Five Years of an Enlarged EU . Filip Keereman Istvan Szekely l Editors Five Years of an Enlarged EU A Positive Sum Game Editors FilipKeereman IstvanSzekely EuropeanCommission EuropeanCommission ECFIN.E.2 ECFIN.A BU1-1/10 BU-103/209 1049Brussels 1049Brussels Belgium Belgium fi[email protected] [email protected] Theinformationandviewssetoutinthisbookarethoseoftheauthorsanddonotnecessarily reflectthoseoftheCommissionoftheEuropeanCommunities. ISBN978-3-642-12515-7 e-ISBN978-3-642-12516-4 DOI10.1007/978-3-642-12516-4 SpringerHeidelbergDordrechtLondonNewYork LibraryofCongressControlNumber:2010931435 # Springer-VerlagBerlinHeidelberg2010withEuropeanCommunicies,2009 Thisworkissubjecttocopyright.Allrightsarereserved,whetherthewholeorpartofthematerialis concerned,specificallytherightsoftranslation,reprinting,reuseofillustrations,recitation,broadcasting, reproductiononmicrofilmorinanyotherway,andstorageindatabanks.Duplicationofthispublication orpartsthereofispermittedonlyundertheprovisionsoftheGermanCopyrightLawofSeptember9, 1965,initscurrentversion,andpermissionforusemustalwaysbeobtainedfromSpringer.Violations areliabletoprosecutionundertheGermanCopyrightLaw. Theuseofgeneraldescriptivenames,registerednames,trademarks,etc.inthispublicationdoesnotimply, evenintheabsenceofaspecificstatement,thatsuchnamesareexemptfromtherelevantprotective lawsandregulationsandthereforefreeforgeneraluse. Coverdesign:WMXDesignGmbH,Heidelberg,Germany Printedonacid-freepaper SpringerispartofSpringerScience+BusinessMedia(www.springer.com) Foreword The Fifth Enlargement that took place in 2004 and 2007 was a milestone in the historyoftheEuropeanUnion.Notonlybecauseofthelargenumberofacceding countriesbutalsobecauseoftheirrecentpoliticalandeconomicexperience.Tenof themhadundergoneaprofoundtransitionfromatotalitarianregimetodemocracy, andfromacentrallyplannedeconomytoamarket-basedsystem.Mostofthemhad incomelevelssignificantlybelowthoseofthethenEU-15.Now,6yearslater,we canclearlyseethattheprocessofEuropeanintegration,bothbeforeandafter2004, was what enabled Europe to overcome the gaps between various parts of the continent.TheenlargementmadeEuropeabetterandwealthierplaceandstrength- eneditspositionintheworld. Integration into the European Union has always been one of the strongest incentives for reform in the new Member States. Particularly important in my view have been the development of financial markets through foreign direct investment and capital inflows, and the opening of labour markets – which was a two-way phenomenon, with markets being opened up in acceding as well as the incumbent Member States. The Fifth Enlargement was thus an exercise of globa- lisationinminiature,apracticerunfortheUniontotacklethechallengesoftheever smallerworld. This book brings together a number of papers by academic researchers and colleagues in other international institutions and critically assesses the first 5 years of the enlarged European Union. Despite the setback which the economic andfinancialcrisisundoubtedlyrepresents,Iamconvincedthatthepathfollowed was the right one and that the foundations of European integration are sound and robust.Thisbooksupportsthisview.Butwecannotrestonourlaurelsintimesof economichardship.Weneedtocarefullyanalyseandcriticallyassessthefactorsof growthandtheroleoftheEUinenhancingwelfareandacceleratingconvergence. Thisbookisanexcellentcontributiontotheongoingdebateontheseissues. OlliRehn CommissionerforEconomicandFinancialAffairs v . Acknowledgements and Disclaimer The 2004 and 2007 enlargements of the European Union were unprecedented in manyways.Whilethepoliticaldimensioncannotbeoverestimated,theeconomic significanceisequallyimportant.Inordertomakeacontributiontotheunderstand- ing of the process of market integration and income convergence, the Directorate GeneralEconomicandFinancialAffairsoftheEuropeanCommissionlauncheda seriesofstudiesaheadofthefifthanniversaryofthelatest enlargementon1May 2009.Theacademicstudiespreparedbyresearchersatuniversitiesandthink-tanks werepresentedataworkshoporganisedinBrusselson13and14November2008 and an edited version of their papers can be found in this book, as well as the discussants’comments. We would like to thank all those who contributed to make the workshop a success and broaden our knowledge on economic growth and catching-up in Europe. The insights provided helped us drafting the Commission report on the matter including a Communication released on 20 February 2009. Further to authors and discussants, we acknowledge the chairpersons of the various sessions attheworkshop.LastbutnotleastthetechnicalassistancebyRajkoVodovnikand Martine Maebe in preparing this manuscript was greatly appreciated as well as AnitaIvan’scontributiontotheindexlistandRobertGangl’sworkaspublication manager. Theviewsexpressedaretheauthors’,discussants’andeditors’aloneanddonot necessarilycorrespondtothoseoftheEuropeanCommissionortheinstitutionsto whichsomeofthecontributorsmentionedinthisbookareaffiliated. FilipKeeremanandIstvanF.Szekely Theeditors vii . Contents 1 Overview ................................................................... 1 FilipKeeremanandIstva´nP.Sze´kely PartI TradeandForeignDirectInvestmentinanEnlargedEU: OpportunitiesandChallenges 2 EvolvingPatternofIntra-industryTradeSpecialization oftheNewMemberStatesoftheEU:TheCaseofthe AutomotiveIndustry ..................................................... 11 Elz˙bietaKawecka-Wyrzykowska 3 FDISpilloversintheCzechRepublic:TakeoversVersus Greenfields ................................................................ 33 JurajStancˇ´ık 4 CommentsonChapter2and3 ......................................... 55 Sa´ndorRichter PartII MigrationinanenlargedEU:solutionorproblemforlabour marketwoesandcash-strappedsocialsecuritysystems? 5 MigrationinanEnlargedEU:AChallengingSolution? ............. 63 MartinKahanecandKlausF.Zimmermann 6 TheConsistencyofEUForeignPoliciesTowardsNew MemberStates ........................................................... 95 Jean-ClaudeBerthe´lemyandMathildeMaurel 7 CommentsonChapters5and6 ....................................... 115 FilipKeeremanandKarlPichelmann ix x Contents PartIII FinancialintegrationandstabilityinanenlargedEU 8 RealConvergence,FinancialMarkets,andtheCurrentAccount: EmergingEuropeVersusEmergingAsia ............................. 123 SabineHerrmannandAdalbertWinkler 9 SustainableRealExchangeRatesintheNewEUMemberStates: IsFDIaMixedBlessing? ............................................... 153 JanBabecky´,AlesˇBul´ırˇ,andKaterˇinaSˇm´ıdkova´ 10 CommentsonChapters7and8 ....................................... 183 CorinaWeidingerSosdean PartIV Integration,OpennessandGrowth:DidAccession MakeaDifference? 11 TheSecondTransition:EasternEuropeinPerspective ............. 191 StefaniaFabrizio,DanielLeigh,andAshokaMody 12 AnEvaluationoftheEU’sFifthEnlargementwithSpecial FocusonBulgariaandRomania ....................................... 221 FritzBreuss 13 CommentsonChapters11and12 ..................................... 249 RyszardRapacki Index .......................................................................... 255