Brussels, 05/12/2001 (Agence Europe) - Enlargement of the European Union to the 12 candidate countries could lead to a growth in EU GDP to the order to 0.7% a year in the next decade according to a study highlighting the financial and economic risks and benefits of enlargement commissioned from the Groupe d'Etudes Politiques Européennes (GEPE) by the Belgian Economic Affairs Ministry. The authors stress that it may be necessary to raise the current ceiling for the Community budget (of 1.27% of the EU's GDP) and levy a European tax in order to fund enlargement from 15 to 27 Member States. The study points out that despite the high cost of restructuring candidate countries' economies, high productivity and production rewards are possible and the desire to join the EU acts as a potent catalyst for change in the candidate countries. This means enlargement would help expand the single market and encourage economies of scale through companies increasing in size. The authors argue that it is reasonable to consider that the candidate countries might be ready to adopt the euro only a couple of years after they join the EU.
It is particularly in the interest of companies in the current EU (particularly in Belgium) to invest in candidate countries in order to win new markets and gain a strategic position (rather than take advantage of cheap labour), asserts the study. The experts believe that the prospect of a mass migration westwards is unlikely because worker mobility will remain quite very low (as happened when Spain and Portugal joined). The study notes that firstly, it will take time to change the labour market and this considerably cuts the risk of a shock. Also the impact of accession will create new job opportunities in the new Member States both for skilled workers (whose salaries are not so different from their EU counterparts in terms of purchasing power) and for unskilled workers, who rarely chose to move country.
Despite these positive aspects, enlargement is still risky. The authors say it will be necessary to ensure the benefits of scrapping customs duties are not counteracted by equivalent measures concerning cartels or state aid. On a more general level, it will be vital to ensure the new Member States are capable of applying EU competition rules since in the short-term there is a potentially huge risk of an uneven playing field. A tendency to move towards industrial specialisation can be noted (through concentrating sales in specific countries or regions) and this danger (of an industry-level crisis) can also become a regional crisis, according to the study. For agriculture, budget problems with the application of aid in candidate countries have to be considered alongside the trade balance which will remain in excess for a long time for the current Member States given the problems the candidate countries are having in restructuring their agri-food industry and adapting to Community safety and quality standards. There is no need to fear a massive emigration of agricultural workers since many of them could qualify for early retirement while better trained young people might benefit from EU aid for young farmers. In terms of the structural funds, a huge rerouting of EU finance towards the candidate countries could have a serious impact on the regions that are currently eligible for aid. The authors argue that in order to solve the problem of the Union's financial resources, it may be necessary to raise the current ceiling of 1.27% of GDP from 2007 onwards.
The authors feel that it will be necessary, after 2006, to avoid a situation where more than 75% of the 27-state EU comes from national contributions. They argue that a fifth resource (an energy tax), while useful, will not suffice and a fair and equitable European tax will have to be considered.
The study ("L'adaptation des structures de décisions économiques aux conséquences de l'élargissement de l'Union européenne" is available in French from the Groupe d'Etudes Politiques Européennes, Rue d'Egmont 11, 1000 Brussels. (Tel: 02/545 0461; Fax 02/511.67.70; e-mail sep.gepe@busmail.net; http: //http://www.tepsa.be. )