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Hopes and Fears on the Eve of Eastern EU Expansion (April 26, 2004)

The author of this article emphasizes the historical significance that the Eastern expansion of the EU held for the cultural and political integration of Europe. He also explains, however, that experts disagreed on the economic consequences for Germany. While some feared that jobs would move to countries with low wages, others saw the expansion of the European market primarily as an opportunity for the German economy.

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The Price of the New Europe

Eastern enlargement will fundamentally change the EU. With low wages and low taxes, the accession countries pose a challenge to the established club members. Germany needs to adjust to this – or it will be among the losers of new Europe.

Gelsenkirchen has seen better days, like back in the 1960s when coal offered thousands of supposedly secure jobs and the steel industry in the Ruhr Valley was flourishing. Today, many years and numerous mine closures later, the city has an unemployment rate of 17.7 percent, the highest in Western Germany. Still, the present seems virtually golden – compared with what is coming.

Two of the city’s largest remaining employers, the boiler manufacturer Vaillant and the automotive supply company TRW, want to relocate or move a portion of their production to the Czech Republic or Slovakia, where wages are low and working hours are flexible. A total of nearly 1,000 jobs are at risk in a place once called the “city of 1,000 fires.”

“People are being put out on the street like mangy dogs so that a few more Euros can be made somewhere else,” said Mayor Oliver Wittke (CDU), attacking the plans. The city rose up, as it always did in the past – with human chains, vigils, and mother-child protests at the management headquarters. Some even chained themselves to TRW’s factory gate.

The works council [Betriebsrat] of the auto supply company hired two consultants to analyze the actual labor cost savings associated with relocation and to make that figure as low as possible. But monthly wages equal to one-fifth of German wages are hard to get around, even with higher mathematics. “The report concluded that the move was justified,” said Bernd Otto of the works council. The workforce now wants to offer to work forty hours a week.

Will that be enough? Or will they also have to lower wages? And if so, then how much? Down to the Czech, Polish, or Slovak level? But how is someone supposed to live on such wages in a country with German rents and German prices?

In these days and weeks, questions of this sort are worrying a great many people: workers who fear for their jobs, managers who are thinking about the competitiveness of their companies, and professors who are concerned about Germany as a location for manufacturing [Standort].

And the chancellor, who has a surprisingly simple answer to this complex question: Whoever moves jobs out of the country is acting in an unpatriotic fashion. Period.

But the world isn’t that simple, and it will get even more complicated on May 1. That is when ten new member states from Central, South, and Eastern Europe will be admitted into the European Union. Once Poland, the Czech and Slovak Republics, Hungary, Slovenia, Estonia, Latvia, Lithuania, and Malta and Cyprus are integrated, it will be the biggest round of enlargement in the history of the European Union. And also the boldest.

It will be the boldest because previous enlargements involved countries in which increasingly Western standards of living and value systems already prevailed. The eight Eastern European countries, on the other hand, were still caught in the grips of the socialist economic system only a decade and a half ago. Since then, these countries have almost entirely privatized their industry; they have liberalized their trade and capital transactions.

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