Vienna institute highlights benefits of EU membership in Central and Eastern Europe

A comparative analysis of 23 country reports published by the Vienna Institute for International Economic Studies (wiiw) highlights the benefits of EU membership, at a time when the accession process of several countries of this region makes little progress.

The countries covered by wiiw  are Albania, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Czechia, Estonia, Georgia, Hungary, Kosovo, Latvia, Lithuania, Moldova, Montenegro, North Macedonia, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, Türkiye, and Ukraine, the reports focusing on their strengths and weaknesses.

Clearly, EU membership divides the region sharply: EU members (Bulgaria, Croatia, Czechia, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia) benefit from market access, funds, and stability, while non-EU countries (Albania, Belarus, Bosnia and Herzegovina, Georgia, Kosovo, Moldova, Montenegro, North Macedonia, Russia, Serbia, Turkey, Ukraine) often show higher growth potential but face volatility and institutional weaknesses.

Key Economic Indicators: EU vs. Non-EU Advantages

1. GDP Growth:
   • EU members:
     • Performance: Growth averages 1.5-3.5% in 2025. Poland (3.5%) and Romania (3%) lead, driven by consumption and EU-funded investments. Czechia (1.5%) and Hungary (~1.5%) lag due to German industrial ties.
     • Advantage: EU market access ensures stable demand; cohesion funds (~€300 billion for 2021-2027 across CESEE EU states) finance infrastructure, green transitions, and digitalization. For example, Poland expects €40 billion, boosting GDP by ~1% annually.
     • Weakness: Dependence on German exports (e.g., ~30% of Czechia’s trade) exposes them to slowdowns. Bureaucratic delays in fund absorption (e.g., ~50% utilization in Hungary) limit impact.
   • Non-EU Members:
     • Performance: Growth often higher, 2-4%. Turkey (4%), Serbia (3.5%), and Georgia (3.5%) benefit from trade flexibility and FDI from China or Gulf states. Ukraine (2.5%) and Russia (3%) are war-driven outliers; Belarus (~1%) stagnates.
     • Advantage: Flexibility to pivot trade to Asia (e.g., Serbia’s €5 billion Chinese investments) or bypass EU regulations. Lower labor costs (~€3-5/hour in Albania vs. €10/hour in Poland) attract manufacturing.
     • Weakness: Volatility from weak institutions (e.g., Turkey 40% inflation) and geopolitical risks (e.g., Ukraine’s energy losses). Lack of EU funds forces reliance on loans or unstable FDI.
   • Comparison: EU members grow more predictably, with funds cushioning shocks (e.g., €10 billion for Romania’s energy transition). Non-EU states risk boom-bust cycles, as seen in Turkey’s currency crises.
2. Nominal GDP Per Capita (2025, in EUR):
   • EU members:
     • Performance: Range from Slovenia (€35,150) to Romania (€13,300), with most above €19,000 (e.g., Poland ~€21,850, Czechia ~€29,450). High productivity and wages drive income.
     • Advantage: EU integration raises living standards via trade (e.g., ~70% of Estonia’s exports to EU) and labor mobility (e.g., ~1 million Poles in Western Europe send remittances). Euro adoption (e.g., Croatia, Slovakia) or pegs stabilize currencies.
     • Weakness: Rural-urban gaps (e.g., Romania’s rural income ~50% of urban) and brain drain (e.g., ~10% of Latvia’s workforce abroad) limit convergence with Western Europe.
   • Non-EU members:
     • Performance: Range from Russia (€14,250) to Ukraine (€2,375-2,850). Most below €8,500 (e.g., Serbia €8,075, Albania ~€6,175), except Montenegro (€11,400). Large populations (e.g., Turkey ~85 million) dilute gains.
     • Advantage: Lower costs support competitiveness (e.g., Georgia’s ~€5,225 attracts tourism). Rapid FDI growth in some (e.g., Serbia’s €3 billion annually) narrows gaps.
     • Weakness: Lower wages (€2-4/hour in Moldova) and instability (e.g., Belarus sanctions) trap incomes. War slashes Ukraine’s pre-2022 level (€4,275).
   • Comparison: EU members average ~€23,000 per capita, nearly triple non-EU’s ~€8,000. EU funds and markets lift incomes consistently, unlike non-EU reliance on volatile FDI or remittances (e.g., ~20% of Moldova’s GDP).
3. Inflation:
   • EU members:
     • Performance: Stabilized at 3-5% in 2025. Czechia (4%), Slovenia (3.5%), and Croatia (~4%) align with ECB targets. Eurozone members (e.g., Estonia) benefit from ECB policy.
     • Advantage: EU monetary frameworks and trade integration dampen price shocks. Energy subsidies (~€100 billion across EU-CESEE since 2022) ease household burdens.
     • Weakness: Imported inflation from energy (30% of Slovakia’s costs) persists, and wage growth (5-7%) risks price spirals in Poland.
   • Non-EU members:
     • Performance: Higher and volatile, from Türkiye (40%) to Georgia (5%). Serbia (7%) and Ukraine (8%) face food and energy pressures.
     • Advantage: Flexible monetary policies allow quick adjustments (e.g., Serbia’s rate hikes). Weaker currencies can boost exports.
     • Weakness: Weak central banks and import reliance fuel volatility. Türkiye’s unorthodox policies erode trust; Ukraine’s war spikes costs.
   • Comparison: EU members’ lower inflation (~4% vs. ~10% non-EU average) preserves purchasing power, aided by EU energy aid and monetary discipline. Non-EU states struggle with external shocks.
4. Labor markets:
   • EU members:
     • Performance: Unemployment ~3-5% (e.g., Poland ~3%, Czechia ~4%). Real wages rise ~4-6% (e.g., ~€1,500/month in Lithuania), fueling consumption.
     • Advantage: EU mobility fills skill gaps (e.g., 200,000 Slovaks in Western Europe). Funds support training (€50 billion for skills in 2021-2027), boosting productivity.
     • Weakness: Aging populations (e.g., Hungary’s median age 44) and emigration (15% of Latvia’s youth) shrink labor pools. Skill mismatches raise costs.
   • Non-EU members:
     • Performance: Mixed, from Russia (3%, war-driven) to Kosovo (20%). Wages lower (€500/month in Serbia vs. €1,200 in Croatia). Ukraine faces shortages (10% unemployment).
     • Advantage: Large labor pools (e.g., Türkiye’s ~30 million workers) and low wages attract FDI. Informal sectors absorb shocks (e.g., ~30% of Bosnia’s jobs).
     • Weakness: Emigration (e.g., 25% of Moldova’s workforce abroad) and weak training systems limit skills. War disrupts Ukraine’s labor (5 million displaced).
   • Comparison: EU members’ tight labor markets and EU-funded training (~€5 billion annually) support higher wages and stability. Non-EU countries’ cheaper labor draws investment but lacks scale and skills, with unemployment averaging ~10%.
5. Trade and Foreign Direct Investment (FDI):
   • EU members:
     • Performance: Exports ~50-70% of GDP (e.g., Slovakia ~€90 billion, ~80% to EU). FDI inflows ~€30 billion annually (e.g., Poland ~€15 billion).
     • Advantage: Single market access ensures tariff-free trade (~€500 billion in CESEE-EU flows). EU funds co-finance FDI projects (e.g., ~€2 billion for Czechia’s green tech). Stable regulations attract multinationals.
     • Weakness: Overreliance on Germany (25% of Hungary’s exports) and U.S. tariff risks (10% of Slovakia’s GDP from cars) threaten output.
   • Non-EU members:
     • Performance: Exports ~30-50% of GDP (e.g., Serbia ~€25 billion). FDI grows (e.g., Türkiye ~€10 billion), often from non-EU sources like China.
     • Advantage: Flexibility to sign non-EU deals (e.g., Serbia’s €2 billion Chinese rail projects). Lower costs draw manufacturing (e.g., ~€1 billion in Albania’s textiles).
     • Weakness: Trade barriers (e.g., Russia’s €200 billion export loss from sanctions) and unstable policies deter long-term FDI. Small markets (e.g., Kosovo’s €5 billion GDP) limit scale.
   • Comparison: EU members’ trade (€1 trillion intra-EU) and FDI (€100 billion since 2020) dwarf non-EU’s (~€300 billion and ~€30 billion). EU stability attracts consistent capital, unlike non-EU dependence on volatile sources.
6. Public Finances:
   • EU members:
     • Performance: Debt ~20-50% of GDP (e.g., Estonia ~€20%, Hungary ~€70%). Deficits ~3-6% (e.g., Poland ~€5 billion).
     • Advantage: EU fiscal rules enforce discipline; recovery funds (€100 billion for CESEE) reduce borrowing needs. Access to ECB markets lowers rates (2-3% yields).
     • Weakness: Deficit pressures (e.g., Romania ~€7 billion) and fund delays (e.g., Hungary’s €10 billion frozen) strain budgets.
   • Non-EU members:
     • Performance: Debt ~30-60% (e.g., Serbia ~€50%, Ukraine ~€100%). Deficits ~3-20% (e.g., Türkiye ~€10 billion).
     • Advantage: Fiscal flexibility allows stimulus (e.g., Russia’s €50 billion war budget). Smaller economies (e.g., Georgia) pivot to grants.
     • Weakness: Higher borrowing costs (~5-10% yields in Türkiye) and aid reliance (e.g., Ukraine’s €40 billion from West). Weak governance risks default.
   • Comparison: EU members’ lower debt (€40% vs. ~€60% non-EU average) and funds (€20 billion/year) ensure sustainability. Non-EU states face higher risks, with Ukraine’s €100 billion debt tied to war.

Comparative analysis: EU vs. Non-EU advantages

• Economic Stability:
  • EU advantage: Single market access and funds (~€300 billion for 2021-2027) stabilize growth, ensuring ~2-3% GDP increases even in crises. Monetary integration (e.g., euro in Slovenia) keeps inflation ~4%, vs. ~10% in non-EU states. Fiscal discipline lowers debt risks.
  • Non-EU limitation: Volatility from weak institutions (e.g., Türkiye’s €100 billion currency losses) and external shocks (e.g., Ukraine’s €50 billion war damage) disrupts growth. Sanctions isolate Russia and Belarus (~€200 billion trade loss combined).
• Income and living standards:
  • EU advantage: Per capita income averages €23,000, triple non-EU’s ~€8,000, driven by trade (70% of GDP vs. 40%) and wages (€1,500/month vs. €500). Labor mobility and training (€50 billion) lift skills, narrowing gaps with Western Europe (~€40,000).
  • Non-EU limitation: Lower incomes (€5,000-8,000, except Russia) reflect weak productivity and reliance on remittances (€10 billion in Moldova). War and emigration (e.g., ~30% of Ukraine’s workforce) erode gains.
• Trade and investment:
  • EU advantage: Tariff-free trade (€1 trillion intra-EU flows) and stable FDI (€30 billion/year) ensure capital inflows. EU regulations attract tech and green investments (e.g., ~€5 billion in Poland’s renewables). Small states like Estonia leverage digital markets.
  • Non-EU limitation: Trade barriers (e.g., ~€5 billion in Serbia’s EU tariffs) and unstable policies deter investors. Smaller economies (e.g., Kosovo’s €5 billion GDP) struggle for scale, relying on ad hoc deals (e.g., China’s €10 billion in Turkey).
• Resilience to shocks:
  • EU advantage: Funds and ECB access cushion energy shocks (~€100 billion in subsidies since 2022). NATO/EU alignment insulates against geopolitical risks, unlike Ukraine’s €100 billion war losses. Coordinated policies (e.g., ~€50 billion for green tech) ensure recovery.
  • Non-EU limitation: Exposure to conflict (e.g., Georgia’s Russia risks) and sanctions (e.g., Belarus’s €20 billion export drop) amplifies shocks. Weak safety nets strain households (e.g., Türkiye’s €50 billion inflation cost).

Country-Specific Highlights

• EU stars:
  • Slovenia (€35,150/capita, ~2% growth): High income, stable trade (€40 billion exports). EU funds (~€3 billion) boost digitalization.
  • Poland (€21,850/capita, ~3.5% growth): Large market (€850 billion GDP), €40 billion in funds. Weakness: German reliance (~€100 billion trade).
  • Czechia (€29,450/capita, ~1.5% growth): Industrial strength (€200 billion exports), but tariff risks (~€10 billion in cars).
• Non-EU dynamism:
  • Turkey (€5,700/capita, ~4% growth): Large GDP (€1,140 billion), FDI (€10 billion). Weakness: inflation erodes gains (€100 billion loss).
  • Serbia (€8,075/capita, ~3.5% growth): Trade pivot to Asia (€5 billion), Chinese FDI (€2 billion). Weakness: EU barriers (€1 billion cost).
  • Georgia (€5,225/capita, ~3.5% growth): Tourism (€3 billion), reforms. Weakness: small scale (~€20 billion GDP).
• Non-EU strugglers:
  • Ukraine (€2,375-2,850/capita, ~2.5% growth): Resilient but war-constrained (€50 billion damage). Aid-dependent (~€40 billion).
  • Russia (€14,250/capita, ~3% growth): War inflates income (€500 billion spending), but sanctions cost ~€200 billion.
  • Belarus (€8,075/capita, ~1% growth): Isolated (€20 billion trade loss), stagnant.

The conclusion that can be drawn based on the reports is that EU membership provides clear economic advantages in the CESEE region, delivering stability, higher incomes (€23,000 vs. ~€8,000 per capita), and resilience through market access, funds (€300 billion), and monetary discipline (inflation 4% vs. ~10%).

Non-EU countries like Turkey, Serbia, and Georgia show dynamism (3-4% growth) and flexibility (e.g., €20 billion in non-EU FDI), but volatility, weak institutions, and geopolitical risks (e.g., Ukraine’s €100 billion war cost) limit their progress.

EU members face challenges like German dependence (€200 billion in trade) and demographics (~10% workforce loss), but their structural advantages outweigh non-EU flexibility, especially in crises. Non-EU states must reform governance and diversify to close the gap, while EU members must leverage funds to boost convergence.

• Central and Eastern Europe
• Central Europe
• demography
• EU accession
• EU enlargement
• FDI
• labor costs
• living standards
• Western Balkans

Updated: April 28, 2025 - 04:52