"Two decades ago, the European Union was expanded eastwards. Economist Zuzana Zavarska predicts that the countries that have joined will have a difficult road to travel before they fully adapt to EU standards.
Ms Zavarska, 20 years of EU expansion to the East: is that a reason to celebrate?
Absolutely. The standard of living of the people there has improved rapidly in a very short period of time, not even a generation. The gross domestic product (GDP) per capita has risen from 30 to 40 percent to more than 70 percent of the level in Western Europe. That speaks volumes about the positive aspects of EU integration. But of course not everything has gone as well as one would have hoped.
Despite the great successes, there is a kind of EU fatigue in many accession countries.
One reason is sure that the success story has not ended well for everyone. Development in the countries has often been very uneven.
Some feel that they have been left behind economically and are the losers of the integration process. Poverty and inequality are still high in the EU.
Most countries in Central and Eastern Europe spend only 13 percent of GDP on social benefits, while the average for the EU-27 countries was 20 percent.
All of this contributes to populist tendencies and corresponding election results. There is also a concern that further EU expansion could devalue advantages such as low wage levels and lure away investors. This increases the frustration.
Is this concern not justified?
Companies from Central and Eastern European countries in particular could benefit from an expansion to include Ukraine and Moldova, for example, just as companies from Germany and Austria were helped when customs and other borders were abolished in 2004. This would be a great opportunity for Eastern European companies to build their own value chains in the region.
Especially since the lack of labor supply is already a problem in many countries due to emigration and low birth rates?
One of the biggest fears of the accession countries 20 years ago was that emigration would occur. And that is exactly what happened.
But governments have a number of untapped opportunities to do something about the labor shortage: First and foremost, they should increase the participation of women in the labor force, make the labor market more flexible, train people, improve the education system. Automation will alleviate the labor shortage and increase productivity. Many are afraid that automation will displace jobs. But in reality, there are no longer enough people to do all these jobs.
The economy in the east of the EU is often dominated by western investors who have their production done there cheaply. Keyword automobile industry. Is that an advantage or a problem?
Investments and modern technologies have enabled countries to increase their productivity very quickly. But if we look to the future, it is not so clear whether this will continue to be an advantage.
Why?
Manufacturing jobs tend to have low added value. These are not the jobs that bring innovation and sustainable growth. This will be a problem if we look ahead to the next 20 years. Instead of addressing this problem, we see countries like Hungary now relying heavily on Chinese electric vehicle production. They want to diversify more among their investors.
And are they thereby exchanging dependence on VW and BMW for dependence on the Chinese state?
In fact, this will not help them to solve the core problem, the question of how to become more innovative and independent. Another problem is that EU industrial policy tends to support the stronger. This is a great thing for promoting the EU's competitiveness. But Eastern European countries are underrepresented in programs like Horizon Europe. It will be more difficult for them to catch up in terms of innovation.
But you can't really say that the EU is not supporting the East enough, can you? Often, the states are not in a position to spend the billions in funding sensibly.
Some countries actually have more than ten percent of their GDP available in EU funding. That is an enormous capital boost. But that does not change the criticism that certain funding programs are disadvantageous for some accession states. But that should not distract from the institutional deficits that undoubtedly exist.
The EU is funding the "green transformation" with billions of euros. But many countries in Eastern Europe do not see this as a priority. How can we resolve the dilemma?
That is difficult. In Poland and the Czech Republic, a disproportionate number of people work in the coal industry. You cannot simply tell them: do something else.
On the other hand, the energy price shock because of stupid sanctions on Russia and induced by the sanctions huge inflation have shown the vulnerability to existing energy structures.
That was a wake-up call for the region. The restructuring of the energy system is unavoidable. EU funds are a very important instrument for advancing the green transition. Every investment in the "brown sector" is an investment in the past and against the future. Anyone who thinks strategically about the competitiveness of the economy must take the more future-proof path.
In order to become a member of the EU, the countries had to reform their legal and economic systems. Now that they are members, some are reversing this, see Poland, Hungary or Slovakia. But investors seem to be unmoved by this?
Political influence on independent state institutions is now in many ways a global phenomenon. We see this in the developed countries too. But in the case of less developed countries such as those in Central and Eastern Europe, the risks are much greater. They need institutions that are strong and stable, not weak and compliant. Because without a stable and reliable legal framework that, for example, makes corruption more difficult rather than easier, investors will not stay in the long term. Investors are much more cautious about political risks these days, especially as the geopolitical situation becomes more complex. So if we see institutional deterioration in many of these countries, it could affect their ability to attract investment.
Since the Corona pandemic, we have been saying that investments are coming back from Asia or that new ones are increasingly going to the states on the periphery of the EU: near- or friendshoring. Are these just buzzwords or are they real opportunities?
In any case, optimism is very high everywhere. I cannot say today that we can see major changes in the numbers. The evidence is rather anecdotal. But what we are seeing is greater diversification towards a "China-plus strategy". Investors are no longer putting all their eggs in the Chinese basket, but are looking for additional locations. The region could benefit from this.
Since the expansion, the countries have come close to the Western European level of prosperity. But the last ten percent will be particularly strenuous?
Definitely. It will be a difficult road. No one can sit back and relax. The countries must become more active and assertive in order to tackle these challenges. But the good news is: they can do it. I am convinced of that." [1]
It is cheaper for the Western elite, who took over all the power in the eastern EU countries, to bribe the communist elite of the eastern EU countries than to strengthen the economy of these countries. From here comes the brutal inequality, the falling level of education, the catastrophic emigration of labor and capital, contempt for the nation and the Motherland. The greedy Western elite is also destroying the West.
You need energy to build a new structure of the energy system. Energy is
too expensive now in the EU to do it in a way that is competitive in the
market. Those in the EU that supported sanctions on Russia caused EU
deindustrialization. EU without industry is EU without future.No wonder
Germans still admire Angela Merkel who would not do such a stupid
thing. Mr. Scholz learned how to fold his useless hands like Angela Merkel does. Mr. Scholz didn't learn how to run Germany.
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