Published: 07/02/2022

Development convergence is taking place in the European Union, mainly due to the Central and Eastern European (CEE) countries’ accession to the EU.

Institutional convergence is here

Crucially, the Maastricht Treaty largely contributed to the institutional convergence between the Member States. The EU countries are alike in terms of the quality of the law and the scope of economic freedom. This is especially true for the CEE countries. The region has undergone an institutional revolution. The indices show that the differences between the EU Centre and CEE in the assessment of the law have decreased almost fourfold, while those in the scope of economic freedom have fallen more than sevenfold. The indicators are currently slightly lower than those for the Central and Scandinavian countries.

Structural convergence is wanted

The EU Member States are not becoming more alike in terms of their economic structures. In 1995–2019, the distance between the CEE countries and the EU Centre decreased by a total of 5.8 per cent, which means that the structural gap shrank at an annual rate of just 0.2 per cent.

‘Specialisation is progressing in the EU. In recent decades, the South has become mainly a tourist hub. In that region, the tourism contribution to GDP is an average of 6.5 per cent, 2.5 times more than in the EU’s West. At the same time, the CEE countries have expanded industry quite rapidly, but mainly as subcontractors to the West. High-tech exports have been developing almost exclusively in the countries of the EU Centre’, says Krzysztof Marczewski from the macroeconomics team at the Polish Economic Institute.

The convergence of the South was interrupted by the financial crisis in the first place. Structural differences between the economies of the South and the EU Centre had decreased by almost 20 per cent in 1995–2008. However, since the start of the financial crisis, they have systematically worsened, along with the growing gap in the level of development between the countries. The structural distance between the EU’s South and Centre is now as big as it was in 1995 – the past quarter of a century has not led to convergence.

Only the Scandinavian countries have been converging structurally. In 1995–2019, the gap between them and the EU Centre decreased by almost 38 per cent. This rapprochement mainly resulted from the development of the construction industry and the business services sector.

‘The 30 years of the Maastricht Treaty have proven successful with regard to institutional convergence, but not very effective in reducing structural differences. Their persistence could prevent full convergence within the EU. The EU is facing a strategic choice of whether to tighten economic and political integration, implement a fiscal union and boost the mobility of workforce or rather support the economic and technological development in each region of the EU. The latter will require reducing the differences in the balance of payments between the EU Member States’, says Marcin Klucznik, an analyst of the macroeconomics team at the Polish Economic Institute.