European Union

 I INTRODUCTION

European Union (EU), organization of European countries dedicated to increasing economic integration and strengthening cooperation among its members. The European Union headquarters is in Brussels, Belgium. The European Union was formally established on November 1, 1993. It is the most recent in a series of European cooperative organizations that originated with the European Coal and Steel Community (ECSC) of 1951, which became the European Community (EC) in 1967. The members of the EC were Belgium, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, The Netherlands, Portugal, the United Kingdom, and Spain. In 1991 the governments of the 12 member states signed the Treaty on European Union (commonly called the Maastricht Treaty), which was then ratified by the national legislatures of all the member countries. The Maastricht Treaty transformed the EC into the EU. In 1995 Austria, Finland, and Sweden joined the EU, bringing the total membership to 15 nations. The EU has a number of objectives. Its principal goal is to promote and expand cooperation among member states in economics and trade, social issues, foreign policy, security and defense, and judicial matters. Another major goal has been to implement Economic and Monetary Union (EMU), which established a single currency for EU members. With the exception of EMU, which went into effect in 1999, progress toward these goals has been erratic. Various factors have limited the EU’s ability to achieve its goals, including disagreements among member states, external political and economic problems, and pressure for membership from the new democracies of Eastern Europe.

II HISTORY OF THE EUROPEAN UNION

The dream of a united Europe is almost as old as Europe itself. The early 9th-century empire of Charlemagne covered much of western Europe. In the early 1800s the French empire of Napoleon I encompassed most of the European continent. During World War II (1939-1945), German leader Adolf Hitler nearly succeeded in uniting Europe under Nazi domination (see National Socialism). All these efforts failed because they relied on forcibly subjugating other nations rather than fostering cooperation among them. Attempts to create cooperative organizations fared little better until after World War II. Until then, nations strongly opposed all attempts to infringe on their powers and were unwilling to yield control over their policies. Early collaborative ventures were international or intergovernmental organizations that depended on the voluntary cooperation of their members; consequently, they had no direct powers of coercion to enforce their laws or regulations. Supranational organizations, on the other hand, require members to surrender at least a portion of their control over policy areas and can compel compliance with their mandates. After World War II, proposals for some kind of supranational organization in Europe became increasingly frequent. A Early Cooperation Postwar aspirations for a European supranational organization had both political and economic motives. The political motive was based on the conviction that only a supranational organization could eliminate the threat of war between European countries. Some supporters of European political unity, such as the French statesman Jean Monnet, further believed that if the nations of Europe were to resume a dominant role in world affairs, they had to speak with one voice and command resources comparable to those of the United States. The economic motive rested on the belief that larger markets would promote competition and thus lead to greater productivity and higher standards of living. Economic and political viewpoints merged in the assumptions that economic strength was the basis of political and military power, and that a fully integrated European economy would reduce conflict among European nations. Because countries were hesitant to surrender any control over national affairs, most of the practical proposals for supranational organizations assumed that economic integration would precede political unification. B Benelux Customs Union The Benelux Customs Union (now the Benelux Economic Union) is an early example of a supranational economic organization. This union provided for a free-trade area composed of Belgium, The Netherlands, and Luxembourg, and for a common tariff imposed on goods from outside the union. Formed in 1948, the union grew from the recognition that the economies of the separate states were individually too small to be competitive in the global market. Belgium and Luxembourg had, in fact, joined in an economic union as early as 1921, and the governments of Belgium and The Netherlands had agreed in principle on a customs union during World War II. These three countries have been among the warmest advocates of European cooperation, and they have continued to work for closer economic integration of their own countries independently of broader European developments. C European Coal and Steel Community (ECSC) The first major step toward European integration took place in 1950. At that time French foreign minister Robert Schuman, advised by Jean Monnet, proposed the integration of the French and German coal and steel industries and invited other nations to participate. Schuman’s motives were as much political as economic. Many Europeans felt that German industry, which was reviving rapidly, needed to be monitored in some way. The ECSC provided an appropriate mechanism since coal and steel are central to many modern industries, especially the armaments industry. The Schuman Plan, as it was called, created a supranational agency to oversee aspects of national coal and steel policy, such as levels of production and prices. Not coincidentally, this mandate allowed the agency to keep German industry under surveillance and control. Determined to allay fears of German militancy, West Germany immediately signed on and was soon joined by the Benelux nations and Italy. The United Kingdom, concerned about a potential loss of control over its industry, declined to join. The treaty establishing the ECSC was signed in 1951 and took effect early the following year. It provided for the elimination of tariffs and quotas on trade in iron ore, coal, coke, and steel within the community; a common external tariff on imports relating to the coal and steel industries from other nations; and controls on production and sales. To supervise operations of the ECSC, the treaty established several supranational bodies: a high authority with executive powers, a council of ministers to safeguard the interests of the member states, a common assembly with advisory authority only, and a court of justice to settle disputes. D European Economic Community (EEC) In 1957 the participants in the ECSC signed two more treaties in Rome. These treaties created the European Atomic Energy Community (Euratom) for the development of peaceful uses of atomic energy and, most important, the European Economic Community (EEC, often referred to as the Common Market). The EEC treaty provided for the gradual elimination of import duties and quotas on all trade between member nations and for the institution of a common external tariff. Member nations agreed to implement common policies regarding transportation, agriculture, and social insurance, and to permit the free movement of people and financial resources within the boundaries of the community. One of the most significant provisions of the treaty was that it could not be renounced by just one of the members and that, after a certain amount of time, further community decisions would be made by a majority vote of the member states rather than by unanimous action. Both the EEC and the Euratom treaties created separate high commissions to oversee their operations. However, it was agreed that the ECSC, EEC, and Euratom would be served by a single council of ministers, representative assembly, and court of justice. In the preliminaries to the 1957 treaties of Rome, other nations were invited to join the EEC. The United Kingdom objected to the loss of control over national policies implied in European integration and attempted to persuade European nations to create a free-trade area instead. After the EEC treaty was ratified, the United Kingdom, Norway, Sweden, Denmark, Switzerland, Austria, and Portugal created the European Free Trade Association (EFTA). The EFTA treaty provided only for the elimination of tariffs on industrial products among member nations. It did not extend to agricultural products, nor did it provide a common external tariff, and members could withdraw at any time. Thus the EFTA was a much weaker union than the Common Market. In 1961, with the EEC’s apparent economic success, the United Kingdom changed its view and began negotiations toward EEC membership. In January 1963, however, French president Charles de Gaulle vetoed British membership, mainly because of the United Kingdom’s close ties to the United States. De Gaulle vetoed British membership a second time in 1967. E European Community (EC) In July 1967 the three organizations (the EEC, the ECSC, and Euratom) fully merged as the European Community (EC). The basic economic features of the EEC treaty were gradually implemented, and in 1968 all tariffs between member states were eliminated. No progress was made on enlargement of the EC or on any other new proposals, however, until after de Gaulle resigned as president of France in May 1969. The next French president, Georges Pompidou, was more open to new initiatives within the EC. At Pompidou’s suggestion, a meeting of the leaders of the member states was held in The Hague, The Netherlands, in December 1969. This meeting paved the way for the creation of a permanent financing system for the EC based on contributions from member states; the development of a framework for foreign policy cooperation among member nations; and the opening of membership negotiations with the United Kingdom, Ireland, Denmark, and Norway. F Expansion of the EC In 1972, after nearly two years of negotiations, it was agreed that the four applicant countries would be admitted on January 1, 1973. The United Kingdom, Ireland, and Denmark joined as scheduled; however, in a national referendum, the people of Norway voted against membership. In the United Kingdom, however, popular opposition to EC membership remained. Many Britons felt British contributions to the EC budget were too high. After the Labour Party regained power in the United Kingdom in 1974, it carried out its election promise to renegotiate British membership conditions in the EC, particularly the financial ones. The renegotiation resulted in only marginal changes. However, questions about the United Kingdom’s commitment to the EC added to existing uncertainties within the community caused by the economic problems of the 1970s. The Labour government endorsed continued EC membership and called a national referendum on the issue for June 1975. Despite strong opposition from some groups, the British people voted for continued membership. G Single European Act (SEA) By the 1980s, 30 years after its inception, the EC still had not realized the hopes of the most ardent supporters of European unity: a United States of Europe. In fact, despite the removal of internal tariffs, it had not even succeeded in ending all restrictions on trade within the EC, nor in eliminating internal customs frontiers. The admission of less-developed Mediterranean countries—Greece in 1981, then Spain and Portugal in 1986—introduced a host of new problems, most related to their lower levels of economic development. In particular, the greater reliance of these countries on agriculture meant that a large percentage of funds the EU earmarked to support agriculture within the community would have to be redirected to the new members. This caused alarm within some quarters of the EU, particularly in Ireland, which feared that its own share of these funds would be reduced. In 1985 the European Council, composed of the heads of state of the EC members, decided to take the next step toward greater integration. In February 1986 they signed the Single European Act (SEA), a package of amendments and additions to the existing EC treaties. The SEA required the EC to adopt more than 300 measures to remove physical, technical, and fiscal barriers in order to establish a single market, in which the economies of the member states would be completely integrated. In addition, member states agreed to adopt common policies and standards on matters ranging from taxes and employment to health and the environment. Each member state also resolved to bring its economic and monetary policies in line with those of its neighbors. The SEA entered force in July 1987. H Creation of the European Union In the late 1980s, sweeping political changes led the EC once again to increase cooperation and integration. As Communism crumbled in Eastern Europe, many formerly Communist countries looked to the EC for political and economic assistance. The EC agreed to give aid to many of these countries, but decided not to allow them to join the EC immediately. An exception was made for East Germany, which was automatically incorporated into the EC after German reunification. In the wake of the rapid political upheaval, West Germany and France proposed an intergovernmental conference (IGC) to pursue closer European unity. An IGC is a meeting between members that begins the formal process of changing or amending EC treaties. Another IGC had occurred earlier, in 1989, to prepare a timetable and structure for monetary union, in which members of the community would adopt a single currency. British prime minister Margaret Thatcher opposed calls for increased European unity, but in 1990 John Major became prime minister and adopted a more conciliatory approach. The IGCs began work on a series of agreements that would become the Treaty on European Union. I Treaty on European Union The Treaty on European Union (often called the Maastricht Treaty) founded the EU and was intended to expand political, economic, and social integration among the member states. After lengthy negotiations, it was accepted by the European Council at Maastricht, The Netherlands, in December 1991. Of particular significance, the treaty committed the EU to Economic and Monetary Union (EMU). Under EMU the member nations would unify their economies and adopt a single currency by 1999. The Maastricht Treaty also set strict criteria that member states had to meet before they could join EMU. In addition, the treaty created new structures designed to promote a more integrated foreign and security policy and to encourage greater cooperation on judicial and police matters. The member states granted the EU governing bodies more authority in several policy areas, including the environment, education, health, and consumer protection. The new treaty aroused a good deal of popular opposition among EU member states. Much of the concern centered on EMU, which would replace national currencies with a single European currency. The United Kingdom refused to endorse some aspects of the treaty and gained exemptions from them, called opt-outs. These included not joining EMU and not participating in the Social Chapter, a section of the Maastricht Treaty outlining goals in social and employment policy, including a common code of worker rights. Danish voters rejected the treaty in a referendum, while French voters favored the treaty by only a slim majority. In Germany, a challenge to the treaty lodged with the country’s supreme court contended that membership in the EU violated the German constitution. In an emergency meeting of the European Council, Denmark gained substantial concessions and exemptions, including the right to opt out of EMU and any future common defense policy. Danish voters then approved the treaty in a subsequent referendum. Because of these difficulties, the EU was not formally inaugurated until November 1993. J Amsterdam Treaty Popular reactions against some elements of the Maastricht Treaty led to another intergovernmental conference among EU leaders that began in March 1996. This IGC produced the Amsterdam Treaty, which revised the Maastricht Treaty and other founding EU documents. The revisions were intended to make the EU more attractive and relevant to ordinary people. The Amsterdam Treaty called on member nations to cooperate to create jobs throughout Europe, protect the environment, improve public health, and safeguard consumer rights. In addition, the treaty provided for the removal of barriers to travel and immigration among the EU member states except for the United Kingdom, Ireland, and Denmark, all of which retained their original border controls. The treaty included the potential for cooperation and integration with the Western European Union (WEU), an organization of Western European powers focused on defense. It also allowed the possibility of admitting countries from Eastern Europe to the EU. The Amsterdam Treaty was signed by EU members on October 2, 1997. A document issued by the European Commission (the EU’s highest administrative body) in 1997, known as Agenda 2000, outlined a strategy for EU enlargement under the Amsterdam Treaty. The document called for wide-ranging reforms within the EU before any enlargement agreement could move forward. These included measures to increase economic growth, competitiveness, and employment; agricultural and structural reforms; and a new European financial framework. K Treaty of Nice The theme of EU expansion was addressed again in 2000 in what became the Treaty of Nice. Signed in 2001, this treaty outlined a series of staged reforms to prepare the EU for enlargement. The treaty called for a reduction in the potential size of the European Commission, reforms to voting rules and processes in the Council of the European Union, and a reallocation of seats in the European Parliament to member states. Unlike the Single European Act or the Amsterdam Treaty, the Treaty of Nice did not seek to broaden the authority of the EU. Rather, the role and powers of an enlarged EU were addressed elsewhere—in the Laeken Declaration of 2001 and by the Convention on the Future of Europe, convened in March 2002. By late 2002, all EU members had ratified the Treaty of Nice. However, Irish voters nearly forced a renegotiation of the treaty after rejecting it in a referendum in 2001; many Irish worried that EU enlargement would reduce financial benefits received by Ireland. Nevertheless, Ireland’s ratification was secured in a second referendum held the following year, putting the schedule for EU enlargement back on course. L Monetary Union The EU’s attempts to establish a single European currency, as set out in the Maastricht Treaty, were controversial from the start. Some EU countries, including the United Kingdom, worried that a shared European currency would threaten their national identity and governmental authority. Despite such concerns, many EU member countries struggled to meet the economic requirements for participating in EMU and adopting a shared currency, which was named the euro. These requirements were stringent: (1) a country’s rate of inflation could not be more than 1.5 percent higher than an average of the rate in the three countries with the lowest inflation; (2) a country’s budget deficit could not exceed 3 percent of gross domestic product (GDP), and its national debt could not exceed 60 percent of GDP; (3) a country’s long-term interest rate could not be more than 2 percent higher than an average of the rate in the three countries with the lowest interest rates; (4) a country could not have devalued its currency against any other member nation’s for at least two years prior to monetary union. EMU participants also agreed to abide by the Stability and Growth Pact, a budgetary agreement designed to underpin the euro after its planned launch in 1999. The pact required countries to keep their annual budget deficits below 3 percent of GDP or else risk fines, and it directed countries to take measures to eliminate their budget deficits altogether. Most countries found it difficult to meet the EMU requirements. Measures to reduce inflation and high interest rates contributed to increasing unemployment, while efforts to control government deficits often led to higher taxes. These consequences compounded the problems of economic recession that most countries were already experiencing. As the deadline for EMU approached, misgivings arose from many quarters that the economic climate was not right, that levels of economic performance across the countries were still too disparate, and that several countries had not strictly met the Maastricht criteria. Despite these concerns, the EU officially agreed in May 1998 to adopt the euro for 11 of the 15 member countries beginning on January 1, 1999. This agreement also created the European Central Bank (ECB) to oversee the new currency and to take charge of the monetary policies of the EU. The countries to adopt the euro were Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, The Netherlands, Portugal, and Spain. The United Kingdom, Sweden, and Denmark met the EMU criteria but decided not to participate. Greece had hoped to be included in the first wave of countries to adopt the euro but failed to meet the criteria. On January 1, 1999, the 11 nations participating in the so-called euro zone began to use the euro for accounting purposes and electronic money transfers; their national currencies remained in circulation for other uses. Greece adopted the euro in January 2001, becoming the 12th member of the euro zone. In 2002 the ECB began issuing euro-denominated coins and banknotes, and the currencies of countries within the euro zone ceased to be legal tender. After some initial teething troubles, the euro established itself as a viable currency in international money markets. Concern now shifted to the enforcement of a common monetary policy, under strict direction from the European Central Bank. Slowing growth and rising unemployment across the euro zone after 2000, however, led to higher budget deficits, and the European Commission soon had to warn Ireland and Germany to reduce their budgetary expenditures to conform to limits required by the Stability and Growth Pact. By 2002 there had emerged within the EU a broader concern about the continued feasibility of the Stability and Growth Pact. Many more countries seemed to be nearing, or in breach of, permissible budget deficits. At the same time, efforts to enforce the pact’s deficit ceiling were seen as inhibiting expenditures needed by national governments to promote social welfare and economic recovery. M Growing Accountability The introduction of EMU led to unprecedented integration and cooperation among EU members. One consequence was a growing concern among European citizens and some EU member governments that the major EU institutions were not sufficiently democratic or accountable. Much of this concern centered on the European Commission. As the power of the EU grew, so did worries that the commission exercised too much control with too little oversight. At the same time, there were also concerns that the one democratically elected institution of the EU, the European Parliament, had little real power. This issue came to a head in 1999, when a report prepared by independent auditors at the request of the European Parliament cited multiple examples of mismanagement on the part of the European Commission. The report accused several commissioners of corruption, cronyism, and poor oversight over programs under their control. After the report was released, the entire European Commission resigned, something that had never happened before. Experts generally considered the report and its consequences to be an important step by the European Parliament toward increasing the democratic accountability of the EU governing bodies.

III STRUCTURE OF THE EU

A Pillar System The members of the EU cooperate in three distinct areas, often called pillars. At the heart of this system is the European Community (EC) pillar with its supranational functions and its governing institutions. The EC pillar is flanked by two pillars based on intergovernmental cooperation: Common Foreign and Security Policy (CFSP) and Justice and Home Affairs (JHA). These two pillars are a result of the Maastricht agreement to develop closer cooperation in these areas. However, because the members were unwilling to cede authority to new supranational institutions, policy decisions in these pillars are made by unanimous cooperation between members and cannot be enforced. For the most part, the governing institutions of the EC pillar have little or no input in the other two. The CFSP and JHA pillars are based entirely on intergovernmental cooperation, and decisions must be made unanimously. CFSP is a forum for foreign policy discussions, common declarations, and common actions that work toward developing a security and defense policy. It has successfully developed positions on a range of issues and has established some common policy actions; however, the CFSP has failed to agree on a common security and defense. Some countries, led by France, want an integrated European military force, while others, especially the United Kingdom, insist that United States involvement through the North Atlantic Treaty Organization (NATO) is vital for European security. This second argument was reinforced when the EU failed to resolve the crisis in Yugoslavia that began in 1991. Between 1991 and 1992 four of Yugoslavia’s six republics declared independence, resulting in a series of violent wars (see Yugoslav Succession, Wars of). EU attempts to find a settlement for these conflicts were ineffective because member states could not agree on how they should be involved, and they feared being dragged into military intervention. The Yugoslav crisis underlined the difficulties in achieving a common foreign policy for the EU. Effective international intervention in Yugoslavia ultimately came only with U.S. and NATO involvement, acting under the auspices of the United Nations. As a result of lessons learned in Yugoslavia, clauses were included in the Amsterdam Treaty for improving cooperation on security and defense. Since the late 1990s the EU has developed the Common European Security and Defense Policy as an interim step toward the ultimate goal of a common defense policy. The EU has expressed its determination to take on a greater international role and more responsibility for humanitarian operations and peacekeeping activities. The EU also began to develop a rapid-reaction military force to enable it to respond to crises quickly with combat troops. The EU has been more successful in JHA, which formalized and extended earlier intergovernmental cooperation in combating crime, especially drug trafficking, and in setting immigration and asylum policies. Under the Amsterdam Treaty, some aspects of JHA were moved to the supranational EC pillar. These related to asylum and visa issues, immigration policy, and external border controls. The JHA pillar is now primarily concerned with police cooperation and combating international crime. Standing above the three pillars and in a position to coordinate activities across all of them is the European Council. The council is in strict legal terms not an EU institution. It is the meeting place of the leaders of the national governments. Its decisions are almost always unanimous but usually require intense bargaining. The council shapes the integration process and has been responsible for almost all EU developments, including the SEA and the Maastricht, Amsterdam, and Nice treaties. The European Council has provided the EU with initiatives for further development, agendas in various policy fields, and decisions that it expects the EU to accept. The council’s actions illustrate one of the major dilemmas within the EU: how to promote further unity and integration while permitting national governments to retain as much influence as possible over decisions. B Major Bodies The European Community (EC) pillar contains all the governing institutions of the EU. The major ones are the European Commission, the Council of the European Union, the European Parliament, the European Court of Justice, and the Court of Auditors. In addition, there are many smaller bodies in the EC pillar, such as the Economic and Social Committee, and the Committee of the Regions. B1 European Commission The European Commission is the highest administrative body in the EU. Unlike the European Council, which oversees all three pillars of the EU, the commission concentrates almost solely on the EC pillar. It initiates, implements, and supervises policy. It is also responsible for the general financial management of the EU and for ensuring that member states adhere to EU decisions. The commission is meant to be the engine of European integration, and it spearheaded preparations for the single market and moves toward establishing the euro. Currently there are 20 commissioners, who are appointed by the member governments and are supported by a large administrative staff. France, Germany, Italy, Spain, and the United Kingdom each appoint two commissioners; the other countries appoint one each. The policy of each member state selecting a commissioner became the subject of debate as preparations for EU enlargement progressed. If each country in an enlarged EU were allowed to appoint at least one commissioner, the commission would be much larger, making it too unwieldy to be an effective executive and decision-making authority. In addition, the fact that the commission is appointed by member governments and not elected by the people has raised questions about how much power it should be allowed to exercise. The Treaty of Nice clarified details about the future structure of the commission in an enlarged EU. After 2005 each member state would have only one commissioner. However, when the EU reached 27 member states, the European Council would be obliged to determine how large the commission should be. The treaty also altered the selection procedures for commissioners, giving the European Council and the European Parliament a role in the confirmation process. B2 Council of the European Union The Council of the European Union (formerly called the Council of Ministers) represents the national governments. It is the primary decision-making authority of the EU and is the most important and powerful EU body. Although its name is similar to that of the European Council, the Council of the European Union’s powers are essentially limited to the EC pillar, whereas the European Council oversees all three pillars of EU cooperation. When the Council of the European Union meets, one government minister from each member state is present. However, the minister for each state is not the same for every meeting. Each member state sends its government minister who is most familiar with the topic at hand. For example, a council of defense ministers might discuss foreign policy, whereas a council of agriculture ministers would meet to discuss crop prices. The Council of the European Union adopts proposals and issues instructions to the European Commission. The council is expected to accomplish two goals that are not always compatible: further EU integration on one hand and protection of the interests of the member states on the other. This contradiction could become more difficult to reconcile as the EU continues to expand. Decision-making in the council is complex. A few minor questions can be decided by a simple majority. Many issues, however, require what is called qualified majority voting, or QMV. In QMV each country has an indivisible bloc of votes that is roughly proportional to its population. It takes two-thirds of the total number of votes to make a qualified majority. QMV was introduced in some policy areas to replace the need for a unanimous vote. This has made the decision-making process faster and easier because it prevents any one state from exercising a veto. Since the Single European Act, QMV has been steadily extended to more areas. Many important decisions, however, still require unanimous support. B3 European Parliament (EP) The European Parliament (EP) is made up of 626 members who are directly elected by the citizens of the EU. Direct elections to the EP were impl