Analysis By Ben Richardson Business reporter, BBC News

The EU's expansion is giving many people pause for thought

Critics have voiced fears of mass migration and concerns about their ability to implement reforms while keeping state finances in order.

And following the recent riots in Hungary, many observers are questioning whether Romania and Bulgaria will be able to marry their population's expectations of a better, richer life with harsh economic realities.

"Joining the EU definitely causes problems, and it's mostly down to psychology," said Klaudius Sobczyk, who invests 750m euros (�505m; $903m) for fund management firm Veritas.

"People think that if you join the EU, then suddenly it is all getting better," he added.

"The truth is that things probably won't get better any quicker or slower than they were before EU membership."

Bigger, better?

Despite their recent bad press, Romania and Bulgaria have made strong progress.

Romania has averaged an annual economic growth rate of 5.8% over the past five years, making it one of Europe's quickest.

Growth this year is expected at 5.5%, and while the main drivers used to be exports from heavy industries such as steel, today Romania is benefiting from a pick up in domestic demand and manufacturing of goods such as car parts.

In Bucharest and the west of country, the unemployment rate has dropped to about 2%, and there are even concerns about a lack of available labour, after foreign companies such as Procter & Gamble set up production plants.

Bulgaria is not too dissimilar, with growth seen at 5% this year, and an economy that is shifting away from the dirty industries of the socialist era towards the more modern sectors of technology and tourism.

The average wage has climbed to about 250 euros a month in Romania, compared with a figure of about 200 euros in Bulgaria.

There is pent-up consumer demand - retail sales are growing at an annual rate of about 25% in Romania and 13% in Bulgaria - and companies are expecting to see a surge in demand for products such as mobile phones and cars.

Central funding

EU development funds are expected to help improve the situation further, and Brussels has earmarked subsidies of about 32bn euros to be distributed in Romania by 2013.

For Bulgaria, which has a population that is about half Romania's 22 million and a much smaller agricultural sector, the figure is closer to 11bn euros.

Both governments will be expected to contribute from their own coffers, and analysts estimate that Romania will have to pay some 800m euros a year, with Bulgaria chipping in about 500m euros.

And it is here that the problems may start to appear as Romania and Bulgaria try to keep their public finances in order, analysts said.

Based on what happened to the last round of EU entrants, inflationary pressures are likely to increase, with most of the gains coming in food stuffs and imported consumer goods.

At the same time, the two governments will come under pressure to increase their rate of spending to fund healthcare and pensions, while also boosting wage levels.

So far both Romania and Bulgaria have kept a reasonably tight rein on the purse strings, with Romania's budget deficit seen at about 2% of gross domestic product (GDP) this year, and Bulgaria running a surplus.

State control

The big question now is how quickly they step up spending especially as there seem to be few ways of generating extra revenue.

Tax is a sensitive issue, especially as Romania has fixed its personal and corporate income tax level at 16%.

Borrow too heavily and pump too much money into the economy, and inflation may quicken, pushing up interest rates, which in turn could slow economic growth.

At the same time, analysts said the higher wage costs may see global firms shift production to cheaper nations, and warned that meeting more stringent EU regulations could increase red tape, further snagging development.

The message seems to be getting through Ivailo Vesselinov, Dresdner Kleinwort. Reaction to EU deal

For Bulgaria the problem is different, in that its currency is pegged to the euro, and as a result it has little control over its interest rates that are linked to the European Central Bank levels.

The main way Bulgaria has to control inflation is by keeping a lid on consumer credit and spending, and not allowing its budget to balloon out of control. It also is expecting an increase in the value of the euro to strengthen its leva.

Already the government has been telling voters that EU membership will not mean an overnight jump in their wages, disposable incomes and standards of living.