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EUROPEAN UNION

The threats of EU entry

TERRORISM and the Iraqi crisis will have more influence on the course of developments in the world than anything else in the immediate future. Although both seem to have little relevance for everyday life in Slovakia and the country's position within the EU, the contrary is true.
The prospect of a long-term military operation and the danger of terrorist attacks in Europe have brought a new agenda to the forefront of European politics - security. The EU has traditionally focused mainly on creating a strong common market, characterised by a high degree of cohesion.

TERRORISM and the Iraqi crisis will have more influence on the course of developments in the world than anything else in the immediate future. Although both seem to have little relevance for everyday life in Slovakia and the country's position within the EU, the contrary is true.

The prospect of a long-term military operation and the danger of terrorist attacks in Europe have brought a new agenda to the forefront of European politics - security. The EU has traditionally focused mainly on creating a strong common market, characterised by a high degree of cohesion. That cohesion was possible thanks to the willingness of the rich to share with the poor for the benefit of all.

Investment in security in European countries has been low. Military expenditures per capita in the US are over $950 (?804), according to the CIA World Factbook. The same figure for France is $772 (?653) and only $470 (?398) for Germany. If these countries decide more needs to be spent on defence, whether it is the military or other security forces, it could mean trouble for the EU.

But France and Germany have failed to keep their budgetary deficits under the 3 percent required under euro-zone rules for three years straight. With additional funds needed for security, these countries would be faced with two options - increasing taxes or running a deeper deficit.

If they raise taxes, they are likely to put enormous pressure on smaller states to do the same. Otherwise, they will find their enterprises moving to countries offering more advantageous tax rates, such as Slovakia, and their tax revenues falling as a result.

In line with this trend, German Chancellor Gerhard Schröder said in late April that acceding countries could not hope to keep favourable tax rates and expect generous EU funding simultaneously. And this is at a time when security is still not as big an issue as it could become in upcoming months.

If large EU states are forced to run deeper deficits, there is little reason to hope there will be enough cash to hand out to less developed acceding countries. A possible oil crisis or difficulties for the US economy caused by either terrorism or a deepening of tensions in the Middle East would have a further devastating effect on the EU economy.

But even without the new threats, the European economy is struggling. Political leaders recently had to acknowledge that the goal set at the union's 2000 Lisbon summit - to make the EU the world's most competitive and dynamic economy by 2010 - will certainly not be achieved.

Many blame Europe's generous social systems for the continent's sluggish economy. With political focus diverted to the issues of security, chances for decisive reform are likely to be reduced. However, even if all stays as it is security-wise, reducing payments to new EU members could be more tempting to current members seeking cures for their domestic economic ailments than pushing through politically sensitive reforms.

If there is not enough cash for the new member states, whether due to safety or the current members' inability to undergo painful reform, and regional cohesion as a fundamental principle of the union is thrown overboard, enlargement could turn ugly.

The same will be true if new members are forced to cripple their business environments by unifying their tax systems with those of EU countries. Without additional support, Slovak firms, with low labour productivity and EU-imposed environmental and other requirements emptying their wallets, will find it impossible to compete with their Western rivals.

Most obviously, their ruin could lead to a further increase in unemployment, already high at 17 percent in the third quarter of 2003, according to the Slovak Statistics Office. However, it could also mean that Slovakia would indeed turn into a large production hall for foreign investors seeking cheap labour, as already prophesied by some.

Any such economic developments would have their consequences in the political realm. As soon as the union becomes more about unfair internal economic rivalry and harmful restrictions than about unity and free competition, Slovakia will be forced to reconsider its future as a member.

Moreover, the EU is likely to become a scapegoat for many of Slovakia's problems, once the population's enthusiasm for integration vanishes. The greater the problems, the more mud will be thrown in the direction of Brussels.

Unfortunately, the same trend could be expected in the countries of the EU15, where there are already fears of cheap labour or Roma migrants flooding their cities and towns. It is no coincidence that the new EU constitution is likely to include a clause allowing for countries to withdraw from the union, something impossible at the moment. Europe will be immune to the threat of disunity only once a truly European identity is created and citizens of neighbouring countries are not viewed as rivals but as fellow Europeans. Then Europeans will be able to work towards common goals even in the face of true problems, rather than trying to climb over each other's backs in times of crisis.

Considering the continent's cultural, religious, historical, and linguistic differences, as well as the deep roots of European prejudices, that process may take decades, if not longer.

For the time being, Europe needs to be glued together by cash.

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