Anticipation Beats Reality

Is it better to be an EU member or a prospective member? Exhibit 1:

Countries preparing for accession in 2004—such as the Czech Republic, Hungary, and Poland—saw a wave of privatization and merger deals in 2002.

Exhibit 2:

In 2003, the wave of investment moved on to lower-cost countries that may be included in the next membership round, including Croatia, Romania, and Ukraine.

Exhibit 3:

New EU members such as the Czech Republic, Slovakia, and Slovenia all slipped in this year’s index, with FDI inflows falling by more than two thirds for each of the three countries as they lost their cost competitiveness following EU integration.

It seems that the best strategy for prospective members could be that of the Cad. Get your wicked way and dump her at the altar. Investors like EU membership for three reasons:

1. Access to Major European Markets
2. Lower levels of Uncertainty
3. The Rule of Law

All the rest is something that they will put up with in order to get those three. Is it really beyond the realms of possibility to devise a system that delivers these three benefits, without the aftertaste that investors dislike so much?