Understanding the European Economy

EU transport system

-Harmonization: failure of Single European Act, time consuming at border checks for trucks -tourism: 60% of world tourism to EU and 12% of EU GDP -Rail transport: from national to European network

EU "Constitution"

-No constitution, but a series of treaties -contract among governments -long and confusing -lots of details -Body of Law applicable in all member states: supersedes national law in EU competence areas backed up by rulings from the EU surrender of powers by member states and a new level of legal authority -5 kinds of rules: Regulations: Most powerful, narrow and immediate effect Directives: Binding goal, but member states decide what actions to take to reach this goal decisions: Binding, much more specific, Aim at particular actors Recommendations and Opinions: Not binding

Decision Making Process

-Decision normally by consensus -If vote is required 3 options: 1. unanimity: power of veto and constructive abstention 2. simple majority (not really used) 3. Qualifies majority vote - 72% of votes - 55% of states - 65% of population

Marshall Plan

-Europe needs US money for reconstruction -Truman wants to secure EU in its side (cold war and NATO) -European Recovery Program -Results: Profitable investment for USA start of economic integration in Europe

Those in favor of Union

-France: traumatized, De Gaulle wanted protection and they had suffered further defeats in their colonies -West Germany: Adenauer tried to get closer to western alliance -Italy: political and economic instability after Mussolini -BeNeLux: too small and weak to protect themselves

Subsidiarity

-decisions should be taken at the lowest level for effective action -EU is responsible in areas out of its competence only when states are not able to deal efficiently Problems: -it cannot be used to reduce EU powers in areas under EU competences -creeping federalism -high politics (most important concern of government: economic and foreign policy) -low politics (environment, culture, transport): still a distinction at national level

Maastricht Treaty

1992 EEC (1957)--> EC (1986)--> European Union (1992) 3 Pillars: 1. Steal and coal, atomic energy, Economic 2. Common Foreign and Security policy 3. Home affairs and justice New EU competences: -consumer protection, public health, transport, education, social policy -Europol -Increased citizenship rights: mobility to live in any member state, can stand and vote in local or European elections

Enlargements

1st (1973): Britain, Denmark, Ireland 2nd (1981): Greece 3rd (1986): Spain and Portugal 4th (1995): Austria, Finland, Sweden 5th (2004): Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, Slovenia, Malta, Cyprus 6th (2007): Romania and Bulgaria 7th (2013): Croatia

European convention treaty

(2002-2003) -100 people from EU and applicant states from EP and national parliament -Proposals: elect president, foreign minister for EU, common EU foreign and security policy Democratic deficit: Netherlands and France voted no

Treaty of Lisbon

(December 2009) Amended EU and EC treaties without replacing them More democratic and transparent EU -citizens initiative: 1 million citizens from a number of MS have possibility to call commission to bring forward new policy proposals -relationship between the MS and the EU is clearer -recognizes the possibility for a MS to withdraw from the Union More efficient EU -qualified majority voting in the council is extended to new policy areas to make decision making faster and more efficient -from 2014 on, the calculation of qualified majority is based on double majority of MS and people, representing dual legitimacy of EU - A double majority will be achieved when a decision is taken by 55% of the Member states representing at least 65% of the population Institutional Framework: -president of EC is elected for 2.5 years -Direct link between the election of the commission president and the results of the European elections -new arrangements for the future composition of the EP -clearer rules on the enhanced cooperation and financial provisions An EU of rights and values, freedom, solidarity and security -democratic values -citizens' rights and charter of fundamental rights -freedom of European citizens -solidarity between member states -increased security for all EU as an actor on the global stage -will be achieved by bringing Europe's external policy tools together -gives Europe a clear voice in relations with partners worldwide -harnesses Europe's economic, humanitarian, political and diplomatic strengths to promote European interests and values worldwide, while respecting interest of MS in foreign affairs -High representative for EU in foreign affairs and security policy (also the VP of EC) -- increase coherence and visibility of EU's external action -A new European External action Service: backup and support to High Representative -A single legal personality for the Union: to strengthen the Union's negotiating power, making it more effective on the world stage and more visible partner for third countries and international organizations

European Free Trade organization (EFTA)

-Britain not a world hegemon anymore 1960 Stockholm convention: Austria, Britain, Denmark, Norway, Portugal, Sweden, Switzerland -wanted to cut tariffs -problem was competition with EEC

Copenhagen conditions

Membership criteria to join EU (came with the 4th enlargement) -democracy -respect human rights -functioning free-market economy -competitive structures -acquis communautaire- laws and policies adopted by members

Convergence criteria for the Euro

-limit on national budget deficit less than 3% GDP -limit on public finance debt less than 60% GDP -limit to inflation rate within 1% to the lowest rate -limit to long term interest rates within 2%

Cons of the Euro

ECB: inflexibility to use the monetary tool unbalance of Euro zone members (potential weakness) 1 currency, 20 languages: social barriers

Those not in favor of union

-Britain: more stable and wealthier than France and German -Ireland: economically and politically tied to Britain -Spain and Portugal: still under dictatorship -Nordic states: created the Nordic council: Denmark, Sweden, Norway, Island, Finland

Proposed European Constitution

-accumulation of treaties: semi constitutional basis for the EU -convention 2002-2003 -Proposals: 1. President of the European Council 2. New foreign minister for the EU 3. Common EU foreign and security policy 4. More power for the European Parliament 5. a legal personality for the EU and EU laws would cancel out national laws- in areas where EU had more competence Failed because: bigger countries like it more than the smaller ones did and France and the Netherlands (founding members) voted no

European Central bank

-based on German Independent Bundesbank -Objective: to ensure monetary stability by setting interest rates in the euro zone -debates about its power: independent political power control over inflation as top priority very little control over the ECB

Commission criticism

-commission leaders aren't elected but appointed by national government -secret but anonymous -expensive-- small budget (6%) and small staff (20.000) -too powerful, but not a decision making body (it only drafts future laws and policies)

European Court of Justice

-completely unknown, but overwhelmed -25 judges, 6 years, appointed by governments -Make sure national and European laws meet the terms and the spirit of the treaties -Make sure that EU laws are consistnently applied throughout member states -court is divided into chambers of 3-6 judges -judges are assisted by 8 advocates-general EU vs. National Law -precedence to which one has competence (most economic law at EU level, social policy at national level)

Pros of the Euro

-easier to travel -price transparency -easier capital transfer, less bureaucratic barriers -creation of a world class currency created more influence

Funding the EU budget

-funded (98%) from EU's own resources supplemented by other sources --taxes on EU staff salaries --contributions from non-EU countries --fines on companies for breaching competition laws --mainly customs duties on iports from outside the EU and sugar levies --VAT: standard percentage is levied on the harmonized VAT base of each EU country -own resource is based on GNI-- largest source of revenue -based on principle that expenditure= revenue

Treaty of Amsterdam

-signed in October 1997 and came into force in 1999 -fell short of moving Europe closer to political union (leaders were unable to agree on substantial changes in the structure of EU institutions) -2 confirmations: east enlargement was confirmed and goal of launching EURO in January 1999

Stages of the Euro entry

1. 1998: which country is economically fit (not all were ready but were adapting) 2. 1/1/1999: Euro was officially launched -fixed exchange rate -control by ECB 3. 1/1/2002 -coins and banknotes -irrevocable step towards monetary and fiscal dependence

Policy Cycle

1. Agenda Setting: Problem +Acknowledgment + Policy choice -Values affect definition of agenda -Perpetual issues: economic and social -Many Agendas: institutional (commission, parliament, council) sub-institutional (directorate-general) regional agendas national agendas cross-national agendas: lobbies social agendas Differences between agenda setting at national and European level: -less accountability -more fragmentation -uncertainty of causes of the problems because of complexity -EU council and commission are main agenda setters, but many influences 2. Formulation of the response to the recognized problem -obstacles -- people disagree over problems, causes, and urgency --not always enough info --personal, ideological biases --uncertainty about the outcomes of a policy --values and personalities of office holders 3. Legitimization -Legitimacy: extent of the belief of citizens that the government under which they live as the authority to govern and make laws -Authority gap: difference between what EU institutions would like to be able to do and what EU citizens/ governments allow them to do -EU legitimacy is growing 4. Adoption -Responsibility shared by council of ministers and European parliament -driven by the negotiating styles of the representatives of each member state 5. Implementation -Monitoring the application of new laws and regulations -Responisbility of EU Commission and EU specialized agencies: Europol and ECB 6. Evaluation -did the policy work? -difficult if: specific goals were not stated previously -member states can't be trusted -outcomes of policies are not measurable Decision: abandoned, adjusted, continued

Characteristics of the Policy Process

1. Compromise and Bargaining: -Less in unitary system -More in federal and coalition governments -Fundamental at EU level 2. Power struggle and political games: -Among member states, EU institutions, and bureaucracies 3. Multi-speed integration - Europe a la cart: countries can choose what element of a policy to adopt 4. Europeanization -Not community method, but harmonization 5. Incrementalism: -gradually -not drastic reforms 6. Spillover -moving into new areas of policy that were never anticipated by the founding treaties: -- social issues -- working conditions -- enviornment 7. Subsidiarity -The EU should do only what it does best, Member states should do the rest -There is a resistence to the EU ecomming involved in new policy areas that are seen as the preserve of member states: --Education, healthcare -- policing, criminal justice -- tax policy

EURO

1944-1971: fixed exchange rate- FMI- Dollar 1971: collapse of Bretton Woods agreement crisis: 1973-1979 1979-European Monetary System -ECU -to create monetary stability -exchange rate system 1989: attempted fixed exchange rate -financial speculation on world markets, Britain and Italy out of the exchange rate mechanism by 1993

Single European Act

1986 -Jacques Delors was President of EC -Collapse of Bretton Woods and oil crisis -creating a global player (US-Japan) -EEC--> European Community -Competence to Brussels on new policy areas -New powers to ECJ, EP and Council of Ministers -Removing non-tarriff barriers: physical, fiscal, technical

EU institutions vs. Member state institutions

College of Commisioners~ Cabinet of Ministers European Parliament~ Parliament European commission~ bureaucracy (and more) European council~? Council of Ministers~? Court of Justice~ Court of Justice

European Commission: College of Commissioners

College of commissioners: -27 (1 per member state) -young (5 year mandate) -Renounce any defense of national interests President -Leader of EU, not head of government -Distribute portfolios, choose commissioners -Launch major initiatives -Appointed

Council of Ministers

Decision making branch -most powerful institution (with commission) -little known: minutes of meetings are secret, no media coverage, few academic studies -most intergovernmental of EU institutions -meetings are 1-2 days -based in Brussels -Helped by COREPER Presidency: -6 months; held by member state -tasks: chair meetings, promote cooperation, EU foreign policy, main voice of the EU -Pro: bring new issues to top of agenda, balance between small and large states -Constitution/ Treaty of Lisbon --elected person for 2.5 years (renewable) -- favored by large countries

Competences

EU: agriculture, competition, customs, environment, immigration, monetary, trade, Shared: culture, energy, foreign relations, aid, regional development, social issues, tax policy Member states: citizenship, defense, education, health care, policing

Failed Supranational organizations

European Defence Community (1952) -objective: to bring Germany into a common military programme Never ratified at national level (France feared Germany and Britain wasn't involved) European Political community (1953) -collapse due to failure of EDC

European Commission

Executive arm of the EU -most supranational institution -1st stage of EU laws and policies: develops proposal drafts, final decisions taken by the EC and the EP -oversees the execution of what has been adopted -defend the treaties (common interest) -powerful (ex: the Euro) -Periodic summit meetings to guide the direction of European integration -Headquarters in Brussels

Treaty of Nice

February 2001 and put in force February 2003 Goals: -make institutional changes needed to prepare for eastward expansion -make EU more democratic disappointment

European Coal and Steel Community

Jean Monnet and Robert Schuman -feared Germany's growth couldn't be controlled -more efficiency and less waste, breakdown cartels, more competition -chose coal and steel because they were the building blocks of industry, foundation of German power, and trade dependent with the rest of Europe

Bretton Woods Agreement

July 1944: 44 countries International -free trade -stable exchange rate linked to the dollar National (Keynesian) state can intervene in its market economy -to control inflation -unemployment rates -Rebuild industry and agriculture

European Parliament

Junior institution -cannot introduce laws or raise revenue (commission) -shared power of decision (council of ministers) -Problem with credibility because elected members but unknown Growing role -more entrepreneurial in suggesting new laws -aggressive with opinion -single chamber, proportional representation -In 3 cities: Luxembourg (administration) Brussels (committees) and Strasbourg (plenary sessions)

European Council

Not a real institution -forum of discussion -consists of heads of governments and the president of the commission, sometimes also foreign ministers -2 meetings a year for 2 days -strategic policy direction for EU -created during crisis in 1974

Powers of EU Commission

Powers of Initiation -Principles of treaties should be turned into laws -Monopoly over drafting proposals -Unit level--> discussed--> college of Commissioners--> European Parliament and Council of Ministers -can take months/years Powers of Implementation -Make sure that adopted laws are implemented -Take member states or cooperation to the Court of Justice Conscience of the EU -Rise above national interest; defend treaties -Mediate disagreements among member states Management of EU finance -make sure that revenues are collected -draft the annual budget, administer EU spending External relations -Represent the EU in IOs (UN, WTO) and contact point witht the rest of the world

European Economic Community

Treaty of Rome (1957) -difficulties to develop steal and coal in isolation -European Atomic energy community (Euratom) -6 members -4 main institutions: Commission, Council of Ministers, Parliament, court of Justice -Objectives: Create a common market within 12 years, set up a common commercial policy, and reduce barriers for goods, capital, services and people -aims reached: common commercial policy (GATT), members of the EP directly elected by 1979, Annual growth rate of 6%, standards harmonized, quoatas to protect domestic indstries removed, common agriculture policy

EU budget

importance: choices government makes about where and how to spend money affect both the policy choices and the effectiveness of the policies pursued small: 142.64 billion Euros (below 2% of the combined GDP of the member states) 45 times smaller than the sum of all national budgets, less than 70 cents a day for average EU citizen, smaller than the budget for Belgium ---- small because most policy sectors are the responsibility of member states and many EU activities involve little in operational costs if policies involve significant costs, the financial impact falls on public authorities and private firms -doesn't bring about major transfer or financial resources from national treasuries to the EU or vice versa and doesn't move great amounts of money around the EU on distributive and re-distributive bases

Multiannual Financial Framework

since 1998 "inter-instiutional agreement on Budgetary Discipline andImprovement of the Budgetary Procedure" all the EU national budges have been set with muliannual financial frameworks, known as financial perspectives since the Lisbon treaty -set for 7 years annual maximum limits (cielings) on Eu expenditure as a whole and for the main categories (headings) of expenditure -Adoption: --Council regulation-Commission proposes --European Council adopts unanimously --Parliament gives its consent --Extension of the existing MFF until adoption of the new MFF (usually 2 years from commission proposal to adoption) own resources are not allowed to exceed 1.23% of the EU's Gross National Income (GNI)--> supplemented by other sources of revenue when EU Council and European Parliament approve the annual EU budget, total revenue must equal total expenditure -- usually a surplus, which is used to reduce member state contributions to the budget for the following year (mostly UK)