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Friday, 29 March, 2002, 20:04 GMT
EU faces East-West poverty gap
As the euro becomes the established currency in most of the European Union, the biggest looming issue is now enlargement. Twelve nations - 10 from East Europe plus Cyprus and Malta - are currently in negotiations for membership and there is every sign that enlargement will go ahead.
Enlargement will transform the social composition of the EU. It will add 100 million - more than a quarter - to the population, and poverty and inequality will surge. At present all the 15 member states have living standards within 25% of the EU average. Millions of poor But the largest candidate state, Poland, with a population larger than 10 of the current EU members, has a GDP per head of less than half the EU average.
Not only are the candidate nations apart from Slovenia and Cyprus much poorer than the current EU, but inequality within these states is also severe. The EU's own high-level Reflection Group on the long-term implications of enlargement reported: "The extent of officially-defined poverty is quite alarming."
Yet if poverty is defined as living at less than half the EU average per capita consumption level, the great majority of those likely to be brought into the EU by enlargement are below the poverty level. German precedent This represents a major challenge to the EU objective of creating a single "social space" and its strategic goal for the next decade of promoting social cohesion.
East Germany with massive support from West Germany has in a decade moved up from 40% to 60% of the West German GDP per head. But such levels of support will not accompany EU enlargement. Even if new entrants grew 2% per year faster than the rest of the EU every year up to 2015 - which would be a remarkable achievement - poverty in those countries would still be two or three times as prevalent as in the current member states.
To mitigate possible migration, a transition period is being negotiated during which the free movement of workers, a core principle of the EU, would not apply to new entrants (except for relatively prosperous Cyprus and poorer, but very small, Malta). How many would seek to migrate is a matter of speculation but the European Commission's estimate that only one-third of a million would move from Eastern Europe if there were free movement seems a serious underestimate. Agricultural dilemma Another impact of enlargement will be on the EU's own policies.
These countries will lose heavily if the funds are re-allocated to those poorest in an enlarged EU. The biggest policy impact will be on the Common Agricultural Programme (CAP). In the current EU, 5% of employment is in agriculture, but in Poland and Romania the proportions were 19% and 43% in 2000. If the CAP were extended to new entrants, the cost would be enormous. If current spending were shared throughout an enlarged EU, farmers in France, Germany and Britain would loose heavily. Yet if transitional arrangements limit agricultural support to existing members, the poverty in rural areas of the new entrant states will only increase. There is a huge dilemma. No solution is on offer.
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