Rhein on Energy and Climate

Most European citizens have no clear idea how “rich” the country they live in is compared to the other 26 EU member states. And few will score 100% when asked to give the correct rating for each of the 27.

Thanks to a comparative EUROSTAT analysis of per capita incomes (in purchasing power parities) in 2008 we dispose of precise data that indicate how far per capita incomes diverge from the EU average.

Tiny Luxembourg is, of course, at the top with a record capita income of 171 percent beyond the EU average; Romania, Bulgaria, Latvia and Lithuania find themselves at the bottom of the 27 with per capita incomes of less than half of the EU average (41, 43, 49 and 53 percent respectively).

This is in line with the general expectation. After all, in 2008 these four countries had been EU members only for one or respectively four years; and they had been the poorest of the twelve newcomers to the EU. Still, these income levels that concern 34 million EU citizens are unacceptably low.

The other eight new member countries, however, are not doing too badly compared to the original 15.

Cyprus has already reached the average EU level of prosperity; considering the advantages of nature and climate its citizens enjoy undoubtedly a higher quality of life than many in core EU countries.

Slovenia, Malta and the Czech Republic have reached 80 percent or more of EU average. Slovenia had already a high standard when being part of Yugoslavia. Malta owes its high income level to its well-functioning tourist, trade, banking and shipping business; and the Czechs could build on their old industrial tradition.

Slovakia, Estonia, Poland and Hungary have attained about two thirds of EU average per capita income. That is not too bad after only four years of EU membership.

The real surprise comes when looking at the fifteen “old” member countries.

Portugal has not succeeded in doing better than the Czech Republic or Malta. That is a miserable result for a country that has joined the EU in 1986 and benefited from substantial EU financial transfers. Something has gone wrong there.

The wealthiest countries were Netherlands, Ireland, Austria, UK, Sweden, Denmark, Belgium and Germany with per capita incomes 16-30 percent beyond the EU average. But by 2010 Irish and UK incomes have dropped considerably as a follow-up from the financial crisis.

Finland, France, Italy, Spain and even Greece were close (111- 93 percent) to the EU average, but Greece and Spain score much worse in 2010 than two years ago, due to serious economic policy mistakes.

In conclusion,

The income gaps between the 14 (without Portugal) “old” member countries do not call for any corrective policies from the EU.

High prosperity levels are no guarantee against governments blundering with macro-economic policies, as the examples of Greece, UK and Ireland have shown.

The EU will have to focus its attention on the 10 new member countries in central and Eastern Europe. They should be the principal beneficiaries from the European regional and agricultural policies.

Though this analysis hides regional differences within member states, e.g. southern Italy and Spain or parts of Greece, it demonstrates that the income differences between old and new member states have been substantially reduced since the beginning of the decade, except for Romania and Bulgaria.

Brussels 22.11. 10 Eberhard Rhein

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