The European Union is now a market of 455 million people, more than twice the size of the United States, putting the EU third behind China and India.
With a comparable 2003 gross domestic product of $11.7 trillion according to the EU’s statistics unit Eurostat, the union now rivals the US as the world’s largest economy, though the latter is growing faster.
The 10 new members – Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia – have added 20% to the bloc’s population, but only 5% to GDP.
Their economies are nonetheless forecast to grow by an average 4% this year, more than twice the 1.7% estimate for previous EU members, and the new states hope to follow the Irish “Celtic Tiger” in using union development funds to catch up with the pack.
Eight of the countries are former communist countries, and the 15 years of painful restructuring they have gone through to join the EU has in turn drawn foreign direct investment of $126 billion between 1993 and 2002.
The leaner economic models should help maintain investment rates which have weakened recently, but are forecast to increase by 5.75% this year and by 7.25% in 2005.
That should spur EU growth and could also come at the expense of the United States, which must continue to attract massive amounts of foreign investment to fund its record budget and current account deficits.
European enlargement has resulted in another fundamental change.
The EU now shares a common border with Russia and is becoming a dominant factor in Moscow’s economic calculations.
Russia expects EU to account for 53% of its foreign trade and a third of foreign direct investment. EU industry on its part is hungry for Russian natural resources, setting the stage for agreements that should bind them closer together.