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The Costs of Uniting Europe

April 30, 2014 in Economics

By Dalibor Rohac

Dalibor Rohac

Ten years since their country joined the European Union on May 1, 2004 — and only weeks before European Parliament elections — only 34 percent of Czechs trust the EU, compared to more than 50 percent just three years ago. Though well-known for their euroskepticism, the Czechs are not alone. Never since the eight eastern European countries, together with Malta and Cyprus, joined the European Union have the levels of distrust in EU institutions been so high across the continent.

This is a paradox, as the advantages brought by the European integration should not be taken for granted, especially in the “new” Europe. Just 25 years ago, the prospect of being a part of the Schengen space, and being able to shop, invest or work anywhere in the EU would have sounded phantasmagorical to most denizens of USSR-dominated Eastern Europe. The eastern enlargement was in many ways a mutually advantageous move, as it provided western European companies with new investment opportunities and unleashed migratory flows that have an economic boon for the host countries — most notably for the United Kingdom.

An honest discussion about the benefits and downsides of European integration is very necessary.”

For the “new” Europe, the most important benefit of membership predated the enlargement. The prospect of being a part of the EU served as a justification for otherwise contentious economic and institutional reforms, including the privatization and deregulation of utilities and energy. Perhaps offering a realistic prospect of EU membership to Ukraine today could have the same effect, garnering support for reforms that the country urgently needs.

But there have also been downsides to the membership on which most politicians prefer to be silent. EU structural funds, once seen as the silver bullet for poor post-communist economies, crowd out the private sector, especially in the area of transport and logistics, where private companies that have been doing profitable business without any government support suddenly face competition from new EU-funded firms.

Worse yet, EU funds have bred waste, cronyism and corruption. In 2013, Slovakia’s Ministry of Social Affairs spent 100 thousand euros of an EU grant to combat unemployment to purchase pens and disposable raincoats. While relatively trivial in size, it seems representative of the waste that has been unearthed by journalists.

It may not be a coincidence that corruption in many eastern European countries has gone up since 2004. Slovakia, for example, ranked 57th …read more

Source: OP-EDS

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