A dilemma for new EU members By Daniel Altman International Herald Tribune
FRIDAY, JUNE 24, 2005 LONDON If you were one of the newer members of the European Union, what would you do? Tony Blair, the British prime minister, has promised to come courting to gain allies for his vision of a modern EU budget: less on farm subsidies and more on research, technology and education. But for the mostly Eastern European entrants, picking sides in the fight for the Union's future could do more harm than good. Start with what the eight post-Communist members want from the EU: hefty fiscal aid, free movement of labor, European markets for their products, international trade agreements, the euro and an overall imprimatur of economic stability. Several of these objectives are connected. Aid money, if well spent, will help the eight to bolster their economic growth and to keep debts and deficits under control. A clean fiscal house will make adoption of the euro easier. So will full access to European labor and product markets, which will slowly bring the newer members' economic cycles in line with the rest of the bloc. If the EU's older powers can't reach a budget agreement, this rosy picture will be nothing more than a daydream. So the newer ones could serve their own interests by doing everything possible to reconcile Britain, France, Germany and the rest. Of course, it's far from clear that any of the big powers would listen to their smaller allies on such politically sensitive matters. Blair clearly hopes that the new members will listen to him. With their rapid transitions from central planning to free markets, the eight seem to be a natural constituency for his campaign. Moreover, it's unlikely that many of the post-Communist members would receive much extra cash if Britain gave up its EU rebate. Countries like the Netherlands, where the per capita contribution to the EU is twice as high as in Britain, would probably demand priority for payback. Yet falling sheepishly in line behind Blair, rather than trying to act as a bridge, could cause worse problems for several of them. Germany and Italy, taken together, have more than double Britain's economic might, as measured by gross domestic product. Slovenia needs Italy just as Poland, the Czech Republic and other nearby nations need Germany. If the entrants want their exports and workers to feel welcome in these mammoth economies, the last thing they need is to stir up bad feelings. The exceptions are the Baltic states, who have some of the most liberalized economies in the EU. This week Goran Persson, the Swedish prime minister, said the EU's agriculture-focused budget was not "future-oriented" and that its whole structure ought to be reconsidered, according to Agence France-Presse. With the Baltics and Sweden joining in, a Northern European block could emerge in support of Blair's economic policy. More than any other outcome, this one could sow the seeds for a split in the Union. Britain, Sweden, Finland, possibly Denmark and the Baltics could hypothetically combine with Norway and Iceland from the European Free Trade Association to form a new coalition with purely economic goals. They wouldn't necessarily abandon the EU - the existing trade and migration agreements might be too valuable to give up - but they could certainly introduce a two-track system of further economic liberalization. This strategy could be too risky for the new members, though, since a confrontation could throw the budget into limbo, jeopardizing scheduled increases in aid money. Raita Karnite of the Institute of Economics at the Latvian Academy of Sciences predicted that Latvia's government would hesitate to pursue free markets for services and an innovation-focused budget, à la Blair. "They understand that these things will be better for the next government, but for this government, it's better to get more money," she said. The most likely scenario, Karnite said, is simply for the Eastern European members to bide their time. At first glance, in fact, waiting seems like a pretty viable strategy. The leaders of France and Germany, who staunchly defended the agriculture-focused budget at the recent summit in Brussels, are likely to lose their jobs to more economically liberal politicians in the next two years. In addition, Italy's recession has provided a catalyst for policy changes that could improve economic growth, like the corporate "competitivity" bill last month. By 2007, there might be much more consensus on the EU's economic direction than there is now. There will also be at least two more new entrants: Romania and Bulgaria. Both are much poorer than the current members, and Blair's arguments in favor of a more progressive EU budget will gain force. Yet just as the accession of 10 countries in 2004 created feelings of insecurity and resentment - the scale of which only became clear after the French and Dutch referendums - the addition of two more could provoke another wave of xenophobia and isolationism. As one might have guessed, there are no easy answers. Try to mediate, and no one might listen. Join Blair, and those big checks for regional development could get smaller. Do nothing, and the moment of opportunity could pass. Whatever route they choose, the new members can help themselves the most by concentrating on their own economies. By continuing to liberalize, they will put pressure on the EU's foot-draggers without explicitly hitching themselves to Britain's noisy wagon. Daniel Altman can be reached at [EMAIL PROTECTED] LONDON If you were one of the newer members of the European Union, what would you do? Tony Blair, the British prime minister, has promised to come courting to gain allies for his vision of a modern EU budget: less on farm subsidies and more on research, technology and education. But for the mostly Eastern European entrants, picking sides in the fight for the Union's future could do more harm than good. Start with what the eight post-Communist members want from the EU: hefty fiscal aid, free movement of labor, European markets for their products, international trade agreements, the euro and an overall imprimatur of economic stability. Several of these objectives are connected. Aid money, if well spent, will help the eight to bolster their economic growth and to keep debts and deficits under control. A clean fiscal house will make adoption of the euro easier. So will full access to European labor and product markets, which will slowly bring the newer members' economic cycles in line with the rest of the bloc. If the EU's older powers can't reach a budget agreement, this rosy picture will be nothing more than a daydream. So the newer ones could serve their own interests by doing everything possible to reconcile Britain, France, Germany and the rest. Of course, it's far from clear that any of the big powers would listen to their smaller allies on such politically sensitive matters. Blair clearly hopes that the new members will listen to him. With their rapid transitions from central planning to free markets, the eight seem to be a natural constituency for his campaign. Moreover, it's unlikely that many of the post-Communist members would receive much extra cash if Britain gave up its EU rebate. Countries like the Netherlands, where the per capita contribution to the EU is twice as high as in Britain, would probably demand priority for payback. Yet falling sheepishly in line behind Blair, rather than trying to act as a bridge, could cause worse problems for several of them. Germany and Italy, taken together, have more than double Britain's economic might, as measured by gross domestic product. Slovenia needs Italy just as Poland, the Czech Republic and other nearby nations need Germany. If the entrants want their exports and workers to feel welcome in these mammoth economies, the last thing they need is to stir up bad feelings. The exceptions are the Baltic states, who have some of the most liberalized economies in the EU. This week Goran Persson, the Swedish prime minister, said the EU's agriculture-focused budget was not "future-oriented" and that its whole structure ought to be reconsidered, according to Agence France-Presse. With the Baltics and Sweden joining in, a Northern European block could emerge in support of Blair's economic policy. More than any other outcome, this one could sow the seeds for a split in the Union. Britain, Sweden, Finland, possibly Denmark and the Baltics could hypothetically combine with Norway and Iceland from the European Free Trade Association to form a new coalition with purely economic goals. They wouldn't necessarily abandon the EU - the existing trade and migration agreements might be too valuable to give up - but they could certainly introduce a two-track system of further economic liberalization. This strategy could be too risky for the new members, though, since a confrontation could throw the budget into limbo, jeopardizing scheduled increases in aid money. Raita Karnite of the Institute of Economics at the Latvian Academy of Sciences predicted that Latvia's government would hesitate to pursue free markets for services and an innovation-focused budget, à la Blair. "They understand that these things will be better for the next government, but for this government, it's better to get more money," she said. The most likely scenario, Karnite said, is simply for the Eastern European members to bide their time. At first glance, in fact, waiting seems like a pretty viable strategy. The leaders of France and Germany, who staunchly defended the agriculture-focused budget at the recent summit in Brussels, are likely to lose their jobs to more economically liberal politicians in the next two years. In addition, Italy's recession has provided a catalyst for policy changes that could improve economic growth, like the corporate "competitivity" bill last month. By 2007, there might be much more consensus on the EU's economic direction than there is now. There will also be at least two more new entrants: Romania and Bulgaria. Both are much poorer than the current members, and Blair's arguments in favor of a more progressive EU budget will gain force. Yet just as the accession of 10 countries in 2004 created feelings of insecurity and resentment - the scale of which only became clear after the French and Dutch referendums - the addition of two more could provoke another wave of xenophobia and isolationism. As one might have guessed, there are no easy answers. Try to mediate, and no one might listen. Join Blair, and those big checks for regional development could get smaller. Do nothing, and the moment of opportunity could pass. Whatever route they choose, the new members can help themselves the most by concentrating on their own economies. By continuing to liberalize, they will put pressure on the EU's foot-draggers without explicitly hitching themselves to Britain's noisy wagon. Daniel Altman can be reached at [EMAIL PROTECTED] http://www.iht.com/articles/2005/06/23/business/euview.php *** sustineti [romania_eu_list] prin 1% din impozitul pe 2005 - detalii la http://www.europe.org.ro/euroatlantic_club/unulasuta.php *** Yahoo! 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