European Enlargement - disadvantages for
existing EU members

There are three significant potential costs of enlargement:
(1) The costs for public finances
(2) The costs of labour market disruption (including higher unemployment) and
(3) The costs of wage competition.

In many ways the costs of enlargement (including the effects on the total EU budget) are
driven by political rather than economic factors – i.e. how generous the existing members
of the EU are prepared to be to accession countries. Several “controls” have been put in
place during final negotiations on accession – most of them relating to regional aid, CAP
funding the limitations on the free movement of labour within the EU.

1) Budgetary Costs for the EU

a) Accession will increase the budgetary contributions of existing members
b) Steps have been taken to limit the fiscal costs to EU(15) countries from enlargement
Farm subsidies for new member-states will be gradually phased in over a period of nine
years. he EU farm budget will increasing by only 1% per year until 2013 to offset inflation

Limits to Structural Funds: Accession countries will receive 25bn euros in structural aid
over the first three years

Net Contributions: The EU will ensure that accession countries do not pay more into the
EU budget than they get back, between 2004 and 2006

c) Long Term Need for Higher Regional Subsidies:
If full enlargement occurs, the EU will become a club of mainly small countries – with the
prospect of a widening “wealth-gap” between rich and poor regions

GDP per head for the EU(15) in 2000 (adjusting for purchasing power parity estimates)
was Euro 22603

GDP per head for EU(25) in 2000 was Euro 19661

The 10 accession countries in 2000 had a GDP per head (PPP adjusted) of just 48.2% of
the average of the newly enlarged 25 nations of the EU

Of the 105 million inhabitants of the applicant states, more than 98 million live in regions
whose current GDP is less than 75% of the average of the enlarged Union

(1) 48 regions within EU(15) have per capita incomes less than 75% of the EU average
(the threshold figure for regional funding). These regions have an average GDP per head
of 65% of the EU average

(2) Expanding the EU to 25 nations increases the number of regions with per capita
income < 75% of the EU average to 85 (135m people - 30% of total EU population).
These regions have an average GDP per head of just 53% of the EU average

3) Poorest regions can claim the highest regional / social funds

Accession countries will dominate regional funds (implying less for relative poor areas
within EU(15) such as Spain, Greece and Portugal.
Spain is trying to maintain the EU subsidies to its poorer regions, which are due to
receive nearly two-thirds of all available structural and cohesion funds under the current
EU budget agreement

Total EU regional funding budget will have to increase massively to meet growing
economic and social requirements if relative poverty / inequality within the EU gets worse

2) Labour Market Issues
a) Fears of higher structural unemployment among accession countries – which might
lead to large immigration of labour into higher-income countries as well as increasing
political and social tensions

i) Unemployment in accession countries is already well above the EU average – much of
it is long term

ii) No guarantee that unemployment will fall following integration with the EU

iii) High unemployment creates large economic and social costs and will put accession
countries under increasing fiscal pressure (rising budget deficits)

b) Fears that enlargement will lead to a huge surge in economic migration from East to

i) Will there be an increase in labour migration from accession countries to the west in
search of employment? (Social dumping?)

ii) Concerns about organised crime and illegal immigration from Russia, Belarus and the
Ukraine through weak Eastern European borders
iii) In Germany, Austria and Italy (countries that border accession states) there are
intensive political debates about controlling the flow of migrants from former Eastern