The enlargement of the European Union 

MEP Esko Seppänen at SYK-school in Helsinki 3.11.2000

Seven per cent of the world’s population are living in the European Union area. The EU’s share of the world production is a quarter. The Union is a strong economic power. It strengthens itself also politically by creating new federation structures.

There exists a deep gap in the standard of living between the EU and many neighbouring Eastern countries. The biggest income disparity is to be found at the border between Finland and Russia. In order to avoid large scale migration in the search of improved standard of living, a political decision has been made to enlarge the EU towards the East and South. How far east, has not been discussed.

All countries are entitled to apply for membership in the EU. In order to be able to do so, they must fulfil the so called Copenhagen criteria. The countries must have such stable institutions that guarantee democracy, the realisation of the principle of legality, human rights and the protection of minorities, and they must be able to cope with the pressures caused by competition and market forces within the Union. These entrance criteria are political and economical but not social. If they lead to uneven income distribution or people’s poor social welfare and inequality, it does not count.

Each EU member state has the right of veto concerning the new members. However, the matters are probably not allowed to get so far that an old member country would, by its right of veto, nullify the joining of new countries. If anybody wants to do so, it can halt the newcomer’s membership by some other issue. One possibility is that no agreement can be reached at the Nice Summit of the European Council on the results of the proceeding Intergovernmental Conference (IGC) concerning the internal restructuring of the EU. Then the EU is not "ready" to receive new members. In Nice the amendment of the basic treaties of the EU are on the agenda, and also unanimity is required.

The political timetable for the realisation of the enlargement, or at least its first phase, is overly tight. The set target is to conclude the negotiations with the first applicant countries by the end of the year 2002.

The enlargement will cause enormous economical costs. It has been speculated that they are more easily charged from the taxpayers of the old member countries, if the enlargement is first made irrevocable, and only after that money is mentioned. This was done when the Germanies were united. The courage is lacking to give account of the economical and social costs in advance because it would slow down the process. Especially Germany is keen on the enlargement as it is a target of the hardest migration pressure from outside. Two thirds of the immigrants of the EU area are living there.

Changing the EU power structures

In the EU, a tandem is used in which the member countries are more or less driven by Germany and France. It is possible that these two have together agreed on the great lines. France has got the EMU and in this way communalized the German Mark/Deutsche Mark). In return, Germany gets France’s political support for the enlargement.

The enlargement is supported among the other member countries perhaps only by the Nordic countries and – for commercial reasons – Italy. To the so called cohesion countries (Spain, Greece, Portugal and Ireland) , which are the great net recipients of the EU budget, the enlargement is a nightmare. They fear that the flow of money from the net payer countries will dry out. If the enlargement does take place, this is just what will happen. If the EU is going to have an additional 100 million poor ( and on top of that, 70 million poor from Turkey!), it must have a definite impact on the flow of money. Spain receives every year 6, Greece 4, Portugal 2,8 and Ireland 2,3 milliard EURO in net from the other member countries. These countries cannot act as stowaways on the enlargement train.

If consensus is not reached in Nice, the small countries have good grounds for it: there is a tendency in the Union to increase the power of the big member countries so that small applicant countries would not have a theoretical chance, even together with the present small member countries, to annul the big ones by voting. That is the original idea of Jean Monet, one of the founder fathers of the EU, at least according to Max Jakobson: "According to his view, the European community would be led by the directoire, leading group of the big European countries."

The applicant countries must, in the course of the negotiations, express their readiness to accept the EU as such as it is and is going to be. They must not only accept but also implement the Treaty, the so called access communitaire, without any exceptions. The acceptance is no problem but the implementation is, as it is considerably dragging behind the acceptance. The new members have to take as given 85 000 pages of EU legislation already existing.

The only concession that the old member countries might be ready for, is given in the form of transitional periods: all the provisions of the Treaty must not be fulfilled immediately but later on. Also all other members which have joined later, have got transitional periods in order to adapt. These periods have not been very long.

A lot is going to change along with the enlargement. The EU’s political atmosphere will be different as the mutual political weight and alliances of the members will change. The EU’s status in the world politics will change. The EU’s financing, agriculture and the levelling of the regional development differences must be reorganised. As far as the labour markets are concerned, the elimination of borders will create quite new kinds of employment relationships and wage systems to many countries.

As the EU ought to be "internally prepared" for enlargement, it means altering the power relationships between the institutions (Council, Parliament and Commission). The matter is under preparation at the Intergovernmental Conference (IGC), which is always summoned when basic treaties are to be amended. The outcome of the IGC which has been proceeding during this year, will be approved at the Nice Summit 7.-9.12.2000 or it may be transferred to be decided during the Presidency of Sweden next year.

But what if the enlargement will not take place but the changes of the power relationships are made, under the pressure of enlargement, in favour of the big countries? Then we have been betrayed. The countries can prevent the change of the power relationships by using their right of veto only once. When power is given away, it is no longer possible to get it back. The changes are irrevocable.

The future of the EU has inspired a lively discussion elsewhere in Europe but not in Finland, which remains silent. The federalists are speaking of the federalisation of the EU.

Federalism is supported especially by those who want to develop the EU with the so called community method . It means that integration is deepened so that the decisions concerning the EU’s development are made by its own institutions. The EU’s rules must be obeyed.

It is different from the method based on intergovernmental (IGC) cooperation, where the EU is developed by the decisions of the member countries. It includes so called flexibility or enhanced cooperation. Its purpose is to make it easier for some member countries to create the so called hard core within the EU. Then a group of countries ("the pioneers" à la the French President Chirac) would march their own way towards a common goal, not including all but leading the way for the others to follow.

If the big countries have their own way, the decisions made in Nice on the renewal of the power relationships will make – besides present small countries – the small applicant countries the biggest losers. The countries will be divided into A and B categories. This is done to ensure the "effectiveness" of the EU decision making, but the background motive is Germany’s and France’s interest to maintain their traditional hegemony in all circumstances, no matter what the number of the member countries is.

One must bear in mind that the federal states of the USA have an equal representation in the Congress. The EU countries, on the other hand, are not equal in the Council even now – not to mention after Nice. In Nice the deficiency of democracy will increase. In fact, no content has been invented for the concept of supranational democracy.

In Nice the member countries are going to lose their right of veto in several matters. The votes of the big countries in the Council and the proportional seats in the Parliament will be increased. The requirement for double majorities will be adopted in the Council (i.e. to accept decisions, both the majority of votes and inhabitants are needed, and at the same time it is easier for the big countries to reject them) . Flexibility and enhanced cooperation are extended also to security and defence policies. The EU becomes federalised and militarised.

If Nice is not ending up in a great chaos, after that the EU will consist of people of various strata. The applicant countries were not aware, when submitting their applications, what kind of EU they are possibly engaging in. Yet, they will join if only they are admitted. Democracy is not their most urgent concern.

The costs of enlargement

The EU has defined the guidelines of its budget policy for enlargement in the so called Agenda 2000 programme for the years 2000-2006. During that time, for the needs of the enlargement countries, the total of EUR0 89 milliard is reserved. That equals the annual budget of the EU. It is approximately the same amount that the cohesion countries receive as net subsidies in one year. During seven years they will receive only one seventh of the resources spent on the reconstruction of DDR. And after all, a much greater number of people are in question than 17 million ossies.

In 1990 the East German income level was one third of the Western level. Now, ten years later it is some 60 %. Unemployment is still over 10 % (for instance in Slovakia 20%, Bulgaria 17 %, Poland 15% and Rumania 13%). Even big money has not helped to create a better compatibility of the systems.

A top limit has been imposed on the EU budget. It can be 1,27% of the total gross national budget of the member countries. This limit can be changed only by the unanimous decisions of the member countries., in other words it is unchangeable. The enlargement must be financed within these limits. With this money the applicant countries must be made compatible with the EU, both socially and regionally.

The development of regions has been uneven also within the EU, and this is balanced by the flow of money. Market forces are not interested in regional policy, instead they seek their way, with their capital, to the regions offering the money the biggest possible profit. So the development of regions is left to the public authorities.

In the EU the regional policy is the Union monopoly, under its exclusive jurisdiction. The countries must obtain the EU’s permission also when they balance the differences between the regions with their own funding. Most structural fund aid is paid to Objective 1-regions with the gross national product per inhabitant under 75% of the average EU level. After the enlargement, the number of people living in such areas might rise from 92 million to 200 million (and Turkey added to that). As the EU’s subsidies have failed to improve the uneven structural development of the EU, the problem would become worse, if both the old and the new areas started to compete for the same money.

If the applicant countries’ annual economic growth were 6% and the EU countries’ growth 2%, the applicant countries’ share of gross national product per person would reach the average EU level in Czech and Hungary in 2035 and in Poland in 2045. If the growth figures were lower, for instance 4,5% and 1,5% per year, the EU level would be reached respectively as late as in 2050 and 2060. Besides, these estimations are optimistic.

The old member countries should assist the new ones with enormous sums at least for half a century. Still there is no guarantee of good results, because the EU has not so far been able to give assistance systematically but only sporadically. For instance, the Phare programme preparing membership, is almost solely functioning to secure the West’s own investments.

The basic justification for enlargement is the solidarity of Europeans towards other Europeans. It is uncertain, whether this solidarity is so great that the citizens of the old member countries are willing to pay solidarity taxes during the enlargement decades in the form of (rising) EU membership fees.

The Eastern European revolution has also carried away us Finns – as payers. Finland is a net payer in the EU with some EURO 330 million, and the sum would grow as the result of the enlargement. Finland would not necessarily have to pay a higher membership fee but the refunds would become smaller. They may get smaller even without enlargement if the World Trade Organisation (WTO) decides to decrease the agricultural subsidies. The WTO negotiations will also influence the costs of enlargement.

The rehabilitation of capitalism

When the socialist block collapsed, the mutual markets were closed and there was no longer demand for many products. Many production plants went bankrupt. The revolution was so rapid that there was no time to think about regional solutions to maintain the production.

Therefore the standard of living in many Eastern European applicant countries has sunk. Citizens’ income decreased at the beginning of the 1990’s by 20-50%, unemployment and social misery grew, criminality increased and the remaining production was continued at the cost of the environment. Many applicant countries have been politically unstable. Many governments have asked for support from the West instead of their own people.
In the years 1995-1997 the GDP per capita average in differents countries compared to the EU average were as follows: Slovenia 66 %, Czech Republic 64 %, Hungary 47 %, Slovakia 44 %, Poland 39 %, Romania 37 %, Estonia 34 %, Lithuania 29 %, Bulgaria 25 % and Latvia 25 %.

At present, the national product of many applicant countries is still below the level that existed in 1989. In 1999, Czech’s industrial production was 85% and that of Bulgaria 20% of the level ten years previously.

After the revolutions, the gap in respect to the EU countries has widened. Likewise within the applicant countries, the disparity between a small group of nouvelle-rich and poor people has been polarised. Especially pensioners are having a hard time as inflation has devoured their savings intended for "a rainy day". Many applicant countries are in debt, and capitals are streaming to the West, in the form of interests and profits.

If there is a will to reduce the gap existing in the standard of living compared to the EU countries, it is not sufficient that the EU is assisting these countries on a political-economical basis . It must be done also in order to gain social equality. So far the adaptation to eventual EU membership has taken place at the applicant countries’ own cost, without significant outside help. This cannot go on. The kind of development that has continued so far, is unbearable for the nations in the long run. If the EU membership is not realised or it does not correspond to people’s expectations, it means growing political instability.

Hungary is one of the first applicant countries that is approaching the EU requirements. It was quickest to restore the honour to capitalism, and the market reform was carried out most completely. The price paid for it has been social and political decay. While in 1991, 15% of Hungarians were below the poverty limit, after 1995 the figure has been 35-40%. In Hungary the share of working people out of the population of working age is only 52% (in Finland 70%) . In that respect the unemployment rate of 10% is still considered quite high, and yet half of the population are working. Social ill-feeling is manifested in the sinking of men’s expected life-span to 64 years. It is, however, higher, than in Russia where it is 57 years but in Finland it is nearly 80 years.

Many mistakes have been made. Restoring capitalism, or privatisation, has not been a miracle cure for all diseases as only the most reckless and skilful self-seekers have gained from its fruits. They have taken care of matters so that it has been more profitable to close down production plants, sell their property and enjoy the tax benefits granted for the capital.

There has been only one model: everything must have been done in the same way as in the West. Nobody has questioned whether it is suitable or not. These countries have been advised by supranational institutions, led by the World Bank and International Monetary Fund. They have not taken into consideration special factors concerning regional, economical, cultural or security aspects.

The only production factor, which makes the applicant countries able to compete with the old member countries, are wages. In the applicant countries they vary from the Czech average monthly salary of EURO 430 to the Bulgarian one of EURO 117. In 1997 the employer’s average hourly labour cost was in Germany EURO 24 but in Slovenia 5,5, in Poland 2,75, in Czech 2,5, in Estonia 1,8, in Rumania 1 and in Bulgaria 0,75. If the currencies’ purchasing power is taken into consideration, the labour costs in the most developed applicant countries, Poland and Czech, are a quarter of the EU level.

If membership opens the EU’s labour market for the citizens of the applicant countries, such differences in labour costs would lead to the emigration of many professionals and thus to a serious "brain drain". Therefore it is in the interest of the applicant countries to make the advanced production follow the labour force, not vice versa, but that would remove jobs from the countries which are losing enterprises. This would have serious political consequences to the countries of departure.

Low labour costs are a good competition factor, yet they should be allowed to rise in order to enable the less developed countries to form their own capital and be less dependent.

To summarise, it might be possible to draw such a conclusion that the West has been more eager to open markets for its own products than to contribute to the rise of the standard of living of the people in the markets of the applicant countries. It is also possible to conclude that for the applicant countries, it is disastrous to open their markets for the competition from the West, and it might lead to the colonalization of these countries, to the birth of new colonies within Europe.

A problem impossible to overcome – agriculture?

Agriculture is the central problem of the membership negotiations. It will be negotiated lastly, and if the membership is at stake, this will be the issue.
Applicant countries need long transitional periods, otherwise their agriculture has to pay the price of membership as unemployment. Poland alone has produced a wishing list of 120 pages concerning exceptions to agriculture. The country has 2 million farms, the half of them producing foods only for its own use. From the point of view of the EU, there is deficiency in hygiene in the country, as only 40 mills of 400 and 19 dairies of 2743 are fit for the EU.

Agriculture is, however, a most political issue, as in the Polish elections 40% of the voters are dependent on agriculture, in one way or another.

The applicant countries have a lot of people living in rural areas, farming. In the EU the share of agriculture of the gross national product is 2%, whereas in the applicant countries 7% on the average (in Bulgaria 21% and Rumania 17%). In the applicant countries on the average 22% of the labour force consists of farmers (In Rumania 37%, Poland 28%, Bulgaria 28% , Hungary 7% and in Czech 5%), compared to the corresponding EU figure, only 5%. In Poland the share of farming population has even grown as the employment of the cities has driven people to their relatives in the countryside.

The productivity of agriculture in the applicant countries is low. The privatisation of land has led to the breaking up of estates and sinking of production. When collectivisation ended, one third of the production was lost. When the agriculture of the ex-DDR was run down, employment in agriculture sunk by 85%.

Compared to the EU countries, the productivity of the applicant countries’ agriculture is approximately only one tenth. If it improves by a half (which requires more capital, i.e. machinery), it would mean 6 million more unemployed people in the countryside, 2 million in Poland alone. These people have nowhere to go to be re-employed, and such costs must, sooner or later, be paid by the EU. If productive jobs are found for all these people by EU funding, energy crises and other limits to economical growth are faced sooner than expected.

In the customs treaties made with the EU, agricultural products have been included in free trade. As a consequence, the EU is a net exporter to all other applicant countries except Poland. This has led to a conflict situation between the EU’s, and specially Germany’s, agriculture business and the small producers of the applicant countries. Everybody knows who is going to win in that competition.

Negotiations on agriculture include two gigantic problems: producer prices and consumer prices.

In the EU producer prices are – particularly according to the French interests – much higher than the so called world market prices. If the applicant countries are going to adopt EU prices, it would mean for instance for the Polish farmers a 47% rise to producer prices. So agriculture would become a very profitable branch of production, but at the cost of the development of more modern sectors. Also consumer prices would rise unbearably high from the point of view of urban population.

Based on the Agenda 2000 programme, the farmers of the applicant countries are not paid direct subsidies, on which the farmers of the present member countries are dependent. The reason is that the rise in prices from the world market level to the EU level will increase the farmers’ income sufficiently even without direct subsidies.

The rise of producer prices will raise the price of food in the applicant countries without corresponding rise in wages and pensions. That will slow down the rise of consumer prices, and in this way two different categories of food prices might be created in the EU area. This could easily mix up the whole food system.

Policy of one alternative: EU membership

One Prime Minister said in 1990 that Hungary had been promised the EU membership in 1996. The next one said in 1994 that in 1998. The third said in 2002. If Hungary’s membership is not realised in 2002, the so called public opinion is likely to get nervous. The sacrifices made for the membership have been enormous. One third of the agricultural production has been sacrificed. 80 per cent of the industrial enterprises have ended up in foreign ownership, and foreigners own 22 out of the 25 biggest enterprises. The next object of purchase will be land.

Yet two thirds of Hungarians are in favour of the EU membership. On the other hand, in Poland and Czech the support is declining. In Poland, for instance, nationalism equals religion, and if it becomes a B-category country in the EU, the self-esteem of the Poles could not bear it. As far as religion is concerned, in many countries it has been a strong argument in favour of the EU as it is seen as a Christian community.

In Czech the majority of people are probably against the membership, for various reasons. For instance, new-capitalists fear the kind of legality that the EU would introduce, looking into the way their property has been made. On the other hand, the EU is objected on the grounds that the outcome of the second world war is respected and people are not willing to return to the Germans their old Czech properties.

It cannot be denied that many applicant countries are in a state of chaos, politically, economically and socially. They cannot manage on their own.

Therefore, most tempting about the EU membership is the thought of being a part of something bigger that gives hope of something better. All hope is based on economic aid , and in its expectance, the applicant countries are ready to accept almost any conditions of membership, without public discussion on the principles of membership.

Membership in the EU is the only possible strategy for the new power to keep their positions. Politicians are able to hide behind the EU’s back by saying that they would but the EU will not.

If there were discussion in the applicant countries on the question what they are likely to be faced with in the EU, people might turn against membership. It would mean birth to a political vacuum, and that might be filled by right-wing radicalism, by nature either traditionalism, nationalism or antipathy against the West and capitalism.

In the Middle Europe there is rising the extremely right-wing "Populism of the Alps". It is based on xenophobia, and it is opposed to the enlargement of the EU. Its more or less anti-EU leading figures are already in power in Bavaria (Stoiber), in Austria (Schlüssel and Haider) and in Hungary (Orbán). It has got foothold also in Switzerland.

If membership is delayed, it crumbles the political foundation of the movements that have been in favour of the EU membership. Each negative measure taken by the EU, is fuel against membership. For instance, the diplomatic boycott of Austria, declared by the EU countries, was a significant factor contributing to the increasing unpopularity of the EU. It looked like other countries started to give orders to an independent country what to do. National and regional policies are thus not only restricted but also implemented outside the member countries.

It is clear that the membership in the EU conforms and homogenises politically. For instance, if the number of the representatives of the European Parliament is limited as planned, its spectrum of views gets narrow, and Europe starts to remind a two-party system. In Europe with half a milliard inhabitants, diversity is suffocated.

At best, the membership of new countries means peace and stability, law and democracy. The division of Europe and old frontlines would be history if nations can get along together without nationalism and ethnic hatred. The enlargement would have a positive impact on the creating of new European sphere and consciousness. Then Europe would be more genuinely "Europe" than it is to-day. It is not justified that eurocrats speak of Europe when they only speak of the EU.

At worst, the delay of enlargement nourishes extremist movements and leads to political instability.

Enlargement is no easy solution to all problems. Nations have different cultures and characters, based on their own national history and shared experience. The EU of over 20 member countries, with the blend of languages, would form a kind of Tower of Babel. Language is bound to culture, and mastering a language is not only mechanical translation performance from one language to another. Also the meanings must be translated, and if they are lost, Europe will lose in the variety of views what it will gain in the deepening of integration and federalisation.

The applicant countries compete with each other to be the first at the start. It is thought that the most masochistic countries get in first. The rest are put in a queue without definite time-tables. One gets often bored with queuing, and nations may invent other solutions. That is also known within the EU, and it is hurrying up with the enlargement matters.

Points of view in favour and against

Enlargement has been good business for the EU. It has been a pretence to open the borders for its own foods and investment goods (which need not be of first class quality), and the EU has a trade surplus of milliards of EUROs with the applicant countries.
The applicant countries’ economy has so far been protected by weak currency (the stability of which has, in many countries, been safeguarded by binding it to the German Mark). It, together with labour costs, has given competition advantage to countries which otherwise lack competitiveness. If the applicant countries access to the EMU (to which they do not need to commit at first), it would increase deflation pressures on their economies.

Protective clauses are necessary in the membership negotiations also against the free trade of fixed assets. In the applicant countries, the prices of land and real estates do not correspond to the level prevailing in the Western markets, and if they are not protected, Western investors are quick to raise the price level beyond of reach of the own people. It is politically unbearable if foreigners buy land and homes.

Extra money has fled from many countries, ending up as capital investments in the West, and at the same time new western money has been brought in as a loan. There is old experience that some people go into debt and the others have to pay it back. If the money that has left its own country does not return as investments, there is little hope to obtain foreign capital. The problem is that the nouvelle-rich neocapitalists are not interested in solving social problems but only getting high profit from their capital. The rich are not always especially patriotic. Among the poor, whole new lost generations are born. In the area of the ex-DDR it is visible in the form of the rise of the extreme right.

As far as the present EU countries are concerned, the enlargement does not represent populism. According to the opinion polls made in Germany and Austria, just over a half of the population is in favour of Hungary’s membership, Baltic countries’ membership under a half, Slovenia’s and Czech’s 40% and Rumania’s, Bulgary’s, Poland’s and Slovakia’s membership only one third of the population. It is very likely that further away from the applicant countries’ borders, towards the Pyréneés, the support is even lower, especially in case somebody says aloud that the EU subsidies to these countries are going to collapse.

The membership of Poland is a special problem for Germany. Seen from the historical perspective, it is not possible that the EU would enlarge without Poland in the first group. Many Germans do not want to take Poland, but nobody can say that aloud. When the Commissioner in charge of enlargement, Mr Günter Verheugen suggested solving complicated issues of the EU by referendums, he was nearly dismissed. It was thought that he had suggested a referendum to be organised in Germany on the enlargement including also Poland’s membership.

Referendums would destroy the ongoing process, and that is why they are not organised. It makes the enlargement of the EU a project of the elites, on both sides.

Membership in NATO or EU?

Some applicant countries have got an idea that the EU bureaucrats do not hasten with the membership negotiations because some countries already are members of the NATO and they have security guarantees against change.

The new NATO countries (Poland, Czech and Hungary) must, according to the NATO’s requirement, spend 2% of their gross national product on military expense. That money will be missing from social security and other development.

That is why Lithuania seems no longer interested in applying for the NATO membership. It would cost a lot. Even its EU-eagerness is tested as the EU demands Lithuania to abandon its nuclear electricity that provides 77% of the country’s energy. The EU would not compensate alternative production, and Lithuania should alone pay for the running down of its nuclear plants.

If the West supports revolutionary changes of social systems politically, it must also take the responsibility for it economically. Otherwise insecurity in Europe will increase. It is dangerous (and expensive) when a whole country ends up politically under the EU’s guardianship, as happened in Serbia. In the election the presidential candidate Kostunica replaced the dictator Milosevic, but the former’s election campaign was led and financed by Germany and other Western countries. That makes the EU politically and economically responsible for the Serbian opposition’s efforts to rebuild the country.

If some of the applicants become the EU members, but some not, it is feasible that around the EU, a Schengen Wall will be erected. It may have same kind of political consequences as the Berlin Wall had. From this wall there will be no shooting, but it will drop people into a gap of standard of living.

[ Arcticles in English | seppanen@kaapeli.fi ]