by Andr és Rodríguez-Pose London School of Economics Oxford University Press ISBN 0-19-874286-X

1. THE EUROPEAN UNION: ECONOMY, SOCIETY, AND POLITY by Andrés Rodríguez-Pose London School of Economics Oxford University Press ISBN 0-19-874286-X

2. Part III POLITY

3. Chapter 6 Enlargement

4. Introduction • The fall of the Berlin Wall in November 1989 marked the beginning of the end of the post-WWII polarized world • Countries to the East of former the Iron Curtain looked immediately towards the prosperous and democratic West • Membership of the EU became an indicator of future stability and prosperity for central and eastern European countries (CEECs) • The EU, despite a warm welcome, was somewhat slow to react: • Because of the economic, social and political situation of countries in CEE • Because of the degree of internal restructuring needed in order to accommodate new members

5. Change in central and eastern Europe • The fall of the Berlin Wall in November 1989 symbolically marked the beginning of a process of radical transformation in CEE • This process entailed different types of transition • Political transition:From one-party states to democratic regimes • Economic transition: From centrally planned socialist economies to capitalist systems • Identity transition: Represented by changes in national allegiances • Diplomatic transition: Integration or reintegration into a ‘Western-dominated’ international system

6. Different transitions in central and eastern Europe • Political transition: • From communist one-party states to democratic regimes • Successful in the Czech Republic, Hungary, Poland, Slovenia, and, increasingly, Slovakia • Baltic states close to that stage (question marks about the treatment of minorities) • Right track, but early stages: Bulgaria, Romania, and, increasingly, Croatia • Still far away: Russia, the Ukraine, Yugoslavia, Albania • Plain dictatorships: Belarus

7. Different transitions in central and eastern Europe (II) • Economic transition: • Mammoth economic changes • Serious difficulties in the passage from centrally-planned to free-market systems • Wholesale reform of how the economy is run • Change in the attitudes and habits of economic agents • End of central planning, of state support and subsidies to basic industries • Introduction of market institutions such as competition and profit • End of full employment and employment for life • Introduction of ‘real’ trade

8. Different transitions in central and eastern Europe (III) • Economic transition (II): • Two alternative approaches to economic transition: • Shock therapy: Rapid demise of socialist economic institutions and their replacement by market institutions (Poland and Hungary, to a lesser extent) • Gradual and incremental transition: step by step change of institutions (Czech Republic) • No system has yielded magical results • Loss of economic weight of most CEECs • Severe recession in the early 1990s • Steep rise in unemployment • Transition to capitalism has often implied the loss of one generation’s worth of income (Fischer, Sahay, and Végh, 1997)

9. Different transitions in central and eastern Europe (IV) • Economic transition (III): • Weak economic situation across CEECs • The republics of the former USSR have been especially hard hit • Although candidate countries, Turkey and the European republics of the former USSR together have a population which is similar to that of the EU-15, the size of their economies put together represents less than the joint size of the Dutch and Spanish economies • The GDP per capita of candidate countries is lower than that of the poorest member states in EU-15 • Economic transition is proving more complicated that political transition • Few CEECs have managed to achieve a full transition to a market economy

10. Evolution of GDP ‘First wave’ countries ‘Second wave’ countries Turkey Ex-Soviet countries

11. GDP in CEECs with respect to the EU

12. GDP per capita in CEECs

13. Different transitions in central and eastern Europe (V) • Identity transition: • From being citizens of a state to being citizens of another (in some case with little or no historical tradition): • Former East Germans, becoming citizens of a united Germany • Former Czechoslovakians, becoming Czech and Slovak citizens • Former Soviets citizens, being divided into 15 independent republics. • Collapse of the former Yugoslavia • National identity still not well defined: • Especially in states with little historical tradition (Belarus, Bosnia-Hercegovina, Macedonia, Moldova) • In states with large minorities

14. Different transitions in central and eastern Europe (VI) • Diplomatic transition: • Failure of regional co-operation after the collapse of communism: • Lack of success of regional co-operation: the Central European Free Trade Area (CEFTA) never really got off the ground • Commonwealth of Independent States (CIS) in the former USSR with little economic and political clout • Integration or reintegration of CEECs into a ‘Western-dominated’ international system: • From the Warsaw Pact to NATO • Integration in international organizations with economic content: IMF, OECD, WTO • Membership of the EU as the ultimate goal

15. Enlargement and European integration • EU engaged during the 1990s in the widening vs. deepening debate: • Deepening: Steaming ahead with greater economic and political integration and reform before opening the gates to new members • Consequences: It becomes more difficult for candidate countries to join, as the acquis communautaire expands considerably • Widening: Allow candidate countries in first and then undertake reforms • Consequences: The consensus to proceed with economic and political integration becomes more difficult

16. Enlargement and European integration (II) • The position each country adopted has depended on their future vision of the EU, as well as on internal political considerations • France, Benelux, Spain, and Portugal on the deepening side • Britain on the widening side, because of the deeply-rooted Euroscepticism in the country • Germany, Italy, and Greece in two minds: pro-widening, but wanting at the same time to deepen the EU • Admission of Austria, Finland, and Sweden in 1995 reinforced the pro-widening camp • Initial decisions favoured the deepening agenda • Process of enlargement has been slow and relatively ad hoc • Introduction of criteria in the 1993 Copenhagen summit

17. Enlargement and European integration (III) • ‘Copenhagen criteria’ 1993: • stable institutions guaranteeing democracy, the rule of law, the protection of minorities, and human rights; • a functioning market economy, capable of coping with an increasingly competitive market pressure • an institutional framework capable of assuming the obligations of the acquis communautaire in its entirety. • Enlargement, however, played second fiddle to economic and political integration until the implementation of the single currency • It is only since the arrival of the Euro that enlargement has become the EU’s greatest priority

18. Enlargement for candidate countries • For candidate countries the EU is regarded as guaranteeing: • Democratic stability • Economic prosperity • But it also implies: • Swallowing the bitter pill of thorough economic, institutional, and political reform • Economic reform may have important implications for economies that are, as a general rule, much poorer that previous candidates • Greater need for adjustment than in previous enlargements as a result of the growth of the acquis communautaire in recent years

19. Enlargement for the EU • Enlargement will increase the heterogeneity of the EU and therefore requires a rethinking of European institutions and policies • The Treaty of Rome was originally devised for six member states, enlargement to twenty five or more members implies a thorough revision of the Treaty… • And a thorough revision of the current institutional framework… • And of the decision-making rules • Enlargement has also important budgetary implications • Thorough revision of main EU policies (agricultural, structural, and cohesion) • Enlargement may revive the large flows of east-west migration of the early 1990s

20. Conclusion • Enlargement will transform the EU • It will increase political and economic stability across Europe • It will increase the budgetary burden on the EU if no thorough reform of current policies is undertaken • It may lead to institutional paralysis without thorough reform • It will tilt the balance of power in the EU, probably in Germany’s favour • A successful enlargement requires a thorough reform of: • The economies, policies, and institutions of applicant countries • A thorough institutional and policy reform in the EU itself