SocialismToday           Socialist Party magazine

EU enlargement, but no celebrations

On 1 May ten countries joined the European Union (EU) after months of negotiations and a series of successful referendums. ‘New Europe’, as famously described by Donald Rumsfeld, has married ‘Old Europe’. But is this the wedding that will lead to the break up of the EU? KARL DEBBAUT reports.

THE TEN NEW member states bring another 75 million people into the EU, making it the world’s biggest single market in population terms. EU leaders should be rejoicing with further European expansion and integration. The European capitalists are now putting into practice ideas that formed part of their euphoric propaganda following the collapse of the former Stalinist regimes in the 1990s. However, they are now far from euphoric, faced with the reality of what their policies mean in a different economic and political situation.

‘The joy of unification has been replaced by bitterness: they don’t want us’, is how Gazeta Wyborcza, one of Poland’s leading newspapers, summed up the mood now Poland, along with seven other central European states, has joined the EU. The rush to impose restrictions on the free movement of labour from the ten new member states has led to an outpouring of anger in the Central European states. If people in Poland, the Czech Republic, Hungary, Slovakia, Slovenia or the Baltic countries needed any further proof that they are being treated as second class citizens, this is it. It comes on top of worries about food price rises, reduced subsidies for farmers and small food retailers, and the fear that Western European corporations will gain even more control over their economies through privatisation and mergers. The press in Latvia has campaigned against a sudden rise in foreigners buying land and property. The paper, Latvijas Avize, warned that if this went unchecked, Latvians would become ‘renters and servants’ in their own country.

In total, the ten new EU countries will receive €40.8 billion (£27.3bn, $48.5bn) worth of aid as part of the Common Agricultural Policy (CAP) and structural funding for poorer regions. That is only part of the story though. To be allowed to join the club, the new members have to pay €15 billion in dues. (€1 = £0.67, $1.19) As a result, some, like Poland, will be net contributors to the EU budget during the first years. The disparity between how much money is available for the new member states and the current 15 EU countries sticks in the throat of many in the East. Poland will receive only €67 per person in aid from Brussels for the first full year of membership in 2005, Hungary €49, Slovenia €41 and Czech Republic €29. By contrast, in 2000, Greece received €437 per capita, Ireland €418, Spain €216 and Portugal €211.

The 2.7 million Polish farmers, most of them subsistence level producers, who make up almost one fifth of Poland’s 14-million workforce, have reason to be worried. The subsidies they will be getting are only one quarter of what French, Greek or Spanish farmers will receive. This means that they will not be able to compete with the giants of EU agribusiness. An even greater fear is the possibility that the majority of smallholders will not fulfil EU criteria for grants at all.

Although the total packet of aid the ten new members will receive is only equivalent to about 0.05% of the aggregate gross national product of today’s EU, the pressure from existing members to restrict the costs of the operation – in particular from Germany, the biggest contributor to the EU budget – reflects the economic crisis hitting Europe and the growing contradictions inside the EU.

The economies of the countries in the eurozone grew by a mere 0.4% last year. States across the eurozone are struggling to keep their deficits inside the limits of the stability pact. The lights in the German powerhouse of the European economy are flickering. France looks set to breach the pact for the third year in a row. Even the Dutch finance minister, Gerrit Zalm, one of the strongest critics of countries that have failed to keep their deficits below the 3% laid down by the pact, had to admit that the Netherlands, too, is joining the ‘instability club’.

The stability pact is dying a certain death as Europe’s governments face massive popular opposition to attempts to accelerate cuts in public expenditure, privatisation and attacks on the welfare state. It is unlikely that the member states will agree with the plans of the European Commission to raise the annual amount available for expansion in the EU’s 2007-13 budget.

‘We want to be like Ireland’

THOSE POLITICIANS IN Poland, the Czech Republic and Hungary who believe that joining the EU is a capitalist fast track to wealth and prosperity are becoming increasing isolated from their populations. Nonetheless, they continue to follow this road and quote Ireland as the example to emulate. They argue that when Ireland joined in 1973 its per capita income was 62% of the EU average, and that the diet of cutting corporate tax, slashing public expenditure, privatising public services and attracting foreign direct investment, pushed it up to 121% by 2002.

Slovakia, for example, has adopted brutal, neo-liberal shock therapy. The government of Mikulas Dzurinda introduced a flat tax on income, corporate profits and retail sales of 19%, partly privatised the pension system, and raised the retirement age from 58 for women with children and 60 for men to 62 for everyone. The latest measure, a 50% cut in basic welfare benefits, triggered food riots in Eastern Slovakia. The Roma minority attacked supermarkets. The government answered by sending in the police and army and closing off entire villages. Brutal repression followed and at least one Roma died at the hands of the police. Unemployment stands at 16% and the national average income is about €250 per month. However, near the capital, Bratislava, incomes are about 90% of the EU average, a sign of how the gap between a very rich minority and a poor majority has opened up rapidly since the reintroduction of capitalism, accelerated by the drive towards EU membership. The results of the neo-liberal shock are that the working class and poor foot the bill to ensure the profits of capitalism.

The countries of Central Europe have attracted foreign direct investment in the run-up to EU entry as they offer a highly-skilled workforce for very low wages. The majority of these investments have been to buy up assets in the privatisation frenzy. The benefits for the working class and poor have been meagre as the growing economy went hand in hand with rising unemployment and poverty. Now they finally get to join the EU, part of the foreign investment is jumping ahead in the search for even lower wages and costs in South-Eastern Europe. Romania’s monthly average wages are $130 compared to $597 in Poland. A report by the Economist Intelligence Unit estimates that Romania, Bulgaria, Croatia and their neighbours on the Balkan peninsula will attract an average of $5.6 billion of foreign direct investment a year through to 2007. The effects on the ten new member states are becoming clear.

While they had growth rates of up to 5% in the second half of the 1990s they now perform more modestly, with an average of about 2.3% GDP annual growth. Even if they could go back to growth of around 4% a year for the foreseeable future, the wealth gap is so large that it would take Slovakia almost 40 years and Poland 60 years before they caught up with Western Europe. On the basis of capitalism this is clearly out of the question.

The capitalist classes do not have the resources or the intention of undertaking the level of investment necessary to develop the new EU members. The net sum the EU proposes to transfer to them from 2004-06 is €25 billion. This compares to €97 billion (at current prices) that was transferred from the US to Western Europe in the Marshall Plan, 1948-51. A more recent comparison is from the 1990s when West Germany transferred €600 billion to East Germany – which, however, has not resulted in Eastern Germany catching up with the West.


THE ISSUE OF immigration and the recent rush in most of the EU-15 countries to impose restrictions on the movement of labour from the accession countries has created enormous resentment in Eastern Europe. In Slovakia, the British ambassador made a television appearance to warn that only ‘genuine’ jobseekers will be welcome, and the British embassy is considering a leaflet campaign to press the point home. The lawful access to European labour markets and the chance to travel and work more freely were seen as one of the few immediate and real advantages of joining the EU. Politicians referred to it in their campaigns for a yes vote in the referendums on joining. Now a feeling of betrayal is spreading, as expressed by an opinion poll in Poland in which only 10% of people believed the EU will keep its promises to Poland.

The pro-EU camp has been forced by public opinion to go on the offensive on the issue. Poland’s government officials went on record threatening retaliation against restrictions on its workers: "One option that we will seriously consider is ‘an eye for an eye and a tooth for a tooth’." Hungary has announced employment curbs for EU countries intending to apply them against Hungarians. Even if these are largely empty threats, the issue of immigration will come back to haunt the EU. Although the European Commission is paying Dana Hübner, Poland’s newly appointed commissioner, about five times the salary of her country’s president, she was forced to reflect public opinion in Poland in her first major interview: "We are tremendously disappointed! And we were already disappointed when we negotiated the chapter on the free movement of people…" She went on to warn the EU about the possibility of a backlash when Poland holds a referendum on the European constitution. "Politically we cannot avoid [organising a referendum]. The challenge again will be voter participation, we need 50% minimum. I do not know if we can make it now".

While people in the ten new member states will have to wait until 2011 before restrictions on travel to Germany, Austria and Italy disappear, they are supposed to immediately introduce tight border controls of their own against the non-EU countries on their Eastern border. The prospect worries Hungary, which wants to keep close ties with ethnic Hungarian minorities in Serbia and Ukraine, and Poland, which would prefer more open borders with Ukraine. Last year, Ukrainians made six million journeys across the border with Poland, Byelorussians, four million. Most were small traders buying goods for resale at home and bringing in cheap consumer goods, like alcohol and tobacco, to sell in the town-square markets of Eastern Poland, the poorest part of the country.

Political instability

THE REINTRODUCTION OF capitalism to Eastern Europe has created political instability. For a while the population had some patience with neo-liberal ‘reforms’ because they hoped their living standards and liberties would increase in the longer term. In the early stages, people had illusions that EU enlargement would deliver better working and living conditions. Now that European enlargement is happening, these illusions are disappearing fast and patience is running out. This has accelerated political instability. The difference, however, with the 1990s is that the ruling class is running out of options, as pro-capitalist ‘reformers’ are being replaced with populist, nationalist forces, far from being entirely under the control of the ruling class. An Economist survey on EU enlargement in November 2003 commented: "If you plan a political career in Central Europe, then hang on to your day job. Countries changed their governments every 20 months, on average, in the first decade after communism". Latvia and Lithuania have each had twelve governments since 1993, Estonia nine, Poland eight, Slovakia six, Czech Republic and Hungary five each, and Slovenia two.

Lithuania wrote European history last month by being the first country to impeach a sitting president. Rolandas Paksas was voted out by parliament for shady dealing with a Russian businessman. The Czech government is in trouble, too, as talk spreads of an alliance between ‘disloyal’ social democratic MPs and an ‘unreformed Communist Party’, in opposition to the ruling social democrats.

In Slovakia, trade unions and an opposition party organised a petition campaign against the neo-liberal reforms of the government, and for a referendum on early parliamentary elections. They succeeded in getting the 600,000 signatures needed to call a referendum, but it failed to get the required 50% turnout. Nevertheless, the referendum took place on the same day as the first round of the presidential elections. Both candidates of the ruling parties failed to make the second round. Ivan Gasparovic, a former minister in Vladimir Meciar’s government, won the presidential election with the backing of the main opposition party, Smer. Smer is a left populist party, a split from the social democratic Party of the Democratic Left, and has gained substantial support in the last few months.

Slovakia’s prime minister, Dzurinda, should go and visit the freshly redundant prime minister of Poland, Leszek Miller. They could boast to each other about their own unpopularity. Dzurinda’s approval ratings sank to 5% in November 2003 and have shown some consistency in that regard. Miller’s personal approval ratings fell to 3%, but it had taken him less than three months to come down from about 20%.

No surprise then that Miller is the first ex-prime minister of a new EU country, resigning on the second day of his country’s EU membership. He appointed a new prime minister and the country’s political elite wants to avoid new general elections at any cost. Opinion polls reveal that the outgoing coalition of the Democratic Left Alliance (SLD) and the Union of Labour (UP) would not get a single seat. They formed a government in 2001 when the SLD polled 41%. According to the latest polls, SLD would gain only 7%, repeating the fate of its predecessors in Jerzy Buzek’s government. Marek Borowski, speaker of the lower house of parliament, led 20 rebel deputies out of the SLD to form a new party, Polish Social Democracy (SDPL). SDPL claims to be on the left of the SLD. However, in one of the first statements Borowski made as spokesperson for the party he promised support for the Hausner plan of drastic cuts in benefits and social provisions. The Hausner plan is the current government’s ‘piece de resistance’ to reduce the public debt and budget deficit, named after the SLD economics minister, Jerzy Hausner.

Currently, the most popular party is the populist Samobroona (Self-Defence) on 29%, beating the official neo-liberal opposition, the Civic Platform (PO), into second place. In reaction, PO leaders have made an about turn on their support for the Hausner plan. But it seems as if Jan Rokita, head of the PO parliamentary caucus, was right when he said "whoever touches the SLD now will catch a horrible disease". This horrible disease leaves the Polish ruling class sweating for the future. President Aleksander Kwasniewski is trying to find a cure by appointing a non-party technocrat to be the next prime minister. Marek Belka, a former finance minister, has started negotiations to win the backing of a majority of MPs. The new prime minister flew in from Kuwait, where he was in charge of the economic policy for the US-led administration in Iraq. He is known as an arch neo-liberal and will try to accelerate privatisation and cuts in social spending. The remnants of the SLD and their new offshoot, SDPL, have announced that they will support Belka.

Not so for Samobroona. Its leader, Andrzej Lepper, built the party by appealing to the poor layer of farmers, and those in the countryside who suffered most during the restoration of capitalism, on a political programme that combines Polish nationalism and agitation against foreign economic influence with nostalgia for the ‘stability’ of Stalinist rule. With his opposition to the EU and neo-liberal reforms, Lepper has made inroads, at least electorally, amongst layers of the working class as well. He calls for vastly increased government spending and cites the government of Edward Gierek* in the 1970s as the best government Poland has ever had: "I think Gierek was going in the right direction. How many factories were built under him, how many roads, how many hospitals? Now we have millions of people out of work, 80% of the banks are in foreign hands and we are almost €83 billion in debt". (Financial Times, 7 April)

The development of populist forces shows the enormous political vacuum that exists in these countries, in the absence of independent working-class parties capable of challenging neo-liberal reform and capitalism, and fighting for the demands of workers, the unemployed, and the urban and rural poor. There are possibilities and dangers present in the situation. The working class needs its own independent party. Such a party would have to draw up a detailed balance sheet of Stalinism and capitalist restoration and develop a strategy and programme for genuine democratic socialism. Far from unifying Europe, the effects of the euro and EU enlargement will be to sharpen the dangers of the development of right-wing populist and nationalist forces in opposition to the policies of the major EU powers. It will lead to more rigorous clashes of interests between the different EU powers.

Capitalism, European or American, is not able to provide a decent living standard to the workers of Eastern and Central Europe. Pro-market policies coerce the peoples of Europe in a union of exploitation. Only workers’ opposition with socialist policies can prevent this and lay the basis for a genuine co-operation between the peoples of Europe by breaking the power of capitalism. A socialist confederation of Europe would mean the end of capitalism, mass unemployment and poverty, and a massive raising of living standards for all.


* Edward Gierek took over from Wladislaw Gomulka as Stalinist leader of Poland in 1970. Living standards initially increased, but price rises in 1976 provoked riots, which Gierek forcibly suppressed. Further food riots in 1980 led to the formation of the trade union, Solidarnösc. Gierek was replaced by Stanislaw Kania, who was ousted by General Wojciech Jarulzelski, who imposed military rule in 1981.


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