What Does EU Membership Do for Your GDP?
Among the candidates for entry into European Union there is a common perception that membership in the EU is going to accelerate economic growth of the aspiring member. Only two years have passed since ten countries have entered EU in 2004, too short a period to make any meaningful observations.
Instead, I attach the data about GDP/capita levels in members that have joined EU earlier (it was then called European Economic Community). Ireland became a member in 1973, Greece in 1981, Spain in 1981 and Portugal in 1986. Greek part of Cyprus joined in 2004.
The new members are supposed to benefit from at least two things:
1) integration into the huge free trade zone that EU is and
2) adjustment funds from the richer members
All countries mentioned were below 75% of EU average in GDP/capita and thus eligible for funds that would allow them to converge to it. Have they suceeded?
Ireland, known because of its later growth as the Celtic tiger, only picked up with growth in the last decade of the 20th century. This is despite being a destination of EEC adjustment funds for longer time than any other member.
Spain expirienced solid growth after its EEC membership, which is often mentioned as case in point of membership accelerating economic growth.
Portugal has started from a very low level, had some good growth which seems to have dissapeared in 2000. I don’t know the cause, but until then Portugal and Spain seemed to follow a similar growth pattern.
Greece not only failed to converge to the EU average, but actually diverged for a period. This has been a mystery for analysts. Greece has had relatively large military and social expenditures and it accumulated a lot of debt under the socialist government but that is not enough to explain the lag. Greece has also been a reciever of generous EU funds.
Cyprus is the control country 
. It especially lends itself to comparisons with Greece. Whatever be the cultural influences on economic growth they cancel each other in this case since both countries are populated with Greeks. The difference in economic performance can most likely be attributed entirely to differences in economic policy.
What can one conclude from all this? Not too much, of course. Every country has its own story to tell (I might cover some of them in more depth in subsequent posts) but the least we can say is that strong economic growth is possible for a European country without membership in the European Union. As for how much the membership helps growth, I’d say that the jury is still out. EU has literally thrown billions at Ireland, Portugal and Greece (my favourite example, thank you Greece for not growing for a period 
), with mixed results. Ireland is now at 40% above the average EU GDP/capita, but the case of Portugal and Greece (both at about 20-25% below it) is far from spectacular.
May 12th, 2006 at 7:34 pm
The EU, I’d hit it :b:
May 13th, 2006 at 12:14 am
Very interesting analysis there. I think we have to remember that in the case of a lot of the ex-Warsaw Pact nations joining the EU now, they are still emerging market economies, and the freer restrictions of being in the EU will aid their ongoing transistion.
December 8th, 2006 at 2:28 am
If you notice during the 1980′s Greece was governed by the failed Socialist policies of the Papandreou Socialist Gvt. His failed Socialist Policies nearly bankrupted the country. Its growth rate was hovering around 0! while the rest of the EU averaged 3-4% growth. This stagnation allowed the less wealthier countries ie Ireland, Portugal and Spain to catch up and surpass Greece in GDP. From memory Papandreou was an economics professor at Harvard! before becoming Prime Minister of Greece in 1981. His father before him was no different, leading to a military Coup!
Look at Greece today under the Conservative Karamanlis Gvt. Its growth rate is apprx 4% and has been for the past few years under this Gvt, while the major countries of the EU are growing at less than 1%.
December 8th, 2006 at 7:29 am
I know Greece has been having solid economic growth in the recent period. But how much really changed with regards to government? Some Greeks I talked to after the change of government told me that nothing radical happened. BTW., I think that at least some part of the growth can be attributed to the inflow of Albanian “gastarbeiters” who contribute to the economy, yet aren’t counted in censii. If true, it could mean that official GDP/capita growth stats are skewed upwards.
August 31st, 2007 at 7:39 am
[…] This is simply not the case. Rainfall does not discriminate on grounds of a region’s economic prosperity. It takes no account of race, GDP or – despite enthusiastic prayers from millions of people here in Turkey – religion. But rainfall is only one part of the problem. What to do with the water once it has descended from the heavens is at least equally important. Gross mismanagement (as has been seen here in Turkey) and insufficient infrastructure is also to blame.
Here in Turkey, for example, real GDP growth hummed along at an impressive 7.2% for the period between 2002-06.
by gsub_spamCarma_1186990996[…]
January 15th, 2009 at 4:11 pm
Greece is an interesting example. EC membership actually hurt the country and on top of that they misused ECC funding in the 80s. There is a growth plateau from the mid-70s to mid-90s.
However, the was (and is as of 2008/9) very significant growth from the mid-90s to todays, although the global economic crisis will likely slow it down.
Much of this unsung growth has been down to 2 things.
1. The goal to enter the eurozone, which prompted politician (and in particular Simitis) to take hard action.
2. The Olympic Games of 2004, which modernised the infrastructure of the country.