Is there a Potential for Increases in FDI for Central and Eastern European Countries Following EU Accession?

Abstract

The speed of the collapse of central planning in central and eastern Europe and the former Soviet Union was one of the most startling political events of the second half of the twentieth century. No-one really knew how long the process of stabilisation and adjustment would take. What was clear, however, was that the international community would not just sit back and let it happen. Substantial resource transfers took place as well as extensive policy advice. The European Union was in the vanguard of this post-Communist reconstruction effort with both financial aid through programmes such as PHARE and policy initiatives such as the Europe Agreements. The latter not only elevated the central and east European countries (CEECs) to the apex of the Union’s ‘pyramid of privilege’ but laid the foundations for progress towards eventual accession. By the middle of 1996, ten CEECs had applied for membership of the Union; in 1998 serious negotiations over entry began; and in December 2000 a formal Treaty commitment was made at the Nice Summit. The most recent Commission report on readiness for accession (in October 2002), concluded that eight of the ten CEECs will be ready to join the EU in 2004.

We are grateful to Simon Harrington at the Office for National Statistics for advice on the data and to Heinz Herrmann, Christian Wey and Eric Strobl for helpful comments on an earlier draft of the paper. Financial support from the Leverhulme Trust under Programme Grant F114/BF is gratefully acknowledged