Wolfgang Renzsch European Integration 8

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Wolfgang RenzschEuropean Integration 8

• The Maastricht Treaty 1
• 1989 gt twofold challenge for the EC
• End of the Communist rule in Central East and
  Eastern Europe
• Internal development of the EC after the
  realization of the single market (SEA)

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• End of Communist rule
• 1989 year of revolutions in Central and Eastern
  Europe
• EC was SEA 1986 on its way to the single
  market, in the debate about a European Economic
  Area (EEA EWR) together with the remaining EFTA
  MS
• Rising political opposition in Poland,
  Czechoslovakia, Hungary (opening of borders) gt
  allowing also resistance in the GDR, fall of
  Berlin wall
• No further details

3

• EC gt first address for reformers of CEEC
  (Central Eastern European Countries MOE)
• End of bipolarity (USSR vs. USA) opened new room
  for political manoeuvre for the EC, but also new
  responsibilities
• Realization of Single Market improved ECs
  capability to react, however pressure to adapt to
  the new international and internal circumstances
  (domestic security and open borders, also to the
  East gt organized crime, migration
• New competencies for the EC required
  strengthening of (missing) democratic legitimacy
• Applications for access gt need for internal reform

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• Summarized need for
• strengthening the (political) cohesion of EC
• increasing the room for political action
• Institutional and procedural reforms in order to
  strengthen the capability to decide and the
  democratic legitimation of EC
• So far the general framework
• How did the EC react
• July 1989 Paris World Economic Summit gt PHARE
  (Poland and Hungary Action for Restructuring of
  the Economy)

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• PHARE The 24 OECD nations (G 7, EC, EFTA,
  Turkey, Australia and New Zealand G 24) adopted
  an action plan for restructuring the new East
  European democracies
• In 1990 500m ECU (then 1.2 billion DM/ 660 mio
  ), raised to 1b ECU (about 2.4b DM/ 1.2b ) in
  1992
• EC Commission served as coordinator.
• Programme originally restricted to Poland and
  Hungary, later also for Czechoslovakia, GDR
  (until German unification 1990), Bulgaria,
  Romania and former Yugoslavia, Albania, Baltic
  nations and Slovenia.

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• German problem 1
• How to integrate the united Germany in the EC?
• On 3 Oct 1990, the former GDR became integral
  part of EC gt 80 pc of EC law came in power
  immediately.
• Principles of regional and structural policies
  were also applied to East Germany and partly
  intensified.
• European Council Edinburgh Dec 1992 accepted new
  Länder as Objective 1 regions (GNP less than
  75 pc of EC average) until 1999

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• Support out of EFRD (European Fund for Regional
  Development EFRE), ESF (European Social Fund
  ESF) and EAGGF (European Agricultural Guidance
  and Guarantee Fund ESGFL)
• Money spent 1990-93 6 b DM/ 3 b
• 1994-99 Germany together 27.5 b DM/ 14 b
• 2000-06 29.8 b (20 b for East Germany)

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• German problem 2 political integration
• When it became clear at the end of 1989/ early
  1990 that Germany headed for unification, the
  German and French government proposed an
  intergovernmental conference for the realization
  of the EMU (objective of SEA) and (new) for the
  realization of the Political Union
• European Council Rome Dec 1990 gt two
  intergovernmental conferences, one for EMU, one
  for Political Union.
• Both started in Dec 1991, EMU in Rome, Political
  Union in Maastricht (NL)

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• Background
• German unification posed a problem for
  neighbours
• what would a united Germany, freed from
  restrictions arising out of division, especially
  the situation of West-Berlin, do? gt look for new
  alliances? Play the old role of before 1914?
• Hegemony by the largest, now even larger MS in
  the EC? gt 80 m inhabitants, 25 pc more than F or
  GB
• Economic power gt strongest economies of West and
  East Europe
• Role outside EC? Fears especially in France and
  Poland

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• Answer not less, but more integration of the
  united Germany.
• Identity of German and neighbours interests gt
  integration of the giant.
• German view
• Integration was the precondition for the
  political and economic success of the old
  Federal Republic
• gt served as peace order for a unusual long period
  of time
• Important to safeguard the trust of the
  neighbours gt integration does not abolish
  interests or conflicts, however it provides for
  peaceful settlement among reliable partners

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• What would have been gained by non-integration is
  less that what has been gained by integration
• Therefore gt integration is vital German
  interest
• gt also enlargement
• Additionally the political situation in the CEEC
  was of vital importance for the EC member gt EC
  were interested in political stability and
  economic progress gt therefore the EC had to be
  able to act in order to support the reform
  process in the CEEC.

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• Perspective for CEEC integration in developed
  West European structure, no CE or East European
  special way (Sonderweg) West orientation seemed
  also more attractive for CEE peoples and
  governments
• Dec 1991 Visegrad H Europe agreement with
  Poland, Hungary and CSFR (Czech and Slovak
  Federal Republic), later joined by
  Slovenia.(Later Bulgaria and Romania included)

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• Economically more than association of third-party
  nations, political signal for future integration
• Free trade area of industrial products within 10
  years asymmetrical liberalization gt reform
  nations got more time for opening their markets
  for foreign products than the EC
• Association Council gt permanent political
  dialogue, especially concerning education/
  vocational training, regional development,
  environment, transport and telecommunication

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• 9 11 Dec 1991 Maastricht summit gt
  representation of the results of the two
  Intergovernmental Conferences (IGCs) started in
  Dec 1990 (Rome summit)
• IGC on EMU and European Political Union (EPU)
  were conducted simultaneously
• EMU IGC gt European Council Madrid June 1989 gt
  Delors Report on EMU
• EPU IGC gt June 1990 Dublin, proposal for
  Political Union by Kohl, Mitterand and Belgian
  government

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• Agreed upon 1991 as Maastricht Treaty, officially
  Treaty on European Union (TEU EU-V),
• Signed 7 Feb 1992 at Maastricht together with the
  treaty on EMU,
• negotiated at Rome, in force Nov 1993
• Place in historical development
• Extension of intergovernmental cooperation within
  the Community
• Deepening of supranational integration in vital
  economic areas

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• Base Acceptance of a multiple and fragile
  alliance of interests among the 12 EC MS. Nothing
  which was unaccepted for any MS gt Price opting
  out of GB from social policy (Social Chapter)
• Incremental continuation of the known course of a
  peculiar mixture of supranational and
  intergovernmental approaches
• No big leap forward, no new Constitution for a
  future Federal Europe
• Flexible adaptation of the Community system to a
  historically changed environment, insofar as they
  were acceptable for the MS

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• Community remained a mixture of supranational and
  intergovernmental constituent parts
• Supranational monetary and economic integration
• A confederal Political Union in charge of
  Common Foreign and Security Policies (CFSP
  GASP)
• Intergovernmental cooperation in Justice and Home
  Affairs (JHA ZIJP)
• Additionally flexible and differentiated policies
  in areas like environment, social policy,
  acceptance to EMU
• Different developments at the same time,
  different speeds resulting in increasing
  plurality and complexity of the Union

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• Three-pillar-model

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• Some details and explanations of TEU
• EMU is the logical next step after the Single
  Market (realized 1 Jan 1993 gt not only
  approximation of law and abolition of barriers,
  but also economic policy gtcurrency
• However coordination of economic policies of MS,
  not gt common policy responsibility rests with MS
  gt three steps procedure
• Principles laid down in European Council gt by
  consensus
• Council of Ministers gives recommendations by QMV
• EP gets informed (not heard, no co-decision)

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• Hardly any sanctions against violations
• Problem different economic policy approaches gt
  F state interventionism GB market economy D
  social market economy, corporatist system

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Economic and Monetary Union (EMU)

• Historical background (of Euro) (partly
  repetition)
• Common currency was an old objective of economic
  integration gt Hague summit 1969, Werner Report
  1970, Monetary snake since 1972 (fluctuations
  of exchange rate between EC currencies were to be
  reduced to 2.25 pc), 1973 bloc floating
  against the US-
• Objective EMU 1980
• Failure because turbulences in 1970s gt oil price
  shock
• Nevertheless 1979 EMS and ECU

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• 2nd attempt 1989 gt Delors Report three stages
  towards EMU
• Liberalization of capital markets and intensified
  monetary cooperation
• Establishment of EMI and ECB
• EMU, fixed exchange rates gt common currency

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• 1998 decision about EMU participation according
  to Maastricht criteria on data of 1997
• 1999 fixed exchange rates national currencies
  Euro, monetary policy concentrated at ECB, not
  any longer in the hands of national Central
  Banks.
• 2002 end of co-existence of Euro (book money) and
  national bills and coins gt as real money in
  the pockets of the European citizens

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• EMU (art. 98 124 ECold102 a 109m) WWU
  core piece of integration
• Objectives gt fixed exchange rates gt common
  currency gt ECU (later named Euro)
• Definition and implementation of a single
  monetary policy, targeting stability of prices,
  creating a European Central Bank
• Preconditions gt balancing and reducing of public
  deficits of the MS in the interest of a stable
  common currency (art. 104 EC) gt

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• Limits for
• Annual public deficit 3 pc of GNP
• Accumulated public debt 60 pc of GNP
• Control by Commission, sanctions need a 2/3
  majority (weighted votes) in the Council, votes
  of MS to be sanctioned not counted
• German problem According Art. 109 para 1 Basic
  Law the Länder are independent in budgetary
  policy they are allowed to borrow money in their
  own responsibility. The Länder are not obliged to
  and have always refused to respect the
  Maastricht criteria no sanctions

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• For EMU
• European Central Bank System (ECBS) gt European
  Central Bank (ECB) and Central Banks of the MS
• Objective (German interest) stability of currency
• Instruments gt centralized, compulsory and single
  monetary policy of EU
• Stability of prices as political and legal
  obligation of ECB
• Independence of monetary decision makers (ECB)
  from national governments or EU institutions
• No financing of deficits by ECB

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• Independence of members of ECB and ECBS gt
• none of them is allowed to request or accept
  advise from national or EU institutions
• Six member, elected for eight years, no second
  elections
• Right to issue bank notes with ECBS only (since 1
  Jan 2002)
• MS had to grant their central banks independence
  from the governments. Formerly except
  Bundesbank all central banks had to act
  according advise of their national governments

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• Realization or steps towards EMU
• 1st stage, decided by Madrid summit June 1989
  (Delors Report), started 1 July 1990 gt
  Liberalization of capital markets and intensified
  monetary cooperation removal of exchange
  controls in 8 of 12 MS (others to follow),
  inclusion in principle of all EC currencies in
  Exchange Rate Mechanism (ERM), measures to
  encourage convergence. No new institutions.
• Dec 1991 Maastricht Treaty signed gt Maastricht
  criteria

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• 1992/93 gt crisis/breakdown of EMS because of high
  interest rates by Bundesbank gt Fed. Gvt. financed
  German unification by debts. GB and Italy leave
  EMS.
• 1993 fluctuation within snake extended from
  2.25 pc to 15 pc.
• 2nd stage started 1 Jan 1994 with European
  Monetary Institute, based in Frankfurt/Maingt
  coordinating role gt start of convergence criteria
  (3 pc/60 pc inflation rate not more than 1.5 pc
  above the rate of the 3 best MS, stability in
  EMS)
• Denmark and GB opted out

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• 1998 The Council of Ministers (at the level of
  the heads and governments only case!) had to
  decide by QMV whether or not the majority of the
  MS fulfil the obligations, and whether it is
  appropriate to start the 3rd stage towards EMU. gt
  decision about EMU participation according to
  Maastricht criteria on data of 1997
• The Council also sets the starting dates. If by
  the end of 1997 no date has been set, the 3rd
  stage was to begin on 1 Jan 1999
• EP had to be consulted

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• 3rd stage of EMU started as stipulated by TEU
  on 1 Jan 1999.
• At the start of the 3rd stage, the participating
  MS had to adopt irrevocably fixed rates at
  which the ECU would substitute the national
  currencies and take measures for rapid
  introduction of ECU as single currency
• Fixed rates national currencies to Euro, as the
  ECU was renamed.
• monetary policy concentrated at ECB, not any
  longer in the hands of national Central Banks.
• EMI was replaced by ECB

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• MS which will not qualify for single currency
  will be excluded from decision making in these
  institutions
• MS which did not take part from the beginning
  should have the opportunity to join later
• 2002 end of co-existence of Euro (book money) and
  national bills and coins gt as real money in
  the pockets of the European citizens

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• Political decision to accept 11 MS, later Greece
  as 12th in the EURO-group. Sweden only remained
  outsideGB and DK used their opting-out clauses
  of the TEUEuro seems to attractive new MS want
  to join as soon as possible.

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• Political Union
• EMU is core of further integration
• Economic integration extended to common monetary
  and finance policy will necessarily create demand
  for more common policies (functional approach,
  spill-overs)
• Therefore EMU is primarily political and need as
  supplement Political Union gt TEU combines EMU and
  EPU gt
• By this Treaty the High Contracting Parties
  establish among themselves a European Union
  (Art. 1 TEU)
• Term European Union is not new, often used,
  however not precise

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• Compromises in terminology cover differences
  about the objective of the integration process
  federal Europe or league of European nations?
• Originally attempt to oblige the EU on a federal
  finality, due to British objections
• ever closer Union of the peoples of Europe
  (Art. 1 TEU) leaves problem of finality unsolved,
  
• However emphasizes the openness, the process
  character of unfinished integration
• Therefore TEU is not the end but a stage of
  integration process

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• New policy areas of the EU
• Education, culture, health, consumers protection,
  trans-European networks (transport,
  telecommunication), industrial policies,
  cooperation in development policies
• However, not real exclusive new powers for
  EU, but policies in which the EU acts
  additionally gt decisions remain with MS

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• Union Citizenship
• TEU introduced Union Citizenship additionally to
  national citizenships (burgundy European
  passports)
• Rights for citizens of EU
• Free movement and right to stay within the Union
  for all EU citizens not only for employees, for
  all except new MS, will be enforced in
  2007/2009
• Right to vote at local and European elections in
  the MS where the citizen lives (why not for
  national or regional parliaments?)
  municipalities and EU are not state level

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• Diplomatic protection in case there is no
  diplomatic representation of home country
• Right to petition to the EP
• Social policy gt largely extended gt
• GB did not take part (Thatcher), but signed in
  1997 after Tony Blair had become PM
• Solution Social protocol outside the TEU,
  opting-in of the other 11, later as Social
  Chapter part of the Treaty (Art. 136ff. TEC)

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• Art. 136 TEC objective of Community
• High level of permanent employment, improvement
  of living and work conditions, adequate social
  security, social dialogue, development of work
  force, fight against exclusion
• New regulations concerning work conditions,
  information and hearing of employees, equal
  opportunities for men and women in the labour
  market and equal treatment at the workplace, job
  integration of persons excluded from the labour
  market
• Decisions partly by QMV and consent of EP, party
  unanimous vote in the Council after hearing of EP

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• No regulations concerning minimum wages, strike
  or lock out
• In this context Cohesion Fund gt additional to
  Structural Fund (and others) gt support of
  MS/regions with a GNP of less than 90 pc per
  capita gt requirement gt appropriate programmes gt
  additional fiscal equalization for poorer regions
• New instruments of policy steering open method
  of coordination Commission sets standards in
  certain areas and publishes to which degree the
  MS fulfil these gt f.e. proportion of women or
  elderly (more than 50 years old) in the workforce

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• Another problem connected with Maastricht gt
  Europe of different speeds, concentric circles,
  variable geometry etc.
• What happens when not all MS are ready to accept
  the next step of integration proposed by a
  majority of MS gt EMU, Schengen, Social Chapter