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Europe: Top Bankers Warn Of Possible Negative EU Consequences

The Czech capital Prague is hosting a two-day international conference on banking and finance. The theme of the first day's events was the future role of Europe in an increasingly globalized financial system. Predictably, perhaps, speakers oriented their remarks toward the role of an expanded European Union in the global economy. But far from praising the benefits of increased European integration, speakers instead warned of its dangers.

Prague, 26 March 2002 (RFE/RL) -- Top European bankers and politicians attending the European Banking and Financial Forum today in Prague used their time at the podium to voice concern over possible negative consequences of the coming expansion of the European Union.

The head of the Czech parliament and a noted EU skeptic, Vaclav Klaus, led off the discussion at the two-day conference by criticizing what he called a creeping "Europeanism" coming from Brussels. He defined Europeanism as a sort of blind promotion of concepts like unification and harmonization as ends in themselves. He says the true goal should be to set up competitive bases of legal and bureaucratic power in order to avoid concentrating power in one center.

In his speech, Klaus asked rhetorically if the EU now truly can be described as free and flourishing: "The problem for me, and I guess for all of us here, is whether Europe as such -- after such a promising decade (the 1990s) -- can be described as a free, flourishing, functioning, efficient society. And I must say, my answer to this question -- to my great regret -- is not an [unequivocal] yes. I have many, many, many doubts."

Klaus, leader of the opposition, right-of-center Civic Democratic Party, is considered a possible successor to Vaclav Havel as Czech president next year. In his speech, he openly questioned the wisdom of the Brussels-centric system on which the EU is currently based.

"My question is whether this European belief in the state and in the omnipotence of political and bureaucratic elites functioning at the continent level will be proven by history as a healthy program for the European continent. I must confess that I am not a true believer in Europeanism of that meaning."

Klaus concedes the Czechs must continue the process of EU membership because, he says, it's seen -- albeit unfairly -- as the only way for the new democracies in the East to reconnect with the continent.

But he points out the cost of membership for those in Eastern Europe is high. It means at least a partial loss of national identity, coming so soon after it had been regained after years of communist suppression.

"I know that we have to go through this procedure (join the European Union) even if we are afraid that our recently born and long-awaited identity can be lost by far-reaching Europeanization. We are afraid that the so-called harmonization has been depriving us from our existing comparative advantages."

Noreen Doyle, the first vice president of the London-based European Bank for Reconstruction and Development (EBRD), takes issue with Klaus's mostly negative interpretation. She says European integration need not lead to stagnation and creeping bureaucracy.

"If handled properly, the EU enlargement will strengthen the existing European Union, prospective new members, and the countries on the boundaries of the enlarged European Union."

But, like Klaus, she admits the advantages of EU expansion are not automatic. For her, the dangers are not so much a loss of competitiveness within the EU, but how the newly enlarged union will deal with countries left outside its borders.

She singles out Russia, the Russian enclave of Kaliningrad, Ukraine, Belarus, and Moldova as countries that stand to lose from EU expansion if it is not handled right.

"From the point of view of the EBRD, it is therefore important that the enlargement of the European Union does not inadvertently marginalize further members of the European family that have been hit hardest by the dislocation of the transition from the planned to market economy. The EU should therefore increase its active engagement with the countries outside of its newly extended borders -- the countries in the Balkans, and Russia and Ukraine, among others."

A third speaker, Finnish Finance Minister Sauli Niinisto, picked up the theme of economic dynamism. He says that no matter what public or social initiatives Brussels adopts, the EU's ultimate success depends on economic growth and the health of its private companies.

He says this time last year, EU officials were talking wistfully about how the union would soon become the engine of global economic growth. After more than six months of slowing growth rates in Europe, and now recession, he says no one talks about that anymore.

He says to ensure dynamism, prospective EU members must go beyond simply fulfilling the basic legal and political requirements for membership.

"The future member states are obliged to complete the transposition of the EU acquis. This is, however, not enough. It is highly important to ensure that market-oriented reforms are also implemented. Therefore, the final aim of the reform process should not be just to create a functioning market economy, but to create a genuine competitive environment. In the end, this is the only sustainable way to enhance dynamism and competitiveness."

The two-day conference is sponsored by the Prague-based Comenius society. Participants include the central bank governors of Belgium, Ukraine, and Belarus and two presidents of federal reserve banks in the United States.

The conference concludes tomorrow. One of the highlights will be a roundtable of Central European bankers.

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    Mark Baker

    Mark Baker is a freelance journalist and travel writer based in Prague. He has written guidebooks and articles for Lonely Planet, Frommer’s, and Fodor’s, and his articles have also appeared in National Geographic Traveler and The Wall Street Journal, among other publications.