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Europe Revision: EU Enlargement
4th June 2009
Revision notes on aspects of EU enlargement
1989 - 20 years since the fall of the Berlin Wall
2004 - 5 years since EU enlargement into Eastern Europe
2009 – a looming economic / financial crisis in many of the new countries of the EU
Enlargement occurred during a period of strong GDP growth (driven by fast-growing exports in an era of globalisation) and low inflation and interest rates. One can argue that this was an opportune time to widen the single market – conditions were favourable.
But progress made by new EU members has not been even – most have achieved a degree of income convergence and have managed to bring down unemployment levels. But there have also been underlying problems – notably property bubbles, rising inflation and the effects of depopulation as migrant workers from central and eastern European countries in particular moved west in search of work and higher incomes.
From late 2007 onwards the global credit crunch and ensuing recession has hit the EU hard. The Euro Area is export-dependent (more than the USA) and economic and financial difficulties have spread into many of the new member states.
Key issues:
1. Has the widening/enlargement of the EU been a success?
2. The benefits and costs of enlargement for
a. New member states
b. Existing (established) members of the EU
3. EU enlargement and immigration policy
4. How many new states will join the Euro?
5. Is enlargement fatigue now setting in? Will it prevent deepening of the EU?
6. What of states that remain outside of the EU e.g. Norway and Iceland and Turkey
Successes of enlargement for new nations
Some income convergence due to fast growth from early 2000s to 2008
Progress in reducing unemployment
Lower inflation and interest rates
Large level of inward capital investment e.g. in Eastern European car manufacturing
Some countries have made sufficient progress to join the Euro
Countries attractive to inward investment because:
• Central European location for many
• Significantly lower wage costs
• Lower land prices
• Attractive corporate tax regime + other incentives
• Success of previous inward investments
• Many new states have highly literate population
Geoff Riley
Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.