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Doc. 10012
8 December 2003
Economic aspects of European Union
enlargement: the crucial years ahead
Report
Committee on Economic Affairs and Development
Rapporteur: Mr Adrian Severin, Romania, Socialist Group
Summary
The 2004 European Union enlargement to include ten new member countries – with more to follow in the coming years – will have profound consequences for the entire continent. Enhanced prosperity due to an enlarged EU Internal Market will be accompanied by a dramatically widening wealth gap between countries as regards income and social protection. It is vital that these divergences be bridged as rapidly as possible and that no barriers arise between an enlarged EU area and countries not belonging to it.
The 45-member State Council of Europe – comprising virtually the whole of the continent – has a primary duty to ensure the above. National parliaments meanwhile must serve as intermediaries between citizens and executive institutions – informing, defining challenges and conveying hopes and expectations.
Building on an Assembly seminar held in Budapest in September 2003, the report among other things advocates a considerable role for the Council of Europe’s revised Social Charter to reduce social and economic disparities among countries and the pursuit of reform across the continent, especially as regards labour markets, pensions, public health systems, migration and agriculture, where the EU’s Common Agricultural Policy is identified as being in particular need of reform. The report also calls for the creation of a ‘European Forum for Social Dialogue’ involving representatives of all sides in the social dialogue in the wider Europe and for the establishment of a joint Council of Europe-European Union Committee for the purpose of streamlining policies in the EU area with those pursued in other European countries.
I. Draft Resolution
1. The Parliamentary Assembly welcomes the milestone decisions of the European Union - via the Copenhagen Summit of December 2002 and the popular votes by accession countries - to push forward with European Union enlargement to include twenty five countries in 2004 and additional countries in 2007, as well as other countries for which accession is foreseen at a later stage. As 75 million people join the European Union in 2004 and many more later, major political, economic and social challenges lie ahead for the whole of Europe.
2. The Assembly, building on the conclusions of the Seminar “Economic Aspects of European Union Enlargement: The Crucial Years Ahead”, held in Budapest in September 2003 at the initiative of its Committee on Economic Affairs and Development, stresses the duty of national parliaments to serve as bridges between European citizens and executive institutions in assuring that all parties are duly informed, expectations conveyed, problems identified and contributions taken into account in a timely and efficient manner.
3. While the long-term perspective of successive European Union enlargements holds the promise of enhanced prosperity for the countries concerned, one of the major immediate consequences of this process will be much wider social and economic divergences in the European Union. Unless this welfare divide is bridged successfully over the years to come, social frustration could set in across the enlarged EU and leave the Greater Europe weaker and more divided.
4. Given its pan-European membership, the Council of Europe has a unique role to play in ensuring that no two-tier Europe results from the above but that all countries remain committed to the development of one Europe. The Organisation should therefore work towards reducing social and economic disparities among its member states via, for instance, the application of its revised Social Charter and through the encouragement of ongoing economic reforms, especially those relating to job creation, adjustments to pension and health-care systems, harmonisation of work legislation and intra-European migratory flows.
5. The Assembly pays tribute to the strides in development reached by the accession countries and believes that their positive social contribution will translate into a new economic dynamism in the enlarged EU. It points to the special difficulties arising from the European Union’s present Common Agricultural Policy (CAP) which, in the current context, has ceased to be either rational or fair. The current enlargement should be used as a catalyst for a long overdue reform of the CAP, not least as a part of the EU’s moral obligation vis-à-vis the developing world. Apart from the need for the CAP reform to proceed more vigorously and for acceding countries to adjust to the competitive pressure from the other member states of the EU, additional efforts will have to be made to encourage and accompany structural changes in the accession countries, also in turning farmers into entrepreneurs.
6. Solidarity mechanisms will have to be strengthened not only within the enlarged EU but also across the continent for a truly inclusive Europe. The Assembly will continue to play a key role in fostering dialogue and promoting core Council of Europe values among its member states with a view to ensuring fair exchanges between countries inside and outside the EU and a ‘win-win’ situation for all, including for countries which cannot or do not wish to join the EU. Membership in the EU should not be seen as an aim in itself and other mechanisms of economic co-operation between European states should be strengthened, such as through the European Economic Area agreements or the “Wider Europe – Neighbourhood” partnership recently proposed by the European Commission.
7. The enlarged EU will constitute a common market with over 450 million consumers and twenty-five economies with a combined GDP of € 10 000 billion – larger than that of the United States and amounting to a quarter of the world’s GDP. The enlargement process will itself cost around 41 billion euros between 2004 and 2006, mainly in structural funds to the accession countries. However, against the background of the current slow economic growth in western Europe, especially in the major EMU area countries and its impact on the economies of central and eastern Europe, fiscal discipline and solidarity need to be strengthened overall and the capacity to absorb funds bolstered, in particular in the accession countries. The Assembly notes with satisfaction the fruitful partnership between the European Commission, the European Investment Bank, the European Bank for Reconstruction and Development and the Council of Europe Development Bank in boosting investment volumes not only in the accession countries but in the whole of Europe.
8. Special attention has to be given to tackling persisting fears among some Europeans that labour migration could have a destabilising effect in the enlarged EU by causing an influx of workers into the wealthier countries of western Europe, where wages and salaries are relatively higher, and a “brain drain” of high-skilled labour from the accession countries. The Assembly believes that while the estimated costs of EU enlargement should not be overlooked, they must be measured against the benefits arising from the new trading opportunities via a larger common market, increased mobility of the work force in the context of population ageing and greater international competitiveness of the European Union. Council of Europe member states should therefore work together to seek a general rise of employment rates and specific solutions encouraging especially high-skilled nationals to remain in their own countries where they can make valuable contributions to post-enlargement development.
9. The larger the EU becomes, the greater will be the need for integration and unity among its constituent countries and regions. As negotiations on the future Constitution of the European Union enter a crucial final phase, concerns over the complexity of post-enlargement tasks should be duly taken into account. The appointment of a European Commissioner to handle post-enlargement issues could provide added stability, co-ordination and focus in this regard, as well as facilitate the integration of new member states.
10. Despite their bold steps in the economic, administrative and legal fields, the ten accession countries have yet to eliminate numerous shortcomings and weaknesses in their governance, including countering economic crime, strengthening judiciaries and overcoming difficulties in law enforcement. Corruption and nepotism must be relentlessly purged until rooted out by all countries in Europe.
11. Bearing in mind the above, the Assembly calls on the member countries of the European Union, the acceding countries, the other candidate countries and the countries participating in the Stabilisation and Association Process:
i. to proceed more swiftly with the reform of the Common Agricultural Policy in order to reduce the burden of agricultural subsidies - on the general EU budget and on consumers in EU countries and beyond - and to open up their markets in favour of a more equitable trade partnership with non-EU countries, especially from the developing world;
ii. to pursue pension reform or adjustment, as might be called for in view of population ageing and long-term societal needs;
iii. to reinforce information links with citizens with a view to enhancing the transparency of European institutions, mustering public support for long-term development projects and fostering European ideals and sentiments;
iv. to consider entrusting a European Union Commissioner with the responsibility for post-enlargement management;
v. to provide fiscal incentives for life-long learning and to raise public awareness of the positive impact of labour migration within Europe;
vi. to continue lowering budget deficits, pursue efforts towards a gradual convergence of fiscal policies, and foster economic and financial policy co-ordination among the states forming part of the Economic and Monetary Union;
vii. to work in favour of better functioning and more interconnected transport links;
viii. to adjust tax policies and other fiscal instruments in ways that foster investment in Europe as opposed to the outsourcing of activities outside the continent;
ix. to devise policies favouring the expansion of long-term micro-loan financing, particularly for small and medium size businesses;
x. to work in favour of a speedy accession by the European Union to the Council of Europe Civil and Criminal Law Conventions on Corruption (ETS No. 173 and 174) and the European Union’s becoming a party to the Council of Europe’s GRECO (Group of States against Corruption) Partial Agreement.
II. Draft Recommendation
The Parliamentary Assembly refers to its Resolution ….. (2004) on economic aspects of European Union enlargement: the crucial years ahead and recommends that the Committee of Ministers:
1. consider the setting up of a joint Council of Europe–European Union working committee with a mandate to devise policy orientations and to encourage the harmonisation of European laws and policies in favour of social, economic and territorial cohesion, as well as sustainable development, in the Greater Europe;
2. examine the possibility of creating a European Forum for Social Dialogue involving representatives of major European organisations, trade unions, employers’ associations and civil society in regular consultations to assess national and European policies for economic and social cohesion, support the work of regional co-operation structures, foster the exchange of best practices among countries and encourage a multi-party cross-sector dialogue at the national, regional and pan-European level;
3. urge the member states of the Council of Europe:
i. to thoroughly implement the framework of the revised Social Charter and make better use of it in reducing social and economic disparities between regions and states;
ii. to ensure full support for the Council of Europe anti-corruption and anti-money laundering measures, including through full adherence to the principles set out in the Civil and Criminal Law Conventions on Corruption (ETS No. 173 and 174) and the Additional Protocol to the latter (ETS No. 191), Common Rules against corruption in the funding of political parties and electoral campaigns, Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime (ETS No. 141), European Convention on Mutual Assistance in Criminal Matters (ETS No. 030) and its two Additional Protocols (ETS No. 099 and 182), the Octopus and GRECO projects;
iii. to promote the mobility of their labour force while ensuring fair access to social security services and equal rights of workers;
iv. to pursue the efforts to achieve higher quality in public services administration and regulatory convergence;
v. to invest more in all-European research and development networks;
vi. to devise national strategies to reduce levels of relative poverty.
III. Explanatory Memorandum by Mr Severin, Rapporteur
Table of contents
1. INTRODUCTION
2. BACKGROUND AND OVERVIEW
3. ECONOMIC OPPORTUNITIES AND CHALLENGES OF EU ENLARGEMENT
3.1 The Accession Criteria
3.2 Economic and Social Disparities
3.3 Altering Trading Patterns and Increased Competition
3.4 Labour Migration
3.5 The EMU and the Euro
3.6 Other
4. CONCLUDING REMARKS
*
* *
1. INTRODUCTION
1. On 13 February 2003, the Rapporteur together with several other members of the Assembly presented a Motion for a resolution on the economic challenges in ensuring a successful and smooth enlargement of the European Union (Doc. 9707). The motion points to a number of economic challenges implied in the EU enlargement process, and stresses the importance of gaining the full support and commitment from all participants in this process in order to ensure its success.
2. This report will address the key economic challenges of the upcoming EU enlargement, or rather enlargements that will follow the 2004 one involving ten countries. Although the Rapporteur fully recognises that the enlargement process will naturally involve major political, administrative and other changes, this report will focus more particularly on its economic aspects. The report commences with a brief background overview of the enlargement process to date and goes on to take a closer look at a number of economic problems related to EU enlargement. In conclusion, the report will attempt to draw up guidelines and recommendations towards meeting these challenges. It is primarily based on information obtained from the European Commission (including its webpage ‘EU enlargement’1), Eurostat, the periodical The Economist and the European Bank for Reconstruction and Development (EBRD). The Committee’s seminar on the subject held in Budapest in September 2003 also proved a valuable source of comments and opinions.
3. The Rapporteur wishes first of all to pay tribute to both the EU candidate countries and to the current EU members for their noteworthy efforts in supporting the enlargement (and transition) process to date. He also stresses the importance of a strong parliamentary role in ensuring the success of the enlargement process as a whole.
4. Looking ahead, one of the main tasks resulting from enlargement will be to tackle the economic and social disparities in the newly expanded European Union. Unlike previous enlargements - where smaller economies, diverging less from the average social and economic indicators of the European Union, were joining - the current addition of ten countries and more poses a major economic and social challenge, but also opportunity, to the region. The Council of Europe can play an important role in working toward the reduction of such divergences thus transforming the challenge into an opportunity. Despite the many challenges for all sides (current EU Member States, acceding countries and European nations remaining outside the Union), the enlargement process can be a ‘win-win’ process for all, provided that clear goals shared by all are borne in mind and expectations managed successfully with proper support mechanisms in place.
2. BACKGROUND AND OVERVIEW
5. On 13 December 2002 in Copenhagen, Denmark, a total of ten countries - Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, the Slovak Republic, and Slovenia2 - were invited to join the European Union on 1 May 2004, contingent upon a successful conclusion of their accession negotiations. Bulgaria and the Rapporteur’s own country, Romania, are preparing for a later entry and could become EU members by 2007, while Turkey has not yet started negotiations for its accession3 (although it submitted its application already in 1987, a date for the start of negotiations is to be decided upon at the end of 2004). Yet another country, Croatia, handed in its application in March 2003 and more countries are likely to follow in the not too distant future.
6. On 9 April 2003, the European Parliament voted by a strong majority in favour of admitting the first ten acceding countries into the EU. A week later, on 16 April 2003, the Accession Treaty was officially signed in Athens, Greece. Now that this treaty has been ratified by all the acceding countries on the basis of popular referendums, it is to come into force on 1 May 2004. Important messages were, however, ‘sent’ by the electorates in these referendums (see table 1 below). The low turnout in many cases for such a historic event reflects concerns held by many voters towards the EU, as well as relative ignorance of the enlargement process as a whole. Where turnout was high (e.g. in Malta, at 91%) the ‘yes’ vote saw its lowest level (at only 54%), suggesting that those who voted in the acceding countries were largely positive to joining. That is why the acceptance of EU membership should not be seen in ‘triumphalist’ terms. Some concerns remain that the new countries will meet difficulties in trying to be equal political as well as economic and social partners in the new European Union. The Council of Europe should therefore continue offering support to these countries to ensure they can play their full part in the enlarged Union.
Table 1: Accession Countries Ratification Votes
Country |
‘Yes’ vote % |
Turnout % |
Malta |
54 |
91 |
Slovenia |
90 |
60 |
Hungary |
84 |
46 |
Lithuania |
90 |
63 |
Slovak Republic |
92 |
52 |
Poland |
77 |
59 |
Czech Republic |
77 |
55 |
Estonia |
67 |
63 |
Latvia |
67 |
72 |
Note: Cyprus approval via parliamentary vote rather than referendum
Source: Eurostat
7. As seen in Table 2 below, the upcoming 2004 enlargement will add significantly to both the land area and the population of the EU area when compared to the present EU-15. The ten acceding countries will add around 739 000 km2 of land (or 22.8% of the current EU-15 land area) and 75 million people (or 19.8% of the current EU-15 population) to the EU. However, they will add less than 5% of the current total EU-15 GDP. In terms of GDP per capita, both the acceding and the candidate countries clearly lag behind the current EU Members States. In 2002, the GDP per capita averaged only € 12 200 for the ten acceding countries and € 5 700 for the three candidate countries, compared to the EU-15 average of € 24 000.
However, real GDP growth rates are generally higher in the acceding and candidate countries than in the current EU members. In 2002, for instance, the real GDP growth rate averaged 2.4% for the ten acceding countries (using weighted Eurostat figures) and 4.8% for two of the candidate countries (i.e., Bulgaria and Romania), compared to only 1% for the current EU Members States.
Table 2: Basic Indicators
|
Land area, thous. km2 |
Popu-lation, million, in 2002 |
Total GDP, € billions in 2002 |
GDP per capita in €, 1999* |
GDP per capita in €, 2000* |
GDP per capita in €, 2001* |
GDP per capita in €, 2002* |
GDP as % of EU average in 2002 |
Real GDP % growth in 1999 |
Real GDP % growth in 2000 |
Real GDP % growth in 2001 |
Real GDP % growth in 2002 |
Cyprus |
9.3 |
0.8 |
10.7 |
17.5 |
17 |
17.1 |
17.4 |
73 |
4.8 |
5.2 |
4.1 |
2.2 |
Czech Republic |
78.9 |
10.2 |
73.8 |
12.5 |
12.7 |
13.8 |
14.4 |
60 |
0.5 |
3.3 |
3.1 |
2.0 |
Estonia |
45.2 |
1.4 |
6.9 |
8.2 |
9.1 |
9.4 |
10 |
42 |
-0.6 |
7.3 |
6.5 |
6.0 |
Hungary |
93.0 |
10.2 |
69.9 |
10.4 |
10.4 |
12.3 |
13.6 |
57 |
4.2 |
5.2 |
3.8 |
3.3 |
Latvia |
64.6 |
2.3 |
8.9 |
6.1 |
7.0 |
7.8 |
8.5 |
35 |
2.8 |
6.8 |
7.9 |
6.1 |
Lithuania |
65.3 |
3.5 |
14.6 |
7.3 |
8.0 |
8.9 |
9.4 |
39 |
-1.8 |
4 |
6.5 |
6.7 |
Malta |
0.3 |
0.4 |
4.0 |
11.7 |
|
|
10.3 |
43 |
4.1 |
6.4 |
-1.2 |
1.2 |
Poland |
312.7 |
38.2 |
200.2 |
8.3 |
8.3 |
9.4 |
9.5 |
40 |
4.1 |
4.0 |
1.0 |
1.6 |
Slovak Republic |
49.0 |
5.4 |
25.1 |
10.5 |
10.5 |
11.0 |
11.4 |
47 |
1.3 |
2.2 |
3.3 |
4.4 |
Slovenia |
20.3 |
2.0 |
23.4 |
14.5 |
14.5 |
16.8 |
17.7 |
72 |
5.2 |
4.6 |
2.9 |
3.2 |
Bulgaria |
110.9 |
7.8 |
16.6 |
6.0 |
5.8 |
5.8 |
5.9 |
25 |
2.3 |
5.4 |
4.1 |
4.8 |
Romania |
238.4 |
21.8 |
48.4 |
5.1 |
5.1 |
5.6 |
5.9 |
24 |
-1.2 |
2.1 |
5.7 |
4.9 |
Turkey |
769.6 |
70.2 |
191.7 |
5.6 |
5.6 |
5.2 |
5.5 |
22 |
-4.7 |
7.4 |
-7.5 |
7.8 |
EU-15 |
3234.6 |
379 |
9162.3 |
21.3 |
22.7 |
23.3 |
24 |
100 |
2.8 |
3.5 |
1.6 |
1.0 |
* in thousands
Source: Eurostat
8. The picture provided by these numbers should be seen in a positive light. Despite the still wide disparities between the acceding countries and the EU-15, the former clearly have valuable human resources at their disposal and dynamic economies with a strong potential for growth, indicating that this gap can be gradually overcome. An increase in per capita GDP has by and large been achieved over the past few difficult years whilst the candidate countries were implementing often painful reforms necessary to meet the accession criteria. This suggests that the accession process and economic development can be positively correlated. This compares with some other candidate countries where per capita GDP has evolved more slowly. Impressive GDP growth was maintained in most candidate countries, even after the late 1990s global economic boom ended in 2000. The populations concerned have patiently accepted austere macro economic policies without disruptive objections, such as strikes (in sharp contrast to the reaction of some western European nations to certain proposals for economic reform).
9. It will now be important to manage expectations in these countries. Economic hardship and reform will not come to an end on 1 May 2004. If the populations are not mentally prepared for the many challenges remaining also after accession, disillusionment may set in with potentially disruptive consequences in the candidate countries and across Europe as a whole. The Council of Europe can and should work to ensure that the current round of enlargement has positive economic effects on the wider Europe.
10. The Council of Europe can also play a useful role in helping to maintain close relations between the enlarged EU and other European states. As stated in a joint session between this Parliamentary Assembly and the European Parliament held in September 2003, it is important that both institutions work for ‘one Europe’, so that there would not be ‘second tier’ states either inside or outside the Union. The
Council of Europe should ensure that countries whose candidature for the EU has not been accepted continue to feel ‘included’ in the broader Europe and that close economic partnerships are encouraged, also with countries whose accession is unlikely in the years to come (such as Russia and other CIS states).
11. The Council of Europe’s role is also vital in relation to Turkey. This is a key country in terms of defining Europe’s identity in social and geopolitical terms. It should be stressed that Europe is a community based on general humanistic values, with the concept of an ‘open society’ being at its core. It must therefore have the capacity to include Turkey fully. The Council of Europe has always seen Turkey as a major element in Europe’s ability to fulfil its mission in the world. Consequently Turkey should be encouraged to pursue social, political and economic harmonisation with the rest of Europe while the Council of Europe should further promote its core values in Turkey, assist with economic modernization, provide ideas, principles and support for social and economic reforms and the removal of barriers to development. This would go along way toward bringing the country more closely in line with the rest of the continent and would facilitate the admission of Turkey as a full member of the EU.
3. ECONOMIC OPPORTUNITIES AND CHALLENGES OF EU ENLARGEMENT
12. The historical and political arguments in favour of enlargement are persuasive. Enlargement will lead to substantial economic benefits. Both the old and new Members States will benefit from greater integration. The acceding countries in particular should experience sustained high growth and further improve their living standards.
13. The EU’s Internal Market will expand to include close to 500 million consumers. Further opening of markets and services between East and West will offer new trading opportunities. It will encourage further economies of scale, boost exports and diversify supply sources. Acceding countries could add to economic growth by at least € 60-80 billion in the coming decade and lead to the creation of approximately 300 000 new jobs4. A larger and more integrated Europe is likely to be more competitive on the world stage.
14. In the short term, new Member States would benefit more due to their low economic starting point (as has been illustrated above, their economies represent only about 5% of the GDP of EU-15). A recent study of the Commission estimates that enlargement could spur the growth of GDP of the acceding countries by between 1.3 and 2.1 percentage points annually, and for the existing members it could increase the level of GDP by 0.7 percentage point on a cumulative basis5.
15. In the medium term, benefits would become even greater which would also be to the advantage of current members. With the expansion of markets, they would be able to diversify and increase their activities in the new Member States. Two examples illustrate the growing importance of candidate countries as trade and investment partners for the EU Member States. Firstly, in 1999, 67.5% of all identified FDI (foreign direct investment) into the candidate countries was from the EU and secondly, the total value of trade has increased almost threefold to reach € 210 billion per year6. This partnership would be further enhanced through the adoption of common EU standards, regulations and preferential trade arrangements by the new Member States. It would also lead to increased flows of FDI, as the countries of the region are becoming one of the world’s most attractive investment sites. The 2001 Transition Report published by the European Bank for Reconstruction and Development (EBRD) indicated that the region was less affected by the global slowdown at that time, its economies growing by 5% in that year. The corresponding report for 2002 pointed out that the region had fared better than most of the western economies.
16. Notwithstanding benefits and taking for the moment a purely actuarial approach, it must also be recognised that the EU enlargement eastwards and southwards will also entail certain financial costs and add to the already significant fiscal burden befalling citizens of the present EU-15. Current EU payments to the candidate countries are already considerable. The expenditure in question falls into four main categories: the general EU budget, the EU’s Common Agricultural Policy budget, structural and regional funds, and the cost of institutional adjustments.
The general EU budget
17. The acceding countries are clearly behind in terms of economic development and welfare state provisions. That means that the EU will have to spend more money in development aid in order to achieve economic convergence. While this would place additional strain on an already tight general EU budget (from which accession spending comes), it must also, however, be seen as an investment in the future. There is also a need to increase the ‘absorption capacity’ in the acceding countries to ensure good administration of forthcoming EU funds.
The EU’s Common Agricultural Policy budget
18. When the accession countries become members of the EU, they will come under the protective umbrella of the CAP and benefit from transfers which will be limited at first and reach the levels observed vis-à-vis the current members early in the next decade. Overall, the EU has adjusted its agricultural policy so as to limit the financial assistance to the new member states to 25 % of the level now paid to existing ones - a volume that is to rise to full equality over the first ten years. However, the CAP is in dire need of comprehensive reform, especially as agriculture is a major sector, at least in terms of employment, in the acceding and candidate countries. Currently the EU spends around € 40 billion per year on direct subsidies to farmers.
19. From the pan-European viewpoint, the current CAP set-up gives rise to three concerns. First, it has made EU policies of budget allocation hostage to the desires of EU farming representatives, who however only make up a small, and shrinking, percentage of the EU population. Second, the current protectionist policy prevailing in the agricultural sector can largely be seen as a pact between the state and agricultural producers often to the detriment of consumers. Indeed, consumers often end up paying ‘twice’ for agricultural subsidies, once in the form of higher taxes and again through higher food prices. Candidate countries have good reason to worry about how they are to cope with competition from more subsidised west European producers. Third, the current agricultural policy largely ignores the need for solidarity with, and the obligation to support, poor countries outside the EU. If the CAP were not reformed before the 2004 enlargement, farm spending would swell by a further € 20 billion per year7.
20. Some encouraging developments took place in summer 2003 as the EU proposed to ‘de-couple’ subsidies and production. A flat payment would be made to farmers relating to the protection of land and livestock. This should go some way toward reducing over-production. However, many developing countries continue to face unfair competition whilst subsidies of any kind are in place. The Rapporteur can only express the Committee’s disappointment over the recent breakdown of the WTO talks in Cancun. Countries concerned should resume negotiations on a more realistic and generous basis as soon as possible. The hostility which has developed globally between North and South represents not only an economic but also a security threat to all countries. European Union can and should take a lead in repairing this damage by strongly reducing subsidies for its least productive farmers, whether in current Member States or acceding countries.
21. Reformed agricultural policy should be based on market opening rather than defending subsidies. The Council of Europe could work to promote such thinking amongst all European nations. Subsidies should only be allowed to persist if they further sustainable development goals. Current and future enlargement rounds should be used as the catalyst for a far-reaching reform of the CAP - for the good of the European economy and the developing world. Aid funds could be given much better use, for example in the area of healthcare or education. Using more money to, for example, promote more flexible labour markets, would do much to further economic and social cohesion between European nations.
Structural and regional funds
22. 70% share of the total EU funds currently goes to the regions where the per capita income is less then 75% of the EU average. Enlargement is estimated to reduce the per capita income in the EU by 16% and to increase competition for resources such as structural and regional funds. A further growth in structural funds appears inevitable. As with agriculture, the volume of structural assistance new members will be entitled to receive will be limited to 4% of their GDP8 (see also Section 3.2. below).
Institutional adjustments
23. Unless internal EU reform is carried out, enlargement could bring about significant costs in running the institution as such. Consensus and bargaining may become more difficult to achieve with more members. Costs in using more languages (interpretation, translation, and the production of documents) will also increase, to mention only one area.
24. Clearly the enlargement of the EU represents not only opportunities, but also challenges. Europe now stands before the task of rendering this enlargement (and upcoming enlargements) as smooth and successful as possible. The Council of Europe, as part of its already established cooperation with the EU in the Greater Europe, could raise awareness of all those concerned about the costs and benefits involved in the process, ensuring that expectations are managed properly and that the positive economic impact of enlargement can be enjoyed by the widest possible part of the populations concerned.
25. Paul Brenton9 points to four key differences between this and previous enlargements. First, the level of income in many of the accession countries is considerably lower than that in existing members (see Section 3.1. below). Second, many of the new members are in the process of completing the transition from centrally planned to market-oriented economies, even though a number among them may in the meantime have become more ‘market’ indeed than some of the EU-15. Third, the volume of EU legislation that the new members have to adopt is far more extensive than in previous enlargements10. Fourth, the extent of pre-accession integration is already substantial.
3.1 The Accession Criteria
26. In order to join the EU, prospective members must fulfil a set of political, economic and administrative/legal conditions, as agreed at an earlier Copenhagen Summit, in 1993. These so-called Copenhagen Accession Criteria call for aspirant countries to: 1) observe stable democracy, respect human rights, and the rule of law, and protect minorities; 2) enjoy a functioning and competitive market economy; and 3) adopt the common rules, standards and policies that make up the body of EU law, the acquis communautaire.
27. During the accession negotiations, the acceding (and candidate) countries have been offered both financial and technical assistance in their efforts to fulfil these criteria and hence towards adopting EU regulations, adapting their political and legal institutions, opening up their markets, and improving their infrastructure and economies.
28. Progress in meeting the accession criteria has been followed by the European Commission’s annual Progress Reports. Last year’s summary report11 claims that all aspirant countries have made considerable progress towards implementing the accession criteria. The ten acceding countries were all considered to be fulfilling the political criteria. Furthermore, considering the achievements made in the economic and administrative/legal fields, the European Commission also expected that these ten countries would fulfil the economic and administrative/legal (i.e., the acquis communautaire) criteria and be ready to join the EU by 2004. It hence recommended that the accession negotiations be concluded and that the countries in question be invited to become EU Member States.
29. While Bulgaria and Romania were considered to meet the political criteria, they were not yet considered to fully meet the economic and administrative/legal criteria. They were, however, expected to meet these last two sets of requirements within the near future. Turkey, on the other hand, was not considered by the Commission to fully meet any of the sets of criteria. The Commission therefore recommended that a date be set for the start of negotiations with Turkey by the end of 2004, contingent on a demanding series of political reforms having been put in place by that time.
30. Although the ten acceding countries have made substantial progress across the board and are expected to be ready for accession at the established date, the November 2003 Progress Report points to persisting weaknesses – varying in severity from country to country – in public administration, the protection of the environment, consumer rights and intellectual property, as well as problems with corruption, economic crime, judiciaries and difficulties in implementing the acquis communautaire. It exhorts the countries concerned to take specific measures, especially as regards the management of state aid and public procurement, the training of public servants and healthcare sector workers, improved sanitary and border controls, and the modernisation of transport-communications networks. The European Commission has to this end sent individual warning letters to all acceding countries, asking them to redouble their efforts and to focus on the outstanding issues so that their economies may be ready to embrace fully the competition awaiting them in the single market upon joining12.
31. On the same occasion the European Commission said that “Bulgaria, Romania and Turkey make significant progress towards [meeting] accession criteria”. At the beginning of 2004, the Commission will present a comprehensive three-year financial framework intended to support the timely completion of accession negotiations by Bulgaria and Romania. With regard to Turkey the Commission lists a number of areas of concern where bold additional efforts are required. These include the strengthening of the judiciary (independence and functioning), the overall framework for the exercise of fundamental freedoms (association, expression and religion) and cultural rights, continued alignment of civil-military relations with the European practice and a commitment to an early settlement of the Cyprus issue.
32. It is clear that an enormous task is in completing the process of meeting the accession criteria and in catching up with the current EU Member States in a number of areas, including macroeconomic stability, economic structure, infrastructure and integration. The Council of Europe can contribute to this process through its experience in the social, cultural and economic fields. The European Union for its part should as a first step make the Council of Europe’s Social Charter part of its own acquis communautaire, for the purpose of reducing divergences among its imminently larger number of member countries.
3.2 Economic and Social Disparities
33. Although the economies of both the acceding and candidate countries (with the exception of Turkey in 2001) are on average growing at a much faster rate than the EU-15 average, their GDP per capita levels are still clearly lagging behind the current EU Member States. As illustrated in Figure 1 below, there are large differences in the GDP per capita levels both between the EU-15 average and the acceding and candidate countries as well as among the acceding and candidate countries themselves. On average, the acceding countries’ GDP per capita amounts to less than half (46%) of the EU-15 average. Even more noticeably, the average per capita GDP of the three candidate countries amounts to less than a quarter (23%) of the EU-15 average.
Figure 1: Acceding Countries per capita GDP as a % of EU-15 average
Note: GDP per capita measured in Purchasing Power Standards (PPS)13.
Source: Eurostat.
34. Large internal economic differences and social disparities also exist within the accession and candidate countries themselves. These differences are particularly troublesome considering the lack of adequate social security measures in most of the countries. The pension system problems are particularly acute in virtually all European countries as a result of demographic trends. This is one area where the Council of Europe should work to promote reform and policy harmonization to ensure that economic and social disparities are lessened in future rather than increased.
35. All acceding and candidate countries will qualify for receiving structural and cohesion funds. The overall allocation for structural actions for the new Member States from the date of accession until the end of 2006 has been set at € 21.75 billion (or only 0.25% of the current EU-15 GDP)14. However, the difference between the richest and the poorest of the EU will turn out to be unparalleled historically, including in terms of previous EU enlargements, and will take a long time to overcome. New member states are, overall, enjoying higher growth rates than the majority of current EU members. This will help them to overcome disparities, but they will have to struggle hard to preserve such high growth, while the growth process will in itself lead to higher expenditure, in particular in the social field. This could lead to social frustration in the candidate countries and would require the EU to adopt a number of measures in order to redress the internal economic and social balance in an enlarged EU. The Rapporteur in this context recalls that members of the Economic Committee have expressed concern that, in the absence of such efforts, the welfare divide will take longer to bridge and the EU will not only be poorer as a whole, but also more internally disparate. Given the Council of Europe’s ongoing work to reduce social disparities among its member states, this is a project where a real contribution can be made.
3.3 Altering Trading Patterns and Increased Competition
36. On the whole, the upcoming enlargement will have fairly limited consequences for the current EU Member States. Firstly, because integration between EU-15 and the acceding countries has already progressed to a degree which makes further larger changes unlikely, and, secondly, because the economies of the new Member States are relatively small when compared with the current EU (as seen in Table 2 above, the acceding countries will add about 5% of the current total EU-15 GDP).
37. Trade liberalisation has been part of the economic reforms in the Central and Eastern European (CEE) countries already from the beginning of the transition period. As a result, trade with the EU started to pick up already in the early 1990s. By the end of the 1990s, the candidate countries were trading as intensely with the EU as EU members traded with each other. On average, around two-thirds of the accession countries’ exports are now going to the EU15. In Poland alone, around 70% of its trade is already with the EU, and only about one-tenth with the former Soviet Union countries16. Although there is scope for further integration with some EU countries, the trade shares are unlikely to increase much further. Many of the benefits of enlargement have hence already been enjoyed (and many of the economic costs arising from adjustment to the enlargement situation have hence already been borne)17.
38. Today, taken together, the imports from the acceding and candidate countries amount to no more than 1% of the EU-15 GDP18. It is therefore unlikely that imports from the new member countries will have a strong impact on the competition for companies in the current EU Member States. Furthermore, while wages are much lower in most acceding and candidate countries, so is productivity. The overall effect on competition is hence likely to be small. Nevertheless, increased competition for the current EU Member States will be notable in certain cross-border regions as well as is certain labour-intensive industries.
39. The acceding and candidate countries themselves, on the other hand, will face greater challenges when joining the EU, for example with regard to the costs of the EU’s social and environmental rules and the – unfair because more subsidised – competition from farmers/producers in the EU-1519. Similarly, SMEs in the acceding countries will face strong competition from SMEs in the current EU Member States, not least in border areas where the EU-15 and the acceding countries meet. The opening of markets is a key policy to promote for the benefit of not only countries within the enlarged European Union but also those in the wider Europe and beyond. Our institution can play an important role in ensuring that a new, if larger, ‘fortress Europe’ is not created and that a ‘spirit of inclusion’ is maintained across the continent.
40. One area where the acceding countries have a clear competitive advantage vis-à-vis the present EU-15 is company taxation. Whereas in the present EU the average company taxation rate on profits is 32.5 per cent, in an acceding country like Poland it is only 27% (with plans to lower it to 19%) while in Slovakia it is only 25% (to be lowered to 19% in 2004). The Czech Republic it is foreseen to reduce its rate from the present 31% to 25% by 2006, while Hungary lowered it from 30% to 18% already in 2002. The model for the candidate countries seems to be Ireland, where it is only 12.5% at present. In a situation where the EU has not managed to create a harmonised level of company taxation – let alone one for personal taxation – the lower tax rates on company profits in the ten candidate countries could prove a potent weapon to attract new investment or even to shift it from some of the EU-15 to the countries in question. Company tax harmonization is in this Rapporteur’s opinion a vital policy without which genuine and full integration across Europe cannot take place. The Council of Europe should promote tax reform as an important means for narrowing divergence across Greater Europe.
3.4 Labour Migration
41. Perhaps one of the most frequently discussed challenges of EU enlargement is labour migration. It is often perceived to be a problem because of the large income gap and the relative proximity of the acceding countries to the EU. Members of the Economic Committee have stressed that it remains a major concern for large parts of their electorates, particularly in countries perceived to already bear a heavy burden of immigration, such as the United Kingdom.
42. For this reason, the Accession Treaty20 includes transitional arrangements with regard to the free movement of workers from the new into the current EU Member States. These arrangements specifically include: 1) a two-year period during which national measures will be applied by current Members States to new members; 2) after this period, reviews will be made (also by the European Commission), but the decision on whether to fully apply the free movement of persons will still be left up to the individual current members; 3) the transitional arrangements should in principle come to an end after five years but may be prolonged for a further two years in those current member countries where serious disturbances in the labour market or the threat of such disruption exist; 4) safeguards may be applied by Member States up to the end of the seventh year21. Depending on how strict, or liberal, the individual national measures are, the actual restrictions might range from very limited labour market access (in, for example, Austria and Germany22) to full labour market access.
43. On the whole, however, despite the above-mentioned fears of electorates in many countries, labour migration is likely to be of minor significance for the EU as a whole. Fears that millions of Eastern Europeans will head westwards in search of greater prosperity are unlikely to materialise. While wages are lower in the acceding countries, so are prices. Many Eastern Europeans hence already enjoy reasonably good standards of living.
44. At the same time the Rapporteur believes that low wages as such should not be considered as an incentive for businesses. An appropriate management of expectations and mentalities also needs to be applied in this area, since at the end of the day lower wages may mean lower productivity. The problem of low prices, wages and productivity in acceding countries should be addressed in a comprehensive way as these factors in themselves imply low growth. The rights of immigrant workers who do move to Western Europe should also be protected to ensure that exploitation does not occur.
45. Although migration flows are difficult to forecast, some estimates foresee that between 100,000 and 400,000 Eastern Europeans will head west in search for labour each year once restrictions are lifted. Supposing that it will take around ten years until most of those who want to move have actually done so, between two to three million people (which amounts to only between 0.5 and 0.8% of the current EU population) from the new Member States could be living in the old EU countries by 2015 or 202023. Another estimate on the cumulative net inflow of migrants from the East to the West amounts to less than one percent of the working population of the EU-15 in 200924. Though care should always be taken when extrapolating from past to future, the experience of previous enlargements supports such conclusions (for example, labour flows from Portugal and Spain, after their accession to the EU, into richer northern European countries were far smaller than many had feared). Intra-European migratory flows cannot be expected to have a major impact on the EU as a whole, though related costs, such as social security and healthcare do need to be considered and monitored.
46. Furthermore, with low birth rates, rapidly ageing populations and shrinking labour forces, the current EU Member States should be welcoming, not restricting, additional labour. Some EU employers (farms in particular) are increasingly relying on foreign labour to do the jobs that they cannot fill with local workers. Germany alone would need to import around 487 000 workers per year, while France would need 109 000 and the EU as a whole 1.6 million. In addition, in order to keep the ratio of workers to pensioners stable, the labour inflow would need to increase to 3.6 million per year in Germany, 1.8 million in France and a full 13.5 million in the EU as a whole. Although these figures do not account for business cycles or changes in the labour market, the underlying message is clear, i.e., Europe’s working population is falling25. Parliamentarians should stress such positive benefits and the relatively small scale of the estimated labour migration, in order to allay any exaggerated fears of their electorates.
47. Within European economies, those moving are largely workers with at least mid-level skills and good, if not high, levels of education. These people tend to move only if they know they can find work in a given host country, illustrating a positive side of labour migration, namely that of a flexible labour market responding to demand. Of greater concern is a potential ‘brain drain’ of highly skilled workers from the acceding countries into Western European nations offering higher wages. The Council of Europe should work to promote conditions which will encourage such nationals to remain in their countries, where their skills will continue to be very much needed in the post-accession years now ahead of us.
48. Finally, temporary restrictions on the free flow of workers will only make sense if the countries concerned use, as one observer put it, “the breathing space provided to make their labour markets more flexible”26. Agricultural subsidies could be better spent on education to promote fair and flexible labour markets. This would contribute to creating a more homogenous European ‘demos’. The Council of Europe can play an important role in building bridges along the new borders of the enlarged European Union, which will touch increasingly impoverished and unstable areas. Work needs to be done to ensure territorial cohesion, in terms of comparable levels of development, and economic and social balance across the continent as a whole. A more homogenous, and therefore more stable, Europe - with a similar quality of life, incomes and economic development – should be our goal.
3.5 The EMU and the Euro
49. Your Rapporteur will not deal with the subject of EMU and EU enlargement other than tangentially, for the very good reason that another member of the Committee on Economic Affairs and Development, Robert Walter of the United Kingdom, is currently preparing a report on this subject for the Committee’s and the Assembly’s attention. Only a few words on the subject are therefore in order.
50. Following their imminent EU membership, the first ten acceding countries will face another major challenge, that of joining the European Monetary Union (EMU) and thereby adopting the euro as their currency. In theory, the question is not if, but when, they will join the EMU, as this is obligatory for the new members27.
51. The acceding countries are supposed to meet the same entry conditions for joining the EMU and adopting the euro as those set for the 12 current members of the euro area. These entry conditions, the so-called five Maastricht convergence criteria, include: 1) an inflation rate of no more than 1.5 percentage points greater than the average of the three countries with the lowest inflation rates; 2) long-term interest rates not in excess of 2 percentage points above the average of the three countries with the lowest inflation rates; 3) a fiscal deficit of no more than 3% of GDP (in “normal circumstances”); 4) a ratio of general government debt to GDP of no more than 60% (unless the ratio is “sufficiently falling”); and 5) At least two years in the second exchange rate mechanism (ERM2), keeping the national currency within a +/-15% range on either side of a central rate against the euro.
52. Table 3 below clearly shows that, although progress has been made in many areas (specifically with regard to inflation), most acceding and candidate countries currently do not meet the first four Maastricht convergence criteria. In fact, only Lithuania presently meets all four criteria, while Estonia and Latvia (and possibly also the Czech Republic) meet all but one.
Table 3. Maastricht Convergence Criteria
|
Inflation rate (%) |
Long-term interest rate (%) |
Fiscal balance (% of GDP) |
General debt (% of GDP) | |||
|
2001 |
2002 |
Early 2003 |
2001 |
2002 |
2001 |
2002 |
Convergence criteria (EU-12) |
<3.5 |
<3 |
<7.1 |
>-3 |
>-3 |
<60 |
<60 |
Cyprus |
2.0 |
2.8 |
n/a |
n/a |
n/a |
n/a |
61.1 |
Czech Republic |
4.5 |
1.4 |
4.8 |
-5.2 |
-9.3 |
23.7 |
34.7 |
Estonia |
5.6 |
3.6 |
4.4 |
0.4 |
-1.0 |
4.8 |
3.3 |
Hungary |
9.1 |
5.2 |
7.8 |
-4.7 |
-6.0 |
53.1 |
61.9 |
Latvia |
2.5 |
2.0 |
9.3 |
-1.9 |
-2.5 |
16.0 |
22.0 |
Lithuania |
1.3 |
0.4 |
6.4 |
-1.9 |
-1.4 |
23.1 |
23.0 |
Malta |
2.5 |
2.2 |
n/a |
n/a |
n/a |
65.7 |
70.0 |
Poland |
5.3 |
1.9 |
7.7 |
-6.0 |
-5.0 |
38.7 |
44.8 |
Slovak Republic |
7.0 |
3.3 |
7.4 |
-3.9 |
-4.5 |
44.1 |
46.4 |
Slovenia |
8.6 |
7.5 |
11.1 |
-1.2 |
-2.9 |
27.5 |
27.3 |
Bulgaria |
7.4 |
5.8 |
6.4 |
-0.9 |
-0.8 |
66.3 |
45.3 |
Romania |
34.5 |
22.5 |
29.7 |
-3.5 |
-3.0 |
23.3 |
22.8 |
Turkey |
57.6 |
32.2 |
n/a |
-28.4 |
n/a |
103.0 |
82.8 |
Note 1: Shaded figures indicate those convergence criteria that the countries do not meet.
Note 2: Some figures are only provisional / preliminary estimates.
Note 3: Inflation rate is measured as annual rate of change in Harmonized Indices of Consumer Prices (HICPs). Malta and Turkey are not yet harmonised.
Note 4: Long-term interest rate is generally considered the interest rate on 10-year government bonds. Shorter maturities have, however, been taken for Bulgaria, Estonia, Latvia, Lithuania, Romania, the Slovak Republic, and Slovenia.
Sources: Inflation rate and General debt – Eurostat; Long-term interest rate - Center for Strategic and International Studies28; Fiscal balance – EBRD for CEE countries, and Enlargement Statistics for Cyprus, Malta and Turkey.
53. With regard to the fifth Maastricht convergence criterion - the prescribed minimum of two years in the ERM2 - several policymakers and academics29 disagree as they see this regime as an outdated framework that could trigger a currency crisis in the acceding countries. They claim that the obligation to participate in ERM2 upon the dismantling of all remaining capital controls when entering the EU will throw the acceding countries into “an interim period [of] enhanced vulnerability before the safety of monetary union”. One of the problems is that the acceding countries can anticipate large capital inflows as investors bet on their convergence with the rest of Europe, which is likely to put upward pressures on the exchange rates of the currencies. The inflows might then also be reversed, bringing the exchange rate down again and causing fluctuations. Once within the ERM2, the acceding countries could ask for assistance from the European Central Bank (ECB) in order to ward off speculative attacks and keep their exchange rates within the set fluctuation limits, but “without an institutional obligation for intra-marginal intervention ERM2 does not fully protect the currencies of ‘outs’ from currency crises”.30
54. To make matters worse, Mr Pedro Solbes, the EU’s monetary-affairs Commissioner, recently announced that, before joining the EMU, acceding countries must keep their currencies within a narrow +/-2.25% band on either side of a central parity against the euro, rather than the wider, and more speculation-resistant, +/-15% range agreed after the old +/-2.5% regime collapsed in the early 1990s31. The Rapporteur cannot see why a narrower regime should be observed in respect of the acceding countries than was the case for the current EMU-12 as they progressed toward EMU membership in the 1990s. What is good for the goose must surely be good for the gander.
55. The European Commission and the ECB are in fact both seeking to discourage the acceding countries from joining the EMU prematurely, but rather to focus on further restructuring their economies. Too swift an entry could endanger the countries’ growth prospects by obliging them to keep budget deficits within 3% of GDP32 as well as by withdrawing the monetary flexibility (namely the setting of interest rates) needed to cope with the pressures of joining the Single Market.
56. It should also be noted that meeting the Maastricht convergence criteria represents a challenge not only for the acceding and candidate countries, but also for some of the current euro zone countries as they struggle to maintain the criteria levels (specifically with regard to the fiscal balance and the general debt). Finally, an increase in the number of euro zone members will also affect the effectiveness of the European Central Bank (ECB) in maintaining monetary and financial stability within the zone.
3.6 Other
57. Most experts on the subject do not consider the challenges and problems listed above to be in any way insuperable for the enlarged EU. Issues of for example the cost of EU enlargement (particularly with regard to agricultural or structural funds) and labour migration are significant only for certain countries and only as such have they become politically important. Some experts instead point to more specific, and not so commonly addressed, problem areas.
58. The previously quoted Paul Brenton33, for example, claims that one of the main difficulties with the upcoming enlargement lies in the successful inclusion of the acceding countries into the Single Market. He specifically points to the existing problems with the operation of the Single Market and argues that the process of regulatory harmonisation will become even more difficult in an EU with 25 or more member countries. The principle of mutual recognition34 will consequently become more important as the main tool for ensuring the free movement of goods and services. This principle does, however, have its limits and is likely to be less effective the more diverse the countries involved.
4. CONCLUDING REMARKS
59. The Rapporteur wishes to recall the pioneering role played by the Committee on Economic Affairs and Development when it organised, in May 1990, the first-ever pan-European parliamentary conference on “Economic Reform in Central and Eastern Europe” and the adoption on its basis, in January 1991, of the similarly entitled Resolution 955 (1991), in which it prophetically stated, and as it turns out veraciously said about the transition process that “few tasks can be more demanding, more determining for the future of democracy and peace in Europe, and more deserving of support and assistance from Council of Europe member states…”. Now that transition has been or is about to be concluded in the region, another historic step – a major enlargement process of the European Union into central and eastern Europe – is before us. May we not shrink from our responsibilities in taking that step boldly, just as we did not shrink from our duties in seeing transition through in the past decade. A new era is opening up for all of Europe. We must all be servants in its cause.
60. The Council of Europe has to assist a smooth economic development of countries joining the European Union and the overcoming of economic and social gaps between them and the current EU member states. The revised Social Charter of the Council should form part of the EU’s acquis communautaire, as a practical step to ensure social cohesion across the Union. The Council of Europe should work together with the European Union to ensure that their member states are advancing towards the goal of ‘one Europe’, with the express aim of inclusion and partnership for all countries. It should make sure that no human right or freedom is overlooked as enlargement takes place. As the acceding countries in the post-communist era developed very much inspired by Council of Europe ideals, our institution should continue to champion and support these countries in their new role within the EU, so that the positive effects of enlargement can be enjoyed to the full.
61. In the context of EU enlargement process, the Rapporteur stresses the intrinsic importance and uniting impact of the Council of Europe’s ideals as regards adherence to democratic pluralism, human rights and the rule of law across Europe. The organisation should continue to exercise its essential function in the oversight and assessment of its member states’ performances in these areas through its monitoring procedures, so that shortcomings can be identified and tackled early on. It should also, together with the European Union, strive to enhance communication with citizens in order to achieve greater public awareness of the challenges related to the EU enlargement. It should at the same time take advantage of its pan-European ‘acquis’ and its parliamentary dimension – which serves as a bridge between European citizens and decision makers – in better informing the public about the work of European institutions, mustering public support for long-term development projects and taking into account people’s expectations.
62. In so doing, the Council of Europe needs to rely on a more structured approach to co-operation with the European Union. Promoting social, economic and territorial cohesion would require a joint working group or committee with a mandate to put forward policy recommendations and to encourage the harmonisation of European laws and policies, also covering sustainable development targets, in the Greater Europe. The Council of Europe could also examine the possibility of creating a European Forum for Social Dialogue that would involve representatives of major European organisations, trade unions, employers’ associations and civil society in regular consultations on national and European policies for economic and social cohesion. In addition, it would support the work of regional co-operation structures, foster the exchange of best practices and encourage multi-party cross-sector dialogue at the national, regional and pan-European level.
63. Whereas greater social and economic cohesion is a major current challenge for the Greater Europe, European Union member states should be encouraged to proceed more swiftly with reforming the Common Agricultural Policy and national pension systems, and to make additional efforts to foster budgetary discipline, fiscal policy co-ordination (especially among the countries belonging to the EMU), intra-European investment, long-term micro-loan financing, transport links, research networks and labour force mobility. Although fears persist among some Europeans that more labour migration risks destabilising the enlarged EU by causing an influx of workers into the richer ‘old’ Europe and a brain-drain in the accession countries, the advantages of labour force mobility, especially against the background of population aging, should be highlighted and measures to boost employment levels sought in all countries.
64. As the European Union grows, so will the need for integration and unity among its constituent parts. The future EU Constitution will no doubt endow the EU with a solid and comprehensive backing for carrying its mission forward. The Rapporteur hopes that the complexity of post-enlargement tasks will not be underestimated and believes that entrusting a European Commissioner with handling these issues would provide added stability, co-ordination and focus in this respect. Finally, he firmly believes that the EU enlargement process will give an impetus to mobilise and improve governance all over Europe, permitting regional and institutional synergies to move us closer towards the ‘one Europe’ we seek.
Reporting committee: Committee on Economic Affairs and Development
Reference to committee: Doc. 9707 and Ref. No. 2810 of 31.03.2003.
Draft resolution and recommendation adopted by the Committee on 13 November 2003.
Membres de la commission: Mme Zapfl-Helbling (Présidente), M. Kirilov, Mme Burbiene, Mme Pericleous Papadopoulos (Vice-présidents), M. Açikgöz, M. Adam, M. Agramunt, M. I. Aliyev, M. Anacoreta Correia, M. Andov, M. Arnau, M. Assis Miranda, M. Ates, M. Attard Montalto, M. van Baalen, M. Berceanu, M. Braun, M. Brunhart, M. Budin (Remplaçant : M. Rigoni), M. Çavusoglu, M. Cosarciuc, M. Crema, M Dimic, M. Djupedal, M. Figel, M. Floros, M. Galchenko, Mme Griffiths, M. Grignon, M. Gusenbauer, Mme Hakl, M. Haupert, M. Högmark, M. Jonas, M. Kacin, M. Karapetyan, M. Klympush, M. Korobeynikov, M. Kraus, M. Krivokapic, M. Lachnit, M. Le Guen (Remplaçant : M. Hunault), M. Leibrecht, M. Liapis, M. Makhachev, M. Masseret, M. Melcak, M. Mikkelsen, Mme Milicevic, Mme Muizniece, M. Naumov, M. Öhman, M. O’Keeffe, M. Opmann, Mme Patarkalishvili, Mme Petursdottir, Mme Pintat Rossell, M. Podgorski, M. Popa, M. Puche, M. Ramoudt, M. Ramponi, M. Reimann, M. Riccardi, M. Rivolta, Lord Russell-Johnston, M. Rybak, M. Sasi, M. Schreiner, M. Severin, M. Seyidov, Mme Smith, M. Stefanov, M. Tepshi, M. Timmermans, M. Torbar, Mme Vadai, M. Versnick, M. Walter, M. Wielowieyski, M. Wikinski, M. Zhevago.
N.B. The names of those members present at the meeting are printed in italics
Head of Secretariat: Mr Torbiörn
Co-Secretaries to the committee: M. Bertozzi, Ms Ramanauskaite, Ms Kopaçi-Di Michele, Ms Stewart
1 At http://europa.eu.int/comm/enlargement/index_en.html
2 Hereafter referred to as “accession countries”.
3 Bulgaria, Romania and Turkey are hereafter referred to as “candidate countries”.
4 Enlargement Papers, European Commission 2001
5 “The Economic Impact of Enlargement”, a study by the Directorate General for Economic and Financial Affairs, May 2001.
6 Enlargement Papers, European Commission 2001
7 “Reform? Forget it”, The Economist, 3 October 2002.
8 “To get them in, cut the costs”, The Economist, 31 January 2002.
9 In “The Economic Impact of Enlargement on the European Economy: Problems and Perspectives”, Centre for European Policy Studies (CEPS) Working Document No. 188, October 2002.
10 Primarily due to the creation and enhancement of the Single Market.
11 Towards the Enlarged Union: Strategy Paper and Report of the European Commission on the progress towards accession by each of the candidate countries, 9 October 2002.
12 Specific comments with regard to each of the first ten accession countries include - Cyprus: Need to further improve administrative capacity. Czech Republic: Problems over corruption and economic crime. Improvements needed to enhance consumer protection, training for the healthcare sector, liberalisation of insurance and information services and compliance with sanitary norms. More should be done to strengthen internal financial control, including public procurement procedures, and to upgrade transport links and regulations. Estonia: Problems with corruption and consumer protection. Training for healthcare workers should improve. Need to bring its environmental protection and regulations concerning labour into line with EU standards. Hungary: More financial control needed in the public sector. Better administrative capacity required to deal with EU funds. Sanitary controls and aid to disadvantaged regions should be enhanced. Concerns over border protection and the issuance of visas. Modernisation of information and communications technologies is needed. Latvia: Fight against corruption must continue; liberalisation of capital movements and tighter anti-trust legislation required. Training in the healthcare sector, fiscal and customs cooperation, veterinary controls, consumer protection, administrative capacity for aid to agriculture and the implementation of labour regulations need to improve. Lithuania: Administration corruption and money laundering remain a problem. Public finances and administrative capacity need to improve. Consumer protection, sanitary, customs and border controls, fisheries’ policy and personnel training must improve. Malta: Administrative capacity in agricultural sector and environmental protection are insufficient. Maritime safety, modernisation of fleet, waste treatment and personnel training should improve. Sanitary controls and consumer protection remain a problem. Poland: Big problems with administrative capacity, especially in civil service; more staff training needed. Corruption, fraud and money laundering remain of serious concern. Sanitary and border controls should be strengthened, industrial pollution curtailed and fleet safety enhanced. Slovak Republic: State aid to steel industry should be abolished. Administrative capacity for aid to agriculture and sanitary controls have to be strengthened. Need for more training in the healthcare sector and improvements in implementing labour regulations. Industrial pollution should be diminished considerably. Slovenia: More training for the healthcare sector workers needed. Protection of personal data and intellectual property, anti-trust measures and sanitary controls should be enhanced.
13 PPS is the artificial common currency unit used in the EU to express the volume of economic aggregates for the purpose of cross-country and regional comparisons. National currencies are converted to PPS by Purchasing Power Parities (PPP) conversion rates, eliminating the differences in price levels between countries in the process of conversion.
14 Report on the results of the negotiations on the accession of Cyprus, Malta, Hungary, Poland, the Slovak Republic, Latvia, Estonia, Lithuania, the Czech Republic and Slovenia to the European Union, prepared by the European Commission.
15 Barysch, Katinka. “Does enlargement matter for the EU economy?”, Centre for European Reform Policy Brief, March 2003.
16 “On the soon-to-be eastern frontier”, The Economist, 24 August 2000.
17 Brenton, Paul. “The Economic Impact of Enlargement on the European Economy: Problems and Perspectives”, Centre for European Policy Studies (CEPS) Working Document No. 188, October 2002.
18 Barysch, Katinka. “Does enlargement matter for the EU economy?”, Centre for European Reform Policy Brief, March 2003.
19 And now let's have another look at the road map”, The Economist, 19 December 2002.
20 Except the provisions for Cyprus and Malta.
21 The current members must, however, give preference to accession country nationals over non-EU labour.
22 Austria and Germany also have the right to apply contiguous national measures in order to address serious labour market disturbances or the threat thereof, in specific sensitive service sectors, which could arise in certain regions from the cross-border provision of services.
23 Barysch, Katinka. “Does enlargement matter for the EU economy?”, Centre for European Reform Policy Brief, March 2003.
24 “The Economic Impact of Enlargement”, Enlargement Papers No. 4, DG ECFIN, 2001.
25 United Nations’ Population Division report in “A continent on the move”, The Economist, 4 May 2000.
26 Barysch, Katinka. “Does enlargement matter for the EU economy?”, Centre for European Reform Policy Brief, March 2003.
27 Unlike Denmark and the United Kingdom, which have a Maastricht treaty “opt-out” with regard to the single currency.
28 Jalcova Zuzana. “European Monetary Union”, Action Commission for an Enlarged Euro-Atlantic Community.
29 For example, D. Begg, B. Eichengreen, L. Halpern, J. von Hagen and C. Wyplosz in “Sustainable Regimes of Capital Movements in Accession Countries”, Centre for Economic Policy Research, Policy Paper No.10, in “The perils of convergence”, The Economist, 3 April 2003.
30 Fölsz Attila. “The monetary framework after accession – a political economy analysis of ERM2”, European Integration online Papers (EIoP), Vol. 7 N° 2, 31 March 2003.
31 “Not so easy to join”, The Economist, 22 May 2003 and “Inelastic bands”, The Economist, 12 June 2003.
32 A very demanding criterion for countries struggling to restore their infrastructure and meet their social obligations.
33 In “The Economic Impact of Enlargement on the European Economy: Problems and Perspectives”, Centre for European Policy Studies (CEPS) Working Document No. 188, October 2002.
34 I.e., the principle that allows for the sale of a product for which no EU harmonisation applies in any EU member state as long as it is legitimately produced/marketed in any one member state, even if the product is produced/marketed in accordance with different technical or qualitative specifications from those applied to the same kind of product in the member state destined for sale.