1. EU-integration knowledges Written by Endre Domonkos 1st Semester, Academic Year 2010/2011

2. I. The enlargement of the European integration The enlargement of the European Communities and then the European Union happened in several waves. The Northern enlargement was followed by the Southern one, and by the admission of the EFTA-countries and then by the Eastward enlargement. It’s important to emphasize that always group of countries were admitted by the Communities (European Union). The only exception was the admission of Greece that joined the European Communities in 1981. The enlargement such as deepening is a process, which won’t be stopped by the EU because there are several potential candidate countries that want to join the European Union. The potential candidate countries are the followings: Croatia, Macedonia and Turkey.

3. II. The establishment of EFTA In the fifties, the British who traditionally favoured free trade, intended to establish a free trade association embracing all of Western Europe. Instead of supranational organisations the British government supported the intergovernmental cooperation and free trade. However it became clear with the establishment of the EEC that „the Six” had a different idea about European integration. Thus, the British had to realise their plan without the six states, so they set out to establish the European Free Trade Association (EFTA). Great Britain didn’t join the European Coal and Steel Community and the Treaty of Rome that established the European Economic Communities and the Euratom. The agreement on establishing EFTA was signed in Stockholm on 4 January 1960. Member States: Austria, Denmark, Norway, Portugal, Sweden and United Kingdom. (Later Iceland, Finland and Lichtenstein joined the Association). However, some member countries left the organisation and decided to join the European Communities. In accordance with the EFTA-agreement the Member States established a lazy form of cooperation and they concluded to reduce the industrial customs tariffs in the same way and manner as the EEC. Exceptions: the EFTA-agreement didn’t set up common external tariffs and wasn’t related to agricultural products.

4. III. The european integration after De Gaulle’s viewpoint The main confirmation of the success of the EEC (the removal of customs tariffs and quantitative restrictions between member states, the dynamic trade and economic growth) was provided through the re-evaluation of the British political attitude. Seeing the results of integration of the six Member States, the United Kingdom indicated its intention to join the Community in July 1961. General De Gaulle set a veto on the application when the United Kingdom indicated its intention to join the Community in 1963 and in 1967. The French President, General de Gaulle viewed British entry as a threat related to increasing American influence in the Communities. The radical approach taken by President De Gaulle considerably affected not only the external relations of the Communities but also the internal functioning of integration. The General proclaimed the idea of the „Europe of Nations” and intended to steer the Communities towards purely intergovernmental cooperation led to serious crisis in 1965 when he boycotted participation in Community institutions for a half year period through his „empty chair” policy because he didn’t agree with the proposals made for financing agricultural policy. On January 1966. Luxembourg compromise (where a Member State declared that its fundamental national interest was at stake in a given situation, a solution could be accepted only if unanimous agreement was reached.

5. IV. The Six become Nine: enlargement of the European Communities In 1969, De Gaulle resigned, and thus the main obstacle to British entry was removed. On 1-2 December 1969. Conference of Hague. Agreement that CAP will be financed from the common budget, starting the accession negotiations with the United Kingdom, Denmark, Ireland and Norway. The candidate countries should accept the acquis communautaire. In June 1970, accession negotiations were started with the United Kingdom, and also with Denmark, Ireland and Norway. The negotiations were completed by January 1972, and following a ratification procedure, Denmark, Ireland and the United Kingdom became the members of the European Communities on 1 January 1973. The Norwegian population rejected the accession in a referendum. As a result of the enlargement, the importance of the European Communities in the world economy grew considerably – primarily owing to the British entry. This development could be observed through a change in American policy toward the Communities. While the United States had intensively supported the economic rebuilding and development of Europe before and, hence, the integration as well, the USA started to see the European Communities more and more like a competitor after the latter’s enlargement in 1973. The Americans frowned at the European protectionist aspirations which presented themselves in a common trade policy, the trade relations established with socialist countries, and also the increased trade in Europe with the developing countries. It became apparent in the seventies that the competition between the three major actors in the world economy, i.e. the Triad consisting of the USA, Japan and the European Communities would play a dominant role.

6. V. The Southern enlargement of the European Communities In 1974 after the failure of the Greek military junta, the Karamanlis-government submitted the application of Greece to the European Communities. Negotiations started between Greece and the European Communities in 1976. In 1979. Accession Treaty of Greece was signed in Athens. On 1 January 1981. Greece became member of the EC. The Accession Treaty came into force. A much longer period of transition was prescribed for Portugal and Spain after they had acquired freedom from military regimes. In 1977. Spain and Portugal submitted their applications to the European Communities. Negotiations started between the two Iberian countries and EC in 1978. In 1985. Accession Treaties of both countries were signed in Madrid and Lisbon. On 1 January 1986. Spain and Portugal joined the European Communities. The Southern enlargement brought with it new problems as a consequence of the accession of poores states. The issue of economic and social cohesion within the Community appeared to have much larger importance than before and the activities and policies dealing with this issue increased in number.

7. VI. The Twelve become Fifteen: Enlargement of the EU In 1992. Austria, Finland, Sweden submitted their applications to the European Communities. On 2 May 1992. The European Communities and six EFTA Member States decided to create a large European economic area through extending the single market to EFTA. As a result, the twelve European Community member countries and the six EFTA members (Austria, Finland, Iceland, Norway Switzerland, Sweden) signed the Treaty on the establishment of the European Economic Area (EEA). The Treaty became effective on 1 January 1994. As a result of establishing the EEA, an economic block with a population of more than 370 million people was created. Its importance, however, declined within a short time because Austria, Finland, Norway and Sweden started accession negotiations with the EU in 1993 and managed to conclude them in 1994. Switzerland and Norway rejected the accession by a referendum. Iceland concluded with the European Communities in fisheries and maritime affairs so that the country could have customs free export to the community market. On 1 January 1995. Austria, Finland and Sweden joined the European Union. Thus, the number of European Union Member States grew to 15 on 1 January 1995. The three new, ex-EFTA member countries continued to be members of the EEA, representing this time, however, the EU. On the other hand, the importance of the EEA as an institution diminished to a minimum as it meant barely more than the EU itself, since the EEA embraces, in addition to the EU Member States, just one small state (Norway) and two mini states (Iceland and Liechtenstein) with less than 5 million inhabitants in total.

8. VII. The process of eastward enlargement I. Following the creation of the European Economic Community, its relations with Central and Eastern European countries (CEECs), which had been forced to join the Soviet bloc, where charactarised by political antagonism and minimal economic relations. Mutual non-recognition and political conditions governed by ideological differences hampered closer economic and trade cooperation. The Community put the socialist countries in the least favourable category of so-called state-trading countries. Trade relations between the EC and CEECs even lacked the most- favoured-nation. Following decades of political opposition and icy economic relations, the collapse of Communist regimes in Europe and the end of bi-polar world order was a great success for the western world, and for the Community. Despite being freed from state party rule and Soviet oppression, CEECs posed an enormous political, security and economic challenge for European integration. The EEC was quick to initiate talks on improving relations with Hungary and Poland. The first steps were aimed at restoring and developing trade. These aspirations were embodied in the trade agreement between the Community and Hungary signed on 26 September 1988, in which Member States agreed to remove former discriminatory measures vis-à-vis Hungary. At the Paris G7 summit on 14 July 1989, the world’s seven greatest economic powers decided to provide economic assistance to Hungary and Poland, the so-called PHARE programme that included trade policy measures, which granted the countries involved the benefit of General System of Preferences. The PHARE was later extended to other Central and Eastern European countries. On April 1990, the Dublin European Council proposed that associated status should be offered to those Central and Eastern European countries which were most advanced in the reform process (the Czech and Slovak Republic, Hungary and Poland, and also Romania and Bulgaria).

9. VII. The process of eastward enlargement II. Finally, negotiations on association with the Czech and Slovak Republic, Poland and Hungary began in December 1990. The Association Agreements and the so-called Interim Agreements with these countries were signed on 16 December 1991; the latter enabled the Associated Agreements’ trade provisions to become applicable immediately (or to be more exact on 1 March 1992). Following the long process of ratification, the Agreements with Hungary and Poland entered into force 1 February 1994, while the Agreements with the Czech Republic and Slovakia (by then two separate states, whose agreements had to be renegotiated due to their separation) as well as Romania and Bulgaria, took effect on 1 February 1995. Later, the Community concluded similar Association Agreements with the three Baltic states of Estonia, Latvia and Lithuania and with Slovenia. These type of Association Agreements were called as „Europe Agreements”. This collective name indicated their historic significance and distinguished them from other association agreements, which aim at reinforcing trade relations but do not include on political cooperation and approximation of legislation. Europe Agreements mainly dealt with four fundamental freedoms, which were the original objectives of European integration. While they contained a few specific provisions relating to capital, labour and services, they went quite far in the area of free movement of goods (except for agricultural produce).

10. VII. The process of eastward enlargement III. Trade provisions are the most important elements of the Agreements and set the ultimate aim full free trade in industrial products (which – for example in Hungary’s case was achieved by 31 December 2000). The EU agreed to dismantle obstacles to trade (custom duties and quotas) asymmetrically, which meant that the EU removed these obstacles by the mid-nineties, while CEECs only had to do so at a slower pace. For agricultural produce the parties only agreed to provide mutual preferences and the option of free trade was not suggested. The Europe Agreements also clarified a number of other trade-related questions. They contained provisions on competition, rules of origin, and the approximation of customs legislation. The various safeguard clauses, however, enabled the parties to restrict trade and derogate from the Agreement’s provisions by reintroducing customs duties for a limited period in justified cases, for instance for emerging countries, crisis-struck sectors and anti-dumping measures. In addition to trade provisions, in the European Agreements, the associated countries undertook to align their legislation with Community norms in certain areas. The obligation for the approximation of legislation was a forward-pointing element of the Association Agreements in terms of alignment with the single market and eventual membership. The European Agreements contained the intention of tightening political cooperation. These Agreements opened up major opportunities for cooperation for the associated countries: building extensive and institutionalised intergovernmental relations, participating in Community programmes, or joining joint foreign policy actions or positions.

11. VII. The process of eastward enlargement IV. Although the Europe Agreements included no specific financial provisions, they reffered to previously created financial instruments such as PHARE. For every associated CEEE country, the Europe Agreements created an institutional framework corresponding to Community institutional levels to run the association relationship. Association Councils, consisting of members of the EU Council, Commission and members of the government of the relevant associated country, became the main decision-making bodies of association agreements. The Association Committees, which consisted of senior officials of the governments of individual associated countries, the EU Council and the Commission, became the main bodies for preparing decisions related to the Association Agreements. The task of Joint Parliamentary Committees, which consisted of members of the European Parliament and of the Parliaments of individual associated countries, was to monitor and control the association process. The Europe Agreements created a new form of association status, which can be considered an innovation among Association Agreements. Europe Agreements had several key elements (the creation of political dialogue, the inclusion of obligations for the approximation of legislation and the ‘evolution clause’) that were not included in the previous Agreements that created association status. But Central European countries would have liked the EU to make promises concerning subsequent full membership in the Agreements but the EU was unwilling to assume any such specific obligations.

12. VII. The process of eastward enlargement V. At the time of the conclusion of the Europe Agreements, the Member States lacked the political will for the integration of CEECs into the EU; thus they tried to avoid linking Association Agreements to premises of future membership. The shift in the official position of Member States came about one year after the signing of Europe Agreements – though before their entry force – when the Copenhagen European Council confirmed the legitimacy of Central and Eastern European applications for membership and also defined the criteria which applicants would have to meet before they could join the Community. These criteria, which have come to be known as „the Copenhagen criteria”, concern: - the stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities (political criteria); - the existence of a functioning market economy as well as the capacity to cope with competitive pressures and market forces within the European Union (economic criteria); - the ability to take on the obligations of membership (i.e. the adoption and enforcement of the acquis communautaire) including adherence to the aims of political, economic and monetary union (legal and institutional criteria). Member States at the Copenhagen Summit also added the conditions of the EU’s capacity to take in new members and the need to preserve the level and intensity of integration. Thus, the Copenhagen criteria can be considered as a political declaration because it was the first time when the European Union defined the conditions that applicant countries had to meet before accession. With the Copenhagen criteria, the EU redefined the conditions for joining the European integration process.

13. VII. The process of eastward enlargement VI. Following the declaration of membership criteria in Copenhagen it was suggested that the EU should elaborate a strategy to help CEECs meet the criteria and thus facilitate their accession. The Essen European Council in December 1994 embarked upon a so-called „pre-accession strategy” to prepare the associated countries for membership and accelerate the integration process. The Essen Summit confirmed the EU’s commitment to closer cooperation with associated countries in a number of areas (such as infrastructure, development, trans-European networks, transport, telecommunications, research, environment, education and culture). To be able to fulfill the tasks, the Member States end CEECs created a structured institutional dialogue, which provided a framework for meetings of Heads of State or Government (once or twice a year), of foreign affairs, justice and home affairs ministers (twice a year) and of other ministers (usually once a year). In December 1994 in Essen, the Member States decided to issue a White Paper, which served as a guideline for associated countries in their preparation for the single market. The White Paper was adopted by the Cannes European Council in June 1995. This White Paper could be considered a comprehensive programme package facilitating preparations for the internal market and defining priorities for the harmonisation of legislation, with the primary aim of orientating the legislative work of applicant countries. At the Madrid Summit in December 1995, Member-State Heads or Government called upon the Commission to prepare country opinions for all Central and Eastern European applicant countries. The European Council instructed the Commission to prepare report on the impact of enlargement of EU policies, particularly structural and agricultural policies, and the financing of the common budget.

14. VII. The process of eastward enlargement VII. The European Council pledged that it would adopt a decision on the launching of accession negotiations in the light of the Commission’s reports and opinions as soon as possible after the completion of the IGC. The IGC was finally concluded at the Amsterdam Summit of 16-17 June 1997, where Member States adopted the draft Amsterdam Treaty. The Amsterdam Treaty secured one major achievement for enlargement: it closed the IGC. According to the Madrid Conclusions, this was a precondition for starting accession negotiations with Cyprus and CEECs deemed fit by the European Council based on the Commission’s proposal. Acting upon the Council’s request, on 16 July 1997, the Commission issues AGENDA 2000, a document containing the EU’s draft strategy for the first years of the new millennium – including the reform of Community policies and the Community budget, and aligning them to the consequences of enlargement – with the Commission’s Opinion on the ten CEECs annexed. AGENDA 2000 was the first major paper to take account of the prospect of an EU enlarged to the east. The main significance of AGENDA 2000 - which bears the subtitle „For stronger and wider Europe” - was that the Commission dealt with the EU’s internal reforms, future strategy and enlargement in a single document. The programme outlined in AGENDA 2000 proposed a strategy for reform in the subsequent years (in the 2000-2006 period) and laid down a framework for enlargement. It even specified the financial perspectives for the 2000-2006 period included a separate budget line for expenses related to new Member States, to the extent that the Commission’s financial perspectives for the 2000-2006 period included a separate budget line for expenses related to new Member States. AGENDA 2000 pointed out the feasibility of eastward enlargement while preserving common and community policies.

15. VII. The process of eastward enlargement VIII. In AGENDA 2000, the Commission not only put forward a concrete concept for an enlargement strategy, but the annexed Opinions prepared on the basis of a comprehensive and objective evaluation of the extent to which the ten applicant countries met the Copenhagen criteria – the Commission recommended that accession negotiations start with Cyprus and five Central and Eastern European countries: the Czech Republic, Estonia, Hungary, Poland and Slovenia (known as the „Luxembourg group” or the 5+1). The Commission didn’t find the other candidates adequately prepared for starting negotiations, due to their inability to meet the Copenhagen criteria to a satisfactory extent (in the case of Slovakia for political reasons, and, in the case of Latvia, Lithuania, Bulgaria and Romania, for economic reasons). Turkey, which was first assessed by the Commission in a country report in 1989, was still not accepted as a candidate country. On 12-13 December 1997 the European Council’s meeting in Luxembourg turned out to be an historic milestone for eastward enlargement, as the Heads of State or Government committed themselves enlarging the EU to the east. According to the Luxembourg Conclusions, it became possible to launch the enlargement process at the beginning of 1998. On the Luxembourg Summit, Member States reached a compromise, by endorsing a form of enlargement that allowed for the commencement of negotiations with the best-prepared candidates (the 5+1 countries proposed by the Commission). The enlargement process would involve all candidates, but negotiations would only start with the most prepared countries.

16. VII. The process of eastward enlargement IX. Accordingly, the solemn meeting of the Ministers of Foreign Affairs of the 15 Member States, the 10 CEEcs and Cyprus on 30 March marked the official start of the enlargement process. The accession negotiations with the 5+1 countries began one day later on 31 March, observing the six-month period from the signing of the Amsterdam Treaty. According to the Luxembourg formula, accession would depend solely on the preparedness of the individual country; the process would be open and inclusive, with an opportunity for any country to catch up with others that began negotiations earlier. This was guaranteed by the annual assessment of the progress made by individual countries towards accession in the form of the comprehensive Reports prepared by the Commission. The status of countries left out the first round didn’t remain unchanged, and the EU reinforced ties with them. Within the framework of a so-called accession strategy, the Luxembourg European Council placed relations between the EU and candidate countries on a new basis. The declared aim of the accession strategy was to help all applicants become fully-fledged members of the EU after they had taken on board as much of the acquis communautarie as possible. This was facilitated by the so-called Accession Partnerships, proposed by the Commission in AGENDA 2000.

17. VII. The process of eastward enlargement X. Accession Partnerships, which were drawn up for each candidate country provided an assessment of the priority areas in which the country needed to make progress in order to prepare for accession. Each country’s Accession Partnership was complemented by its own National Programme for the Adoption of the Acquis (NPAA), which set out the timetable for adopting the acquis and putting into practice. The implementation of the Accession Partnerships and the NPAAs, which were adopted following consultations between the two sides, was monitored by the association institutions created on the basis of Europe Agreements. A key element of Accession Partnerships was the technical assistance and financial aid through the pre- accession funds. The new system of pre-accession funds was laid down at the Berlin Summit in March 1999. The Berlin European Council also finalised the formula put forward by the European Commission in the 1997 draft of AGENDA 2000. The Berlin European Council decided to finance candidate countries in the seven-year budgetary period with an annual sum of EUR 3,12 billion from three separate funds. The remodelled PHARE programme provided EUR 1,56 billion in aid per year, which financed two main priorities 1) institution building in public administration and the judicial system (30%); 2) adopting and implementing the acquis communautaire (70%). The SAPARD financed agricultural restructuring (EUR 520 million), while ISPA supported the infrastructural development in a worth of EUR 1,04 billion. It’s important to emphasize that the above mentioned funds could only be used for financing costs related to new Member States, and could not be reallocated to other areas.

18. VII. The process of eastward enlargement XI. Following the official opening of negotiations with the 6 Luxembourg-group countries on 31 March 1998, the EU immediately started screening the acquis, which was concluded by July 1999. The first round of substantive negotiations was held on 10 November 1998 and dealt with the seven chapters screened first. Accession talks continued gradually, though not too dynamically, with usually one or two negotiating rounds every six months, leading to the closure of three to six chapter during a Presidency. The Helsinki Summit of 10-11 December 1999 brought further important decisions concerning the enlargement process. Looking at the first 18 months of negotiations with the first six applicants, an increasing number of Member States were of the opinion that negotiations should begin with the remaining candidate countries as well. Despite the clear differences in progress made by some of these countries, the majority of Member States supported the idea of launching negotiations with the five CEECs left out in Luxembourg and with Malta, which re-submitted its application in 1998. The Member States decided in Helsinki to start negotiations with all remaining six applicants in early 2000. The Helsinki European Council pointed out that the commencement of negotiations with all candidate countries put an end to their division into two groups. The Member States emphasized that the principle of differentiation within the „Luxembourg group”, and therefore the possibility for countries in the „Helsinki group” to catch up those candidates who began negotiations earlier. The Helsinki European Council officially acknowledged the candidate status of Turkey.

19. VII. The process of eastward enlargement XII. In relation to the implementation of institutional reforms necessary for enlargement, the Helsinki European Council took an important decision on the possible date of enlargement. The Member States asserted that the European Union had to complete institutional reforms before the end of 2002 at the latest and be ready to take in new members by 1 January 2003. However, the EU only expressed the possibility of the first entries in 2003 and didn’t make any commitments for 2003. The Union also confirmed that, from that date, the preparedness of individual candidate countries would the only factor which would determine the precise date of accession. Following the Helsinki conclusions, the EU officially opened negotiations with Bulgaria, Latvia, Lithuania, Malta, Romania and Slovakia on 15 February 2000. The European Council’s session in Nice held from 7 to 10 December 2000 concluded the institutional reforms and opened the way for enlargement. In Nice, the EU Heads of State or Government expressed their support for a concrete negotiating timetable, which confirmed that it should be possible to conclude negotiations with the most advanced candidate countries in 2002, provided that they had demonstrated their ability to assume the obligations of membership. The Member States decided that accession negotiations should progress as far as possible during the course of 2001, leaving only the most outstanding substantial issues in the negotiations, particularly those with the greatest budgetary implications and the institutional chapter, to be addressed in 2002.

20. VII. The process of eastward enlargement XIII. In cases where a chapter could not be provisionally closed, but the number of remaining problems was very limited, the Commission proposed to modify the approach and instead of leaving such a chapter on the negotiating table, to ‘set aside’ the chapter with a specific written annotation that it would be revisited later at the appropriate moment. This approach ensured that a few unresolved problems would not delay negotiations of other chapters and facilitated agreement on the final package. The so-called „road map” proposed by the Commission and adopted by the European Council in Nice set out a priority schedule for the negotiations in the subsequent 18 months, listing the chapters that should be provisionally closed in each of the three semesters, to enable the parties to agree on a package deal of outstanding issues in late 2002. The Nice European Council Conclusions stated that the EU should be in a position to welcome new members from the end of 2002. The Heads of State or Government also expressed their hope that citizens of candidate countries would be able to participate in the next European Parliament elections in June 2004. The first half of 2001 was a breakthrough in the accession negotiations (environment, free movement of capital and free movement of persons chapters were provisionally closed with a few candidate countries), and the EU granted the first transitional measures with a significant scope or duration (for environment and the free movement of capital). The Gothenburg European Council of 15-16 June 2001 confirmed and specified the Nice timeframe by setting the express objective of concluding negotiations with the best prepared applicants by the end 2002, in order they could take part in the elections to the European Parliament in 2004 as full members. It became clear that ten countries (Cyprus, the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Malta, Poland, Slovakia and Slovenia) might be able to conclude negotiations within the foreseeable future, possibly all at the same time, while Bulgaria and Romania had no change of doing so.

21. VII. The process of eastward enlargement XIV. The Laeken European Council of 14-15 December 2001 conclude that, during the course of 2001, the Nice roadmap had been observed. Confirming the Nice and Gothenburg conclusions, at the Laeken Summit, the Member States committed themselves to completing negotiations before the end of 2002 with countries that were ready, and which could thus participate in the EP elections in 2004. The Laeken Summit was of significance because – for the first time in the enlargement process – the EU named the potential first-round countries. It was officially pronounced that, if the pace of negotiations was maintained and if candidate countries continued with their internal reforms, then Cyprus, the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Malta, Poland, Slovakia and Slovenia would be able to keep to the Nice roadmap and might be in a position to conclude the negotiations before the end of 2002. The Laeken Summit supported the Big Bang concept of enlargement. Having closed most of the chapters related to the adoption of the acquis, for 2002 the ten candidate countries indicated in Laeken only had the budgetary chapters (agricultural, regional policy, budget) and the institutional issues to discuss. The concept of Big Bang enlargement and the Nice roadmap were confirmed by the Seville European Council of 21-22 June 2002, where a decision was made that, on the basis of the Commission’s proposals, the Brussels Summit to be held in October 2002 would determine the list of countries with which the EU could conclude the negotiations at the Copenhagen European Council in December 2002.

22. VII. The process of eastward enlargement XV. The European Council’s meeting in Brussels held on 24-25 October 2002 named all ten candidates already signed out in Laeken. The Member States also managed to adopt a common position on budgetary questions. This agreement was made possible by a Franco-German deal on the future financing of the EU’s most costly policy: the Common Agricultural Policy. In Brussels, the Member States decided that the Common Agricultural Policy would only be extended to the new Member States gradually: direct payments to farmers in new Member States would start at 25% of the Community level and would increase 100% over a period of 9 years, while in the financial perspectives for the period 2007-2013, Community spending on agriculture could not grow by more than 1% annually. Concerning structural and cohesion policy, Member States decided that, for the interim period of 2004-2006, preceding the next budgetary period, new Member States would benefit from proportionately lower funding than eligible regions in old Member States. In line with the conclusions of the Brussels Summit, the Copenhagen European Council of 12-13 December 2002 had to make the final decisions concerning negotiating chapters with financial implications and bring the negotiations to a successful conclusion. By slightly improving the budgetary terms of its offer, the EU managed to forge a compromise, and the final package of the accession negotiations were agreed upon with the 10 countries on 13 December 2002.

23. VII. The process of eastward enlargement XVI. The Heads of State or Government emphasized in Copenhagen that the results of the negotiations provided a sound basis for the integration of the 10 new Member States and ensured the efficient operation of the enlarged Union, and noted that the final package included all the transitional measures necessary for the acceding countries to meet their obligations of membership. Accession negotiations were concluded one by one with each of the 10 countries, according to their needs, interests and level of preparedness. The two key issues of accession negotiations – the budgetary sums involved transitional measures – were similar for all candidate countries. This enables a general summary to be made of the financial projections for all ten countries. The enlargement financial package that the 15 Member States and the 10 candidate countries agreed to in Copenhagen specified budgetary obligations and rights, i.e. how much each country had to contribute to and could receive from the EU budget until 2006, the end of the financial period laid down in AGENDA 2000. Only in the area of agriculture (direct payments) did they adopt decisions reaching beyond the current financial perspective, setting the terms of eligibility for Community budgetary funding for the next period from 2007 to 2013. According to the Copenhagen financial package, the ceiling for enlargement-related financial commitments in 2004-2006 was EUR 40,85 billion, out of which 14,5 billion was covered by contributions from new members. This meant that in practice, in the first two and half years enlargement cost the 15 old Member States EUR 26 billion.

24. VII. The process of eastward enlargement XVII. In the field of agriculture and structural and cohesion funding, the agreement reached in Copenhagen maintained the EU proposal on direct payments adopted in Brussels. According to this formula, in 2004, farmers of ‘new’ Member States received only 25% of direct payments that ‘old’ member-state farmers were entitled to, which increased to 30% in 2005, 35% in 2006 and 40% in 2007; from 2007, the amount will grow by 10% annually, reaching 100% in 2013. The original formula was improved somewhat by the possibility of ‘topping-up’, which allows the new Member States to top up direct payments from the national budget by 30%, meaning that ultimately, in 2004, 2005 and 2006, farmers received 55, 60 and 65% respectively, which can reach the full 100% direct funding by 2010. Structural and cohesion funding to the new Member States from 2004 to 2006 was set at below EUR 22 billion. According to the agreement no distinction was made between the ‘new’ and ‘old’ Member States in structural and cohesion operations. In the financial period, the ten Member countries must be treated equally (except in the field of agriculture). On the whole, the Copenhagen financial package enabled the EU to proceed with enlargement, and met the candidates’ goal that their budgetary position should improve upon accession. Copenhagen paved the way and caused significant positive changes in the financial position of new Member States from 2007 on. One the transitional period ended for structural and cohesion policy, considerable Community funding opened up for them, making most of these countries major net recipients for a long time.

25. VII. The process of eastward enlargement XVIII. Other important elements of the accession negotiations were the followings: 1). In the field on free movement of persons the old Member States granted a transitional period of 2+3+2 years. This formula allowed Member States not to open their labour markets fully in the first two years after enlargement, and then they could choose to extend this transitional period by another three years. After five years, however, they could only maintain such restrictions if they could prove that the influx of workers from new Member States really distorted the domestic labour market. 2). In the chapter on free movement of capital, it was the new Member States who requested transitional exemptions, primarily for property and land ownership. 3). Important requests for transitional exemptions were put forward by acceding countries in the area of environment, where the magnitude of investment required made compliance with the rules upon accession practically impossible (for example in the case of municipal sewage). 4). In the chapter of on competition, the major clash between the two negotiating sided was usually over state aids. Several candidate countries had introduced incentives aimed at attracting foreign investors and boosting local enterprise development, which included forms of state aid (such as tax breaks) not allowed under Community rules. The achieved compromise allowed these countries to maintain such forms of state aid, normally for periods of between one to two years and in some cases between five to seven years.

26. VII. The process of eastward enlargement XIX. 5). In the chapter on justice and home affairs related to border controls and accession to the Schengen area. According to Community law, the new Member States had to join in the Schengen area, dismantle internal border checks and establish common border controls. Decision was taken that new Member States would only become full members of the Schengen area a few years following their accession, in 2007. 6). A special demand put forward by the EU side during negotiations concerned the possibility of monitoring and introducing sanctions against new Member States if they failed to meet the obligations laid down in the Accession Treaty. The solution came in the form of so-called safeguard clauses, which enable the Council acting on the Commission’s proposal to impose transitional restrictions on the rights of a Member State in in the areas of the economy (including agriculture), the internal market, as well as justice and home affairs. The Commission could have activated these safeguard clauses if serious and persistent problems had arisen in the specified areas. On 16 April 2003, the leaders of the 25 old and 10 acceding Member States signed the Treaty of Accession in Athens. From that day, the Interim Agreement annexed to the Treaty of Accession gave their government or parliamentary representatives the right to express their views during decision-making, though not yet the right to vote. After the Treaty of Accession was signed by 25 Member States, the old and new Member States had to ratify it according to their own constitutional rules. The national parliaments of the 15 old Member States gave their seal of approval to eastern enlargement without any difficulties, usually with a decisive majority. In nine of the ten acceding countries, the Treaty of Accession was not only ratified by the Parliament but also approved by the electorate in a referendum.

27. VII. The process of eastward enlargement XX. Overall, the ratification of the Treaty of Accession went without major hitches in all 25 Member States. Consequently, the first eastern enlargement of the EU took place on 1 May 2004, completing the fall of the Iron Curtain. The ten new Member States became fully-fledged members; their delegates began to take part in the work of the Community institutions. The accession of ten new Member States on 1 May 2004 was by no means at the end of a process; it was just the end of a beginning: the beginning of eastward enlargement, which was followed by a second wave of enlargement in 2007 and which is expected to continue in coming years with more enlargement rounds. At the Copenhagen Summit of December 2002, specific decisions were taken concerning Bulgaria and Romania, engaged in accession negotiations since 2000. In Copenhagen, the Member States adopted a roadmap for these two countries, setting clear objectives and pronouncing that – provided that the membership criteria were fulfilled – the EU wished to welcome the two countries as members in 2007. The Copenhagen Council also decided that supplementary resources be made available within the pre- accession funds for these candidates in the run-up to their accession. The Thessaloniki Summit of June 2003 amended the roadmap by setting a target date for the conclusion of negotiations the following year.

28. VII. The process of eastward enlargement XXI. The Heads of State or Government, at their summit meeting of 16-17 December 2004 could decide on the official closure of negotiations and set 1 January 2007 as a target date for accession. The Treaty of Accession of Bulgaria and Romania included a new kind of ‘super safeguard clause’ (postponement clause), which left open the option of postponing accession by one year should the two countries fail to fulfill the membership criteria on time. The financial package agreed upon during the accession negotiations included the following sums earmarked for Bulgaria and Romania for the years 2007-2009 (calculated at 2004 prices): EUR 8.274 billion for structural and cohesion funding, EUR 3.041 billion for rural development, EUR 1.12 billion for agricultural market measures, EUR 1.312 billion for direct payments to farmers, EUR 210 million for nuclear safety and EUR 82 million for institutional building. Bulgaria and Romania received another 799.3 million budgetary compensation over the three years to ensure that the net balance of the two countries contributions to and receipts from the EU budget remains positive from year one. The Treaty of Accession with Bulgaria and Romania was signed on 25 April 2005 in Luxembourg. The European Council of 16-17 June 2005 also decided that these two countries could participate in the work of the decision-making bodies (the European Council, the Council of Ministers and the European Parliament). Once the Treaty of Accession was signed and sealed, its ratification could begin in the 25 Member States and the two acceding countries. After the publication of the Commission’s positive monitoring report (on 26 September 2006), the remaining four Member States (Belgium, Denmark, France and Germany) completed the ratification procedures and Bulgaria and Romania became members of the European Union on 1 January 2007.

29. VIII. Continuing eastward enlargement I. The accession of Bulgaria and Romania marked the end of an historic phase, the enlargement process began in the early nineties with the conclusion of the Europe Agreements had reached its end. Nonetheless, enlarging the Union to the east and southeast remains a top priority on the Union’s agenda, due to former commitments towards Turkey and countries of the Western Balkans. The case of Turkey: The Helsinki Council on December 1999 recognised Turkey as a candidate country, but the start of negotiations remained out of the question at the time. The main criticism against Turkey was that it didn’t even meet the political criteria of membership in relation to the development of properly functioning democratic institutions and ensuring respect for human rights. According to the EU’s principle declared earlier, meeting the Copenhagen political criteria is a precondition for starting negotiations on the economic and legal terms of accession. A precondition set by the EU for starting accession talks was that Turkey should officially recognise the extension of the 1963 customs union under the Ankara Agreement to the countries that became Member States on 1 May 2004. On 1 August 2005, Turkey signed the Protocol to the Ankara Agreement extending the customs union to the New Member States, but on the same day a unilateral declaration stated that the extension doesn’t mean the recognition of Cyprus.

30. VIII. Continuing eastward enlargement II. On 3 October 2005, Member States decided to start negotiations with Turkey. Accession talks with Turkey and Croatia began on the above mentioned day, are conducted on the basis of 35 chapters. The screening phase of acquis communautaire was completed by the end of October 2006. But despite the Ankara Agreement and the request of the European Union, Turkey refused to allow ships flying Cypriot flags to enter Turkish ports. As a consequence, the Council of the EU – following the Commission’s proposal – decided on 11 December 2006 to suspend eight chapters related to the customs union and not to re-open them until Turkey fully implemented the Ankara Agreement. Apart from the eight suspended chapters, accession talks can continue if the usual conditions are met (in the first half of 2007, three chapters were opened). Some Member States (Austria, Germany) think that Turkey should be offered some kind of special status instead of full membership. The French position is particularly ambivalent towards Turkey; the French Constitution, amended in February 2005, calls for a referendum on all accessions in the future. Instead of granting a full-membership, France wanted to provide a special status for Turkey. It is safe to conclude that Turkey will not become a member of the EU in the next few years, but the exact timeframe of its accession process is rather difficult to predict.

31. VIII. Continuing eastward enlargement III. The Thessaloniki Summit held on June 2003, decided to offer the prospect of EU membership to the countries of the Western Balkans (Albania, Bosnia-Herzegovina, Croatia, Macedonia and Serbia- Montenegro, including Kosovo). The Thessaloniki Agenda doesn’t mean candidate status (only potential candidacy), and doesn’t given any specific dates, but does stipulate that the EU’s aim is to take these countries on board and continue eastern enlargement, extending the area of political stability and economic prosperity further south-east. The EU stressed that the accession of individual country would be conditional on the fulfillment of the Copenhagen criteria and based on individual merits. The EU’s commitment to the Western Balkan was demonstrated by the decision of the Brussels Council meeting of June 2004, to grant candidate status to the region’s most advanced country, Croatia (which submitted its application for membership in February 2003). The accession negotiations started with Croatia on the same day as Turkey (3 October 2005), when Croatia cooperation with the International Criminal Tribunal for the Former Yugoslavia in the Hague was deemed satisfactory. The second country from the region of the Western Balkans to submit its formal application for membership was Macedonia, in March 2004. The European Council’s meeting held on 15-16 December 2005 decided to grant Macedonia candidate status. The European Council acknowledged the reforms that made Macedonia but emphasized further progress for the accession process to move on.

32. VIII. Continuing eastward enlargement IV. In the case of Western Balkan countries, membership is clearly a very distant prospect; the primary goal is to implement the Stabilisation and Association agreements (SAAs) they have been offered. Still, the EU considers all of these countries (Albania, Bosnia-Herzegovina, Montenegro and Serbia, including Kosovo, under interim UN administration) as potential candidates for EU membership. Albania signed the SAA in June 2006. Negotiations on the SAA started with Serbia in October 2005, but were suspended in May 2006, because the EU deemed the country’s cooperation with the International Criminal Tribunal for the former Yugoslavia (ICTY) in the Hague as insufficient. Negotiations re-commenced in June 2007, but they will only be concluded if Serbia fully cooperates with the ICTY. Negotiations on the SAA with Montenegro started following its independence in June 2006 and Agreement was signed in 2007. From 1 January 2007, all existing pre-accession-type funds (PHARE, ISPA, SAPARD, Turkey’s pre-accession support and CARDS for the (IPA), which covers candidate countries (Croatia, Macedonia and Turkey) as well as potential candidates (Albania, Bosnia-Herzegovina, Montenegro and Serbia, including Kosovo). The IPA has five constituent strands, each supporting one priority area: transition assistance and institution building, regional development, cross-border cooperation, human resources development and rural development.

33. VIII. Continuing eastward enlargement V. The latter three are only available to candidate countries and are aimed at preparing them for management of Structural Funds. IPA will provide a total amount of EUR 11.47 billion over the 2007-2013 period. The breakdown of the total envelope is decided anually on the basis of a three-year indicative financial framework. In the first three years from 2007 to 2009, IPA will have at its disposal EUR 4 billion, divided between Turkey and the Western Balkan in a ratio of 40% to 60%. The case of Turkey and the Western Balkan shows that there is a lot to do still in the enlargement process, which will undoubtedly remain high on the agenda in the coming one to two decades. At the same time, it is increasingly likely that a debate will have to be held on – and an answer will have to be given to – the question of how far European integration can go, how far the Union can enlarge and where the geographical boundaries of the united Europe end. In this context, the issue of absorption capacity (sometimes also referred to as integration capacity) has received increasing attention. The further enlargement process depends on the absorption capacity of the European Union.