EU Eastward Expansion: 20 years in fast motion

The EU's eastward enlargement is a historic success story - economically, politically and in terms of consolidating Europe's importance as a leading region in world trade. The World Bank also acknowledges this by describing Europe as an "integration machine". Never before in history has the fundamental transformation of an economic system worked so quickly, in this case from a planned economy to a market economy.

There were reservations before the new members joined. The economic gap between the accession countries and the existing member states was too great. The wage gap was also repeatedly cited as an argument against the enlargement round. Many feared that the influx of workers from the new member states could lead to low wages and higher unemployment. The debate was particularly controversial in Germany: Immediately before the accession round, less than a third of Germans were in favor of enlargement in the Eurobarometer - in no other old EU member state were approval rates so low.

The price for the big enlargement round was a series of transitional regulations. For example, the old EU states were given the right to close their labor markets to citizens from the new member states for up to seven years. Agricultural subsidies were also only paid in full years later.

The reason for this is the transitional arrangement for agricultural income support negotiated at the EU summit in Copenhagen in December 2002. After accession, Eastern European farmers initially had to make do with 25% of what their counterparts in France and Germany received. Full "equal treatment" between West and East will only be achieved in 2013 for these subsidies, which account for around two thirds of the agricultural budget.

On the other hand, farmers in the new member states benefited from EU mechanisms to support agricultural markets immediately after accession: high tariffs, export subsidies and state purchase guarantees caused prices for some agricultural products, especially dairy products and beef, to soar. The EU produces a third more grain than before and a quarter more milk and meat after enlargement. Arable land increased by 45% and the market, with 470 million inhabitants, is one of the largest and most absorbent.

At the time, Poland was considered the worst-prepared candidate of the ten countries that joined the EU in 2004. The reforms demanded by Brussels in advance had only been partially implemented. And the country was rife with corruption scandals involving key party officials. The fact that Poland was allowed to join the EU at all had less economic than political reasons. Western politicians did not want to leave out the largest of the Eastern European accession candidates. Without Poland, EU enlargement made no political sense, many felt.

At the same time, there were great fears in Poland about the new alliance. There was concern that after accession, Western investors would dominate all sectors of the economy, "buy up" the country and ultimately lead it to bankruptcy. Many farmers, who play the biggest role in the largest accession state, were also afraid: Almost 20 % of the workforce there still earn most of their money in agriculture. They were worried about whether their products would be competitive after enlargement. 

None of the nightmare scenarios came true. According to a survey by the Polish state institute CBOS, over 60% of Poles now believe that joining the EU has been of great benefit to the country. Farmers are the most satisfied, as they have also benefited the most from EU subsidies. Three quarters of them speak positively about the EU.

In economic terms, EU accession was definitely a success: the Polish economy grew by 49% (in terms of GDP). Unemployment, once at 20%, has halved. Only a few years after EU enlargement, it also became clear that well-educated young Poles can also lead a successful life in their own country.

For years, the governments of the ten candidate countries fought for EU subsidies and raised high expectations. For months, the haggling over subsidies, area premiums and milk quotas dominated the accession negotiations. The result disappointed many farmers in Eastern Europe, probably also because the demands were so high. They felt like second-class farmers because the agricultural subsidies were initially less generous for them than in Western Europe.

Looking at the current EU budget, just under €243 billion has been budgeted for subsidies, with around €57 billion allocated to agricultural subsidies alone in 2022 (see chart). The funds for the Common Agricultural Policy (CAP) are made up of the pillars of the European Agricultural Guarantee Fund and the European Agricultural Fund for Rural Development.

The West is still one of the top recipients of agricultural subsidies. In 2022, Germany received around €6.3 billion in subsidies for the agricultural sector, while the federal government contributed around €2 billion in the corresponding financial year. Only France and Spain, with €9.5 billion and €6.9 billion respectively, received even more financial aid for domestic agriculture.

It is also remarkable that the highest-ranking countries have an agricultural subsidy share of just under 50% of total EU subsidies. France is higher at 56% and Germany is lower at 45%. Other EU countries such as Poland, which also received around € 5 billion in agricultural subsidies, are primarily subsidized in other economic sectors.