Economic impact of new member states joining the European Union

¶ … new world order seems to have been built on a foundation of a single, global, technologically advanced, highly competitive economic market place. This sole global market has been serviced by a few industrialized powers teaming together to form free trade agreement conglomerates. Examples of this phenomenon can be demonstrated by the oil producing nations of the world holding hands to form OPEC and the United States, Canada and Mexico agreeing to open each of their markets to one another through the North American Free Trade Agreement or NAFTA. Many of us probably think that those combinations have created the world's largest combined Gross Domestic Products. However, the European Union has very effectively matched the benefits of OPEC and NAFTA through their own combined economic and trade agreement pact.

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The European Union is a multi-government organization that is currently composed of twenty-five European nations. "The European Union has many activities, the most important being a common single market, consisting of a customs union, a single currency, a common agricultural policy and a common fisheries policy. The European Union also has various initiatives to co-ordinate activities of the member states."(Akademie de)

The member countries include: Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. Bulgaria and Romania are scheduled to join the union in 2007 and Croatia and Turkey are currently considered as candidate countries.

Although the European Union was technically established as the Treaty on European Union or the Maastricht Treaty of 1992, the plan to combine the nations has a history that traces back to the 1950's. Between 1952 and 1958, there were six founding members of the EU which included Belgium, West Germany, France, Luxembourg, Italy and the Netherlands.

In 2004, ten new individual countries joined the European Union which made it one of the largest economic groups in the world. These included Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia. Some countries joining the union obviously have a positive or negative affect the overall economic value of the organization as a whole. To clarify the significance of new comers joining the union, this report aims to realize some differences between some former eastern block countries such as Slovakia and Slovenia as compared with Germany and France. This will provide insights into some inherent differences.

To get a feel of what has occurred when the new nations entered, an examination of the Gross per capita GDP, per capita GDP at PPP, gross fixed capital formation, and unemployment rates will show that the newer nations have added quite a burden to an already sluggish process. "The EU economy is expected to grow further over the next decade as more countries join the union - especially considering that the new States are usually poorer than the EU average, and hence the expected fast GDP growth will help achieve the dynamic of the united Europe. However, GDP per capita of the whole Union will fall over the short-term. In the long-term, the EU's economy suffers from significant demographic challenges." (Akademie de)

Consider that Germany and France are ranked 1 and 3 in regard to GDP per capita and Slovakia and Slovenia are some of the poorest nations of Europe and therefore offer much less. In Euros, Germany has a 23-012 GDP per capita of 108.7%, France has 23-915 of 113.0%, Slovakia 10-857 of 51.3% and Slovenia 15-941 of 75.3%. The latter are both very close to the bottom of the pack. The following table also shows the disparities in the nations' economies as compared with the EU as a whole.

Member State GDP in billions of $ (USD) GDP

% of EU GDP per capita in $ (USD) Public Debt

% of GDP Deficit

% of GDP Inflation

% Annual Unemp.

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These newer eastern block nations will have a similar effect on the European Union as the reunification had on Germany. When East Germany and their high unemployment, outdated manufacturing facilities and cash poor economy was mixed with West Germany's, it was quite a challenge to make the endeavor work. The same can be said for these two East European countries. The addition of these poor economies hurts because neither is a viable trading partners for the majority of the other EU nations. Both Slovakia and Slovenia are behind in the realm of technology and industry and that will in turn create a slow down on any progress the EU has made or will make.

In conclusion, the European Union enjoyed significant trade surpluses when compared to the ever widening trade deficit here in the United States. but, with the addtion of ten new nations in 2004, the European Union has begun to show signs of becoming stagnant in regard to economic growth and employment. Of course, economic performance varies from state to state within the union. This entails that some states are carrying others and this report has aimed to show that this trend came about with the ten new addtions to the European Unon in 2004. Countries like Slovenia and Slovakia may not provide the necessary stability needed to maintain an overall EU GDP growth potential.