Just six months after the accession of 10 additional countries into the European Union, the largest ...
Just six months after the accession of 10 additional countries into the European Union, the largest countries are already seeing the benefits of EU membership.
They have all enjoyed net inflows of funds from the European budget, which in turn supports local currencies that have appreciated against the euro and the US dollar.
We also see an increasing number of companies moving their manufacturing base to new EU member countries as they can enjoy cheaper labour and lower taxes. While stronger local currencies seem to be a concern, if we look at exports, all these countries still record export growth of more than 20% year-on-year.
Investment and exports have been the main drivers of the high GDP growth in key Central European countries. This growth is already reflected in local stock markets where strong appreciation has been visible this year, resulting in some markets reaching their all time highs.
We have also seen large purchases by foreign investors as well as local investments and pension funds, especially in Poland where private pension funds already manage assets worth e12bn. We expect Eastern European economies to continue to benefit from greater inflows and investor focus.
In the past two years Turkey has taken major steps to ensure the beginning of accession talks with the EU. Prime minister Erdogan's current government has shown determination in passing and enacting all the relevant laws and requirements for the process to take place.
The EU accession committee has recommended the commencement of talks to the Council of Presidents, the highest body in the EU. The Council of Presidents met on 17 December 2004, to decide whether talks should start with Ankara.
The benefits of Turkey getting a date from the EU are obvious, political stability, economic stability and Western standard laws and regulations, all of which would lead to an increase foreign investment in Turkey.
One should also look at the benefits to the EU from Turkey's accession. Many of the EU members are trying to condition Turkey's membership. For instance, they are trying to limit the migration of the Turkish population to other EU countries. From what we see, aging Europe will need the young and dynamic Turkish population. In 10 years Turkish migration to Europe could be a necessity probably encouraged rather than restricted by Europe.
Although Turkey will bring Europe closer to the troubled spots in the Middle East, as a EU with Turkey will border Iraq, Iran and Syria, it will also bring Europe closer to major booming populations and markets in the region, as well as energy sources. Turkish companies with European standards would be able to dominate markets ranging from Russia in the west to North Africa in the east.
Overall the conditions for continued Eastern Europe growth and reform are present. Although trade and investment are leading economic growth, going forward local consumption should also drive growth.
Trade & investment led economic growth.
Local consumption increasing.
Benefits from Turkey getting the go ahead from the EU.
Council of Presidents may say no to Turkey.
EU may apply too many conditions on Turkey.
Accession of Turkey would bring Middle Eastern conflict closer.