The Real Convergence of THE NMS-10 to THE EU-15

Abstract

The goal of this article is to study the group and the individual convergence of ten new member states - Bulgaria, the Czech Republic, Poland, Romania, Slovakia, Estonia, Hungary, Latvia, Lithuania and Slovenia (known as the NMS-10), to the fifteen old member states – Austria, Finland, Belgium, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, the United Kingdom and Sweden (referred to as the EU-15). A beta convergence approach was applied on three samples of annual Eurostat data (2000-2008, 2009-2019 and 2000-2019). The results from the empirical research show that the NMS-10 converged to the EU-15 both absolutely and conditionally in all analyzed periods. However, five new member states only (the Czech Republic, Estonia, Latvia, Lithuania and Romania) converged individually to the old member states over 2000-2019. The other five new member states - Bulgaria, Hungary, Poland, Slovakia and Slovenia, diverged from the EU-15. Fiscal balances, which took into account the economic cycle phase, encouraged a rise in the living standard in the old and the new member states prior to and following the global financial crisis. However, government debt and government consumption impeded the growth of the PPS per capita GDP in the EU-15 and the NMS-10 after the global economic crisis.