of the twelve new members would not occur for 56 years, a figure that could even rise to 90 or 100 years should their respective growth rates fall below the required rate of convergence. To give an extreme example: if one of the candidate countries were to grow at an annual rate of 2% and the community’s present average growth remained unaltered, convergence would not take place at all.
• Economic dislocation and diversion of investments from former net receivers of capital to new member states having cheaper labour costs. This phenomenon is already taking place and, in all likelihood, will continue to do so. Investments will tend to be diverted to cheaper labour markets for the same reasons they once turned towards Spain. What we Spaniards do not seem to realise is that in the past twenty years Spain has changed from being a net investment receiver to becoming the world’s sixth top investor. Spain must learn to view the new members not as competitors, but as potential destinations for our own investments and that will help balance out our current tendency to concentrate capital in South America. Our country must also continue to foster the best possible conditions to continue to attract external capital here.
• As a result of the creation of wider free markets, the new members, with their cheaper products, are nowadays competing in world and European markets against products from both Spain and other EU countries. The truth is that Spain, which has an extremely low share of the Union’s percentage of trade with the new members (under 2.5%), has a trade surplus of over 1 billion euros a year. If we could increase our trade by 5% –although that would imply some changes in our trade spread– our exports could make large profits in the new markets.
As well as posing the numerous challenges we have outlined, enlargement also offers great advantages. The accession of ten new member states –Bulgaria and Romania will follow later– will mean the creation of a much wider Union, over a larger geographical area. And in this new Union, the new members are complementary to many of the existing members, particularly Spain.
They complement each other economically. For example, the Continental climate products of Central Europe are complementary to our own Mediterranean agricultural products, as is the output of easily inter-changeable industrial products.
For other EU countries –such as Germany, Italy and France– the enlargement will imply a strengthening of their already very powerful markets. Germany accounts for almost 50% of total EU trade with the new members. This renders rather meaningless Berlin’s stated determination to cut back on EU expenditure and freeze Regional Policy.
In the cultural sphere, the Slav, Magyar and Mediterranean worlds will contribute greatly to the Community acquis. They also open up a vast realm for the expansion of our languages –Spanish most notably– and of our cultural and artistic manifestations.
Concerning the complementary nature of our diplomacy, politics and history, it is obvious that all fifteen members, Spain included, have a lot to teach and much to learn from the newcomers. Our South American and Mediterranean connections, our conflict-free historical past with Central Europe, and our mutually enriching differences will be of major importance for the new EU.
But over and above the fact that the new members are complementary, there is one other reason that alone would suffice to justify the accession of the new members. We have to make amends for an episode in Europe’s recent history. An episode that should never have happened, when these countries were abandoned to their fate as members of a club to which they had no desire to belong. These countries –every bit as European as we are– now join an organization that will provide them with peace, progress and democracy.
Once this important enlargement has been accomplished, the EU will be greatly strengthened, although the integration process will not have been fully completed. There are still four groups of European countries outside the Union. They are the three Western countries that choose to remain on the fringes of the EU (Norway, Switzerland and Iceland), the four small states (Andorra, Monaco, San Marino and Liechtenstein), the five western Balkan countries and the seven East European countries, which include the giant of them all, Russia. Turkey, which might begin its accession negotiations in 2005, should be added to these. Croatia, the most advanced of the Balkan states, might start its negotiations even earlier.
Conclusions: Since its birth in 1957, the EEC –later the EU– has not ceased to strengthen and expand. Today, the European Union is a success story.
The fifth enlargement takes in an important group of countries. They will contribute significantly to the integration process, increasing Europe’s size and population considerably. Everything points to the fact that the success story will continue although, for the first time, this cannot be fully taken for granted given the economic levels of the new members.
In addition, one cannot ignore the complexities of the situation in which the EU finds itself nor, indeed, of the world scene. Both are factors that have delayed the creation of a European Constitution and hindered the Union from acquiring a specific profile and weight. Only the coming years will tell how Europe works, with almost 30 members, more than 20 languages, an almost common currency, a robust first pillar and two others –the second and the third– that cannot lag behind without putting the whole structure of the Union at risk.
Jorge Fuentes Monzonís-Vilallonga
Diplomat, currently Ambassador at Large for the Enlargement of the European Union