Friday, April 29, 2005

Maybe not all of the EU is under a cloud.

EU: Eastern Europe seems to be doing gangbusters.

AROUND Tallinn, the Estonian capital, smart houses are sprouting amid an unprecedented rise in construction. People drive expensive cars. This is a boom town, not a depressed former Soviet city. Foreign investment is pouring into a low-tax economy that grew at 6.2 per cent last year. But even that left Estonia the slowest of the three Baltic Tigers: Lithuania grew at 6.7 per cent and Latvia at 8.5 per cent — as much growth in one year as the EU achieved in the previous five. Unemployment is falling fast. .....Just a month after enlargement the new Eastern European states joined Britain and Italy in rejecting Guy Verhofstadt, the Belgian Prime Minister and Franco-German candidate for European Commission president. Instead they installed José Manuel Barroso, the Prime Minister of Portugal and an economic liberal. France and Germany initially responded to the threat of low-cost, low-tax competition from the East by demanding tax harmonisation. But they have been forced to retreat, and Germany and Austria have started cutting taxes. “The new members are setting a very good example. We want a dynamic Europe. France and Germany will have to reform their labour markets in the face of competition from the East,” Mr MacShane said. The new states, refusing to be bullied, have also transformed EU foreign policy. Poland and Lithuania demanded EU support for Ukraine’s pro-Western Orange Revolution, sidelining France and Germany. They have fostered a more pro-American agenda, countering the French desire to make the EU a counter- balancing power to the US.

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