w 109 long-run economic aspects of the european union's eastern ...

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LONG-RUN ECONOMIC ASPECTS OF THE EUROPEAN UNION’S EASTERN ENLARGEMENTFigure 7.4Scenarios 1 and 2, year 2010 – compared with the Berlin financialframework year 2006 (1999 prices)BelgiumDenmarkGermanyYear 2010,scenario2 - SFlevels equalGreeceSpainFranceIrelandItalyLuxembourgNetherlandsYear 2010,scenario1 -Structural FundcriteriaunchangedAustria146PortugalFinlandSwedenBerlin - 2006 EU20UKCEEC 5-20000 -10000 0 10000 20000 30000million euroData Source: Annex 7The picture shows how politically crucial the issue of enlargement really is. Thebudgetary costs are substantial. The Berlin European Council has made it impossibleto limit transfers to the CEECs by its inability to reform the CAP’s direct payments.The Structural Funds expenditures are also sizeable. Assuming these reachthe four percent limit of national GDP agreed in Berlin, the expenditures in theCEECs could potentially rise to eighteen billion Euro for the first group of applicants.The combined extra expenditure for the CEECs could well be over ten billionEuro on top of the sum of seventeen billion Euro envisaged in the financial frameworkfor enlargement in 2006.
BUDGETARY TRANSFERS IN AN ENLARGED EUROPEAN UNIONAn even bigger problem is the introduction of five new members into the futurenegotiations on the EU budget. The new members will be major net beneficiariesof the EU budget. Since a timely opportunity to revisit the transfer system wasmissed, present net contributors and net beneficiaries are certainly going to be hitby the enlargement beyond the line of political acceptability. Furthermore, there isthe question of the second enlargement. Even if this one seems distant at themoment, it might well take place before or by 2010, i.e. shortly after the end oftransition periods of the first five CEEC entrants. This will bring a second round ofsimilar problems. Most likely, the countries opposing a further enlargement maywell be the new Member States. They will be worried by the loss of their newlyobtained benefits. If they join forces with some cohesion countries, pressureagainst the second enlargement will be strong, and another crisis might belooming.7.5 THE RATIONALE OF EU BUDGET TRANSFERS TO THE CEECSThe preceding sections discussed the political problems of introducing the CEECsinto the EU ’s transfer system. They clearly show that Member States have neglectedthe ‘how and who’ of transfers. However, another equally relevant dimension tothe transfer issue is that of the policy rationale for transfers to the CEECs. One ofthe points to bear in mind is that the problems related to the Structural Funds andCAP transfers for the CEECs are neither new nor purely related to enlargement.Policies inherit their faults and inefficiencies from the present EU -15. The mainproblem enlargement adds is that the EU will increase considerably its area of disadvantagedregions. By introducing its own policies in the CEECs, the EU will exacerbatethe weaknesses already present. Most of the problems in the CEECs are infact quite similar to those in other low GDP regions in the EU. The exception to thisis the environmental problem, which is much larger in the CEECs than in the EU.147The main challenge for the EU, as far as transfers are concerned, is to increase thethree ‘E’s’ – economy, efficiency and effectiveness – of its policies. The old balanceof power that led to consensus on the single market and EMU through side payments,is becoming unsustainable. Enlargement will certainly widen the cohesionprocess, but it may lose depth if the cohesion funds are diluted. If the EU wants towiden the cohesion process to the CEECs, there are basically only two ways open:increasing expenditure proportionally to the increase in coverage while protectingexpenditure levels in current cohesion regions, or improving policy efficiency. Thelatter option, as we will argue below, is the more attractive of the two. It wouldallow some reduction in expenditure at the regional level while maintaining thespeed and depth of the cohesion process.
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WORKING DOCUMENTS W 109LONG-RUN ECO
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CONTENTSCONTENTSPreface 3Summary 91
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CONTENTSAnnexes1 The Balassa-Samuel
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LONG-RUN ECONOMIC ASPECTS OF THE EU
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INTRODUCTION1 INTRODUCTIONThe Europ
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INTRODUCTION4 To what extent do the
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INTRODUCTIONefficiency-based (first
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INTRODUCTIONThe exercise is not so
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INTRODUCTIONsome suggestions to min
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PROBLEMS OF ACCESSION TO THE INTERN
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A SOUND AND DYNAMIC ECONOMIC UNION5
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Page 157 and 158: LITERATURELITERATUREAlberolo-Ila, E
Page 159 and 160: LITERATURECommission (1998i) Twenty
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Page 175 and 176: ANNEXESANNEX 2WHY IT PAYS TO JOIN T
Page 177 and 178: ANNEXESThe key item in equation (4)
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ANNEXESTable A17Estimated expenditu
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ANNEXESANNEX 8TECHNICAL ASPECTS AND
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ANNEXESreasons the Commission (1998
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ANNEXESOwn resourcesThe amount reta
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