An EU of 36 Members?

“An EU with 27, 30, 36 states, with then more than 500 million free and equal citizens, can bring its weight to bear even more strongly in the world.” – German Chancellor Olaf Scholz’s. In his statement, Chancellor Scholz declared his support for European Union (EU) enlargement in preparation for the European Parliament’s 2024 elections.

The position towards EU enlargement will be an integral part of the different party groups’ visions for the EU. The nine new member states in question include seven of the eight current candidate states: Albania, Bosnia and Herzegovina, Moldova, Montenegro, North Macedonia, Serbia, and Ukraine. Georgia and Kosovo are potential candidate states. Assuming that the talks with the additional candidate state Türkiye are not about to be unfrozen on the current trajectory, the other seven candidate states and the two potential candidate states will build the basis for this analysis. Chancellor Scholz refers to the eastward expansion towards an EU of 36 member states as a “win-win for all of us”. EU enlargement that is based on the fulfillment of the Copenhagen criteria to enter the EU is seen as a success story by the European People’s Party, the European Parliament’s largest group. The nuanced implications and consequences of a potential EU enlargement towards 36 member states ranging from shifting power dynamics to budgetary questions will be at the center of the analysis.

Geographic Center

When signing the Treaty of Rome in 1957, Strasbourg, the location of the European Parliament, was the geographic center of the EU’s precursor. Since then, the EU’s geographic center has shifted to Linz in Austria. All nine new potential member states are South-Eastern or Eastern European countries. Therefore, the geographic center would shift further eastwards in an EU of 36 member states, crossing the Hungarian-Austrian border.

Geopolitics and Shifting Internal Power Dynamics

The potential new member states have a combined population of 67 million people, increasing the population of the peace project EU by 13%. Of the nine potential new member states, Ukraine has the largest population with 40 million people, making it the fifth largest EU member state. A more populated EU with a deeper reach eastward can increase the EU’s global weight in areas ranging from the United Nations to bilateral trade negotiations and human rights and democracy efforts.  

The proportional representation of the potential new member states in the European Parliament will shift the relative power towards favoring Eastern European positions. Same is true for the veto power and qualified majority voting of the European Council. For the qualified majority voting system, the most used voting method in the European Council, 55% of member states representing 65% of the EU population must vote in favor. Particularly in security policy, the new Eastern European positions might be more focused on Russian deterrence and non-confrontation with China. All potential member states except for Kosovo are members of China’s Belt and Road Initiative.

Economic Impact

Enlarging the European Single Market allows the new members to economically develop faster due to the removal of trading barriers with some of the most important trading partners. In line with the current geopolitical trend of diversifying supply chains, this provides an attractive opportunity for the current EU members. Friendshoring is made more profitable due to lower production costs in the new member states. If the EU’s issuance of more common Euro-denominated debt continues in an EU of 36 member states, the risk premium will increase due to larger EU-internal risk premium spreads.

Sequencing of the Four Freedoms

The overall economic impact depends on the sequencing of access to the four freedoms of the EU. The free movement of goods, capital and services could come first. Gradual steps can be taken towards free movement of people to allow for economic development in the new member states without the emigration of the most educated population to high-income EU member states. The space for catch-up economic development is given: The average nominal GDP per capita in the nine candidate states is $6.597 a year, compared to an average of $38.400 in the EU-27. The redirecting of investment might hurt current production locations in middle-income EU countries. The accession of the nine states into the EU would not have to coincide with the accession to the Schengen zone. Criteria for joining the Schengen area on border control, national security and law enforcement partly differ from EU membership criteria. Same is true for the Maastricht criteria to join the Eurozone.

EU Budget and Common Agricultural Policy

Currently, the EU‘s budget through the Multiannual Financial Framework has the size of 1.1% of the area‘s GDP. Adding the off-balance sheet items of the NextGenerationEU package, the share reaches 1.8%. While this budget does not allow for massive fiscal interventions, the EU is the dominant actor in the European agricultural market. The Common Agricultural Policy and Fisheries is the biggest single program of the Multiannual Financial Framework. 72% of these funds support the provision of income to farmers while 21% of the funds are used for rural development.

Implications for Agricultural Transfer Payments

All nine potential new member states would be net recipients. The average contribution share of agriculture to GDP is 9% in the potential new member states compared to 1.8% on average in the EU at the moment. The 2004 EU enlargement of ten new Eastern European member states can be used as an example for how to design a transitional transfer policy within the EU’s budgetary capacities. Initially, farmers in the new member states received relatively lower agricultural transfer payments from high- to low-income member states which have gradually been raised to the other EU countries’ levels.

Consequences of Fulfilled or Shattered Dreams

The nine potential new EU member states have put the dream of EU membership at the forefront of domestic policies and reforms. Elections are held under the categorization of pro- and anti-EU candidates. Amid the EU enthusiasm shown in recent elections, the consequences of potentially shattered dreams of EU membership cannot be neglected. Learning from Türkiye’s candidacy experience, no false hopes should be given to avoid credibility issues. Following a country’s fulfillment of the strict pre-conditions for joining the EU, the EU must make the final decision on fulfilling its end of the bargain and allowing a candidate state into the EU. A transparent process avoiding a frozen candidate status would counter the encouragement of anti-EU forces. This process has the chance to lead to the situation described by German Chancellor Scholz.