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Economic hurdles of EU expansion into Eastern Europe

Marie Sina
April 23, 2024

Russia's invasion of Ukraine has pushed enlargement back on the European Union's agenda. But how much would taking on new members like Ukraine, Moldova and Georgia strain the bloc's budget?

Demonstrators gather in front of the Palace of Culture and Science to attend a farmers' protest against EU climate measures and Ukrainian imports in Warsaw on February 27, 2024
EU farmers fear that Ukraine's entry into the bloc could threaten their livelihoodsImage: Sergei Gapon/AFP/Getty Images

"No more farmers, no more bread" was a popular slogan during the more than 200 street blockades organized by Polish farmers in February this year.

Outside the Polish town of Kock, a two-hour drive from the Ukrainian border, for example, hundreds of tractors blocked a street to prevent cheap Ukrainian grain from entering the country. For farmers here, there's another major worry: They fear that the entry of Poland's eastern neighbor into the EUcould threaten their livelihoods.

"They must forget about it. It's a crazy idea," one of the protesting farmers told DW during the blockade.

For more than a decade, the EU seemed like a closed club with several countries lining up to get in. But Russia's invasion of Ukraine has fundamentally changed this.

In December, the EU opened accession talks with Ukraine and Moldova and granted candidate status to Georgia.

Political push hits budget constraints

"For obvious reasons, the EU is now seeing enlargement as a security instrument. And the budget is part of the discussions, but it might not necessarily be the deciding factor," Thu Nguyen, deputy director of the Berlin-based independent think tank Jacques Delors Center, told DW.

The recent protests in Poland are a reminder though that economics are invariably part of the EU's political drive. And Brussels' new expansion enthusiasm is accompanied by fears that enlargement will put some of the EU's members and citizens at an economic disadvantage.

The EU spends the biggest chunks of its budget on regional development and agriculture. The less well-off member states get more money from the EU than they pay in. The eight countries currently in line for joining are all poorer than the current member states. Turkey is the ninth EU candidate country, but its accession process has been suspended. 

Can the EU afford to expand?

Hopes for economic improvement

For Jasna Pejovic from Montenegro, EU membership would give her country "more legitimacy." 

Montenegro is the country furthest ahead in the queue to join the EU, and 80% of its population wants to be part of the bloc. Speaking to DW at the office of her e-learning startup Flourish in the capital, Podgorica, Jasna says being an EU citizen would be a stamp of approval for her business.

"[Investors] say: 'We never did business with Montenegro, and we don't know how to do it.' I asked them: 'If we were part of the European Union, would it be different?' And they say it would be different. Because they know about the European Union," she said.

With a population of just 630,000, Montenegro is a small country like many in the Western Balkans. It wouldn't be much of a strain on the EU's budget.

"If the EU were to take in Montenegro tomorrow morning and pay for it, literally pay for it. No one would notice, so it's clearly affordable," said Nathalie Tocci, an advisor to two former EU foreign policy commissioners. But, for the EU, "the economic upside is not there," she added.

Mila Kasalica, an economist and finance chief of the municipality of Zeta in Montenegro, believes EU membership would transform her country. "We have around 45% to 48% of the living standards of EU countries. That is the big dream in the accession process: Converging in real terms with [EU] living standards."

Admitting the Western Balkan countries would bring economic opportunities to millions of people at a manageable cost to the EU. Yet, most Western Balkan countries have been EU candidates for over a decade. North Macedonia, even for two.  

Ukraine's complicated EU candidacy

More recently, a new candidate for the EU accession has emerged on the eastern horizon: Ukraine. Hard-pressed by the Russian invasion, the country received candidate status in June 2022.

But the most populous — and poorest — of all candidate countries would be "a different ball game," says Nathalie Tocci, "because of its size, because of its agriculture sector, because of its average wealth, and, above all, because it's a country at war with €500 billion in reconstruction and still counting."

If Ukraine were to join the EU, it would become the bloc's biggest agricultural producer and weigh most heavily on the bloc's finances.

While all of the EU's farmers combined till about 157 million hectares (387.35 million acres) of arable land, Ukraine would add a further 41 million hectares.

For some current members, that would mean unwelcome competition in the single market.

Poland, for example, has become one of the most competitive food producers in the EU since joining in 2004. If Ukraine joins the EU, this role will be threatened, because Ukraine's industrial farms dwarf European ones. "We would most probably go bankrupt. Because we would be easily flooded with the much cheaper products from Ukraine," says Lukasz Czech, a Polish grain and pig farmer from Parczew, who receives part of his income from EU subsidies.

How much would expansion strain the EU budget?

According to an internal investigation by the European Council, admitting all candidates would cost the EU €256 billion ($272 billion), with Ukraine alone estimated to receive €186 billion over seven years, not including reconstruction expenses.

Thu Nguyen thinks "the financial impact would be not as high as some of the numbers suggest."

However, Thu Nguyen cannot say exactly where the extra money will come from. "It is possible that it comes from the current member states. It is possible that the EU raises its own money through new resources. For example, there are discussions about a plastic tax or carbon adjustment mechanisms."

Some of the EU member states are pressing ahead with the accession process at an unprecedented speed. Whether or not they succeed, however, will depend on the future makeup of the new EU Parliament to be elected in June.

Edited by: Uwe Hessler