Abstract
In this study, we examined whether small countries, when joining the European Union and transferring a part of their sovereignty to the EU institutions, become economically stronger or weaker. We have conducted our assessment based on the index of relative concentration of power (IRC), which was developed for the purpose of this analysis, modifying the Herfi ndahl- Hirschman Index. Our analysis has shown that in the analyzed period between 2000 and 2015, the relative economic power of small member states of the EU grew stronger, while, at the same time, the relative economic power of large countries weakened. We started from the assumption that small countries, prior to their entry into the European Union, have lower competitiveness due to the relatively higher fi xed costs in the public and private sector. Large single market of the European Union produces relatively stronger effect of economies of scale for small countries compared to large countries, which is why their relative economic power grows faster than the relative power of large countries. Keywords: small countries
Highlights
The global economic crisis ‘hit small countries hardest’ (Rachman, 2009)
Experience with the first more serious economic crisis has shown that the European Union is not so economically solidary as much as member states expect, and that member states are not ready to protect the general interests of the Union stronger than their national interests
Restriction and transfer of a part of national sovereignty to the European Union institutions are motivated by the expected benefits of the European business environment for the development of sovereign state
Summary
The global economic crisis ‘hit small countries hardest’ (Rachman, 2009). As explained in the Financial Times (Rachman, 2009), a few years before the crisis it seemed that ‘the era of small countries’ was about to come because during the time of prosperity they succeeded in attracting foreign investment which changed significantly the quality of life of the population (e.g. Ireland, New Zealand, Chile, the Baltic countries, Slovenia, etc.). Along with Euro-optimism, which affirms many advantages of European integration and strengthening the role of the European institutions in all countries of the European Union with major or minor impact, there are those who are Eurosceptic, and even Europhobic, who oppose any form of impairment of national sovereignty in favor of European integration. Euro-optimists see the advantages of the European Union in the tremendous effects of the free trade between member states, opening new possibilities for education and employment, preserving the national identity of the people within the Union (preserving statehood, language, culture, etc.), a single currency, monetary policy as an option potentially available to all member states, strengthening the peace and tolerance among the member countries
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