Among the Central and Eastern European Countries of the European Union, Who Gained and Who Lost?

Abstract

The continuous enlargement of the European Union (EU) has been one of its greatest achievements and judging by the increasing number of EU member countries, one of its most successful policies. This primer considers the economic side of enlargement for the ‘new’ EU members, and provides data on the principal economic indicators of the period 2000-2016. The eastern enlargement of the EU has proven to be a hybrid bag of effects for the newly arrived countries. Data show that economic growth, the expansion of trade and an increase in foreign direct investment to the east of the EU denote obvious successes and gains for its new members. The cost of the structural transformation and modernization of these new EU countries is an amazing acceleration in the level of domestic and foreign debt that financed these successes. The new member countries have been ‘living on a credit card’. The danger is that this debt burden; unfavourable demographical developments; changes in the rates of interest; uncertainty about the future of the eurozone and of the EU; as well as the departure of Britain from the EU, may partially suffocate the newly acquired economic vigour seen in the EU’s east. It may also reduce the level of subsidies coming from the ‘old’ EU countries, assistance to which the new countries have become accustomed. In addition, these new countries might be treated like second-class EU members. The conclusion is that EU membership has not been a tide that lifted all boats, and that the great benefits of integration were oversold. There is still a quandary as to whether in the long run the new countries will have received the EU doughnut, or just its hole.

Keywords: European Union, Eastern Enlargement, Central and Eastern Europe, Sanctions, Economic Transition, European Perspective, Eurozone

JEL Classification: F13, F15, F50