Introduction
The European Union continues to attract the attention of the whole world as an unprecedented experiment in regional blocking. United by a single market, a common currency, and a host of supranational bodies, this structure has gone beyond the level of integration commonly achieved in regional blocs. The economic success of the Union makes it attractive for new members, with neighboring nations eagerly awaiting their chances of admission to the bloc. However, the numerous successes of the EU were interspersed with failures. Quite recently, its officials reported that the Union was in a state of deep crisis over the rejection of the new all-European Constitution by some of its members. The bureaucratic structure of the union, inflexible economic policies, and economic crisis that affects many countries have been blamed. In this paper, we will review the historic processes that led to the formation of the EU in its current form, admission policies, internal structure and management, and successes & failures.
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1. History
The creation of the European Union was inspired by the desire to secure peace in Europe after World War II and the need to join efforts in rebuilding the continent’s economy devastated by the war. The first precedent of strong economic cooperation between the key nations in Europe appeared in 1950 with the establishment of European Coal and Steel Community (ECSC) that involved 6 members: Belgium, West Germany, Luxembourg, France, Italy and the Netherlands (Europa). In this union, “the power to take decisions about the coal and steel industry in these countries was placed in the hands of an independent, supranational body called the “High Authority” (Europa). It proved to be the first workable example of integration that led to further projects.
In 1957, through the treaty of Rome, the forerunner of the EU was formed, called the European Economic Community, as well as the European Atomic Energy Community (EURATOM). In 1967, the merger of all three communities resulted in the creation of a single European Commission, the European Parliament, and Council of Ministers (Europa). In the period 1967-1979, European parliamentarians were delegated by local parliaments; after that, there have been direct votes to the European Parliament.
The Treaty on European Union, also known as the Maastricht Treaty, was signed in 1992, leading to the formation of the European Community that is now an integral part of the EU. This treaty was a milestone because it “introduced new forms of co-operation between the member state governments – for example on defence, and in the area of “justice and home affairs” (Europa). One of the remarkable additions to the current policy was the creation of the economic and monetary union (EMU) that involved the introduction of the euro. The single currency became reality on January 1, 2002, for members of 15 EU countries. The history of the Union has also been characterized by continuous access of new members. The largest wave of expansion came in 2004 when the bloc expanded into Eastern and Southern Europe, accepting Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia (Europa). 2007 is likely to see the accession of Bulgaria and Romania.
2. Admission Policies
The founders of the EU are considered to be six nations that grounded the European Coal and Steel Community: Belgium, France, West Germany, Italy, Luxembourg, and the Netherlands (Wikipedia, 2006). Today, the bloc numbers 25 members. All new members are admitted provided they meet the conditions for membership and their parliaments ratify the Treaty of Accession.
The conditions that a candidate country must meet are termed “Copenhagen criteria”, named after the location of the meeting of the European Council in June 1993 where these criteria were approved. The criteria were summed up in the following way in the corresponding document:
stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and, protection of minorities, the existence of a functioning market economy as well as the capacity to cope with competitive pressure and market forces within the Union (Europa).
Another crucial point made by the Council in the document refers to “the ability to take on the obligations of membership including adherence to the aims of political, economic & monetary union” (Europa). Thus, the criteria include political, economic and legislative requirements to potential member states. As they are rather vague and general, these criteria have been given interpretation in numerous documents produced by the European Commission and other ruling bodies, the European Court of Justice and the European Court of Human Rights.
Even if the country meets these criteria, it may be barred from accession if the European Union recognizes that it does not have at the moment sufficient absorption capacity. Exactly this problem is likely to impact negatively the chances of new applicants at the moment, as the last wave of enlargement and failure to adopt the Constitution generated pessimistic sentiment concerning the need to add new members.
A potential entrant is first given an official candidate status after it submits a formal application to the union that can be denied or approved. The nation can then start official negotiations concerning its accession, in the course of which controversial points are clarified, and demands concerning improvements in political, economic, and legislative areas. Successful negotiations end with signing the treaty of accession. This treaty is given an opinion of the European Commission and approved by the European Parliament, after which it is submitted for ratification to the member state’s parliament. When it is ratified by the national parliament, membership becomes reality.
3. Internal Structure and Management
The European Union includes a complex of structures that complement each other in the process of governance. Mimicking nation-states, the Union’s governing bodies are separated into executive, legislative, and judicial branches.
The executive branch is represented by the European Commission and the Council of the European Union (the European Council). The European Commission is the executive body composed of 25 representatives, one from each country, that act independently of their national governments, making decisions for the whole of Europe. The Commission “drafts proposals for new European laws, which it presents to the European Parliament and the Council”, “manages the day-to-day business of implementing EU policies and spending EU funds” and ensures compliance with the EU legislation (Europa).
The European Council, in contrast, includes delegates from national governments. Its meetings assemble ministers from all member states responsible for the issues under discussion. Decisions are made by votes that represent the demographic proportions, but give an advantage to smaller nations in these terms.
The legislative branch is represented by the European Parliament. As stated above, since 1979, the population of the Union directly votes for members of the European Parliament that meets in Strasbourg and Brussels. The responsibility of this body is to pass laws into effect, approving proposals of the European Commission, and distribute the EU’s budget. It is elected once in five years.
The judicial branch includes the European Court of Justice and the European Court of Auditors. The first works to “make sure that EU law is interpreted and applied in the same way in all EU countries, thereby ensuring that the law is equal for everyone” (Europa). It is also engaged in checking compliance with EU laws by nation states and other agents. Luxembourg-based Court of Auditors ensures that the funds collected for the EU budget are distributed in a fair and balanced manner.
The European Union also has a number of agencies in its structure, responsible for a variety of issues such as the Economic and Social Committee, the European Police Office (EUROPOL), the European Environment Agency, and others. Other important institutions include the European Central Bank and the European Investment Bank. The ECB is responsible for the stability of the regional currency, the euro, and maintaining stable prices in the area. The European Investment Bank, in its turn, is engaged in financing projects that are relevant to the development of the entire continent and strives to create a favourable atmosphere for businesses of different size around Europe.
4. EU’s Successes and Failures
The European Union over the course of its history has remarkable achievements. Nevertheless, as a union that has deeply affected the lives of its citizens, it has attracted many criticisms and is associated with a number of lapses. The current struggles for further integration and accession of new members gave additional impetus to criticism.
4.1. The Introduction of the Euro and Economic Integration
The common European currency was first introduced for non-cash transactions on 1 January 1999. On January 1, 2002, the currency became everyday reality for many people who switched to using euro in all operations. The euro notes and coins replaced franks, guldens, marks, and other national currencies.
Today, most analysts agree that the common currency proved a success. The Eurozone encompasses almost all of the union, with the exception of Sweden, Denmark, and the UK that preferred to keep their currencies. The new members that joined the Union in 2004 are expected to join the Eurozone later on.
Gertrude Tumpel-Gugerell, Member of the Executive Board of the ECB, in her speech on November 5, 2004, has approved of economic developments that arose because of the euro. Euro, she says, contributed to integration of national markets due to “the elimination of intra-area exchange rate risk, and of private and public initiatives to foster financial integration through harmonised regulations and institutions” (Tumpel-Gugerell, 2004). This makes the markets more efficient and increases their scope. Over the long term, euro introduction is expected to contribute to economic growth in the area because capital will be allocated with greater effectiveness.
Overall, the common currency helped smooth imbalances in the region, especially in the times of major crises. Tumpel-Gugerell (2004) believes that “without a common currency… a number of countries – in particular some of the smaller ones – would have experienced more pronounced adverse effects in times of turbulent market conditions, than was the case in the last six years”. The euro has become a recognized international currency that can compete with US dollar and Japanese yen as an investment opportunity. The rising price of the euro relative to the dollar is evidence of the fact.
Overall, the economic integration of the Union is considered to be successful. Within Europe, barriers to trade have continuously reduced to achieve their currently low level. There is a common “EU competition law controlling anti-competitive activities of companies (through antitrust law and merger control) and member states (through the State Aids regime)” (Wikipedia, 2006). The capital flows are free within the European Economic Area (EEA). The members of the Union have also agreed on harmonization of regulations related to trademark registration and patent law, indirect taxation including Value Added Tax, and a number of other issues. There is also a Common Agricultural Policy and a Common Fisheries Policy, although the former has become a subject for criticism, as will be discussed later. The existence of the European Investment Bank represents the presence of European mechanisms for funding projects that have significance for the whole of the area. All these policies are proof of deepening economic integration that can be considered a success of the EU. Modern economic development gets a boost when borders are removed, barriers lowered, and nations can cooperate on a large scale. The European experience proves that idea.
4.2. Eastward Enlargement
The enlargement of the European Union that happened in 2004 can be considered a great success of the union. This was the largest expansion of the Union since the times of its foundation as it had never before accepted more than three members at a time (as, for example, in 1995 when Austria, Finland, and Sweden joined the Union. The 2004 enlargement placed a large territory under the control of its institutions and broadened its power territorially. Besides, it was instrumental in helping Eastern European countries make a transition from post-Communist legacy to democracy. Katinka Barysch (2006), chief economist at the Center for European Reform, notes that “the prospect of joining the Union has helped the ten Central and Eastern European countries move from post-Communist chaos to orderly EU membership in only a decade and a half”. In this sense, the EU was able to secure peace and stability in the region, which can be considered one of its greatest successes.
This does not mean that integration was smooth and unproblematic. The new entrants received a cold reception on the part of old members, and populations in ‘old’ Europe continue to fear loss of jobs because of the inflow of low-skilled workers from Eastern Europe. However, economically, the new members did rather well and continue to boost European economic growth. They attracted a lot of foreign investment thanks to their membership as “foreign investors did not wait until the accession date to buy up newly privatised companies in Eastern Europe” (Barysch 2006:5). Removal of trade barriers led to a dramatic rise in trade between Eastern and Western Europe, which helped develop the economies of both regions. The economic growth that intensified in new members after they became part of the EU received the name “post-accession boom” from economists (Barysch 2006:6).
It is certain that the EU still has a long way to go to digest the new members; however, their presence creates stimulus for further economic growth. The new members are in many senses more dynamic and adaptable than the ‘old’ EU. Their entrance helped increase the bloc and make it a weightier influence in the region and the world. Overall, the fact that the Union over the course of its history absorbed more and more members shows its success. It remains an attractive bloc for most European countries. The willingness of Turkey and even North African nations to join shows that the Union may soon spread its influence beyond the continent where it was originally formed.
4.3. Common Agricultural Policy
The Common Agricultural Policy (CAP), on the one hand, symbolizes deep integration achieved by the EU; on the other, has been a target of criticism in the past years. The policy consists mainly of payouts to EU farmers included in subsidies. The CAP aims to “guarantee minimum levels of production, so that Europeans have enough food to eat, and to ensure a fair standard of living for those dependent on agriculture” (Wikipedia, 2006).
The criticism targets this policy as a way of government intervention in economic activities. It supposedly negatively affects Third World farmers who produce goods at much cheaper prices but cannot sell them in the EU because European farmers can offer a competitive price because of subsidies. This creates an unfair situation where members of non-EU states are denied entrance to its markets and violates free trade regulations. From the financial point of view, this policy is very costly as subsidies account for about £30bn a year, which is about 50% of the Union’s budget. In fact, countries are often in unequal position because some receive a larger share of subsidies than others. Critics insist that “the CAP has become badly unbalanced, with 70% of its funds going to only 20% of Europe’s farms – predominantly the largest – and leaves nearly three-quarters of EU farmers surviving on less than £5,000 a year” (Wikipedia 2006). It is also believed to be responsible for overproduction and other negative side effects such as environmentally damaging farming practices.
The CAP is likely to remain a controversial issue in the EU. The UK, for instance, has long advocated a change in the policies governing agriculture. France, in contrast, tries to oppose them and block changes. The outcome of debate in this area will show to what degree the Union is able to produce balanced policies and what measure of government intervention in economic activity is accepted by its population.
4.4. The Constitution Rejection
The project of the European Constitution is an ambitious undertaking that could unite the whole of the continent. The Treaty establishing a Constitution for Europe was signed in 2004 by representatives of member states. However, to this day Europe does not have a constitution.
The treaty was supposed to be ratified by nation states to bring it into effect. The problems began when France and the Netherlands voted against it in referenda. In 2005, “after the No in the French referendum (54.9% of votes, turnout at about 70%), the Dutch voters have rejected the EU constitutional treaty by an even larger majority (61.6%, turnout 62.8%)” (Deutsche Bank 2005). Following this rejection, the Union found itself in a deep crisis, and political integration beyond the scope envisaged in the Treaty of Nice became impossible. As Deutsche Bank (2005) notes, the failure of ratification means in the first place that “the opportunity to strengthen the enlarged EU’s decision-making structures and attendant ability to act will have been missed”. Under the Constitution, if ratified, the EU would make decisions possible if accepted by the qualified majority of 55% that account for 65% of population, with a blocking minority of 4 states or more. This is a much simpler procedure than the one currently in action under the Nice Treaty.
Perhaps the most serious downside of the rejection was psychological. For Europeans and outsiders, this rejection signals growing disappointment with the Union that is attributed to opposition to the latest enlargement. The prospects of new enlargement, beyond scheduled accession of Bulgaria and Romania, are very dim now. Turkey may have to wait another decade or more before its chance becomes real. The rejection also means that EU officials and national leaders have a communication problem with their home audiences who do not respond to and support their plans.
The event was also painful for the economy and financial markets of Europe. It turns out that “financial markets were influenced by the prospect of a French as well as a Dutch No even in the run-up to the referendum, in particular in the form of a weaker euro vis-à-vis the dollar” (Deutsche Bank 2005). The situation also affected neighboring nations and others across the world.
The main problem with the failure of the Constitution is the deep crisis in which it put the Union. At the time of the rejection, there was obviously no reliable Plan B to support further actions. The leaders found themselves at a crossroads, unsure as to further direction. This period of uncertainty generated a feeling of disillusionment about Brussels’ politics and realization that EU population may in fact want integration to stop at the present levels and do not want any more intense projects. The differences between Western and Eastern Europe were also blamed for the halt since it was assumed that European nations were repelled by the possibility of gaining new members.
4.5. Political Integration: Still a Long Way to Go
On this issue, the European Union cannot be said to have either a clear-cut success or failure. On the one hand, it has achieved integration at the political level that goes beyond that commonly found in regional blocs. On the other, it still has a long way to go in terms of political integration. The critics of Europe “have described the EU as an economic giant but a ‘political dwarf” (Europa).
Political integration proceeds in two areas: defense policy and diplomacy. The Union’s own website calls the common defense policy “embryonic” meaning that “Common Foreign and Security Policy (CFSP) and the European Security and Defence Policy (ESDP)” are only in the budding stages of development (Europa). For these reasons, nation-states often want to rely on intergovernmental arrangements. This demonstrates the contradiction often reflected in EU policies – one between supranationalism and intergovernmentalism. In supranationalism, “power is held by independent appointed officials or by representatives elected by the legislatures or people of the member states”, whereas in intergovernmentalism “is possessed by the member states and decisions are made by unanimity” (Wikipedia, 2006). Where the EU fails to develop adequate mechanisms for supranationalism, it resorts to intergovernmentalism as a way to govern internal and external affairs. In this way, defense issues are managed since the governments have to agree on a common policy. To this date, there is no purely ‘European’ army; instead, the European contingent consists of units delegated by different member states. Most of military cooperation between European states occurs within the framework of NATO, the bloc that includes many other countries.
The common diplomatic policy is also a long way ahead. The EU Constitution envisaged the creation of a common post of EU Foreign Affairs Minister that does not exist now because the Constitution was rejected. The EU meant this as an answer to “the question famously asked by Henry Kissinger in the 1970s: “If I want to talk to Europe, who do I phone?” (Europa). As it stands today, someone willing to talk to Europe these days, still has to call a number of telephones to clarify often conflicting positions on various issues.
This does not mean that the EU has no achievement to boast in this area. In contrast, it has agreed on many issues pertaining to free trade, for example, established a common tariff on customs. In international negotiations on trade issues, the Union acts as a single member. The common trade policy enabled the EU to promote its positions in talks within the WTO, including those related to agricultural products. The Union as “a single trading bloc … home to nearly half a billion consumers, with a relatively high average level of income” is attractive for importers, a fact that gives it a lot of power in world markets (Europa).
Conclusion
The European Union is one of the most prominent international organizations in the world that continues to attract the attention of the public and policy-makers with its integration projects. Starting out as a regional bloc, the organization achieved the level of integration that make it a closely knit supranational union and promise to turn it into a single state sometime in the future. Although at the time the Union is struggling with economic stagnation and Constitution rejection, it remains an attractive target for many potential member states. The unification of economic policies and introduction of a single currency have made the Union an important economic partner for many nations of the world. In political sphere, integration proved more difficult due to diversity of included states. However, the Union represents a case of unprecedented level of integration. In this sense, its experience is of interest to all regional blocs that strive to integrate more closely.
Bibliography
Barysh, Katinka. Enlargement Two Years On: Economic Success or Political Failure? April 2006. 23 August 2006 <http://www.cer.org.uk/pdf/essay_enlargement_two_%20barysch.pdf>.
Deutsche Bank. Double No in France and the Netherlands – initial shock, opportunities in the offing. June 2, 2005. 23 August 2006 <http://www.dbresearch.com/servlet/reweb2.ReWEB;jsessionid=11e%3A43d8f6f1%3A1f1396467d721cd6?rwkey=u1156139>.
Europa. 23 August 2006 <http://europa.eu>.
European Union. Wikipedia. 23 August 2006 <http://en.wikipedia.org/wiki/European_Union>.
Tumpel-Gugerell, Gertrude. Six Years after the Euro: Success and Challenges. Annual Conference of the Association of Private Client Investment Managers and Stockbrokers (APCIMS), Paris, 5 November 2004. 23 August 2006 <http://www.ecb.int/press/key/date/2004/html/sp041105.en.html>.
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