Financing the Eastern Enlargement of the European Union

One of the most debated problems of the EU enlargement to the Central and Eastern European countries is the financing of the candidate countries. As they are much poorer and much more agricultural than the present EU members, they will be entitled to major financial transfers from the EU budget. Given the limited size of the EU budget, this will imply to redesign the current EU policies and financial transfers. The paper examines the framework (Agenda 2000 and the Berlin European Council) within which the present pre-accession and accession appropriations have been determined. Remarkable differences can be observed in the financial transfers to the current and future member States: however, given the Agenda 2000 accession hypothesis (first and second wave accessions), the estimated cost of eliminating this unequal treatment would be affordable under the current financial provisions. The recent change in the EU accession negotiation strategy opens the possibility that nearly all the candidate countries join the EU before 2006: the additional financial burden could be sustained without changing the present Own Resources ceiling, provided a difference in treatment could be accepted between the EU incumbents and the new members. The paper finally presents the estimated costs of enlarging the EU to eight or ten new members, while granting them, under the current policy regime, a level of transfers comparable to what is granted to the poorer EU incumbents.