Germany: Bundesbank Monthly Report: Effects of eastward enlargement of the EU on the German economy

On 1 May 2004, ten new members were accepted into the European Union (EU). This so-called eastward enlargement of the EU represents a considerable challenge for all the countries concerned and for the Community institutions. Never before have so many countries joined the EU at the same time and never before have the economic differences within the group of countries joining the EU and between these and the existing member states been so great. Although the EU's pre-accession strategy had already provided the new member states with a 'priveleged' position in relation to the EU helping them catch up with the existing member states, economic integration will be additionally stimulated by further institutional and economic involvement. The effects will be felt mostly in the new member states but are also likely to result in a variety of changes in Germany owing to its geographical proximity and close economic relations with those economies. The following article examines the potential effects of EU enlargement on Germany. It comes to the conclusion that Germany can take advantage of the chances of an increasing division of labour in Europe if its economic policy continues to focus on reforms