Schroder jobs proposal draws fire

Central European leaders have given a chilly response to a proposal by the German chancellor, Mr Gerhard Schroder, that workers from applicant states should wait for up to seven years after joining the EU before they can take up well paid jobs in the West.

At a meeting of regional leaders in the Slovak capital of Bratislava yesterday, the Czech prime minister, Mr Milos Zeman, suggested the German chancellor's view was shared by few other EU leaders.

"This is a statement of a single member country of the European Union, and we are waiting for the common position. I can imagine there are some fears, even if unreasonable, from the side of Germany and Austria. At the same time there are no fears from Ireland, Scandinavian countries, Spain, Portugal, France and so on," he said.

Mr Schroder's proposal was undoubtedly motivated in part by domestic political considerations. But as the prospect of EU enlargement draws closer following last week's summit in Nice, a number of EU member-states are getting jittery about the possible economic impact. Like Germany, Austria is worried about a possible influx of labour from the east. Small and medium-sized firms near the border with applicant states fear cheap labour will give competitors in the former communist countries an unfair advantage.

And trade unions are concerned factories could move across the border to take advantage of lower overheads.

The EU Commissioner responsible for enlargement, Mr Gunther Verheugen, has called for an open debate about the potential risks of enlargement, especially on border regions. It is likely these regions will receive special assistance from the EU, and Germany and Austria are probably prosperous enough to keep any short-term economic damage within acceptable limits.

The same cannot be said for Portugal, a country that has since the 1980s experienced a boom based on the appeal of low wages for big industrial companies, which has helped to bring unemployment down to just 4 per cent.

Unfortunately, Portugal has not used the fruits of its boom years to improve standards in schools, universities and training facilities and few foreign investors are impressed by Lisbon's attempt to market the country as a high-tech paradise.

Because Portugal's healthy economic growth over the past few years is due almost entirely to foreign investment, EU enlargement could have disastrous consequences as industry moves to cheaper locations in central and eastern Europe.

Ireland's more successful shift towards a high-tech economy means Irish officials take a relaxed view of the flight of industry towards the east. Indeed, Irish trade officials assist companies in such fields as textiles to outsource production to countries such as the Czech Republic, Slovakia and Hungary on the basis that the tight labour market in Ireland makes such outsourcing necessary.

As long as economic conditions remain benign and the US avoids a hard landing that could destroy much of the "new economy", Ireland has little to fear and much to gain from the expansion in the European single market that EU enlargement will bring. But if a downturn comes as the date for enlargement approaches, the sound of grumbling from the established EU member-states could rise to a roar.