Growth and prosperity in Europe - an agenda

Enlargement will provide major impulses for economic integration and new possibilities for the division of labour in the enlarged EU will offer additional opportunities for growth. At the same time, ensuring a more or less uniform regulatory framework in a single market comprising 25 or more countries with very different standards of living will be an enormous challenge. The catch-up process would be threatened if countries were to enter the European Economic and Monetary Union too early. The economic integration of the accession countries with the EU is already far advanced. After they join the Union, the ties will become even closer through increased trade and direct investment. All the studies that have looked into the economic effects of the enlargement conclude that it will lead to prosperity gains, albeit moderate, for the EU owing mainly to a better, Union-wide allocation of resources. Therefore, the more abundant (and at present cheaper) supply of labour must be used efficiently (i.e. full freedom of movement immediately upon entry), trade in goods and services must be freed from barriers (i.e. exceptions for particular sectors should be kept to a minimum), and capital must flow unimpeded if the Union is to take full advantage of the growth opportunities offered by enlargement. The EU-15 countries will have to adjust in some areas in response to the new competition; in their labour markets, for example, they will need greater wage flexibility and higher mobility. There are also indications that the accession countries will pursue more investor-friendly tax policies with lower corporate taxation.