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Book EEI summary H1 through 7, 9 to 11, 13 & 14
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Comprehensive summary of The economics of European Integration, EEI Public Administration.
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The Economics of European Integration - volledige studiestof samengevat
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Economische Europese IntegratieWEEK 1: H1, 2, 3
Chapter 1: History
Post second world war.
3 beliefs about the causes of the war:
1. Germany was to blame.
2. Capitalism was to blame.
3. Nationalism was to blame.
Cold war: east versus west.
Berlin wall.
Marshall plan and the Organization for European Economic Cooperation (OEEC).
Marshall announced that the US would give financial assistance to all European nations
‘west of the Urals’. The main condition for the money was that Europeans had to agree to a
joint program for economic reconstruction.
OEEC trade liberalization.
2 strands of European integration: federalism and intergovernmentalism
- A trade-off between European integration and national sovereignty.
Centralizers federalists. Nations should be embedded in a federalist structure – a
supranational organization embodied with some of the powers that had traditionally been
exercised exclusively by nations.
De-centralizers intergovernmentalists. European integration should take the form of
closer cooperation conducted strictly on an intergovernmental basis, that is, all power would
remain in the hands of national officials and any cooperation would have to be agreed
unanimously by all participants.
hThe first big federalist step came in 1952 with implementation of the Schuman Plan, which
proposed that France and Germany should place their coal and steel sectors under the
control of a supranational authority called the European Coal and Steel Community.
The plan was inspired by Jean Monnet and promoted by Robert Schuman.
NATO.
European Economic Community (EEC).
Treaty of Rome.
,Baldwin, the domino theory of regional integration; the preferential lowering of some trade
barriers created new pressures for outsiders to join the trade bloc and, as the trade bloc gets
bigger, the pressure to join grows.
The Community was rocked by a series of political crises in the 1960s, soon to be followed by
economic shocks in the early 1970s. The political and economic shocks together created a
period known as ‘Euro-pessimism’ (1973-86).
The Single Market Program unleashed a political economy snowball effect that eventually
led to the euro.
Without capital controls, nations must choose between controlling their exchange rate and
controlling their monetary policy.
Since exchange rate stability was considered paramount, EU members chose to sacrifice
national control over their monetary policy in order to keep exchange rates stabilized.
But once nations were no longer actively using monetary policy, national objections to
centralizing monetary policy decisions in a European central bank were greatly weakened.
Moreover, the exchange rate crises of the 1990s convinced many European leaders that
creating a single currency would be a good way of preventing them.
EEA compromise on ‘obey and pay but have no say’.
Early European integration was an economic project on the surface, but deep down it was a
military, political and foreign policy project.
Treaty of Maastricht (1992) the idea of a single currency.
European Community European Union.
Copenhagen Criteria for membership:
1. Political stability of institutions that guarantee democracy, the rule of law, human
rights and respect for and protection of minorities.
2. A functioning market economy capable of dealing with the competitive pressure and
market forces within the Union.
3. Acceptance of all EU economic and political rules and the ability to take on the
obligations of membership, including adherence to the aims of political, economic
and monetary union.
Lisbon treaty included all the main institutional reforms that were in the constitutional
treaty but they were repackaged in a very different way.
Today’s Europe is the sum of the solutions to past crises, and the process is continuing.
1970s: pessimism concerned the EU’s ability to implement deeper economic integration.
At the end of the 2010s, the pessimism was not about whether the EU can advance
economic integration, it was about whether it should be stopped or even reversed.
Nationalism and anti-EU rhetoric is becoming commonplace.
,Distrust of mainstream leaders, political parties and institutions is the key factor
underpinning the rise of populism and Euroscepticism.
Economic hardship lasted for a decade. In some countries, the trigger issue was immigration.
The core of populism is a general sense that ‘the people’ are pure and ‘the elite’ are corrupt
or inept. Populist leaders win votes by telling the people that they have been taken
advantage of by the elite. Much of populism is driven by an urge to vote against something,
not for something.
3 really big increases in European economic integration:
1. The formation of the customs union from 1958 to 1968. This eliminated tariffs and
quotas on intra-EU trade in goods.
2. The Single Market Program, implemented between 1986 and 1992, which eliminated
many non-tariff barriers, harmonized regulations, and liberalized the movement of
labor and capital within the EU.
3. The Economic and Monetary Union introduced a single currency for many EU
members. It also set up the institutions, rules and practices necessary to run a
monetary union.
Chapter 2: Facts, law, institutions and the budget
The idea was to fuse the 6 national economies into a unified economic area in a way that
launched some kind of snowball effect, or ratchet effect.
Economic integration, according to the founders’ thinking, would launch a gradual process
that would draw European citizens together in ways that went way beyond simple business
interactions.
The intention of the Treaty of Rome was to create a unified economic area.
It would draw Europeans into ever-closer, ever-deeper economic exchanges. These would
lead Europeans to embrace ever-closer political cooperation and integration.
How to create a unified economic area
- Free trade in goods remove trade barriers (treaty of Rome).
- Common trade policy with the rest of the world.
- Ensuring undistorted competition (within the national economies, no subsidy or deals
between all French companies). State aid prohibited. Anti-competitive behavior.
Approximation of laws/harmonization of regulations. Taxes.
- Unrestricted trade in service free movement of services.
- Labor and capital market integration free movement of workers and capital.
- Exchange rate and macroeconomic coordination.
- Common policy in agriculture not much in the Treaty of Rome. The Common
Agricultural Policy (CAP) came into effect in 1962.
, The Treaty of Rome was noticeably silent on 2 politically sensitive areas that might naturally
be part of creating a unified economic area:
1. Harmonization of social policies the set of rules that directly affects labor costs
such as wage policies, working hours and conditions, and social benefits.
2. Harmonization of taxes.
Subsequent treaties have pushed social integration further but not anywhere near as deep
as economic integration.
Social harmonization is very difficult political different opinions on what t different
opinions on what type of social policy.
Does European economic integration demand harmonization of social policies?
2 schools of thought:
1. The harmonize-before-liberalizing school. international differences in wages and
social conditions provide an ‘unfair’ advantage to countries with more laissez-faire
social policies.
2. The no-need-to-harmonize school. wages and social policies are reflections of
productivity differences and social preferences – differences that wage and exchange
rate adjustments will counter. Social policies tend to converge as all nations get
richer.
EU pre-Lisbon structure
The Maastricht Treaty drew a clear line between supranational and intergovernmental policy
areas by creating a ‘three-pillar’ organizational structure.
The deep economic integration was placed in the supranational first pillar.
The intergovernmental policies are under the European Union ‘roof’ but were not subject to
supranationality in terms of decision making and EU court rulings.
Maastricht put member states clearly in control in second- and third-pillar areas. Common
Foreign and Security Policy and Justice and Home Affairs. Both intergovernmental.
Post-Lisbon organization
A two-pillar structure.
Supranational:
- Economic Integration
- Justice and Home Affairs
Intergovernmental:
- Common Foreign and Security Policy.
Main principles of the EU legal system:
1. Direct effect: EU laws are automatically laws in every member state.
2. Primacy of EC law: Community law has the final say. When EU law and national,
regional or local laws conflict, the EU law is what must be enforced.
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