European Economic Integration and South-East Europe
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European Economic Integration and South-East Europe

Challenges and Prospects

Edited by Klaus Liebscher, Josef Christl, Peter Mooslechner and Doris Ritzberger-Grünwald

With both transition dynamics and the EU integration process having shifted to the south-east of Europe, a region fairly marginalized in the literature, this book fills a gap by taking stock of where South-East Europe’s economies and institutions stood in 2004. The authors evaluate the potential for investment and growth within the South-East European region, including the role of trade and FDI, and discuss the challenges associated with unemployment, poverty and ‘brain drain’. The book also provides insights into the particular monetary and exchange rate policies applied, including cases of ‘euroization’, and finally makes an assessment, against this background, of the European perspective of the countries of South-East Europe.
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Chapter 15: Trade integration of the new EU member states and selected South-East European countries: lessons from a gravity model

Matthieu Bussière, Jarko Fidrmuc and Bernd Schnatz


Matthieu Bussière, Jarko Fidrmuc and Bernd Schnatz1 1. INTRODUCTION Over the past ten years, Central and South-East European countries (CEECs and SEECs) experienced rapid trade integration with the euro area, which had two major implications. From a euro area perspective, the share of these countries in extra-euro area trade2 almost doubled between 1993 and 2003, from 7 per cent to 13 per cent.3 Taken as an aggregate, the whole region now represents the euro area’s third largest trading partner behind the United Kingdom (15.8 per cent) and the USA (13.6 per cent). For the CEECs and SEECs, in turn, the euro area represents the most important trading partner. The share of the euro area in the Czech Republic, Hungary, Poland, Slovenia and Romania (measured as percentage of imports and exports of these countries), is close to 60 per cent; for Albania it reaches almost 80 per cent, while for Bosnia and Herzegovina, FYR of Macedonia, Bulgaria and the Slovak Republic it is closer to 50 per cent but quickly rising. The natural question that arises from these stylized facts is whether the increasing integration of the CEECs and SEECs with the euro area is likely to continue in the years to come, or rather to slow down. The answer to this question depends to a large extent on the interpretation of past developments. Clearly, the fact that integration between Eastern European transition countries and the more mature economies of the euro area increased in the 1990s should not, by...

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