Will expansion bring more unemployment and immigration? Is it affordable? Will it increase crime? Martin Brusis of the Center for Applied Policy Research (CAP) in Munich answers 12 questions about expansion.
A much larger union come May 1.
1. Is EU expansion necessary?
Yes, because it will overcome the institutional division of Europe that has continued for over a decade after the end of the Cold War. But more than anything, expansion will increase political and economic stability in Europe. The new member countries will be drawn into the complex negotiating process of the EU, whereby conflicting interests between states are worked out in detail through diverse legal and procedural guidelines, through alliances with other states, and through intensive multilateral cooperation on many different administrative levels. Conflicts aren't allowed to escalate into hostilities, because too many other common interests are at stake. The nature of the EU system is measured and temperate, and that's been having an effect on the new member states since the beginning of the expansion process. And it also hinders the likelihood that any of these states could fall back into an authoritarian system.
2. What economic advantages are to be gained from expansion?
The economic interdependence and the catching-up process that Eastern Europe is undergoing should have the effect of additional economic growth for the new and old EU states. Germany is profiting from trade in Eastern Europe. In 2001, exports to the region accounted for over 11 percent of German exports -- that's an increase of almost 17 percent from 2000. Exports to Eastern Europe now rival German exports to the United States. In the same year, Germany's trade balance with Eastern Europe amounted to almost €1 billion. According to the European Commission, eastward expansion will mean an additional 0.5 to 0.7 percent economic growth per year for the current 15 EU members. The countries that will profit the most are Germany and Austria: Here, the Commission reckons with a yearly growth increase of up to 1 percent.
3. What about the risks?
If the various governments aren't able to get the draft European constitution approved, then after expansion, the EU's decision making process could be paralyzed. In that case, the European integration process could increasingly be superseded by different forms of bilateral cooperation. And after all the past history of tension among some states, that entails big risks. Another risk comes from the populist parties and movements in Europe, who are using the eastward expansion to spread fear among citizens, and then mobilizing this fear for their own purposes.
4. How is expansion being paid for, and is it affordable?
Within the scope of the EU's budget for the years 2004-2006, expenses of €40.85 billion have been earmarked for the new member states. Germany's share of the EU budget for the years 2000-2006 averages at about 23 percent, so Germany has to bring about €9.4 billion to the table to help finance expansion. This sum is affordable, especially if you view it in terms of the expected economic growth that will result from expansion. An expected growth of 1 percent of Germany's gross domestic product is equivalent to around €19.82 billion. However, the financing for expansion beyond 2006 has yet to be decided. If one were to simply extrapolate and transfer the EU's current spending policies to the new member states, there could be an enormous increase in costs beyond 2006. The direct payment of subsidies to farmers in the new member states that was agreed on during accession talks is especially problematic. The new and old states need to come to an agreement on a future financing of the EU that both reflects the political priorities of European integration and is in accordance with the EU's principles of solidarity.
5. How will expansion affect everyday life?
In the old member states, people will hardly notice a change because the new freedom of movement will only be introduced after a transition period of two to seven years. Similarly, the border controls will only start to be lifted after a longer transition period. Even as a tourist, in years immediately following expansion, you'll still have to pay with the old national currencies in the new member states. But thanks to harmonised EU standards on quality, consumers of European goods will be guaranteed better products.
6. How will expansion affect unemployment?
Structurally weak border regions, low-skilled laborers and wage cost-intensive branches will have to reckon with increased competition from the new member states, and increased unemployment. But these effects aren't solely the result of eastward expansion. They're primarily the effects of globalization generally, and would have happened with or without expansion. On the other hand, the expected growth in trade could create, or at least maintain jobs in other branches or regions. Economists predict that the EU's trade balance with Poland, Hungary, the Czech Republic and Slovakia will have the immediate effect of securing around 65,000 jobs (44,000 in Germany) in manufacturing industries, and could indirectly secure as many as 114,000 jobs (77,000 in Germany). A 'wave of labor migration' from Eastern European countries isn't expected, not least because of the transition period where there'll be no free movement of labor. It'll be primarily highly skilled workers and specialists, as well as workers from border regions with limited immigration status who will be trying their luck on the labor markets of the western European states. And this is hardly expected to have a large impact on the German job market.
NEXT PAGE: PART II