EU membership a nightmare
I feared I would have to spend an uncomfortable and cold night on the platform at Krzyż railway junction when I was approached by a complete stranger and offered shelter and a bed for the night. Two days later, after my host informed me that the situation had calmed down, I returned to the station and asked a middle-aged official whether the connection to Szczecin had restarted. He was adamant that the trains had been running normally and that I was rather stupid for believing the misinformation of saboteurs and vehemently denied there had been any trouble, anywhere. At that time, there was only one party and everyone in authority toed the party line, and those who disagreed over the high price of food were considered to be 'Enemies of the State.'
When I returned towards the end of the 1990's, Poland had changed. Warszawa had three new hotels to rival the three pillars of the old establishment - the Bristol, the Warszawa, and the Gromada. They were the Marriott, the Holiday Inn and the Sheraton. And, most importantly, McDonald's was on the scene. The four pillars of the ex-pat comfort zone provided the most important facility: clean lavatories for free as opposed to dirty lavatories at a price.
Other familiar international names were already part of the landscape. Estate agencies; solicitors; accountants; banks; and insurance and finance companies were all here assisting the people of Poland in their preparation for the obvious prosperity to come. Credit became more easily available and car ownership boomed. Soon the property developers were competing with one another in the construction of more and more grandiose schemes. Spacious and luxurious office blocks sprang up like mushrooms. And more hotels. Then out-of-town shopping malls made their appearance, containing supermarkets offering a choice of products from all over the world in addition to the four shelves filled with 24 varieties of tomato ketchup that was the trademark of the previous system. And more hotels.
During my stay, the city changed from a decrepit, socialist eyesore to a metropolis on the move, with a new bridge facilitating progress from West to East built by a company that was formed after the contract had been granted. Warszawa became an international city on August 1, 1999, when parking meters appeared in the capital, and a partially solvent city on December 11, 2003, when it actually decided to acquire some revenue from them. However, once a rash of partially filled coffee bars and modern style drinking dens started to appear, then disappear and then reappear (a good way to launder money) and Hennes & Mauritz replaced The Arena, the most frequently used conference centre for the, particularly Dutch, ex-pat contingent, I knew that the peak of economic development had been reached and that the future would consist of an increasingly violent squabble over ever-diminishing resources.
May 1, 2004 will mark the establishment of a bureaucratic nightmare that will prove immensely damaging for the prosperity of Europeans, apart from politicians, bureaucrats, academics and economists - a conclusion with which the prestigious Mont Pelerin Society, whose members are an impressive collection of Nobel-prize winning economists, leading international academics and think-tankers, agree.
Commentators who still spout the standard line that membership of the EU will facilitate flows of trade and investment (but not labor) across Europe and increase economic prosperity further actually show their ignorance of what has happened and the high probability that the present economic situation is as good as it gets.
Since the early 1990s, the accession states entered into various association agreements with the EU in order to facilitate trade. In 1997, the introduction of a scheme called the 'Pan-European System of Cumulation of Origin' allowed all the separate and usually incompatible trade deals signed until then to be merged into one large, Europe-wide free trade zone for industrial goods.
Around 95 percent of trade between the EU and the accession states is already completely liberalized. It is therefore wrong to claim that joining the EU will provide new markets for Central and Eastern European producers. Central and Eastern European companies have already redirected their trade towards the EU. Indeed, the existing 15 members account for between 60 percent and 75 percent of the accession states' exports. In fact, Central and Eastern Europe's economic integration with the EU has already peaked, even before actual membership.
The real impact of enlargement on the European economies will be political. Combined with the proposed new European constitution, membership will allow the existing members to impose their rules and regulations on the new members and, by doing so, stifle competition in order to protect their own revenue base.
The biggest and most important battle will be over the issue of taxation. There is a glaring difference between the relatively low corporate tax burden of the 10 applicant states and that levied by the rest of the EU. In Estonia, there is a 0 percent corporate tax burden; in Lithuania and Cyprus it is 15 percent; and in Latvia, Slovakia and Poland it is just 19 percent. By contrast, Germany levies 38.7 percent; France 35.4 percent; Spain 35 percent; Italy 34 percent and the UK 30 percent. Of course, the EU accession countries use lower tax rates to compensate for the lower productivity of their workers and their high level of government corruption.
The same is becoming true of personal income tax. A flat rate tax was introduced in Estonia in 1994 and to date Latvia and Lithuania have adopted flat taxes, as have Russia and Ukraine, while Slovakia is planning radical reforms. For high-tax EU nations, the challenge is clear. Either they succeed in crushing the small, low-tax member states and impose tax harmonization, perhaps with the help of the European Court of Justice and the new charter of fundamental rights, or else they will have to slash their taxes. They cannot afford to do so, as it would mean certain bankruptcy, even though in Germany over 41,000 small-to-medium-sized companies went bust last year (an average of more than 111 per day) and direct international investment was down by 86 percent. Only when the results of this looming battle are known will we understand what the true legacy of European enlargement will prove to have been. But one thing is clear: officials in Brussels will be the heroes of the piece and everyone in authority will toe the party line, and those who disagree with the authorities over the high cost of food will be considered 'Enemies of the State.'
Just in case you believe that the Euro will rule, have you ever met a native speaker of Esperanto? The history of this language, invented by L.L. Zamenhof (1877-1885), living in Warsaw at the time, gives you a clue to the eventual role that the Euro will play.
Disenchanted Germans in the country's capital are introducing a new currency which will replace the despised euro and become legal tender in local shops in September. The new money will be called the 'Berliner Mark' and will be introduced at shops and businesses in the upmarket Prenzlauer Berg area before being expanded to the rest of Berlin.
When I returned towards the end of the 1990's, Poland had changed. Warszawa had three new hotels to rival the three pillars of the old establishment - the Bristol, the Warszawa, and the Gromada. They were the Marriott, the Holiday Inn and the Sheraton. And, most importantly, McDonald's was on the scene. The four pillars of the ex-pat comfort zone provided the most important facility: clean lavatories for free as opposed to dirty lavatories at a price.
Other familiar international names were already part of the landscape. Estate agencies; solicitors; accountants; banks; and insurance and finance companies were all here assisting the people of Poland in their preparation for the obvious prosperity to come. Credit became more easily available and car ownership boomed. Soon the property developers were competing with one another in the construction of more and more grandiose schemes. Spacious and luxurious office blocks sprang up like mushrooms. And more hotels. Then out-of-town shopping malls made their appearance, containing supermarkets offering a choice of products from all over the world in addition to the four shelves filled with 24 varieties of tomato ketchup that was the trademark of the previous system. And more hotels.
During my stay, the city changed from a decrepit, socialist eyesore to a metropolis on the move, with a new bridge facilitating progress from West to East built by a company that was formed after the contract had been granted. Warszawa became an international city on August 1, 1999, when parking meters appeared in the capital, and a partially solvent city on December 11, 2003, when it actually decided to acquire some revenue from them. However, once a rash of partially filled coffee bars and modern style drinking dens started to appear, then disappear and then reappear (a good way to launder money) and Hennes & Mauritz replaced The Arena, the most frequently used conference centre for the, particularly Dutch, ex-pat contingent, I knew that the peak of economic development had been reached and that the future would consist of an increasingly violent squabble over ever-diminishing resources.
May 1, 2004 will mark the establishment of a bureaucratic nightmare that will prove immensely damaging for the prosperity of Europeans, apart from politicians, bureaucrats, academics and economists - a conclusion with which the prestigious Mont Pelerin Society, whose members are an impressive collection of Nobel-prize winning economists, leading international academics and think-tankers, agree.
Commentators who still spout the standard line that membership of the EU will facilitate flows of trade and investment (but not labor) across Europe and increase economic prosperity further actually show their ignorance of what has happened and the high probability that the present economic situation is as good as it gets.
Since the early 1990s, the accession states entered into various association agreements with the EU in order to facilitate trade. In 1997, the introduction of a scheme called the 'Pan-European System of Cumulation of Origin' allowed all the separate and usually incompatible trade deals signed until then to be merged into one large, Europe-wide free trade zone for industrial goods.
Around 95 percent of trade between the EU and the accession states is already completely liberalized. It is therefore wrong to claim that joining the EU will provide new markets for Central and Eastern European producers. Central and Eastern European companies have already redirected their trade towards the EU. Indeed, the existing 15 members account for between 60 percent and 75 percent of the accession states' exports. In fact, Central and Eastern Europe's economic integration with the EU has already peaked, even before actual membership.
The real impact of enlargement on the European economies will be political. Combined with the proposed new European constitution, membership will allow the existing members to impose their rules and regulations on the new members and, by doing so, stifle competition in order to protect their own revenue base.
The biggest and most important battle will be over the issue of taxation. There is a glaring difference between the relatively low corporate tax burden of the 10 applicant states and that levied by the rest of the EU. In Estonia, there is a 0 percent corporate tax burden; in Lithuania and Cyprus it is 15 percent; and in Latvia, Slovakia and Poland it is just 19 percent. By contrast, Germany levies 38.7 percent; France 35.4 percent; Spain 35 percent; Italy 34 percent and the UK 30 percent. Of course, the EU accession countries use lower tax rates to compensate for the lower productivity of their workers and their high level of government corruption.
The same is becoming true of personal income tax. A flat rate tax was introduced in Estonia in 1994 and to date Latvia and Lithuania have adopted flat taxes, as have Russia and Ukraine, while Slovakia is planning radical reforms. For high-tax EU nations, the challenge is clear. Either they succeed in crushing the small, low-tax member states and impose tax harmonization, perhaps with the help of the European Court of Justice and the new charter of fundamental rights, or else they will have to slash their taxes. They cannot afford to do so, as it would mean certain bankruptcy, even though in Germany over 41,000 small-to-medium-sized companies went bust last year (an average of more than 111 per day) and direct international investment was down by 86 percent. Only when the results of this looming battle are known will we understand what the true legacy of European enlargement will prove to have been. But one thing is clear: officials in Brussels will be the heroes of the piece and everyone in authority will toe the party line, and those who disagree with the authorities over the high cost of food will be considered 'Enemies of the State.'
Just in case you believe that the Euro will rule, have you ever met a native speaker of Esperanto? The history of this language, invented by L.L. Zamenhof (1877-1885), living in Warsaw at the time, gives you a clue to the eventual role that the Euro will play.
Disenchanted Germans in the country's capital are introducing a new currency which will replace the despised euro and become legal tender in local shops in September. The new money will be called the 'Berliner Mark' and will be introduced at shops and businesses in the upmarket Prenzlauer Berg area before being expanded to the rest of Berlin.
