(Again) A Tale of Two (or More) Europes · European Law Blog – Go Health Pro

The late Polish-born Pope John Paul II famously remarked that Europe should ‘breathe with two lungs’ – its Eastern and Western halves. Two decades after the European Union’s historic enlargement in 2004, which saw the accession of ten new Member States from Central and Eastern Europe (CEE), this idea is just as relevant. However, a reading of Mario Draghi’s much-anticipated report on EU economic competitiveness – or noticing what is left unsaid – reveals a familiar story: a Europe divided into different tiers, where some nations are still considered secondary.

Of course, in the EU, diverse divides persist despite decades of integration. They are fuelled by economic, political and socio-cultural dissimilarities. They are reinforced by different, sometimes contradictory interests, expressed through political rhetorics. Bruszt and Vukov frame this issue within a core-periphery relation and highlighting the challenges that arise from the ‘imposition of homogenous rules and policies on diverse economies at different levels of development, with dissimilar growth models’ and their consequences.

This post focuses on the East-West divide which is strongly linked to the post-Cold War compared to North-South Divide which primary emerged from the Eurozone crisis. The East-West divide is not just a historical footnote – it is a persistent reality that threatens European integration. While the EU has fostered peace and economic cooperation, structural and historical differences between the East and the West remain deeply ingrained. Economic prosperity in the East has not always translated into political alignment, and democratic backsliding in some CEE countries has fuelled scepticism among Western Member States. Meanwhile, economic policies crafted primarily by and for Western Europe have reinforced a two-tier system, with Eastern Europe often relegated to the periphery.

Finally, this division threatens not only the economic balance of the EU but also the very unity upon which it was built. As Bernatt and Cseres rightly point out,

‘[f]ailing to acknowledge and address the specific challenges of CEE countries is problematic politically, economically and legally. Omitting the CEE countries from the processes of re-thinking the EU’s future policies reinforces Europe’s core and periphery relations. It raises questions about such policies’ legitimacy while undermining the goal of creating economic sovereignty and security for the EU’.

In this post, I will analyse to what extent omitting CEE countries perspective in the discussion about competitiveness of EU is a strategic failure at many levels as it goes against the presumption of the equality of the Member States included in Article 4(2) TEU as well as undermining foundations of the internal market.

Draghi’s Report and the Missing Eastern Perspective

Mario Draghi’s report seeks to address Europe’s lagging competitiveness in comparison to the United States and China, yet it fails to reflect the diverse economic realities of the EU. Notably, the report does not incorporate insights from any Central and Eastern European economists, policymakers, or think tanks. Among the companies consulted, only one—Estonian tech firm Bolt—represents the CEE region. It would not be problematic per se if the outcomes of the report – aimed at supporting key EU sectors of a more competitive EU – were not ‘to the advantage of richer members in Western Europe’, it is postulated in the report that state aid goes to attract more production facilities to compete with, e.g. Germany – than invest in innovation and R&D.  

This exclusion is problematic not only symbolically but practically. Since 1990, Poland’s GDP per capita has grown 3.5 times, outpacing every other European country and setting a global benchmark. Other CEE nations, such as the Czech Republic, boast some of the lowest unemployment rates in the EU, signalling robust labour markets. Estonia’s thriving tech sector, exemplified by companies like Wise or Bolt, demonstrates the region’s capacity for innovation. And yet, none of these factors seem to have informed Draghi’s analysis. Ministers from Latvia, Poland, and the Czech Republic have criticized the report’s failure to consider Eastern Europe’s dynamic economies. Latvia’s economy minister Viktors Valainis noted that the ‘bureaucracy, countless regulations, and lack of dynamism’ Draghi identifies are problems rooted in the core of ‘Old Europe’, not necessarily in the East. Meanwhile, Polish officials have emphasized that competition is not just between Europe and global superpowers like the U.S. and China but also within Europe itself.

A Czech government official pointed out the stark contrast between Draghi’s approach and that of Enrico Letta, who actively engaged with CEE policy-makers before releasing his report on the Single Market. Draghi, by contrast, ‘didn’t travel’, leaving many in the East feeling excluded from a conversation that directly affects them and ignoring that the CEE region has first-hand experience in transitioning from communism to a competitive market economy—experience that should have been integrated into Draghi’s findings.

Are Member States equal?

The Treaties include a presumption in Article 4(2) TEU that all Member States are equal. This principle of equality finds its origins in the broader international law principle of sovereign equality of states and is embedded in various EU institutional rules.

Legally as indicated by Lenaerts, it implies that this equality is intertwined with uniform interpretation and application of EU law and is ensured by ‘one court and one court only’ – the CJEU. In this context, equality of Member States and their citizens is ensured through primacy of EU law. However, so far question about equality of the Member States was rather raised in respect to bottom – up tensions between national laws (‘domestic provisions’) and EU law then from the way how looking top – down Member States are perceived and treated.

Thus, as pointed out by Rossi, in a progressively integrated EU, formal equality alone is insufficient. As integration progresses from membership, through partnership and then to an even closer Union, the legal order serves as a ‘glue’. The membership translates into formal equality between Member States, partnership must be based on the principle of sincere cooperation and mutual recognition and then tightened by the principle of solidarity.

Membership: The Effort of New Member States: from Peripheries to the Core

The 2004 enlargement was a monumental achievement, symbolizing the peaceful unification of a continent long divided by history and ideology. The process was demanding— in line with the Copenhagen criteria, candidate countries had to incorporate the acquis communataire including 470 legal texts, transpose 80,000 pages of the Official Journal of the European Communities, and implement 31 negotiating chapters. The sheer scale of adaptation was unprecedented, with over 800 twinning projects helping to align institutions across the EU.

Despite this immense effort, little is discussed about the contributions and sacrifices made by the people in preparing for and adapting to accession. Citizens of CEE countries had to endure profound economic and social transformations, often facing job losses, structural reforms, and a redefinition of daily life. To illustrate the scale of this transformation, as hard as it is to believe, in 1990, GDP per capita in Poland and Ukraine were similar.

The structural imbalance was evident from the very beginning of the enlargement process. Eastern countries have long struggled with underrepresentation in EU decision-making bodies, while Western concerns about democratic governance and migration management in the East have reinforced old stereotypes and clichés. This led to a strong feeling of historical injustice and economic crisis which were at the roots that also drove a sharp rise of populist movements. As a result, scholars have observed a paradox in the region: while economic growth has been strong, democratic institutions have sometimes weakened. The EU’s enlarged Single Market has benefitted Western companies, but at the same time, Eastern workers face labour rights issues, and political concerns about the rule of law have fuelled tensions. The EU’s institutions in Brussels have attempted to address these concerns, but their efforts have been constrained by weak enforcement mechanisms and a lack of political support.

Partnership: One Solution Does Not Fit All

Moreover in respect to a more substantial discussion, the creation of the internal market is based on a strong premise on establishing of equivalent conditions for the exercise of an economic activity throughout the European Union. However, the potential opportunities offered by the internal market remain unrealized as long as the project remains incomplete, leading to a fragmented regulatory environment which can result from neglecting of differences and diversity of Member States. The free movement rules do not imply that all the products or services are identical. On the contrary, the principle of mutual recognition allows the differentiation of those products and services and maintain of the diversity between Member States. Draghi’s recommendations focus on reducing bureaucracy, yet the real inefficiencies in Europe are not uniform and differ among Member States. Overlooking these differences can lead to misdiagnosed solutions.

If Europe is serious about strengthening its competitiveness, it cannot afford to sideline its fastest-growing economies. Draghi’s call for an €800 billion investment package appears detached from the mechanisms that have already driven Europe’s economic growth, such as cohesion funding. Countries like Poland, Czechia, and Hungary have benefitted enormously from these funds, which have facilitated infrastructure improvements and economic convergence. Many economists have warned that Draghi’s recommendations, while relevant in some contexts, could be dangerous for smaller economies if implemented without considering regional considerations. For example, consolidating the telecommunications market and creating a unified capital markets union may work for Western economies but could restrict funding access for niche businesses in CEE. Furthermore, Germany’s recent opposition to Italy’s UniCredit takeover of Commerzbank demonstrates that economic nationalism remains strong even within the supposedly unified Single Market.

Cohesion funding has been a key driver of the success of CEE countries and needs to continue, rather than prioritizing Western (national) champions alone. Access to such funding should be linked to fostering innovation and education to enhance competitiveness. Draghi’s report (p. 19) highlights the need for new investment types building on existing innovation initiatives. It also stresses that services—key to future growth—tend to cluster in large, wealthy cities, as do the benefits of innovation. Transport and deeper coordination with adjacent network industries play a crucial role in counterbalancing these trends. Meanwhile, near-shoring– the relocation of production from Asia to Europe – has largely benefited CEE economies, where strong labour markets and a culture of hard work continue to attract investment. Draghi’s omission to consider these dynamics raises concerns that his recommendations might inadvertently hinder the very regions currently driving European growth.

Conclusion: A Europe That Breathes with Two Lungs

Bruszt and Vukov argue that effective market integration among diverse economies can occur under two conditions: (1) when the benefits and burdens of integration are distributed to reduce developmental disparities, or (2) when policies expand and adjust integrated markets in ways that approach the Pareto frontier, even if convergence is not achieved. Draghi’s report overlooks these considerations. Fostering innovation and competitiveness without addressing the risk of distorting peripheries is short-sighted and could strongly exacerbate the core-periphery divide.

Dr. Malgorzata Kozak is an Assistant Professor in European Union law and Competition Law at Utrecht University’s School of Law.