EU policy of expansion requires a rethink

Euro zone needs to heal itself before looking to sort out the problems of other states

Minister of European Affairs Lucinda Creighton with Latvia’s prime minister Valdis Dombrovskis and Estonia's president Toomas Hendrik  Ilves.

Minister of European Affairs Lucinda Creighton with Latvia’s prime minister Valdis Dombrovskis and Estonia's president Toomas Hendrik Ilves.

Mon, Apr 8, 2013, 10:43

Amid all the headlines of troika reports on Ireland’s progress, the contentious bankruptcy application of Seán Dunne and the tantalising leak of the details of 130,000 holders of offshore accounts, you probably missed the news from Brussels.

On Thursday, it emerged that Serbia and Kosovo had hit a logjam in negotiations between them that would have moved both towards possible membership of the European Union. It might come as some surprise that Europe is actively looking at expansion.

As it stands, five of the 17 members of the euro zone are in some form of bailout. There are ongoing concerns about the ability of a sixth, Slovenia, to avoid a similar fate. And Italy struggles to form a government that will face its own economic challenges. Yet the EU wants to expand.

Ireland, the current holder of the presidency of the EU, has listed expansion as one of the priorities of its six-month stint at the helm. As of now, six states are in various stages of active engagement to join. They are Croatia, Turkey, Macedonia, Montenegro, Iceland and Serbia.

A further three are looking to start the process: Kosovo, Bosnia Herzegovina and Albania. All will agree to join the euro zone as soon as they meet the necessary criteria.

While the commissioner in charge of enlargement, the Czech Stefan Fule, insists no new members will be allowed in unless they are fully prepared, Ireland’s Minister for European Affairs Lucinda Creighton has enthused that Ireland saw scope during its presidency to “inject some momentum into the process”. She cited the importance of stability in the western Balkans, stating at the outset of Ireland’s term that “it is very much in our economic interest that we encourage these countries along the European path,” she said.

Her comments are important because, if we have learned anything about European enlargement, it is that it has been far more a political decision than one driven by economics, despite the reservations of the commissioner, who stated at that time that it was important to “try and strengthen the credibility of the process”.

This should concern every citizen within the existing euro zone. Only last week, in this paper, it was stated that, following the Cypriot bailout, the risk of a break-up of the euro was higher than ever.

For all the ineptitude on show in Europe through successive bailouts, such an outcome is unlikely. Too much political, economic and administrative work went into creating the currency bloc and there is no easy way back. Dismantling the zone would have catastrophic implications for all its members, not just the wayward ones.

Having said that, it is easy to see why people are sceptical. It is now clear that, for political reasons, Europe chose to ignore the clear questions about Cyprus’s banking sector at the time of its accession – questions that seemed to dominate its thinking in recent weeks almost to the point of disaster. It has also become evident some of the most strident critics of the economic performance of Greece had shown a deliberate blind eye to the well-known fiction that had been Greece’s national accounts over many years.

Even at the euro zone’s outset, several states were blatantly allowed to manipulate their finances to “meet” the entry criteria, including “core” states.

Stability in the western Balkans is important. How bringing those states into the EU delivers it has not been explained. If it is still possible to see why outlier states may choose to join such a major trading bloc, it seems scarcely comprehensible that it is in the interests of a deeply strained euro zone to have such states on board. Europe needs to concentrate first on how it can work with the stresses in the existing euro zone, forming a policy framework that can accommodate economies at various points in their cycle and different stages of development. The euro zone, as an entity, is far from fixed.

We can ill-afford the expansionist cheerleading that had Ms Creighton state last week there was “still a lot of optimism” that a deal on trenchant border issues in northern Kosovo can be done within weeks. She might be better advised to cast an eye forward to European Parliament elections which loom next year. It will give the electorate across the EU its first chance to give its verdict on some of the fumbling in Brussels and Frankfurt.

The signs are ominous. There is little public appetite for imminent expansion and persevering obstinately on that path could yet see the doomsayers on the euro zone proved correct.

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