Introduction

Notwithstanding the historical opportunity to achieve the unification of Europe on the basis of values such as democracy, competition and social welfare, is the recent enlargement of the European Union (EU) good news for the economies of the old Member States?

This enlargement has raised several concerns among EU-15 members. First, this enlargement episode has involved a large number of countries and thus raised institutional issues. Secondly, the new Member States have per capita income levels much lower than the old Member States' average, which has raised among the latter the issue of social competition and the fears of a massive relocation of industries or massive migrations. In addition, political sustainability of the enlargement will imply sizeable transfer payments associated with structural policies, whereas the effectiveness of such transfers in promoting the catching-up process has been challenged by empirical analysis (e.g. Boldrin and Canova, 2003 and Chapter 13 below). Since catching-up is not proved to be an automatic process for new members, internal reforms should be promoted (Kaitila, 2004). Last but not least, the agricultural sector represents a disproportionate share of GDP and employment in certain new Member States, which has raised the issue of the Common Agricultural Policy (CAP) and how it will be adjusted in order to take into account the enlargement.

Some issues such as the EU budget and the impact of enlargement on immigration have been extensively dealt with in the last few years.