Mon, May 28, 2012 - Page 9 News List

It is not all milk and honey when east meets west

As the economic meltdown of the eurozone continues, many east Europeans are beginning to question the benefits of joining the EU

By Michael Winfrey and Luiza Ilie  /  Reuters, PETRACHIOAIA, ROMANIA

Illustration: Yusha

Five years after joining the EU, the town of Petrachioaia, 21km outside of Romania’s capital is still waiting for the jump in living standards its politicians said membership would bring.

Four out of five people have no indoor toilet or running water. Homes are still heated with wood-burning stoves and most people raise animals in their yards to survive. Just one in five of the town’s 3,375 inhabitants has a job.

Now Europe’s newest citizens — the 100 million people in Romania and nine other eastern European countries who have joined the 27-member bloc since 2004 — may have to retire their earlier dreams.

A growing number of economists working in think tanks and investment banks say the economic crisis in Europe has hurt the chances that the EU’s poorest members will catch up to, or converge with, living standards in their richer counterparts.

Convergence — the trend for new member countries to move towards Europe’s average GDP per capita — has long been one of the rewards of EU membership.

That was what politicians almost universally promised in the run-up to membership, saying that generous development aid from Brussels and foreign investment could help them follow the example of Ireland, whose boom took it from EU laggard to Celtic Tiger.

The former Communist states in eastern Europe appeared to be following the same path. However, convergence has now slowed in many places and economists say it could come to a stop in around 20 years at levels far lower than earlier hoped.

“Catching up is unlikely to proceed as rapidly as we thought before 2008,” said Ville Kaitila, a researcher at The Research Institute of the Finnish Economy (ETLA), referring to the most widely used measuring stick for living standards.

“Even though there has been overall long-term convergence in the EU, convergence is not a natural law,” he added.

The economic slowdown over the past four years is already taking a toll. Angered by austerity measures and slow progress, some voters have swung away from reform-minded parties in favor of those that promote stronger social safety nets and reject economic reforms.

Constantin Florea, a 63-year-old former mill worker in Petrachioaia who subsists on a military pension of 100 euros (US$125) a month and by raising animals, sums up the disillusionment.

“I thought they were supposed to raise our wages and pensions and create jobs for young people after we joined,” Florea said as his heifer munched on grass by the side of a road. “If I didn’t have this cow, I’d starve.”

In the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia, people popped champagne and danced in the streets when the EU ushered them into its club eight years ago.

Bulgaria and Romania had to wait another three years for accession, which politicians and economists said would boost their economies.

It had elsewhere. In Ireland economic reforms and a torrent of EU development funds, foreign investment and a lending boom to firms and consumers boosted GDP per capita from 65 percent of the EU average in 1960, 13 years before it joined the EU, to almost 150 percent in 2008.

At first, it looked like the EU newcomers would go the same way.

In the run-up to membership and immediately after, foreign firms poured cash into factories in Hungary, the Czech Republic and Slovakia, making the latter the world’s top car producer per head and, in less than a decade, pushing its GDP per person to 75 percent of the bloc’s average from just 50.

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