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18 April 2003

EZA 522 - Euro-Enlargement




Athens Declaration: Near Term Economic Impact of Accession Countries on EU to be Minimal
The accession treaties of the 10 prospective EU member states were signed in a ceremony in Athens on Wednesday. EU leaders highlighted the historic nature of this event, which formally ends the post-war division between western and eastern Europe, in the Athens Declaration. However, we would argue that the economic impact of the EU enlargement is small, both because the economies of the new member states are small and because much of the impact already has been felt. Taken together, the 10 accession countries (AC10) would raise the EU population by 20% and GDP for the EU by 12% (at exchange rates reflecting purchasing power parity). The eight former Communist countries among the AC10 have managed remarkably successful transitions to market economies, including unilateral trade liberalisation even before trade barriers with the EU were formally lifted. Trade linkages with the EU are thus strong and rising. By contrast, EU enlargement provides the opportunity of much-needed reform of the Common Agricultural Policy and the EU’s decision-making process. Down the road, the AC10 will join the euro area, but this will not occur before May06 at the earliest.

SummaryAsset Conclusions: Athens Declaration will pProvide short-term demand for accession country assets and temporarily lift markets before enthusiasm fades.

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© Graham Bishop

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