The Eu Enlargement. How to be Like the Irish and not the Greek?

Abstract

Apart from the former EFTA members (Iceland, Lichtenstein, Norway and Switzerland) and a few former republics of the Soviet Union (Bjelorussia, Moldova and Ukraina) the countries of the Western Balkans are the only European states outside of the European Union. They are very keen to join the Union. The Balkans have always been the poorest part of Europe. The appeal of the wealthy European Union is apparent. Access to the largest market in the world, investment, modern technologies and generous regional funds give a hope that by joining the EU the Western Balkans countries will join the rich club. At the moment performance of the Western Balkan countries does not guarantee that they will become rich by joining the European Union. Their current production and trade structure makes it likely that the Western Balkan countries will be locked in inter-industry trade in which they will export products of low and medium technological and developmental level and import products of high technological and developmental level. This might lead to divergence rather than convergence between them and the European Union. In other to overcome this problem the Western Balkan countries need to conduct radical reforms in the public sector, fiscal policy, industrial trade and investment policy. They also need to tackle corruption, simplify administrative procedure, strenghten property rights and the lawful state. All this with the aim to change economic structure and shift from achievements of the second and third to fourth technological revolution. Only if these reforms are successfuly implemented the Western Balkan countries can hope to avoid the Greek scenario and possibly experience the Irish scenario.

Keywords

• gravity model
• ricardian theory of comparative advantage
• h-o-s theory
• consumer preference theory
• inter-industry trade
• intra-industry trade
• eu core
• eu periphery
• f50