Four Weeks in Europe 06/08-02/09/03

EU news in brief

EU Humanitarian aid - focus on “forgotten” crises

Helping people who are most in need, irrespective of their nationality, religion or ethnic origin, is a key principle of the European Union's humanitarian aid policy. This is reflected in the support channelled by the European Commission's Humanitarian Aid Office (ECHO), which falls under the responsibility of Commissioner Poul Nielson, to crisis zones that have slipped out of the international media spotlight. ECHO is one of the world's largest donors of relief assistance, with an overall budget of €538 million in 2002. According to Mr Nielson: “Humanitarian aid for victims of natural or man made catastrophes should not depend on media coverage or political interests but on the needs of the people affected. ECHO is deeply concerned by the problem of the so-called 'forgotten crises', and we take great care to ensure that they are not forgotten by the European Union”. For more information: http://europa.eu.int/comm/echo/index_en.htm

[Background paper MEMO/03/162]

EC and US propose a framework for a joint approach on agricultural questions in WTO

Today the EU and the US presented a joint framework to relaunch agricultural negotiations. We have agreed that it is necessary for the two largest trading powers to develop a joint approach to the major issues dividing the WTO membership. It focuses on three areas, domestic support, market access and export competition. The joint paper reflects the great importance the EU and the US attach to their responsibility to pave the way for a successful and ambitious conclusion in Cancun and to provide added impetus to the cycle of trade negotiations.

[Background paper IP/03/1160]

Commission's Joint Research Centre forecasts this year's crop losses caused by drought

The Commission's Joint Research Centre (JRC) uses its advanced crop yield forecasting system to predict the effects of the persisting drought on this year's harvest in the European Union. The expected drop in the main crop yields ranges from about 2% for potato to 25% for sunflower at EU level. The loss in wheat production will be approximately 10 million tonnes compared to the previous agricultural campaign. The quantitative forecasts produced by the JRC on a regular basis in support of the Common Agricultural Policy cover the main crops, such as wheat, grain maize, rape seed, sunflower, sugar beet and potato.

[Background paper IP/03/1163]

Romano Prodi expresses outrage at attack on UN office in Baghdad

Romano Prodi, President of the European Commission, has this afternoon sent a message to Kofi Annan, expressing the Commission's outrage at the barbaric attack on civilians working at the United Nations Office in Baghdad. The Commission deeply regrets the loss of life and the injuries caused, both to Iraqis and international staff, and we offer our condolences to the families of those affected. The work of the United Nations is essential to rebuilding a stable and prosperous Iraq. It has been among the strongest advocates of a rapid and effective transfer of power to the Iraqi people. The targeting of its staff and of Special Representative Sergio Vieira de Mello is therefore an attack on the future of Iraq and all of its people. Together with other recent attacks on international personnel, this attack will seriously hamper the ability of the international community to provide much needed humanitarian aid and will be a blow to its efforts to prepare for rapid reconstruction of the country. The European Commission remains determined to work with its international partners to support the UN in its vital role.

WTO farm talks: Commission presents info pack for Cancún

Today, the European Commission presented an agriculture information pack for the upcoming WTO Ministerial meeting in Cancún, Mexico from 10 to 14 September 2003. The information material contains facts and figures about the Common Agricultural Policy (CAP) and its history of reforms, the EU's approach for Cancún, especially regarding developing countries and non-trade concerns and a glossary which helps to decipher WTO- and euro-speak. The press pack is available in English, French and Spanish on paper and on the internet at: http://europa.eu.int/comm/agriculture/external/wto/backgrou/index_en.htm

[Background paper IP/03/1180]

European Cinema: 300 partners already for the second CINEDAYS festival 2003

At a press conference in Venice, where the 60th Venice Film Festival is taking place, the European Commissioner for Culture and Audiovisual Media, Viviane Reding, presented today the preliminary programme for the second CINEDAYS festival, which will take place from 10 to 24 October 2003. In 2002, this European film festival mobilised almost 50 television channels, hundreds of cinemas and film archives and allowed 100 000 young people to attend screenings of both modern and vintage European films or to work at school on the theme of education in the visual image. The official opening will take place in Brussels on 9 October, and the Italian Presidency will be organising the closing ceremony on 24 October in Rome. Information on CINEDAYS 2003 is available at: http://www.cineuropa.org/

[Background paper IP/03/1179]

European Commission paves the way for EC ratification of UN Convention Against Transnational Organised Crime and its protocols on smuggling and trafficking in human beings

The European Commission has proposed to the Council the ratification, on behalf of the Community, of the UN convention against transnational organised crime (UNTOC), its supplementing Protocol to prevent, suppress and punish trafficking in persons, especially women and children and its supplementing Protocol against the smuggling of migrants by land, air and sea. If the Council of Ministers agrees the European Union will join the 40 countries that have already ratified the convention, which will enter into force on 29 September 2003. For further information:http://europa.eu.int/comm/justice_home/index_en.htm

[Background paper IP/03/1185]

Eurostat news releases

Third release for the first quarter of 2003 Euro-zone and EU15 GDP up by 0.1%; +0.9% and +1.1% respectively compared to first quarter of 2002

Gross Domestic Product (GDP) grew by 0.1% in both the euro-zone and the EU15 during the first quarter of 2003, according to estimates out from Eurostat in Luxembourg. These results follow an increase of 0.1% in both the euro-zone and the EU15 in the fourth quarter of 2002. In comparison with the first quarter of 2002, euro-zone GDP grew by 0.9% and that of the EU15 by 1.1%, after increases of 1.2% and 1.4% respectively in the previous quarter. The US economy recorded a 0.4% increase in GDP during the first quarter of 2003, after growth of 0.3% in the fourth quarter of 2002. In Japan, GDP grew by 0.1%, after +0.4% in the previous quarter. Compared to the first quarter of 2002, GDP rose by 2.0% in the United States and by 2.5% in Japan.

[Background paper STAT/03/91]

European population trends in 2002 EU population up by 0.3% in 2002 to 379 million; EU accounts for 2% of world population growth

On 1st January 2003 the population of the EU was 379.0 million and that of the euro zone 305.6 million, far behind China (1 283 million) and India (1 042 million) but in front of the US (289.0 million). The EU population increased by 1 290 000 in 2002, an annual rate of 0.3%. The rise in the EU population was around 2% of the 74 million increase in the world's population in 2002. The main contributors to world population growth were India (with an increase of 15.6 million, or 21% of the total world increase), China (+7.9 million or 11%) and other developing countries (+47.3 million or 63%). Net migration accounted for almost a million, or three-quarters, of the EU population increase in 2002, with natural increase accounting for the rest. Natural increase has been below net migration since 1989. The United States recorded a population increase of 0.9%, three times higher than in the EU, with natural growth accounting for nearly two-thirds of the increase. Japan, with 127.1 million people, recorded an increase of 0.1%, due solely to natural growth.

[Background paper STAT/03/92]

Flash estimates for the second quarter of 2003 Euro-zone and EU15 GDP stable; +0.4% and +0.6% compared to the second quarter of 2002

GDP remained stable in the euro-zone and in the EU15 during the second quarter of 2003, compared to the previous quarter, according to flash estimates published by Eurostat. In the first quarter of 2003, growth rates were +0.1% for both zones.

Compared to the same quarter of the previous year, GDP grew by 0.4% in the euro-zone and by 0.6% in the EU15, after +0.9% and +1.1% respectively in the previous quarter.

[Background paper STAT/03/93]

July 2003 Euro-zone annual inflation down to 1.9%; EU15 stable at 1.8%

Euro-zone annual inflation fell from 2.0% in June to 1.9% in July 2003, Eurostat reports. A year earlier the rate was 2.0%. EU15 annual inflation was 1.8% in July 20032, the same as in June. A year earlier the rate was 1.9%. EEA annual inflation was 1.8% in July 2003. In July, the highest annual rates were recorded in Ireland (3.9%), Greece (3.5%), Spain, Italy and Portugal (2.9% each); the lowest rates were observed in Germany (0.8%), Austria and Finland (both 1.0%). Compared with June 2003, annual inflation rose in five Member States, fell in seven, and remained stable in two. Compared with July 2002, the biggest relative falls were in Finland (2.0% to 1.0%), Austria (1.5% to 1.0%) and Germany (1.0% to 0.8%) and the biggest relative rises were in Sweden (1.8% to 2.4%), France (1.6% to 2.0%) and Belgium (1.1% to 1.4%). Lowest 12-month averages up to July 2003 were in Germany (1.0%), Belgium (1.3%) and the United Kingdom (1.4%); highest were in Ireland (4.5%), Portugal (3.8%) and Greece (3.7%).

[Background paper STAT/03/94]

Enlargement news

Ups and downs in euro parity for prospective Member States

Over the nearly five years that the Euro has been in existence, the exchange rates for the currencies of the candidate countries and acceding states have fared very differently - with some strong rises in value, and some even stronger declines.

A new report from Eurostat, the EU's statistical service, shows that since the introduction of the euro on 1 January 1999, the Lithuanian litas has performed best, rising 35%. But that is largely because it was pegged to the US dollar from 1994 to January 2002, and consequently rose as the dollar rose against the Euro. Since February 2002 the Litas has been pegged to the Euro, at a fixed rate of LTL 3.4582/€1.

Lithuania is one of the countries that has operated a currency board regime - the system in which a country's currency is irrevocably fixed against a foreign currency, and where the base money stock is totally financed by foreign reserves, which more or less precludes offering lines of credit to private financial institutions experiencing short-term liquidity problems.

By contrast, the second-best performance came from the Czech koruna, which has risen 11% over the same period, but under a managed floating exchange rate regime, where the exchange rate is determined by foreign exchange supply and demand, but with the Czech central bank avoiding all excessive fluctuations in its currency. The increase recorded was 3% in 2000, and almost 10% during 2001. In the course of 2002, it rose by 1.22% over the year as a whole, peaking in June 2002 at a rate of 29.267 CzK to 1 euro before falling back. During the first six months of 2003, the CzK has hovered around 31.5 CzK to 1 euro.

Farmers falling outside social security arrangements in future member states?

Large numbers of farmers appear not to be covered by adequate social security arrangements in the candidate countries, according to a new report, "Social security systems and demographic developments in agriculture in the CEE candidate countries". Prepared by the Network of Independent Experts in the CEE Candidate Countries and the Institute for Agricultural Development in Central and Eastern Europe, the report provides an overview of the agricultural social security systems and their impact on agrarian structural change. But they often do better on pensions than they might otherwise expect, it says. While agricultural incomes are lower than average incomes, the pension benefits "tend to be only roughly linked to incomes, if at all", and there is an effective subsidisation of pension arrangements that amounts to a de facto transfer to agriculture. This, however, could in turn create new vulnerability for farmers as cost-cutting social security reforms under way in many countries may reduce the size of the state budget contribution.

Meanwhile, structural unemployment in agriculture is "one of the major political challenges in the candidate countries", and the report insists on the importance of the possible contribution of social security arrangements in general in reducing this problem. Given the relatively low educational levels of those in the farm sector, a link between income support policies and training and capacity building might be pursued, it suggests. But it warns that in some countries, the age structure of farmers is such that encouraging them into off-farm employment is simply not realistic. Encouragement to farmers to take up early retirement through incentives in the social security system might be an alternative, provided it led to an accelerated restructuring of the sector.

Assessing the economic effects of accession

The most uncertain component of the immediate transfers from the EU to the acceding states are related to the project-related funds, their disbursement and fiscal implications, because of co-financing requirements, according to a new report from the Austrian think-tank, WIIW, "Consequences of EU Accession: Economic Effects on CEECs". But looking further ahead, the study foresees the formation of new coalitions within the enlarged European Union in the longer-run negotiations over the Financial Framework for 2007-2013. And it assesses the trade-off decisions new member states will face between fast versus delayed entry to European Monetary Union. This "will shape the constraints within which the conduct of fiscal and monetary policy will have to take place", and is likely to dominate the medium-run growth prospects of the new members upon accession.

Lisbon targets "more difficult in enlarged EU"

The Lisbon strategic goal of "becoming the most competitive and dynamic economy" may be more difficult to achieve in the enlarged EU, simply because in most cases the average EU starting base is statistically lowered by the fact that most acceding countries are less well placed vis-ŕ-vis the Lisbon targets than the existing member states, says a new study from the European Commission, "Key structural challenges in the acceding countries: The integration of the acceding countries into the Community's economic policy co-ordination processes". The report aims to be a first step towards integrating the acceding countries, after enlargement into the multilateral surveillance conducted by the EU Council of Ministers. It assesses the challenges faced by the acceding countries with regard to the Lisbon goal and the Broad Economic Policy Guidelines, and identifies possible priorities for structural reforms in those countries.

The report remarks that while enlargement in a medium- to long-term perspective is set to enhance the prospects for growth of the EU economy, progress, and the speed of structural change, "have not been consistently strong across all countries and areas". Achieving real convergence with the EU and enhanced resilience to possible future shocks will depend on the scope and pace of progress in the implementation of the structural reform agenda, it insists. As regards the Lisbon and Stockholm targets for employment rates, the total employment rate in an EU-25 would have been some 1.5 percentage points lower than in the EU-15 in 2001 (62.6% compared with 64%) and the same is true across other key employment indicators. Challenges facing labour markets in the acceding countries "are often more severe", the report says.

The acceding countries also "face more severe problems than the present member states as regards their efforts at reform intended to strengthen competition in several product markets, including the need to enhance the general business environment, to lower barriers imposed by market entry and exit mechanisms, and to reduce significantly sectoral or ad hoc state aid". And in many acceding countries, the administrative capacity of the public sector "also needs to be urgently enhanced", since "many segments of the public sector are perceived as remaining highly inefficient, which creates obstacles to the operation and growth of businesses." The regulatory burden on business, implementation and design of judicial reforms, and quality and administrative capacity of the central and local public sectors are flagged up as particular areas of concern. Financial markets in the acceding countries also "continue to be underdeveloped". And for public finances, "there is a need in many acceding countries to reassess the structure of budget revenue and expenditure in order to foster a growth-enhancing environment providing sufficient space and incentives for private sector development."