11 Enlargement
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6842/09
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COM(09) 79
| Commission Communication: Five years of an enlarged EU — Economic achievements and challenges
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| Legal base | — |
| Document originated | 20 February 2009
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| Deposited in Parliament | 26 February 2009
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| Department | HM Treasury |
| Basis of consideration | EM of 6 March 2009
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| Previous Committee Report | None
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| To be discussed in Council | Not known
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
11.1 It is almost five years since Cyprus, Czech Republic, Estonia,
Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia
acceded to the European Union.
The document
11.2 In this Communication the Commission marks the fifth anniversary
of this enlargement by looking at the economic performance of
these ten new Member States, with a view to exploring the policy
challenges that lie ahead for them. The Commission looks at:
- the achievements of the ten economies over the first five
years of membership;
- challenges that the current global economic and
financial situation pose for these Member States; and
- measures that can be taken to meet those challenges.
The Commission's conclusions are supported by an
accompanying staff working document, which provides a detailed
analysis underlying the conclusions.
11.3 Under the rubric Achievements of the first
five years the Commission says that:
- living standards in the ten
new Member States have significantly improved, to the extent that
income per person increased from 40% of the EU15 (the 15 EU Member
States prior to enlargement in 2004) Member States' average in
1999 to 52% in 2008;
- this is attributed to rapid trade integration
and modernisation of the new Member States' economies;
- the Community framework for product market regulation
resulted in increased competition in new Member State markets,
which benefited consumers. Investment opportunities created by
enlargement have been instrumental in the re-structuring of new
Member State economies. This has also brought benefits to the
EU15 through new business opportunities; and
- despite initial fears, there was no mass migration
from new Member States to the EU15, and the overall benefits of
migration have been judged to be positive. The recent level of
intra-Community labour mobility adds about 0.3% to the GDP of
the Community as a whole in the medium term. New Member States
have benefited through increased remittances and the enhanced
skills of returning migrants.
11.4 In relation to Challenges ahead amplified
by a severe global crisis the Commission says that:
- the ongoing financial crisis
has exposed vulnerabilities among the new Member States;
- openness to trade was key in the rapid growth
rates experienced in the new Member States since accession —
however, the onset of the global financial crisis has resulted
in sharp contractions in demand from export markets, acting as
a drag on growth;
- in addition, some new Member States have accumulated
credit-fuelled imbalances that are unsustainable and have been
exposed by a sharp reduction in credit availability more recently;
- EU membership provided protection and a stable
anchor to new Member States, which is even stronger for those
who joined the single currency (Cyprus, Malta, Slovakia and Slovenia);
- the Community has a role in restoring stability,
transparency and confidence in the financial markets of all the
Member States' economies, including the new Member States, by
addressing not only the most prominent failings but also tackling
the need for a more profound reform of the regulatory and supervisory
system;
- new Member States are showing signs of reform
fatigue following earlier reform success to meet the accession
targets; and
- remaining challenges are 'strengthening the rule
of law', 'increasing public administration efficiency' and 'judiciary
reforms' if these countries are to reap the full benefits of the
single market.
11.5 On Addressing the challenges the Commission
says:
- sound fiscal policy is essential
to maintaining macro-financial stability; and, as such, it recommends
that new Member States follow best practice for fiscal governance
— this includes the implementation of transparent and credible
medium-term frameworks;
- in addition, reforms of healthcare, pension and
education systems are crucial in ensuring long-term fiscal sustainability
and economic efficiency;
- the Lisbon Strategy for Growth and Jobs should
act as a powerful catalyst for structural reforms, where productivity
growth remains the Community's key long-term challenge;
- progress in enhancing the research and development
and innovation activities is insufficient;
- continued implementation of Community cohesion
and rural development policies should help new Member States realise
more of their regional growth potential; and
- "Enhanced country surveillance … in
the context of the Stability and Growth Pact and the Lisbon Process"
will be undertaken by the Commission and the Council — such
surveillance will have to play a central role in the early identification
of future risks.
11.6 The Commission concludes its Communication by
saying that:
- overall, deep structural reforms
can be made now to underpin a quick and sound recovery;
- these, coupled with sound macroeconomic management,
will be essential to reduce the likelihood of a major financial
crisis in the future; and
- these should see income convergence of new Member
States towards the Community average as the integration process
continues.
The Government's view
11.7 The Economic Secretary to the Treasury (Ian
Pearson) says that:
- there are no direct policy
implications in the document for the UK; and
- although the focus is on the new Member States
and the Commission makes a number of recommendations to those
countries, the report and its recommendations have not been approved
by Member States and are non-binding.
Conclusion
11.8 This Communication and the accompanying staff
working document usefully describe developments in the economies
of the ten Member States since they acceded in 2004 and their
prospects for the future. As such, whilst clearing the document
from scrutiny, we draw it to the attention of the House.
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