Managing European Union Enlargement

Book excerpt: Leading international economists assess the effects of the 2004 expansion of the European Union. In May 2004 the European Union will undergo the largest expansion in its history when ten countries -- Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia -- become members. The number of new members and their diversity make this "big bang" enlargement particularly challenging. Not only do these countries vary widely in language, culture, and geography, but also their per capita income is less than half that of existing members. EU officials believe that expanded integration will serve the EU's objectives of peace, stability, prosperity, and democracy; but the less abstract questions of costs and benefits of enlargement are more complex. Each of the chapters in this CESifo volume addresses a different aspect of EU expansion. The contributors, all leading international practitioners and scholars, consider such topics as the effect of euro zone expansion on European Central Bank monetary policy making; using the euro as an external anchor for a national currency; worker migration and income differentials; the Swiss experience with immigration policy in a direct democracy framework; detailed sector analysis using a computable general equilibrium model of the world economy; investment and job creation and destruction in incumbent member countries; and the asymmetric effects of enlargement on high- and low-income incumbent countries. Taken together, the chapters provide useful guidance in shaping the EU policies of the future.