PART 5 OPINION OF THE COMMITTEE
73. This Part of the
Report sets out the opinion of the Committee on the major issues
that arose during the enquiry. Our opinions are based principally
on the evidence received which is published with this Report.
We have also taken into account the Commission's detailed material
in Agenda 2000, which is not published here, and other
generally available documents including in particular some prepared
by the European Parliament.
INTRODUCTION
74. Accession to the
European Union is widely seen in the countries of the former eastern
bloc as an integral part of re-joining the historic culture of
Europe to which they belonged before the tide of communism engulfed
them. It is seen as a coming home. It is seen as a confirmation
that the freedoms of democratic societies will again be theirs
and will be safeguarded by their membership of the institutions
which since 1957, when the Treaty of Rome was signed, have fostered
peaceful cooperation and prosperity among the growing number of
countries within what is now called the European Union.
75. Coming home after
a long absence may involve adjustments not always easily made
or fully foreseen. The European Union is not just a political
grouping of countries with a common commitment to democracy and
liberal market economies. It is a uniquely complex political organism
in which the tensions between the interests of the larger and
the smaller states, the richer and the poorer regions, the demands
of economic growth, social cohesion and respect for the environment
are resolved or contained by constant political manoeuvring within
and between the EU institutions, national governments, national
parliaments and ultimately their electors. At the level of the
Union institutions this process of adjustment takes place in a
sophisticated culture in which acceptable compromises are sought
with a determination which is both robust and subtle. But to the
public, even within the existing Member States, the ways of the
Union are often obscure and byzantine: it is, therefore, to be
expected that there will be less than a good understanding among
the peoples of the newly acceding countries of the ways decisions
are taken in the Union when they join. The enlargement of the
Union by the accession of ten or eleven countries will necessarily
bring about a new balance of forces between the EU's Member States
and a new configuration of the institutions of the Union.
76. We do not see enlargement
as leading to business as usual for the Union but as providing
an opportunity in which it will be necessary to forge new relationships
between Member States and between the institutions of the Union.
We have been impressed by the careful study and thought that the
Commission have put in to their Communication, Agenda 2000.
The two Commissioners who gave us evidence convinced us that,
given political will, the route to enlargement up to 2006 sketched
out in Agenda 2000 is, in broad terms, realistic. We remain
to be convinced that national governments have yet thought equally
hard about the way ahead or faced up to the sometimes uncomfortable
decisions which will have to be taken. The temptations to postpone
awkward choices are always strong. Unfortunately delay can make
difficult choices harder.
77. The processes of
enlargement are not unfamiliar to the Member States: their number
has grown from the initial six to the present fifteen. In 1995
when the Union was enlarged by the accession of Austria, Finland
and Sweden their entry was relatively easy, quick and, for the
Union, cheap because the three countries were comparatively small,
rich and not heavily dependent on agriculture. Also they had recent
experience of operating a market economy. But the enlargement
now in prospect is quite different in these respects and is of
a different order of magnitude from any that has happened in the
past. No previous enlargement is comparable in terms of the resulting
growth of population, the size of the land mass involved, the
economic diversity of the prospective new Member States, and the
short recent experience of the acceding countries in operating
an open civil society. The enlargement now foreseen is a challenge
of momentous consequence. This view is justified even without
taking into account that relations with other countries on the
borders of the enlarged Union will continue to be of great importance
for the stability and peace of the continent.
WHAT
WILL THE MEMBER STATES PAY FOR ENLARGEMENT?
78. National governments
may have adopted a tough stance for public consumption in advance
of serious detailed negotiation but we think that there is a deep-seated
reluctance among existing Member States to pay more to, or receive
less from, the Community Budget than they do at present. Governments
wish to minimise the tax burdens on their own voters, particularly
at times when national elections are approaching; Ministers are
unwilling to return home with less of what has been called "our
own money" than was achieved by their political predecessors;
and there is also a more high-minded desire to keep budget deficits
low and ensure that sound public finances promote growth and safeguard
the path towards and within Economic and Monetary Union (EMU).
GROWTH
RATES
79. We put little faith
in the ability of governments or others to forecast economic performance,
particularly over periods as long as five to seven years. We approached
the Commission's estimates of annual rates of growth between 2000
and 2006 with some scepticism.
80. The 4 per cent growth
a year estimated for the CEEC10 must be highly uncertain. It could
be exceeded in some countries and not met in others. But we are
unable to offer a more reasonable estimate. The impact of the
growth rates in the CEECs will be small in terms of any contributions
they might make to the Community Budget. A more important effect
of CEEC growth will be on their ability to finance their own investment
and restructuring. We conclude that, although the CEECs' rates
of growth are likely to affect the time they will require to become
ready for accession and the scope and duration of transitional
periods needed after accession before the full rigour of the acquis
is applied, these rates of growth are neither an important factor
in determining what should be the EU's "own resources"
ceiling before 2006 nor will they have much affect on the net
contributions or net receipts of the EU15 in this period.
81. The 2.5 per cent
growth a year estimated for the EU15 is also uncertain. The estimate
is not far in excess of achieved performance over the last decade
during which the EU has suffered from high unemployment and low
growth. There are some grounds for thinking that the next decade
may be better: if EMU works well and and if the Single Market
exerts the expected positive effects on the EU15 and the applicant
countries, the resulting freer flows of trade may produce somewhat
faster growth. On the other hand, there seems to be increasing
volatility in world financial markets which makes economic forecasting
even more hazardous than usual. We are, therefore, unable to offer
a more reasonable estimate than the Commission's, but we would
attach a warning: reliance on this figure could be misleading-alternative
scenarios should be given thought by the Commission well in advance
of 2000.
Faster or slower
growth
82. If growth in the
EU15 exceeds the annual 2.5 per cent estimated by the Commission,
funding policies for agriculture, economic and social cohesion
and enlargement obviously becomes easier. It would be possible
to pay for these policies and leave a greater margin within the
own resources ceiling. More problematic is the situation where
growth falls below the 2.5 per cent annual rate. The Treasury
written evidence, quoted in paragraph 46 above, shows that with
an annual growth rate as low as 2.0 per cent there would still
be a small margin of ecu 1 billion a year in the annual Budget.
If growth fell below the 2.0 per cent rate it would be necessary
either to reduce payments from the Budget by curbing spending
on agreed policies or to raise the own resources ceiling. The
latter option would probably be the more unattractive in what
would, ex hypothesi, be a time of particular economic stringency.
This brief consideration emphasises the importance of stimulating
economic growth in the EU15 if the Community's policies are to
remain affordable.
83. Looking further
ahead than the period 2000-2006, the annual growth rates estimated
(2.5 per cent for the EU15 and 4 per cent for the CEEC10) have
significant implications for the funding of the Community. Despite
these growth rates it would still take about 25 years for the
CEEC10 to reach roughly half the average GNP of the existing EU15.
Even to narrow the gap to this extent will require Community assistance
to the new Member States for at least a generation after their
accession. We do not see this long period as a reason for delaying
enlargement.
THE
OWN RESOURCES CEILING
84. In our recent report
entitled Reducing Disparities within the European Union: the
Effectiveness of the Structural and Cohesion Funds[19],
we took the view that on grounds of political realism the best
assumption for planning purposes was that the Budget ceiling of
1.27 per cent of EU GNP will not be increased after 1999. Nothing
we heard in this enquiry caused us to change that view of the
political realities. We think that the Commission's suggested
margin between total payments and the "own resources"
ceiling is so small that the ability to fund enlargement as proposed
is at risk. It would be endangered by failure to reform the Community's
policies adequately or by growth rates falling short of those
estimated. We have to conclude that the financial perspective
for 2000-2006 to be agreed should contain provision for review
before 2002 of the "own resources" ceiling.
REFORM
OF THE STRUCTURAL FUNDS AND THE COHESION FUND
85. In our report mentioned
in the previous paragraph we made a number of recommendations
on the reform of these Funds. Although we urged reform to reduce
bureaucracy and delay we were supportive of the aims of the Funds.
We commented that "the EU's cohesion policies have had marked
and beneficial effects for the poorest countries but regional
disparities within and between Member States remain unacceptably
large. At the national level, if conditions in the receiving country
are favourable, the funds can achieve an important effect."[20]
We are encouraged that the general thrust of the reforms of the
Structural Funds outlined in Agenda 2000 is very much in
line with the views we expressed. We note that the amounts to
go to the EU15 fall quite sharply after 2002 as funds for structural
assistance are to be diverted to the acceding countries. The political
problems are obvious. We are concerned that governments, including
the government of the United Kingdom, may balk at presenting their
electors with some phased reduction in Structural Funds payments
from the Community in the interests of longer-term benefits of
a successful enlargement. It may be that the annual growth rates
in the EU15 exceed the 2.5 per cent estimated in Agenda 2000
so providing a greater margin which could be used to sustain the
volume of structural fund support.
86. In our report on
the Structural Funds and the Cohesion Fund[21]
we took the view that those Member States currently receiving
assistance from the Cohesion Fund should continue to do so after
1999 only if their GNP per capita remained below 90 per cent of
the EU15 average and if they were not eligible for entry to EMU.
We reached this view partly, at least, because we understood at
the time that the Cohesion Fund had been established with the
express purpose of assisting the convergence of the eligible countries
with the criteria for entry to EMU. We have been told by the Commission
that legal advice now is that the Cohesion Fund is not legally
confined to this purpose. The scope of the Cohesion Fund requires
clarification. We think that the Cohesion Fund has proved its
worth in helping Member States where the GNP per capita is below
the 90 per cent of the EU15 average. We think that these countries
should continue to receive funding after 1999 where they continue
to meet this criterion. When a recipient no longer meets these
tests assistance from the Fund should be phased out.
19
See footnote 5. Back
20
Paragraph 78. Back
21
See footnote 5. Back
| 
