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Hans J. Tümmers European School of Business ESB
Reutlingen
The enlargement of the European Union June 4,
Piacenza
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Biographie

• Born 1944 in Ravensburg (Germany) studied
  business science and political science at the
  universities of Nuremberg and Tuebingen.
  Diplom-Kaufmann (Nuremberg) PhD (Augsburg) with
  a thesis on the Gaullism under the 4th republic
  
• 1975 Professor of European Studies at FH
  Reutlingen
• In 1978 founder of ESB Reutlingen and its
  director until 1987
• Visiting professor at the universities of
  Middlesex London, Nuremberg, Tuebingen,
  Strasbourg I (Louis Pasteur), Boston College,
  Pepperdine and Memphis
• Commissioner for Europe of the Minister of
  economic affaires of the State of
  Baden-Wurttenberg (1990 - 1995)
• Professor of political science at the Robert
  Schuman University of Stras- bourg and Dean of
  the Strasbourg Management School IECS (1995-2000)
• President of the Stuttgart Institute of
  Management and Technology, SIMT (2000 - 2003).
• Co-author of the book Frankreich,
  Staat-Wirtschaft-Gesellschaft, 3rd edition,
  Beck-Verlag München, 1998

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It is not the first time
Europe of the Six
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1973 United Kingdom, Ireland, Denmark
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1981 Greece
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1986 Spain and Portugal
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1990 Reunification of Germany
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1995 Austria, Finland and Sweden
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And now the new member-states
Since May 1st, 2004 ten new states are members of
the EU
Prob. in 2007
What about
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 The last chance for a united Europe  (Prof.
Dr. Peter Glotz) or The end of the European
Union? by overstretching by internal
conflicts for financial reasons
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War is a mere continuation of policy by other
means Carl von Clausewitz (1780-1831)
On War (Vom Kriege), Berlin 1832
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Policy by other means?
The fundamental change Europe was born in
violence, the Nations were born in violence .
for the first time in history, a war in Western
and Central Europe is simply impossible.
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Just to remember....
Therefore, the (economic) integration of
(Western) Europe after World War II has always
been a response to ? (political) problems
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After the collapse of the Soviet system there are
two political problems 1. The integration of
unified Germany in Europe. 2. The establishment
of a stable political order in Europe Thus, the
enlargement of the European Union is first of all
a political and not an economical decision.
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The response of the European Union to the
collapse of the Soviet Empire
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The enlargement process
At the European Council in Copenhagen in 1993,
after the collapse of the Soviet Empire, the EU
made an offer to the Central and Eastern European
States to become a member of the EU. Without
this enlargement, the European integration
process would be incomplete. It is regarded as a
question of historic justice a political
necessity and a historical chance This
decision was confirmed in Essen 1994, in
Luxemburg 1997, and in Helsinki 1999. The
objective is to stabilize the political situation
in Central and Eastern Europe.
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The population after the enlargement (in Mio.)
EU of the 15 377,920 New member states -
Poland 38,625 - Czech Republic 10,257 -
Hungary 10,075 - Slovakia 5,422 -
Lithuania 3,601 - Latvia 2,367 -
Slovenia 1,933 - Estonia 1,416 -
Cyprus 0,767 - Malta 0,297 74,860 After
enlargement - population 20 452,780
For comparison USA 280,562
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Consequences of the enlargement
The enlargement is the most important challenge
in the history of the EU. Questions 1. What
are the political consequences for the Union?
2. What are the economical and social
consequences of the enlargement?
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I. Political perspectives
1. Common identity Are the 25 - or even 28
states - able to develop a common identity and
do they have the ability to act together? What
are the conditions?
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Questions ...
1. What are the elements which bring the Finns,
the Maltese, the Irish, the Portuguese and the
Cypriotes together and make of them a community?
2. How is it possible to organize a community
with 20 different languages? 3. How can such
a heterogeneous community develop a common
identity?
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Conditions for a successful integration

• Consensus on the basic values of a society

• Respect of the cultural and social individuality
  of its members

• Respect of the principle of subsidiarity

• No hegemony of a member State

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Some historical remarks. This is the
Mitteleuropa of our great-grand-parents.
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The Europe of our great-grand-parents
The German Confederation 1815 - 1866
The Austro-Hungarian Empire
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Where the Germans lived in the 1930s
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Some of the new members have a long tradition of
close relationship with Western Europe. They
 return to Europe . Poland, Czech Republic,
Slovakia, the Baltic States, Slovenia, Hungary
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Historical Reminiscences

• The King of Bohemia was a  Great Elector  of
  the Roman (German) Emperor
• In Prague the first German speaking university
  was founded in 1346
• The King of Poland defeated the Turks in 1683 at
  Vienna
• The Great Elector of Saxony became King of Poland
  in 1697
• Slovenia and Bohemia were a part of the German
  Confederation
• Hungary, Slovenia, Slovakia and parts of Poland
  were members of the Austro-Hungarian Empire
• Numerous Germans lived in the Baltic States

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Conclusions
There are a lot of ties and common values which
keep the enlarged Europe together. But it
requires a long integration process over decades
and even generations. What is the role of
Christianity?
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And Turkey?

• Is Turkey a European Country?
• Is it sharing the European cultural values?
• Does it fulfill the conditions for membership?
• 1. Democratic structures
• 2. A market driven economy
• 3. Acceptance of the acquis communautaire

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I. Political perspectives (2)

• 2. The institutional frame
• Will this large Union still be governable?
• Will it become an intergovernmental formation?
• Will it become a large free trade zone?
• Will it politically become a new OSCE?

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Strategic Reflections
How do the geo-strategic weights shift? Some
facts 1. Germany is the most important trade
partner of the Middle and Eastern European
states. 2. There are close historical ties
between the acceding countries and Germany. 3.
The center of the Union will be relocated to the
East.
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Strategic options in Europe
France Europe Russia ? Africa ? Mediterranean
? Francophonie ? Germany Europe Russia
? Mitteleuropa ? United Kingdom USA Commonwealt
h Europe
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The result
The country, that politically will most profit
from the East expansion, will most likely be
Germany. In addition it maintains a very close
relationship to Russia. Germany is by far the
largest foreign investor in Russia.
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Exporting country Germany
In all acceding countries, Germany is trade
partner No 1! Share on the imports Czech
Republic 33,8 Hungary 29,7 Poland 25,5
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Investor Germany
Germany is the largest investor in the acceding
countries and in Russia!
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Germanys trade with Eastern Europe
Trade with the new members Total
trade Exports Imports Exports Imports 1993
2003 285 341 105,9 83,7
Share of the trade with the new members
Exports Imports 1993 4,6 4,5
2003 8,5 10,8
Quelle Statistisches Bundesamt, Erklärung
Vizepräsident W. Radermacher vom 22.4.2004
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The situation of Germany
The country, that economically will most benefit
from the EU enlargement, will be Germany. In
addition it maintains a very close relationship
to Russia Germany is by far the largest foreign
investor in Russia.
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The answer to the problem
The only answer to this situation can be a closer
political integration of Germany into the
European Union. In a politically integrated
Europe, the power of Germany is counterbalanced
by a larger number of member states. Remember
the reaction of the Eastern European countries in
the Iraq crisis!
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Migration
Germany is the most important target country of
citizens of the acceding countries with all
advantages and disadvantages.
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Objective Germany!
More citizen from the new member states live in
Germany than in all other EU member- states
together.
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Foreigners in Germany
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Massive immigration from the East?

• With the East enlargement on May 1st, 2004,
  borders will not yet be open. Labor mobility and
  freedom of movement arrive not until five to
  seven years later, I.e. about the year 2010.
• Within 15 years, approx. 2.7 Mio. immigrants from
  the candidate states are expected (ifo-Institut
  Munich). The EU commission anticipates approx.
  1.8 Mio immigrants, thereof 2/3 to Germany. For
  comparison today 5.3 mio non-EU citizen live
  within the EU..
• Germany will face a labor deficit in approx. 10
  years. Immigrants will be welcome especially
  with the low birth rates.
• Source Financial Times Deutschland, 1.12.02

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Economical and social perspectives of the
enlargement
1. Which integration costs will the EU
approach? 2. How shall the problem of
agriculture be solved? 3. Which advantages and
disadvantages do the old EU-countries have? 4.
Which advantages and disadvantages do the
acceding countries have? 5. How shall the
structural change be financed? 6. Who has the
best chances on the new markets?
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Redirection of trade flows
For one decade, the candidates have undergone a
profound restructuring process. During this
time, they had to redirect their trade relations
from East to West.
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Foreign Trade of the Eastern European
CountriesPart of the Trade with the Soviet Union
/ Russia in
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Foreign Trade of the Eastern European
CountriesPart of the trade with Eastern Europe
in
46
Foreign Trade of the Eastern European
CountriesPart of the Trade with Western Europe
in
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The exports of Eastern Europe to the EU(in of
all exports)
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Increase of the exports of Eastern Europeannual
change between 1992 and 1998 in
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Conclusion
The trade relations of the East European
countries broke down with the collapse of the
Soviet Union. Within 10 years, the candidates
redirected their foreign trade towards the West.
A remarkable performance!
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Weak economic performance
However, compared to the EU, the candidates show
a large arrear in economic performance. This
poses a great challenge for the regional policy
of the EU. Previous beneficial regions GNP
suddenly lie above the EU average.
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The GNP of the EU and the Candidates(EU 100
)

Luxemburg 175 Cyprus 78 Denmark 119
Slovenia 68 Netherlands 113 Czech
Republic 60 Belgium 112 Hungary 49
Austria 111 Slovakia 46 Germany 108
Poland 39 Ireland 108 Turkey 37 Great
Britain 102 Estonia 36 Sweden 102
Lithuania 31 Finland 102 Rumania 27
Italy 101 Latvia 27 France 99
Bulgaria 23 Spain 81 Portugal 74 Greece 66
48 of the 50 regions of the candidate states
have a GNP less than 75 of the EU average.
Source Institut der deutschen Wirtschaft, 15
June 2000 and Managermagazin 11/2000
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The areas of Europes regional policy
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GNP per capita in the EU and the new member states
Iwd 27.6.02
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Regional policy and enlargement
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The performances of the candidates
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Conclusion
The conditions for the candidates to enter the EU
are completely different. Hungary, Czech
Republic, Poland have the best chances to catch
up with the EU. The situation for the future
candidates Bulgaria and Rumania is very critical.
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The problem of agriculture
One of the greatest problem is agriculture of
GNP in the EU 2,6 of employees in the EU
4,3
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The problem of agriculture
GDP active popul. Lithuania 9 20 Latv
ia 5 15 Estonia 6 11 Poland
4 27 Slovakia 4 9 Hungary 6 8 Czech
Republic 5 5 Slovenia 4 ? Romania 15 40
Bulgaria 15 26 European Union 2,6
4,3 Source CIA
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Advantages and disadvantages of the enlargement
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The acquis communautaire
The new member states have to accept and
implement the acquis communautaire, that means
14.500 legal acts on 97.000 pages of the official
journal of the E.U. The treaty of the EU with
the new member states has 1.000 pages. 200
measures of transition will facilitate the
integration of the new members.
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The enlargement of the European Union1.
Advantages for the European Union
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The enlargement of the EU2. The effects
1. The end of Soviet hegemony in central Europe
opens the possibility of an enlargement to all
European countries. But the Union has no
instruments of common security. The entrance of
10 new members will enlarge the European
Union 33 of its territory 28 of its
population 9 of its GNP and will ipso
facto increase its weight in international policy
- compared to the United States and Russia. 2.
The reunification of Germany has dramatically
changed European geopolitics. The enlargement of
the European Union to Eastern Europe will
integrate Germany more into Europe and contribute
to more stability. 3. The entrance of the
Central and Eastern European States in the EU
will stabilize their democratic development.
Examples in the past Greece, Spain,
Portugal. 4. The enlargement will create more
stability in Europe.
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The enlargement of the European UnionThe effects
(2)

5. The real problems are in the economic sector
Positive perspectives ? development of
trade with western European countries growth of
25 - 30 p.a. Attention domination of Germany
in the foreign trade (40 - 50 ). Most important
elements of the EU exports industrial and
investment goods, machines, cars,
electro-technical products. Positive balance of
trade of the Union. ? participation to common
programs (esp. of the structural fund). Transfers
of 75 billion between 2000 et 2006 (estimations
of the European Commission). They represent ca. 5
of the PNB. ? Opening of the markets favorite
foreign investments. ? Economic growth will be
stimulated. Positive examples Ireland, Portugal
negative example Greece. All depend from the
economic policies of the new members.
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Labor costs in Eastern Europe
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Opportunities for SMEs
The new member states are close to the old
members. This creates a particular opportunity
for small and medium size companies. The
Chinese, Japanese ore Brazilian market is
accessible for big companies, but less for the
small ones.
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The enlargement of the European Union2. The
effects (3)
Negative perspectives - 1 - ? Important
agricultural sectors, very little modernized
GDP active popul. Lituania 9 20 La
tvia 5 15 Poland 4 27 Slowakia
4 9 Romania 15 40 Bulgaria 15 26 Europe
an Union 2,6 4,3 ? The cost for the European
Union is estimated at 10 billion per year. (The
structure of the agricultural production is
similar to that of the northern European
countries!) But mainly the large farms will
benefit from the European subsidies and not the
small family farms. ? The balance of the
commercial exchange of the new members will be
negative for a long period. The disparities of
customs will benefit to the Western European
industries.
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Negative perspectives - 2 - ? The advantages of
labor costs risk to disappear very rapidly. The
low productivity risks to lead to
de-industrialization (example East Germany) ?
The new members have to contribute to the
finance of the European budget (up to 1,27 of
the GNP). Nevertheless, for a long time the
subsidies will be higher than the financial
contribution. ? The new members have to adopt
the European regulations (about 40.000 directives
and other regulations). ? The ecological and
security standards will cause enormous costs and
investments. The need of investments in this
field is estimated at 60 billion (Ifo-Institute
Munich). ? The tariffs of the EU are about 3
Eastern European countries 6,5. A reduction of
the tariffs will decrease the State income by 0,5
of the GNP. Example in the Hungarian budget,
the income by the tariffs represents 11.
(source Integration 3/98).
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Negative perspectives - 3 - ? The free
movement of people risks to create important
migrations, esp. of young people. Estimations
340.000 - 680.000 people of the 5 candidate
countries. (source DIW Cologne). ? The new
members lose a large part of their autonomy in
the field of economic and monetary policy. There
will be no possibility of a protectionist policy
and autonomous economic development - like the 5
tigers did. ? The budget policy has to respect
the Maastricht criteria. The possibility of
public deficit spending is very
limited. Conclusion Not all the countries will
benefit from their membership in the European
Union in the same way. The national economic
policies will be determinant. In any case, a long
period of adaptation will be necessary.
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Financial assistance to prepare the admission
Financial assistance to prepare the admission of
the new member states Per year from 2000 - 2006
pro Jahr, von 2000 - 2006
SAPARD
Structural policy Agriculture
ISPA
Per year 3.120 billion
Total 21.840 Mio.
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Estimated costs of the enlargement (in billion )
2000 2001 2002 2003 2004 2005 2006
Total 92,0 93,4 100,3 102,0 103,1 105,0 107,0
Agriculture 40,9 42,8 43,9 43,8 42,8 41,9 41,7
Structural policies 32,0 31,5 30,9 30,3 29,6 29,6
29,2 Internal Policies 5,9 6,0 6,0 6,1
6,1 6,2 6,2 External Policies 4,6 4,6 4,6 4,
6 4,6 4,6 4,6 Administration 4,6 4,6 4,7 4,8 4,
9 5,0 5,1 Reserves 0,9 0,9 0,7 0,4 0,4 0,4
0,4 Admission prepar. 3,1 3,1 3,1 3,1 3,1 3,
1 3,1 Enlargement 6,5 9,0 11,6 14,2 16,8 So
urce European Council
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The financial agreement of Copenhagen (Dec. 2002)
Expenses for the enlargement in mio. (2004 -
2006)
Agriculture 9.791 Structure-political
arrangements 21.847 Internal policy
groups 4.256 administration 1.673 Miscellaneous
/ budget balancing 3.285 Total 40.852
The agricultural problem shall be solved in
future by direct payment. However, the full load
of payment will occur only after a transitional
period of ten years. However Agricultural
expenditures of 330 bio. have been decided upon
until 2013.
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The costs of the enlargement
10 new members - estimation of the
costs (European Commission)
iwd 18.4.02
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The acceding of countries of middle and east
Europe is an act of Europes reunification in
peace and freedom. For us, it has to be worth
the effort. In comparison to the expenditures
that the wars of the past caused, these future
costs will be peanuts.
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Mille grazie!