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Expansion heads list of knotty EU problems

February 16, 2011

By Staff Reporter

But the expansion brings new complex challenges to the EU that experts predict could make or break the entire ambitious project. Ireland is at the forefront of the developments as it holds the EU presidency for the first six months of 2004.
“Enlargement will pose new challenges for the European economy, but with these challenges come exciting new opportunities for growth in trade, tourism and collaboration in research and knowledge networks,” Ahern said. “Our enlarged European Union will be a union where knowledge, innovation and ideas will be the key resources for economic success.”
Such rhetoric is typical of EU leaders in public — behind the scenes, however, some serious horse-trading lies ahead.
And EU expansion is only one of several knotty problems lying ahead. There is also the continuing issue of the strong euro. Large member states such as Germany and France rarely agree with smaller countries such as Ireland on how to fix problems.
The recent period of economic stagnation in the EU region has been replaced by a fragile recovery that is threatened by the strong euro — or by the weak dollar, depending on one’s perspective.
Among companies reporting last Thursday, drinks maker Remy Cointreau and plastic goods firm Bic have suffered especially sharply as export revenues fell.
There is no clear consensus on what to do about the euro, if anything is to be done at all. Analysts have agreed that even concerted pressure by member states might fail to impact on the markets at all.
Some policy-makers have argued that a strong euro could benefit the region, which is also a major importer of raw materials. The euro is now not much stronger than its launch value of 1999.
The main firms to have suffered are either in tourism, and hence vulnerable to the comings and goings of American tourists, or in the business of manufacturing for export.
Ireland certainly relies heavily on U.S. tourism — but that can only be one of many concerns for Ahern and his team during the next six months.
The Irish government will host more than 100 meetings, including major international summits with world leaders. Responsibility for the new constitution now also falls with the Irish presidency as European Union leaders failed to agree new terms for the enlarged Union earlier this month.
In Davos last week, the taoiseach outlined more of the challenges ahead. “The main economic challenge that the new member states face is to catch up in terms of income levels with the rest of the European Union,” he said.
Ahern warned that the income-per-capita levels of the new member states remain unacceptably low compared to the EU average, claiming that the republic was “perhaps the best example of a member state that has, over the course of its membership, achieved full economic convergence, with incomes starting at 60 percent of the European average now comparable with any other.
“The gulf between the European Union’s ambition to be the most competitive and dynamic knowledge-based economy in the world and the reality is still very wide. We are still some way behind the United States and other global economies. We have to compete in a rapidly integrating world market that includes, for example, a rapidly growing Chinese economy,” he said.
Ahern also outlined his plan to improve global market competitiveness: “We must focus on increasing investment in physical infrastructure, in education and training and in research and development — ensuring that our people can respond to and exploit the opportunities of the knowledge-based economy. In the process we will create an employment market that provides more and better employment for all citizens, exploiting the full potential of the single market and developing within the enlarged union a regulatory and business environment from which companies can compete confidently in the global markets. This can be done whilst maintaining effective levels of social protection and cohesion.
“Central to raising productivity is investment in people, skills, research and lifelong learning. Such investment is vital if we are to provide more and better employment for our citizens. We must increase the ability of workers and enterprises to respond to change. We must make work more attractive and we must ensure more effective investment in human capital.”
Ahern said Ireland would use its six-month presidency of the EU to push for faster economic reforms to help boost growth. He said the Lisbon Agenda, which has set EU leaders the task of making Europe the world’s most competitive economy by 2010, was about creating employment and raising the standard of living for EU citizens.
“The bottom line is, how many people tonight are able to go out on a Saturday night because they have a job and they’re doing well?” he said. “How can they afford to pay their mortgages? How can they afford to educate their children? That is the connect we need to put into the Lisbon strategy rather than talking about broad economic terms.”

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