E.U. accession will boost the economies of Central and Eastern Europe. But in the short term, the new members will face tougher competition. Can they cope?
Posted Sunday, April 4, 2004; 11.52BST
With its cobblestone streets and arched Renaissance galleries, the medieval city of Kraków has long been Poland's most popular tourist attraction. But the biggest local crowds these days are flocking to monuments with a much shorter history, such as the very 21st century M1 shopping mall near the decrepit, socialist-era Nowa Huta steel mill on the outskirts of town. The M1's architectural splendor consists mainly of faux Greek columns, cloud murals and a scattering of disconcertingly lifelike stuffed pigeons. Even so, the mall drew more than 6 million visitors last year. Some of them were lured by free entertainment a concert by the Polish rock band Perfect; a runway saunter by Miss Poland, Karolina Gorazda, that was broadcast live on mtv Polska. But most come to shop 'til they drop at M1's 90 stores, which sell everything from Yves Rocher cosmetics to oscypek, a traditional Polish smoked cheese.
For Europe's retailers, Kraków is the new frontier. M1, built by Germany's Metro Group, is one of eight massive shopping centers that have sprung up in this ancient capital in recent years, including two Tescos (British), two Carrefours (French) and several other big German stores. In all, Kraków is now home to some 20 hypermarkets, giving it one of the highest per-capita concentrations of megastores anywhere in Europe. And it's not over yet. Despite a moribund economy, two more hypermarkets are planned in the next two years. "The competition is horrific," says Kevin Doherty, president of Tesco Polska, which is headquartered in Kraków. "If you don't win in Poland, you can't win in Europe."
Kraków's retail onslaught is mirrored in towns and cities across Central and Eastern Europe, as Western firms tap into emerging markets in the E.U.'s 10 new member states. German publishers have bought up many of the leading Polish magazines and newspapers; virtually all the world's auto manufacturers have set up plants across the region; and last week two French companies opened a customer-service center in Prague to help Air France passengers worldwide find lost luggage. There will be no economic "big bang" on May 1 when the new members join. The most significant changes the lifting of most tariffs, introducing free market competition and harmonizing national legislation with E.U. norms have been phased in over the past decade. But Kraków's retail free-for-all is a harbinger of things to come in the rest of the economy.
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