European enlargement promises to end the division of the continent, which goes back at least to the second world war. But, as I argued last week, it also creates huge challenges for the continent's richer west. If the west is to cope, it must make big reforms to its labour markets and welfare states.

Integration of two economies generates price and wage convergence. If that convergence is prevented, the gains are thwarted and unemployment results. If wages are pushed too high in the poorer region, as happened during German unification, unemployment will emerge there. If wages are kept too high in the richer region, the unemployment will emerge there, instead, as production shifts to the low-wage region next door.