European Integration – A Brief History

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Miroljub Labus

• European Integration A Brief History
• Introduction into Economic System of the EU
• Faculty of law, Belgrade
• Literature
• R.Baldwin and C. Wyplosz The Economics of
  European Integration, 3rd ed. Ch.1-2
• Thursday, November 3rd ,2011
• 1800 2025

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Agenda

• Where we are today
• Brief history of economic and political
  integration
• Enlargements
• Chronology up to date

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1. Where we are today
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The European Union today
Fast-Track Accession
Neighboring Policy
Turkey CU/No date
Western Balkans SAP
Croatia 28th member state
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Three pillars and one roof
European Union
Intergovernmental decision making
Supranational decision making
EC The European (Economic) Community Customs
union, single market, agricultural and structural
policies, trade and competition policies, etc.
CFSP Common Foreign and Security Policy
JNA Justice and Home Affairs

Treaty on European Union (TEU)
Treaty establishing the European Community
(TEC/TFEU)

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Fundamentals
United States of Europe
The
Security NATO (No European Defense Community)
Economy Single market (European Economic
Community)
Fis cal Centrali zation
QMV on all issues
EDC
Polity Common Affairs (No European Political
Community)

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Economic and political integratuion Treaties
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Economic and political integratuion Enlargements
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Euro skepticism in Serbia
Enlargement policy
Goal
Conditionality
Recourses
Owners of the program
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Euro-Pessimism in the EU
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Post-conflict period
Zagreb Summit SAP for WB
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Euro-pessimism - Its the Economy
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Euro-pessimism Sovereign debt crisis

• EC is in trouble
• Peripheral countries PIGS triggered the crisis

Sovereign debt
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Euro skepticism - Similarity and differences

• Post-conflict challenge
• World War II
• Collapse of the Soviet Union
• Civil War in Ex YU
• Stabilization by integration
• Assistance
• The Marshall Plan
• Structural funds
• Reconstruction and stability program CARDS
• EFSF
• Political and strategic integration
• NATO
• Post-conflict open issues

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Means and Goals

• Economic integration and law approximation are
  two striking outcomes
• Market integration was the most visible driving
  force
• But, they are means, not the goal
• The goal is deeply rooted in a common European
  security system
• Hence, it would be misleading to ignore security
  issues
• There are two drivers of the EU
• Economy plus security
• Integration of the WB into the EU is more a
  security issue, than an economic issue

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2. Brief history
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Early Post War Period

• A Climate for Radical Change

• How can Europe avoid another war?
• What caused the war? 3 answers
• Blame the loser
• Capitalism
• Destructive nationalism
• These implied 3 post-war solutions
• Morgenthau Plan, 1944 (Stripping Germany of its
  industry)
• Adopt communism
• Pursue European integration (Churchill United
  States of Europe)
• European integration ultimately prevailed, but
  this was far from clear in the late 1940s.

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Emergence of a divided Europe

• Cold War begins
• USSR pushes communism in the East
• UK, French and US zones merged by 1948 in moves
  towards creation of West German government
• Berlin blockade
• The Morgenthau plan
• abandoned, opting
• for strong West Germany
• controlled by neighbours
• European integration

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First Steps

• The Marshall plan, 12 billion (1948-52)
• Organization for European Economic Cooperation
  (OEEC 1948) (Close to EU15)
• OEEC coordinated aid distribution and prompted
  trade liberalisation
• From 1961 OECD
• Great success in promoting intergovernmental
  trade
• European Payment System (EPU 1950-58)
• No convertible local currencies
• Clearing mechanism in a multilateral barter
  arrangement
• Facilitated payments and fostered liberalisation

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Need for deeper European integration

• As Cold War got more war-like, West Germany
  rearmament became necessary
• Wide-spread feeling that it was best to embed and
  economically and militarily strong W. Germany in
  European superstructure
• OEEC was too loose to avoid future war among
  Western European powers
• NATO was created in 1949

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Two strands of European integration

• Federalism and intergovernmentalism
• Immediate disagreement about depth of European
  integration
• Federalism supranational institutions
• Intergovernmentalism nations retain all
  sovereignty
• Intergovernmental initiatives
• OEEC (1948), Council of Europe (1949), EFTA
  (1960)
• Federal initiative
• European Coal and Steel Community, ECSC (1951),
  European Economic Community (the Treaty of Rome),
  EEC (1958)

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1960-1973, two non-overlapping circles

• EEC-6 was a custom union
• EFTA-7 was a free trade area

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Evolution to Two Concentric Circles

• Preferential liberalisation in EEC and EFTA
  proceeded
• (EECs customs union and EFTAs FTA completed by
  1968)
• Discriminatory effects emerge, leading to new
  political pressures for EFTAs to join EEC
• Trade diversion creates force for inclusion
• As EEC enlarges, force for inclusion strengthens
• When UK decides to apply for EEC (1961), 3 other
  EFTAns also change their minds
• De Gaulles non (twice, 1963, 1969)

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Evolution to Two Concentric Circles

• First enlargement, 1973
• UK, Denmark, Ireland Norway admitted
  (Norwegians say no in referendum)
• Enlargement of EEC reinforces force for
  inclusion on remaining EFTAs
• Remaining EFTAs sign FTA agreements with EEC-9
• Domino-like affect of lowering barriers

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Two concentric circles
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First Euro-pessimism, 1975-1986

• Political shocks
• Luxembourg Compromise (1966)
• Unanimity voting if issues are of very important
  interest for a MS
• Failure of Monetary Integration
• Staflation
• Failure of Deeper Trade Integration
• Technical Barriers to Trade
• Growing cost of Common Agricultural Policy
  creates frictions over budget

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Bright spots

• Democracy in Spain, Portugal and Greece
• Greece joins in 1981 (Is it still a bright spot?)
• Spain and Portugal join in 1986 after long a
  difficult accession talks
• EMS set up in 1979 works well
• Budget Treaties

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Single market programme

• Delors launches completion of the internal market
  with Single European Act (1986)
• create "an area without internal frontiers in
  which the free movement of goods, persons,
  services and capital is ensured".
• Important institutional changes, especially move
  to majority voting on Single Market issues

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Single Market Programme, EC92

• Basic elements
• Goods Trade Liberalisation
• Streamlining or elimination of border
  formalities,
• Harmonisation of VAT rates within wide bands
• Liberalisation of government procurement
• Harmonisation and mutual recognition of technical
  standards in production, packaging and marketing
• Factor Trade Liberalisation
• Removal of all capital controls, and deeper
  capital market integration
• Liberalisation of cross-border market-entry
  policies

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Domino effect

• Deeper integration in EC-12 strengthened the
  force for inclusion in remaining EFTAns
• End of Cold War loosened EFTAns resistance to EC
  membership
• Result of force for inclusion
• EEA initiative to extend single market to EFTAs
• Membership applications by all EFTAns except
  Iceland
• Concentric circles, but both deeper

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3. Enlargements
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Fourth enlargement

• 1994, Austria, Finland, Norway and Sweden
  admitted (Norwegians again vote no).
• Still divided Europe

1994
1973
1958
1986
1981
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Communisms spectacular collapse

• By the 1980s, Western European system clearly
  superior due to the creeping failure of planned
  economies
• Up to 1980s, Soviets upset reform efforts
  (economic military pressure)
• Changes in USSR due to inadequacy economic
  system
• hesitant pro-market reforms (perestroika)
• openness (glasnost)

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Velvet revolutions in CEECs

• June 1989 Polish labour movement Solidarity
  forced free parliamentary elections communists
  lost
• Moscow accepted new Polish government.
• Moscows hands-off approach to the Polish
  election triggered a chain of events.
• Reformist in Hungarian communist party pressed
  for democracy Hungary opened its border with
  Austria, 1000s East Germans moved to West Germany
  via Hungary and Austria.
• Mass protests in East Germany Wall falls 9th
  November 1989
• End of 1989 democracy in Poland, Hungary,
  Czechoslovakia and East Germany (unification in
  1990).

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USSR collapses

• 1990, Estonia, Latvia and Lithuania declared
  their independence from the USSR
• End of 1991, the Soviet Union itself breaks up
• Cold War ends without a shot
• Military division of Europe ended

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EU reacts

• The European Union reacted swiftly to this
  geopolitical earthquake by providing emergency
  aid and loans to the fledgling democracies.
• Signing of Europe Agreements with newly free
  nations in Central and Eastern Europe
• These are free trade agreements with promises of
  deeper integration and some aid

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From Copenhagen to Copenhagen

• EU says CEECs can join the EU (June 1993)
• Set out famous Copenhagen criteria for membership
• 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
• Copenhagen summit December 2002
• 10 CEECs can join in 2004

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German unification and Maastricht

• Jacques Delors proposes radical increase in
  European economic integration
• the formation of a monetary union
• Idea championed by French President Francois
  Mitterrand and German Chancellor Helmut Kohl.
• Grand deal? German can unify if it gives up the
  DM
• Maastricht Treaty, signed 1992
• A monetary union by 1999, single currency by
  2002.
• Also, sets up EUs three pillar structure
• ERM exchange rate crises

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Preparing for Eastern Enlargement

• Coming enlargement required EU to reform its
  institutions
• Three tries
• Amsterdam Treaty, 1997
• Nice Treaty, 2000
• Draft Constitutional Treaty, 2003
• Lisbon treaty 2007

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Amsterdam Treaty

• Failed to reform main institutions
• Tidied up of the Maastricht Treaty
• More social policy, Parliament powers modestly
  boosted,
• Flexible integration, closer cooperation
  introduced
• Amsterdam leftovers
• Voting rules in the Council of Ministers,
• Number of Commissioners,
• Extension of issue covered by majority voting

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Nice Treaty

• Reforms of main institutions agreed, but poorly
  done
• Council voting rules highly complex and reduce
  EUs ability to act with more members
• No important extension of majority voting
• Make shift solution for Commissioners
• No reform of decision making in ECB
• Generally viewed as a failure
• Main changes re-visited in draft Constitutional
  Treaty, 2004

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Fifth and Sixth enlargement

• 2005 EU-10 from the CEE
• 2007 Romania and Bulgaria
• Integrated and Outer Europe

1994
1973
2004
1958
2007
1986
Cyprus
Malta
1981
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Constitutional Treaty

• Treaty of Lisbon (2007)
• Introduced qualified majority voting in the EU
  Council
• Enhanced co-decision of the European Parliament
  and the EU Council
• Created the President of the EU and a HR for
  Foreign Affairs
• Made legally binding Charter on Human Rights and
• Three pillars of the EU (EC, CSFP, HJA) with a
  different balance between supranational and
  intergovernmental principles.

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4. Chronology
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Chronology EU

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Chronology EU

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Chronology EU

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Chronology EU

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Chronology EU

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Chronology Serbias accession to the EU
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Chronology Serbias accession to the EU
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Chronology Serbias accession to the EU
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Six conditions for opening negotiations

• Serbia should take further steps to normalize
  relations with Kosovo in line with the conditions
  of the Stabilisation and Association Process by
• Fully respecting the principles of inclusive
  regional cooperation
• Fully respecting the provisions of the Energy
  Community Treaty
• Finding solutions for telecommunications
• Mutual acceptance of diplomas
• Continuing to implement in good faith all
  agreements reached and
• Cooperating actively with EULEX in order for it
  to exercise its functions in all parts of Kosovo.