Costly subsidiaries will be needed to bring applicant member states up to the agriculture standards that the rest of the European Union is at of production, quality of products and technique.
Economic impacts
The European Union is planning to expand its size by up to a third, but its GDP by only 5%. Unfortunately the Central and Easton Europeans have just come out of a 50-year time warp under dictatorship. The net recipients of the European Union budget are reluctant to lose the vital European Union grants that have aided them to progress economically. However the European Commission argues that it would not make sense to offer new member states full access to the regional aid budget as these countries would not be able to absorb more then 4% of their GDP.
Culture and Migration issues
Former dominating nations such as the Hungarians could pose a threatening problem to the rest of the European Union. Pressures from outside migrants will rise and the many different cultures feel threatened by the expansion of the European Union as patriotism.
Language issues
The many different languages of the European Union makes communication difficult and widens the gap between regions. With 12 members there are 9 official languages in normal use; however if there are 30 members then there could be up to 25 languages in use.
New Periphery vs Old Periphery
We need to understand what the problems with the present peripheries are. The major features of regional disparities are relatively low incomes, low productivity and high unemployment. Firstly, there are the location factors, to do with the access to the large markets of the EU, access to inputs (such as raw materials, centres of administrative or financial expertise) and access to skilled labour. Secondly, comparing labour markets in different regions, wage differentials sometimes exceed productivity differences therefore rendering some regions uncompetitive. Thirdly, labour is not always mobile; in theory the least skilled is the least mobile whereas the skilled are able to move to the productive regions. This therefore makes any income disparities even worse.
The gainers and losers of the single market tend to be regionally concentrated. A depressed region is unattractive to entrepreneurs and therefore lacks investment, so the depression becomes cumulative. This is obviously a problem and needs government intervention to correct it (e.g. W.D.A.). It is able to increase its competitiveness by decreasing the value of their currency.
There are two main areas of depressed regions:
Rural areas where there is a large dependence on agriculture, especially small farms that lead to low productivity. These areas are characterised by high unemployment and poorly developed infrastructures. These areas at present but are changing slowly are the south of Italy, most of Greece, Ireland and Portugal and large areas of Spain.
Urban areas where traditional industries, such as coal mining, steel production and ship building are declining. Characterised by high unemployment, decaying housing and infrastructures, and social depravation. These areas are mainly found in Belgium, France, the UK and the eastern part of unified Germany.
These disparities lead to the need of government intervention and therefore the use of policies. The ESF (European Social Fund) focuses on retaining workers to raise their productivity, EIB (European Investment Bank) loans and ERDF (European Regional Development Fund) grants concentrate on improvements to infrastructures, particularly roads. These expenditures have been largely in the poorer regions, especially Greece, Portugal and Ireland, the three poorest members of European Union. The thrust of the policy is to improve the economic environments of the poorer regions so that investment is attracted into them.
The 'New Periphery'!
The Balkan area has received a lot of European Union aid in the last decade or more due to their problems with civil war, etc.
Bosnia and Herzegovina have received assistance of over €2billion since 1991. The main objectives of this aid are to consolidate the peace process, which also involves the ethnic reconsolidating and the return of refugees. Also the European Union is trying to establish functioning institutions, lay foundations for sustainable economic recovery and growth and bring it closer to European Union standards. So according to the Dayton Agreement, which is a stability pact, there needs to be a stable social political structure and functioning economy built.
Croatia in 1999 received over €20 billion with 15 for reconstruction. The European Union have helped in other ways such as European Union-Croatia Consultative Task Force, which has established informal political dialogue at a higher level and are starting preparation to open negotiations for a Stabilisation and Association Agreement as soon as possible. The SAA will provide wide-ranging partnership, which will allow it to get closer to the European Union. Also here the Dayton Agreement is also in progress here.
The Federal Republic of Yugoslavia (FRY) which is made up of the Republic of Serbia and the Republic of Montenegro. FRY was itself not allowed to have large-scale European Union assistance because of the lack of respect for democracy, human and minority rights. However it still gets money for humanitarian assistance and support for democratisation and independent media. The European Union has done a lot of work to make Serbia see that democracy does work by doing a few programmes: Energy for Democracy (winter 1999-2000) delivered heating oil to opposition-municipalities. Schools for Democratic Serbia (July 2000) builds on 'energy for democracy' focuses on repairs and the supply of education related materials for kindergartens, schools and educational establishments.
The Republic of Montenegro has a population of 600,000, and is pursuing a path of political and economic reform and openness to the West under president Milo Djukanovic. Unfortunately the area has come under pressure from Milosevic. Trade has been restricted between 2 republics therefore no access to its most important and cheapest source of food and medicine which will force the govt to have a large budget and balance of payment deficit. They have received €93 million and help via 'Bilateral Aid Programme'.
The Former Yugoslav Republic of Macedonia (FYROM) received €422 million from 1991 - 1999. Most of this money was given due to the Kosovo crisis however they have also received money to consolidate economic reforms and reconstruction such as to help the transformation to a market economy. The assistance so far has helped in many different ways such as support to enterprises and financial sector. So as to make the economic and commercial legislation compatible with that of the European Union through technical assistance to draft new laws. Transport has also been given help by receiving funds for the improvements of their infrastructure; some of the funding has come from the EIB. Agriculture has also received help to try and bring it up to European Union standards via the market economy. Also there have also been help in preparing new land laws. Education has been given a boost by allowing certain ministers to visit European places of higher education. Also there has been assistance in preparing the national curriculum. Social welfare policies are also been put into force.
Slovenia has received €192 million between 1992 - 1999 under the Phare programme, which in place to help Slovenia's pre-accession strategy and €31 million in 1999. This pre-accession aid is planned to continue until 2006 and these figures will also increase as well.
Slovenia is the closest geographically and also in respect to the Copenhagen political criteria to the European Union compared to the rest of the Balkans which is also due to the European Union Accession Partnership. However there are two areas that need attention such as streamlining and speeding up of the judicial and parliamentary processes. Slovenia is already regarded as a functioning market economy they cope with competitive pressure and market forces. It has maintained macroeconomic stability with the adoption of laws on banking and foreign exchange. Along with the reform of the tax system with an introduction of value added tax with pension reforms. Priority has been given to the privatisation of state assets, including the two state banks. Restructuring of public utilities is necessary but the legal environment for enterprises should be further improved.
Attention needs to be paid to completing alignment in the areas of free movement of persons, capital and services. Other areas of attention are that of border control and drugs. Continual attention needs to given to all the above areas even if they are okay because if they are not then they may fall behind and hinder their progress.
So as one can see the Balkan region is already receiving a lot of money from the European Union and will continue to receive more money. The amount of money they receive at the moment could be more then that of the present peripheries in financial terms. The only difference that may take place is that when European Union membership is undertaken then the money will come from different pools instead of the foreign and defence pools at the moment. However, they are not physically peripheral and therefore may be able to make good progress in the European market.
Unfortunately for the Balkan region they have come out of Communism and into wars and have not been able to find their feet properly. Their industries are unfortunately old and still heavily primary based so they are falling into the present peripheral framework and are depressed regions. The rural areas look like old medieval times in Britain where the countryside is covered in long narrow strips owned by loads of different landowners. Which are obviously of low productivity. The urban areas are also characteristic of the present depressed regions due to their high dependence on primary industry, decaying housing and infrastructure, and social depravation.
The present help that they are receiving from the European Union should be able to get rid of this type of production and become more secondary or even tertiary based. Which will therefore make the area more prosperous and also more likely to merge with the European Union without many problems and mainly be able to keep most of their workers there or even pull new investors into the area.
So in conclusion as long as the integration and the European Union Accession Partnership before integration takes place and is followed carefully and all goes well then the Balkan area and even all of Central and Eastern Europe could integrate and not become peripheral but prosperous memberstates instead.
Word Count: 2,100
References
Peter Coffey "The Future of Europe".
Agenda 2000 for a Stronger and Wider Union
Brian Hill, "The European Union", 2nd edn, Heinemann Educational, 1994
1991-1999 EU assistance to South-Eastern Europe & Western Balkans - Figures
www.europa.com/ec/enlarge
www.europa.com
