May first marked the most important expansion of the European Union in its 50 year history, as 10 countries joined the 15 existing members to create an economic block of 455 million people stretching from the Western shores of Ireland deep into Central Europe.
Four former Warsaw Pact nations, Poland, Hungary, the Czech Republic and Slovakia joined three Baltic states, Latvia, Lithuania and Estonia, along with Slovenia, formerly part of Yugoslavia, and two Mediterranean Islands, Cyprus and Malta, to swell the EU’s numbers by 74 million.
The economic terms under which the new countries joined the EU mean that full and equal provisions with the existing members won’t happen right away. Worries over such matters as immigration, low wage competition and farm subsidies have essentially put Europe on a two-tier system.
However, the new EU has formed the world’s largest trading bloc, and the center of gravity has definitely shifted eastward. The long-standing east-west divide should gradually disappear. The east bloc countries formerly state run economies have now been transformed into free market economies – a prerequisite for EU membership, and they will offer investors significant opportunities.
Where economic investment leads, the insurance industry is never far behind, and European and American companies have been positioning themselves to take advantage of the EU’s expansion for many years. The pace of investment and the search for increased market share is expected to continue as companies such as Germany’s Allianz, France’s AXA, Italy’s Generali, Holland’s ING, and the U.S. AIG seek to position themselves in the new markets.
It will take some time, however, for the newcomers to catch up. Their total GDP is less than 5 percent of that generated by the old EU members. For instance Poland the largest of the newcomers with a population of 38.2 million posted around $12,300 GDP per person in 2003, 41 percent of the EU average. Ireland, Denmark and the Netherlands each produced almost twice as much.
The Irish experience, however, is the best example of what EU membership can achieve, and one that the newcomers certainly hope to emulate. Since it joined the EU in 1973, the country has moved from a backwater, largely dependent on farming, tourism and the emigration of its people to survive, to become one of the EU’s most successful countries – the “Celtic Tiger.” Ireland’s GDP per person in 2001 was over $27,000 – equal with Denmark, and exceeded only by Luxembourg.
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