Unpublished internal European Union contract lists indicate that the main beneficiaries of the EU 'aid' programme to Central and Eastern Europe (CEE) are western corporations.
The lion's share of contracts are received by powerful European businesses, and where easterners are employed, they are paid only one-fifth the rate of westerners. Under pressure from western banks, indebted eastern governments are being coerced into privatizing public properties. In what has been called »the greatest transfer of public wealth ever into private hands«,1 the prize assets of the Soviet bloc are being bought up by western companies - with financial, legal, political and diplomatic support from the EU Commission. The new 'trade and cooperation' agreements with eastern countries further western TNC interests and ignore broader interests of promoting human development and protecting the environment. And this bias towards business is maintained through a strategic silence in the Commission, keeping the European public in the dark.
The most direct way that the 7.6 billion ECU European Union aid programmes help western businesses is by giving them jobs. Thousands of western experts are paid up to 1000 ECU per day to advise easterners how to run things, while their eastern counterparts receive at most 200 ECU per day.2 Even the EU auditor, Patrick Everard, disapproves. He says the western consultants are given too much responsibility, are paid too much and that their activities are shrouded in secrecy. »A lot of the money comes back to our consultants in one form or another,«3 he remarks.
Then there is the contracting of western companies. Hundreds of firms from all over Europe are awarded contracts to work in the East. Since 1990, when the EU started the Phare programme for Central and Eastern Europe, and Tacis for Russia and the former Soviet Union, international management consultants Coopers and Lybrand have been awarded over 50 contracts, worth in total more than 8 million ECU. They were paid over 300,000 ECU for »technical assistance for enterprise privatization in Albania«, and the same amount again for advising on the privatization of the Belorussian wood processing industry.
More than forty different TNCs have been paid between 100,000 and 1 million ECU by Phare to supply pesticides for Eastern European agriculture. Beneficiary companies include Monsanto Europe, Bayer, Rhône Poulenc Agrochimie, ICI, Hoechst and Shell.4 Some of the exported pesticides are banned in the West. Others were unsaleable and now lie in toxic stockpiles polluting land and threatening drinking water supplies. The TNCs were paid to supply pesticides as »agricultural assistance«, even though the United Nations Conference on Environment and Development declared in 1992 that agricultural development should use a minimum of pesticides, and despite a 1994 European Parliament resolution that »ecologically sound and organic farming« should be a priority for EU programmes in the East.
For western nuclear firms currently suffering a lull in work at home, the EU assistance programme to the East is providing much-needed employment. The German nuclear giant Siemens has earned over 3.5 million ECU in the former Soviet bloc under Tacis. The World Association of Nuclear Operators has been awarded 21 contracts by Phare and Tacis. The UK's AEA Technology had 6 contracts worth at least 3.7 million ECU, and Scottish Nuclear received two contracts.5 While it is difficult to argue that money should not be spent on making the existing nuclear power stations in the East safe, there is currently a serious case to be made for switching to alternative forms of power. Greenpeace experts argue that the energy problem in the East is one of inefficient use. The present electricity consumption per unit of economic output is at least twice as high as in the West. A unique »opportunity for radical energy reform« is being overlooked by the EU, partly, says Greenpeace, because businesses and utilities promoting non-nuclear supply and demand options do not appear to be vocal enough in the key financial institutions, like the European Commission.6
Hundreds of other firms, including Rank Xerox, Hewlett Packard, Barclays Bank, Deutsche Aerospace and Olivetti have gained direct financial benefits from EU »aid« to the East. However, the indirect benefit gained by western TNCs from the EU programmes in their promotion of privatization and the market is probably far greater than the direct financial boosts described above. In terms of policy, Phare and Tacis are very business friendly, smoothing the way for western TNCs to penetrate eastern markets and buy up the best post-communist assets.
Indebted eastern governments are already under pressure from international banks to privatize public property and develop private ownership. The screw is turned tighter by the EU through its so-called aid programmes. A condition of Phare and Tacis funding is that each recipient country must commit to making progress towards a market economy. Aid is often conditional upon the privatization of key state utility companies, factories and so forth. But privatization in a country lacking capital invariably means selling national businesses to foreigners.
Once the government has agreed to sell off public assets, the EU aid programmes step in with advisors ready to help smooth the passage of the deal. Thus, Phare paid over 1 million ECU to western legal experts and accountants for advising Polish authorities in negotiations for Fiat's purchase of a 14 million ECU stake in FSM, the state-owned car company. Phare also set the stage for British-based multinational Pilkington to buy a stake in the Sandomierz glass factory.7
In case of popular discontent, Phare also provides money to sell the idea of privatization to the public. According to the Slovenian Mission to the EU, Phare spent around 400.000 ECU in 1995 to help »familiarize the Slovenian public with the benefits and necessity of privatization«.8
Other consultants paid by the European taxpayer are advising eastern governments how to rewrite their legislation in order to assure the safety of private capital in the former Soviet bloc. There are land registration schemes, mass privatization laws, new stock exchanges and accountants training programmes. All of this is funded by the EU taxpayer.
In addition, the EU aid programmes are ploughing money into infrastructure that will help business. Siemens-Plessey Electronics Systems (a wholly-owned subsidiary of Siemens, an ERT member), whose 3200 employees work on air traffic control systems, is involved in a long-term series of air traffic control projects for the EU in the East. Glynn Meridith of Siemens-Plessey says that his company is »delighted with Phare«.9 Phare has opened the doors to affordable air traffic control in the East, which provides Siemens-Plessey Electronic Systems with work, and in his opinion will stimulate trade and tourism in the eastern countries. »The problem,« he says, »has been the financing. Individual nations have been reluctant to put up bilateral finance. The EU is taking the lead.«10 Meridith talked about how Siemens lobbyists use the idea of the U.S. threat to extract money from the European Commission. »The European air traffic industry gets much lower subsidies than the American. And since the European market has been thrown wide open to General Motors, Siemens, in consortium with Thomsons have been doing a lot of lobbying [of the EU], saying look, please support us from the American threat.«11
One quarter of Phare aid is being spent on infrastructure projects. This includes a new motorway from Pilzen (Czech Republic) to Germany and upgrading the railway line linking Berlin to Warsaw and Minsk.12 Phare maintains that in Poland »sustaining reforms in the longer term depends critically on improving East/West transport connections«.13 The links are part of the EU transport network programme TENs, which has been extensively criticized by environmentalists and other activists as being damaging to both the economy and the environment (see chapter 2.2). Environmentalists are concerned that the new roads will increase CO2 emissions dramatically, instead of stabilizing emissions at 1990 levels as promised by the EU in the Earth Summit climate change convention.14
But TENs have supporters in high places. In 1984, the ERT argued in Missing Links that »cross-border transport provision« was a »deficiency« which acted as a barrier to progress in Europe.15
At the international level, EU diplomats have been negotiating new bilateral agreements with the weakened nations in the East which are cementing them into a relation of colonized dependency upon the West and its TNCs. In December 1994, the Essen European Council adopted a strategy of enlarging the EU to include many of the CEE countries after they have restructured their economies according to western standards. Since then most of these countries have signed »Europe Agreements« which lay out rules for progressive convergence in a wide range of areas. Extending the so-called EU »level playing field« to the East, the main principles of the Union's competition policy are now being implemented in countries like Poland, Hungary and Rumania. Public sector contracts are to be opened to international tender, thus limiting the capacity of locally elected representatives to pursue public or political objectives with taxpayer's money. There has been a boom in the so-called »regulation and normalization« industry. Swathes of lawyers are helping governments to rewrite their national laws to meet EU norms. In 1995, Hungary had already complied with about 50% of EU Directives and was expecting to reach 90% compliance by the end of 1997.16
Most of the new regulations are pro-market and pro-TNC. Yet there has been almost no public debate about the new relationship between West and East.
This is partly because Phare and Tacis publications obscure their close link with TNCs by scarcely mentioning the names of western companies. Financial reports are always broken down by sector or country, obscuring the actual recipient of the programme funding. The glossy documents given very liberally to the public and Brussels press corps focus heavily on projects which have ended up with local ownership, giving a false impression of the development of popular capitalism. A typical case study entitled Rural Telecommunications for the Heart of Poland - A Local Approach to Rural Telephony reports that Phare funding will help the Polish Ministry of Telecommunications set up a local phone network »which has the potential [...] say Polish officials [...] to attract investment, some of it local, to generate profits locally and to facilitate employment in rural areas across the country.«17 There is no mention of western experts receiving wages five times as high as their Polish counterparts, nor any mention of western TNCs providing vastly expensive technical assistance.18
The bias towards business is further hidden behind a sophisticated veil of pretended incompetence. European Union officials whose task is analysis present the programmes as confused rather than colonizing. After several years of looking at Phare and Tacis and writing damning reports about their failure to help the people in the East, Patrick Everard, the chief EU Auditor for Phare concluded that there was no overall strategy behind the EU's programme in the East. Rather than conclude that the strategy was to help western TNCs, the Auditor decided that the bureaucrats are buffoons.