As the euro sinks gently lower and William Hague's Sterling for Britain wagon trundles round county ...
As the euro sinks gently lower and William Hague's Sterling for Britain wagon trundles round county towns glad-handing disenchanted farmers, truck drivers, widget manufacturers and car plant workers, the pro-Europe lobby face an uphill battle to convince the public of the merits of joining the single currency and the EU economic block.
Opinion polls show Britons increasingly reluctant to sign up to rule from Brussels, but while the UK disdains membership of the Euro club, countries from Eastern and Central Europe are straining every last sinew to claim first EU membership, followed by the coveted prize (in their view) of inclusion in the single currency.
While investors may shake their heads in disbelief at such a foolhardy ambition, the economic growth the candidates must achieve on the way to their nirvana provides an interesting opportunity. The first of these, Greece, has already all but passed. One of the best performing markets in 1999, Greece, enters the eurozone in January next year.
Next in line to join an enlarged Europe are the 10 countries that applied between 1994 and 1996. These, which have "EU Association Agreements" are the Czech Republic, Estonia, Hungary, Poland, Slovenia, and trailing them, Bulgaria, Latvia, Lithuania, Romania and Slovakia. Three more ‹ Cyprus, Malta and Turkey have been specifically told they are eligible to join. The candidates have been set highly demanding criteria, in political, social and economic terms, and occasionally complain that the EU has been cleverly and clandestinely moving the goalposts so that hitting the target becomes extremely difficult. And it is true that public support in the EU for enlargement ranges from the downright resistant (Jorg Heider's Austria at 29%) to the dilly Danes (at 62%, still not exactly a resounding endorsement).
But from the outside, the EU grass is rich and sweet. The aspiring candidates know exactly what the unwieldy phrase "income convergence" means...money in their pockets. And they have seen how Ireland and Portugal, one-time regional yokels, have been transformed by EU subsidies. In 1979, after six years in the EU, Ireland had a per capita GDP level of $4,800, compared to the EU average of $8,850. By 1998, that had shot up to $22,900, outstripping the average of $22,182. Per capita GDP growth means what expanding economic activity represents for each person in the country. When Portugal began negotiations to join the EU in 1979, it was just $2,100 and by 1985 there was no change, even though the EU average had leapt to $9,130. But 10 years later, the level in Portugal had soared to $11,000.
Many Central and Eastern countries' per capita GDP are already better than Portugal and Ireland's were before they joined, and growing apace. Over 1997 to 1999, according to ING Barings, per capita GDP growth averaged 13-16% a year in Bulgaria and Latvia, where reforms are delivering clear results, 9% in Poland and 7-8% in Slovenia, Hungary, Slovakia and Turkey.
The trend is established, although there is some way to go before any meaningful "income convergence", even with the poorest present EU members. Europe's enlargement was supposed to follow hard on the heels of the launch of the Eurozone, but the timetable has slipped first from 2003 to 2004, and now to 2005.
Partner Insight Video: Advisers have had to adapt to the changing investment landscape.
Investment trust savings scheme