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Last Updated: Wednesday, 16 April, 2003, 04:05 GMT 05:05 UK
Should Old Europe fear the New?

By James Arnold
BBC News Online business reporter

Young people in Tallinn
A threat to western prosperity?
In February, the European Commission advertised for 1,000 temporary workers to stuff envelopes and lick stamps during the EU enlargement process.

But instead of the couple of thousand applications the Eurocrats were expecting, 25,000 CVs gushed into Brussels - more than 21,000 of which were from Poland, Hungary, the Czech Republic and the EU's other prospective new members.

For many west of the former Iron Curtain, incidents like this sound an economic warning bell.

This week, those countries' leaders are gathering in Athens to sign the enlargement process irrevocably into being.

Could they - as many sceptics fear - also be signing away Europe's cosy prosperity?

Labour pains

Politically, the Athens gathering is something of a triumph.

Getting 15 argumentative nations to agree terms with 10 equally quarrelsome former enemies is a huge achievement, notwithstanding the fact that much remains to be finalised.

But it is economics, rather than politics, that gives critics of EU enlargement sleepless nights.

EU candidate economies

Concerns over the fall-out from enlargement are in three broad categories.

First, there are worries that Europe's labour markets will be put under strain.

The unemployed or underpaid millions of Eastern Europe, it is felt, are already pouring west; throwing the labour market open will only accelerate that exodus, swamping the West while draining the East of precious talent.

At the same time, workers in the West, especially Germany and Austria, fear that ever more of their jobs will be exported to Hungary and Poland, where labour costs are about one-fifth of the EU average.

Not to be trusted

Second, Westerners fret that EU enlargement could dent the union's economic prestige.

Slovak sheep farmer
Not sophisticated enough for the West?
East Europeans certainly are poor: the accession of the 10 leading candidates will raise the EU's population by one-quarter, but its total economic output will increase only by 4%.

All the candidates have slick-seeming economic machinery - central banks, stock markets, bond markets and the like - but few in the West feel they have the wisdom or experience to inspire the trust of the financial community.

The fact that few East European countries seem to stick with the same government for more than one term, and that the region's communists and other extremists refuse to lie down and die, means the candidate countries still have a faintly maverick reputation.

Many hands make heavy work

Third and most pressing, no-one is sure what enlargement will do to the EU's already unwieldy administration.

European Parliament
We'll need some more seats in here for a start
Poorer regions in the West fret that Brussels subsidies will be diverted to plainly needier recipients in the East; farmers fear that Europe's vast agricultural budget will be guzzled away by the numberless and inefficient smallholders of Central Europe.

Nor is it trivial to be concerned about how the EU will make decisions when it has 25 members.

Even the logistics of arranging translation into 21 official languages, rather than the current 11, boggle the mind.

Flexible friends

In fact, none of these three bundles of worries are as knotty as they seem.

Labour markets certainly are due for a shake-up; many East Europeans, especially young people, are far more desperate to work in the West than their governments like to admit.

But the much-feared barbarian invasion is unlikely: wage differentials on either side of the divide are already equalising, and western governments have done their best to dissuade casual job-seekers.

In any case, the European economy is in sore need of freer movement of labour.

One of the issues that has prevented the eurozone becoming a homogeneous continental economy like the United States is that its population has been reluctant to move in search of work.

Up to speed

Nor should the West fear the loss of its prestige too much.

Eastern Europe may be poor, but it is willing.

Behind the occasionally ramshackle facades of the candidate countries lie bodies of legislation that in most cases way exceed EU standards.

Almost all the countries fulfil Maastricht criteria for adoption of the single currency, although they do not have to do that until two years after they join the EU.

And while western Europe's economy is growing at just over 1% a year, the East is expanding at four times the rate.

The financial markets certainly anticipate no loss of prestige: most East European currencies have appreciated against the euro in recent years, and the region's credit is reckoned as good as much in the West.

Poverty row

Justified worries still hang over the EU's budget, however, despite a deal struck last year to delay subsidies to candidate countries.

Hungarian corn farmers
Brussels won't make Hungary's farmers rich
It is still far from clear how seriously voters in poor Western regions such as Extremadura in Spain or Calabria in Italy will react to the enrichment of the East.

So far, concern seems only marginal, reflecting perhaps the fact that most Europeans have only a hazy engagement with EU issues.

Indeed, Brussels may get away without a major fuss on the issue: the current policy of niggardliness and jam-tomorrow promises has prevented the issue taking off in the West, and most candidate countries have been too polite to kick up a storm.

Cuts both ways

Which raises a question: just why is EU enlargement seen as such a one-way street?

In some ways, Brussels has more to gain from expanding the union than the new members have from joining.

East European metal worker
About to get tied up in red tape
The 10 candidate countries already enjoy the trade privileges, and quite a bit of the subsidy, that they would get as EU members.

Nor is the promise of future subsidy quite as generous as it was: thanks to reductions and delays, most candidate countries will be worse off in their first year of EU membership than they were before, according to a Commission report last year.

Tied down

At the same time, new members will have to tighten their belts to fit in with EU strictures.

Imposing Maastricht rules on budget deficits will crimp government spending at a time when many in the East are still reliant on the state for their livelihood.

Eastern Europe's relatively free-and-easy economies will have to become more bundled in red tape, especially regarding environmental regulations.

And if anyone is worried about a loss of economic prestige, surely it should be the East Europeans - after all, the EU's sluggish growth and unbudgeably high unemployment are scarcely something to aspire towards.

Forget working in Brussels; the clever CVs will be heading in the other direction.

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