The Countries of Central and Eastern Europe as Takers of EU Economic Policy

One of the main dividing lines in the European Union runs between the creators of systemic rules, which is policy makers, and the policy takers, adapting to the established principles. This division, increasingly discussed in recent times, is also used for analyzing the course of the accession and membership of Central and Eastern European countries (CEE). The high asymmetry of political and economic resources between the countries of the “old” Union and the CEE candidates during the integration turned the latter into policy takers—adopting the rules which were in force in Western Europe. One manifestation of that was implementing neoliberal economic patterns and acquis communautaire, which, together with the opening of internal markets and the privatization process, were particularly beneficial for Western economic interests.

Such a direction of systemic changes made it possible for Western corporations to rapidly gain a dominant position on the new markets, and to take over the control and ownership of the most profitable sectors of the economy— banking, export sectors and companies from the list of 500 biggest enterprises. The asymmetry of potentials and status during the difficult transition and accession processes led the former Polish Foreign Minister Radek Sikorski to conclude that after 1989 “we were a supplicant, candidate country to various institutions, […] we had to fulfil conditions established by others and submit to rules which we perhaps did not want to accept.” This view to a large extent reflected the situation both of Poland and other countries of the region.

EU membership, along with the much faster economic growth of the CEE countries compared to Western Europe, strengthened their capacity for political action both within EU structures, and in relations with other member countries. But this capacity is variously used by particular countries of the region, often at cross-purposes from the political point of view. We can point, for example, to the Polish support of pro-Western changes in Ukraine and of the entering of the eurozone by some of the countries of the region, and on the other hand the euroscepticism of the Czech Republic or the policy of “restoring national sovereignty” by the Viktor Orbán government in Hungary. Does the growth of economic potential and political capacity of the CE countries translate into the EU economic policy?

After more than a decade, the division into policy makers and policy takers is still visible. The closing of the economic gap by the CEE countries is not large enough to dramatically alleviate this division. Moreover, after 2008 the division has been assuming new forms as a result of the crisis of cohesion, principles of solidarity, and EU policies. From the perspective of the CEE countries, this is caused by two groups of mutually interrelated external and internal factors.

In the first group the key role is played by the crisis of the eurozone, which revealed fundamental contradictions of economic growth in the EU, strengthening its internal divisions. The crisis undermined the assumption about economic convergence, which is the foundation of European integration, and showed that the principles of integration produced differences promoting “multi-speed Europe.” The main role is played here by the division into highly developed countries of the eurozone’s “core,” including Austria, Belgium, Finland, France, Germany, Luxembourg, and Holland, and the more differentiated “peripheral” countries of Southern Europe and CEE. The introduction of the euro was supposed to accelerate integration, but it produced an opposite effect—it has been deepening the disproportions and conflicts between countries with trade surplus and countries with trade deficit, between importers and exporters, between the South and North of Europe. The core countries centered around Germany, which support the euro as a factor stabilizing their growth, introduce new mechanisms of budget management, greater coordination and macroeconomic stability. These solutions include adopting a new version of the Lisbon Strategy Europe 2020, the European Stability Mechanism, the Euro Plus Pact, the fiscal pact and banking union. Countries taking part in them (including some CEE countries) are getting closer to the creation of a EU quasi-federation, which aims to increase the power of the European Commission through instruments of coordinating policy in the area of banking law and taxes, and in the future also in education, vocational training and wages. But for now, the role of the Commission and of the European Parliament in practice has significantly declined in favor of technocratic institutions such as the European Central Bank and the governments of some core countries (mainly Germany), imposing austerity policy, structural adjustments and budgetary supervision on debtor countries, especially South Europe headed by Greece. As a result, there is a growing gap between eurozone members and other countries, which have a limited access to EU decisions impacting on their economic interests, and the eurozone membership is becoming more important than EU membership itself. In the future, these zones may function according to different rules, with a separate government, parliament, budget etc.

Other divisions within the Union are also appearing. Some of the countries closely connected with the core economies (Denmark, Poland, Lithuania, Romania and Bulgaria) signed the Euro Plus Pact. The Czech Republic, United Kingdom, Hungary and Sweden did not take that way. The last two countries ratified the fiscal pact imposing constraints on the domestic structural deficit. And Great Britain and the Czech Republic reject all forms of coordinating economic policy through treaties (apart from participation in the annual European Semester on economic policy). The migration crisis divided the EU into Western countries accepting the adoption of quotas for refugees from the Middle East and North Africa, and the CEE states, which are against such a solution. All these divisions have a negative impact both on the economic policy of the entire EU, and on the capacity of the CEE countries to influence this policy. Weaker economies find it harder to follow the new rules and especially to get a say in shaping them. A very bad precedent was set here by the argumentation used by politicians from the core countries in the context of the migration crisis. The reluctance of Eastern Europe to accept migrants led politicians from Austria, Germany and France to say that if the European Commission demands were not met, changes could be made in the distribution of structural funds. The influence of the CEE countries on the EU economic policy is further weakened by the divergences of positions in many other key issues, such as the attitude towards the euro, energy policy, environmental policy or bilateral relations with Russia.

As for the internal factors limiting this influence (alongside the asymmetry of resources and dependence on the core countries as described above), we should first of all point at an insufficient effectiveness of state institutions and the civil society, as well as post-authoritarian models of political culture. The neoliberal reforms in the economy and labor relations led to social fragmentation and in most countries of the region additionally dampened the political and civic activity, which had been very low under the Communist dictatorship. The experiences of frequent systemic changes result in a low trust towards government institutions in the CEE countries. Apart from the neo-corporatist Slovenia, characteristic for these countries is also the dysfunctionality of the system of representation and coordination of interests, erosion of trade unions and weakness of employers’ organizations. Compared to Western countries, less developed is also the sector of non-governmental organizations, which have very inadequate human and financial resources.

As a result, the weakness of social and civic dialogue reduces the articulation of the collective interests of the CE countries also within the EU. Such diagnoses are partly confirmed by analyses of the performance of Polish business interest associations (BIAs) on the EU forum compared to their German, French and British counterparts. These analyses show the weakness of the system of representing economic interests on the EU forum, which to some extent also concerns other countries of the region. Polish BIAs are young and small institutions with a limited membership, modest budgets, and only a symbolic presence in Brussels. Their functioning is characterized by a low level of cooperation between politics, administration and business on EU arenas. This is largely caused by the structural features of the Polish economy: dominance of foreign investors in key branches and largest companies, a significant government participation in some sectors, and fragmentation of domestic private capital. This makes domestic cooperation of BIAs difficult, it is hard to find a common ground for articulating interests for such diverse economic agents. For example, in discussions about the BIAs position on EU proposals concerning energy policy, Polish chapters of foreign corporations usually have similar interests as their headquarters. Also the positions of government and private companies are often divergent.

Polish effectiveness in EU institutions is further weakened by particular features of the political culture, such as a low capacity for consensus, the role of personal and party connections, as well as the fact that BIAs enter the legislative or political process only in its final stage, which diminishes the chance for success. Although some of the CEE countries have better-functioning representations of economic interests in the EU, their smaller economy and population potential prevents them from playing a greater role than Poland in this context.

In a word, in the short term we can hardly expect a significant increase of the influence of CEE region on the EU economic policy. The region as a whole still possesses smaller resources than the EU North and South, although the current economic trends strengthen its position. Its countries do not form effective coalitions, as exemplified by the inconsistent actions of the Visegrad Group; its member countries make alliances with other EU countries, joining the strongest coalitions. But the influence of the CEE countries is gradable. Due to the differences in potential they have varying “clout” in the Union, and this to a large extent (along with geographical location) determines the strategies of their political elites. For example, the small Baltic republics selected the course of the fastest possible integration with the core economies, while Poland has an ambition to play the role of one of the main EU countries, which translates into its greater political and economic assertiveness. The role and influence of the CEE countries in the EU economic policy will depend on the further direction of the EU development, but also on their own increased capacity for consolidation and innovativeness of domestic capital, strengthening the coordination of social and civic dialogue and effective representation of their interests in Brussels.

The best way to increase the influence of the CEE countries on economic policy would be to take actions aimed at reducing the structural differences between stronger and weaker economies, as well as breaking the division between the core and the peripheries of the EU. But such a strategy requires introducing new ways of investing and distributing EU financial resources with a view to restoring convergence between weak and strong economies in the eurozone and outside it, and also developing new principles of cohesion, solidarity and EU policies. The continuation of “crisis” policy, were EU institutions become mostly an instrument for furthering the interests of the core countries, would recreate the position of the CEE countries as takers rather than makers of economic (and not just economic) policy. An effective and future-oriented reintegration of the EU requires a different scenario of growth, a new perspective on European integration.