The Challenges of Eastward Enlargement of the EU. Political and Economic Transitions in Eastern Europe

It’s been several years since the first countries of Central and Eastern European began their transition to market economies. This transformation was a special challenge since there has been no clear and detailed map to guide the way. In this short article  I would like to point the most general macroeconomic problems of the successfully reforming countries as well as the challenges of their political transition.

Tamas Reti in his article ‘East Central European Economic Transitions and the West’[1] defines major tasks these economies has to face at the onset of the transition:

– going through a process of macroeconomic stabilization ( external and domestic )

– implementing economic liberalization measures

– introducing major institutional changes ( mainly, the decrease of state involvement in the economy, beginning with property changes, and the emergence of a new private sector )

It was clear that the legacy of the Soviet-style economic system, which produced both hidden and open inflation, monetary overhang, excess demand, fiscal deficit, a foreign debt crisis – had failed.[2] The first free parliamentary elections gave an impetus for new governments to select appropriate reform strategies for their nations’ conditions. The result of these changes, became transformation of a ‘shortage economy’ into a ‘demand-constrained economy’.

However, this was beginning of the recession that has been compared to the Great Depression of the 1930s in the US. As Tomas Reti points out, the reason for the recession were the collapse of the COMECON trade, which resulted in a switch to dollar-trade and the end of bilateral state trading. [3]

Another important factors can also be named:

– the squeeze on real wages and credit supply, which affected both consumer demand and the business climate;
– the absence of government assistance to state firms led to a decline in output.

Along with these, in the framework of monetary stabilization, a tight monetary policy reduced government expenditures, and a restraint on wages had a direct negative impact on the level of production.[4]

Western trade and opening up became a major source for economic growth. From 1988 to 1990 the political systemic changes occurred in Central and Eastern Europe, and the European Community began promoting political and economic reforms. Cooperation agreements were established between the EC and the former USSR Poland, Bulgaria, Czechoslovakia, Hungary and Romania.

The General System of Preferences was provided, which eliminated a number of quantitative restrictions and reduced barriers to textiles and steel products. [5] At the end of 1994, following the splitting of Czechoslovakia, Bulgaria, Czech Republic, Hungary, Poland, Romania, and Slovakia had Association Agreements with the EC, which consolidated the removal of trade obstacles, except agriculture.

Speaking about the Eastern enlargement, the asymmetry in economic potential between the old and new member countries of the EU has made it the biggest challenge. Along with this , the Union was unprepared to open its doors to countries which are unable to prove the efficiency of their democratic systems. So the answer was the Copenhagen criteria, the rules of which set general requirements for establishing effective democratic institutions, respect for human and minority rights, and appropriate mechanisms for guaranteeing a market economy.[6]

Of course, the domestic conditions in the current candidate countries are less favourable than they were in the post-communist countries in 2004. Without a doubt, exists a negative impact on the legislative capacity of the Council of Ministers due to the dramatic increase in the number of MS in recent years. As Ulrich Sedelmeier in his article ‘Europe after the Eastern Enlargement of the European Union: 2004-2014’[7] states that

the increase in numbers and increasing heterogeneity of MS preferences threatened to thwart effective decision-making not only in areas that explicitly required unanimous agreement but also Council’s longstanding practice for consensus decisions.

Additionally to the challenges of enlargement for decision-making in the Council, there were also concerns that the need to accommodate representatives of the new members in other EU institutions, notably for the Commission and the Parliament, enlargement could lead to indigestion.

Another area in which a negative impact of the 2004 enlargement might have caused greater reluctance is the new member’s compliance with EU law. The acquis communautaire, were the main reason for skepticism about the desirability of eastern enlargement. And at the same time, were raised concerns about the durability of compliance after accession. Another sense of negative attitudes towards further enlargement is through immigration, mainly labour immigration from poorer eastern MS.

The enlargement of the EU posed and will pose severe budgetary, administrative, and operational challenges for the Union. As considerable as the challenges of enlargement for the EU are, the challenges of accession for the new members especially for those countries, which were governed by Communist parties with predominantly-collectivized economies.

David R. Cameron defines those challenges[8] as:

1)administering the acquis;
2)deepening and extending the reform and transformation of the economy;
3)reducing high levels of unemployment and large government, trade, and current account deficits;
4)financing accession in the face of the EU’s budgetary constraints and financial provisions; and
5)coping with all of those challenges.

[1] Tamas Reti “East Central European Economic Transtition and the West”., Macalester International Vol.2

[2] Ibid page 54

[3] Ibid

[4] Ibid

[5] Stefania Fabrizio, Daniel Leigh and Ashoka Mody., “The Second Transition: Eastern Europe in Perspective”., Economic Papers 366, 2009.,European Commission Economic and Financial Affairs., Brussels

[6] Jacek Wieclawski “The Eastern Enlargement of the European Union: fears, challenges and reality”. Global Studies Journal., Issue 15, 2010

[7] Ulrich Sedelmeier “Europe after the Eastern Enlargement of the European Union: 2004-2014”., Heinrich Boll Stiftung topics., 2014

[8] David R. Cameron “ The Challenges of EU Accession for Post-Communist Europe”., Center for European Studies, Working Paper Series #60., Department of Political Science Yale University


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