European Union Essay
The European Union was formally established on November 1, 1993. It is the most recent in a series of cooperative organizations in Europe that originated with the European Coal and Steel Community (ECSC) of 1951, which became the European Community (EC) in 1967.
The original members of the EC were Belgium, France, West Germany (now part of the united Germany), Greece, Italy, Luxembourg, and Netherlands. Subsequently these nations were joined by Denmark, Ireland, the United Kingdom, Portugal, and Spain. In 1991 the governments of the 12 member states signed the Treaty on European Union (commonly called the Maastricht Treaty), which was then ratified by the national legislatures of all the member countries.
The EU has a number of objectives. Its principal goal is to promote and expand cooperation among member states in economics and trade, social issues, foreign policy, security and defense, and judicial matters. Under the Maastricht Treaty, European citizenship was granted to citizens of each member state. Border controls were relaxed. Customs and immigration agreements were modified to allow European citizens greater freedom to live, work, and study in any of the member states.
The dream of a united Europe is almost as old as Europe itself. The early 9th-century empire of Charlemagne covered much of western Europe. In the early 1800s the French empire of Napoleon I encompassed most of the European continent. During World War II (1939-1945), German leader Adolf Hitler nearly succeeded in uniting Europe under Nazi domination (see National Socialism). All these efforts failed because they relied on forcibly subjugating other nations rather than fostering cooperation among them.
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A.Early Cooperation
Postwar aspirations for a European supranational organization had both political and economic motives. The political motive was based on the conviction that only a supranational organization could eliminate the threat of war between European countries. Some supporters of European political unity, such as the French statesman Jean Monnet, further believed that if the nations of Europe were to resume a dominant role in world affairs, they had to speak with one voice and command resources comparable to those of the United States.
The economic motive rested on the belief that larger markets would promote competition and thus lead to greater productivity and higher standards of living. Economic and political viewpoints merged in the assumptions that economic strength was the basis of political and military power, and that a fully integrated European economy would reduce conflict among European nations. Because countries were hesitant to surrender any control over national affairs, most of the practical proposals for supranational organizations assumed that economic integration would precede political unification.
B.Benelux Customs Union
The Benelux Customs Union (now the Benelux Economic Union) is an early example of a supranational economic organization. This union provided for a free-trade area composed of Belgium, Netherlands, and Luxembourg, and for a common tariff imposed on goods from outside the union. Formed in 1948, the union grew from the recognition that the economies of the separate states were individually too small to be competitive in the global market. Belgium and Luxembourg had, in fact, joined in an economic union as early as 1921, and the governments of Belgium and Netherlands had agreed in principle on a customs union during World War II. These three countries have been among the warmest advocates of European cooperation, and they have continued to work for closer economic integration of their own countries independently of broader European developments.
C.European Coal and Steel Community (ECSC)
The first major step toward European integration took place in 1950. At that time French foreign minister Robert Schuman, advised by Jean Monnet, proposed the integration of the French and German coal and steel industries and invited other nations to participate. Schuman’s motives were as much political as economic. Many Europeans felt that German industry, which was reviving rapidly, needed to be monitored in some way. The ECSC provided an appropriate mechanism since coal and steel are central to many modern industries, especially the armaments industry.
The Schuman Plan, as it was called, created a supranational agency to oversee aspects of national coal and steel policy, such as levels of production and prices. Not coincidentally, this mandate allowed the agency to keep German industry under surveillance and control. Determined to allay fears of German militancy, West Germany immediately signed on and was soon joined by the Benelux nations and Italy. The United Kingdom, concerned about a potential loss of control over its industry, declined to join.
The treaty establishing the ECSC was signed in 1951 and took effect early the following year. It provided for the elimination of tariffs and quotas on trade in iron ore, coal, coke, and steel within the community; a common external tariff on imports relating to the coal and steel industries from other nations; and controls on production and sales. To supervise operations of the ECSC, the treaty established several supranational bodies: a high authority with executive powers, a council of ministers to safeguard the interests of the member states, a common assembly with advisory authority only, and a court of justice to settle disputes.D. European Economic Community (EEC)
In 1957 the participants in the ECSC signed two more treaties, known as the Treaties of Rome. These treaties created the European Atomic Energy Community (Euratom) for the development of peaceful uses of atomic energy and, most important, the European Economic Community (EEC, often referred to as the Common Market).
The EEC treaty provided for the gradual elimination of import duties and quotas on all trade between member nations and for the institution of a common external tariff. Member nations agreed to implement common policies regarding transportation, agriculture, and social insurance, and to permit the free movement of people and financial resources within the boundaries of the community. One of the most significant provisions of the treaty was that it could not be renounced by just one of the members and that, after a certain amount of time, further community decisions would be made by a majority vote of the member states rather than by unanimous action.
Both the EEC and the Euratom treaties created separate high commissions to oversee their operations. However, it was agreed that the ECSC, EEC, and Euratom would be served by a single council of ministers, representative assembly, and court of justice.
In the preliminaries to the 1957 treaties of Rome, other nations were invited to join the EEC. The United Kingdom objected to the loss of control over national policies implied in European integration and attempted to persuade European nations to create a free-trade area instead. After the EEC treaty was ratified, the United Kingdom, Norway, Sweden, Denmark, Switzerland, Austria, and Portugal created the European Free Trade Association (EFTA). The EFTA treaty provided only for the elimination of tariffs on industrial products among member nations. It did not extend to agricultural products, nor did it provide a common external tariff, and members could withdraw at any time. Thus the EFTA was a much weaker union than the Common Market.
In 1961, with the EEC’s apparent economic success, the United Kingdom changed its view and began negotiations toward EEC membership. In January 1963, however, French president Charles de Gaulle vetoed British membership, mainly because of the United Kingdom’s close ties to the United States. De Gaulle vetoed British membership a second time in 1967.E. European Community (EC)
In July 1967 the three organizations (the EEC, the ECSC, and Euratom) fully merged as the European Community (EC). The basic economic features of the EEC treaty were gradually implemented, and in 1968 all tariffs between member states were eliminated. No progress was made on enlargement of the EC or on any other new proposals, however, until after de Gaulle resigned as president of France in May 1969. The next French president, Georges Pompidou, was more open to new initiatives within the EC.
At Pompidou’s suggestion, a meeting of the leaders of the member states was held in The Hague, Netherlands, in December 1969. This meeting paved the way for the creation of a permanent financing system for the EC based on contributions from member states; the development of a framework for foreign policy cooperation among member nations; and the opening of membership negotiations with the United Kingdom, Ireland, Denmark, and Norway.F. Expansion of the EC
In 1972, after nearly two years of negotiations, it was agreed that the four applicant countries would be admitted on January 1, 1973. The United Kingdom, Ireland, and Denmark joined as scheduled; however, in a national referendum, the people of Norway voted against membership.
In the United Kingdom, however, popular opposition to EC membership remained. Many Britons felt British contributions to the EC budget were too high. After the Labour Party regained power in the United Kingdom in 1974, it carried out its election promise to renegotiate British membership conditions in the EC, particularly the financial ones. The renegotiation resulted in only marginal changes. However, questions about the United Kingdom’s commitment to the EC added to existing uncertainties within the community caused by the economic problems of the 1970s. The Labour government endorsed continued EC membership and called a national referendum on the issue for June 1975. Despite strong opposition from some groups, the British people voted for continued membership. G. Single European Act (SEA)
By the 1980s, 30 years after its inception, the EC still had not realized the hopes of the most ardent supporters of European unity: a United States of Europe. In fact, despite the removal of internal tariffs, it had not even succeeded in ending all restrictions on trade within the EC, nor in eliminating internal customs frontiers. The admission of less-developed Mediterranean countries—Greece in 1981, then Spain and Portugal in 1986—introduced a host of new problems, most related to their lower levels of economic development. In particular, the greater reliance of these countries on agriculture meant that a large percentage of funds the EU earmarked to support agriculture within the community would have to be redirected to the new members. This caused alarm within some quarters of the EU, particularly in Ireland, which feared that its own share of these funds would be reduced.
In 1985 the European Council, composed of the heads of state of the EC members, decided to take the next step toward greater integration. In February 1986 they signed the Single European Act (SEA), a package of amendments and additions to the existing EC treaties. The SEA required the EC to adopt more than 300 measures to remove physical, technical, and fiscal barriers in order to establish a single market, in which the economies of the member states would be completely integrated. In addition, member states agreed to adopt common policies and standards on matters ranging from taxes and employment to health and the environment. Each member state also resolved to bring its economic and monetary policies in line with those of its neighbors. The SEA entered force in July 1987.H. Creation of the European Union
In the late 1980s, sweeping political changes led the EC once again to increase cooperation and integration. As Communism crumbled in Eastern Europe, many formerly Communist countries looked to the EC for political and economic assistance. The EC agreed to give aid to many of these countries, but decided not to allow them to join the EC immediately. An exception was made for East Germany, which was automatically incorporated into the EC after German reunification.
In the wake of the rapid political upheaval, West Germany and France proposed an intergovernmental conference (IGC) to pursue closer European unity. An IGC is a meeting between members that begins the formal process of changing or amending EC treaties. Another IGC had occurred earlier, in 1989, to prepare a timetable and structure for monetary union, in which members of the community would adopt a single currency. British prime minister Margaret Thatcher opposed calls for increased European unity, but in 1990 John Major became prime minister and adopted a more conciliatory approach. The IGCs began work on a series of agreements that would become the Treaty on European Union.I. Treaty on European Union
The Treaty on European Union (often called the Maastricht Treaty) founded the EU and was intended to expand political, economic, and social integration among the member states. After lengthy negotiations, it was accepted by the European Council at Maastricht, Netherlands, in December 1991. Of particular significance, the treaty committed the EU to Economic and Monetary Union (EMU). Under EMU the member nations would unify their economies and adopt a single currency by 1999. The Maastricht Treaty also set strict criteria that member states had to meet before they could join EMU. In addition, the treaty created new structures designed to promote a more integrated foreign and security policy and to encourage greater cooperation on judicial and police matters. The member states granted the EU governing bodies more authority in several policy areas, including the environment, education, health, and consumer protection.
The new treaty aroused a good deal of popular opposition among EU member states. Much of the concern centered on EMU, which would replace national currencies with a single European currency. The United Kingdom refused to endorse some aspects of the treaty and gained exemptions from them, called opt-outs. These included not joining EMU and not participating in the Social Chapter, a section of the Maastricht Treaty outlining goals in social and employment policy, including a common code of worker rights. Danish voters rejected the treaty in a referendum, while French voters favored the treaty by only a slim majority. In Germany, a challenge to the treaty lodged with the country’s supreme court contended that membership in the EU violated the German constitution. In an emergency meeting of the European Council, Denmark gained substantial concessions and exemptions, including the right to opt out of EMU and any future common defense policy. Danish voters then approved the treaty in a subsequent referendum. Because of these difficulties, the EU was not formally inaugurated until November 1993.J. Amsterdam Treaty
Popular reactions against some elements of the Maastricht Treaty led to another intergovernmental conference among EU leaders that began in March 1996. This IGC produced the Amsterdam Treaty, which revised the Maastricht Treaty and other founding EU documents. The revisions were intended to make the EU more attractive and relevant to ordinary people.
The Amsterdam Treaty called on member nations to cooperate to create jobs throughout Europe, protect the environment, improve public health, and safeguard consumer rights. In addition, the treaty provided for the removal of barriers to travel and immigration among the EU member states except for the United Kingdom, Ireland, and Denmark, all of which retained their original border controls. The treaty included the potential for cooperation and integration with the Western European Union (WEU), an organization of Western European powers focused on defense. It also allowed the possibility of admitting countries from Eastern Europe to the EU. The Amsterdam Treaty was signed by EU members on October 2, 1997.
A document issued by the European Commission (the EU’s highest administrative body) in 1997, known as Agenda 2000, outlined a strategy for EU enlargement under the Amsterdam Treaty. The document called for wide-ranging reforms within the EU before any enlargement agreement could move forward. These included measures to increase economic growth, competitiveness, and employment; agricultural and structural reforms; and a new European financial framework.K. Treaty of Nice
The theme of EU expansion was addressed again in 2000 in what became the Treaty of Nice. Signed in 2001, this treaty outlined a series of staged reforms to prepare the EU for enlargement. The treaty called for a reduction in the potential size of the European Commission, reforms to voting rules and processes in the Council of the European Union, and a reallocation of seats in the European Parliament to member states.
Unlike the Single European Act or the Amsterdam Treaty, the Treaty of Nice did not seek to broaden the authority of the EU. Rather, the role and powers of an enlarged EU were addressed elsewhere—in the Laeken Declaration of 2001 and by the Convention on the Future of Europe, convened in March 2002. By late 2002, all EU members had ratified the Treaty of Nice. However, Irish voters nearly forced a renegotiation of the treaty after rejecting it in a referendum in 2001; many Irish worried that EU enlargement would reduce financial benefits received by Ireland. Nevertheless, Ireland’s ratification was secured in a second referendum held the following year, putting the schedule for EU enlargement back on course.L. Monetary Union
The EU’s attempts to establish a single European currency, as set out in the Maastricht Treaty, were controversial from the start. Some EU countries, including the United Kingdom, worried that a shared European currency would threaten their national identity and governmental authority. Despite such concerns, many EU member countries struggled to meet the economic requirements for participating in Economic and Monetary Union (EMU) and adopting a shared currency, which was named the euro.
These requirements were stringent: (1) a country’s rate of inflation could not be more than 1.5 percent higher than an average of the rate in the three countries with the lowest inflation; (2) a country’s budget deficit could not exceed 3 percent of gross domestic product (GDP), and its national debt could not exceed 60 percent of GDP; (3) a country’s long-term interest rate could not be more than 2 percent higher than an average of the rate in the three countries with the lowest interest rates; (4) a country could not have devalued its currency against any other member nation’s for at least two years prior to monetary union.
EMU participants also agreed to abide by the Stability and Growth Pact, a budgetary agreement designed to underpin the euro after its planned launch in 1999. The pact required countries to keep their annual budget deficits below 3 percent of GDP or else risk fines, and it directed countries to take measures to eliminate their budget deficits altogether.
Most countries found it difficult to meet the EMU requirements. Measures to reduce inflation and high interest rates contributed to increasing unemployment, while efforts to control government deficits often led to higher taxes. These consequences compounded the problems of economic recession that most countries were already experiencing.
As the deadline for EMU approached, misgivings arose from many quarters that the economic climate was not right, that levels of economic performance across the countries were still too disparate, and that several countries had not strictly met the Maastricht criteria. Despite these concerns, the EU officially agreed in May 1998 to adopt the euro for 11 of the 15 member countries beginning on January 1, 1999. This agreement also created the European Central Bank (ECB) to oversee the new currency and to take charge of the monetary policies of the EU. The countries to adopt the euro were Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal, and Spain.
The United Kingdom, Sweden, and Denmark met the EMU criteria but decided not to participate. Greece had hoped to be included in the first wave of countries to adopt the euro but failed to meet the criteria. On January 1, 1999, the 11 nations participating in the so-called euro zone began to use the euro for accounting purposes and electronic money transfers; their national currencies remained in circulation for other uses. Greece adopted the euro in January 2001, becoming the 12th member of the euro zone. In 2002 the ECB began issuing euro-denominated coins and banknotes, and the currencies of countries within the euro zone ceased to be legal tender.
The ten members that joined the EU in 2004 have various timetables for adopting the euro, and adoption efforts have met with strong opposition in a number of countries. Some new members, such as Cyprus, Estonia, Lithuania, and Slovenia, announced that they would take immediate steps to adopt the euro, opening them for membership in the single currency as early as 2007. In order to adopt the euro, a new member must first meet the EMU criteria. It must then demonstrate that its currency can remain stable relative to the euro over a two-year period. Slovenia became the first of these members to meet the EMU criteria and adopted the euro on January 1, 2007.
After some initial troubles, the euro established itself as a viable currency in international money markets. Concern now shifted to the enforcement of a common monetary policy, under strict direction from the European Central Bank. Slowing growth and rising unemployment across the euro zone after 2000, however, led to higher budget deficits, and the European Commission soon had to warn Ireland and Germany to reduce their budgetary expenditures to conform to limits required by the Stability and Growth Pact. By 2002 there had emerged within the EU a broader concern about the continued feasibility of the Stability and Growth Pact. Many more countries seemed to be nearing, or in breach of, permissible budget deficits. At the same time, efforts to enforce the pact’s deficit ceiling were seen as inhibiting expenditures needed by national governments to promote social welfare and economic recovery.M. Growing Accountability
The introduction of Economic and Monetary Union led to unprecedented integration and cooperation among EU members. One consequence was a growing concern among European citizens and some EU member governments that the major EU institutions were not sufficiently democratic or accountable. Much of this concern centered on the European Commission. As the power of the EU grew, so did worries that the commission exercised too much control with too little oversight. At the same time, there were also concerns that the one democratically elected institution of the EU, the European Parliament, had little real power.
This issue came to a head in 1999, when a report prepared by independent auditors at the request of the European Parliament cited multiple examples of mismanagement on the part of the European Commission. The report accused several commissioners of corruption, cronyism, and poor oversight over programs under their control. After the report was released, the entire European Commission resigned, something that had never happened before. Experts generally considered the report and its consequences to be an important step by the European Parliament toward increasing the democratic accountability of the EU governing bodies.III. Structure of the EU
A. Pillar System
The members of the EU cooperate in three distinct areas, often called pillars. At the heart of this system is the European Community (EC) pillar with its supranational functions and its governing institutions. The EC pillar is flanked by two pillars based on intergovernmental cooperation: Common Foreign and Security Policy (CFSP) and Justice and Home Affairs (JHA). These two pillars are a result of the Maastricht agreement to develop closer cooperation in these areas. However, because the members were unwilling to cede authority to new supranational institutions, policy decisions in these pillars are made by unanimous cooperation between members and cannot be enforced. For the most part, the governing institutions of the EC pillar have little or no input in the other two.
The CFSP and JHA pillars are based entirely on intergovernmental cooperation, and decisions must be made unanimously. CFSP is a forum for foreign policy discussions, common declarations, and common actions that work toward developing a security and defense policy. It has successfully developed positions on a range of issues and has established some common policy actions; however, the CFSP has failed to agree on a common security and defense. Some countries, led by France, want an integrated European military force, while others, especially the United Kingdom, insist that United States involvement through the North Atlantic Treaty Organization (NATO) is vital for European security.
This second argument was reinforced when the EU failed to resolve the crisis in Yugoslavia that began in 1991. Between 1991 and 1992 four of Yugoslavia’s six republics declared independence, resulting in a series of violent wars (see Yugoslav Succession, Wars of). EU attempts to find a settlement for these conflicts were ineffective because member states could not agree on how they should be involved, and they feared being dragged into military intervention. The Yugoslav crisis underlined the difficulties in achieving a common foreign policy for the EU. Effective international intervention in Yugoslavia ultimately came only with U.S. and NATO involvement, acting under the auspices of the United Nations.
As a result of lessons learned in Yugoslavia, clauses were included in the Amsterdam Treaty for improving cooperation on security and defense. Since the late 1990s the EU has developed the Common European Security and Defense Policy as an interim step toward the ultimate goal of a common defense policy. The EU has expressed its determination to take on a greater international role and more responsibility for humanitarian operations and peacekeeping activities. The EU also began to develop a rapid-reaction military force to enable it to respond to crises quickly with combat troops.
The EU has been more successful in JHA, which formalized and extended earlier intergovernmental cooperation in combating crime, especially drug trafficking, and in setting immigration and asylum policies. Under the Amsterdam Treaty, some aspects of JHA were moved to the supranational EC pillar. These related to asylum and visa issues, immigration policy, and external border controls. The JHA pillar is now primarily concerned with police cooperation and combating international crime.
Standing above the three pillars and in a position to coordinate activities across all of them is the European Council. The council is in strict legal terms not an EU institution. It is the meeting place of the leaders of the national governments. Its decisions are almost always unanimous but usually require intense bargaining. The council shapes the integration process and has been responsible for almost all EU developments, including the SEA and the Maastricht, Amsterdam, and Nice treaties. The European Council has provided the EU with initiatives for further development, agendas in various policy fields, and decisions that it expects the EU to accept. The council’s actions illustrate one of the major dilemmas within the EU: how to promote further unity and integration while permitting national governments to retain as much influence as possible over decisions.B. Major Bodies
The European Community (EC) pillar contains all the governing institutions of the EU. The major ones are the European Commission, the Council of the European Union, the European Parliament, the European Court of Justice, and the Court of Auditors. In addition, there are many smaller bodies in the EC pillar, such as the Economic and Social Committee, and the Committee of the Regions.B.1. European Commission
The European Commission is the highest administrative body in the EU. Unlike the European Council, which oversees all three pillars of the EU, the commission concentrates almost solely on the EC pillar. It initiates, implements, and supervises policy. It is also responsible for the general financial management of the EU and for ensuring that member states adhere to EU decisions. The commission is meant to be the engine of European integration, and it spearheaded preparations for the single market and moves toward establishing the euro.
Commissioners are appointed by member governments and are supported by a large administrative staff. Initially, France, Germany, Italy, Spain, and the United Kingdom each appointed two commissioners, while other member countries appointed one each. The Treaty of Nice, signed in 2001, changed the structure of the commission so that by 2005 each member state could appoint only one commissioner.
However, when the EU reaches 27 member states, the European Council is obligated to determine how large the commission should be. The Treaty of Nice also altered the selection procedures for commissioners, giving the European Council and the European Parliament a role in the confirmation process.B.2. Council of the European Union
The Council of the European Union (formerly called the Council of Ministers) represents the national governments. It is the primary decision-making authority of the EU and is the most important and powerful EU body. Although its name is similar to that of the European Council, the Council of the European Union’s powers are essentially limited to the EC pillar, whereas the European Council oversees all three pillars of EU cooperation.
When the Council of the European Union meets, one government minister from each member state is present. However, the minister for each state is not the same for every meeting. Each member state sends its government minister who is most familiar with the topic at hand. For example, a council of defense ministers might discuss foreign policy, whereas a council of agriculture ministers would meet to discuss crop prices.
The Council of the European Union adopts proposals and issues instructions to the European Commission. The council is expected to accomplish two goals that are not always compatible: further EU integration on one hand and protection of the interests of the member states on the other. This contradiction could become more difficult to reconcile as the EU continues to expand.
Decision-making in the council is complex. A few minor questions can be decided by a simple majority. Many issues, however, require what is called qualified majority voting (QMV). In QMV each country has an indivisible bloc of votes that is roughly proportional to its population. It takes two-thirds of the total number of votes to make a qualified majority. QMV was introduced in some policy areas to replace the need for a unanimous vote. This has made the decision-making process faster and easier because it prevents any one state from exercising a veto. Since the Single European Act, QMV has been steadily extended to more areas. Many important decisions, however, still require unanimous support.B.3. European Parliament (EP)
The European Parliament (EP) is made up of 732 members who are directly elected by the citizens of the EU. Direct elections to the EP were implemented in 1979. Before that time, members were appointed by the legislatures of the member governments. The European Parliament was originally designed merely as an advisory body; however, its right to participate in some EU decisions was extended by the later treaties. It must be consulted about matters relating to the EU budget, which it can reject; it can remove the European Commission as a body through a vote of no confidence; and it can veto the accession of potential member states.
The European Parliament’s influence is essentially negative: It can block but rarely initiate legislation, its consultative opinions can be ignored, and it has no power over the Council of the European Union. Its effectiveness is limited by two structural problems: It conducts its business in 20 official languages, with consequent huge translation costs, and it is nomadic, using three sites in different countries for its meetings. Unless changes are made, these weaknesses will likely intensify as the union grows larger.
At the same time, there have been frequent calls for expanding the powers of the European Parliament, which would increase the democratic accountability of the EU. The weaknesses of the European Parliament can be remedied, however, only by the national governments. To cope with an increase in the number of member states due to EU enlargement, the Treaty of Nice allowed for a limit to the size of the EP by providing for a reallocation of seats among the members.B.4. European Court of Justice (ECJ)
The European Court of Justice (ECJ) is the judicial arm of the EU. Each member country appoints one judge to the court. The ECJ is responsible for the law that the EU establishes for itself and its member states. It also ensures that other EU institutions and the member states conform with the provisions of EU treaties and legislation. The court has no direct links with national courts and no control over how they apply and interpret national law, but it has established that EU law supersedes national law.
The ECJ’s assertion that EU law takes precedence over national law, and the fact that there is no appeal against it, have given the ECJ a powerful role in the EU. This role has, on occasion, drawn criticism from both national governments and national courts. The ECJ has declared both for and against EU institutions and member states.
The ECJ’s historically high caseload was eased in 1989 when the Court of First Instance was created. This court hears certain categories of cases, including those brought by EU officials and cases seeking damages. Rulings by the Court of First Instance may be appealed to the ECJ, but only on points of law. Despite the establishment of this court, the ECJ’s caseload has continued to rise. As a result, the Treaty of Nice introduced further reforms to reduce the accumulated backlog of cases.B.5. Court of Auditors
The Court of Auditors is made up of 25 members, one from each EU member state. The court oversees the finances of the EU and ensures that all financial transactions are carried out according to the EU budget and laws. The court issues a yearly report to the Council of the European Union and the European Parliament detailing its findings. B.6. European Central Bank (ECB)
The European Central Bank (ECB) began operations in 1998. It is overseen by an executive board that is chosen by agreement of EU member governments and includes the ECB president and vice president. The ECB has exclusive authority for EU monetary policy, including such things as setting interest rates and regulating the money supply. In addition, the ECB played and continues to play a major role in overseeing the inauguration and consolidation of the euro as the single EU currency. Its authority over monetary policy and its independence from other EU institutions make the ECB a powerful body. There are misgivings in some quarters that the ECB is too independent, leading to a debate over whether it should be subject to political direction.B.7. Other Bodies
Other important bodies in the EU include the Economic and Social Committee and the Committee of the Regions. The Economic and Social Committee is a 317-member advisory body drawn from national interest groups of employers, trade unions, and other occupational groups. It must be consulted by the European Commission and the Council of the European Union on issues dealing with economic and social welfare. The Committee of the Regions was formed in 1994 as a forum for representatives of regional and local governments. It was intended to strengthen the democratic credentials of the EU, but it has only a consultative and advisory role.IV. Important Features and Policies of the EU
A major goal of the EU has been to establish a single market in which the economies of all the EU member states are unified. The EU has sought to meet this objective in three ways: by defining a common commercial policy, by reducing economic differences among its richer and poorer members, and by stabilizing the currencies of its members.
The 1957 Rome treaties obliged the EU to adopt a Common Commercial Policy (CCP) and a Common Agricultural Policy (CAP). By 1968 the EU had also created a customs union in which all tariffs and duties among members were eliminated. Finally, members had defined uniform commercial practices for trade with nonmember states. In the 1980s the Common Fisheries Policy (CFP) was adopted to regulate fishing in EU waters.
The EU has attempted to address regional economic differences through agencies such as the European Social Fund, the European Regional Development Fund, the Cohesion Fund, and the European Investment Bank (EIB). These agencies provide money through loans or grants to promote development in the economically disadvantaged areas of the EU. However, apart from activities of the EIB, this funding is limited by the size of the EU’s overall budget, which is equivalent to about 1 percent of the gross domestic product (GDP) of all the member states.
Finally, the EU attempted to stabilize the currencies of its members with the European Monetary System (EMS). The EMS was prompted not only by the desire for a single market, but also by international economic problems and fluctuations in exchange rates. These problems also convinced the EU of the importance of Economic and Monetary Union (EMU), in which both the economies and the currencies of the members would be unified.A. Common Policies
A.1. Common Agricultural Policy (CAP)
The Common Agricultural Policy (CAP) was established by the 1957 Rome treaty that created the European Economic Community. The policy reflected a belief in the economic value of agriculture. Memories of the economic hardships that followed the two world wars led the EEC founders to believe that member states should be able to feed their populations from their own resources.
The CAP was intended to stabilize agricultural markets, improve productivity, and ensure a fair deal for both farmers and consumers. It has three major elements: a single market for agricultural products with a system of common prices to producers across the EU; preference for EU producers through a common levy on all agricultural imports from abroad; and shared financial responsibility for guaranteeing prices.
From the beginning, the common prices set were based on political pressure from farmers and governments rather than market considerations. This led to massive overproduction. Prices remained artificially high, and all surpluses were bought by the EU and either stored, destroyed, or sold at very low prices on international markets. The costs became a huge burden. Even so, there were few internal critics, although the CAP consumed two-thirds of the EU budget in the early 1980s. The CAP was, however, unpopular overseas. Developing countries believed it hurt their own export agriculture, while the United States and other major food producers attacked the CAP’s protectionism, distortion of prices, and dumping of surplus produce on world markets.
Despite complaints, EU member states with strong farming interests were initially unwilling to accept the need for reform. The CAP was almost the only major common policy possessed by the EU, and consequently it was an important symbol of integration. Nonetheless, the EU did agree to reforms to the CAP in 1984 and 1988. These agreements, which imposed production quotas on some types of agriculture and reduced agricultural spending, were driven by a combination of external pressure and estimates that CAP costs would soon outstrip EU resources. A more radical revision was finalized in 1992. This revision switched EU spending from supporting artificially high agricultural prices to directly subsidizing farmers’ incomes. This involved cutting guaranteed prices to farmers, and the effect was a significant reduction in CAP costs and in the level of support given to farmers. By 2001 CAP expenditure had been reduced to 46 percent of the EU budget.
Still, the CAP remained the largest item in the EU budget and continued to provoke resentment among many EU citizens and other world producers. The commitment to the CAP as a symbol of integration may not guarantee its future, however, especially given the EU’s decision to accept members from Eastern Europe. The economies of these countries are more agricultural and less efficient than EU states. Without major reform, almost all CAP expenditure would be redirected to these states, which would be politically and economically impossible.
The European Commission attempted to address the future of CAP funding in Agenda 2000, a document detailing a strategy for enlargement. A wide-ranging reform program proposed by the commission sought to reduce payments to larger farms and to scale back market supports and export subsidies. But strong differences of opinion remained between the member states.
In 2002 the commission’s reform plans were largely abandoned, and a group of member states led by France effectively deferred a more radical overhaul. Instead, limits were placed on how much assistance new EU members could expect from the CAP, suggesting that for the foreseeable future there would be a two-tier pattern of funding favoring the older member states. Further limits were imposed in CAP reforms adopted in 2003 and 2004.A.2. Common Fisheries Policy (CFP)
The other major common policy is the Common Fisheries Policy (CFP) of 1982. It imposed controls on access to fish stocks and attempted to preserve the fisheries. The CFP set up a structure of price and compensation systems modeled on the CAP. The policy successfully limited overfishing in EU waters. However, national fishing industries have objected to its system of fixing prices and allocating to each country strict quotas on the amount of each fish species that can be caught. Controversy over the CFP has been persistent, with frequent disputes between the EU and national fishing industries and among member states.B. Reducing Economic Differences
Under the 1957 Rome treaty that created the EEC, the signatories pledged to standardize policies regarding working conditions, social insurance, and similar matters. However, little progress was made until an increase in oil prices brought about the worldwide economic depression of the 1970s. At that time, the European Regional Development Fund was created and the moribund European Social Fund, which had originally been established by the Rome treaty, was reactivated. In 1994 the EU established the more comprehensive Cohesion Fund for reducing the economic gap between its richest and poorest areas.B.1. European Regional Development Fund and European Social Fund
The European Regional Development Fund is concerned with infrastructure developments proposed by member governments. Since 1989 it has focused on regions with weak economies, severe industrial decline, or problems of rural development. Each member country is eligible to receive a percentage of the fund’s budget, determined roughly by its population size and economic wealth. The fund normally covers only 50 percent of the proposed costs; the remainder has to come from national sources. The European Social Fund is organized in much the same way, but it focuses mainly on the training and retraining of workers. Since 1988 it has concentrated more on long-term and youth unemployment, especially in the economically disadvantaged regions of the EU. All countries have benefited from the funds, but the vast bulk of grants have gone to poorer areas. B.2. Cohesion Fund
Another instrument for reducing economic differences between EU member states is the Cohesion Fund. The fund was established to transfer money to the poorer EU states to assist them in meeting the criteria for Economic and Monetary Union. As with the Regional Development Fund and the Social Fund, the majority of grants from the Cohesion Fund have gone to the poorer member states.B.3. European Investment Bank (EIB)
The European Investment Bank (EIB) was established in 1957 under the Rome treaty that created the EEC. Its primary objective is to fund projects that promote European integration. It focuses mainly on industry, energy, and infrastructure. The member states contribute to its finances, but it raises most of its funds on international markets. Some 8 percent of its budget goes to projects outside the EU. The bank only offers loans, not grants, and its contribution must be matched by an equivalent outlay from other sources. The EIB is an autonomous body able to make its own decisions free of political direction, within the general legal framework of the EU. It has been one of the most successful EU bodies. Since 1993 its annual lending volume has exceeded that of the International Bank for Reconstruction and Development (the World Bank).C. Stabilizing Currencies: The European Monetary System (EMS)
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The European Monetary System (EMS) is the exchange rate structure of the EU. It was established in 1979 to stabilize exchange rates among members at a time when currencies were fluctuating dramatically because of the economic recession of the 1970s. The promotion of stable currencies, it was hoped, would provide the foundations for a future monetary union and a single currency among member states.
The core of the EMS and the engine of stabilization is the Exchange Rate Mechanism (ERM). This system was designed to reduce the amount that the currencies of member states could fluctuate against each other. By evening out exchange rate fluctuations and stabilizing currencies, the ERM was intended to stimulate trade and investment among EU members, and to help prevent inflation by linking weaker national currencies to the strong and stable German national currency, the deutsche mark.
In addition to the ERM, the EMS introduced the European Currency Unit (ECU), which was used for accounting and for administrative purposes. The ECU was replaced by the euro when EMU went into effect on January 1, 1999.
The EMS was highly successful in the 1980s. It helped promote a sense of collective responsibility and discipline that contributed to a reduction of inflation and, after 1987, to a period of exchange rate stability. Its success led to the further push in the Maastricht Treaty toward full economic and monetary integration. However, once currency realignments under the ERM had been largely completed, the EMS became more rigid, and currencies were allowed to fluctuate against each other only by very small amounts. This rigidity prevented countries experiencing economic difficulties from simply adjusting their exchange rates as they might have done otherwise.
Exchange rate rigidity, coupled with differing economic and monetary conditions in the member states, made it difficult for the EMS to hold stronger and weaker currencies together when currency traders began to have doubts about the value of certain members’ currencies. Feeding such doubts were Germany’s reunification in 1990, which generated huge costs, followed by difficulties in ratifying the Maastricht Treaty. Waves of currency speculation in 1992 and 1993 forced several countries to devalue their currencies, and the United Kingdom and Italy had to leave the ERM. The EMS survived by increasing the amount that currencies could fluctuate against one another, but the increase was so great that members’ currencies could fluctuate almost at will. The EMS was held together only by the EU’s political will to create monetary union and a single currency.
The role of the EMS has remained essentially unchanged with the introduction of the euro. It regulates exchange rates between the euro and those EU states that did not join the single currency.D. Economic and Monetary Union (EMU)
Economic and Monetary Union (EMU) is a step beyond a single market toward further integration. EMU requires an intense degree of economic coordination among its members. Participating nations must integrate their budgetary policies, establish common interest rates, and use a single currency. It is a logical step forward from the European Community’s customs union of 1968 and the decision in the 1987 Single European Act to move to a single market.
EMU first appeared on the EC agenda in the late 1960s, following the community’s economic success. At that time, concerns were growing that the post-World War II fixed exchange rate system was beginning to crumble. This system linked the major world currencies to the U.S. dollar, which was tied to the price of gold. However, in the mid-1960s the dollar began to weaken, and confidence in the system waned. What the EC wanted was a fixed exchange rate system that was less susceptible to the influence of the dollar. In 1969 EC leaders asked Pierre Werner, the premier of Luxembourg, to head a committee to devise a new system for the EC. In 1970 they accepted Werner’s recommendation for a movement to full EMU by 1980.
Poor economic conditions in the 1970s, however, forced postponement of the Werner Plan. In 1971 the United States uncoupled the U.S. dollar from gold, and subsequently, currencies that had been tied to the dollar became floating currencies with no fixed exchange rates. Then in 1973 oil prices quadrupled, producing a tumultuous economic climate in which governments were faced with both rising inflation and rising unemployment. EMU was more or less forgotten as the EC instead concentrated on trying to achieve a more modest structure of currency stability. After some initial difficulties, the result was the successful European Monetary System of 1979.
The seemingly positive effects of the EMS and the 1987 decision to form a single market led to a resurrection of the Werner Plan, with EMU to be implemented in three stages after 1990. In Madrid in June 1989 the European Council set up an intergovernmental conference (IGC) to flesh out the proposal. The IGC report was incorporated into the Maastricht Treaty in 1991. It was accepted that the first stage of EMU, the elimination of exchange controls and restrictions on the flow of capital, had already begun. The second stage was set for 1994, when member states would begin to coordinate their economies to reduce inflation and budget deficits. Full EMU, with the inauguration of a single currency under the direction of an EU central bank, would begin in 1999 at the latest. After pressure from Germany, which wanted the single currency to be as strong as the deutsche mark, the EU decided that countries entering the third stage would have to meet strict economic criteria on the size of government deficit, interest rate levels, inflation, and currency stability.
However, the currency speculation problems in 1992 and 1993 that caused Italy and the United Kingdom to leave the ERM, along with a general slide into economic recession, raised doubts about how many countries would meet the EMU criteria. Many governments struggled to control inflation and budget deficits through cuts in government spending and other austerity measures, but their efforts often led to higher unemployment and popular discontent. By 1998 many people within the EU believed that the qualification criteria would have to be relaxed for EMU to occur. Despite these worries, only Greece failed to meet the criteria. On January 1, 1999, the single currency, the euro, went into use. Greece was permitted to adopt the euro two years later, on January 1, 2001, after the Greek government succeeded in lowering inflation and budget deficits.
The economic success of EMU depends on whether the euro is accepted in the international markets as a stable and strong currency and the extent to which it leads to a greater convergence of national economies and greater mobility of production, goods, and services within the EU. There is still debate over whether EMU has a sufficiently firm foundation for these goals to be achieved. However, many EMU supporters find disagreements about the economic costs and benefits less important than the conviction that EMU, even if economically flawed, is an important step toward political integration.
EMU therefore supports the views of Robert Schuman and Jean Monnet that political union is best achieved through economic union. It has also reinforced the central role of France and Germany in the EU. The reunification of Germany reawakened French concerns of German dominance in Europe and energized France’s desire to influence German economic policy. At the same time, Germany wanted to allay fears of an ascendant militaristic German nationalism. Much the same as in 1950, when the European Coal and Steel Community was created, both governments believed that these political issues could be resolved through economic integration. These concerns underpinned a more widespread belief that long-term economic and political benefits outweighed the initial costs of switching to a single currency.V. Relations with the Rest of the World
One of the major objectives of the European Union is to speak with one voice and to have a unified policy position on world issues. This has been easier to achieve in economics and trade than on political problems. Bilateral and multilateral trade agreements have been signed between the EU and most developing countries. Common political positions, however, have been hindered by conflicts between national interests, despite close collaboration among EU member states and the development of common foreign policy statements.
Such collaboration has not always resulted in common action. EU countries were divided over the 1991 Persian Gulf War, the post-1991 crises in the former Yugoslavia, and future relations with Russia and Eastern Europe. In each instance, differences arose between members over how and to what extent the EU should become involved in foreign policy problems, and what the results of any EU action would be for members’ economies and political relationships.A. EU Expansion
By 1995 all the former Communist countries of Eastern Europe had applied for EU membership. The countries of Eastern Europe had less-developed economies than those of Western Europe, raising questions about their ability to cope with the competitive pressures of the EU’s internal market. In addition, the EU was concerned about the stability of democratic institutions in these countries and their commitment to human rights and the protection of minorities. Expansion would require a significant reevaluation of EU programs—especially the CAP—and distribution of EU resources. The richer member states worried that they would have to pay more into EU funds, while poorer member states feared that their share of EU funding for agriculture and regional development would be drastically reduced. Equally, it was argued that enlargement without significant institutional reform would reduce the effectiveness of the EU.
Despite these worries, trade between Eastern and Western Europe substantially increased after 1990. Western nations began to make commercial investments in Eastern Europe; at the same time, the EU provided economic aid, formed joint ventures, and signed formal agreements of political and cultural cooperation. In 1997 the EU agreed to open membership talks with Cyprus, the Czech Republic, Estonia, Hungary, Poland, and Slovenia, with EU membership coming sometime after 2000. Then, in 2000, the EU opened accession negotiations with Bulgaria, Latvia, Lithuania, Malta, Romania, and Slovakia. (At the same time the EU declined to pursue in detail the long-standing application of membership from Turkey, noting concerns about the country’s human rights record.) In May 2004 the EU formally admitted ten of these European nations—all except Bulgaria and Romania—as member states. Bulgaria and Romania became EU member states in 2007.B. The EU and Non-European Nations
Relations between the EU and the non-European industrialized countries, especially the United States and Japan, have been both rewarding and frustrating. The EU follows a protectionist policy, especially with respect to agriculture, which on occasion has led the United States in particular to adopt retaliatory measures. In general, however, relations have been positive. The United States and Japan are the largest markets outside Europe for EU products and are also the largest non-European suppliers.
The EU has been less protectionist when dealing with developing countries, which receive more than one-third of its exports. By the mid-1990s all underdeveloped countries could export industrial products to EU nations duty free; many agricultural products that competed directly with those of the EU could also enter duty free. In addition, the EU has reached special agreements with many countries in Africa, the Caribbean, and the Pacific (the so-called ACP countries). In 1963 it signed a convention in Yaoundé, Cameroon, offering commercial, technical, and financial cooperation to 18 African countries, mostly former French and Belgian colonies. In 1975 it signed a convention in Lomé, Togo, with 46 ACP countries, granting them free access to the EU for virtually all of their products, as well as providing industrial and financial aid. The Lomé convention was renewed and extended to a total of 58 countries in 1979; to 65 in 1984; and to 69 in 1989. In 2000 the Lomé convention was superseded by the Cotonou Agreement, which provides a more wide-ranging and longer-term basis for the EU’s relationship with ACP countries. The EU has concluded similar agreements with all the Mediterranean states except Libya, as well as other countries in Latin America and Asia.VI. The Future of the European Union
The EU has come a long way since 1951. Its membership has grown to include most of Western Europe and it is poised to absorb much of Eastern Europe as well. It has developed a common body of law, common policies and practices, and a great deal of cooperation among its members. Its progress, however, has been uneven, with spurts of activity separated by dormant periods. After vigorous activity in the 1960s, it was not until the mid-1980s that the EU moved decisively to greater integration. In the 1990s concerns about the economic climate and evidence of popular disenchantment with the EU led to a slowdown in innovation. Both the Amsterdam and Nice treaties emphasized consolidation rather than addressing outstanding issues.
This erratic progress is in part due to two unresolved conflicts within the EU. The first is whether to give priority to “deepening” or “widening,” that is, whether to concentrate upon integrating the existing members further, or to welcome new members so that all can have an input into the kind of Europe they want. The second is the conflict between supranationalism and intergovernmentalism. Despite broad acceptance of the supranational principle, national governments have been reluctant to cede control over all policy areas to EU institutions. The development of three distinct EU pillars reflects this reality: Member states have declined to yield national control to supranational institutions over politically sensitive areas such as foreign policy and judicial affairs.
One of the most immediate challenges facing the EU is to secure the long-term success of the euro, an outcome that rests in part upon how acceptable it proves to world financial institutions and markets. Enlarging the EU by including Eastern Europe should, over time, improve economic prospects by extending the single market and stimulating economic growth and trade. The EU hopes that enlargement will raise the EU’s standing as the major European voice in world affairs and contribute to security and stability throughout Europe.
It has proven difficult, however, for the EU and its member states to forge a united position on the future of EU finances and structures after enlargement. Under existing criteria, the bulk of funds dispersed under the CAP to support agriculture—by far the largest element of EU spending—will have to be transferred to the new member states. This has alarmed poorer member states accustomed to receiving these funds, while richer members are reluctant to provide more CAP funding.
The budget issue and enlargement also present problems for the structure of the EU. They raise questions about the nature of the European Commission, how nations should be represented on the commission, and the extent of the commission’s authority and responsibility. As the power of the EU has grown, the organization has drawn criticism for being undemocratic, since the European Parliament has no real powers or control over decisions. Furthermore, the decision-making bodies, especially the commission, are not subject to any democratic check.
Uncertainties about the future of the EU are underlined by concerns among member states over the potential loss of their ability to act independently. A reluctance to cede national authority has been most pronounced in security policy. The EU failed to present a coherent front in either the Persian Gulf War or the former Yugoslavia when required to move from a common policy position to a common action. The desire of some countries to build a common defense policy is resisted by others that insist that at best a European defense force can only be supportive of and subordinated to NATO.
The EU’s decision to welcome 10 new member states in 2004 raised many questions about integration. In June 2004 the EU member states agreed to the final text of the first EU constitution, which was primarily developed to streamline EU institutions and facilitate enlargement. The final text was the result of more than two years of draft negotiations. Built on the founding treaties of the EU, the constitution further defined the roles and powers of EU institutions, such as the European Parliament. Ratification of the constitution required approval by all 25 member states (including the 10 new members), either by popular referendum or by parliamentary vote, by November 2006.
In May 2005, however, voters in France and Netherlands resoundingly rejected the proposed EU constitution, plunging the EU into its worst political crisis in decades. Soon thereafter several EU member states announced they would postpone their own votes on the constitution. At the EU summit meeting in June, EU leaders abandoned their plan to ratify the constitution by the November 2006 target date. EU president Jean-Claude Juncker described the proposed constitution as “no longer tenable” and called for a “period of reflection.” The summit also exposed deep rifts in the EU over economic integration. Budget talks broke down after leaders failed to resolve a bitter dispute that primarily involved Britain and France. Britain’s insistence on a reform of the CAP, which sets farm subsidies, was strongly opposed by France.
At the 2007 EU summit, however, the 27 member nations agreed on a treaty with governing rules for the organization that would replace the defunct constitution. The treaty created the position of president of the European Union and a stronger head of foreign policy to represent the EU on the international stage. It also sought to ease EU decision-making by requiring majority, rather than unanimous, approval of many policy decisions. European leaders signed the treaty in Lisbon, Portugal, in December 2007. Only Ireland planned to hold a popular vote on the treaty. Other EU members sought parliamentary ratification.
The difficulties surrounding the constitution raised further questions about what the EU is and what it wants to achieve. For almost all its life span, European integration has resulted from elite initiatives and agreements that did not involve national electorates. In the 1990s, however, the picture changed because of the single market, demands for more harmonization, and the Maastricht Treaty. Popular discontent with elite decisions increased, indicating that electorates could no longer be taken for granted. Almost all EU activity has focused on building the equivalent of a state encompassing much of Europe. Yet little effort has focused on how to create a European nation with a strong bond of identity across national borders, making European citizens feel they have much, including a future, in common. The effort to forge a European identity was expected to pose a major challenge in the 21st century.
Despite these challenges, the EU is unlikely to disappear. It has become a fact of life, with the countries enmeshed together in a host of cooperative practices. The EU has had great success in developing a culture of collaboration, and it occupies a place at the center of Europe. What is at issue is not its survival, but its form as it leads Europe in the 21st century.
Contributed By:
Derek W. Urwin, B.A., M.A., Ph.D.
Professor of Politics and International Relations, University of Aberdeen. Author of A Political History of Western Europe Since 1945 and The Community of Europe.
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