Summary The Economics of European Integration - Economics of European Integration (EC2IEEI) (EC2IEEI)
Notes for Economic Aspects of European Integration
The Economics of European Integration - volledige studiestof samengevat
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Tilburg University (UVT)
Economics
Economics of the European Union (310123B6)
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Chapter 1 History
What caused the war? 3 schools of thought =
- Germany (Morgenthau plan to ‘neuter’ Germany, turning Germany into a country
with primarily agriculture and pastoral in character)
- Capitalism
- Nationalism
West Germany = UK, US, France → Defining moment European integration
Bizonia
East Germany = Soviet zones
New view: Trade liberalization could be pro-growth and pro-industrialization
2 strands of European integration =
- Federalism = supranational institution; centralized → ‘Vanguards’
o ECSC, EEC
§ B, NL, D, L, F, I
- Intergovernmentalism = nations remain all sovereignty; decentralized → ‘Doubters’
o OEEC, Council of Europe, Court of Human Rights, EFTA
§ UK, P, N, S, DK, A, CH
Schuman (Germany) and Monnet (France) are ‘heroes’ in European integration. They
implemented European Coal and Steel Community, which was crucial for a nation’s military
and industrial strength
1
,Single market program = Create an area without internal frontiers with free movement of
goods, persons, capital and services (Treaty of Rome) → Boost to trade liberalization
(deepening the circles)
- Good trade liberalization: streamlining or elimination of border formalities;
harmonization of VAT rates within wide bands; liberalization of government
procurement; harmonization and mutual recognition of technical standards in
production, packaging and marketing
- Factor trade liberalization: removal of cross-border market entry policies, including
mutual recognition of approval by national regulatory agencies)
Increasing cross-border supply chains as a result
Domino effect = Decreasing trade barriers creates new pressure for outsiders to join the
trade bloc (trade diversion because of customs union)
Maastricht treaty = Achieve a monetary union
CEEC announced that their goal was to join the EU, at first no promise was made, but
‘Europe agreements’ were introduced: free trade agreements
Copenhagen criteria for accession Central and Eastern European Countries =
- Political stability
- Functioning market economy
- Acceptance of community acquis
Euro-pessimism 1973 – 1986
- Political shocks
o Luxembourg compromise + enlargement = decision-making jam
o Unanimity was the typical rule in EEC decision-making procedures: the
insistence on consensus radically reduced the EEC’s ability to make decisions
- Economic shocks
o Bretton woods falls apart
o EEC failed to establish monetary union
o Oil price shocks with stagflation 1973 – 1979
o Introduction of technical barriers to trade as substitute for tariffs brought
back trade frictions
EMU seemed to work during great modification. Interest rate converged by EMU formation
(which is a sign of confidence)
… HOWEVER
2
,Eurozone crisis 2009
Lehman Brother’s bankruptcy (subprime mortgage loans) in 2008 led to a global crisis and a
snowball effect; deep recession which hit the Euro area hard → Banks stopped lending to
each other
Emergency loans and packages to:
Greece, Ireland, Portugal, Spanish banks, Cyprus
New rules =
- Balanced budget rules
- Six pack
- European Stability Mechanism
- European Banking Union
- Customs union (elimination tariffs and quotas)
- Single market program European economic integration
- Monetary union (single currency)
EU members = 27 = Austria, Belgium, Bulgaria, Cyprus, Denmark, Germany, Estonia,
Finland, France, Greece, Hungary, Ireland, Italy, Croatia, Latvia, Lithuania, Luxembourg,
Malta, Netherlands, Poland, Portugal, Romania, Slovenia, Slovakia, Spain, Czech, Sweden
19 Euro members, Denmark has an opt-out clause
1. Netherlands, Belgium, Germany, Luxembourg, France, Italy
2. Denmark, Ireland, United Kingdom
3. Greece, Portugal, Spain
4. Austria, Finland, Sweden
5. Cyprus, Malta
6. CEEC countries
3
,Chapter 2 Facts, law, institutions and the budget
Treaty of Rome/Treaty of the Functioning of European Union
→ Create unified economic area
- Freedom of goods (no tariffs, quotas and other trade barriers)
- Freedom of services (quality of services, supply/demand)
- Freedom of workers (free travel in search of work)
- Freedom of capital (insurance, capital flows)
→ Common trade policy with the rest of the world: Customs union to avoid trade deflection
(tariff cheating)
→ Ensuring undistorted competition
Omitted elements: Social policy and tax policy (different opinions across countries)
Main principles of European legal system =
- Direct effect = EU law can create rights which EU citizens can rely upon before their
domestic courts
- Primacy = Community laws have final say, cannot be altered by national, regional or
local laws
- Autonomy = System is independent of members’ legal orders
4
, European Council = Highest political-level body, political guidance, major strategic
choices, no formal role In EU law making
Council of the European Union = Main decision-making body, every piece of legislation is
subject to its approval, member states’ government assert their influence directly, pass
laws, coordinate general economic policies, final judgement on international agreement,
approve EU’s budget, takes decisions related to Common Foreign and Security policies
European Commission = Executive branch, proposes legislation to Council and
Parliament, provides surveillance, prepare proposals for new EU legislation, manage EU
budget, has a near-monopoly (right to initiative)
European Parliament = Overseeing EU institutions, especially commission
Court of Justice = Settles disputes between member states, between EU and member
states, between EU institutions
Parliament and Council are the primary democratic controls over the EU’s activities
Legislative processes =
- Ordinary legislative procedure = Main one, gives Parliament and the Council equal
power in terms of approval/rejection and amendment
- Consultation procedure = Only Parliament gives opinion
- Consent procedure = Council adopts legislation (proposed by Commission) after
obtaining the consent (without amendments) of parliament
The role of the national parliaments =
- Yellow cards = Any parliament can submit an opinion that the law violates the
principle of subsidiarity
- Orange card = Applies to the ordinary legislative procedure. If a majority of available
parliaments vote against a proposed law, the Commission must review the law as
before, but in addition to the Commission providing justification, the European
Parliament and Council must also consider the national parliaments’ objections
5
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