Romania, Bulgaria head for EU
Whatever else motivated the European Union to invite Bulgaria and Romania to join the 25 nation bloc next January, it was not the wealth they will add to Europe's economy. After accession, the two Black Sea countries will add 6 percent to the EU's population, currently about 450 million, but just one percent to gross domestic product. Figures from the EU's statistical agency Eurostat put wealth levels at 35 percent of the EU average for Romania and just 32 percent for Bulgaria.
True, as things stand now, economic performance looks promising. Bulgaria's economy grew by 5.5 percent last year and that has picked up to more than 6 percent this year. Romania's growth rate was 4.1 percent last year and may come close to double that figure in 2006.
Public sector debt is low in both countries -- 27 percent of gross domestic product in Bulgaria and 20 percent in Romania. Though Bulgaria's current account situation looks fragile with a deficit which may hit 15 percent of gross domestic product this year, the country actually runs a budget surplus and has done since 2003.
Romania's state finances also look well run, with a budget deficit of just 2.5 percent.
Unemployment is running at a 15 year low in Bulgaria of 8.74 percent and a 14 year low in Romania of 5.1 percent.
The trouble is that after recent events in new member states such as Hungary, which is coping with a major political and economic crisis, Slovakia, whose new government plans to roll back several of its predecessor's reforms, Poland which is scrambling to save its government from collapse, and the Czech Republic, which is locked in total political stalemate, there are real fears that reform momentum may subside once membership is achieved.
In an attempt to address such concerns, Brussels has imposed an unprecedented set of entry conditions, backed by the provision for sanctions such as the withholding of economic aid, if progress is not maintained on judicial and administrative reform, food safety standards and above all corruption.
On that last category, Romania especially still has a long way to go. In Transparency International's 2005 Corruption Perceptions Index, the country ranked 87th out of 159 countries surveyed putting it in the same grouping as the Dominican Republic and Mongolia.
Bulgaria was somewhat better in 55th place, which though superior to current EU member Poland, ranked 74th, still leaves substantial room for improvement.
So, will such improvements be made, is the general thrust of reformism going to continue and are the EU sanction provisions sufficient?
How we go about answering such questions depends to a great extent on the way we interpret the current backsliding among some of the new EU members. If you take the view that the accession process merely held the line against pent up pressures that were bound to be released once accession took place, it is easy to slip into pessimism. Under such an analysis, deeply held public frustrations at years of painful reforms combined with a wide gap between existing levels of wealth and high and often unrealistic expectations left a space which financially irresponsible economic management or outright social populism was always likely to fill. Hence reform fatigue and hence the kind of reckless state spending which has given Hungary a twin deficit problem amounting to 10 percent on the budget and 9 percent on the current account.
If that is the underlying logic at work in the post-accession period, the EU's conditions are unlikely to make much difference especially since the sanction provisions will expire three years after membership takes place.
Fortunately, there are other ways of interpreting what has happened in central and eastern Europe in the last couple of years. For one thing, though the budget and foreign trade situation in Hungary is dire indeed it is not nearly so bad in the rest of the region. For another, despite the undeniable deceleration in the pace of reforms in the leading accession countries, growth remains, in most cases, formidable. That is partly due to the massive wave of reforms that have already been instituted and partly because of the varied benefits of EU membership itself -- diminished political risk and easier access to export markets to name but two. In the second quarter of the year, Slovakia grew by 6.7 percent, the Czech Republic by 6.2 percent and Poland by 5.5 percent. Even Hungary posted growth of 3.8 percent.
The governments of most of the older EU members would be shouting about it from the rooftops if they were sitting on records like that.
There is, of course, the thorny question of Romanians and Bulgarians leaving their own countries to take jobs further west. Many of the richer countries in the EU are worried about an influx of migrant labor of the kind that has occurred between Poland and Britain. They should think again. Economic migrants usually take jobs that locals don't want. Their presence may enflame national sentiment in some quarters, but their labor has been a benefit to the host economies.
In a broader sense, this is no time for gloom and despondency. While the current problems in central and eastern Europe should alert us to the fact that EU membership is no panacea, there is also the hope that Romania and Bulgaria can learn from the new members' mistakes.
Joining the European Union crowns a remarkable turnaround for the two countries following the difficult years of economic and political transformation in the 1990s.
In the long term they may well contribute to a much needed economic renaissance across the whole of the European continent. In the short term, the European Union will now have a window into the strategically important and energy rich Black Sea region as well as completing the encirclement by Brussels of the Western Balkans.
Romania and Bulgaria deserve to be given the benefit of the doubt. Now it's up to them to prove the doubters wrong.
Robin Shepherd is a senior transatlantic fellow of the German Marshall Fund of the United States, based in Bratislava.