Importance of EU enlargement for east Germany
Trade liberalisation:External trade of the EU with accession candidates has been liberalised for a long time (exception: agricultural products). The share of foreign trade of the ten Central and Eastern European candidate countries (CEEC-10) in German exports has risen from 3% (1991) to currently 8%. For the east German economy the share even tops 14% although external trade in east Germany is much lower than in west Germany.
As trade has largely been liberalised, eastward enlargement will probably not boost external trade in the short term. For east German companies mounting competitive pressure is likely to outweigh export opportunities for the time being as they have in many cases specialised on the same market segment as the accession candidates (few technology-intensive export products; products standardised, however).
Freedom of establishment:Transition periods for opening of labour markets (up to seven years) do not apply to companies and the self-employed. Thus, worries above all on the part of services companies (skilled trades etc.) bordering the Central and Eastern European candidate countries because of the rapid market access of CEEC competitors who benefit from considerable cost advantages (Polish labour costs in terms of current exchange rates roughly 13% of west German and 20% of east German level). True, transition periods would protect the east German services sector; however, they would also pose a burden especially on consumers (in the form of higher prices).
Immigration:Forecasts vary considerably. Expectations range between 1 and 2 1/2 million people within the next 15 years. As a result of lower wages and high unemployment east Germany is probably not an attractive region for (potential) immigrants. But: proximity to home country (commuting, weekend trips). East European immigrants have so far given preference to the west German federal states, their share in the total west German population is between 0.3 and 0.5% on average. The share of east European immigrants in east Germany ranges between 0 and 0.2% (border regions 0.3-0.5%).
Structural policy:Currently, all east German states are eligible for Objective 1 funding in the framework of EU Structural Fund assistance; after EU enlargement this status can probably hardly be maintained, though. More EU funds will be channeled into the accession countries. In view of Germany's tight budget situation there is hardly any scope for the federal government to compensate revenue shortfalls for the east German states to a sizeable extent. Thus an efficient appropriation of the remaining funds is required all the more.
Business sentiment in east Germany:German business has an ambivalent attitude towards EU enlargement; large companies tend to stress the opportunities, whereas small and medium-sized companies are rather sceptical and fear competition.
Survey of the Dresden Chamber of Industry and Commerce (IHK; summer 2001) on the assessments of companies located near the CEEC borders: close to 14% of companies polled ultimately expect an improvement of their business situation (Polish enterprises: 31.5%); 48% anticipate a deterioration. The largest concern is fiercer price competition as a result of different cost structures.
For more analysis see the
Deutsche Bank Research website.