T HE DEGREE OF MARKET REGULATION

Enlargement will greatly increase the size of the world’s largest common market. Despite the success of the EU on the economic front, there are still intense conflicts at meetings of the IM Council for which the data set yields an aggregate level of disagreement of 66.6%. Taking into account that IM policy dynamics are innately intertwined with those concerning producers and consumers, i.e. product standards, this section will assess the repercussions of enlargement from a different angle. The factor analysis has singled out one supreme conflict

40 see Daniela Weingärtner, “die EU haut den Fisch in die Pfanne” die Tageszeitung, December 23, 2002)

over market regulation, which best reflects the given dissent among the member states and the supranational institutions in this policy domain. Although the current government party is an intervening variable, we generally observe the UK, DK and FIN in a coalition as fervent supporters of de-regulationist policies, thus minimal state intervention (see Hix 1999a: 232), while France and other southern states have continued to resist the neo-liberal, de-regulationsist trend during the period of analysis (see also Garrett 1992). Regulation may entail the maintenance of national interventionist policies and/or the support for a solid regulatory framework on the EU level for certain sectors. As previously noted, Germany and another group of states tend towards policies of re-regulation - moderate state and community intervention, i.e. a social market (Hix 1999a: 237).

Diplomats from the CEECs were first given a brief overview of the current conflict and requested to share insights on their countries’ expectations towards the internal market. The experts located their fundamental position along the one-dimensional scale while elaborating on the peculiarities of certain economic sectors and the social impact of deregulation. To bolster the reliability of the data collected from the diplomats, EU representatives from the DG Enlargement and DG IM pinpointed the expected positions of the candidate states along this dimension. The aggregate results with a mean standard deviation of 8.58 are as follows:

Figure 7-12. Internal Market Policy Positions

PL

IRL SQ NL CZ CY EST SLO

GB FIN DK S A D LT ^{Com P L EP GR B} LV H SK E I F M

0 10 20 30 40 50 60 70 80 90 100

total deregulation re-regulation total regulation

EU 15 EU 25

Minimum – Maximum 0 87.5 0 100

Mean 42.2 53.3

Median 28 62.5

Median by weighted Council votes 50 65.8

Standard Deviation 29.5 28.9

Skewness .27 -.25

(see Appendix C for calculation technique)

Unlike in other policy areas, there are no preference “poles”, but instead a spread-out distribution. Even the most competitive CEECs are expected to lean towards the continental economic tradition, advocating regulationist or “re-regulationist” policies. The preference towards a moderate dosage of regulation is rooted in the CEECs’ inclination towards a

framework of “selective regulatory alignment” (see Sedelmeier 2002: 640; Young and Wallace 2000). This would allow the transition economies greater leverage in setting their own economic priorities and policies without being overly exposed to external forces of de-regulation and liberalization. At least in the early years of membership, most candidates express a desire for a moderately regulated economy to facilitate structural adjustments and prepare firms for European and international competition. This explains both the aversion to further harmonized product standards as well as full-scale market liberalization. Most importantly, the public sector serves as an employment buffer for the CEECs (see also Scharpf 2002: 648). Governments have relied on this oversized and often inefficient sector as an ultimate means of preventing mass unemployment, having led to the postponement of further privatization. One should also note that far-reaching de-regulation is often instantaneously related to social hardships and unemployment.⁴¹ Thus, the success of former- communist parties can partially be explained by their advocacy of government regulation of the most problematic sectors to provide a sort of economic safety net for the losers of privatization. On these grounds, a backlash against what many view as disproportionate economic liberalization cannot be excluded.

Table 7-7. Economic regulation after Nice Status Quo

This aversion towards de-regulation has and will also put the CEECs at odds with the EU’s competition policy, which has disabled state interventionism and public procurement (Scharpf

41 see interview reports CEEC Diplomats

2002).⁴² Once again, questions of regulation go hand in hand with consumer-oriented legislation. The essence of economic competition is founded upon the concept of a “level playing field” which implies that IM legislation guarantees fair competition on the one hand through the free circulation of goods and services, and on the other by means of harmonizing the production process. The previous analysis has demonstrated that accommodating the CEECs into the given market structure and simultaneously generating further legislation concerning process and product standards will severely strain the EU’s coordination capacity.

However, the data offered do merit particular caution. The CEECs have been exposed to an unprecedented process of de-regulation, which has generated high levels of economic growth (see Sachs and Warner 1995), but also rapidly increased social inequalities (Quaisser 1997:

12-14). This has sparked highly polarized ideological conflict on issues of economic regulation. In particular in CZ, LT, EST, and LT state intervention is an extremely salient issue, provoking a large domestic schisms. Pressures for extensive de-regulation are best represented by the influential Czech Občanská Demokratická Strana (Civil Democratic Party), who are like-minded with the British Conservatives or the German FDP in their advocacy of high-scale economic liberalism. This is manifested by their profound criticism of the generous EU social dimension (Mudde and Kopecký 2002: 306) - and aversion towards EU regulation (ODS Party Program). The other side of the spectrum of influential democratic parties is rounded off by the Hungarian Socialist Party (MSZP) whose politics of social spending and labor protection are generous even for western standards. Thus, concerning matters of economic regulation, any change in government may imply a drastic tilt to the opposite end of the preference spectrum.