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Europe’s Big Bang at Ten

BRUSSELS – Ten years ago, eight countries from the former Soviet bloc, together with the island states of Malta and Cyprus, joined the European Union, bringing its membership from 15 to 25. At the time, it was feared that this eastern enlargement would create tensions within the EU because new members from Central and Eastern Europe were poor and some had large agricultural sectors. Because the EU spends mainly on poor regions and on farmers, many worried that enlargement would overburden its budget.

In the end, this problem was resolved through a typical European compromise that allowed enlargement to proceed, even though the budget, as a proportion of Europe’s GDP, was reduced. Agriculture has now largely disappeared as a major item on the EU agenda. Moreover, the planning horizon under the EU’s Multi-Annual Financial Framework implies that the issue of who pays for whom has to be addressed only once every seven years.

The purpose of economic integration is ultimately to boost GDP growth and improve living standards. Judged from this perspective, enlargement has worked well. The transition countries have caught up considerably over the last decade.

In the mid-1990’s, many transition countries’ per capita GDP was only about one-quarter to one-third of that of the old EU-15 (in purchasing-power-parity terms). Some of the distance had already been covered when the new member states finally joined the EU, but the process of convergence has continued, even through the financial crisis.