EUROPEAN UNION: The World's New Leading Economic Power

EUROPEAN UNION: The World's New Leading Economic Power
Analysis by Mario de Queiroz* - IPS 5/1/04

LISBON, Apr 30 (IPS) - Even the most far-sighted observers probably did not imagine in 1952, when six countries created the European Coal and Steel Community (ECSC), that the treaty would be the embryo of a bloc that is becoming the world's leading economic power, even slightly surpassing the size of the U.S. economy.

May 1, 2004 marks the birth of today's new Europe, no longer separated by the ''Iron curtain'', which for 45 years divided the continent between ''capitalists'' and ''communists''.

For the first time, 10 countries are joining the bloc simultaneously, including eight from the defunct Soviet bloc; Cyprus; and the tiny island of Malta, a British colony until 1964.

To better understand the origins of today's newly expanded bloc, it is necessary to go back to the 1952 treaty and the integrationist trend that five years later led ECSC members Belgium, France, Italy, Luxembourg, the Netherlands, and the then Federal Republic of Germany (West Germany) to sign the Rome Treaty, which created the European Economic Community (EEC).

The EEC was joined by Denmark, the United Kingdom and Ireland in 1973; Greece in 1981; and Spain and Portugal in 1986. In 1992 the Maastrict Treaty officially created the European Union (EU), which was joined by Austria, Finland and Sweden in 1995.

With the admission of Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia on Saturday, the 15-member bloc of 378 million people expands to a 25-nation EU with a combined population of 453 million.

According to figures from Eurostat, the Statistical Office of the European Communities, the EU's combined Gross Domestic Product (GDP) will grow to 12.1 trillion dollars, slightly higher than the 12.04 trillion dollar GDP of the United States, which will thus lose its position as the world's leading economic power.

Joining the EU amounts to ''staking our bets on peace,'' Gunter Verheugen, the bloc's commissioner for enlargement, said this week in Lisbon.

Verheugen recalled that ''men like Robert Schuman and Jean Monet (in France) and Konrad Adenauer (in Germany) not only understood (in the 1950s) the absolute urgency of restoring peace on our continent once and for all, but they also knew that the only way to achieve that objective was through economic integration and the development of common policies.''

The political spectrum of the new 25-member EU has been dominated by the right since four years ago, when the then-candidate countries took part in European Parliament elections for the first time.

The conservative European People's Party (Christian Democrats)/European Democrats holds 231 of the 622 seats in the European Parliament in Strasbourg, followed by the Party of European Socialists, with 173. After that come the centrist European Liberal Democrats and Reformists (52 seats), the Confederal Group of the European United Left/Nordic Green Left (49), the Greens/European Free Alliance (44), and the extreme-right Union for a Europe of Nations (23).

The remaining 50 parliamentarians represent small parties or are ''non-attached'' members, who describe themselves as independent.

Portuguese economic analyst Luis Sarfield Cabral says that ''despite all of the defects of the European community, adhering to it was and is a priority for many countries,'' because joining the bloc ''means strengthening still-insecure democracies.''

Nevertheless, Sarfield Cabral says the enlargement process has been accompanied by doubts with respect to the future of the EU.

He says the most frequent questions are ''whether it will be diluted into a mere free trade area, the objective of many opponents of integration who have nonetheless applauded the expansion. Or will a directorate of the big members (France, Germany, Italy and the UK) be in control, leading to a loss of the sense of community?''

Especially in Greece and Portugal, the least developed EU countries, expansion has given rise to worries about the diversion of EU structural and cohesion funds and foreign investment to the new member states.

To that is added expected competition from countries with cheaper labour power and higher productivity levels, especially Hungary, Slovenia and the Czech Republic.

The former socialist candidates made a huge effort in terms of overall development and transformation to prepare for Saturday's big event.

The ex-socialist nations, which up to the early 1990s had planned economies, underwent major privatisation processes of industry and the banks, liberalised their markets and prices, created new bodies to guarantee fair competition and overhauled their judicial systems.

But in terms of the number of cars, computers and cell-phones, the countries of eastern and central Europe are even surpassed by Portugal, which ranks last in the EU in terms of development.

On the other hand, the former socialist states win handily with respect to access to cultural events like concerts, ballet performances or plays, as well as reading habits.

More people read newspapers in the countries set to join Saturday than in the 15 EU members. In Hungary, 465 of every 1,000 inhabitants read the newspaper every day, far above the level in France (181 per 1,000), Spain (120 per 1,000), Portugal (91 per 1,000) and Greece (82 per 1,000).

Other important indicators of development, such as the proportion of GDP allocated to research and development, show that Slovenia, with 1.5 percent of GDP, and the Czech Republic (1.4 percent), surpass Italy, which earmarks just 1.0 percent, Ireland (1.2 percent), and Greece and Portugal (0.7 percent).

Meanwhile, the overall infant mortality rate of the 15 EU members, 4.5 per 1,000 live births, is similar to that of nearly all of the new members, with the exception of Latvia (9.8 per 1,000), Lithuania (7.9), Poland (7.5) and Hungary (7.2).

The average infant mortality rate of the 25-member EU will be 4.8 per 1,000 live births, lower than the U.S. rate of 6.9 per 1,000.

The eight percent average unemployment rate in the 15-member EU will now increase to nine percent, three percentage points higher than unemployment in the U.S. Inflation, however, will remain unchanged at two percent, lower than the U.S. rate.

The biggest differences, which have made many countries in western Europe fear an ''invasion from the east'', are seen in the national minimum wage, in which France is in the lead, with 1,926 dollars a month, while Portugal ranks last, with 516 dollars a month.

Of the 10 new members, only Malta has a higher minimum monthly wage than Portugal. The island nation's minimum wage of 664 dollars a month puts it on an equal footing with Spain and close to Greece's 750 dollars, and Slovenia's 560 dollars.

IPS collected opinions from east European immigrants in Lisbon and residents of Budapest and Warsaw.

Antón Mifka, a Slovakian metal-worker, pointed out that 70 percent of his fellow countrymen and women voted for accession to the EU ''because they believe their living conditions will improve.''

But he lamented that in order to attract foreign investment, the centre-right government in Bratislava modified the country's labour laws to make it easier to hire and fire workers.

An Estonian doctor, Marko Kalle, who owns a small surgical equipment company, said that although he is not terribly excited about admission to the EU, ''Brussels must be better than the Soviets.''

Andrea Czakóné, who works for Pepsi in Hungary, said it is yet to be seen whether admission will be good for the country, ''because if the cost of labour goes up, foreign companies will leave the country.''

Polish blacksmith Henryk Janka sounded bitter. ''Being a blacksmith means I'm practicing a trade on its way to extinction, and Poland was going down the same road. We have no option. The alternative is an alliance with Russia, and I prefer the EU to that any day.''

* Luis Naves in Warsaw, Katalin Muharay in Budapest and the editorial staff of the Lisbon weekly VISAO contributed to this report.