Welcome to Enlargement Weekly. This weekly bulletin provides an overview of where European Union enlargement has got to, who's doing what in the EU, in the acceding states and the candidate countries, and how the main challenges are being met.

The ten Commissioners-designate from the new member states last week convinced members of the European Parliament that they were the right men – and women – for the job. Over the course of three days, each of the Commissioners-designate appeared before senior figures from EP committees to present their views and answer questions. The overall judgement was favourable, and the full Parliament will vote on the approval of the enlarged Commission at its plenary session of 3-6 May in Strasbourg.

In his overall assessment, the chair of the Parliament's conference of committee chairmen, Joseph Daul (EPP-ED, F), recommended overall approval of the enlarged Commission. "The Commissioners-designate performed satisfactorily at their hearings, demonstrating a genuine commitment to European integration and the technical abilities required to carry out their intended duties".

The Parliament approval was not without some qualification, particularly in respect of the levels of knowledge of some Commissioners-designate. The Parliament produced individual assessments.

 

The ten new member states due to join the EU on 1 May are on course to meet the EU's food safety standards, according to Commissioner David Byrne, responsible for Health and Consumer Protection. The enlargement will bring wider food choice to all EU citizens, he promised.

"After 1 May consumers through the existing and new member states will enjoy the choice of an even wider variety of food. The new member states have made huge progress in recent months in upgrading their laws, systems and food producing factories. The EU´s food safety rules are being put in place and the local enforcement systems are up and running.

Some food processing plants, dairies and abattoirs will need some transitional time to finish upgrading their standards, he recognised, announcing the final list of establishments which will benefit from such an upgrading period. But until they have met EU norms, their products will be sold only on their domestic market.

The new member states' Accession Treaty, signed in April 2003, granted transition periods of up to three years to a number of food processing establishments in the Czech Republic, Hungary, Latvia, Lithuania, Poland and Slovakia that were seen as unlikely to meet EU standards by 1 May 2004. The list has now been completed with a further group of establishments in Poland, Hungary, Latvia, Lithuania, Malta, Slovakia and Slovenia: these will have transition periods of from three months to one year to allow the completion of upgrading work.

 

 

With the plebiscites on the Cyprus settlement plan only days away, and with plenty of negative signals still coming from the Greek Cypriot side over the UN-brokered and EU-backed deal, the message coming from the international community – and notably from UN Secretary-General Kofi Annan and European Enlargement Commissioner Günter Verheugen – has been crystal clear over recent days: the April 24 referendums are, in effect, the last chance for an agreement.

"The question in the next days will not be 'This solution or another solution', but it will be 'This solution or no solution at all for a very long time'. The plan on the table is the best and most balanced solution that could be reached", said Commissioner Verheugen last week. "The absence of a solution would damage everyone: it would not only destroy the hope of many Cypriots. The status quo would deepen the island's division and the dividing line would become de-facto an external EU border".

On April 7 the European Commission proposed adapting the terms of the accession of Cyprus with a view to welcoming a united island on 1 May 2004. However, it pointed out, "such re-unification will only be possible if both the Greek Cypriot and Turkish Cypriot communities approve the comprehensive settlement".

The proposed act accommodates the terms of the settlement and recognises the particular national identity of Cyprus and the need to protect the overall balance between Greek Cypriots and Turkish Cypriots. It takes account of large economic disparities between the (future) Cypriot constituent states and the economic situation in the (future) Turkish Cypriot constituent state in general.

 

 

Alongside the warnings against a "no" vote has come a constant stream of encouragement for a "yes" vote. "The Annan Plan achieved a fair and balanced compromise. We would get rid of barbed wire, barrels and minefields. The Cypriots will move freely over the whole island, many will return to their former houses. The permanent division of the Cyprus will come to an end", promised Verheugen.

New EU financing plans will come into play if the referendums deliver a united island, with financial support as soon as a settlement is reached: the EU has designated €259 million for the Turkish Cypriot constituent state, and an extra €43 million for the Greek Cypriot constituent state, aimed at overcoming economic disparities on the island.

Panicos Pouros, the Greek Cypriot representative at the April 15 preparatory donors conference, spoke of the vision of the Greek Cypriots to create a united Cyprus, and to create an area of growth, prosperity and peace. But Mehmet Ali Talat, the Turkish Cypriot representative there, stated bluntly that it is up to the Greek Cypriots how the referendum will end. He suggested that peace is in the hands of the people, and that thoughts should be directed towards the future of the younger generation.

 

 

Despite weak growth in the EU, the economies of the new member states are estimated to have expanded on average at a robust 3.6% in 2003 as accession unleashes favourable growth dynamics, according to the European Commission's Spring Economic Forecasts, released this month.

Investment growth should be lifted above its meagre 1.9% in 2003 to as much as 7.3% in 2005, the Commission predicts. Interest rate convergence towards EU levels, the need to improve infrastructure, and the recovery in the EU should all contribute to the boost.

Catching-up should continue vigorously as the new member states with the lowest per capita GDP are expected to grow the fastest..

In 2004-2005, employment is expected to increase moderately in the acceding countries as activity picks up and new activities develop, compensating for jobs lost in the restructuring process. However, the unemployment rate is set to decline only slowly to 13.8% in 2005 in the acceding countries as a whole compared to 14.3% in 2003.

Three factors underpinned household spending last year, according to the Commission: increased real disposable income, partly thanks to relatively low inflation in many countries at about the euro-area level; greater access to credit as a result of the development of the banking system; and anticipated spending ahead of expected price rises in 2004 linked to indirect tax hikes.

However, investment activity was weak in 2003 (except in the Baltic states), reflecting the global situation, but also as a consequence of the stalling reform process in the acceding countries.

Except in Hungary, Slovakia and Slovenia, inflation was particularly low in 2003 in the new member states at about the same level as in the euro area, thanks to increased competition and low import prices. An acceleration is expected in 2004 to 3.8% on average, linked to an increase in indirect taxes since tax rates are adjusted to the EU levels. A subsequent easing of inflation to 3.3% is projected for 2005.

On average, the general government deficit in the acceding countries is estimated to be about 5.7% of GDP in 2003, worse than in 2002

As fiscal consolidation resumes, government balances are expected to improve in most new member states in 2004, with the notable exception of Poland. Despite strong growth, budgetary balances are also worsening in the Baltic States, because of accession-related expenditures. In Lithuania, the deficit is approaching the 3% of GDP threshold, while in Estonia the large surplus of 2.6% of GDP in 2003 should completely disappear in 2005.

The other candidate countries will see a continued improvement in their macroeconomic performance. Growth is expected to amount to around 5% per year over the forecast period. Private domestic demand remains the driving force behind growth in each country, says the Commission.

Despite sustained gains in labour productivity, strong economic growth will lead to a rise in employment in all countries and falling unemployment, although the improvement will be very small in Turkey due to the strong rise in labour supply. The general government deficit will see a moderate widening in Bulgaria and Romania, whereas Turkey will continue to experience a significant reduction of its deficit. In all three countries, current account balances are set to widen further, driven by strong domestic demand and a slight deterioration in the price competitiveness of exports, which leads to rising deficits in their respective merchandise trade balances.