The Times
March 3, 2009
Bronwen Maddox: World Briefing
The crisis in Central and Eastern Europe has been triggered by the world's financial turmoil. But the European Union was already set for an unpleasant showdown between its older members and its newer ones. Any recession - never mind one as acute as this - would have driven home the point that the east wants more than voters in the west want to pay.
The leaders of the first to join the EU club never wanted to admit, though, that the expectations of the newcomers were bound to be dashed. They didn't want to be thought to be condemning them to a second-class wing of Europe. Nor did they want to spell out to voters how big the bill might be and how funds might be diverted from their own countries to meet it. The blunt truth is that the newcomers' hopes of becoming Spain, or the Irish Republic - poor countries transformed in a decade or so by the EU - were never realistic. Spain and Ireland joined a club of a few rich countries, and their own people's income was about two thirds of the average. In contrast, former communist countries joined a loose, large club only half of which was wealthy in any sense. Their people were comparatively far poorer than the Spanish and Irish.
The magical transformation was never going to happen.
The oddity now is that this crisis - one that threatens the stability of banks across Europe and might cause some eastern governments to default on debt - creates pressure for Western Europe to help. It won't want to. But the intertwined finances give the east a case that the west can't afford to stand back.
The EU's decision five years ago to take in eight former communist countries, plus Cyprus and Malta, was one of the most generous gestures it has made. The spirit was admirable. But the idealism glossed over the difficulties, particularly on the economic side. The new members made big changes before they joined - but less so afterwards. Romania and Bulgaria, joining in 2007, have rubbed in the point that the EU has few sanctions if countries renege on reform. Romania, again, and Hungary, are now struggling with heavy debt because of reluctance to reform state industries and benefits. Others, such as Estonia, the Czech Republic and Poland, have better claim to be unlucky casualties of the collapse of export markets. Even there, debts were casually taken on in euros while the income to meet them was in national currency, now sliding. Leaders and their people wanted to act as if they were already as rich as the rest of Europe, without income to match.
Even before this crisis the EU bill for helping these countries was large. A European Commission report last month ("Five years of an enlarged EU") notes that in 2007 the new states received a fifth of the €99 billion that the EU gives to countries. That is set to rise between 2007 and 2013 to 35 per cent. The report blithely asserts that this "cannot be regarded as an unbearable burden" by old member states as it is only 0.2 per cent of their gross domestic product. The old members may not see it that way. To get the east out of this crisis the bill would have to be even larger, if only to rescue the banks from foreign currency loans.
There is a strong case to be made for the rescue. But it can't be made in the airy tone in which the Commission has written its assessments of enlargement, which makes taboo any suggestion that the move was risky or expensive or overoptimistic in what it led the newcomers to expect. It was all of these. It was also worth doing.
The only argument which will now persuade Western European voters that they should pay even more is that, otherwise, Europe faces dangerous disintegration. For once, though, that kind of alarmist talk is justified.
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