ECONOMY

Fear not EU enlargement, it may be a blessing in disguise

Historical experience points to greater opportunities from European Union enlargement, says Giorgos Markopouliotis, director of the EU representation bureau in Athens, who finds many similarities but also differences in relation to the «Mediterranean» enlargement of the 1980s. If one exempts the two island newcomers, Cyprus and Malta, the other eight new members are entering the EU, on the whole, with significant economic divergence from the old members and a lack of democratic experience – more or less like the three Mediterranean countries that joined in the 1980s. The same fears expressed now as a result of the enlargement, such as an influx of immigrants and reduced funding to the old members, existed when Greece, Spain and Portugal joined. Irrational fears «The truth is that none of that happened,» says Markopouliotis. Greek and Spanish workers, apart from those already there, did not flood into Germany, nor was there any significant destabilization of European currencies. «On the contrary, the ‘weakest’ members, including Ireland, made great strides in relation to the EU average. «We think the same thing will happen now, but with two differences,» he says. The first difference is the much greater number of new small members. This brings about a change in the size of the average member, affecting Greece’s particular weight. The second difference is that in the 1980s, the Community budget was much smaller in relation to requirements and, therefore, there was a large margin for increase. In 1987, then Commission President Jacques Delors achieved a doubling of money for structural funds overnight. «Nothing of the sort will happen now, or, at least, it cannot happen easily,» Markopouliotis believes. Redistribution after 2007 Regarding the cost of enlargement and who will assume it, he explains that the question concerns the period after 2007 and is essentially a matter for negotiation. The fiscal decisions for 2000-2007 were made in Berlin in 1999 and the cost of enlargement will reach about 41 billion euros until 2007, but this has been provided for. «What Greece was going to receive through 2007, it will, irrespective of enlargement,» says Markopouliotis. The question is what will happen after that; if the budget remains at the same levels, the pie will be divided into 25 pieces rather than 15. The discussion about the budget will intensify in 2004-5 and it is a matter of negotiation what each country will achieve from then on. Two basic policies, the structural and the agricultural (CAP), absorb about 80-85 percent of total budget spending. As regards structural policy, Markopouliotis thinks that, as things stand today, it does not appear that there will be a significant increase in Community funds, as there is no willingness from the net contributors to increase their contributions. The negotiations will have two legs: which policies will receive priority and how funding will be allocated among the members. Markopouliotis reminds us that by the end of 2006, Greece will have received a total of about 75 billion euros since its entry into the EU. A large part of this huge sum is being directed toward basic infrastructure – roads, bridges, airports – unlike what has happened in other countries. «The financing of basic infrastructure in Greece cannot continue to eternity. There has to be a qualitative change; there is the issue of human resources and we must orient ourselves in that direction, to improving the situation there,» he says. As regards the new members, Markopouliotis stresses that the countries of Central and Eastern Europe have a high standard of human resources and it is difficult to estimate how quickly the so-called «multiplier» effect will yield results when combined with Community funding at a regional level. It is possible that their economies will converge must faster than those of the Mediterranean countries. The countries of Central and Eastern Europe suffered considerable economic dislocation after the collapse of the Communist regimes, unlike the southern Europeans. CAP reform As regards reforms of the Common Agricultural Policy (CAP), its budget is set until 2013. Nevertheless, there is a need for reform irrespective of enlargement, according to Markopouliotis. Subsidization according to quantity creates a number of internal and international complications. Internally, for instance, we have the infamous butter mountains, and outside, disputes within the framework of the World Trade Organization. Change is leaning toward supporting farmers’ incomes. This will possibly help Greece, he says, as subsidization will take place according to plot, noting that what used to be the comparative disadvantage (small plots and family farms rather than industrial agriculture) now may become a comparative advantage. Of the new members, essentially only Poland has a farming sector of a size that could present difficulties. And what is the benefit of enlargement? «We had better think what would have been the cost of non-enlargement,» says the EU bureau chief.