New Member States Research Articles

Trade characteristics of new member states’ agriculture

New member states (NMS) joined the European Union (EU) in 2004 or later. They became a part of the common, unified market. Without any trade restrictions, NMS were able to trade with every member state. On the other hand, generous support of the Common Agricultural Policy also boosted their agricultural sector. This paper gives an overview of the OMS’ agricultural performance, followed by a detailed trade analysis. It identifies major export products and the concentration of trade. Agricultural trade will be separated into NMS and old member states (OMS) to reveal differences and similarities in the trade patterns.

Late to the Game? Capital Flows to the Western Balkans

The boom and bust in capital flows to the New Member States (NMS) has received considerable attention, relatively little has, however, been written about capital flows to the Western Balkans, often perceived to be ‘late arrivals’ to large capital flows. We find that while financial integration took off later in the Western Balkans, it has increased rapidly, despite lower capital account openness. Capital inflows are (perhaps surprisingly) diverse in terms of source countries, but broadly similar in terms of drivers and composition, though with equity shares higher than they were in the NMS at comparable levels of development.

IMPACT OF NEW MEMBER STATES ACCESSION ON FOOD SAFETY AND OBESITY IN THE EUROPEAN UNION

The objective of this paper is to present food safety in the EU and obesity among inhabitants of the Member States countries. The Global Food Security Index (GFSI) was analyzed for the period from 2012 till 2016 using descriptive, tabular and graphical methods. UN-FAO data was the source of information on the GFSI. The concept of the GFSI is described and then used to explain changes in national food security and obesity over time. The GFSI index in 2016 was the highest in Ireland (84.3) and Netherlands (82.6). The lowest GFSI Index in 2016 was found in Bulgaria (60.6), Romania (65.6), and Slovakia (67.7). The results indicate that the largest increase in the GFSI during this period were observed in the Great Britain (+3.1), Ireland (+2.4), and Germany (+1.4). The authors also analysed obesity resulting from excessive consumption of food in developing and developed countries. The research shows that the highest obesity rates are in the Great Britain (28.1%), the Czech Republic (26.8%), Slovakia (25.7%), and Ireland (25.6%).

Migration, Remittances and Brexit: European Labor Market Integration and Its Effects on Inequality and Convergence

The increase in migration from Eastern to Western Europe after their accession to the European Union (EU) in 2004 resulted in a large increase in remittances to New Member States (NMS) and were comparable in size to FDI or EU funds. This paper adds to the literature by analyzing the impact of remittances and migration jointly, rather than separately, on the integration of EU economies and their implications for welfare and inequality. Labor market integration affects labor supply directly through migration, and labor demand indirectly through remittances increasing capital stock. We develop an incomplete asset markets model with migration and portfolio choice, where agents may choose to save in assets related to their citizenship or global bond. We find that including the remittance channel on top of migration boosts economic convergence between EU countries, driven primarily by growth in NMS without impacting the average citizen in wealthier EU members. Nevertheless, wealth inequality in original EU countries rises as rich local households benefit disproportionately from increased labor supply. Therefore when evaluating Brexit outcomes in terms of welfare, NMS should be concerned despite the weak trade ties.

Financial supply cycles in post-transition Europe – introducing a composite index for financial supply

This paper introduces a new composite index – the financial supply index (FSI) – measuring the level of supply of foreign capital to small open economies. FSI is estimated on a sample of 11 EU new member states (NMS) applying Kalman filtering, principal components and variance-equal weights. Results indicated that the main drivers of financial supply to NMS are externally determined, with economic sentiment and business climate in the Eurozone carrying the highest weight. FSI proved to have a good predictive power for debt inflow dynamics. In addition, we create a new indicator – the Refinancing Risk Ratio, which relates the supply and demand for foreign capital – to quantify the external refinancing conditions and risk faced by the government. We distinguish between two recent episodes of high refinancing risk – one during the global crisis, and the other during the European sovereign debt crisis – but the episodes significantly differ in nature.

DECLINING SYSTEMIC TRUST IN THE POLITICAL ELITE IN THE EU’S NEW MEMBER STATES: THE DIVERGENCE BETWEEN EAST-CENTRAL EUROPE AND THE BALTIC STATES

In the last decade there has been a process of rolling-back Europeanization efforts in the EU’s new member states (NMS), a process intensified by the global crisis. This de-Europeanization and de-democratization process in the NMS has become a significant part of a more general polycrisis in the EU. The backslide of democracy in the NMS as a topical issue has usually been analysed in terms of macro-politics, formal-legal state institutions, party systems, and macroeconomics. The most significant decline of democratization, however, is evident in the public’s decreasing participation in politics and in the eroding trust. This decline in systemic trust in political elites in the NMS has been largely neglected by analysts. Therefore, this paper concentrates on this relatively overlooked dimension of declining trust and social capital in the NMS. This analysis employs the concepts of governance, trust, and social capital to balance the usual formalistic top-down approach with a bottom-up approach that better illustrates the divergence between East-Central Europe and the Baltic states’ sub-regional development.

The Impact of the 2013 CAP Reform on the Decoupled Payments’ Capitalisation into Land Values

AbstractWe assess the effects of the 2013 CAP reform on the capitalisation of decoupled payments in land rental values. Our estimates suggest that the reform leads to an increase in the capitalisation of decoupled payments by an additional 18 cents for each Euro of decoupled payments relative to the pre‐reform situation. However, there is an important variation in the reform effects between Member States (MS) particularly between Old Member States (OMS) and New MS (NMS). In NMS, the capitalisation rate slightly reduces from 83% in the pre‐reform period to 79% in the post‐reform period. Although, the rate is significantly lower in OMS, it doubles (from 21% to 43%) due to the reform. The main sources of the post‐reform capitalisation in the European Union (EU) are the pre‐reform capitalisation accounting for 69% of the total post‐reform capitalisation, followed by the entitlement stock change with 19%, by the internal convergence of payments with 18%, the budget change (including external convergence) with 1%, and the differentiation of payments (redistributive payment) with −7%. Overall, our estimates suggest that on average in the EU, the non‐farming landowners’ policy gains are 27% of the total decoupled payments in the post‐reform period compared to 18% in the pre‐reform period.

The Relations between Institutional Reforms and FDI inflows of EU New-Member States in the Central and Eastern Europe

The Relations between Institutional Reforms and FDI inflows of EU New-Member States in the Central and Eastern Europe

Up or Down the Value Chain? A Comparative Analysis of the GVC Position of the Economies of the New EU Member States

AbstractThe pattern of trade of the Central and Eastern European countries has been changing since the beginning of the economic transition in the early 1990s. By the end of the century this process was additionally strengthened by their integration with the European Union and overlapped with the development of global value chains (GVC) spanning across Europe with which the new member states (NMS) have become increasingly integrated.In this paper, we shed light on these changes by analysing the position of the NMS within the global value chains. We employ the upstreamness measure proposed by Antràs et al. (2012) and use the World Input–Output Database. Although we observe a global increasing trend in the upstreamness of all countries, we find that the NMS have in many cases gone against this trend while converging in their production structure within their group and with the EU-15. This convergence is mostly observed in Czech Republic, Hungary, Poland and Slovakia where the level of upstreamness in the most important exporting sectors was close to that of Germany by the end of the analysed period 1995−2011.

(Not) Learning from the Past? The Diffusion of the EU’s Rural Development Policy in its Neighbouring Countries

After the Arab revolts the EU attempted to contribute to the rural development of the Arab Mediterranean states by designing the European Neighbourhood Programme for Agriculture and Rural Development (ENPARD). Through ENPARD the EU tried to diffuse policies that were implemented in the new member states (NMS) and the candidate countries. Based on the experiences of one NMS (Croatia) and one candidate country (Turkey), the article surveys what is (not) learned from the pre-accession programmes and the limits of policy diffusion in Egypt and Tunisia. The article claims that policy diffusion must be distinguished from policy convergence and that policy success must be contextualized by taking into account the role of domestic actors in each case study.

Рискове и ползи за новите страни-членки на Европейския съюз при влизането им в Еврозоната в контекста на дълговата криза

The Granger causality test is used to establish the direction of influence among multiple indicators related to exports and imports of new member states (NMS) of the European Union, considering the impact of the debt crisis in the Euro area (EA). Basic macroeconomic indicators of the countries are reviewed for the period 2004-2015, including the fulfillment of the Maastricht convergence criteria. The conclusions of the study point to positives for the considered countries regarding the EA membership, as well as risks. Recommendations are made on the diversification of the NMS export markets, implementing of an economic growth policy, based on exports and foreign direct investment, and forming of a roadmap on the EA membership of the states, which are not in the monetary union.

Distinct and yet not Separate: Revisiting the Welfare Models in the EU New Member States

Objective : The objective of this paper is to evaluate the welfare state models in the EU countries and to start the discussion if the new member states (NMS), i.e. those EU member states that joined the EU in 2004/2007, fit the Sapir typology (Nordic model, Continental model, Anglo-Saxon model, Mediterranean model). The second objective is to examine the labour market situation, reduction of poverty and social inequalities in the EU countries. The third one is to open the issue if the public spending can be managed both justly and effectively. Research Design & Methods : The linear regression function and correlation has been used to present effectiveness of social expenditures to reduce poverty, as well as evidence that public spending can be managed both justly and effectively. Findings: This paper demonstrates more similarities can be drawn across the NMS and the EU-15 than within the NMS and EU-15, respectively. The typology of welfare state models is applied to the NMS and their effectiveness is tested. Accordingly, we classify the Czech Republic, Slovenia and Cyprus as countries of the Nordic model; Hungary, Slovakia and Malta as the Continental model; Lithuania, Latvia and Estonia as the Anglo-Saxon model and, finally, Poland, Croatia, Romania and Bulgaria as the Mediterranean model. Implications & Recommendations: Recent data suggest that the global crisis has caused an increase in the level of poverty and social spending in the EU countries. However, this is just a temporary situation and it does reflect the solutions of models. Contribution & Value Added: The NMS tend to be examined as a separate group of countries that – as the literature suggests – depict different qualities of the welfare models than those pursued in the EU-15.

European Integration and Competitiveness of EU New Member States

This research is intended to evaluate the influence of the European integration, through the EU financing dimension, upon the evolution of external competitiveness of countries part of the EU community since the enlargements of 2004 and, respectively, 2007, excluding Malta and Cyprus (hereafter called as New Member States (NMS)). The paper methodology is based on appropriate research of relevant economic indicators intended to evaluate the EU funds’ influence on the industrial development and external competitiveness of NMS. Therefore, in the analysis performed there were figured out and calculated correlations between the following indicators: EU expenditure by NMS, Current Account to GDP ratio, Industrial Performance index, Global Innovation Index and Index of Economic Freedom. These indicators characterize the NMS’ business environment, institutional framework and, consequently, the degree of international competitiveness. The research contributes to confirm the assumptions about the European integration and the EU financing instruments had important effects in improving the industrial performance, in particular, and international competitiveness of NMS, in general. However, the differences in the correlations calculated between EU financing received by the NMS and different analysed indicators, suggest that EU funds were not the only drivers of the increasing competitiveness of the analyzed countries.

The collateral effects of political integration on credit growth in the new member states of the EU

Since 2009, low interest rates have been associated with increases in credit growth and overheating pressure in many emerging markets. In the new member states (NMS) of the European Union (EU), however, domestic lending contracted along with a shrinkage in cross-border financial inflows. In this paper, I investigate whether political integration with the EU has strengthened the relation between domestic credit growth and international financial inflows in the NMS in comparison to other emerging markets. Taking into account the period 2008–2014 and the boom period in the run-up to the 2008 crisis, I provide empirical evidence that domestic lending in both periods is more responsive to changes in cross-border bank lending if a country is a member of the EU. The paper’s finding lends support to studies suggesting that political integration has collateral effects on emerging markets via financial integration.

Productivity and Convergence in European Agriculture

AbstractWe investigate relative productivity levels and decompose productivity change for European agriculture between 2004 and 2013. Specifically (i) we contribute to the debate on whether agricultural Total Factor Productivity (TFP) has declined or not in the European Union (EU); (ii) we compare the relative TFP level across EU Member States and investigate the difference between ‘old’ Member States (OMS, i.e. the EU‐15) and ‘new’ Member States (NMS); and (iii) we test whether TFP is converging or not among Member States. The empirical analysis applies an aggregate quantity framework to country‐level panel data from the Economic Accounts for Agriculture for 23 EU Member States. The results imply that TFP has slightly decreased in the EU over the analysed period; however there are significant differences between the OMS and NMS and across Member States. Finally, our estimates suggest that productivity is generally converging over this period, albeit slowly.

Is internal devaluation policy in the EU effective?

This research provides indepth analysis of the causes and outcomes of internal devaluation policy in EU. It is conducted using statistical and econometric tools on a sample of three groups of EU member states: EU new member states, PIIGS, and the rest of the EU (EU-core). The analysis points to the key drivers of economic growth in the whole of the EU as being productivity and investment (and consumption in EU new member states and EU core members). Unit labour costs are relevant for GDP growth in PIIGS but with a positive sign, while for the rest of the EU it is not a significant variable. The policy of internal devaluation is unsuitable for application in any EU member states, due to individual specificities. The solution is stronger EU governance that takes the heterogeneity of EU member states into consideration in the process of creating policies and finding solutions.

Analysis of Operating Costs of Subsidies in the Field of Agriculture of EU Countries

The article deals with comparison of agricultural subsidies in the member states of the EU in the period 2004-2012 based on the database Farm Accountancy Data Network (FADN). During the monitored period we found a slight increase of operational subsidies with the fact that variability shows a decreasing trend. In the structure of subsidies we can see a clear transition to payments separated from production with significant differences between original member states and new member states (NMS). With the help of cluster analysis the member states were divided into groups according to their operational subsidies, total production and costs. With the use of correlation analysis we assessed the relationships between production, costs and operational subsidies re-counted per ha of utilised agricultural area. The increase of subsidies will not occur in higher cost productivity and only very slightly will it occur in the higher share of subsidized costs.

Analysis of Operating Costs of Subsidies in the Field of Agriculture of EU Countries

The article deals with comparison of agricultural subsidies in the member states of the EU in the period 2004-2012 based on the database Farm Accountancy Data Network (FADN). During the monitored period we found a slight increase of operational subsidies with the fact that variability shows a decreasing trend. In the structure of subsidies we can see a clear transition to payments separated from production with significant differences between original member states and new member states (NMS). With the help of cluster analysis the member states were divided into groups according to their operational subsidies, total production and costs. With the use of correlation analysis we assessed the relationships between production, costs and operational subsidies re-counted per ha of utilised agricultural area. The increase of subsidies will not occur in higher cost productivity and only very slightly will it occur in the higher share of subsidized costs.

The Bumpy Road of Civil Society in the New Member States: From State Capture to the Renewal of Civil Society

AbstractThis theoretical paper discusses the controversial development of civil society in the new member states (NMS) over a quarter century of systemic change and after 10 years of EU membership. In doing so, it attempts to elaborate a new conceptual framework for the decline of top-down democracy and the return to democratisation as a bottom-up process. This study of the bumpy course of NMS civil society analyses the gap between large formal legal institutions and small local informal ones and emphasises the need for participatory democracy if democracy in the NMS is to be sustainable. In fact, in this quarter century, two faces of informal institutions have emerged, reflecting the tension between genuine civil society organisations and large corrupt clientele networks. The mass emergence of these “negative” informal institutions has led to a situation of state capture and a democratic façade often analysed in the NMS academic literature. The study concludes that after the political and policy-learning processes of the last 25 years, there are now some signs of a participatory turn in the bottom-up process of NMS democratisation.

Ten Years of EU Membership: How Agricultural Performance Differs in the New Member States

SummaryTen years have passed since the 2004 accession round to the EU. The 10th anniversary provides a good opportunity for stocktaking and assessing the agricultural development of the New Member States (NMS). Using mainly Eurostat, FAO and World Bank data we constructed 15 indices to assess agricultural performances of the NMS for the period 1999–2013. Using these performance measures we identify the winners of accession and those who have performed less well. By ranking individual country performances, our results suggest that Poland and the Baltic countries can be considered the winners of EU accession in agriculture, while Romania, Slovenia and Bulgaria proved to have used their potentials to least effect. It seems that a large number of drivers influenced post‐accession performance including, pre‐accession fund management, differences in initial agricultural conditions, the nature consistency and transparency of agricultural policies, and the extent of privatisation and foreign ownership. On the whole, all countries gained from EU membership, though individual NMS used their possibilities to different extents. Future research might change the indices and periods analysed to test the validity of our results as well as quantify the factors which had the biggest impact on different country performances.