New Member States: ‘as social as they can afford’

Date: 25/11/04

Now that they have joined, the new countries are part of the Lisbon Agenda too.

The report from a group of advisors chaired by Wim Kok, issued earlier this month as an attempt to breathe new life into the process, offers little guidance about how they should handle the situation on tax, or much else for that matter.

The Dutch former prime minister, as his critics pointed out, is not good at solutions.

“With their low tax and wage rates, attracting inward investment from the rest of the EU is likely to be a source of growing friction,” the report points out.

“Unless there is some prospect of convergence these tensions will mount. In this respect, meeting the Lisbon goals to promote growth and employment in all parts of the EU is vital for its future internal cohesion,” it warns.

Happily, the countries appear not to need the Kok report to tell them what they ought to do.

Given their current predicament, it is no surprise to hear political voices in the new member states talk with more purpose about economic reform, including changes in their pension systems - not just tax cuts - than more timid leaders in 'old' Europe can manage.

Their need is more pressing. And, since the ten new countries are more used to reform than the rest for historical reasons, the chances are that they will be able to move faster than the older member states. That could help them to boost their relative competitiveness.

But they also talk openly about the need for prioritizing. It is OK, they say, to have 'old' EU levels of social security - even if most people post-Lisbon reckon these things need to be pegged back. First, though, you need 'old' EU levels of wealth and income.

The same goes for environmental standards - though most people recognize that there is no longer an excuse for ravaging wildlife or polluting lakes, if there ever was.

Czech Deputy Prime Minister Martin Jahn said governments must put economic growth ahead of environmental or social policies in the list of priorities.

“I am not against a welfare state and environmental protection.,” he said. “But first we have to have a strong economy.”

The EU's lavish social model, he said, “can only be as social as we can afford”.

Jahn added that the Czech Republic was concentrating on steps to control its public debt.

Other new member states, if they want to get ahead of their friends in old Europe, are doing the same.

Article discusses strategic options for the ten Member States that entered the EU in 2004 to increase their competitiveness.