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Mr. Prime Minister,
Mr. Commissioner,
Dear colleagues,
I am grateful that the Government of Latvia and European Commission have convened this roundtable. Commissioner’s presence here today is a strong indication that issues of social dimension are being elevated ever higher on the EU’s enlargement agenda. Over the past decade countries in the Central Europe have been coping with profound structural reforms, which affect all tissues of the society. It is a fact of life - accession to the EU has served as a catalyst for the reform engine, which is now running with full speed. This dynamism has become so involving that social factors or even individual psychology have, somewhere along the way, been pushed aside – perhaps for better times. Now that enlargement of the Union is a matter of an immediate future, this is about the right time to talk about the ‘human face’ of enlargement. In my brief intervention I would therefore like to just recapitulate the structural changes that Lithuania has undergone that are similar to the experiences in many other candidate countries. I will then try to give couple of examples how these changes relate to the enlargement and, specifically, to the requests for transitional periods in the accession negotiations. I believe there is a relevant linkage between the two. So the economic outlook is rather clear: privatisation in Lithuania is nearly over; about 70 per cent of GDP is now generated by the private sector. The economic structure of Lithuania has become similar to that of the EU member states: the services account for 60 per cent of GDP, the industry - a quarter of GDP, the agriculture – 7.5 per cent. GDP is rising 4-5 percent annually – twice as much as the EU average.There is another side – or shall we say price – to these achievements. Unemployment has been rising and it is nearly twice higher than the average in the EU. Unemployment is acute in rural areas, which in the case of Lithuania accounts for a fifth of the total workforce. Tight budgetary policies have restricted spending for social needs. Not surprisingly, sectors of social protection, health care, education are the most sensitive in terms of reforms. Needless to say - in order to balance economic and social reforms, the Lithuanian Government has undertaken steps and adopted programming documents. It is part of the coordination efforts between the European Union and the candidate countries by the means of Pre-accession economic programmes and Joint Assessment Agreements on Employment policy priorities. In the spirit of European social model these measures aim at alleviation of social impact that accompanies the market economy. When the European Parliament makes a statement that “development of social dimension of the enlargement is pre-condition for averting potential undesirable effects of integration into internal market” – it is clear that reforms are not free of political and social costs. Again - the popular opinion in the candidate countries relate these costs to the European integration often more than they are related in reality. We, in Lithuania, have been telling different interests groups and society at large that it us who need reforms more than the Union or ‘Brussels’. But many around this table can perhaps agree that this message is not that easy to get across to people’s minds. There is a perception in the candidate countries that they are carrying a double burden: economic and social transition and adoption of the entire EU legal acquis. Just to illustrate what Lithuanian Government is programming; what figures we are talking about; here are some: Pension reform: in the first decade we need 0,9% GDP every year.Health care reform: 2002-2004 spending should be increased from 4.6% to 5% of GDP.Environment: by 2010 every year 2.4 % GDP (commitments M 1600 LTL).Energy sector [and implementation of the acquis] also requires substantial resources. A single task – decommissioning of the first Unit of the Ignalina Nuclear Power Plant costs – is immense in itself.Transport: 2001-2004 to spend 1.3% GDP.Reforms and harmonisation is taking place – and money - now while yield is to be seen in the medium or even longer term. This time gap translates in a gap of understanding or appreciation of enlargement. It is a real challenge for governments and elites. We have to be clear – this is a challenge for both present and future member states of the Union. It is a delicate and politically demanding balancing act. Here I come to a second point of my intervention. In accession negotiations we are moving to the difficult chapters and it is precisely the financial and social implications that make them difficult for both sides. Transitional periods requested by the candidate countries are not meant to lay back and relax the implementation of the acquis – they appear out of necessity. The Commission has developed the concept for sorting out these requests through a filter of their acceptability for a single market. The filter is very dense. And it is right. But it also ought to be reasonable. Single Market would not be fatally affected if cigarettes are cheaper or compulsory oil stocks are smaller than in the present member-states for a few years. Another particular Lithuanian case - the single market would not be disrupted and citizens of the present member-states would not feel discriminated if noisier planes land in Kaunas airport for a year or two after the accession. It would bring in some cash and ensure jobs for people who work in the airport and thus give the airport time to restructure. The same could be said about the number of transitional periods concerning chapter on environment. My final point is that political economy of enlargement is interlinked with the principle of solidarity. For - enlargement is not only economic and legal, but a major sociopolitical process. We are in this process to make it socially sustainable. We are in this process to increase social and economic cohesion. We are to strengthen social dialogue on these issues. A smooth transition from pre-accession funds to structural and cohesion support is essential. Administrative preparations for SAPARD must be completed. ISPA is already playing important role in re-orientation of environmental protection and transport sectors. Candidate countries are making great efforts in preparing for the structural funds so that a high level of absorption is possible from the first day of membership. (As large proportion of resources as possible should be transferred via this fund to the new member states. Co-financing rate for ERDF has to be maintained up to 80 percent of total eligible cost and not less than 70 percent of ERDF spending must be assigned to Objective 1 regions.)If cohesion policy was success in Ireland or Portugal then why this should not repeat here in the Baltics or elsewhere? In other words, credibility of the European integration rests on the degree in which its successes are given the means and conditions to be repeated in the expanded Union. We clearly have a joint interest that this Union appears comfortable to all its members, hospitable and, above all, human.