Home / Archive tout / Copenhagen 2002-Brussels 2003 – From pre-accession aid to Structural Funds : Is the pre-accession aid covering the cost of enlargement for the new members?

Copenhagen 2002-Brussels 2003 – From pre-accession aid to Structural Funds : Is the pre-accession aid covering the cost of enlargement for the new members?

Numerous institutions and institutes, scholars and politicians have tried in the last years to asses as exact as possible the benefits and costs of the enlargement wave to take place in May 2004. A considerable part of the resulting studies are concentrating on the (as) pure (as possible) financial aspects of this issue. Nevertheless, one cannot talk about these aspects without setting also a larger frame. A series of other non-material gains resulted from this process, among which the most important one is the political gain: after half a century of artificial but intrusive separation, the countries in Central and Eastern Europe are „back to Europe“, to democracy and freedom of choice. The economic gains, to start with FDI flows and end up with significant increase in the GDP of the new member states, are also obvious. Not the same I could say about the costs of enlargement for these countries, at least for certain important groups. Most of the time shadowed by electoral stakes, the price for entering the EU, i.e. for implementing the acquis communautaire, is kept away from the citizens’ eyes.

This article intends to concentrate on the financial agreement between the EU and the 10 countries to became its members in short time. From pre-accession aid, whose amount was gradually increased in order to fit the needs of the CEECs, or the needs of the EU in these countries, what was envisaged at the 1999 Berlin Summit finally became reality. Beginning with May 2004 PHARE, ISPA, SAPARD will become, in the 10 new members, European Regional Development Fund, Cohesion Fund, European Agricultural Guidance and Guarantee Funds and European Social Fund[[For a short description of these Funds, please check the first (for EU funds) and the second (for pres-accession funds) papers posted on this section.]]. But has this pre-accession aid attained its aim? To which degree? It is obvious that these countries are closer to the EU in many respects, but is the pre-accession aid paying the domestic bill for “coming back to Europe”?

The development of the EU Regional Policy in its present form has been driven by needs successive waves of the EU enlargement created (UK&Ireland in the ’70s, Greece and the Mediterranean states in the ’80s, Northern states in the ’90s, the last one with lower impact). Waiving statistics according to which the regional disparities among the EU regions are the same as 30 years ago, critics of the EU Regional Policy claim that the Structural Funds have been rather a side-payment to lubricate further integration and to compensate the lost the new members were arguing that their domestic economies would suffer once part in the EU common market. Was it the case also in this enlargement round?

The present Financial Framework 2000-2006, decided at the 1999 Berlin Summit, made a break-through in the perpetual conflictual discussions about financing enlargement. Net-contributors to the EU budget were refusing to pay even more in the European pot, the main beneficiaries were not accepting to receive less[[The so called “statistics effect”: even if the GDP of these regions was the same, due to the calculation of the GDP average (indicator for Obj. 1 funds (see paper 1)) including the significantly lower GDP of the new members, they would not be eligible for Obj.1 funds anymore. Transitional support was arranged till 2005 for 18 of these regions.]], nonetheless, the enlargement was approaching steadily and it had to be financed in one way or another. After intense negotiations, 42 billion were dedicated to enlargement for the future 6 years (4 billion less than the Commission proposed in the Agenda 2000), funds to be re-distributed in the following years, according to the number of countries and the moment these would accede to the EU. This „adjustment“ moment came in 2002, at the Council of Copenhagen, when it was decided that 10 candidate countries would become EU members in May 2004. During the same summit the gross amount agreed in Berlin dropped from 42 to 40,8 billion. For one more time the critical economic situation in the EU affected negatively the generosity of its members. Even if extra money was, in the end, made available, it was used actually to create a straight cash transfer fund, in order to attenuate the so called „cashflow problem“[[Even when a project is approved, it takes some time till the money reaches the beneficiaries’ bank accounts.]].

The new member states do not only benefit from the Structural Funds, but they will also contribute to the EU budget, according to the respective budgetary rules. Despite the difference of 4 months, i.e. they contribute to the budget beginning with May, but benefit from Structural Funds for the entire year (25.1 billion for the 3 years), their financial share will amount to 15 billion between 2004-6, this rending the enlargement costs to 10.3 billion Euro. Around 30% of the funds are coming back to Western Europe through transfer of “know-how” to Eastern Europe and, according to the European Commission the 10 new member states will not be able to absorb all these funds due to lack of or inefficient national structures. Than the question is what amount of the € 5 billion per year for 10 new member countries (not for 6, as the Agenda 2000 was estimating) caught in the budget will actually reach the domestic level and needs in CEECs?

After making these simple calculations, it seems that the price of enlargement, sum to be paid out of European chests, is not at all the scare-crow waived by enlargement opponents along the years. On the contrary, one huge market with a real potential to turn the EU in the first economic super-power on the globe was achieved with minimum costs. Further than “small talk” on € cents, the most important is to be acknowledged that, on one side, the European politicians, administrators and economists did a great job for the EU, reinforcing actually its economic “giant”-ness. On the other side, it is remarkable that, despite the high costs for a system in transition, the new Member States understood to seize the moment and invest in their future in the EU.

Poland—Another France? Financial Framework 2007-2013

According to the decisions of the Copenhagen Summit, Poland benefits of special financial conditions. Not only that it receives almost half of the money dedicated to this round of enlargement, but the share of pure cash assistance is higher than for other countries. In the light of this “special treatment”, the Polish significant “contribution” to the failure of the December 2003 IGC, not only that stirs the regret of European high civil servants for according this country more concessions and privileges, but it might endanger the Polish position in the negotiations for the Financial Framework 2007-2013. While in close collaboration with the Commission during the negotiation process, the accession countries enter new alliances once they become full members of the Union. If the Spain-Poland alliance had unfortunate effects on the immediate future of the EU, it draws a picture about a Union where the “new-comers” refuse to limit their political power on the ground of their “EU years”, negotiating firmly for a position in the EU directly proportionate with their significance (already existing or anticipated). In principle this is the right thing to do, but when the future of the entire Europe is at stake, such radical positions are rather hurting than helping their case.

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