The 2004 EU Enlargement Was a Success Story Built on Deep Reform Efforts
IMF Blog, December 3, 2024
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- Authors: Robert Beyer, Claire Yi Li, Sebastian Weber
- Published: December 3, 2024
Overview and context
- The 2004 EU enlargement expanded the EU’s population by about 20 percent and welcomed the Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Slovenia, Slovakia, and Poland into the Union.
- Poland is highlighted as one of the success stories of European economic convergence and is now the EU’s sixth largest economy.
- Current accession candidates (in different stages of the process) are Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, Serbia, Georgia, the Republic of Moldova, Ukraine and Türkiye.
- The European Commission issued a new report in October with detailed assessments of each candidate’s progress toward EU accession.
Quantitative impacts of the 2004 enlargement
- After 15 years GDP per person in the new member states was on average more than 30 percent higher than it would have been without EU accession.
- Regions in new EU countries that were already better integrated into value chains with existing member states increased GDP per person nearly 10 percentage points more than those less integrated pre-accession.
- Regions with firms that had easier access to long term financing gained close to 15 percentage point more than others.
- By 2019, income per person in existing member states was around 10 percent higher than it would have been in a scenario without enlargement.
- The enlargement welcomed ten new member states in 2004 (listed above) and expanded the EU population by about 20 percent.
Main drivers of gains in new member states
- More comprehensive economic reforms prior to joining the EU, including on trade, financial sector, and product market liberalization.
- Additional financing from foreign direct investment and EU cohesion funds that helped boost the capital stock.
- Technology transfers and enhancements in educational attainment that improved productivity.
Heterogeneity of gains across regions
- Regions already integrated into value chains with existing member states benefited disproportionately, irrespective of geographic distance.
- Access to long term financing prior to accession was a key differentiator in regional gains.
- While all regions in new EU countries gained, the magnitude varied substantially based on pre-accession integration and financing conditions.
- Within existing member states, regions in Scandinavia, Germany, and Austria—already well integrated with new member states prior to accession—gained the most, though many regions further away also benefited.
Benefits to existing EU members
- The expansion of the EU’s single market was the main driver of gains for existing members, allowing firms to expand production and reap efficiency gains, including through higher investment in the accession countries.
- By 2019, aggregate income per person in existing member states was around 10 percent higher than without enlargement.
Implications for the next wave of accession
- New accession candidates will need to undertake equally ambitious reforms to make the next expansion a comparable success.
- Key requirements include strong pre-accession reforms, significant financing, political resolve, and possible institutional adaptation.
- For accession countries, actions directly under their control—such as closing business regulation and institutional gaps to the EU—are especially important.
- For existing members, deepening the single market by removing remaining within-union trade barriers and advancing the capital market union to finance dynamic firms’ growth would further amplify potential gains.
- Joint efforts could accelerate catch-up within Europe and help narrow Europe’s persistently large income gap with the US.
Source: The 2004 EU Enlargement Was a Success Story Built on Deep Reform Efforts — Robert Beyer, Claire Yi Li, Sebastian Weber; December 3, 2024. https://www.imf.org/en/blogs/articles/2024/12/03/the-2004-eu-enlargement-was-a-success-story-built-on-deep-reform-efforts