Transcript Mikroekonomie I.

European Union
Introduction
History
Ing. Tomáš Siviček, PhD.
Time-plan
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
2
History of the EU.
Theoretical approaches to international integration
Institutional set-up (2 lectures)
European law
Decision making procedures
Lisbon Treaty
Internal market
Regional and cohesion policies, CAP
Budget
EU in the world
Enlargement
Europe 2020
EMU
Recommended literature and sources


R.BALDWIN, Ch. WYPLOSZ: The Economics of
the European Integration, Chapters 1, 2, 3.
How the European Union works, European
Commission, 2007;
–

Europa - Summaries of legislation - Institutional
affaires;
–

http://europa.eu/legislation_summaries/institutional_affairs/index_en.htm
Treaty of Lisbon: Implementing Institutional
Innovations, Center for European policy Studies,
2007;
–
3
http://ec.europa.eu/publications/booklets/eu_glance/68/index_en.htm
http://www.egmontinstitute.be/SD/Joint_Study_complet.pdf http://www.ceps.eu/book/treaty-lisbonimplementing-institutional-innovations
Recommended literature and sources

KAMPPETER, W.: Lessons of the European
Integration, 2006;
–

Europe in 12 lessons, Eur. Commission, 2006;
–
–

http://ec.europa.eu/publications/booklets/eu_glance/60/index_en.htm
http://europa.eu/abc/12lessons/index_en.htm
http://ec.europa.eu/publications/booklets/eu_glance/91/index_en.htm
Your Guide to the Lisbon Treaty, EC, 2009;
–
4
http://library.fes.de/fulltext/id/00730.htm
http://ec.europa.eu/publications/booklets/others/84/en.pdf
Unit Outline



5
News and discussion: 15 – 30 minutes
Presentation and discussion: 45 - 60 minutes
Additional Remarks: 15 - 30 minutes
Requirements

Active participation - articles, discussions etc.
Written assignments
Presentation

Eventually: Test


6
Lecture 1 – Content:

History of the EU.
–
–
–
–
–
–
7
The post-war situation in Europe.
The cold war
German problem and its suggested solution - to establish
a European super-state?
Second option - market integration.
Evolution from simple control over coal and steel
industries towards a monetary and economic union: from
Paris to Lisbon.
Historical milestones.
Source
• R.BALDWIN, Ch. WYPLOSZ: The
Economics of the European
Integration; Chapter 1
8
9
Post-war period


Recent history of conflicts
Climate for change – the mindset of
Europeans
–
Death and destruction:



–
Hunger, refugees, riots, political crises

10
WE: cca 8 million people dead
CEE: over 9 million people perished
Soviet Union: over 20 million
UNRRA (UN Relief and Rehabilitation Administration)
Death and destruction
11
Source: Baldwin, pp. 5
How can Europe avoid another war?

Whom/What to blame for the war?
–
Germany

–
Capitalism

–
Tighter integration – a united Europe.
Integration finally prevailed, but it was not easy.
–
–
12
Marxism-Leninism; communism as the solution.
Nationalism


Morgenthau plan – agricultural and pastoral character
Ideas of communism; communist regimes;
Division of Europe; political and economical problems,
occupation.
Cold War


East-West confrontation
USA+UK: Economically strong Germany essential
for liberal democracy in Europe
–
–


13
Adenauer: a promoter of a Franco-German cooperation
Bizonia + France
Communism and one-party politics vs. multiparty
democracy, social market economy, European
integration
Integration and national interests
OEEC and EPU

Marshall plan (1948-1952):
–
–

economic assistance; joint program of economic
reconstruction.
Economic conditions; communists.
OEEC (1948): cooperation - mutual economic
recovery
–
–
$12 billion (1948-1952): 50% to UK, France, W.G.
Advance European economic integration


14
Reducing trade barriers; system of payment (EPU)
CMEA = RVHP: Council of Mutual Economic
Assistance (1949)
OEEC and EPU

EPU (1950-1958) – European Payments Union
–
–
–
–

Effects of trade liberalisation
–
–

15
Multi-lateralised bilateral agreements
Surplus/deficit with respect to the EPU.
Removing discriminatory measures – trade liberalisation
Allowed by 1958 to restore the currency convertibility
Rapid growth of trade and incomes
Changing the mindset of policy makers
Limits of the OEEC and integration Germany as a
way forward.
Federalism vs. intergovernmentalism


Schism over the role of nation-states.
Federalist structure - supranational
organisation:
–
–

Intergovernmental cooperation:
–
–
16
prevention of national rivalry and wars;
with delegated powers from states.
closer economic cooperation; Britain;
Power in hands of national officials; unanimity.
Council of Europe and the ECSC

Intergovernmental organisation:
–
–

OEEC;
Council of Europe (1949); Court of Human Rights
(1950).
Schuman Plan (1950) – federalist step
–
–
Robert Schuman inspired by Jean Monnet the
„father of European integration“.
Coal and Steel sectors of France and Germany
under the control of a supranational institution.

17
Sectors crucial to military and industrial growth
Council of Europe and the ECSC

European Coal and Steel Community (ECSC)
–
–
ECSC treaty signed in Paris in 1951 („Treaty of Paris“)
Members - „The Six“


–
Forerunner of European Commission = High Authority

18
France, Germany + Benelux, Italy
Driving force of European integration.
Decisions on price, trade, production
Treaty of Rome

Germany joined NATO (1955)
–
–

Rearmament (key factors)
Warsaw Pact
Broader Economic integration
–
–
Coal and Steel lost their economic position
Failed political and military integration


Two treaties signed in Rome on 25 March 1957
–
–
19
EDC-European Defence Community, EPC-European Political
Community.
European Atomic Energy Community (Euroatom)
European Economic Community (EEC)

„Treaty of Rome“ – came into existence in January 1958.
Treaty of Rome

Deep economic integration
–
Customs union


–
–
Promised – free labour mobility, capital market integration,
free trade in services; common policies
Supranational institutions:



20
removing tariffs and quotas; earlier than planned (1,5 year).
common external tariff – revenues paid to the European
Commission
European Parliamentary Assembly (forerunner of the
European Parliament)
European Court of Justice
European Commission
EFTA

Trade liberalisation in Europe:
–
–
–

European Free Trade Association (1960)
–
–
–
21
OEEC - non-discriminatory basis
EEC – all barriers, but on a discriminatory basis
Two non-overlapping areas.
„outsiders“ led by the UK
Stockholm Convention
Free trade area – removed tariffs in tandem with
EEC schedule (agricultural goods excluded).
EFTA vs. EEC

Discriminatory liberalisation
–
–
–

Lost profit opportunities
EEC more attractive
Creating forces for inclusion
First enlargement of the EEC
–
UK’s volte-face – in 1961, the UK applied for membership



–
22
EFTA was not a substitute for access to the EEC market.
Led to a change of attitude of other EFTA nations (Ireland,
Denmark, Norway).
France said NO to UK membership (1963 and 1967).
Membership granted in 1973: Norway’s referendum –
negative
EFTA vs. EEC

Europe of two concentric circles
–
–
23
Increasing disadvantage of EFTA based firms
Set of bilateral FTAs between each EFTA
member and the EEC
Euro-pessimism (1973-86)

Political shocks
–
–
Restored confidence to own governments
Luxembourg compromise (1966)

De Gaule initiative against majority voting in the Council
of Ministers.
–

Empty chair crisis - CAP
Unanimity
„very important interests“ of a member are at stake
– reduced ability to make decisions
–

24
1986 – Single European Act: majority voting restored
Failure of monetary integration

Bretton-Woods monetary system
–
–

US inflation transmitted
Break-down (1971-1973)
Werner Plan (1970/1971)
–
–
Plan for European monetary union by 1980 - failed
Bad economic environment – stagflation


US inflation
Stagnation/downturn – rise of oil prices:
–

–
25
Yom Kippur War-1973; Iranian revolution – 1979
Expansionary monetary and fiscal policies
Series of exchange rate crisis
Failure of deeper trade integration

New trade barriers – inhibited trade
–
TBT – technical barriers to trade: regulation,
standards


–
General Programme (1969)


26
„protect consumers“;
Protection of domestic firms
directives – unanimity; implementation – delay.
Harmonisation slower than implementation of
new barriers
Bright spots

Further enlargement – after democratisation
–
–


European Monetary System (EMS) – 1978
EEC financing
–


Rationalisation of institutions
Parliament directly elected - 1979
Decreasing inflation
–
–
27
2 budget treaties (1970; 1975)
Merger Treaty – 1965
–

1981: Greece
1986: Portugal and Spain
1981-1983: recession, unemployment
1984: economic growth; turn to market-based solutions

Reagan, Thatcher; Mitterand.
Single Market Programme: EC92

Target: Completion of internal market
–
–
1985: J. Delors (president of the European Commission)
1985: Duty-free access but not free-trade



Single European Act
–
–
–

By 1987: adopted by all members
Legislation implementing Single market measures
Majority voting on most economic integration issues
Capital Mobility – liberalised in 1988
–
28
Barriers; practices of national and local governments
Limitation for free movement of goods and services.
Process led to euro – monetary policies slaved to exchange
rate stabilisation
Single Market Programme: EC92
Reinforcement of 4 freedoms:
 Goods Liberalisation
–
–
–
–

Factor trade liberalisation
–
–
–
29
Elimination of border formalities
Harmonisation of VAT
Liberalisation of government procurement
Harmonisation and recognition of technical standards
Removal of all capital control
Increase in capital market integration
Liberalisation of cross-border market-entry policies
(recognition of approval)
EEA and further enlargement

Reaction to Single market
–
–

considering EU membership
Considering bilateral agreements
European Economic Area agreement
–
–
–
1989: J. Delors proposed; 1992: signed
Extension of Single Market to EFTA economies
Rights and obligations of EFTA members – unbalanced


EU membership applications
–
–
–
30
Future legislation; supranationality.
Austria, Finland, Sweden – members since 1995
Switzerland rejected EEA effectively freezing EU
application
Norway rejected in referendum.
Collaps of the communist regime


Different living standards; economic pressure, interventions
USSR – perestroika, glasnost
–



Poland – „Solidarity“ (June 1989); free elections
Hungary – free elections, opened border
East Germany – mass protests, opened border
–




31
Timid pro-market reforms; policy of openness.
9 November 1989 – Fall of the Berlin Wall
Czechoslovakia – 1989; „Velvet revolution“
Unified Germany – 1990
Estonia, Latvia, Lithuania – independence from the USSR
(1990).
Soviet Union – by the end of 1991 broke up itself.
Maastricht Treaty


Germany – unification, but with stronger European integration.
Monetary union proposal (leading to political integration)
–

J. Delors; accepted by France and Germany
Treaty of Maastricht – Treaty on European Union
–
a monetary union by 1999, a single currency by 2002

–
–
–
–
–
–
32
The most profound deepening of integration since Treaty of Rome
EU citizenship – movement, living; voting
Locked in the free movement of capital
Strengthened cooperation in non-economic areas
Enshrined the principle of subsidiarity
Strengthened the European Parliament’s power
„Social Chapter“ – workers' rights
Maastricht Treaty

Ratification difficulties
–
–
–
–
33
Britain: opt out from the common currency and
„Social Chapter“. Gov. almost brought down
France: very close referendum results
Germany: Treaty challenged as unconstitutional
Denmark: supported Treaty in the second
referendum after opt-outs on the single currency
and defence matters.
Reuniting east and west Europe

Priority – EU and NATO membership
–
–

Worries of CEEC
FTA – economic necessity and stepping stones.
Europe Agreements = Association Agreements
–
–
PL, HU, CZ – 1991; CEFTA
Removing tariffs and quantitative restrictions by 1994

–
–
34
„sensitive“ industrial products, agricultural trade.
Other economic freedoms – establish functioning market
economies; adoption of EU laws and practices
Ambivalence to enlargement – economic nature of the
CEEC vs. EU budget spending
Reuniting east and west Europe

Copenhagen summit
–
–
–
European Council (June 1993)
Accession date: 1 May 2004
Copenhagen criteria:



35
Political stability of institutions that guarantee democracy,
the rule of law, human rights and respect for and protection
of minorities.
A functioning market economy capable of dealing with the
competitive pressure and market forces within the Union
Acceptance of the Community „acquis“ (EU law) and the
ability to take on the obligations of membership, including
adherence to the aims of political, economic and monetary
union.
Preparing for eastern enlargement

Necessity of institutional reforms
–
1993 Brussels summit – new agenda for IGC (’96)

„Reflection Group“ – Westendorp report
–
–
–
Decisions making problems
EU role in the world


36
Lack of consensus on solutions.
Complexity of international affairs
Ability to act effectively
Amsterdam Treaty






Signed in 1997, came into force on 1 May 1999
„Tidying up“ of the Maastricht Treaty
Social policy
The EP powers boosted
Closer cooperation = flexible integration
Amsterdam leftovers for the IGC in 2000
–
–
–
37
Council of Ministers voting rules
Number of EU Commissioners
The EU parliament composition
Nice Treaty



December 2000 – Longest summit
Amsterdam leftovers were not fully solved.
Ratification problems
–
Irish referendum refused the Treaty, accepted after commitments



Declaration on the future of the Union
–
–
–
–
–

38
Guarantees to Irish neutrality
All 14 other members ratified
„Nice declaration“
Division of powers between EU and members
Status of the Charter of Fundamental Rights
Making Treaties easy to understand
Defining the role of national parliaments
Next IGC in 2004 – new treaty preparation.
Nice Treaty

Laeken Declaration on the Future of the European Union
(2001)
–
Convention on the Future of Europe




European Convention (02/2002-06/2003)
–
–
–
–

V. G. d’Estaing (president) changed purpose
Constitution-writing convention
„consensus“
Participation of candidate countries (only) in the debate.
IGC 2003-2004
–
–
39
„European Convention“
Four themes of the Nice Declaration
Question of a constitutional text in a long run
Differences: Council voting - shift of voting power to Germany
from Spain and Poland
Irish compromise – rewritten draft accepted (06/2004 summit);
Constitution signed in Rome in October 2004.
Constitutional Treaty

Ratification difficulties
–
–
40
France and the Netherlands – negative
referendums (2005) = over 20 million NOs
„period of reflection“.
Reform Treaty = Lisbon Treaty









41
Reforms not popular but necessary to keep the EU running
German presidency – Constitutional Treaty (CT) dead
Aim to include the main CT reforms in the Lisbon T.
Grandiloquent language and gestures; symbols (the flag, the
anthem...); the word „constitution“ - taken away.
Signed on 13 December 2007 – after concessions to Poland.
Planned ratification before 2009 EP elections.
Repackaging strategy – to avoid referendums
Irish referendum (07/2008) – negative; second attempt in
2009 successful.
Entered into force on 1 December 2009