MANAGERIAL ASPECTS OF
EUROPEAN INTEGRATION
Summary
Powerpoint, class notes and an example of the exam in an
integrated Q&A document :16/20
I put the course in Q&A form to make memorisation more easy 😊
,Inhoud
1. Introduction
1.1 The environment of business
Effective management in the market and nonmarket environment is necessary for superior
performance
1.2 History of European integration
1.2.1 World War II
What was the prime concern after WOII?
o Avoiding a new war
Different opinions on what caused the war + solutions to avoid war in the future
o Germany neuter Germany
o Capitalism Adopts communism
o Nationalism pursue European integration
We can see that nationalism has been seen as the cause of the second world war + Germany
(because Germany indeed got neutered by splitting the countries four zones)
1.2.2 First steps in European integration?
What was the first step in direction of European integration?
o Marshall plan: marshall help was offered to countries that joined the Organisation for
European Economic Cooperation (OEEC)
Booming effect on economy
But lots of States felt a deeper integration was needed to be sure war was
avoided <-> sharp disagreement how this integration should look like
What where the two strands of European integration
o Federalism: supernationality Schumann Plan ECSC: the Six place their coal and
steel sectors under the control of a supernational authority success
commitment to form a customs union Treaty of Rome EEC
o Intergovernmentalism: States keep full sovereignity
What were the two non-overlapping circles?
o EEC <-> EFTA (economic discrimination)
o Why did members of EFTA like UK applied for membership to EEC
The GDP (potential market size) of the EEC was much larger than that of EFTA
EEC club much more attractive for exporters
What were the causes of Euro-pessimism
o Political shocks: unanimity as typical rule in EEC decisionmaking process
(decisionmaking jam due to Luxembourg Compromise and enlargement)
o Economical shocks: Werner plan failed (establishment monetary union), oil price
shocks, introduction of technical barriers to trade
Solution?
o European Single Market Act (SEA) < Single Market Programme
Area without internal frontiers in which the free movement of goods,
persons, services and capital is ensured
Majority voting for what related to the Single Market
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, What are the basic elements of the Single Market Programme
o Further liberalization of trade in goods by elimination of border formalities
o Harmonization of VAT rates
o Liberalization of government procurement
o Harmonization of technical standers in production, packaging and marketing
o Removing of all capital control
Maastricht Treaty
o MONETARY UNION
o Eu citizenship
o Strengthened EU cooperation in non-economic areas
o Strengthening power EU parliament
o Introduction Social Chapter
What are the Copenhagen criteria
o Criteria: political stability of institutions, rule of law, human rights + a functioning
market economy capable of dealing with the competitive pressure and market forces
within the EU
o Criteria set out to let join CEEC countries
Preparation for enlargement
o 6 15 states: institutions were not ready for that
o Amsterdam Treaty
Succeed: parliament powers boost, more social policy, flexible integration
Fail: reform of the Commission, Council Voting rules, for what QMV required
o Nice Treaty
Failures of Amsterdam were still not solved completely
o Constitutional Treaty
Laeken Declaration + Convention of the Future of Europe
European Convention
o France and Netherlands rejected the Constitutional Treaty in
referendums
o Lisbon Treaty
Word constitution banished, gestures to supernationalism banned, all
references to symbols of statehood idem
1.2.3 Why is the history of EU integration important?
It helps managers to understand the broader picture and to anticipate on new events
2. Institutions
2.1 The 5 big institutions: the big 5
2.1.1 Why is it important to know these institutions
To predict policy decisions we have to know which institutions make these decisions
What are the 5 main institutions
o Legislation (bicameralism)
Council of Europe
European Parliament
o Execution
European Commission (initiative right!)
o Judiciary
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, EU Court
+ European Council
2.2 The Commission
Each member States has one commissioner = 27 commissioners
Commission represents European interest and not national interest
EXCLUSIVE Initiative right to adopt legislation agenda setting power
The Commission always approves a whole
You have to pass an exam before you can become a commissioner
Becomes more and more important due to the growing importance of the EU itself
How is the Commission president elected?
o Every member state in the parliament chooses a spitzen candidate after that a voting
takes place and one of these spitzen candidates becomes the new president
o + you must be accepted by the current president
o What is the power of the president?
Can resign the whole Commission
Where can the Commission be found in the separation of powers
o Executive branch: enforcement of the Treaties + surveillance on the Treaties and
driving force of European integration
2.2.1 How does the Commission decide
Legally a simple majority is required, but in practice the Commission tries to reach consensus
2.2.2 What does the structure of the Commission look like?
Each Commissioner is in charge of a specific area of EU policy, equivalent to a
national ministry called Directorates-General (DGs)
2.2.3 Size of the Commission
Small size need of experts
Small size limited budget
2.2.4 Working at the Commission
What are the three phases you have to pass before you can become member of the
Commission
o Preselection
o Intermediate:
o Assessment Center in Brussel
For all exams you have to be among the highest score candidates
If selected reserve list: you have to lobby yourself to get the job
2.3 The Council of the Eu
Most important Organ in terms of legislation
o All legislation has to be approved by the Council & can completely block the
legislation procedure
National interests
Permanent representatives (COREPER I & II < working groups)
o = diplomats
o What is Coreper
Committee of Permanent Representatives < Diplomats
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, Coreper I: Deputy Permanent Representatives
Coreper II: most senior diplomats
Rotating presidency
Administrators work on the proposal and they search for agreement, if they agree it goes to
ministers who formally check it
o If a compromise cannot be found Coreper I & Coreper II
If it’s a political sensitive subject always Coreper II
Closed doors
As manager its good to know which gamers are played and how its negotiated to know how
to influence it as a manager
2.3.1 Presidency
Holds for all configurations except Foreign Affairs Council is always the vicepresident of the
Commission
What are the advantages of holding the Presidency?
o Prestige and status
o Privileged access to information
o Power to set the Council Agenda
o Delay of proposals that doesn’t match national interest or accelerate proposals that
serve national interest
What are the limitations to the power of the President?
o Short period: 6 months
o Administrative burden: complicated and costly procedures
o A compromise has still to be found so the President cannot only act in its own
national interest
2.3.2 Decisionmaking in the Council
In which two ways Ministers take decisions
o Unanimity
o QMV
55% of MS have to vote in favor
65% of EU population has to be presented
A blocking minority must consist of at least four States
o Which one depends on the policy area
What was the big change after the Lisbon Treaty
o EU population becomes determinant
o BUT it’s the same countries who have to most voting weight, there is change for
smaller countries
What are the different ways to show discontent
o Negative statement
In spirit of reaching a compromise we voted for, but actually we don’t agree
because of following reasons
France does this a lot, why?
For smaller countries there is no point to make a negative statement,
because they have small power so nobody will actually listen to what
they would like to change
Voting against doesn’t really help, because the voting is more a
formal procedure, when the presidency organizes a voting he/she
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, already knows enough member states are for to have a
QMV/unanimity
No is more aggressive which doesn’t really match with the
compromise making spirit
o Abstention
o NO
Why would you vote no
Strong national parliaments who pushes the ministers to express a
strong opinion
2.4 The European Parliament
What are the two main tasks of the EU parliament?
o Adopting legislation
o Surveillance on other European institutions such as the Commission
Parliament gained more power thanks to the Lisbon Treaty
o Shares power with the Council in most matters
How is the European Parliament organized?
o Directly elected member
o Amount of members is not completely proportional to populations numbers
Very small states have more MEP’s per capita than big states
o Parliament is divided left-right and not along national lines
What is the most important function of the Parliament
o Democratic control, all MEPS are directly eleccted
Is there rotating presidency?
o No, fixed president
By which majority the parliament decides
o Simple majority
2.5 European Council
The highest political level-body: providing political guidance at the highest leven
o Initiating the most important EU initiatives and policies
Who is in the European Council
o President of Council + Commission
o Leaders of MS
STRONGEST BODY <-> no formal role in legislation
Is there a rotating presidency?
o YES, 2,5 years and selected by voting within the European Council (QMV)
When does it meet?
o Minimum 4 times a year + at the end of the presidency period of the Council (so
every 6 months)
Which majority?
o The European Council decides by unanimity
CAREFUL: European Council <-> Council of the EU <-> Council of Europe (organization which
adopted EVRM and includes also Russia unrelated to the EU)
2.6 Court of Justice of the EU
Court reaches its decisions by majority voting
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, 2.7 The Legislative process
The Commission has a near monopoly on initiating the EU decision-making process
Once developed the Commissions proposal is sent to the Council Parliament
What are the two kinds of legislative procedures
o Consultation procedure: EP can only express an opinion
o Codecision procedure = Ordinary Legislative Procedure: the Parliament and Council
have equal power in the decisionmaking procedure
The optimal strategy is based on the strategies of the other players
Consultation procedure
o Commission Council: amend + voting or doesn’t amend + voting
Amendment voting not approved second reading
If then still not approved: the proposal is send to the Concilitation Committee
for a third reading approved send back to both houses
Codecision procedure
o EC EP CM EP CM Concilitation Committee
o Growing amount of policy areas which fall within the scope of the Codecision
Procedure
o EP and CM can both amend!! = equal powers
How does the Lisbon Treaty give more national parliaments a stronger role?
o The introduction of yellow and orange cards
Commission can ignore the cards and if its an orange card she has to
motivate more deeply why she ignores the card
The card allows member states to express the opinion that the principle of
subsidiarity is violated
Used in policy areas where the competence is shared between EU and MS
Why is this important for managers
Influences the way of lobbying of managers
3. The competences of the EU and EU budget
3.1 Exclusive competences
Customs Union
Competition policy
Monetary policy
Common fisheries policy
Common commercial policy
Only the EU has competences in these policy areas
3.2 Shared competeneces
Internal market
Social
Regional policy
Agriculture and fisheries
Environment
Consumer protection
Transport, enegery, area of freedom, security and justice, research, technological development
and space
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, EU has priority, but as long the EU didn’t make policy in a certain area the member states can
make policies themselves
o If as MS you don’t agree: yellow or orange card procedure in EP
3.3 Supporting competences
The member states have the exclusive competence to adopt legislation, but if needed the EU
can help with that or give advise
Human health, industry, culture, tourism, education, civil protection and administrative
cooperation
Why is the distribution of competences relevant for managers?
o The legislative procedure differs from policy area to policy area and therefore a
different strategy to influence legislation in your benefit applies
o Its important to know which institutions play an important role, so you know in which
institution you better go to lobby
3.4 The EU budget
3.4.1 Revenues
What are the four main sources
o VAT
o Tariff revenue
o Tax paid by MS based on their GNP
o Agricultural levies (tariffs on agricultar goods)
Is it the problem that some member states put more money in the EU than they actually
get back?
o In literal terms they indeed don’t profit from the EU, but they profit a lot indirectly
thanks to the welfare benefits established by the internal market
3.4.2 Expenditures
3.4.3 Why is it important for managers to know about the EU budget?
Managers need to know where the EU is spending its budget on so they can attract money of
this if needed
o Eu regional policy: choose your location to get subsidies
o Environmental policy: as a farmer you may want to take care of the environment in
order to receive subsidies
o R&D policy: innovation is subsidized by the EU
The first three classes are not enough for managers:
o Ability to detect pivotal players
o Predict policy outcomes
o How can you effectively influence the decisionmaking process
4. Spatial models
4.1 Introduction
Government is important for companies and companies have to be aware fo that
o Acknowlegdment that the EU plays a role and take them in consideration by spending
resources in the institutions/pivotal players relevant for the policy you want to
influence
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,4.1.1 Hostelling’s model of spatial competition
Hotelling examined why merchants locate their shops close to each other
Uniform division of stores on one street: where on the street you choose your location
influences your profit
Why would you put your store close to the store of a concurrent?
o To steal clients of your concurrent
Where will the two stores be located eventually?
o In the middle
This economical model can be applied to politics
o Radicality can lead to stronger commendation <-> any radical departure would lose
many votes
4.1.2 Policies as points in space
Left-right dimension
4.1.3 Preliminaries: utility
Y = U (y) : level of satisfaction
If the member strictly prefers y to z then U(y) > U(z)
If U(y) = U(z): the MS is indifferent between z and y
o Works in two directions
We use a Satiable utility function (y= -x2) <-> y= √ x
Preferences are spatial and all alternatives can be described spatially
4.1.4 What are the three key elements necessary to undertake a spatial
analysis of politics?
1. Preferences
2. Issue alternatives
3. The rules by which alternatives are voted on
4.1.5 What are the two components of voters that need to be specified?
1. Ideal point
a. The point you would most want enacted
i. Can be a number
ii. Can be more abstract
2. Utility curve
a. How much pleasure does the voter receive from policies, as a function of how far the
policy is located from the voter’s ideal point
b. If its ideal point get adopted than the derivative of the utility curve in that point is 0
(= the max of the curve)
4.1.6 What are the assumptions we make about preferences
1. Preferences are single peaked and symmetric
a. Preferences are said to be Euclidean
i. : the Policymaker has an ideal point and its utility declines at the same rate,
regardless of direction
b. preferences are a decreasing function of the distance between the policy outcome
and the policymaker’s ideal point
4.1.7 Which two forms the Satiable utility function can have?
1. Linear (triangle)
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, a. U = - |xi− p|
2. Quadratic (y= x2)
a. U = -(xi- p)2
I prefers y to z if and only if | y −xi|<|z−xi|
=> xi = ideal point
Y an Z are alternatives: you like one alternative more than the other
In a spatial voting theory alternatives can be expressed in the same coordinate system as
preferences
4.1.8 In spatial models one alternative in particular demands attention,
which one?
Status quo = reversion point
o The alternative that results if the committee fails to agree to change policy
o Helps to provide the frame of reference for the comparison among alternatives
Members of the Council never vote for a policy alternative in a vacuum
o Rather they are aware that something will happen if they fail to act
4.1.9 What are two useful sets
1. Pi(x)= legislator I’s preferred to set of x
a. The set of all policy that legislator I prefers to x
2. W(x) = Majority rule winset of x
a. The set of all policies that some majority prefers to x
i. If W(x) is empty then X is unbeaten
4.1.10 How to find windsets?
1. Find the preferred sets for all legislators
2. The windset is the intersection (∩) of sets in Step 1 of a majority of legislators
a. = de doorsnede: circle in the middle of the Venn-diagram
4.1.11 What are the rules
1. The majority requirement
a. BUT: different Eu institutions require different majorities
i. The Commission + EP = simple majority
ii. Council: QMV or unanimity
2. The decision-making process: Who is the agendasetter? Who can amend proposals? Who can
veto?
a. Commission EP and Council all have different roles which also change by the specific
procedure
4.2 Lets start
Example dia 21-26
o The outcome is called the new statusquo SQ’
o The member states who proposes you always have to exclude from the intersection +
you only include the amount of member states equivalent to the strict majority
needed, which states this are is based on the distance from the ideal point of the
proposer to the ideal point of the other players
o Or the most close to the SQ (I don’t know)
Example dia 27-29
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