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When the Central and Eastern Europe countries (CEECs) started their transition to democracy and the market, they had very high expectations of support by the EU. In the last few years, however, the enlargement process has lost momentum. In Discussion Paper No. 1234, Research Fellow Peter Bofinger analyses the Eastern enlargement of the EU from a political economy perspective. He shows that with the preoccupation of academic debate on trade liberalization, important political economy aspects of EU membership are neglected. These concern above all the very stringent `hands-tying' of national governments by many regulations of the Maastricht Treaty. The author also analyses how the incumbent members have so far responded to the changed situation in the East. Quite obviously their actions have been guided by the imperative of a very stringent EU budget constraint. As a consequence, all efforts were directed to the field of trade liberalization. The last five years has confirmed the empirical literature suggesting that increasing imports from the CEECs would have no major negative effects on EU producers, even at regional and sectoral levels. On the contrary, there are many areas where EU producers have clearly benefited from trade integration with the CEECs. Thus, the standard theory of political economy is not very useful for the case of the Eastern enlargement. Under present conditions there is an obvious discrepancy between what the EU is willing to offer and what the CEECs are asking for. This could lead to a complete standstill in the enlargement process, as a result of which the CEECs would lack a stable economic framework as well as a clear perspective for membership. As an alternative, the author develops a `comprehensive accession strategy' (CAS), containing the following elements: a three-stage transition process that leads to full membership (stage III) after ten years, and a list of countries that can apply for that integration procedure. In stage I of the CAS, the Europe Agreement regulations have to be applied in a multilateral way; in stage II trade liberalization will be enhanced and macroeconomic surveillance according to the Maastricht Treaty applied. The Political Economy of the Eastern Enlargement of the EU Peter Bofinger Discussion Paper No. 1234, August 1995 (IM) |