IP 325 European Integration

IP 325 European Integration SpringSemester 2011/2012 27.02.2012

The 70´- Decade of Strengthening • April 1970: Signature of the Treaty of Luxembourg. The European Council approved the gradual introduction of a system of own-resources under which the Community would receive all customs duties on products imported from non-member countries, all levies on agricultural imports and resources deriving from value-added tax. They also decided to extend the budgetary powers of the European Parliament.

The 70´ - cont. 1 • June 1970: Negotiations with four prospective Member States (Denmark, Ireland, Norway and the United Kingdom) open in Luxembourg; • May 1971: The Council introduced a system of monetary compensatory amounts for trade in agricultural products between Member States in order to maintain the unity of the common agricultural market (abolished 1993).

The 70´ - cont.2 • April 1972: The currency "snake" is set up: Belgium, France, Germany, Italy, Luxembourg and the Netherlands agreed to limit the margin of fluctuation between their currencies to 2.25% (6 % for Italy); • January 1972: Denmark, Ireland, Norway and the United Kingdom signed the Treaties of accession to the European Communities.

The 70´ - cont. 3 • September 1972: A referendum was held in Norway on the country joining the European Communities. The majority was against the accession; • January 1973: Denmark, Ireland and the United Kingdom joined the European Communities (9); • The Community free trade agreement with Austria, Switzerland, Portugal and Sweden came into force.

The 70´- cont. 4 • November 1978: A European Council was held in Brussels. It established the European Monetary System based on a European currency unit (the ECU); • After the demise of the Bretton Woods system in 1971, the EEC countries agreed in 1972 to maintain stable exchange rates by preventing exchange rate fluctuations of more than 2.25% ("currency snake"); • March 1979: this system was replaced by the European Monetary System, and the European Currency Unit (ECU) was defined.

EMS – cont. 1 • The ECU: A basket of currencies, preventing movements above 2.25% (6% for Italy) around parity in bilateral exchange rates with other member countries; • An Exchange Rate Mechanism (ERM); • An extension of European credit facilities; • The European Monetary Cooperation Fund: allocates ECUs to members' central banks.

European Exchange Rate Mechanism, ERM • The European Exchange Rate Mechanism (ERM) was a system introduced by the European Community in March 1979, as part of the European Monetary System (EMS), to reduce exchange rate variability and achieve monetary stability in Europe, in preparation for Economic and Monetary Union and the introduction of a single currency, the euro. After the adoption of the euro, policy changed to linking currencies of countries outside the Eurozone to the euro. The goal was to improve stability of those currencies, as well as to gain an evaluation mechanism for potential Eurozone members. This mechanism is known as ERM2 („waiting room for the Eurozone“).

ERM - cont. 1 • The ERM is based on the concept of fixed currency exchange rate margins, but with exchange rates variable within those margins. This is also known as a semi-pegged system. Before the introduction of the euro, exchange rates were based on the European Currency Unit (ECU), the European unit of account, whose value was determined as a weighted average of the participating currencies.

UK and ERM • The United Kingdom entered the ERM in October 1990, but was forced to exit the program within two years after the pound sterling came under major pressure from currency speculators. The ensuing crash of 16 September 1992 was subsequently dubbed "Black Wednesday; • The UK spent over £6 billion trying to keep the currency within the narrow limits; • Britain's exit from the ERM was seen as an economic failure which contributed significantly to the defeat of the Conservative government of John Major.

The 80´ Decade of Enlargement • January 1981: Greece joined the European Communities (10); • June 1985: The Schengen Agreement signed; • January 1986: Spain and Portugal joined the European Communities (12); • February 1986: The Single European Act was signed in Luxembourg and The Hague (DK, I, GR), effective July 1, 1987.

The 80´ Decade of Enlargement • The SEA was signed on the basis of a political agreement reached at the European Council held in Luxembourg on 3 December 1985; • The Single European Act (SEA) revised the Treaties of Rome in order to add new momentum to European integration and to complete the internal market.

Single European Act Jacques Delors, president of the European Commission, summarised the main objectives of the Single European Act in the following way: "The Single Act means, in a few words, the commitment of implementing simultaneously the great market without frontiers, more economic and social cohesion, an European research and technology policy, the strengthening of the European Monetary System, the beginning of an European social area and significant actions in environment„.

Main changesintroduced - SEA • In the institutional field it ratified the European Council, i.e. the periodical meeting of Head of State and Government, as the organism where major political negotiations take place among the member States and great strategic decisions are taken. The competences of the European Parliament were also reinforced; • The main compromise agreed was to adopt measures guided to the progressive establishment of a common market over a period that would conclude on 31 December1992. This ambitious goal, summed up in 282 detailed measures, was broadly reached in the foreseen term. The common market became a reality.

Main changes introduced – SEA • Different procedures were passed to coordinate the monetary policy of the member States, paving the way toward the objective of economic and monetary union; • The Single Act included diverse initiatives to promote integration in the spheres of social rights (health and the workers' security), research, technology and environment; • To achieve the objective of a greater economic and social cohesion among the diverse countries and regions of the Community, financial support to the denominated Structural Funds, European Agricultural Guidance and Guarantee Fund (EAGGF), European Regional Development Fund (ERDF) and European Social Fund (ESF) was settled.

Protagonists of the SEA The Single European Act entailed an important step forward in the integration process. The president of the Commission, Jacques Delors, was the main figure. This French socialist, not only promoted the economic and monetary union as a key element in the integration process, but tried to balance the advancements on free trade, that benefited managers directly, by proposing the passing of a Social Charter that would guarantee some social minimum standards to every European worker.

Protagonists of the SEA - 1 • British Prime Minister Margaret Thatcherplayed, alongside US President Ronald Reagan, a leading role in what had been denominated the neoliberal revolution: shrinking State intervention in economy and in social welfare, deregulation of whole economic areas, decreasing of worker unions influence, reduction of taxes... From the first half of the eighties, the Iron Lady had also claimed an out-and-out policy against any advancement in European integration, striving to reduce the British contribution to the EEC budget.

Protagonists of the SEA - 2 • In a celebrated speech, pronounced at the College of Europe in Bruges (Belgium) on 20 September 1988, Margaret Thatcher summed up her eurosceptic view: "To try to suppress nationhood and concentrate power at the centre of a European conglomerate would be highly damaging (...) We certainly do not need new regulations which raise the cost of employment and make Europe's labour market less flexible and less competitive with overseas suppliers (...) And certainly we in Britain would fight attempts to introduce collectivism and corporatism at the European level - although what people wish to do in their own countries is a matter for them".

90´s - Treaty of Maastricht • The Treaty on European Union (TEU), signed in Maastricht on 7 February 1992, entered into force on 1 November 1993; • The Maastricht Treaty created the European Union and led to the creation of the single European currency, the euro; • The Maastricht Treaty has been amended by later treaties of Amsterdam, Nice and Lisbon.

Treaty of Maastricht - 1 • strengthened the democratic legitimacy of the institutions; • improved the effectiveness of the institutions; • established economic and monetary union; • developed the Community social dimension; • established a common foreign and security policy.

Treaty of Maastricht - 2 The treaty created what was commonly referred to as the pillar structure of the European Union. The treaty established the three pillars of the European Union -- the European Community (EC) pillar, the Common Foreign and Security Policy (CFSP) pillar, and the Justice and Home Affairs (JHA) pillar. The first pillar was where the EU's supra-national institutions — the Commission, the European Parliament and the European Court of Justice — had the most power and influence. The other two pillars were essentially more intergovernmental in nature with decisions being made by committees composed of member states' politicians and officials.

The First Pillar of EU • The European Communities pillar handles economic, social and environmental policies. It is the only pillar with a legal personality, consisting of the European Community (EC), the European Coal and Steel Community (ECSC, until its expiry in 2002), and the European Atomic Energy Community (EURATOM).

Second Pillar The Common Foreign and Security Policy (CFSP) pillar took care of Foreign policy: • Human Rights, • Democracy, • Foreign Aid and Security policy: • Common security and defense policy, • EU battlegroups, peacekeeping.

Third Pillar • Police and Judicial Co-operation in Criminal Matters (PJCC), originally Justice and Home Affairs (JHA): • Drug trafficking and weapons smuggling • Terrorism • Trafficking in human beings • Organised Crime • Bribery and fraud

Maastricht criteria The Maastricht criteria (also known as the convergence criteria) are the criteria for European Union member states to enter the third stage of European Economic and Monetary Union (EMU) and adopt the euro as their currency. The 4 main criteria are based on Article 121(1) of the European Community Treaty.

Maastricht criteria – cont. 1 1. Inflation rates: No more than 1.5 percentage points higher than the average of the three best performing (lowest inflation) member states of the EU; 2. Annual government deficit: The ratio of the annual government deficit to gross domestic product (GDP) must not exceed 3% at the end of the preceding fiscal year. Only exceptional and temporary excesses would be granted.

Maastricht criteria – cont. 2 • ratio of gross government debt to GDP must not exceed 60% at the end of the preceding fiscal year. Even if the target cannot be achieved due to the specific conditions, the ratio must have sufficiently diminished and must be approaching the reference value at a satisfactory pace.

Maastricht criteria – cont. 3 3. Applicant country should have joined the exchange-rate mechanism (ERM II) under the European Monetary System (EMS) for two consecutive years and should not have devalued its currency during the period; 4. Long-term interest rates: The nominal long-term interest rate must not be more than 2 percentage points higher than in the three lowest inflation member states.

CITIZENSHIP One of the major innovations established by the Treaty is the creation of European citizenship over and above national citizenship. Every citizen who is a national of a Member State is also a citizen of the Union. This citizenship vests new rights in Europeans:

Citizenship - cont. 1 • the right to circulate and reside freely in the Community; • the right to vote and to stand as a candidate for European and municipal elections in the State in which he or she resides; • the right to protection by the diplomatic or consular authorities of a Member State other than the citizen's Member State of origin on the territory of a third country in which the state of origin is not represented; • the right to petition the European Parliament and to submit a complaint to the Ombudsman.

European Economic Area • The European Economic Area (EEA) was established on 1 January 1994 following an agreement between the member states of the European Free Trade Association (EFTA) and the European Community, later the European Union (EU). Specifically, it allows Iceland, Liechtenstein and Norway to participate in the EU's Internal Market without a conventional EU membership; • The EEA Agreement states that when a country becomes a member of the European Union, it shall also apply to become party to the EEA Agreement, thus leading to an enlargement of the EEA.

EEA – cont. • The EEA Agreement provides for the inclusion of EU legislation covering the four freedoms— the free movement of goods, services, persons and capital — throughout the 30 EEA States; • In addition, the Agreement covers cooperation in other important areas such as research and development, education, social policy, the environment, consumer protection, tourism and culture.

Amsterdam Treaty • officially the Treaty of Amsterdam amending the Treaty of the European Union, the Treaties establishing the European Communities and certain related acts; • signed on 2 October 1997, and entered into force on 1 May 1999; it made substantial changes to the Maastricht Treaty, which had been signed in 1992.

Amsterdam Treaty – cont. 1 Main changes brought about by the Amsterdam Treaty in the areas of: • Freedom, security and justice • The Union and the citizen • Effective and coherent external policy • Institutional questions.

Amsterdam Treaty – cont.2 • Fundamental rights and non-discrimination; • The gradual establishment of an area of freedom, security and justice; • Although the Amsterdam Treaty did not provide for a common defence, it did increase the EU's responsibilities for peacekeeping and humanitarian work, in particular by forging closer links with Western European Union.

EU time axis

IP 325 European Integration