At Last, Enlargement Day Has Come. Will it Bring Prosperity Or Troubles--or both?(European Union)(Cover Story)

Byline: Grzegorz Ekiert and Andrew Moravcsik, Ekiert and Moravcsik teach at Harvard University.

The big bang has gone off. Now is the time for second thoughts. Among newcomers and old-timers alike, politicians are scrambling to reassure skeptical electorates that May 1 will bring no harmful changes. Not so. While the long-term economic and social consequences of EU enlargement will almost certainly be positive, one thing is certain: some unpleasant surprises will come along the way.

To be sure, new Europe's architects have good cause for optimism. Economic growth in the 10 countries joining the European Union was 3.7 percent last year--nearly 10 times that of the existing eurozone. U.S. and foreign multinationals, quick to scent big opportunities, are investing heavily, both in the East and West. Yet a whiff of overconfidence taints the air. The EU's new members all hope to follow in the footsteps of Spain and Portugal, which joined in 1986 and thrived. They don't speak as loudly of duplicating Ireland's "economic miracle," where per capita incomes rose from 62 percent of Europe's average in 1973 to 121 percent today, surpassing its former imperial ruler, Great Britain. But that's the dream.

Reality is more sobering. The successes of yore were made possible by large infusions of cash. Spain and Portugal received EU subsidies totaling as much as 10 percent of GNP. As for Ireland, besides the subsidies it became the preferred launchpad into Europe for American multinationals, which generate more than two thirds of the country's exports and spurred the country's famous high-tech boom. Rural Irish unhappy about EU entry were quickly bought off with generous investments funded by the Union.

Today's EU is very different. From the earliest days of European integration, Germany was the paymaster that made all good things financially possible. But after spending a trillion euros over a decade on the former East Germany, money in Berlin--and hence Brussels--is much tighter. Led by Germany, the six net contributors to the EU budget have called for a break. And despite the funds and factories coming in from America and elsewhere, Eastern Europe is probably too large and too diverse to replicate the Irish experience.

Nor have all poor EU members done as well as Spain and Ireland. Greece is Exhibit A. Its workers earn a third less than the EU average, roughly on the same level as in 1981. Greek politics and administration are widely viewed as inefficient and corrupt; foreign policy is at best inconsistent. For years officials in Brussels openly regretted allowing Athens to join. It was a case study, Eurocrats agreed, on the dangers of accepting countries not fully prepared for membership.

Among the lessons policymakers drew from the Greek experience--relevant to the present--is that joining the EU can create tensions, not only among states but within the new members ...