THE STATE OF THE ART

would have undermined itself and eventually self-destructed,'' said
Joschka Fischer, Germany's foreign minister in 2000.

In 1998 the EU finally launched the enlargement program which

now comprises of 13 applicant countries:

» Bulgaria, Cyprus, Czech Republic;
» Estonia, Hungary, Latvia;
» Lithuania, Malta, Poland;
» Romania, Slovak Republic, Slovenia, and Turkey.

Restructuring these countries' systems to comply with EU requirements
for democracy, the rule of law, economic stability, and the adoption of
all current EU law is a hugely difficult task. At the time of writing the
EU has postponed the first admissions to 2004 at the earliest.

The economic challenge is substantial. Admission of the 10 Central

and Eastern European countries (Turkey is a separate case) would
increase EU GDP by 5% but increase its population by 29%. The
purchasing power of the average income would drop by 16%. While
there are opportunities for growth, EU enlargement will be hard to
digest.

EMU

Meanwhile, the introduction of the euro, the single currency, by most
existing members is intended to complete the EU's single market by
providing price transparency and removing forex risk. The strength of
the euro will ultimately depend, as with all currencies, on how well
the economy performs.

As we saw earlier, the euro has encouraged mergers and other deals.

By creating a single market for capital it gives investors and firms more
flexibility. For example, the number of corporate bonds being issued
is increasing in Europe, mainly denominated in euros.

THE EU AND AGRICULTURE

One of the most problematic areas for the EU is its Common Agri-
cultural Policy (CAP), run by the European Agricultural Guarantee
and Guidance Fund (EAGGF), also known by its French title ``Fonds
Europeen d'Orientation et de Garantie Agricole'' (FEOGA). When the