This article presents an analysis of economic implications of the major EU enlargement in 2004. The research is based on sigma (σ) and beta (β) convergence of per capita GDP among the 10 countries which joined the European Union in 2004. Our results confirm the existence of both types of convergence in the second half of the 1990s and the 2000s. Generally, the poorer new EU member states grew faster than the richer new EU member states. As a result, the income gap between these two groups of countries has narrowed although it still remains quite large. The convergence occurred at the rate of 4.2% during the period 1992-2006 and 7.0% and 9.6% during the sub-periods 1995-2006 and 2002-06 respectively.

Abs tract:This pa per pre sents the ana ly sis of un con di ti o nal b and s con ver gen ce among the ten Eu ro pean coun tries that ac ces sed the Eu ro pean Uni on in 2004. Un con di ti o nal b con ver gen ce me ans that the less de ve lo ped coun tries (with lower GDP per ca pi ta) grow fas ter than the more de ve lo ped coun tries (with higher GDP per ca pi ta). s con ver gen ce exists when in co me dif fe ren ti ati on among eco no mies decre a ses over time. Our re sults con firm the exis ten ce of both types of con ver gen ce in the se cond half of the 1990s and the 2000s. The po o rer New EU Mem ber Sta tes grew ge ne ral ly fas ter than the ri cher New EU Mem ber Sta tes. As a re sult, the in co me gap among the se coun tries has decre a sed (although it still re ma ins qu i te lar ge). The con ver gen ce occur red at the rate of 2.87% in the years 1995-2006 and 3.23% in 1996-2006. This re sult is very si mi lar to the re sults of other ana ly ses on the subject.Key words: eco no mic growth, eco no mic con ver gen ce, tran sitio nal eco no mies, Eu ro pean Uni on JEL Clas si fi cati on: F02, F43, O11, O19

Financial resources are of essential importance for optimal local government functioning. Without a sufficient level of autonomy and resources, fiscal federalism is nothing more than an external appearance. With only one lower tier of government (municipalities), Slovenia is among the countries with a relatively low degree of decentralisation. The share of local finance amounts to around 5% of GDP (EU around 12%). Although the law allows creation of more lower tiers, no such units have been created yet. There are currently 193 municipalities, varying greatly in terms of population. Most of the local financial model discrepancies derive from: a) an inappropriate vertical tax structure and low level of local fiscal autonomy, b) an inadequate system of financial equalisation that is a strong disincentive to revenue mobilisation, c) absence of correlation between normative and actual expenditure/revenue, disregarding local characteristics, wealth and tax base, d) politically enforced decisions to found some 'fictitious' units, consequently reducing the role of local officials in political bargaining and lobbying.

The real benefits of integrating different economic areas and regions into one common economic, monetary, and sometimes also fiscal area are among the most important issues to be resolved because the win-win situation for all participants should prevail unless the Member States or local authorities lose their interest in further participation. In this study, we compare the speed and the real benefits of economic integration between the three groups of Member States that emerged following the last big EU enlargement. The first group is composed of the so-called old EU Member States. The second group represents the countries that achieved full membership in 2004 (the so-called new Member States), and in the third group, there are the countries that are now in the negotiation process for EU membership. We then draw from the experience of these new Member States to derive implications for a possible new round of EU enlargement. The conclusion of this paper is therefore supposed to be some kind of direction for the new candidate countries. The results offer an answer to the question of what degree of convergence the new EU10 Member States reached within certain macroeconomic fundamentals during the period of their accession negotiations. Keywords: • economic convergence • EU integration • transition economies • integration • EU accession • economic trends

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