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regard. Germany supported the Cohesion Fund even in the context of the eco-
nomic consequences of Reunification and with a looming economic recession.
The economic and financial stability of the Union required additional resources
to be transferred to Ireland and the Mediterranean rim, both as compensation
for necessary adjustments and as stimulus that helped contain unemployment,
support structural reforms toward meeting the EMU criteria, and contain unde-
sired disruptions within the common market. The EMU required economically
feasible partners, or else, as recently witnessed, financial and budgetary disrup-
tions could prove too taxing for wealthier partners themselves (Eichengreen
2007
).
The dual nature of interregional transfers, compensatory and insurance,
emerged again in the way the European Union approached the enlargement
to the East. With the collapse of the Berlin wall, the geopolitical situation of
Europe changed. The same concerns that motivated EU insiders to incorporate
the South in the Mediterranean enlargement applied now to the East. Hardly
anyone disputed that, in the medium run, the Union would be better off if these
younger democracies consolidated politically and modernized economically.
Germany, the biggest contributor to the EU budget, while clearly in favor
of pursuing the process and expanding its area of economic influence was
concerned about two things. Together with Austria, Luxembourg, and other
advanced democracies from central Europe, they were worried about the scale
of the migration of workers from the East and the potential disruptions this
could cause to their economies. In addition, and in stark contrast with the
Mediterranean enlargement, they were also concerned about the overall budget
size of the Union. This time Germany could not afford to foot the bill for an
increase of resources that would ameliorate the distributive conflict between
current and future recipients of interregional transfers. As Schneider's (
2009
)
analysis reveals, the menu of strategies was constrained by these budgetary
limitations. Germany aimed for a combination of two measures: restriction
on the mobility of workers and a redirection of interregional transfers from
the South to the East. Naturally, Spain, the biggest recipient of interregional
transfers, along with other South European members, objected to the proposal
and demanded measures that would not worsen drastically its status as a net
beneficiary within the Union.
22
In an illustrative twist during the negotiations, Aznar famously threatened to
block the restriction on workers' movements if his demands were ignored. For
obvious geographical and cultural reasons, this was a much more important
issue for Germany, Austria, or Luxembourg than for South European democra-
cies. What Aznar sold domestically as a courageous defense of national interests
the rest of Europe perceived as an outrageous blackmail (Rodrigo and Torre-
blanca
2001
).
23
The deadlock was finally overcome through an agreement that
22
On Spain's fears about a reorientation of structural funds towards the East, see Barbe (
1999
).
23
As an example of the perceptions generated by this and other similar moves by Aznar's European
strategies, see “The Ugly European,” Die Zeit, September 14, 2000.
