Paying (A Lot) For EU Membership

A report into the planned enlargement of the European Union in 2004 has sent ripples of anxiety through the nine countries that are striving to meet the conditions regarding possible membership.

The news is not good. The hopeful states have been told that funding promised on receiving full membership is being delayed by at least two years. On top of that, the countries are still expected to make membership payments while they wait.

The European Commission's so-called 'working document' on the calculation of net budgetary balances for new members sums up the full financial consequences of enlargement for potential new member states between 2004 and 2006.

The possible enlargement of the European Union to 30 countries is the most significant event in the history of the EU since its inception in 1957. Spreading its borders as far as Finland in the north and Greece in the east, the EU hopes to become a more powerful player in international political and economic spheres.

However, the subject of enlargement has already divided Europe before it has brought it together.

The payment of farming subsidies to be delayed

Those wanting to be part of the EU now have major financial concerns. The European Commission's offer to give new members 25 per cent of the agricultural subsidies it gives current members is not going to happen in 2004, as planned. The subject is already a thorny one between EU members, many of which object to paying out farm subsidies to new members.

According to the commission's working paper, the root cause of the whole funding problem is not the lack of money, but its slow movement. The paper states that the farming subsidy payment is subject to what it calls "budget lag."

The commission document assumes the flow of funds will speed up in 2005 and 2006, but even then, a major part of the new members' income will come from late payments for allocations made for 2004. It has already been made clear by the Commission that these terms are the best the candidates can get.

The explanation for the lack of promised cash will not please any of the candidates, all of which have said they are looking for significant improvements in their finances from the first year of enlargement onward.

New members will have trouble 'making ends meet'

In fact, the European Commission reckons the European Union will have a difficult time helping the new members make ends meet in 2004, with the situation only improving over the next two years.

What happens after 2006 is an open question at this point, as the EU budget for 2007 to 2013 has yet to be negotiated. By that time, the new members hope to be full partners at the negotiating table.

Until then, however, most of them will have a hard time avoiding paying more into the EU budget than they receive from it. In fact, the European Commission calculates that in 2004, only the three Baltic countries will see sizeable improvements in 2003.

Lithuania, which will already benefit from the nuclear 'safety-program' fund, Latvia,and Estonia expect to receive well needed money after one year of membership.

Poland, by far the largest, and far from the richest, of the applicants will benefit to a lesser degree.

All the others - Cyprus, Malta, Slovenia, Hungary, the Czech Republic, and even Slovakia - could lose out, according to the projections.

Redevelopment funds are also subject to 'budget lag'

And it gets worse. In the case of the second biggest expense for the EU after agricultural subsidies, the 'structural funds' which are designed to finance regional economies, only 16 per cent of the 2004 allocations can be released that year in the form of advance payments. Other development funds will also be less than expected.

The allure of membership is beginning to dim in the light of the paper. While waiting for delayed payments, the new members are expected to assume full responsibility for their own financial membership obligations.

New states will have to pay up like the rest of the club

From 2004 onward, they will be making full contributions to the EU budget, which demand the same percentage of their gross national products (GNP) as the contributions made by current EU members.

The candidates are expected to contribute roughly three billion euro of the annual EU budget of 98.6 billion euro that all member states pay into.

Intriguingly, some of the current net contributors to the EU budget - Germany, the Netherlands, Austria, and Sweden - have negotiated a reduction in their share of the British rebate payments.

According to Commission calculations, the new members will in addition need to share the extra burden generated by these reductions.