An Evaluation of the EU’s Fifth Enlargement with Special Focus on Bulgaria and Romania

Abstract

The fifth EU enlargement in 2004 and 2007 not only extended the Single European Market, but it also led to the enlargement of the euro zone, which since 2009, encompasses 16 out of 27 EU Member States. Moreover, the Schengen area has also been expanded to include 25 European countries (22 EU Member States). A first evaluation shows that the new member countries have already been able to benefit noticeably from their participation in the single market (SM), despite being not yet fully integrated labour markets. However, the international financial crisis also shadows onto the economies of the new Member States. After an ex post evaluation, the possible future integration effects of EU’s 2007 enlargement by Bulgaria and Romania are simulated with a simple macro-economic integration model able to encompass as many of the theoretically predicted integration effects as possible. The direct integration effects of Bulgaria and Romania spill-over to the old Member States, including Austria and the ten new Member States of the 2004 EU enlargement. The pattern of the integration effects is qualitatively similar to those of EU’s 2004 enlargement by ten new Member States. Bulgaria and Romania gain much more from EU accession than the incumbents, in the proportion of 20:1. In the medium-run up to 2020, Bulgaria and Romania can expect a sizable overall integration gain, amounting to an additional 1/2% point real GDP growth per annum. Among the incumbent EU Member States, Austria will gain somewhat more (+0.05%) than the average of EU-15 (+0.02%) and the ten new EU Member States (+0.01%), which joined the EU in 2004.