European Enlargement - entry process

This revision notes considers two important parts of the enlargement process
- the requirements for entry, and the process by which the accession
countries achieve a "transition" to a market economy

Joining the European Union – Requirements for Entry

Accession countries seeking membership of the EU have had to meet the
criteria laid down by the Copenhagen Summit of 1993 which outlined specific
and detailed entry requirements:
• Stability of political institutions guaranteeing democracy, the rule of law,
human rights and respect for and protection of minorities
• A functioning market economy, which can deal with the market forces of
the EU – requires accession countries to introduce widespread micro
economic reforms to their economies – it must be remembered that the
majority of applicants are transition economies from the former Eastern Bloc
and that this transition process has been at times very painful for many
• The ability to meet the obligations of EU membership, including keeping to
the main aims of political, economic and monetary union
• The adoption and implementation by each member of the “acquis
communautaire” – this is the body of existing and new EU law – including
labour market laws, regulations concerned with the Single European Market
including competition policy and many other EU social regulations.

Accession countries have had to convince existing member nations of the EU
that they are able to meet with the demands of EU competition policy and
have a sound framework for the operation of monetary policy. None of the
accession countries is entering the Single European Currency on joining the
EU although several nations are keen to join at the earliest opportunity.

Transition Process to a Market Economy

The collapse of the Berlin Wall brought about fundamental changes to
economic and political structures within Eastern Europe. Over the last fifteen
years, the majority of countries who are now poised to join the EU have
been classified as transition economies – engaged in a process of structural
change that takes them from command (state-controlled) economies
towards a system based on Western free-market principles.
There are many aspects of the transition process – among them:

Price Liberalisation
• Moving away from government controlled prices
• Allowing the price mechanism to perform its signaling and incentive
functions in allocating resources – with land, labour and capital allocated
according to the profit motive
• An expansion of the role played by the private sector in the economy – in
most countries this process is well advanced. In Hungary for example 85% of
businesses are privately owned and managed
• Privatisation has seen the rapid development of private sector capital
markets allowing businesses to raise capital to finance expansion

Liberalisation of Trade with other Countries
• Trade liberalisation has involved full convertibility of currencies
• Gradual reductions in foreign exchange capital controls
• Allowing the foreign exchange markets to determine the external value of a
currency (floating exchange rates)

Reforms of the Financial Sector
• Establishment of fully-functioning Central Banks to take control of
monetary policy
• Development of private sector capital markets for corporate and
government bond issues