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The Fourth Enlargement of the European Union: Austria, Finland, and Sweden Join the EU


  • Fritz Breuss



The integration of the rich EFTA countries Austria, Finland, and Sweden into the EU shifts the center of gravity to the North. While the previous enlargement by the "cohesion" countries Greece, Portugal, and Spain was a burden on the budget of the EU, the present enlargement is a relief. The integration of the three neutral countries constitutes no economic problems, but progress in the area of collective security might possibly be slowed down by their accession. Through the fourth EU enlargement the number of countries in the European Union rises to 15. The EU's economic power, as measured by gross domestic product, increases by 7 percent; its population grows by about 6 percent, and its area expands by 37 percent. On a per-capita basis, however, the EU is growing richer by only 0.1 percent (at purchasing power parities) and 0.7 percent (at current prices and exchange rates), respectively; Austria and Sweden but not Finland have a higher per-capita income than the twelve EU members on average. Austria's GDP per head is fourth in the EU, with only Luxembourg, Belgium, and Denmark ranked ahead of Austria. Sweden takes the tenth position, Finland the eleventh. The three former EFTA countries now joining the EU are, with the exception of Finland, small wealthy and highly industrialized countries. They will also, again with the exception of Finland, be net payers in the EU. The three new EU members also have a great deal in common in the political realm: they are all neutral countries. How their neutral status will be handled in the future is an open question. In the WEU, the defense branch of the EU, they have accepted the position of observers. After the treaty of Maastricht the European Union has been composed of "three pillars". The European Communities are the first pillar. The second pillar is the common external and security policy (CESP); the third is the close cooperation in judicial and internal matters. The final goal of economic integration after Maastricht is the creation of an Economic and Monetary Union (EMU). It is scheduled in 1996 (but more likely in 1999) to lead to a single currency in the EU and a common monetary policy, administered by the European Central Bank. The precondition for participation in this third stage of the EMU is fulfillment of the convergence criteria postulated in Maastricht, which will be examined for the first time in 1996. According to current forecast, the only countries which might meet these criteria in 1996 are Germany and Luxembourg. Austria is presently the only country among the new members to participate fully in the exchange rate mechanism of the European Monetary System. Membership in the EU engenders an adjustment of economic policy in many central areas (common external policy, common agricultural policy – CAP, common regional policy, competition policy, and the common monetary policy). The adjustment problems are being acutely felt particularly in the area of agricultural policies where expected income losses are being cushioned by funds from the federal budget. The consequence is an additional burden in the budget which far exceeds the net payments proper (Sch 12 billion) in connection with EU membership. All three EU members have high hopes regarding the integration effects. Economic analyses for Finland, Sweden, and Austria indicate medium-term to long-term positive growth and welfare effects. For Finland and Sweden, the yearly growth gains are expected to be between ½ and ¾ percentage point. For Austria, the growth impulse (counting the effects of membership in the EEA and the EU as well as the effects from the single market) is estimated at ¾ percentage point of real GDP per annum. Inflation is expected to slow down as the single market will stimulate competition in all areas.

Suggested Citation

  • Fritz Breuss, 1995. "The Fourth Enlargement of the European Union: Austria, Finland, and Sweden Join the EU," WIFO Monatsberichte (monthly reports), WIFO, vol. 68(2), pages 105-125, February.
  • Handle: RePEc:wfo:monber:y:1995:i:2:p:105-125

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