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Hickley Catherine, International Herald Tribune - 8 dicembre 1994
UE: the enlargement to the East.


by Catherine Hickley

SUMMARY: When Jozsef Antall, the Hungarian prime minister at the time, predicted in 1990 that Hungary would be a member of the European Community in 1995, his forecast did not sound entirely unrealistic. But with 1995 just around the corner, it is clear that for Hungary, as well as for Poland, Slovakia and the Czech Republic, joining the EU is still a long way off - despite their associate membership status and applications for full membership.

(International Herald Tribune, "European Union", 8-12-1994)

Economists agree that the transition period from planned to market economies in Eastern Europe has taken much longer than was anticipated at the start of the political reforms - and is still by no means over. In the four Visegrad countries - the term refers to a cooperative agreement signed in that Hungarian town in 1991 - privatization is only 50 percent to 60 percent complete, and currencies are not yet convertible. Many loss-making, state-owned companies are still in dire need of restructuring. According to Professor Richard Baldwin, author of the recently published book "Towards an Integrated Europe," the biggest obstacle is the lack of experience. "These countries are being run by people who had no idea about how a government runs a market economy until five years ago," he says. "The human capital is missing because it hasn't had time to develop."

Fulfilling the prerequisites

In Hungary, further hardships for the population are expected as the new Socialist/Liberal Democrat coalition government tackles the gaping central budget deficit.

The Czech Republic, which has so far experienced a relatively smooth transition period, is expected to undergo major economic restructuring when the currency is made convertible - probably next year.

Slovakia is struggling with political instability and the legacy of an obsolete armaments industry. Foreign direct investment has slowed down, and growth is sluggish. Poland, by far the largest and therefore the most important market for the EU, is experiencing industrial growth and increasing foreign investment, but at the same time is fighting escalating wages and inflation.

In some respects, however, the Visegrad economies are more developed than those of some EU member countries: GDP per capita, for example, is lower in Portugal than in Hungary or the Czech Republic. Inflation is lower in the Czech Republic than in Greece or Italy. "No real criteria have been set by the EU," says Tamas Novak, a research fellow at the Institute for World Economics in Budapest. "They didn't tell us what we should do if we want to join the EU, except to create political stability and economic growth. But to what extent?"

Hurry up and wait

Legislation is one area the Visegrad four are attempting to quickly bring into line with EU norms. But Central European economists accept that there is little their countries can do to speed up the process of integration with the EU. "in the end, full membership in the EU for the Visegrad countries is a political issue," says Andras Koves, a leading Hungarian economist and director of the Kopint-Datorg research institute in Budapest. "I don't think that it is within the capacity [of the Visegrad countries] to influence the decision. But they can influence the conditions."

Now the most optimistic forecasts by Central European politicians put the date for full EU membership at the year 2000. But even this is a pipe dream, according to Professor Baldwin. "This is entirely unrealistic," he says. "if you take membership in the year 2000 for the Visegrad countries as a given and calculate the budget costs to the EU, it would mean an increase in the budget of 60 percent." Within the context of the recent bitter debate in the House of Commons over raising the British contribution to the EU from 1.0 percent to 1.1 percent of the GDP, a 60 percent rise in the EU budget over the next five years seems a farfetched prospect, he adds.

Someday, somehow

Mr. Koves says he cannot speculate on the timing of EU membership for the Visegrad countries. "There is a belief that full membership is in the interest of Central Europe but not in the interest of the Union. This is not a correct picture - relations are of mutual interest and are much more complicated, and basically that's why I think that in the final analysis there won't be any question of not joining," he says.

Professor Baldwin says he also believes that despite the obstacles, the Visegrad four will eventually join the EU. He puts the time scale at around 15 to 20 years from now. "There is a political drive toward it - a vision of Europe," he says. "Politics is the engine, economics is the brake."

Catherine Hickley

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