Economic Convergence and Divergence in Europe
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Economic Convergence and Divergence in Europe

Growth and Regional Development in an Enlarged European Union

Edited by Gertrude Tumpel-Gugerell and Peter Mooslechner

This highly topical book addresses the challenge of economic convergence within Europe, beginning with a thorough review of the theory of growth and related empirical research. Historical and more recent economic developments within the present EU and current accession countries are discussed, along with the design for the process of further integration of accession countries into the EU and the Euro area. Moreover, the potential to achieve a sustainable catch-up process in Western Balkan countries, the Ukraine and Russia is explored, focusing on the task facing the EU in designing proper policies vis-à-vis these countries. The contributors’ varied perspectives ensure that the theories and policies postulated are linked closely with the actual situation in accession countries and offer up-to-date insights.
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Chapter 26: Policy challenges within the (enlarged) European Union: how can economic convergence be fostered?

Stanislaw Gomulka


Stanis-aw Gomulka l 26.1. HOW LARGE IS THE DIVERGENCE PROBLEM?1 Table 26.1 provides a selection of basic data on the eight countries which are regarded in this chapter as the primary candidates from the Central European (CE) region to join the European Union (EU) and European monetary union (EMU). Enlargement will be a major institutional innovation for them, as indeed it will also be for the present EU countries. Any such innovation must entail adjustment costs. These costs will be related to the divergence of the CE-8 from the EU-15 and to the magnitude of enlargement. Both factors will determine the size of the ‘enlargement shock’. The data in Table 26.1 provide a basis for an evaluation of the development gap between the two groups of countries – one of several dimensions of divergence – and of the size of the enlargement shock. The CE-8 group is dominated by one country, Poland, which in terms of population and GDP accounts for about half of the group’s totals. This makes the transition progress in Poland important for the success or failure of the entire enlargement project. Using market exchange rates, the GDP of the CE-8 group is only about 4 per cent of the EU’s GDP, which means that it is about half the GDP of Spain. By this measure, the prospective enlargement will be a relatively small affair. One important implication is that net transfers from the EU budget to the CE-8 will initially represent only about 0.1 per cent,...

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