IN THE GRAND scheme of history, this week’s enlargement of the European Union, to include eight of the former communist countries plus Cyprus and Malta will unquestionably be remembered as one of the milestones of the early 21st century. A hundred years from now, enlargement will probably be the subject of far more essays by schoolchildren than the terrorist attacks of September 11. In this sense, the lofty rhetoric which we will hear in the next few days from political leaders across Europe will be amply justified.
Emotionally, too, it is impossible not to be moved by the unification of Europe, especially for somebody like me. My father was born in the tempestuous eastern borderlands between Poland and Russia, and brought up speaking five languages. He was an involuntary actor in the tragic drama of European history and geography, but always saw himself as a citizen of Europe. His conversation was as likely to be peppered with quotations from Voltaire, Pushkin or Heine. The books he read to me at bedtime alternated between Dickens, Hugo and Sienkiewicz. And all his life, he dreamt that one day Warsaw would regain the title it conferred on itself in the interwar years when he grew up: “the Paris of the East”.
Sadly, my father died just over 15 years ago, a tantalising few months before the Berlin Wall fell and his dreams began to come true. Yet if he were alive today, I fear that he would be disillusioned. His celebrations would be tinged with bitterness and his joy at the unification of Europe marred by a sense of injustice and even betrayal, as it is among millions of his compatriots in the new member states.
A Polish friend recently compared Warsaw or Budapest or Prague today with how they were 15 years ago, when they expelled the Russians. There is freedom, to be sure, and that is the most important prize, said my friend. But look at the poverty, the beggars, the homeless, the unemployed, the unheated hospitals, the vanishing public services, the physical decay. Is this the progress that the people of Eastern Europe were told to expect in 1989 when they threw off communism?
History and technology are supposed to be moving faster than ever, but consider what Frankfurt, Hamburg or even Milan or Rome looked like in 1960, 15 years after the devastation of the Second World War. Poverty, homelessness, economic insecurity seemed to be vanquished. Health and education were readily available to all. Unemployment was non-existent and workers were flooding in by the millions from Turkey for the jobs that Germans no longer cared to do. By 1960, Germany had already overtaken Britain to become Europe’s richest country and even in Italy la dolce vita was back in full swing.
Now consider Eastern Europe today. The ten new EU members will account for 25 per cent of Europe’s population but only 5 per cent of its GDP. Estimates of how long it will take their living standards to catch up with the present EU average range from 15 years to 50 or more.
To acknowledge that Eastern Europe’s gratitude towards the West will be tinged with resentment is not to suggest that the EU is to blame for the absence of a German-style economic miracle. Although it is true that countries such as Poland and Hungary initially found Western markets closed to some of their most competitive products and received far less financial support in real terms than Germany and Italy did under the Marshall Plan, these are not the main reasons for their exasperatingly slow economic progress. Internal economic mismanagement, political turmoil and corruption are more important causes of disappointing performance. Perhaps most important was the lack of industrial infrastructure and managerial skills. Poland and Hungary never had their Siemens, Krupps, Volkswagens, Mitsubishis or even Fiats, capable of being transformed into globally-competitive powerhouses. In many ways, therefore, the situation in Eastern Europe in 1989 was far more difficult than it was for Germany, Italy and Japan in 1945.
But my main point in comparing Eastern Europe today with Germany in 1960 is not to cast aspersions on what has been achieved since the Cold War ended. It is to try to understand the impact of enlargement on Europe, not just in terms of lofty historic and cultural aspirations, but also through the bread-and-butter issues which dominate politics and public life.
In many of the new member countries, enlargement could produce an even deeper disillusionment with the EU, since most of the economic benefits of joining have already accrued, while the costs will start to be paid only next week.
As candidate countries they enjoyed almost a decade of unfettered access to EU markets and big inflows of capital from multinational companies eager to use them as a low-cost base. Foreign investment peaked in most of the accession countries two to three years ago and several are now seeing a reversal of capital flows. Ironically, the decline in foreign investment is partly a consequence of the move to full EU membership. Companies in the accession countries will now be subject to the full panoply of EU environmental and labour regulations and the prospect of rapidly rising wages and social costs. Thus industries, such as textiles and footwear, where investment is driven mainly by the search for low wages are relocating to the next wave of candidate countries — Bulgaria, Romania, Croatia and eventually Turkey — to keep their access to EU markets without the regulatory and social costs.
To make matters worse for the accession countries, taxes will have to be raised and public services cut to comply with the Stability Pact and interest rates may need to be kept very high if inflation is to be squeezed down to the artificially low levels required for eurozone membership. While some of these painful adjustments will be beneficial in the long run, they are likely to exacerbate a populist backlash against the EU.
Meanwhile the only tangible benefits of full membership — the free movement of labour, the agricultural subsidies and the cohesion transfers — have been denied. Eastern Europeans will have the right to work only in Britain, Ireland and maybe Sweden and the Netherlands. All other EU countries will deny them employment rights for up to seven years. Agricultural subsidies to Eastern Europe’s farmers will remain a fraction of those paid to existing members and the net flows of money from cohesion funds will be derisory after the budget contributions which new members start paying on Saturday are taken into account.
These new countries will not be joining as starry-eyed idealists, like the Spain of Felipe Gonzalez in the early 1980s, but as tough-minded pragmatists. They will face huge domestic pressures to squeeze more economic rewards out of EU membership than are currently on offer and to resist further losses of national sovereignty or harmonisation which would narrow their freedom of manoeuvre. These pressures are already at work in the rapid growth of populist anti-EU parties.
The ten new members could prove a disruptive presence in EU councils, demanding a say out of all proportion to their economic power and unyielding in their defence of national interests, as their sometimes unruly electorates perceive them. This enlargement will make the EU an even more argumentative body. And with further expansion approaching, the high-water mark of Europe’s institutional integration has surely been reached. The more the EU grows, the clearer it will surely become that it must remain an association of 30 independent countries, linked by history, geography, a common cultural heritage and mutual economic interests, but far too diverse and idiosyncratic ever to merge into a single federal state.
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