Applicants face uphill struggle to liberalise key industrial sectors

Date: 04/05/2000

By Simon Taylor

MATCHING the EU's levels of industrial liberalisation poses one of the biggest challenges in the enlargement process for the applicant countries, and it is energy which presents possibly the most difficulties of all.

Not only do the central and east European countries have to break up the monopolies created by the Communist system - a difficult task given the job losses required and the effect on inflation of introducing price competition - but the candidates also have to ensure that the companies which emerge from the resulting shake-out are fit enough to cope with the competition they will face when they join the EU.

The Union has set gradual targets over the next eight years for liberalising its energy market, but the applicant countries are nevertheless bound to struggle to meet these goals. EU governments have set 2003 as a deadline for opening up 28% of the gas market and 33% of the electricity market. Although the first wave of enlargement is unlikely to take place until 2004-2005, Poland has already asked for a further two years to dismantle its gas monopolies.

Union officials say that even in the case of countries which claim to have met the liberalisation targets by the time they join, the European Commission will be asked to keep a very close eye on the state of their industries to ensure they are sticking to their commitments.

The lingering fall-out from dismantling old Soviet-era monopolies has also caused problems in the telecoms sector. The Czech Republic has been strongly criticised by the Commission after its parliament voted to extend Czech telecoms firm Cesky's monopoly until the end of 2002, even though the government had pledged to end the company's stranglehold by 2001.

Warsaw also had to change its law after objections from Sweden that it was being excluded from the Polish market.

Article forms part of a suvey, 'Industrial liberalisation'.