Radcliffe is the chief economic adviser to the international consulting firm PricewaterhouseCoopers' European operations. She has 30 years of experience working with top managers, helping them to shape, influence and respond to strategic, economic and policy issues.
There's been a lot of talk here about how long it will take new European Union members' economies to catch up with existing members. One EU study estimated that it will take Latvia 23 years to reach the EU's average per capita GDP. Many here are more optimistic, stating it might take just 10 years. What's your estimate?
We have to bear in mind the relative starting points. It's not as if the rest of the EU is going to stand still. I think if economic history tells us anything it's that the catch-up theory can vary quite considerably.
The Irish economic miracle, for example, is very splendid but it didn't start the moment they joined the EU. There was quite a long period of time before they started turning in the sorts of rates of growth that everybody comments on.
Some of the policies that contributed so successfully to Irish development were quite long-term in nature.
If you reckon that what you're going to need is a highly skilled work force well versed in the technical skills, in other words the middle rank – who are actually the engine of the Irish economy – you need to be able to plan over a respectable period of time before your educational establishments are going to be turning out the right kinds of people.
These policies, at least some of them, are quite long term. That having been said I do think there are potential sources of competitive advantage to build on in the Baltic states.
If you presuppose a reasonably benign world economy and a reasonably benign European economy, then - well 10 years may be going too far for full convergence - but you should at least see some improvement in that time.
Many people talk about Ireland's success but at the other end there's Greece, which has been in the EU for more than 20 years and still lags far behind the EU average in most indicators. What has Greece done wrong?
Well it's not that Greece has done anything wrong, it just hasn't done as much right as quickly as Ireland. OK, Greece is still way down on the pecking order in terms of GDP per capita, but it has improved considerably. Greece has obtained benefits because of its membership in the European Union.
It's merely a question of how rapidly you earn the benefits. Ireland probably stands out as the spectacular success story, which isn't to say that perfectly respectable performances weren't turned in by Spain and Portugal after they acceded.
The Baltic countries seem to relish in the fact that they have reoriented their economies away from Russia and toward the EU. Russia is a big economy and its indicators show it is the fastest improving economy in the world next to China. Is it a mistake to ignore Russia?
I think if I accepted the premise that the Baltics had uniformly turned their backs completely on Russia and were focusing only on the EU then I would say its a mistake.
But I don't know that that is necessarily true. If I were advising the Baltics strategically, I would certainly devise a strategy that recognized the sheer size and scale of the Russian market. It's huge. It's not just the absolute size of the market, but it needs to have enough disposable income to be of interest. That's beginning to happen in Russia.
There is a fear among both EU members and candidate countries about the free movement of labor. Current members fear a flood of East Europeans and candidate countries fear brain drain. Is either fear justified?
I think labor mobility is not necessarily a bad thing. I think increasingly in Europe its something which is healthy and its something people want to do and its all part of an effective internal market.
I'm struck by these surveys that show that quite significant percentages of young people are interested in spending a period of time living and working in another country. I think that's a good thing.
What impact will it have on economies in the countries they are leaving?
It might present problems if one were of a mind to think that the whole 20-35 age group with respectable skills training were going to up and leave tomorrow, but that isn't going to happen, is it? There's a demand as well as a supply issue here. What businesses tend to want by way of mobile workers doesn't necessarily square up with what people want. The people tend to be the young and unattached and what businesses say they want are people with relative practical experience who have been around a bit.
So there's a mismatch there anyway. What I'm saying is that over a long period of time – and we're in one of those long-term debates on this one – we're going to see a greatly increased mobility between member states of the European Union. I think it's excellent.
We're talking about letting 10 countries in the EU at once, which is going to pull down its per capita average income. Can the EU afford enlargement?
I think it's a mistake to think of enlargement as somehow a charitable donation from the rich to the poor. I don't see it like that at all. I think the whole basis of enlargement of the EU is that everyone can benefit.
It would be naive to say that everyone is going to benefit immediately, and its equally naive to say there won't be some losers because there will. In any economic change, whether it's enlargement or whether it's the restructuring of the economy or privatization or whatever, there are always some losers.
The objective of social policy ought to be to try to make sure that a proportion of the gains are appropriated to the losers or to help put them in a position where they don't lose so much.
There's no doubt in my mind at all that an enlarged EU offers net benefits. The issue is how do you share them out.
What about the impact of enlargement on the euro? Under EU regulations candidate countries can't opt out of the European Monetary Union, so they will all have to adopt the euro at some point.
That's a big question. I think when the history books are written about the introduction of the single currency we're going to see that quite a lot of rubbish was talked in the early stages.
I've always thought the introduction of a single currency across an economic area the size, scale and wealth of the European Union will not necessarily take its place alongside the U.S. dollar or even above the dollar, but it certainly has the potential to do so.
As it happens the single currency was introduced at a particular point in the global economic cycle when the United States was on a high and rising trend and when Europe was not.
I have no problem with the euro having depreciated against the dollar in the first two years of its existence. It's exactly what needed to happen in order for Europe's exports to become more competitive on global markets.
I think the much more interesting question is what's going to happen in the medium and longer term in terms of the role of the euro vis a vis the dollar and what that's going to tell us in terms of the relationship between the economic power of the European Union and the economic power of the United States.
But it has to be said that I thought there would be a bigger correction in the exchange rate when the correction in the U.S. economy happened, and I'm still puzzled why the correction wasn't bigger.
You hear this theory bounced around once in a while that the fall of the euro against the dollar may have been, to some extent, caused by the prospect enlargement and a fall in GDP per capita, etc. Is there any sound basis to that?
I'm very doubtful about that. Well of course I can't rule it out because foreign exchange markets aren't always rational.
To say the currency markets were discounting any possible downward pressure on the euro as a consequence of enlargement that will happen two to three years away just doesn't hold up.
In the run-up to the EU do you think the countries' best preparation strategy is just to throw the doors open for foreign direct investment to get companies in here that know what they're doing and know what the EU is all about?
That's certainly part of what you might want to do, but I think there are quite a lot of other things you want to do as well. I'm struck by how a proportion - now I'm not necessarily talking about the Baltics here, I was thinking more about Poland, Hungary and the Czech Republic - how a proportion of medium-sized indigenous businesses are filled with fear about enlargement and aren't really recognizing the opportunities.
It would be naive to say that everyone is going to benefit immediately, and its equally naive to say there won't be some losers because there will. In any economic change, whether it's enlargement or whether it's the restructuring of the economy or privatization or whatever, there are always some losers.
The objective of social policy ought to be to try to make sure that a proportion of the gains are appropriated to the losers or to help put them in a position where they don't lose so much.
There's no doubt in my mind at all that an enlarged EU offers net benefits. The issue is how do you share them out.
What about the impact of enlargement on the euro? Under EU regulations candidate countries can't opt out of the European Monetary Union, so they will all have to adopt the euro at some point.
That's a big question. I think when the history books are written about the introduction of the single currency we're going to see that quite a lot of rubbish was talked in the early stages.
I've always thought the introduction of a single currency across an economic area the size, scale and wealth of the European Union will not necessarily take its place alongside the U.S. dollar or even above the dollar, but it certainly has the potential to do so.
As it happens the single currency was introduced at a particular point in the global economic cycle when the United States was on a high and rising trend and when Europe was not.
I have no problem with the euro having depreciated against the dollar in the first two years of its existence. It's exactly what needed to happen in order for Europe's exports to become more competitive on global markets.
I think the much more interesting question is what's going to happen in the medium and longer term in terms of the role of the euro vis a vis the dollar and what that's going to tell us in terms of the relationship between the economic power of the European Union and the economic power of the United States.
But it has to be said that I thought there would be a bigger correction in the exchange rate when the correction in the U.S. economy happened, and I'm still puzzled why the correction wasn't bigger.
You hear this theory bounced around once in a while that the fall of the euro against the dollar may have been, to some extent, caused by the prospect enlargement and a fall in GDP per capita, etc. Is there any sound basis to that?
I'm very doubtful about that. Well of course I can't rule it out because foreign exchange markets aren't always rational.
To say the currency markets were discounting any possible downward pressure on the euro as a consequence of enlargement that will happen two to three years away just doesn't hold up.
In the run-up to the EU do you think the countries' best preparation strategy is just to throw the doors open for foreign direct investment to get companies in here that know what they're doing and know what the EU is all about?
That's certainly part of what you might want to do, but I think there are quite a lot of other things you want to do as well. I'm struck by how a proportion - now I'm not necessarily talking about the Baltics here, I was thinking more about Poland, Hungary and the Czech Republic - how a proportion of medium-sized indigenous businesses are filled with fear about enlargement and aren't really recognizing the opportunities.
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