Is the EU’s enlargement over-stretched?

Visit of Egemen Bağış, Turkish Minister for EU Affairs and Chief Negotiator for Turkey’s accession negotiations with the EU to the European Commission (on the left, seen from the back), László Andor, Member of the EC in charge of Employment, Social Affairs and Inclusion (on the right) and Štefan Füle, Member of the EC in charge of Enlargement and European Neighbourhood Policy (in the centre), (EC Audio-visual Services, 10/04/2013).

The myth that the European Union is a seamless economic volume is belied not only after the latest developments, with Berlin and Paris working hard to institutionalise the fragmentation of EU’s financial markets. The dysfunction is also depicted by hard-core macroeconomic and labour market statistics. Again it’s not only the huge differences in the relative numbers of the unemployed in various EU member states, but more so the extreme differences prevailing in wages and salaries, which appear usuay when comparing first and third world economies. Differences of the order of the multiple of 12 are not only quantitative. They reveal also quality differences in the organisations of everyday life in different member states.

Qualitative differences

It’s like developing and developed countries trying to live under the same roof, follow the same economic policies and rules and sell their products in the same market. Those differences are less striking in the Eurozone of the 17 countries, where all of them belong more or less to the category of developed economies. Still the last four years of economic crisis and deep recession in many Eurozone member states have greatly increased the differences in key variables like, unemployment, hourly and yearly earnings even within the euro area. The unemployment explosion in Greece, Spain, Portugal, Italy, Ireland and elsewhere stand as an infallible witness of diverging futures within the EU.                         

              Median gross hourly earnings, all employees (in euro)

It is however even more discouraging to watch and hear the Brussels dignitaries to talk all the time about interdependence and the need for common economic governance rules in the EU. It is as if the Bulgarian and the Danish working people have anything in common regarding their families’ lodging, nourishment, schooling, health care, environment and quality of life in general. Of course such comparisons are only possible if the Bulgarian or the Greek worker has an employment, God knows how he survives if he hasn’t.

Despite all that, Brussels insist that all those poor EU countries in order to remain in the Union or in Eurozone need to apply centrally planned restrictive fiscal policies and severe austerity measures, in reality depriving thus their real economy of any growth potential. Also not to forget that consumers and small businesses in poor countries like Romania and Portugal do not enjoy the same financial market conditions as their counterparts in Belgium and the Netherlands, concerning borrowing opportunities and interest rate costs. In many EU countries new consumer and business loans have disappeared.

At the same time all the EU 27 countries belong to the single internal market, where every restriction on movement of goods or market rules differences have been abolished. As if the Bulgarian and Greek firms could compete with the German industrial giants on a level play field market, which is today the EU. Experience has proved by now that the fact all the 27 countries operate under exactly the same market conditions, has invariably led to the impoverishment of the poor and enrichment of the rich countries. The ongoing crisis has only aggravated this tendency. On top of that the imposition of the same macro and micro economic policies seem to have seriously and irrevocably undermine the future of the developing countries within the EU.

Rich and poor workers

No, the Swedish and the Romanian workers do not have the same problems. To be convinced about that it suffices to read what follows here bellow. According to Eurostat, the EU statistical service, the average hourly labour costs and the structure of labour costs varied widely across the EU Member States in 2012. Hourly labour costs ( arithmetic mean) in the business economy (industry, constructions and services) ranged from €38.44 in Denmark, €37.70 in Belgium and €41.9 in Sweden, to €3.7 in Bulgaria. Eurostat notes that these figures cover not only wages and salaries (gross earnings) as well as social contributions paid by the employer but also vocational training costs, taxes and other expenditure paid by the employer less the subsidies received by the employer.

Understandably the same huge differences prevail in the annual wages. Always according to Eurostat, “Among EU Member States, in 2010 the mean (average) gross annual earnings of full-time employees in enterprises employing ten employees or more were highest in Denmark (€58,840), followed by Luxembourg (€49,316), the Netherlands (€45,215), Ireland (€45,207, in 2009), Belgium (€43,423) and Germany (€42, 400). On the other hand, the lowest mean gross annual earnings were registered in Romania (€5,891) and Bulgaria (€4,396)”.

Conflicting interests

Such differences in wages may hide directly conflicting interests, between Bulgarian and Greek workers on the one side and German and Swedish ones on the other. For one thing the German and the Swedish businesses for example, in order to be able to pay such high wages to their personnel, they obviously needed the freedom to sell their products completely unobstructed in Bulgaria and Greece, as it is the case today. From one point of view this is exactly “la raison d’être” of the European Union. The EU offers a level play field for the more competitive ones to exploit the others. In reality it seems that this huge single internal market is gradually becoming an insurmountable impediment for the growth of the less competitive.

Unfortunately the unemployed of the less productive countries don’t even have the possibility to emigrate and seek a better life in the rich countries of the EU, despite all the rhetoric about the freedom of movement of labour. Remember what happened to the Romanian Roma in France last year? In the USA probably exist similar differences in wages and salaries between the different states and regions, but people are completely free to travel and work where ever they want. In the EU it is out of question for Romanian, Bulgarian, Greek, Spanish and Portuguese unemployed to hang around in the parks and the squares of German and the Swedish cities and towns waiting to find work. They got to have a job within two months, otherwise they can be expelled to their country of origin.
All in all the European Union has rather over-stretched its enlargement abilities and this seems today to be in the heart of all its problems.