http://zadonbass.org/en/news/message.html?id=9997
Viktor Yuschenko, the newly elected President of Ukraine, regards joining Ukraine to the European Union to be his first and the key task. According to him negotiations about Ukraine membership in the European Union will begin in 2007. However, he is planning to apply for EU membership in several weeks, as soon as the Government and the Department on European Integration Policy are formed. Yuschenko is also going to introduce a position of a Vice Premier Minister on European Affairs.
Javier Solana, the High EU representative on joint external policy issues and security policy, does not share Yuschenko’s optimism. In his article dedicated to cooperation between Ukraine and EU he repeated 13 times in different wordings a thesis that we should “forge close and deep relationships”; and he did not mention that Ukraine would some time join the European Union.
Rocco Buttiglione, Minister for European Affairs of Italy, thinks even more soberly. Referring to Copenhagen treaty determining terms and conditions of joining EU, he stated that Ukraine must effect 31 reforms to join the European Union. “I do not know when Ukraine will be able to meet these conditions” - he said. This is rather concrete answer.
Copenhagen criteria are not for Ukraine
Copenhagen treaty mentioned by Italian Minister represents admission criteria to the Community formulated in 1993 at the meeting of EU countries in Copenhagen. Later on these criteria were called ”Copenhagen criteria”.
The first of them claimed stability of institutions guaranteeing democracy, jural state, human rights, respect and defense of minorities’ rights. Moreover, this criterion was regarded as a pre-condition for beginning negotiations on joining the Community.
Another two criteria - existence of the market economy able to meet competition within EU, and ability to assume member-country obligations including adherence to aims of political, economic and currency union - must be achieved to the moment of joining the Community.
It is also necessary to take into account the fact that besides Copenhagen criteria of joining EU, there are also Maastricht criteria. They are even stricter as they determine the level of macro-economic achievements required for joining single currency zone - Euro zone.
We should note that three European countries: Denmark, Sweden and Great Britain did not join Euro-zone on January 1, 2002, mainly due to political reasons.
Maastricht criteria include the following requirements:
- inflation rate must not exceed the average inflation rate of three states with the lowest inflation rate by more than 1.5%;
- the national budget deficit must not exceed 3% of the country GDP;
- the national debt must not exceed 60% of GDP;
- the national currency should not suffer devaluation within the last two years, and fluctuation of the currency exchange rate must not exceed 2.25% established by the European currency system;
- interest rates on long-term governmental bonds must not exceed the average interest rates of three states with the lowest inflation rate by more than 2%.
Viktor Yuschenko is going to integrate Ukraine into the European Union within 4-5 years. However, according to many Ukrainian and western experts Ukraine will require much more time to meet all above criteria.
Moreover, many experts believe that rapid Euro integration of Ukraine conceals many if not negative but at least controversial and ambiguous factors.
The first factor - relations with Russia
One of the most objective reasons due to which Ukraine will not be ready for EU membership within at least next 5 years is our economic relationship with Russia.
Joining European Union and simultaneous opening of western borders will result in closure of eastern borders and introduction of visa regime with Russia. This will significantly complicate trips from and to Russia.
We also should not forget that all Ukrainian industry directly depends on cost of energy resources that are mainly imported from Russia. Closure of borders will lead to the increase of excise-duties, levies and other customs fees, because we will have to amend our legislation in line with European requirements and standards.
First of all this will touch customs fees, as before entering the single European market we will have to standardize them. This means that petrol (1L of petrol costs up to Euro 2 in Europe), oil products, electricity which we will be importing from Russia at European prices, will become more expensive.
Along with growing electricity charges utilities will also cost more. Not all citizens will be able to pay them. In western democratic society those people who cannot pay for some service have no rights to use it. For example, utility payments in the Paris suburb for a single-room flat, “studio”, makes up about Euro 300 per month and a flat rent for the same accommodation is over Euro 1,000 per month.
The second factor - prices and salary correlation
Taking into account experience of countries accepted recently to the “European family” we should note that Eastern Europe marked out increase of prices after joining EU while salaries remained on the same level. We can suppose that the situation in Ukraine will be the same, and not only in provinces but in “wealthy” Kiev as well.
Though the average salary in Kiev making up about USD 200 is higher than in other Ukrainian cities, it is still much lower than the average European income.
The highest salaries in the European states are paid in Switzerland, Norway, Denmark and Great Britain. The list is closed by Latvia and Lithuania where average salary is just USD 500 today. Whereas the average monthly salary in the European Union made up USD 4,500 as at May 1, 2004.
EU candidate-countries are obliged to bring their goods and services prices in line with EU prices in order to join it. For example, though most goods and food products prices in Riga before joining EU were higher than in Kiev, they still were 25-30% lower than in EU. Service prices were also higher than in the Ukrainian capital but three times lower than in Europe. However, by the year-end they all will have to be equal to the European.
In Poland, one of ten newcomer-countries joined EU on May 1, 2004, the petrol price doubled next day after getting long-expected membership. The increase of petrol price will result in growing of transportation charges leading to the growth of prices on all goods. For example, fruit prices grew by 18%, rice price increased by 27%, meat and poultry - by 22%.
In Estonia the following notices are very common: “Dear customers, we ask you to respect the increase of “Old Tallinn” price that is connected with Estonia joining EU”. Such notice can be seen on bottles of a famous liqueur which price grew by UAH 12 for a Ukrainian customer.
Export of this little Baltic country also reduced and this could not but make influence on the citizens’ living standard. Estonia Government promises dividends from joining the European Union to its citizens in some indefinite future
The third factor - closing of enterprises and agriculture noncompetitiveness
After opening western borders larger companies will enter the Ukrainian market, they will compete with our companies on equal terms. Many national companies will not meet such competition.
Besides this, people working at the enterprises that will not meet European standards will become jobless. This will also have huge impact on agricultural and processing enterprises, most of which will not be able to purchase new expensive equipment complying with sanitary, ecological and other EU standards.
More than one third of Ukrainian population lives off the production, selling and processing of agricultural products. They sell their products wholesale and at retail mostly in the markets.
“Elemental” commerce is not acceptable in the European Union that is why it will be replaced by supermarkets and special complexes with corresponding rental rate of the leased area.
Single tax will be abolished, it is also necessary to take into account the fact that after “harmonization” of the tax legislation of Ukraine in line with the European the income tax will increase from 13% to 46%.
Cash registers will be introduced compulsory. It will be necessary to purchase rather expensive software for them. Most likely it will be necessary to buy additional refrigerating equipment and change mechanical scales into electronic, as well as not to forget about goods packing.
Commercial extra charge will have to be reduced otherwise national agricultural production with its increased prices will not be able to compete in price with western production that will certainly fill up our shops.
For instance, “Rovisa”, meat processing enterprise in Lithuania, had to spend about USD 2.86 million on overcoming all euro barriers. It is most likely that those enterprises which will not have such money will have to close their production.
In Poland after obtaining this long-expected membership more than 50 enterprises producing milk products and about 1,000 producers of meat products were closed.
By the way, one of the European Commission requirements when discussing Bulgaria joining the European Union was to forbid production of home-made wine. It is despite the fact that wine-making traditions in Bulgaria are much more ancient than in France and wine is made by each village family for many centuries.
The matter is that production of Bulgarian wines might cause losses for French and Italian economies dominating in the wine market. If Bulgarians are forbidden to produce wine at home, the small production capacity of wine-making industry in this Balkan country will be enough just for Bulgarians.
The fourth factor - unemployment
If the prices of energy resources go up, the competitiveness of many kinds of products will reduce that will certainly result in closing of enterprises and accordingly in unemployment.
It is very naive to reckon that EU countries will open their labor market for us. As we know, out of all EU countries just U.K. and Ireland offered their jobs for eastern workers, and these are the most elementary and low paid jobs.
There are enough local unemployed people in Europe. The promised “equal opportunities” for new Europeans are significantly limited.
It is undesirable that for example Latvian engineers could compete with Norwegian or English ones, because they could reduce salary, undermine trade unions’ positions and make unemployment problem acute. In general, EU newcomers have right to work, however it can only be used if no local experts were found.
Having joined Europe, Poles, Czechs and Baltic population understood that they are second grade people in Europe. That is why, in order to bring back this feeling of “more European Europeans” they keep on persuading Ukraine to take its place in the third level.
Surely, it is necessary to cooperate with European Union, but not as its poor suburb and a place of cheap labor force accumulation. Moreover, Ukraine should use all its facilities and develop partner relationship both with Russia and EU, first of all taking into account its own interests and interests of its citizens.
However, it is necessary to prepare people and economy before joining Europe. It is evident that this can’t be done in the nearest future, and four-five year period offered by Viktor Yuschenko is too short.
DVC Dossier: European Union is an economic association of 15 European countries. There is a single internal market in EU, where there are no restrictions on free movement of goods, capital and manpower among the countries, there is a single currency system with a single controlling monetary institution.
Another 10 counties joined the European Union on May 1, 2004. Thus, now the European Union comprises 25 European states.
EU Strategic Program developed up to the year 2010 stipulates further expansion of the Union by joining Bulgaria and Romania in 2007; it is also planning to negotiate joining of Croatia and Turkey.
Natalia Mashkova.
Viktor Yuschenko, the newly elected President of Ukraine, regards joining Ukraine to the European Union to be his first and the key task. According to him negotiations about Ukraine membership in the European Union will begin in 2007. However, he is planning to apply for EU membership in several weeks, as soon as the Government and the Department on European Integration Policy are formed. Yuschenko is also going to introduce a position of a Vice Premier Minister on European Affairs.
Javier Solana, the High EU representative on joint external policy issues and security policy, does not share Yuschenko’s optimism. In his article dedicated to cooperation between Ukraine and EU he repeated 13 times in different wordings a thesis that we should “forge close and deep relationships”; and he did not mention that Ukraine would some time join the European Union.
Rocco Buttiglione, Minister for European Affairs of Italy, thinks even more soberly. Referring to Copenhagen treaty determining terms and conditions of joining EU, he stated that Ukraine must effect 31 reforms to join the European Union. “I do not know when Ukraine will be able to meet these conditions” - he said. This is rather concrete answer.
Copenhagen criteria are not for Ukraine
Copenhagen treaty mentioned by Italian Minister represents admission criteria to the Community formulated in 1993 at the meeting of EU countries in Copenhagen. Later on these criteria were called ”Copenhagen criteria”.
The first of them claimed stability of institutions guaranteeing democracy, jural state, human rights, respect and defense of minorities’ rights. Moreover, this criterion was regarded as a pre-condition for beginning negotiations on joining the Community.
Another two criteria - existence of the market economy able to meet competition within EU, and ability to assume member-country obligations including adherence to aims of political, economic and currency union - must be achieved to the moment of joining the Community.
It is also necessary to take into account the fact that besides Copenhagen criteria of joining EU, there are also Maastricht criteria. They are even stricter as they determine the level of macro-economic achievements required for joining single currency zone - Euro zone.
We should note that three European countries: Denmark, Sweden and Great Britain did not join Euro-zone on January 1, 2002, mainly due to political reasons.
Maastricht criteria include the following requirements:
- inflation rate must not exceed the average inflation rate of three states with the lowest inflation rate by more than 1.5%;
- the national budget deficit must not exceed 3% of the country GDP;
- the national debt must not exceed 60% of GDP;
- the national currency should not suffer devaluation within the last two years, and fluctuation of the currency exchange rate must not exceed 2.25% established by the European currency system;
- interest rates on long-term governmental bonds must not exceed the average interest rates of three states with the lowest inflation rate by more than 2%.
Viktor Yuschenko is going to integrate Ukraine into the European Union within 4-5 years. However, according to many Ukrainian and western experts Ukraine will require much more time to meet all above criteria.
Moreover, many experts believe that rapid Euro integration of Ukraine conceals many if not negative but at least controversial and ambiguous factors.
The first factor - relations with Russia
One of the most objective reasons due to which Ukraine will not be ready for EU membership within at least next 5 years is our economic relationship with Russia.
Joining European Union and simultaneous opening of western borders will result in closure of eastern borders and introduction of visa regime with Russia. This will significantly complicate trips from and to Russia.
We also should not forget that all Ukrainian industry directly depends on cost of energy resources that are mainly imported from Russia. Closure of borders will lead to the increase of excise-duties, levies and other customs fees, because we will have to amend our legislation in line with European requirements and standards.
First of all this will touch customs fees, as before entering the single European market we will have to standardize them. This means that petrol (1L of petrol costs up to Euro 2 in Europe), oil products, electricity which we will be importing from Russia at European prices, will become more expensive.
Along with growing electricity charges utilities will also cost more. Not all citizens will be able to pay them. In western democratic society those people who cannot pay for some service have no rights to use it. For example, utility payments in the Paris suburb for a single-room flat, “studio”, makes up about Euro 300 per month and a flat rent for the same accommodation is over Euro 1,000 per month.
The second factor - prices and salary correlation
Taking into account experience of countries accepted recently to the “European family” we should note that Eastern Europe marked out increase of prices after joining EU while salaries remained on the same level. We can suppose that the situation in Ukraine will be the same, and not only in provinces but in “wealthy” Kiev as well.
Though the average salary in Kiev making up about USD 200 is higher than in other Ukrainian cities, it is still much lower than the average European income.
The highest salaries in the European states are paid in Switzerland, Norway, Denmark and Great Britain. The list is closed by Latvia and Lithuania where average salary is just USD 500 today. Whereas the average monthly salary in the European Union made up USD 4,500 as at May 1, 2004.
EU candidate-countries are obliged to bring their goods and services prices in line with EU prices in order to join it. For example, though most goods and food products prices in Riga before joining EU were higher than in Kiev, they still were 25-30% lower than in EU. Service prices were also higher than in the Ukrainian capital but three times lower than in Europe. However, by the year-end they all will have to be equal to the European.
In Poland, one of ten newcomer-countries joined EU on May 1, 2004, the petrol price doubled next day after getting long-expected membership. The increase of petrol price will result in growing of transportation charges leading to the growth of prices on all goods. For example, fruit prices grew by 18%, rice price increased by 27%, meat and poultry - by 22%.
In Estonia the following notices are very common: “Dear customers, we ask you to respect the increase of “Old Tallinn” price that is connected with Estonia joining EU”. Such notice can be seen on bottles of a famous liqueur which price grew by UAH 12 for a Ukrainian customer.
Export of this little Baltic country also reduced and this could not but make influence on the citizens’ living standard. Estonia Government promises dividends from joining the European Union to its citizens in some indefinite future
The third factor - closing of enterprises and agriculture noncompetitiveness
After opening western borders larger companies will enter the Ukrainian market, they will compete with our companies on equal terms. Many national companies will not meet such competition.
Besides this, people working at the enterprises that will not meet European standards will become jobless. This will also have huge impact on agricultural and processing enterprises, most of which will not be able to purchase new expensive equipment complying with sanitary, ecological and other EU standards.
More than one third of Ukrainian population lives off the production, selling and processing of agricultural products. They sell their products wholesale and at retail mostly in the markets.
“Elemental” commerce is not acceptable in the European Union that is why it will be replaced by supermarkets and special complexes with corresponding rental rate of the leased area.
Single tax will be abolished, it is also necessary to take into account the fact that after “harmonization” of the tax legislation of Ukraine in line with the European the income tax will increase from 13% to 46%.
Cash registers will be introduced compulsory. It will be necessary to purchase rather expensive software for them. Most likely it will be necessary to buy additional refrigerating equipment and change mechanical scales into electronic, as well as not to forget about goods packing.
Commercial extra charge will have to be reduced otherwise national agricultural production with its increased prices will not be able to compete in price with western production that will certainly fill up our shops.
For instance, “Rovisa”, meat processing enterprise in Lithuania, had to spend about USD 2.86 million on overcoming all euro barriers. It is most likely that those enterprises which will not have such money will have to close their production.
In Poland after obtaining this long-expected membership more than 50 enterprises producing milk products and about 1,000 producers of meat products were closed.
By the way, one of the European Commission requirements when discussing Bulgaria joining the European Union was to forbid production of home-made wine. It is despite the fact that wine-making traditions in Bulgaria are much more ancient than in France and wine is made by each village family for many centuries.
The matter is that production of Bulgarian wines might cause losses for French and Italian economies dominating in the wine market. If Bulgarians are forbidden to produce wine at home, the small production capacity of wine-making industry in this Balkan country will be enough just for Bulgarians.
The fourth factor - unemployment
If the prices of energy resources go up, the competitiveness of many kinds of products will reduce that will certainly result in closing of enterprises and accordingly in unemployment.
It is very naive to reckon that EU countries will open their labor market for us. As we know, out of all EU countries just U.K. and Ireland offered their jobs for eastern workers, and these are the most elementary and low paid jobs.
There are enough local unemployed people in Europe. The promised “equal opportunities” for new Europeans are significantly limited.
It is undesirable that for example Latvian engineers could compete with Norwegian or English ones, because they could reduce salary, undermine trade unions’ positions and make unemployment problem acute. In general, EU newcomers have right to work, however it can only be used if no local experts were found.
Having joined Europe, Poles, Czechs and Baltic population understood that they are second grade people in Europe. That is why, in order to bring back this feeling of “more European Europeans” they keep on persuading Ukraine to take its place in the third level.
Surely, it is necessary to cooperate with European Union, but not as its poor suburb and a place of cheap labor force accumulation. Moreover, Ukraine should use all its facilities and develop partner relationship both with Russia and EU, first of all taking into account its own interests and interests of its citizens.
However, it is necessary to prepare people and economy before joining Europe. It is evident that this can’t be done in the nearest future, and four-five year period offered by Viktor Yuschenko is too short.
DVC Dossier: European Union is an economic association of 15 European countries. There is a single internal market in EU, where there are no restrictions on free movement of goods, capital and manpower among the countries, there is a single currency system with a single controlling monetary institution.
Another 10 counties joined the European Union on May 1, 2004. Thus, now the European Union comprises 25 European states.
EU Strategic Program developed up to the year 2010 stipulates further expansion of the Union by joining Bulgaria and Romania in 2007; it is also planning to negotiate joining of Croatia and Turkey.
Natalia Mashkova.
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