Vision and reality remains poles apart
CO-OPERATIVE is a bad word in Poland. In the past it meant a massive, state-run farm.
But Jan Mitura needs help to buy cool rooms for the hundreds of tonnes of strawberries he grows every year on his 150 acres.
He could form a cooperative with his neighbours who are in the same business, build the cool rooms and employ a marketing manager.
And maybe they could ensure he does not become over-reliant on a single customer as he is afraid of losing his economic independence.
With his wife, Mariola, and three teenage sons, life is good. They spent a lot of money extending and modernising their house, bought big new tractors with EU help and their eldest son is going to agricultural college.
That son, with the 20 acres of land given to him by his father, qualified as a young farmer for an EU grant and also bought a tractor.
Jan is one of the new breed of Polish farmers a businessman prepared to expand his business and compete internationally. But he is cautiously optimistic and a little anxious about joining the EU.
Like most of his countrymen he knows now that the rich West will not buy him and his country out of all their troubles.
Ireland is held up as the model of a very successful EU economy and the new countries assume it is because of the huge amount of money from the EU.
But the truth is not as simple Greece, Portugal and Spain received much the same help but have not had the same success. Greece is still poorer than several of the new members.
Ireland received more than €17 billion from Structural and Cohesion Funds during its 30 years of membership and €31 billion in farm subsidies.
However, the impact was not as great on the country's gross national product as many might think.
Jim Higgins, principle officer in the banking finance and international section in the Department of Finance says Structural Funds added about 1.5% to the country's GNP.
Ireland failed to use the EU funds efficiently for the first 20 years, using them instead to fund unemployment benefits and civil service wages, according to research carried out by MEP Joe McCartin.
The country owed 112% of GDP in 1987 and was on the verge of bankruptcy. It was only when the Government tackled public debt that real change became possible.
The cutbacks meant less money for infrastructure, education and training, but the EU money helped out, putting the country in a better position to take advantage of the economic recovery in the 1990s.
Jim Higgins said EU regulations forced the Government to adopt a more cost effective or 'value for money' approach.
The EU10 are perhaps in a better position than Ireland was when it joined the EU in 1973.
Four of the new members Slovenia, Cyprus, Malta and Estonia are wealthier per head than Ireland was at the time of its accession.
Their growth is underway with an average of over 4% last year which is the same as the US and four times the EU-15 average.
Many of their competitive advantages are developed: a well educated and skilled workforce; wages a quarter of Germany's; corporate taxes half the level of Germany's though still higher than Ireland's; and foreign direct investment similar to that currently being experienced in China.
They have spent the last four years negotiating over 80,000 pages of EU law, adopting them and integrating them into their own systems of government and economies.
The new legislation covers a far wider range than when Ireland joined and in many ways better prepares them to meet the challenges of a modern capitalist culture.
The EU-10 face similar problems to those Ireland has faced at various stages in its membership: high unemployment (which in Poland is about 20%); a danger of inflation due to rapid growth; and rapid social changes.
The percentage of farmers or those working in agriculture is as high as 30% in some of the countries. Many are unemployed or, at least, under-employed.
They are joining the EU while the Common Agricultural Policy is changing so they will not get the kind of easy money doled out to Irish farmers but they will receive rural development funding.
However, they will need to learn the lesson of fiscal rectitude from Ireland.
Several of their economies are having difficulties, including those of Poland, Hungary and the Czech Republic.
In Poland, after refusing to adopt belt tightening measures, both opposition and government are now ready to make severe cutbacks that include reducing pensions and civil service pay. In fact, some opposition parties are questioning whether the cuts proposed go deep enough.
Integration is well under way with almost all necessary tariffs and quotas scrapped on goods being exported and imported between the EU-10 and EU-15.
But the imposition of EU excise taxes will increase some prices for instance, sugar is to double in price from four cents a kilo in Estonia.
The economies of the EU-10 are expected to converge with the EU-15 much as Ireland's has until the cost of living is much the same across the EU-25. The changes will be enormous if incomes in the EU-15 do reduce. For instance, at present the annual average income in Lithuania is about a sixth of the EU-15 average while the cost of living is much the same.
However, despite the huge growth being experienced at present, convergence is predicted to take years.
Growing at even 2% faster than, say, France, Slovenia the best of the EU-10 economies would take over 20 years to catch up with the richest states.
Investment has been flooding into most of the new member states and this is expected to continue for some years attracted by the low operating costs and the low wages. Wages in Poland are a quarter of the EU average while the Czech Republic has the second-lowest cost of living of the new members, with prices some 45% lower than Dublin according to the latest survey.
They have low corporate tax an incentive to industry they learned from the Irish which at present varies from 0% in Estonia to 19% in Latvia, Slovenia and Poland.
Over the past 13 years foreign direct investment into the former communist countries was close to e200 billion with Poland, Czech Republic and Hungary getting half of this. Companies such as Volkswagen, Europe's biggest car-maker, and Tesco, Britain's largest grocer, have invested a combined e95.5 billion into the region in the past 15 years.
However, the latest forecast from the Economist Intelligence Unit (EIU) suggests that even these tiger cubs could lose out to Asia. They have gained almost as much as they are going to and their advantages in the eyes of investors will be offset by the effects of higher wages; the adoption of business-inhibiting aspects of EU rules; and the possibility of a post-accession slowdown in reform momentum.
According to Daniel Franklin, the EIU's Editorial Director, "far from being able to sit back and reap widely expected gains from joining the EU, the new east European members will have to work very hard to retain their attractiveness for investors, to improve their business environments and maintain competitiveness."
While this is bad news for the EU-25, the EU-15 will hope to benefit from exporting to the new members. Ireland exports the least of all the EU-15 to the new member states little more than 1% of its total exports.
"This offers a real opportunity to Irish business," Colin Hunt of Goodbody Stockbrokers points out.
Germany's Foreign Trade and Exporters Association expects this huge new market could provide a half million new jobs in Germany alone over the next ten years even though they have already lost quite a lot of industry to the new states.
The next big move for the new member states will be adopting the euro.
They have signed up to it as part of their accession agreement but will have to satisfy all the requirements beforehand. Latvia and Lithuania already meet the criteria, according to Colin Hunt.
He believes they will adopt the euro in 2007 with Estonia and Slovenia, then Malta and Cyprus next in 2008 and the other four the following year.
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