European Union enlargement in 2004 and 2007 has been an important economic success for new and old member states alike, according to European Commissioner for Economic and Monetary Policy Joaquin Almunia.

Almunia was speaking on March 2 2009 at a conference organised by the Czech Presidency of the EU, entitled Five Years of an Enlarged EU.

Enlargement has brought higher growth, especially in the accession countries, who have seen a considerable boost to their catching up process.

New member states have expanded at a pace of 5.5 per cent of GDP over the past five years, compared to the 3.5 per cent of the previous five years.

These higher growth rates have helped close the gap in living standards, Almunia said, with income per capita rising to 52 per cent of the old member states average in 2008, up from 40 per cent in 1999.

"These improvements have not come at the expense of old member states. Their growth was around 2.2 per cent annually from 2004-2008, a similar figure to the previous five years," Almunia said.

A number of factors had driven the higher growth rates in new members, he said.

The first is the opening of new trade opportunities brought by enlargement. New member states have seen their imports and exports increase and they have doubled their world trade share since 1999.

Trade between old and new member states and between the EU12 themselves, have intensified considerably.

In 2007, almost 80 per cent of exports of the new member states went to the rest of the EU.

Old member states have also gained, Almunia said. Their sales to the new members increased to about 7.5 per cent of their total exports in 2007, from 4.75 per cent a decade ago.

"Take Denmark, where sales to the 10 new member states have been growing by double digit rates since 2004. Or Germany, whose exports to the region have more than tripled over the last 10 years," Almunia said

As well as trade, a surge in investments has driven the economic transformation in the EU12, he said

"I must commend the rigorous reform efforts of member states and sound macroeconomic policies which together with the EU’s institutional and legal framework have created an attractive location for private capital."

Investors from old member states and worldwide had seized on these new opportunities and the EU12 had enjoyed an unprecedented inflow of foreign investment.

This investment had fuelled the rapid modernisation of the new member states’ economies.

"Service based and knowledge intensive sectors of the economy have come on leaps and bounds in recent years. High tech goods reached 14 per cent of total exports in 2006 – almost the same rate as the old member states."

Moreover, EU rules on product market regulation and state aids had increased competitiveness in new member states, Almunia said.

"Our report finds a boost in business activity and reduction in consumer prices thanks to these measures. Taken together, this economic modernisation and restructuring, coupled with rising education levels, bode well for competitive position of new member states in the globalised economy."

EU integration has also played a crucial role in reducing the very high levels of unemployment that were prevalent in the enlargement countries.

Three million new jobs were created in the EU12 between 2003 and 2007, and unemployment has been reduced to mirror levels seen in the rest of the EU, he said.

"However, I should add that long term unemployment remains a persistent problem."

"I know that migration from new to old member states sparked anxiety at the time of accession. However, apart from some concerns over brain drain for the EU12, overall labour migration has brought economic benefits for member states both new and old. For the countries of central and Eastern Europe, it has offered increased employment opportunities. Workers returning to their home countries are also bringing back new skills that are being put to good use for their economies."

An objective analysis showed how valuable labour migration had been for the old member states, he said.

"The flow of workers from Eastern countries since enlargement has been absolutely crucial in meeting shortfalls in their labour markets and boosting growth. This is not said often enough and needs to be recognised more widely," Almunia said.

"Indeed, it is important to stress that the EU as a whole has gained enormously from enlargement, not only its newest members. The new markets for investment and exports have opened up a wealth of opportunities for EU businesses."

He said that the economomic crisis had exposed vulnerabilities in the economies of the newest members.

These countries, with support from the wider EU, would have to make some serious adjustments and employ sound domestic policies with vigour.

"But the crisis is also clarifying a stark lesson: Europe's strengths lie in unity, not division," Almunia said.

"This is the only way forward and we must apply this lesson to all the elements of our agenda: to fighting the recession, to strengthening our single market, to reinforcing our European financial sector and to promoting and defending our interests at the global level. If we can combine the power of our 27 member states, acting together, for our shared interests, we can transform the greatest of challenges into mutual prosperity," he said.