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Many small states wish to join the EU as they see it as a body that can better the lives of their citizens and deliver a better standard of living for all. The perception is that EU membership can bring about economic growth, employment, better social conditions and the opportunity to live in a community where there is peace, security and social justice.
Member states on the other hand have sometimes conflicting
views about prospective membership of some smaller states. There are
worries about the economic impact of taking on some of the poorer
countries and concerns about immigration and security issues arising
from smaller states on the boundaries of the EU. This dissertation will
examine the three main reasons that small states wish to join. Chapter
one looks at the economic issues and the benefits that the single
market can bring, Chapter two looks at issues around security, in
particular the desire of smaller stats to combine EU membership with
NATO membership and chapter three looks at the aspects of EU social
policy and its overall culture that attract small states. Chapter four
and five are cases studies of the Czech Republic and Estonia – why they
wished to join the EU and how membership has affected them to date.
There is some debate as to what actually defines a small state. Some
definitions will base the description on population alone and define a
small state as one with a population of less than 1.5 million. Other
definitions pay more attention to economic and political status. For
the purpose of this dissertation, a small state is understood to be one
within Europe deemed to have a small amount of economic and political
influence in comparison to influential EU member states such as
Britain, France and Germany.
Chapter 1 - Economic Reasons for Joining the EU
Economic growth is the primary reason for small states joining the EU.
It is emerging into a huge commercial force and is now the largest
internal single market as well as the largest trader of goods in the
world. The year 2000 saw the EU account for 24 per cent of the total
world trade in services, ahead of nearest competitors the US (with 22
per cent) and Japan (8 per cent) (p61, Jeremy Rifkin – The European
Dream, Polity Press, Cambridge 2004).. Importantly the EU exports more
than it imports, unlike the US, which runs on a trade deficit. The
EU’s GDP is also exceeding that of the US – $10.5 in 2003 against $10.4
and in total accounts for 30 per cent of GDP in the world.
Quite simply, small states in Europe want to be a part of this economic
powerhouse, and although debates about sovereignty, security and
national identity may rage in all member states and amongst the
politicians and citizens of prospective member states, the bottom line
is the economy – many smaller states feel that unless they become part
of the EU, they will be left behind economically.
Many small states will argue, quite rightly, that the enlargement of
the EU to accommodate them will bring benefits across the Union. The
enlargement in 2004 to include a further 10 states (Cyprus, Czech
Republic, Estonia, Hungary, Poland, Slovenia, Latvia, Lithuania, Malta
and Slovakia) has added over 100 million people to the EU’s market and
will boost economic growth and create jobs. A study in 1997 by the
Centre for Economic Research estimated that the accession of the
countries of Eastern and Central Europe would bring and economic gain
of 10 billion Euros for existing member states and 23 billion Euros for
the new members. A further study by the European Commission also
suggests that the accession of the new member states could increase the
growth of GDP of the acceding countries by between 1.3 and 2.1
percentage points annually, whilst for the existing members it could
increase the level of GDP by 0.7 percentage points on a cumulative
basis.. Certainly for small states, there is a perception that
remaining outside of the EU denies them economic benefits, reduces the
possibilities for growth and weakens their incentive for economic
reform as well as discouraging foreign investment.
Figures on national GDPs in the 1990s explain why the smaller states
see EU membership as economically beneficial. The Economist reported
the following levels for 1994 at purchasing-power parity exchange
rates: Czech Republic £7,910, Latvia $5,170, Malta $7,460, Cyprus
$10,260, Estonia $5,519 and Lithuania $3,240. This can be compared
against a GDP of $18,170 for the 15 member states at the time – roughly
the average GDP of the smaller states was one third that of the average
GDP of existing members.
The existing members states obviously want to see new members add to
the economic success of the EU. Andrew Moravcsik writes “enlargement
rests on the convergent interests of existing and prospective members.
EU leaders promote accession because they consider enlargement to have
longer-term economic and geopolitical benefits – the creation of
commercial opportunities and the stabilisation of neighbouring
countries (Andrew Moravcsik and Milada Anna Vachudova – Bargaining
Among Equals 2002). Moravcsik further makes the valid point that
smaller states, particularly those from Eastern Europe will even accept
less favourable terms on accession simply due to the fact that the
economic consequences of non-membership are unpalatable – for the likes
of Poland and the Czech Republic the EU gives them something that was a
distant dream fifteen years ago – access to the worlds largest single
market, strengthening of political ties with the West and the
stabilisation of democracy and their own capitalist economies.
The financial aid available to prospective member states is a huge
incentive for small states to apply for EU membership. The Union’s
pre-accession strategy provides aid for applicants to carry out the
reforms required for membership and the Phare Programme which is open
to prospective countries from Central and Eastern Europe involves
institution building measures with accompanying investment as well as
measures designed to promote economic and social cohesion. Eight of the
new member states that joined the EU in May 2004 had been eligible for
the Phare Programme and pre-accession aid has been substantially
increased to remaining candidate countries. Bulgaria and Romania for
example have been allocated 4.5 billion euros in pre-accession aid for
2004 to 2006.
The Instrument for Structural Policies for Pre-Accession (ISPA) is
financial assiatance aimed at addressing environmental and transport
infrastructure priorities identified in accession partnerships with
applicants from Central and Eastern Europe. Coming under the remit of
the Directorate General for Regional Policy, ISPA only finances major
transport and environmental projects. Up until 2003 its overall budget
for Central and Eastern European countries was 1.1 billion euros and
for 2004 it had a budget of 452 million euros for Bulgaria and Romania.
A further type of assistance for candidate countries is the Special
Accession Programme for Agricultural and Rural Development (SAPARD).
This programme, again aimed at beneficiary countries from Central and
Eastern Europe offers aid to help deal with problems in the
infrastructure in agricultural and rural sectors. SAPARD had a budget
of 560 euros for the ten candidate countries from the region in 2003
and a further 225.2 million euros for Bulgaria and Romania for 2004.
Slovenia serves as a good example of a small state that has
particularly benefited from pre-accession assiatance – from 2000
onwards it received a total of around 65 million euros annually from
the financial aid programmes. It was allocated large amounts of money
form the PHARE programme: in the period 1992 to 1999 it was allocated
191 million euros, for 2000 33.3 million, 28.5 million in 2001 and 41.9
million in 2002. In addition there were payments totalling 19.6 million
euros from ISPA in 2000, and 17 million in 2001. 60 per cent of the
support was directed at environmental projects and 40 per cent at
transport projects. Finally the Slovenian SAPARD programme has given
the state 6.6 million euros annually since 2000. Such financial
assistance is obviously an attraction to governments of small states
and it is also something that sways the populations of the states in
favour of EU membership. A referendum held on EU accession in Slovenia
in 2003 showed a 90 per cent vote in favour of accession, influenced
largely by the amount of aid that it had received. A referendum held on
NATO membership at the same time was in favour, but with only a
majority of 66 per cent.
Attracting business with its comparatively cheap labour force is a
further objective of the smaller states in seeking EU membership.
Certainly for the larger, established members, the thought of cheap
labour from 75 million new citizens from Eastern and Southern Europe is
a fear for their own economies as is the prospect of companies in
Western Europe relocating more of their manufacturing and service
operations to the East where labour costs are cheaper.
Happily, for the small states in Eastern Europe at least, there is
evidence that this has already begun to happen. The consulting firm
Gartner states that The Czech Republic, Poland, Slovakia and Hungary
are especially attractive options as sites for Western European
companies looking to outsource some of their operations to cheaper
labour markets. Logistics company DHL set up an IT operation centre in
Prague in 2004 and Gillette has announced plans to set up a $148
million plant in Poland, moving its manufacturing and distribution out
of Germany and England (p63 Rifkin 2004). The consequences are as
worrying for Britain and Germany as they are positive for Poland -
Gillette will close two plants in England and cut production and its
workforce in its Berlin factory.
Poland serves as an example of a country feeling the economic benefits
of EU membership. Prior to joining, many Poles were sceptical and
vociferously made know their concerns about dangers to their
sovereignty and social values. However over three quarters say that
they are now happy with EU membership (The Economist – Reaping the
European Harvest, January 8, 2005) and this is largely due to the
upturn in the polish economy generated by EU membership. In the first
eight months of its membership Poland was given $3.4 billion from the
EU budget, equating to roughly twice what it paid in. Farmers’ incomes
have risen by one third for small farmers and by two thirds for those
with large farms reversing years of decline. Generous EU subsidies and
an influx of foreign buyers paying good prices for Polish fruit and
meat have been the reason for this. Poland’s total exports rose by over
30 per cent in the first nine months of 2004 due to the abolition of
customs formalities and tourist numbers have been boosted by 20 per
cent with EU rules opening up the skies to budget airlines. (The
Economist January 8, 2005). There have been similar results in other
Eastern European states – in Poland, the Czech Republic, Hungary,
Slovakia and Slovenia, growth averaged 4.6 per cent as opposed to 3.5
per cent in 2003. In Baltic States Estonia, Latvia and Lithuania, less
regulated economies enjoyed growth of 6.7 per cent in 2004 (The
Economist January 8, 2005).
There have been some economic tensions with more established member
states. The low tax policies of newer members have been criticised by
the likes of France and Germany who see the lower taxes of Central
European states as damaging to jobs and investment in Western Europe.
Belgium, as well, has publicly questioned why the EU should give
regional financial assistance to states that appear to collect very
little in tax. Slovakia, for example set a 19 per cent flat rate for
income tax, corporate tax and VAT for 2004 as an incentive for its
business climate. Despite the raised eyebrows of Western members
however, tax revenues showed a modest rise for the year.
For smaller states, the greatest attraction of the EU is its economic
power. Individual aspects such as trade without tariffs and the common
currency can alone be seen as positive benefits for the smaller states,
but it is the overall economic package that comes with the EU that
really appeals – small states generally believe that membership will
secure their long-term economic prosperity.
Chapter Two - Security in the EU
Security is an important issue for small states and the EU offers a
security that many of these countries could not achieve alone. It is
however an issue that means different things to different countries.
The Czech Republic for example has been as keen to join NATO as it has
the EU, whilst neutral small states such as Malta have concerns about
being tied into a Western security bloc that threatens the neutrality
that it cherishes.
An effective security policy is crucial for the EU. Bretherton and
Vogler rightly states that: “If the Union is fully to realise the
potential of its significant presence, it is vital that the economic
power of the European Community is articulated to a stronger sense of
collective political purpose. A well coordinated and fully functioning
common foreign policy would have this effect” (p169 Bretherton and
Vogler – The European Union as a Global Actor, Routledge Publishing,
New York 1999).
Individual states have differing agendas in terms of security. States
in Eastern Europe and The Baltics are largely looking to move west and
away from the old sphere of Soviet influence. Slovenia on the other
hand has one eye always on the situation in the former Yugoslavia.
The EU has a secondary role in terms of security to NATO and small
states realise this. For the majority, NATO membership is more
important in terms of security but there is a perception that EU
membership can somehow be a stepping-stone to NATO membership. Military
alliance with the US is seen as a far greater guarantee of security
than membership of the EU. Certainly there is a noticeable gap in the
military capability European NATO members and The US – the EU has
struggled to fund and mobilise its 60,000 strong Rapid Reaction Force
whilst the extra $48 billion that President Bush planned to spend in
addition to America’s $331 billion defence budget in 2002 was more than
Britain or France spends in a year (The Economist – A moment of truth –
the future of NATO, May 4, 2002).
The EU’s Common Foreign and Security Policy announced objectives that will have been well-received by small states:
• To safeguard the common values, fundamental interests, independence and integrity of the Union
• To strengthen the security of the Union in all ways
• To preserve peace and strengthen international security
• To promote international cooperation
• To develop and consolidate democracy and the rule of law, and respect
for human rights and fundamental freedoms (p171 Bretherton and Vogler
1999)
Whether it has the military capability to be little more than a defence
and security talking shop overshadowed by NATO remains to be seen. Its
is not planning to set up a European army – its Rapid Reaction Force is
little more than a multinational peacekeeping force, similar to that of
the United Nations. With a force of 60,000 personnel, the objectives of
the force are to undertake peacekeeping, humanitarian, crisis
management and rescue missions at short notice. EU policy has made it
very clear that such a force will in no way replace the national armed
forces of individual member states.
Malta’s position as a neutral member state (along with Ireland, Sweden,
Finland and Austria) makes it an interesting case in relation to
security. It has had a number of concerns as to the military
implications of its EU membership, however most of its issues can be
resolved with reference to policy. The EU does not have any
jurisdiction over military service – it cannot impose military service
in EU countries; it has no power to decide what EU countries should do
with their armed forces and whether they should participate in any
military activities; defence and military matters are discussed under
the Common Foreign and Security Policy and decisions must be taken by a
unanimous vote – Maltese forces cannot be ordered to fight with the
armies of other EU countries; Malta does not have to give up its
neutrality as a condition of EU membership – it can also refuse to
serve as a military base or a join a military alliance; Malta does not
have to join NATO.
Malta also has an interesting position in relation to the EU’s Rapid
Reaction Force. It has agreed to contribute a platoon of 30 Maltese
soldiers coordinated with Italian troops. It will not take part in any
peacekeeping or crisis management missions and will limit its
involvement to humanitarian and rescue missions. Even more unusually,
participation in the EU force will be the decision of individual
soldiers – The Commander of its Armed Forces will ask for volunteers
for the EU platoon. Finally Malta has sought clarification that the EU
as an entity cannot join NATO. It is aware that the EU itself has no
capability to defend members and the NATO umbrella of mutual defence of
its members does not cover Malta itself – in effect, Malta alone is
responsible for its own defence.
For the majority of small states looking at EU membership however,
eventual membership of NATO is a twin goal. One of the issues for all
European states in future will be whether the EU security role has to
be increased if the US shows itself less likely to commit its troops in
or around Europe in the future, even under the umbrella of NATO, to
fight battles that should be fought by Europe itself. There are mixed
messages from the American – on one hand it hints that the EU should be
taking more responsibility for the defence of Europe yet at the same
time it has repeatedly warned Europe that the EU should not attempt to
build its own military organisation, independent of NATO. As Rifkins
suggests: “the US would like EU member countries to pony up greater
military expenditures and to ratchet up their commitments to the
defence of Europe, but within the NATO rubric, so as to maintain US
military dominance in that part of the world” (p310 Rifkins 2004).
Historically, the idea that the EU should speak with one voice in terms
of foreign policy and world affairs has been around since the earliest
ideas of European integration. It has however been the issue around
which national governments are most reluctant to lose control of and
whilst small states are keen to benefit from the security of EU and
possible NATO membership, their governments and their populations are
also reserved about handing over too much influence in terms of defence
and foreign policy to a centralised body. Certainly, over the years,
the EU has had far more success in creating a single market and a
common currency than it has in formulating a common foreign and
security policy. Nonetheless the geopolitical changes across Europe
since the fall of communism, along with the crises in the Balkans have
encouraged members to make continuing attempts to show a united front
in terms of foreign policy.
Whilst progress continues to be made, albeit slowly in the creation of
a Rapid Reaction Force, previous attempts to forge a military
partnership have failed. An attempt to form a European Defence
Community was unsuccessful in 1954 and a further attempt through a
process called European Political Cooperation in 1970, in which
countries attempted to coordinate their positions on foreign policy
issues had little success in translating words or statements into
action.
The sphere of foreign policy does actually give smaller states some
leverage within the overall activities of the EU. Whilst some within
the EU are pushing for a greater amount of authority to go towards the
EU and its institutions, the situation at present remains that
essential authority remains with member states - the agreed formula
requires that key decisions are taken by a unanimous vote. This
obviously is problematic with 15 members, never mind 25. It does
however allow small states an important power of veto if they so close
to use it. The system also allows small neutral states a degree of
protection in terms of their neutrality. If for example, 24 other
states decided to join NATO, thus wiping out the perceived neutrality
of member states, a neutral country such as Ireland would still be able
to veto this.
The Common Foreign and Security policy that was laid out in 1992 was
soon tested in the break up of the former Yugoslavia. The experience
was a sobering one for the EU – unable to broker a peace deal
diplomatically, it was unable to act effectively as an intervening
European force and member states could only become involved under a
NATO or UN umbrella.
For small state in Eastern Europe, EU membership is something to
override their often deep-rooted feelings of insecurity. The European
Commission has also made statements to confirm that it is aware of its
security responsibilities to the smaller states of Eastern Europe,
confirming in 1990 that: “the peaceful revolution which swept Ester
Europe in 1989 is probably the most significant event in global terms
for the last 45 years. It is happening on the doorstep of the European
Community. It represents a challenge and an opportunity to which the EC
has given an immediate response” (p183 Mike Mannin – Pushing Back the
Boundaries – The European Union and Central Europe, Manchester
University Press 1999) The threats that they perceive are not
necessarily the traditional threat of an aggressive neighbour, although
(despite its own overtures towards NATO) Russia is still seen as a
potential threat by most and the Czech Republic has an understandable
historical wariness of Germany. Hungary also has its own security
concerns in relation to its extensive borders with the seemingly
unstable states of the former Yugoslavia. The feeling of threat has
generally emanated from the experience of rapid and fundamental
internal change, exacerbated by perceptions of external threat to
environmental or societal security.
Small states have fears about the spread of international terrorism in
much the same way as large states, even though there has been little
history of terrorist attacks in some of the smaller states to date. The
indiscriminate nature of attacks on Western targets over the last
decade has meant that all nation within Europe’s boundaries must be
prepared to tackle the threat. The European Security Strategy agreed in
2003 confirmed the commitment of all member states to its basic mission
and priority areas for action: the fight against terror; a strategy for
the Middle East and a comprehensive policy on one of the smaller states
of Europe itself, Bosnia-Herzegovina. The Security Strategy also looked
to build on the credibility of its intervention capability, identifying
a number of peacekeeping, rescue and humanitarian missions that could
be undertaken by the Rapid Reaction Force. It also agreed to provide up
to 5000 police officers that could be deployed within 30 days for
civilian duty in crisis areas.
For smaller states, the international security aspect of EU membership
is largely about a feeling of belonging and knowing that their own
defence is more secure as a result of membership of the EU. For the
likes of Hungary and the former Soviet states in the Baltics, this
requirement is largely met by EU accession and the potential for NATO
membership. There are compromises to be made in the region of security
though – this has been something that has been experienced by all
member states. Despite their commitments to making a success of the
Common Foreign and Security Policy, member states still find it
difficult to change their own national policy towards a particular
region or country in the name of EU solidarity. Even the seemingly
closest of neighbours can disagree – for example Ireland’s opposition
in comparison to British support for war in Iraq.
As things stand, military intervention including European nations is
likely to continue to be NATO led. Accession to the EU alone is likely
to offer the smaller states to operate in the midst of what has been
referred to as an ‘island of peace’. That will suit the majority of
them perfectly.
Chapter Three – Social Aspects of EU Membership
At the most basic level, the governments and citizens of small states
seeking EU membership seek a better standard of life. Whilst the
economy and defence and security issues contribute to this the overall
perceived social benefits of EU membership cover a wide range of
issues. Directed specifically at the 10 prospective accession states in
2004, the EC stated that “adapting to the EU’s employment and social
policies will (also) lead to an improvement in key areas such as labour
market reform, work conditions, health and safety, gender equality and
social cohesion”.
The EU has been built on a commitment of economic competition alongside
social cohesion and solidarity – it has developed traditions of quality
in terms of working conditions, industrial relations and social policy
in general. It purports to be a non-discriminatory society in which all
citizens have the same opportunities and rights as others, regardless
of sex, race or origin. All or these aspects are an attraction to the
majority of leaders and citizens in smaller European states. Similarly
EU policies in the workplace and in terms of social security attract
small states. The EU looks to increase minimum rights as regards
working condition with policies on issues such as equal opportunities,
health and safety and flexible working time. It also sets targets for
member states in terms of universal social protection, participation
and democracy in the workplace and participation in democratic life.
The EU introduces social inclusion programmes for the most vulnerable
in society – in 2002 this led to the adoption of a coordinated policy
among member states to fight social exclusion, a policy that was to ne
extended to new members states. The EU expects its member states to
develop the social justice that is enshrined within its own charters.
It encourages decent or fair wages and decent living standards for all
its citizens. In the words of Jechimis “freedom from need for the basic
necessities of life – food, housing, medical care and education – is as
important to true democracy as the freedom of speech and worship,
assembly and association” (p9 Daniel Vaughan-Whitehead, EU Enlargement
versus social Europe, Edward Elgar Publishing, Cheltenham 2002) .
EU enlargement is promoted by the EU as mutually beneficial. New
smaller member states benefit from the social policies of the EU and,
despite the reservation of larger established states about some new
members, they should benefit from the increased market and the
diversity that new members bring. The EU enlargement of 2004 was
estimated to increase the EU population by 28 per cent and its surface
area by 35 per cent.
The EU takes steps to ensure that the smaller states acceding to the EU
are committed to their responsibilities in employment and social
affairs. Efforts required by the states acceding in 2004 included:
• Full transposition of EU legislation into national legislation – in
areas such as labour law, health and safety, gender equality, or
anti-discrimination
• Preparation for the participation in the European employment
strategy, following up the so-called Joint Assessment Papers (JAP)
which set out priorities for employment policy in the run-up to
accession
• Preparation for participation in the open method of coordination in the arrears of social inclusion and pensions
• Preparation for the future intervention of the European Social Fund
(ESF), a key tool in supporting the development of human capital and
restructuring – the allocation of ESF is now entering a decisive phase
• Enhancing the dialogue in these countries involving employers and trade unions and their interaction with government.
EU policies towards employment and training are also seen as a positive
factors by both politicians and populations in smaller European states.
EU social policy has a determination to secure more and better jobs and
opportunities at its core. EU policies are designed to ensure that
nobody is left behind as it aims to become the most competitive and
knowledge-based economy in the world. It has developed a Social Policy
Agenda that links together its economic, social and employment policies
and includes key strands:
• The European Employment Strategy
• Improving working conditions and standasrds
• Social inclusion and social protection
• Equality of men and women
The EU aims to raise the level of working age people I employment to 70
per cent, again something that would represent a significant
improvement for many of the economically stagnant smaller states. To do
this the EU will have to create 20 million new jobs amongst the current
25 member states by 2010 – a target likely to have current prospective
candidates even kinder to join and share in the benefits of job
creation.
The European Employment Strategy involves the EC meeting annually to
decide on common priorities and objectives for the employment policies
of member states. Strategies are created that aim to ensure job
creation, job quality, a decent work-life balance and the stamping out
of discrimination based on race, gender or disability. Individual
governments feed into this with their own plans and how they are
achieving them – as with many aspects of EU membership, small states
can benefit from the chance to work with partners from other member
states and develop best practices.
The European Social Fund also entices small states towards the EU. It
is due to spend around 60 million euros to develop work skills and
social skills for citizens across the EU. The fact that the fund is
particularly directed at states with high levels of unemployment or low
income also makes the scheme attractive to small states. A further 3
billion euros is also set aside to tackle discrimination and
inequality.
The minimum standards for all also set out attractive policies in
terms of employment and social policy for smaller states. From expected
guarantees on standards of working environment to minimum rules on
working conditions and health and safety, the EU does set out to
protect workers rights, something that is popular with voters
throughout the EU.
Freedom of movement and the possibility of taking up employment
elsewhere is of course a massive attraction for citizens in many of
Europe’s small states where they feel their opportunities are
restricted. In the period leading up to accession the citizens of
prospective member states were free to travel and reside in existing
member states for up to three months provided that they possessed valid
travel documents, were not considered a threat to national security and
could provide evidence of means to support themselves for the duration
of their stay. Following accession, although the abolition of borders
between existing and new members states as outlined in the Schengen
agreements have not yet come into effect, citizens of small sates such
as Latvia and Lithuania are now able to enter other member states and,
providing that they meet the conditions for gaining the right of
residence, they will be able to study and live there as well as voting
in local and European Parliament elections.
The right to take up employment elsewhere in the EU has been something
that citizens in smaller states such as those in the Baltics have seen
as selling point for EU membership. At present this remains something
of a grey area. Whilst the aim is to allow complete free market access
and the right to work anywhere within the EU, if current member states
are convinced that it is absolutely necessary to protect their own
labour markets from disturbances and potential influxes of migrant
workers then they can impose temporary restrictions on the right to
work within their borders. Also for a two-year period from 2004,
existing member states can choose how to deal with work permits for
citizens from new member states. These policies are to be reviewed
after two years as the EU looks to move towards full freedom of
movement and although the restrictions maybe extended, some member
states have already said that they will probably not demand specific
work permits.
Small states such as Latvia and Lithuania have had problems with
organise crime since the collapse of communism and they have hopes that
a closer working relationship with the law and order agencies of the
larger established member states will help to alleviate these problems.
In contrast, one of the fears of existing sates is that an enlarged EU
will lead to an increase in illegal migration and organised crime. One
of the key objectives of European policy is to ensure that European
citizens can enjoy a high level of personal freedom and mobility within
the EU. It has developed a set of rules and standards on issues such as
border control, asylum, illegal migration, organised crime and police
and judicial cooperation. As previously mentioned, the Schengen system
has been developed for the eventual lifting of border controls once all
member states are satisfied that all its external borders are as safe
and well managed as they would expect of their own borders. New states,
particularly those n the fringes of Europe will have to implement these
controls – there may be a cost but end result is hoped to be a Europe
in which freedom, security and justice can be offered to all of its
citizens.
EU membership allows small states to more freely enjoy and participate
in cultural aspect of European life. Ireland for example has benefited
culturally from Cork’s status as European Capital of Culture for 2005.
The award of the status has seen a number of benefits for the citizens
of Ireland including promotion of events involving people active in
culture across Europe, ensuring the mobilisation and participation of
large sections of the population in cultural events, the opportunity to
receive citizens from across the Europe Union and reach as wide an
audience as possible, to promote a dialogue between European cultures
and to exploit the historic heritage, architecture and quality of life
in the city. These are obviously in addition to the large-scale
economic benefits of hosting a series of events that pull in tourist
from all over Europe.
Culture is one the many ‘quality of life’ aspects that attract small
states towards EU membership. There are a number of other varying
indicators that suggest the benefits of EU membership. For example, in
the EU there are 322 trained physicians per 100,000 people (P79 Rifkin
2004) - significantly higher than in many of the smaller states outside
of the EU.
The social aspects of the EU are a major attraction to small states
within the EU, in some aspects more to the citizens of poorer nations
than to their national governments. There is obviously a cost involved
in implementing the some of the employment strategies and for the likes
of the Latvian and Lithuanian governments, workers rights and equal
opportunities are issues to be worked on once they have managed to
boost economic growth. Certainly for the workforce in poorer small
states, REU membership offers opportunity. Many are happy to stay and
work in their home countries but the opportunity to move and elswehwere
is a freedom that they are keen to have.
The benefits of EU membership can be seen in Central and Eastern
Europe. Combined with economic benefits, social policies have already
begun to create better employment prospects. The arrival of new members
will also enrich the community through the spread of cultural
diversity, exchange of ideas and a better understanding of other
nations. Quality of life in smaller states should improve as their
governments adopt EU policies for the fight against organised crime,
against drugs and illegal immigration. Adherence to EU environmental
policies should also see a better standard of living and indeed better
health for citizens in new member states.
One of the main criteria for accession to the EU as laid out by the EC
in Copenhagen was that members should be able to ensure democracy, the
rule of law, human rights and respect for minorities. All of these
criteria are incentives for joining the EU that cab be described under
the broad framework of social policy. Economic benefits and increased
security may be the immediate things that come to mind when analysing
why small sates wish to join the EU, social issues, encompassing the
likes of employment law, law and order and culture, are also important
factors.
Chapter Four – Case Study: The Czech Republic
The Czech Republic was seen from the early 1990s as the most likely of the
Eastern European nations to be a candidate for EU membership. Following the
Velvet Revolution it made good progress towards meeting the membership
criteria, despite some scepticism towards the EU when under the leadership
of Prime Minister Klaus.
The initial breakaway from communism had been completed as Czechoslovakia.
Rupnik and Zielanka write that: "for both Czechs and Slovaks, the 'Velvet
Revolution' of November 1989 heralded the exit from communism and a 'return
to Europe' that became identified with the prospect of joining the EU" (p3,
Rupnik and Zielenka 2003).
Following the split with Slovakia, the Czech Republic began to focus on its
entry into the EU. It's prime motives were its identification with European
cultures and values, a belief that joining up with other democracies would
make its own democratic transition irreversible and the desire to access
western modernity, prosperity and security. For the Czechs, security in
particular was an issue and it had in fact seen membership of NATO a
priority over membership of the EU. The Czechs were more pro-American than
many other of the EU member states or prospective members and had a general
wish to 'keep the Russians out, the Americans in and the Germans down' Otto
Pick, Director of the Institute of International Affairs argues that NATO is
seen by the Czechs as the only organisation the links the US with Europe and
that whilst the EU is important to the Czechs, its most influential country
is Germany whilst in NATO's case the most influential member is the US. He
writes of Czech opinion: "so to many people, NATO seems to be a political
counterbalance of the EU which many people see as dominated by Germany" (p33
Rupnik and Zielenka 2003).
Amongst the Euro sceptics in the Czech Republic was a cross-section of
political thought. Liberals had fears of communism being smuggled in through
the back door again in the form of a centrally governed regulatory frame,
ex-communists had concerns about Americanisation and the prospect of
international capitalists taking over profitable local firms and
nationalists were ever wary of German influence.
Entry into the EU was of course seen as an opportunity to build on the
Czech Republics economic growth. The economy had performed well
following the Velvet Revolution, due partly to the prudent economic
policies of the Communist government. Having split with Slovakia, it
boomed again with rapid transfer of ownership to the private sector,
low unemployment and an avoidance of the hyperinflation that affected
other former communist states. The Czech Republic had a well-developed
industrial tradition and a well qualified labour force that
complemented its progress under democracy. The shift towards a market
system worked well in the mid-1990s with price stability and a
reasonable rate of growth. The economy was based in mineral resources
including coal, tin, lead, zinc and iron ore along with highly
developed processing industries for machinery, steel, chemicals, glass
and uranium. Exports that the Czechs hoped to boost with entry into the
EU included manufactured goods, machinery, cars and transport equipment
and beer. In agricultural production, cereals, sugar beets and hops
were the main products.
A balance of payments crisis led to a recession between 1997 and 1999
that the government took a number of steps to correct. The
privatisation of the banking sector was completed by 2001 and a public
bailout of the banks and their bad debts. A great deal of attention was
paid to the restructuring of loss making companies and a legal
framework was put in place to combat economic crime and establishing
more efficient bankruptcy procedures. Whilst waiting for entry to the
EU, THE Czech Republic made a determined effort to attract foreign
investment, something it hoped would be further enhanced by EU
membership. There have been successes – large investment has been
attracted from the Toyota Motor Corporation and PSA Peugeot Citroen – a
1.5 Euro green-field car assembly plant in Kolin.
The economic outlook in 2004 painted a generally positive picture for the
Czech Republic. With buoyant exports and strong private investment, output
growth had gained momentum and was predicted to reach 4 per cent during 2005
and 2006. Inflation was expected to remain around 3 per cent and whilst
employment growth was expected to be muted, a slight decline in unemployment
was expected for 2005 and 2006 (OECD Economic Outlook - Czech Republic
Volume 2004/2 no 76).
A more detailed analysis shows GDP growth strengthening and becoming more
broad based, largely due to entry into the EU single market. Private
investment had increased quickly, improving export results and profits and
increasing profitability of firms and low interest rates. Imports have also
soared. Entry into the EU has brought about some positive developments
in terms of employment growth, primarily in the private sector. In
contrast with previous experience, jobs have been created mostly for
dependent workers, whilst self-employment decreased mainly due to
changes in the tax treatment of the self-employed. On a more negative
note, restructuring and downsizing has continued in manufacturing,
public services and some private services, leaving unemployment at its
highest since 2001.
The government had introduced a programme of fiscal reform in 2003
including spending ceilings and major reforms on pensions and in
health. The aim is to bring the central government deficit down to 3
per cent of GDP by 2008,with an intermediate target of 4 per cent in
2006 (OECD Outlook 2004/2) . Harmonisation has driven excises increases
and increases in regulated prices is likely to effect consumer prices
in 2005 and 2006 and whilst there is little change projected change in
interest rates following EU entry, some additional inflation pressures
could come from robust output growth, sizeable increases in some public
sector wages and oil price effects.
Czech Republic: Demand, output and prices
2001 2002 2003 2004 2005 2006
Current prices Percentage change, volume (1995 prices)
Billion CZK
Private Consumption 1192.3 2.8 4.9 3.5 3.6 3.6
Government consumption 513.0 4.5 2.2 -0.4 -0.2 0.5
Gross fixed capital formation 638.6 3.4 7.4 9.5 7.2 6.0
Final domestic demand 2343.9 3.3 4.9 4.1 3.7 3.6
Stockbuilding 30.0 0.1 -0.4 0.6 0.0 0.0
Total domestic demand 2374.0 2.8 4.2 4.5 3.7 3.6
Exports of goods/services 1593.3 2.7 6.2 16.7 12.0 10.4
Imports of good/services 1598.0 4.9 7.8 17.3 11.2 9.6
Net exports -58.7 -2.2 -2.2 -2.8 -0.9 -0.7
GDP at market prices 2315.3 1.5 3.1 3.9 4.2 4.1
GDP deflator 2.8 1.7 4.1 2.6 2.5
Memorandum items
Consumer price index 1.8 0.1 2.9 3.1 3.0
Private consumption deflator 0.7 -0.7 2.1 2.8 2.6
Unemployment rate 7.3 7.8 8.4 8.3 8.2
Central govt financial balance -6.8 -12.6 -4.3 -4.6 -3.9
Current account balance -5.6 -6.2 -6.5 -6.6 -6.5
Source: OECD Outlook 2004/2
The OECD analysis of the Czech economy into entry into the EU suggests
that the overall effect has been positive – the momentum of export
growth is expected to continue and economic output is projected to grow
about 4 per cent over the projection period, while inflated is
predicted to remain stable at around 3 per cent. Export growth is
expected to reach double digits in 2005 and should remain high for the
following two years. Investment growth is likely to decelerate but
remain sustained and employment growth should be positive but muted.
The Czech republic, like other new member states, is committed to
joining the euro zone. This again is likely to be a positive move,
partly from the economic gains from joining a large currency area but
also as the conditions fro entry will encourage the Czechs to maintain
low and stable inflation and seek reductions in government deficit and
debts that in themselves would probably improve economic conditions.
The OECD looks favourably upon the Czech strategy on entry into the
euro. A process of dialogue and explicit agreement between the
government and the Central Bank has helped shape expectations and
reduce uncertainties among markets. Also the aim to avoid a
prolongation of ERM II membership over two years will lessen the risk
of exchange rate volatility. To meet the Maastricht criteria for entry
into the euro, the Czech Republic still has to tackle its high budget
deficit and there will need to be clear evidence of fiscal
consolidation to achieve a positive assessment by the EU authorities.
For the Czech Republic, entry into the EU was largely based on economic
ambition and its target for the short to medium term is to strengthen
its growth prospects. At the beginning of 2005, growth potential is
somewhere around 3 per cent (p9 OECD Outlook 2004/7) which suggests at
best a moderate pace of catch-up to living standards elsewhere in the
EU. The OECD sees four major issues that will determine the merits of
the Czechs’ EU accession. Firstly is fiscal consolidation – necessary
to cope with ageing, to bring down the tax burden and to fulfil
euro-entry conditions. Pension and health reforms should be targeted at
making savings, greater revenue raising measures need to be implemented
and with the decentralisation of public services, there is a
requirement for good budgeting practices and accountability in regional
and municipal governments. A successful entry into the euro area will
be a second crucial factor in the Czech Republic’s successful
integration into the EU. Again the OECD is optimistic about this but
states that “the Czech authorities should pay close attention to how
the Maastricht criteria are interpreted and applied by the European
Commission and the ECB and adjust their communication strategy
accordingly. Thirdly is making the business environment more
growth-friendly. Whilst EU membership has seen the Czech Republic
compete strongly for foreign investment, policy towards poorly
performing firms and business start-ups is far from efficient, often
slowing down the exit and entry of firms. Also, bankruptcy procedures
in the Czech Republic are cumbersome and more often than not end up in
asset stripping and liquidation. Finally, improving the functioning of
the labour market is a challenge for the Czech government. Mobility
between jobs and regions is weak and factors such as debt control,
severe poverty traps and strict employment protection legislation on
individual dismissals have led to some considerable long-term
unemployment. The Roma population is particularly hit by this, as with
social exclusion and poor educational opportunities, something that the
EU is keen to see rectified. Migration following EU membership has
slowly started to have an effect on the Czech labour market – Slovaks
have migrated to take up a number of skilled vacancies and other
migrants from Eastern Europe, particularly Ukraine have been taking up
unskilled jobs that are unattractive to Czechs. A more open immigration
policy needs to be adopted to address the inconsistency in the granting
of work permits and to allow for a better alignment of immigrants
skills with those needed on the Czech labour market.
Prime Minister Vaclav Klaus had often been sceptical about Czech entry
into the EU. One of his favourite metaphors had been “shall we let our
identity and sovereignty dissolve in Europe like a lump of sugar in a
cup of coffee?” (p26 Rupnik and Zielonka 2003) and Czechs can be
relieved that this has not happened. To date, the Czech Republic has
found EU membership more inline with the vision of Havel who spoke of
“one big community, based on the principle of unity in diversity” (p283
Rupnik and Zielonka p2003). Certainly for the Czechs, long-term
economic growth with a share in Western prosperity was the prime
motivation for entry into the EU – the signs so far are at the very
least that this looks achievable.
Chapter Five –Case Study: Estonia
The Estonian transformation from a planned to market economy had taken
place in the early 1990s. Systematic reforms had followed monetary
reforms in 1992. The first major move of the post-communist government
had been to restore the kroon as the national coin and set up a
currency board to enforce a peg to the DM. A legal framework was
established to launch the private sector and to restructure Estonia’s
business sector – it was successful from early in the post-Communist
era in attracting foreign investment. GDP fell in the early 1990s as
the new economic system bedded in but by 1995 the recession had run its
course, although a crisis in the financial sector in 1998 caused
foreign demand to decline with a subsequent fall in GDP.
2000 saw the growth rate in the economy increase again to 7.1 per cent,
driven by the economic integration with member states. From then on the
economy continue to show great resilience despite the slowdown in its
major EU trading partners during 2001.GDP growth fell slightly during
this year, the budget showed a small surplus of GDP at 0.2 per cent and
the current account deficit stood at 6.1 per cent, covered by strong
foreign direct investment flows. Estonia’s most important exports are
machinery and electrical equipment, wood and textiles while tourism is
also an important factor. Its biggest business partners in recent years
have been Sweden and Finland.
The IMF describes Estonia as “an outstanding performer among the
transition economies” yet it faces a number of challenges that it hope
EU membership can help it with – in particular, it needs to lower
unemployment and ensure the balance regional development of the
country.
Its relations with the EU were good throughout the 1990s. It was
recognised by the European Commission in August 1991 and the following
year the Estonian Ambassador in Brussels was accredited by the EC. Its
draft Accession Treaty was approved by the Estonian Government on April
8 2002 and a referendum was held on entry in September 2003 and 66.84
per cent of voters supported accession.
Estonia’s monetary policies in the 1990s committed the nation largely
to a classic liberal agenda of open borders, low taxes, balanced
budgets, the competition principle, privatisation, deregulation and a
minimal state. Such was the extent of this, that when Estonia made the
decision to seek EU membership it would involve a good deal of economic
sacrifice.
It can be argued that some of Estonia’s economic strengths can be
balance d by a number of political weaknesses. Certainly its government
has displayed a certain amount of bitterness about its recent
experiences of cultural and economic imperialism. The immediate
de-Russifiaction of the administrative process serves as an example of
this. In fact, since its independence, Estonia’s nationalism has been
strongly inclusive, with an open disregard for all things Russian and
authoritarian.
Security was a major factor in Estonia’s decision to join the EU.
Whilst relation have been amicable with Russia, the large number of
ethnic Russians living within its borders have led Estonia towards
seeking membership of NATO as a further security blanket. Even despite
good relations with its Nordic and Baltic neighbours, security
considerations remain overriding: “The EU is seen as the strongest
anchor for Estonia’s return to the West….even Estonian liberals argue
that the EUs protective cloak is worth the sacrifice of full-blooded
liberal economic policies, if that indeed is what EU membership
requires” (p422 Gillingham John, European Integration 1950-2003,
Cambridge University Press 2003).
Estonia realigned itself with the West from the early 1990s onwards and
clearly had set its sights on EU membership. Martin Laar, prime
minister between 1992 –1996 and 1999 – 2001 spoke glowingly of the
Union stating that it was “not only an economic union but has a
cultural and historical identity” (p423 Gillingham 2003) and also that
“Europe should concern itself deeply with what it is about, so that for
the (Estonian) people the European Union does not merely stand for a
Euro-currency. It must be an idea, a dream” (p423 Gillingham 2003). As
Estonia applied for membership in 2000, Laar also spoke of his beliefs
that small states were a vital part of the EU success and that the
acceptance of such diversity within its framework was one of its
strengths, stating: “nowhere else on earth do so many cultures live
together on such a small territory” (p423 Gillingham 2003).
Structural change in Estonia in the lead up to EU membership
exemplified its move away from a Soviet past to a future with its
Western and Baltic neighbours. Finnish influence in particular was
noticeable. Estonians use more computers and cell phones per capita
than the French, its capital, Tallinn, has been restored, yet away from
the capital there are still large areas of poverty, with the 30 pry
cent Russian minority in particular remaining disengaged from economic
progress. One of the assurances that the EU has demanded from Estonia
is fair access in opportunity for jobs, housing and health care for its
sizeable Russian minority.
Since accession, Estonia has continued to flourish as an emerging
economic power. Its is attracting business in particular from the
affluent Nordic states and is rapidly developing a highly educated
workforce and expanding telecommunications and information technology
sector – it has more personal computer per head than France (p59
Mannin)
Like many small states, Estonia was buoyed by improvements in its
economy in its years as a candidate member. Once a state has been
accepted for accession, financial aid from the EU, along with the
targets that it sets would be members for economic improvement tend to
bring about economic upturn in them. The pre-accession benefits to EU
membership can be as much of an incentive to small states as membership
itself. The Regular report of the European Commission reported in 2002
“Estonia is a functioning market economy. The continuation of its
current reform path should enable Estonia to cope with competitive
pressure and market forces within the
Union” Other economic indicators, helped by prospective entry into the
EU were also positive – GDP growth of around 6 per cent was underpinned
by strong private consumption growth which reached 9.3 per cent in
2002, helped by low interest rates and strong wage and employment
growth.. Despite a slump in global investment, within Estonia
investment grew by 16.2 per cent in 2002, again helped by low interest
rates. Labour market conditions improved, with an increase in the
employment rate to 62 per cent and unemployment falling to 91 per cent
of the labour force by the end of the year.
Estonia benefited in the Labour market following input form EU
advisors. Curtailing unemployment had been one of the core objectives
of Estonia’s pre accession agreement and as such was closely monitored
by the EU. The rate declined significantly from 14.6 per cent in the
first quarter of 2000 to 10.6 per cent in 2003, although large regional
disparities continued to exist and the ethnic Russian population was
noticeably affected. It is also worth noting that the improvement was
largely due to significant decline in the economically active
population during the period – a decline of almost 2.5 per cent.
Severe skill mismatches remained a problem, as did a rise in the number
of long-term unemployed. These are issues that may well be tackled with
EU membership – of the EU’s employment targets is a guaranteed offer of
a job or training for any young person out of work for more than six
months or for an adult out of work for more than twelve months (p9
Vaughan Whitehead, 2003). Estonia has already undertaken efforts to
address issues around unemployment - it has promoted vocational
training and lifelong learning and set up an effective institutional
framework with the aim of supporting job creation.
Such was the strength of Estonia’ economy in the 1990s, relative to its
years under communism, that in fact it probably need the economic
assistance of the EU considerably less than other small states, almost
to the extent the EU membership may have had a negative effect on its
economy. Nevertheless, Estonia had set its sights on EU membership from
the early 1990s – its historical security worries and a certainty that
its future belonged in the west were the driving factors behind it
application. Estonia’s accession process was relatively smooth and it
was able to enter the EU in 2004. The early signs are that it economy
is remaining stable and that the Estonian people, whilst fiercely
independent on one level, are comfortable with their statues as
Europeans.
Conclusion
Not all small states seek EU membership. Switzerland is quite happy
with its own economy and longstanding neutrality to withstand any
overtures from EU members who would be keener to see the prosperous
Swiss joining the EU than perhaps they are to see some of the poorer
small states. Iceland is another small nation that has shown a distinct
lack of interest – quite simply, such is its reliance on its fishing
industries that it does not wish to share them with other European
states.
For many small states however, membership of the EU has either been or
remains a long-term strategic goal. The EU offers a host of benefits,
of which importance varies according to the situation of the particular
state. The economic benefits are of course crucial. Financial
assistance prior to accession is a large enough carrot to dangle in
front of small sates with under performing economies but the longer
term rewards of the single market and shared currency offer small
states the possibility of a relatively stable economic future. Security
to some is equally important. The traumatic 20th century histories of
sates such as the Czech Republic and the Baltic states ensure they are
keen to be a part of a collective security force. Some of the fear may
be psychological than based on genuine security threats but nonetheless
the desire for a common security policy, whether within the EU or NATO
is very real.
Finally, there is a simple sense of wanting to belong to Europe that
fuels a desire to be part of the EU. Agirda Brazausskas spoke to the
Council of the European Parliament in April 1994 and stated:
“Lithuania’s major gain following the restoration of independence on
March 11 1990 is the sense and desire of commonality with Europe, a
distinct awareness that Lithuania is a European state” (Mouritzen,
Waever & Wiberg, European Integration and National Adaptations,
Nova Science Publishers, New York 1996). His words may well have a
resonance for the leaders and people of small states across Europe –
they see themselves as Europe and want to belong to a Union that looks
to further the interests of all Europeans.
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