The Public Finance and Political Impact from the European Perspective

By Van Der Hoek, M. Peter | Atlantic Economic Journal, December 2001 | Go to article overview

The Public Finance and Political Impact from the European Perspective


Van Der Hoek, M. Peter, Atlantic Economic Journal


I will start by focusing on the political consequences of the terrorist attack on New York, because these may be even more important for Europe than the economic consequences. In this respect I can refer to the war against Yugoslavia in 1999. As you know, the European Union has embarked on a bold enlargement process following the collapse of the Soviet Union and communism in general in Central and Eastern Europe. (1) Initially, the European Union made a distinction of two groups of applicant countries. The reason was that the countries in the first group were considered to be all ahead of the other applicant countries in Central and Eastern Europe judged on the basis of the Copenhagen criteria. The first group comprised of five countries from Central and Eastern Europe (the Czech Republic, Estonia, Hungary, Poland, and Slovenia) and also Cyprus. In its 1,300-page communication Agenda 2000, the European Commission stated in 1997 that the first wave of accessions could occur as soon as in 2001, although 2003 wa s considered more likely. This statement was totally unrealistic from an economic viewpoint, but it was understandable from a political point of view. Countries that had embarked on a transition process and that were trying to reform their economies quickly had to be rewarded, not the least to show that rapid transformation attempts would lead, or could lead, to early European Union membership.

The statement on early accession to the European Union formed part of the euphoria among European politicians following the fall of the Berlin Wall and the collapse of the centrally planned economy as an economic system and as an alternative to the market system. The Central and Eastern European applicant countries in the second group (Bulgaria, Latvia, Lithuania, Romania, and Slovakia) were considered to need more preparation time to meet the Copenhagen criteria and to complete the transition to a market economy and a democratic society. Although the door remained open to them and they were invited into partnerships with the European Union, they were referred to the European Union's waiting room. They had to wait considerably longer for their accession to the European Union than the applicant countries in the first group.

The war against Yugoslavia, however, changed the whole picture. Like countries in the first group, countries belonging to the second group had cooperated with NATO by opening up their air space for NATO aircraft involved in air raids on Yugoslavia and by allowing NATO's air force to use their bases. Although the European Union's judgments of these countries against the Copenhagen criteria had not changed, the European Union abolished its distinction between the first and the second group of applicant countries after the Yugoslav War. This decision to abolish the distinction between the two groups was not the outcome of careful economic analysis. Rather, it was a purely political decision based on the peculiar political circumstances at the time after the Yugoslav War. The applicant countries of the second group in Central and Eastern Europe had to be rewarded for their cooperation and their support in that war. It was only later that European politicians began to realize which economic and political consequen ces this decision could have.

One important consequence is most likely not accelerating the accession of the former second group of applicant countries, but rather slowing down the accession of the former first group. The original timetable as mentioned by the European Commission in Agenda 2000, which was already unrealistic beforehand, has also proved to be infeasible in practice. The European Union also rewarded Turkey for its cooperation and support in the Yugoslav War by recognizing Turkey as an applicant country on the same footing as the other applicant countries. This was a major change in the European Union's position with regard to Turkey. In particular the human rights situation in Turkey, but also its position with regard to Cyprus had always been a stumbling block in the negotiations between the European Union and Turkey before the Yugoslav War. …

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