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entrants would absorb a significant share of the interregional transfers they
were currently benefiting from.
Naturally, core members of the Union were happy to incorporate two large
new markets into the European economic space, but they wanted to do it
on their own terms: maximizing the market space for their own products by
reducing industry tariffs, and limiting the effect on their producers by contain-
ing as long as possible the free circulation of agricultural products and workers
from the Iberian peninsula. In this context, Spain's bargaining position was
weak, and the final agreement, reached as late as 1985, reflected much more
the aspirations of current members than those of the newcomers. Analysts of
this process generally recognize that “
the behavior of EC member states mir-
rored that of members of a select club who, when faced with newcomers, seek
to protect their position by transferring any cost onto new members
”(Closa
and Heywood:
2004
,p.21). Current members combined two strategies. First,
restrictions on mobility and circulation of products were notorious. Free move-
ment of workers and agricultural products would not take effect until 1994;
in parallel, the Spanish executive gained a similar period to remove indus-
trial duties, allow foreign banks to enter the new economic space, and remove
state monopolies. The process was bitter for Portugal and Spain, as many
domestic sectors needed structural reform before acquiring full status within
the common economic space. Second, current members agreed to finance a
series of programs designed to overcome the structural differences between
new and current members (Torreblanca
1998
). These efforts were not just a
side payment. They were also a purposeful effort to bolster local economic
activity and limit the scope of population outflows towards wealthier areas
of the Union. Economically, these programs created a stimulus in the short
run and contributed to the economic convergence of backwards regions. The
rationale behind both initiatives was the creation of new sources of employ-
ment in the poorest areas of the new members. By bolstering the demand
of labor locally, interregional transfers helped absorb the domestic supply
of labor, thereby limiting migration towards more advanced regions in the
Union.
The dual role of interregional transfers as compensation and insurance
becomes apparent when analyzing disputes among current members about
where and how best to use these funds. Current recipients demand compensa-
tion for the broadening the economic union, and therefore demand additional
resources so that the arrival of new members does not lead them to a rela-
tive loss of resources. In contrast, net contributors want to cap overall costs
and, more importantly, also want the flow of interregional transfers to be redi-
rected toward the new members, if possible at the expense of current recipients.
The purpose of interregional transfers, in their view, is to help new members
bridge the development gap during the transition period. Interestingly, there is
a close link between mobility restrictions and the expected impact of expen-
ditures toward infrastructural convergence. Restrictions on mobility buy time
to reduce the modernization gap. The transition period operates as a buffer to
