Tag Archives: New member states

Purchasing property in another Member State

Purchasing property in another Member State

Outline of the Community (European Union) legislation about Purchasing property in another Member State

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Single market for capital

Purchasing property in another Member State

Acts

Treaty of Accession of the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia signed in Athens on 16 April 2003 – Annexes V to XIV [Official Journal L 236 of 23.9.2003]

Act concerning the conditions of accession of the Czech Republic, the Republic of Estonia, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of Poland, the Republic of Slovenia and the Slovak Republic and the adjustments to the Treaties on which the European Union is founded – Protocol No 6

on the acquisition of secondary residences in Malta [Official Journal L 236 of 23.9.2003]

Treaty between the Kingdom of Belgium, the Czech Republic, the Kingdom of Denmark, the Federal Republic of Germany, the Republic of Estonia, the Hellenic Republic, the Kingdom of Spain, the French Republic, Ireland, the Italian Republic, the Republic of Cyprus, the Republic of Latvia, the Republic of Lithuania, the Grand Duchy of Luxembourg, the Republic of Hungary, the Republic of Malta, the Kingdom of the Netherlands, the Republic of Austria, the Republic of Poland, the Portuguese Republic, the Republic of Slovenia, the Slovak Republic, the Republic of Finland, the Kingdom of Sweden, the United Kingdom of Great Britain and Northern Ireland (Member States of the European Union) and the Republic of Bulgaria and Romania, concerning the accession of the Republic of Bulgaria and Romania to the European Union [Official Journal L 157 of 21.6.2005]

Act concerning the conditions of accession of the Kingdom of Norway, the Republic of Austria, the Republic of Finland and the Kingdom of Sweden and the adjustments to the Treaties on which the European Union is founded – protocol No 2 on the Åland islands [Official Journal No C 241 of 29.8.1994]

Treaty on European Union – Protocol No 1 on the acquisition of property in Denmark [Official Journal No C 191 of 29.7.1992]

Summary

Article 56 of the Treaty establishing the European Community enshrines the free movement of capital as a fundamental freedom. It is intended to remove all restrictions on the movement of capital so that European citizens may take full advantage of the single market. However, with the successive accessions of new Member States to the Community, transitional periods of varying lengths governing the possibility of purchasing property and/or cultivated land and forest areas in another Member State were negotiated. This was notably the case for the new Member States that joined the Union on 1 May 2004 (Cyprus, Estonia, Hungary, Latvia, Lithuania, Poland, the Czech Republic, Slovakia, Slovenia and Malta) and on 1 January 2007 (Bulgaria and Romania), but is also true of Denmark and Finland.

Accession criteria and negotiations

The conditions under which a candidate country is to become a member of the Union are the result of negotiations. Candidate countries must first of all satisfy the Copenhagen criteria by meeting the following political, economic and legal conditions. They must:

  • be a democratic state based on the rule of law: they must be democracies with stable institutions guaranteeing the rule of law and human rights, and respect for and protection of minorities.
  • have a market economy: states wishing to join the Union must have a functioning market economy as well as the capacity to cope with competitive pressure and market forces within the Union.
  • be able to take on the obligations of membership: candidate countries must in particular transpose the acquis into their national legislation and be able to put it into practice. The acquis is the body of EU legislation, made up of all the rules, legislation and common policies.

The Union’s capacity to absorb new Members while maintaining the momentum of European integration is another important consideration with each accession.

Negotiations clarify the conditions under which each country’s accession is to take place. Transitional periods may be agreed. Negotiations are conducted in Intergovernmental Conferences involving Member States and the candidate country in question. The Council adopts the EU’s common positions on a proposal from the Commission. The candidate States nominate a chief negotiator, backed up by a team of experts, who directs negotiations according to the positions that have been set out. Parliament receives reports about the progress of the negotiations, and gives its assent to the accession that results. For the treaty to come into force, Member States and the candidate country in question must ratify the accession treaty according to their respective internal procedures.

States that have been Members since 1 May 2004

The ten Member States that joined the Union on 1 May 2004 all negotiated transitional periods. These are recorded under the heading “free movement of capital” in the Annexes to the Treaty of Accession:

  • Cyprus obtained a transitional period of five years (starting from the date of accession) for legislation in force on 31 December 2000 on the acquisition by aliens of residences for secondary use;
  • Estonia, Latvia, Lithuania and Slovakia negotiated a transitional period of seven years regarding the acquisition of agricultural land and forests. Self-employed farmers from other Member States who have been legally resident and active in farming in Estonia for at least three years are not subject to this restriction. The transitional period may be extended for a maximum of three years if these countries demonstrate the need for a safeguard clause;
  • Hungary enjoys a five-year transitional period regarding the acquisition of secondary residences. Nationals of the Member States and States party to the European Economic Area (EEA) Agreement who have been legally resident in Hungary for at least four years continuously are not subject to the restrictions. Hungary also enjoys a seven-year transitional period for the acquisition of agricultural land and forests. Self-employed farmers who have been resident and active in farming in Hungary for at least three years are not subject to the restriction. The transitional period may be extended by a maximum of three years if Hungary demonstrates the need for a safeguard clause;
  • Poland negotiated a transitional period of five years regarding the acquisition of secondary residences. This does not apply to EU nationals and nationals of States party to the EEA Agreement who have been legally resident in Poland for at least four years continuously. There is also a twelve-year transitional period for the acquisition of agricultural land and forests. Self-employed farmers from the EU and EEA who have been legally resident and leasing land in Poland for at least three years or seven years continuously (depending on the region) are not affected by these measures;
  • The Czech Republic negotiated a transitional period of five years for the acquisition of secondary residences by EU and EEA nationals who do not reside in the Czech Republic. Regarding the acquisition of agricultural land and forests, the country applies provisions similar to those in force in Estonia, Latvia, Lithuania and Slovakia;
  • Slovenia: as regards the real estate market, Slovenia may resort to the general safeguard clause provided for in Article 37 of the Treaty of Accession for a period of up to seven years after the date of accession. This general economic safeguard clause (normally valid for a period of up to three years only after accession) is intended to mitigate the effects of any serious deterioration in the economic or competitive situation resulting from accession in certain sectors or regions;
  • Malta negotiated a specific protocol which is part of the Treaty of Accession: Protocol 6 on the acquisition of secondary residences in Malta. The country may maintain in force the restrictions contained in its national legislation on the acquisition of secondary residences by nationals of Member States who have not legally resided in Malta for at least five years.

States that have been Members since 1 January 2007

Bulgaria and Romania have been Member States of the European Union since 1 January 2007. The Treaty of Accession of these two countries was signed by the Heads of State and Government in Luxembourg on 25 April 2005. It provides for transitional periods for the acquisition of secondary residences and agricultural land and forests:

  • a five-year transitional period for the acquisition of secondary residences by Community citizens not resident in Bulgaria/Romania;
  • a transitional period of no more than seven years for the acquisition of agricultural land and forests. This period will not apply to self-employed farmers residing in Bulgaria or Romania.

The European Commission has drawn up a report on the results of the negotiations with Bulgaria and Romania[pdf].

Scandinavian countries: Denmark and Finland (the Åland Islands)

Protocol 1 on the acquisition of secondary residences in Denmark is part of the Treaty on European Union. It stipulates that, notwithstanding the provisions of the Treaty on the free movement of capital, Denmark may maintain the existing legislation on the acquisition of second homes. However, it should be underlined that any discrimination on grounds of nationality is strictly forbidden under Article 12 of the Treaty establishing the European Community. A European national residing in Denmark may therefore acquire a secondary residence under the same conditions as a Danish national. A Danish national not residing in Denmark, by contrast, is subject to the same conditions as any other European national residing outside the country. In short, nationals should not enjoy any privileged treatment in their Member State.

Finland has sovereignty over the Åland Islands, which enjoy special status under international law, with relative autonomy as negotiated in the League of Nations in 1921. Protocol No 2, which is part of the Finnish Accession Treaty, stipulates that the provisions of the EC Treaty apply with certain derogations. The Åland Islands may therefore maintain the national provisions in force on 1 January 1994 regarding, inter alia, restrictions on the right of natural and legal persons to acquire and hold real property without permission by the competent authorities of the islands. There should be no discrimination concerning such acquisition of property. Finland must ensure that the same treatment applies to all natural and legal persons of the Member States in the Åland Islands.

The introduction of the euro in Slovakia

The introduction of the euro in Slovakia

Outline of the Community (European Union) legislation about The introduction of the euro in Slovakia

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Economic and monetary affairs > Institutional and economic framework of the euro

The introduction of the euro in Slovakia (2009)

Document or Iniciative

Council Decision of 8 July 2008 in accordance with Article 122(2) of the Treaty on the adoption by Slovakia of the single currency on 1 January 2009.

Summary

This Decision allows Slovakia to adopt the euro on 1 January 2009, considering that the country meets the necessary requirements for entry into the third stage of the Economic and Monetary Union (EMU).

In this respect, the derogation which applies to Slovakia in accordance with Article 4 of the 2003 Act of Accession(PDF) will be abrogated on this date.

The country fulfils the convergence criteria insofar as:

  • the legislation, including the statutes of the national central bank, is compatible with Articles 108 and 109 of the Treaty and the Statute of the European System of Central Banks (ESCB);
  • the average rate of inflation was 2.2 % in 2008, much lower than the reference value (an average 1.5 % lower than those of the three Member States with the best results in terms of price stability). This trend should remain steady in the medium term;
  • the budget deficit has been reduced to less than 3 % of GDP and Decision 2005/182/ECon the existence of an excessive deficit in Slovakia has been abrogated by Decision 2008/562/EC;
  • the country has been a member of the European Exchange Rate Mechanism (ERM II) since 28 November 2005. During this two-year period, Slovakia has not devalued the bilateral central rate of its currency against the euro, and the Slovak koruna (SKK) has not been subject to any severe tensions;
  • the long-term interest rate in Slovakia is, on average, 4.5 % which is below the reference value (the average rate of the three Member States with the best results in terms of price stability, plus two percentage points – i.e. 6.5 % in 2008).

This Decision is based on convergence reports provided to the Council by the Commission and by the European Central Bank (ECB ) (PDF), at Slovakia’s request.

Context

With regard to the Act of Accession, new European Union Member States are in a position to participate in the EMU from their date of accession. They benefit from a derogation under Article 122 of the Treaty until the Council decides, following a proposal from the Commission, to abrogate the derogation for those States meeting the convergence criteria.

References

Act Entry into force Deadline for transposition in the Member States Official Journal

Decision 2008/608/EC

24.7.2008

OJ L 195 of 24.7.2008

 

Enlargement, two years after – an economic success

Enlargement, two years after – an economic success

Outline of the Community (European Union) legislation about Enlargement, two years after – an economic success

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Enlargement > Enlargement 2004 and 2007

Enlargement, two years after – an economic success

Document or Iniciative

Communication from the Commission to the Council of 3 May 2006 – Enlargement, Two Years After – An Economic Success [COM (2006) 200 final – Not published in the Official Journal].

Summary

The 2004 enlargement has led to considerably more diversity and a significant increase in the number of citizens and Member States of the European Union (EU). This ambitious step in the history of Europe was marked by the integration of ten new countries (EU-10): Cyprus, the Czech Republic, Estonia, Hungry, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia) with different economic, political and social roots.

The economic forecasts made prior to accession were generally positive. On the one hand, they predicted economic growth for the new Member States and benefits, although more limited, for the old Member States (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden and the United Kingdom). On the other hand, they defused the fears relating to the costs of enlargement for the new Member States and the repercussions for the old Member States.

The objective of this Communication is to check whether, two years after the enlargement, these economic forecasts have proved correct and to identify the advantages and the challenges which remain on the pathway towards European integration.

GROWTH AND STABILITY

The period 1997-2005 was marked by strong economic growth in the new Member States (3.75% on average, as against 2.5% in the EU-15). The income of the new Member States, whilst being substantially lower than that of the old Member States, has put on a spurt, rising from 44% to 50% of the EU-15 average in 1997. In general, their growth rate has continued in line with the forecasts and has been particularly fast in countries with the lowest income to start with. The employment market has also benefited from this phenomenon, with an upturn in 2005.

This new growth has contributed to the macroeconomic stability of the new Member States, with positive repercussions for their economic policies and their public finances. The integration currently under way and the strengthening of the coordination procedures have contributed to economic policy discipline. In addition, the credibility of economic policy is enhanced, which is confirmed by interest rates which are now closer to those of the EU. Developments in public finances have been less uniform on account of the transition-related reforms. The excessive government deficits, still characteristic of some of the EU-15 economies, have been corrected in most of the new Member States. Public debt is higher in the EU-15.

INCREASING ECONOMIC INTEGRATION

As regards trade, integration with the new Member States started in the early 1990s with bilateral agreements which liberalised 85% of trade between the two blocs. Between 1993 and 2005, the opening of these economies led to a considerable increase in trade on both sides. During this period, the old Member States increased their trade with the EU-10 countries by 6 percentage points, whilst their imports from the new Member States rose by 13 percentage points. These trade flows are characterised by more labour-intensive products from the EU-10 countries, in exchange for goods with greater technology content from the EU-15.

The old Member States continue to run a trade surplus with the EU-10 countries, which benefit from lower production costs. The trade deficit of the EU-10 countries has declined drastically in recent years and is not considered to be alarming in relation to the economic catching-up needed in these countries. However, the Commission considers that this imbalance must be the subject of close political surveillance, especially in the countries which are also recording high inflation.

Since the mid-1990s, the number of foreign firms and the stock of foreign direct investment (FDI) have risen sharply in the new Member States, which is further evidence of the increasing openness of their economies and their integration in the EU. Specifically, FDI in the new Member States exceeded EUR 190 billion in 2004, most of which was financed by the old Member States. Germany is the leading investor, especially in Hungary, Poland and Slovakia, while the Nordic countries are the main investors in the Baltic States. The services sector receives the lion’s share of FDI (55%), followed by traditional manufacturing (37%), although modern manufacturing is becoming an increasing focus of attention.

The new Member States, especially those of Central and Eastern Europe, have recorded substantial progress in the financial sector. The surge in credit growth confirms this development, although loans outstanding and stock market capitalisation remain below the average levels in the euro area.

Cross-border investment and the penetration rate of foreign banks have exceeded the levels in the old Member States. Keener competition has cut the cost of borrowing (especially mortgages) and narrowed net interest margins, although differences are still obvious depending on the country (around 0.5% in Hungary, Latvia and Slovakia; about 3% in Poland and Slovenia).

Banks in the old Member States have benefited from accession as it has enabled them to gain access to these new growth markets and to diversify their portfolios. The investments of Austrian banks in Central and Eastern Europe and of Nordic banks in the Baltic States confirm this trend.

GRADUAL ADJUSTMENT

FDI and relocation

The concerns about relocation have proved to be unfounded: the outflows of FDI and their impact on employment are not significant.

The Commission considers that the new Member States only receive a small proportion (4%) of FDI outflows from the EU-15. The bulk of FDI outflows are destined for the other Member States (53%) and the United States (12%). In addition, since the outflows of FDI to the new Member States largely come under privatisation programmes, they would not bring about replacement of existing activities.

Different studies have shown that the annual job turnover attributed to relocation comes to 1%-1.5%. Relocation has in fact allowed an increase in the competitiveness of the firms of the EU-15 by leading to lower job creation (estimated at between 0.3% and 0.7% in Germany and Austria, which are among the largest investors in the EU-10 countries).

Nevertheless, through its Communication on restructuring and employment, the Commission encouraged Member States to make best use of the Community instruments (including the Structural Funds) to offset any repercussions on certain sectors or in certain regions.

Relocation is influenced only to a lesser extent by corporate tax rates. The factors which prompt the transfer of business activities, capital and jobs to the new Member States include cheaper labour costs and economies of scale. The impact of taxation should be assessed, considering all the aspects involved (including labour taxation, the tax base, overall transparency and integration of the corporate tax system). However, the taxes paid by companies as a share of GDP have remained fairly stable in the past decade.

The opening of the borders of the old Member States to nationals of the EU-10 was one of the most significant and sensitive issues of the 2004 enlargement. Nevertheless, the fear of migratory flows on a massive scale and significant distortions on the labour market now appear to be unwarranted.

Initially, all the Member States of the EU-15, except Ireland, the United Kingdom and Sweden, introduced forms of derogation from the principle of the free movement of persons and workers that had been authorised by the Accession Treaties for the transitional period (7 years). In the EU-10, only Poland, Slovenia and Hungary adopted national restrictions for EU-15 nationals. In 2006 four Member States of the EU-15 (Greece, Spain, Portugal and Finland) lifted these restrictions (which comprised quota systems and work permit schemes) and six others (Belgium, Denmark, France, Italy, the Netherlands and Luxembourg) eased them.

In general, the presence of citizens from the new Member States in the migratory flows was distinctly less than that of citizens from third countries. This phenomenon also arose in Austria and Germany, which have become the preferred destinations of EU-10 nationals. The highest percentage of EU-10 nationals is to be found in Ireland, where they account for 2% of the total population.

The Member States which did not introduce restrictions for EU-10 workers also put up the best performance in terms of employment.

Body of EU law and challenges to be met

There are still challenges to be taken up in the following fields, in which in general there is a considerable degree of integration:

  • Internal market: The new Member States have integrated most of the European legislation on the internal market, lagging behind only in respect of competition. Transposition facilitates trade, investment and the development of the financial sector in the EU-10 Member States.
  • Agriculture: The enlargement has brought progress to the agricultural sector of all the Member States, facilitating trade within the EU and supporting the modernisation of agriculture in the new Member States. As a result of the contribution of the members of the EU-10, European agriculture has grown in importance in terms of area, production and number of farmers. The fears regarding the negative effects of the enlargement on the agricultural sector have proved to be unfounded. Nevertheless, the productivity of the members of the EU-10 remains distinctly lower than that of the rest of the EU. There is still a significant difference in terms of employment: in Slovakia and the Czech Republic, 4% of the population work in agriculture, compared with 19% in Poland.
  • Employment and social cohesion: The new Member States have not experienced problems in integrating EU legislation in employment and social policy, as far as labour law, health and safety at work, equal opportunities and anti-discrimination are concerned. However, major challenges remain in the new Member States in terms of combating unemployment, promoting social dialogue and ensuring social protection. The employment situation, which has improved since the 1990s, still features a high unemployment rate (13.4%), although the seriousness of the problem varies considerably from country to country. The schemes of the new Member States, which are supported by the European Social Fund, must make a considerable effort to achieve the targets set out in the Lisbon Strategy for growth and employment.

LIMITED BUDGETARY IMPACT

The budget of the Member States has been affected only to a limited extent by the enlargement. The financial support of the EU for the new member countries started fifteen years before their accession and gathered pace in 2004 and 2005. Today, the contribution of the EU-10 Member States to the European budget remains below the amounts they receive in terms of aid. On the other hand, the contribution of the old Member States to improving the well-being of the EU-10 countries represents only 0.1% of their GDP. In the financial framework 2007-2013, this level of assistance is set to increase substantially, while remaining limited in relation to the GDP of the EU-15. Moreover, the Schengen facility and the compensation facility have contributed to avoiding pressure on the national budgets of the new Member States.

In conclusion, thanks to the 2004 enlargement, the EU economy has become more dynamic and ready to take up the challenges of globalisation. This enlargement has extended the internal market and increased the benefits for European companies and consumers without causing any significant distortion on the product or labour markets. Careful preparation over the decade preceding access played an important role.