Issues in forming & joining the EU Professor sheds light on the

Author: Dina Magaril

On Thursday, April 21 Larry Neal, professor of economics at the University of Illinois and founder of the European Union center in Illinois, spoke to Middlebury College students and faculty about the enlargement of the European Union (EU) in relation to the expansion of the Euro currency. Assistant Professor of Economics and International Politics and Economics Kristen Wandschneider, who helped organize the scholar's visit to Middlebury, was pleased with the extremely relevant insight provided by Neal's lecture, that will supplement information presented in her economic classes. "Professor Neal covered some very important issues," she said. "The future accession of states into the EU that Neal talked about relates to the accession the United States has undergone."

In his lecture, Neal outlined the transition problems European countries have faced in switching to the Euro from their original national currencies. Neal also discussed the initial problem the EU faced - that of choosing which countries qualified for entrance into the EU. In order to join the EU a country must first be defined as an established democracy. Secondly, it must be able to meet the economic competition - Neal hypothesized that this standard was put into place so the EU would not have to subsidize a weak enterprise.

Countries that are in the process of converting their national currency to the Euro - like Poland, Hungary, the Czech Republic, the Slovak Republic and the Baltic states of Estonia, Latvia and Lithuania - serve as a hindrance to the EU's stable development. Neal discussed how the Baltic States suffered greatly after the collapse of the Soviet Union and during their struggle for independence. These states had to re-establish a national identity before they were given entry into the EU. Neal stated that Poland's shock therapy, which helped strengthen the economy, was unpleasant yet successful. He identified the Czech Republic as an opposing example, a country with a movement of gradualism that was not very effective.

Neal talked about Ireland and Greece's entry into the EU, in 1973 and 1980 respectively. Spain and Portugal applied for but did not receive EU entry in the mid 70s, immediately after the end of Franco's rule and the start of democracy, for political as well as economic reasons. However, he said that when they were finally accepted in 1986 these nations experienced their most significant growth in history.

As a result, the EU underwent a rapid growth in trade and continued to expand foreign investments. In January 1999, when the Euro was officially introduced, all the countries in the EU had originally announced their plan to switch to the Euro. Currently, however, only 12 countries have the Euro in circulation. Denmark and Sweden opted out of the referendum while the United Kingdom insists they are not yet ready to vote. Interestingly, all three of these countries are doing better economically than most of those in the Euro zone.

In his lecture, Neal concluded that while the adoption of the Euro as a currency was an issue in the formation of the EU, it was not the most important one to consider. Many of these countries are still recovering from financial collapses as well as political turmoil - unemployment is still a big issue in the Baltic States as well as in the Czech Republic. The current financial situation of many of the nations that await entry into the EU, as well as their political contributions to the EU, remain paramount factors.

"I think the topics Neal touched upon were very appropriate to Middlebury students," said Elizabeth DiCioccio '06, who attended the lecture. "As the European community grows, it has a great impact on the global economy and on anyone living in a global community."