[VIEWPOINT]A new kind of war in Europe

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[VIEWPOINT]A new kind of war in Europe

In Europe, May 1 has been Labor Day for more than a hundred years, complete with red flags and demonstrations for more pay and less work. But on this First of May, Labor Day was eclipsed by History with a capital H when the European Union expanded from 15 to 25 members. Yet the sheer numbers don’t quite do justice to the historic transformation the world has just seen.
With the exception of Malta, Cyprus and the former Yugoslav republic of Slovenia, the newcomers are all former members of the Soviet bloc. Estonia, Latvia and Lithuania were literally part of the Soviet Union, while the Czech Republic, Hungary, Poland, and Slovakia were forced members of the Soviet empire. So May 1 didn’t just mark the enlargement of the European Union. It symbolized a historic “coming home” by countries that are as European as Portugal and Ireland, but were kept from Europe by that vast Iron Curtain running from the Baltic to the Balkans.
What an irony! Austria was always considered “West.” But who knows that Vienna is farther east geographically than Prague, the capital of the Czech Republic? No city can be more European than Budapest, which before World War I was one of the two capitals of the Austrian empire ― and with architecture to show it.
So sixty years after the Iron Curtain fell over Europe, Europe is one again. But more wondrous is this: For the first time, the unification of Europe was achieved without a single shot. In the past, there have been many attempts at eastward “enlargement” ― by force, invasion and treachery. Germany’s Teutonic Knights used the Christian cross as a pretext for colonization all the way into Russia. In the 18th century, Prussia, Austria and Russia carved up Poland three times. In the 19th century, Napoleon marched to the gates of Moscow. In World War II, Hitler’s armies tried to do the same in order to enslave not only Poland, but also Russia.
May 1, 2004, thus spelled a revolutionary change in European history. For the first time, enlargement of the West unfolded in complete peace ― and with the enthusiastic support of those so absorbed. Whereas in Asia, the nation state is alive and jealous of its sovereignty, Europe has taken yet another leap into a post-national future.
The “Easties” were delirious with joy on May 1, but what about the “Westies?” The applause was rather muted. Three fears about the future are tormenting the older members of the European Union.
One is inundation by hordes of hungry East European workers in search of jobs. The other is the opposite: the export of jobs to the East by Western firms eager to take advantage of wages that may be as low as ten percent of comparable wages in Germany or Holland. The third fear is about the influx of cheap goods that will displace the high-wage, high-price goods produced in the West.
Actually, all of these fears are misplaced. As for cheap goods, most Western Europeans do not realize that the new members have been part of a common economic space ― a free-trade zone ― for the last ten years, and the impact has been so minimal that it was hardly noticed. A flood of foreign workers? Well, they are here already ― about half a million of them in Germany alone. And we are lucky they are here, because native German workers simply do not want to turn bricks into walls or clean houses any more, no matter what the wage.
Will jobs flee the West? Seventy-three percent of Germans think that investments will be drawn to their low-wage neighbors. But let’s look at the actual numbers. It turns out that business “discounted” the future quite a while ago. The big investments took place long before enlargement. For instance, Western companies invested $8.2 billion in the Czech Republic in 2002; in 2003, it was only $ 2.3 billion. In Slovakia, foreign investment dropped from $4 billion to less than half a billion. The picture is pretty much the same throughout the East, as wages are rising and cutting into the low-cost advantage that attracted foreign money in the last 10 years.
Meanwhile, these rising living standards are translating into imports of goods and services from the West. So there is probably a net gain in jobs in the West because of rising exports to “New Europe,” growing at 4-5 percent, even though growth in the “old EU” has been flat for three years.
So enlargement is not just a wondrous historical blessing for a once-divided continent; it is also an economic boon. Yet in one respect, the West Europeans are right to worry. All of the East is low-regulation and low-tax, which means that the newcomers will have an enduring strategic advantage over high-tax, highly rigid countries like France and Germany.
Therefore watch out for another “war” between Western and Eastern Europe, although it will be a totally peaceful one. Will France and Germany force Poland and its neighbors to raise taxes and regulations? Or will these capitalist newcomers force “Old Europe” to liberalize its markets? Whatever happens, this time the rivalry will not be fought with tanks and jackboots, but with wingtips and cell phones.

* The writer is the editor of Die Zeit, a German weekly, and an associate at the Olin Institute for Strategic Studies at Harvard University.

by Josef Joffe
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