Candidate countries - the big picture

07-11-2003

The European Commission's report on accession has messages for all of the candidate countries in Central Europe. Slovenia was assessed as the best prepared but the commission said inflation remains a concern. Hungary was told wage growth is exceeding productivity gains. Slovakia hasn't capped steel production in line with EU demands and the Commission says the Czech Republic must improve its food safety system. Katinka Barish, is chief economist at the Centre for European Reform in London.

"Just a couple of years ago these reports were about real shortcomings, about banking sector crises, about shoddy politics, about corruption, all these sorts of things. Now we're really down to detail and that shows you how much progress we have made with the accession preparations. We're now talking about really small things. Now having said that these things are important for the functioning of the internal market."

What's the worst that could happen to Poland? I mean there is a suggestion in there that exports to the EU could be banned.

"Yes that could absolutely happen and I even think this is rather likely. But then this is what happens within the current European Union as well. I mean the French are still arguing over taking British beef after a BSE scare years ago. "

A lot of the criticism is of basic public administration functions. I wonder if you can comment on why this should be so bad in these countries.

"Yes and it is important because the EU is as much a legal community as it is a political community which means that all these rules and regulations that make up trade and competition policies and single market and all that, they need to be properly implemented and enforced across the board. Eastern European bureaucracies normally are rather weak. I mean this is partly a legacy of central planning. It's a whole ethos of not moving very fast of not liking competition. The other big problem is one of human resources. Everyone who has any kind of skills, be it computer skills or language skills or understanding how business works is much better off in the private sector where the salaries are much higher. So it is just too difficult to keep qualified people in the public sector."

And can that only be overcome by growing these economies and having public finances in a better state?

"Yes and the Hungarians are doing this at the moment. They have just given their public servants a 50% pay rise to narrow the gap between the public and the private sector a little bit but that has had very bad implications for the national budget and it sent a signal for all other sections of the economy that they will now have wage growth going through the roof. So it's a very fine balance that these countries must strike. But the EU has promised to help and it will do so."

07-11-2003