eva srejber : a reunited europe – the roles played by sweden and the riksbank speech by ms eva srejber, second deputy governor of sveriges riksbank, to the baltik financial network, stockholm, 13 february 2002. * * * thank you for inviting me here to speak of and discuss this important subject with such a knowledgeable public. the enlargement will change europe and sweden and will also affect the riksbank. for those of us in western europe, this is an important opportunity to regain the right geographical, economic and historical perspectives. we talk about " eastern europe ", despite the fact that prague and ljubljana lie west of stockholm, we forget that riga and tallinn are actually closer to stockholm than gothenburg. we often still have a mental curtain where the iron curtain once prevailed. now this division will soon be at an end. a hundred million europeans, who lived under a totalitarian communist dictatorship for half a century, can now finally return to a single european community. the political dimension is undoubtedly the most important. the new community confirms democracy and thereby guarantees peace and stability throughout europe, which will in turn provide a good foundation for growth and development. today i intend to say a few words about an important facet of the eu enlargement, namely the economic consequences, which will affect the work of the riksbank more directly. before i go into the major socio - economic contexts, i thought i might begin with an anecdote from a smaller context, a personal experience from one of my most recent visits to hradec kralove, in bohemia, czech republic, the region where my relatives come from. every time i return there i am pleased and surprised at the changes that have taken place, but during my most recent visit last year i was quite astonished. there, in the small provincial town of hradec kralove, with only around 100, 000 inhabitants, they now have a shopping mall worthy of stockholm's smartest shopping area, as well as a couple of large discount stores and a d. i. y. store, all selling goods of better quality but a fraction of the price of those in sweden, and all full of shoppers. when i left the shops loaded up with shopping bags to take home to sweden, i remembered how things used to be, when we in sweden sent parcels to family and friends containing clothing, medicine and even decent soap and washing powder, along with various other things

as a whole is a larger market for swedish foreign trade than, for instance, japan or east asia. when the riksbank makes its inflation forecasts, central and eastern europe will move gradually from being a brief footnote to becoming an important area in the international forecasts. the importance of membership the recipe for success behind the trade integration between the eu and eastern europe is a littleknown international trade agreement. while the wto and nafta steal the headlines, few people are aware of the agreement that created the boost in east - west trade in europe, the “ europe agreement ” between the eu and the eastern european countries. there are major shortcomings in this agreement, but it includes free trade for almost all industrial goods and thereby enabled the rapid changeover to become reality. however, a decisive factor for the success of the europe agreement is that all of those involved knew that actual membership of the eu would come in the near future. membership is that major and important step, when the rules of the game are confirmed and investors know that the institutional conditions are stable and up to eu standards. this assurance is accentuated in many studies of the enlargement and said to be the most important individual factor for continued strong growth in the eastern european countries. it is also at the point of actual membership that the final trade barriers will be abolished and the investment channels will be fully opened. we can make a comparison with the countries that entered the eu earlier with income levels way below the average, i. e. spain, portugal and ireland. for these countries membership meant a large inflow of capital and technology as well as a further increase in trade. the economic policy of the new member countries became more stable. rapid growth and a convergence in the standard of living followed. this led to major gains for both the richer, existing member countries and for the newcomers. it would therefore be regrettable if the candidate countries'membership were allowed to delay or be diluted. fortunately, there is now a clearer timetable and a strong probability that 8 of the 10 countries will become members in the coming years. however, after the enormous efforts made by the candidate countries in recent years, their actual membership must not be blocked by internal power games and ultimatums between the existing eu members. however, the attempts in recent years to create transition periods before candidate countries can enjoy the eu's free mobility for labour are worrying. this would probably also prove counterproductive, as many studies show that the