View
519
Download
1
Category
Tags:
Preview:
DESCRIPTION
University of Canterbury course ECON339: Lecture 1
Citation preview
ECON339EURO339
January 2012
Historical and Political Integration in Europe,
1945-2012
ECON339 / EURO339
2
The EU in 2012
ECON339 / EURO339
3
Early Post War Period: the Climate for Radical Change
Death toll The Economic Set-Back: Pre-war year when GDP equalled that of 1945
Austria 525,000 1886 Belgium 82,750 1924 Denmark 4,250 1936 Finland 79,000 1938 France 505,750 1891 Germany 6,363,000 1908 Italy 355,500 1909 Netherlands 250,000 1912 Norway 10,250 1937 Sweden 0 GDP grew during WWII Switzerland 0 GDP grew during WWII UK 325,000 GDP grew during WWII
ECON339 / EURO339
4
London 1940 East London, 1940
Early Post War Period: the Climate for Radical Change
ECON339 / EURO339
5
Rotterdam, 1940
Early Post War Period: the Climate for Radical Change
ECON339 / EURO339
6
Reichstag, 1945Frankfurter Allee, 1945
Early Post War Period: the Climate for Radical Change
ECON339 / EURO339
7
Brandenburg Gate
Early Post War Period: the Climate for Radical Change
ECON339 / EURO339
8
Unter der Linden, 1945 Unter der Linden, 1997
Early Post War Period: the Climate for Radical Change
ECON339 / EURO339
9
Berlin Cathedral, 1945 Berlin Cathedral, 1997
Early Post War Period: the Climate for Radical Change
ECON339 / EURO339
10
Refugees and famine
The situation worsens 1945-47 1946/47 winter Famine and starvation 1m refugees in UN camps 7m Displaced Persons (DPs) returned home Political turmoil – monarchies abolished
ECON339 / EURO339
11
How can Europe avoid another war?
What caused the war? Blame the loser (as in 1919) Capitalism Rampant nationalism (fascism)
Three different post-war solutions Blame the loser? - deindustrialise Germany – Henry
Morgenthau (US Treasury Secretary), 1944 Capitalism? - adopt communism Nationalism? - pursue European integration
European integration ultimately prevailed
ECON339 / EURO339
12
Emergence of a divided Europe
Germany, Austria & Berlin divided into four zones
ECON339 / EURO339
13
Winston Churchill, Fulton, Missouri, March 5th, 1946
‘From Stettin in the Baltic to Trieste in the Adriatic an iron curtain has descended across the Continent. Behind that line lie all the capitals of the ancient states of Central and Eastern Europe. Warsaw, Berlin, Prague, Vienna, Budapest, Belgrade, Bucharest and Sofia…’
ECON339 / EURO339
14
Winston Churchill, Fulton, Missouri, March 5th, 1946
‘… all these famous cities and the populations around them lie in what I must call the Soviet sphere, and all are subject, in one form or another, not only to Soviet influence but to a very high and in some cases increasing measure of control from Moscow.’
ECON339 / EURO339
15
The Iron Curtain
ECON339 / EURO339
16
The Iron Curtain
ECON339 / EURO339
17
East German Guard Towers
The Iron Curtain
ECON339 / EURO339
18
The ‘Cold War’ begins
USSR enforces communism in the East UK, French and US zones merged by 1948 Moves towards creation of West German
government Berlin ‘air bridge’, June 1948
'Neuter (“deindustrialise”) Germany' solution abandoned for strong West Germany plus European integration
ECON339 / EURO339
19
First Steps at European integration
The Organisation for European Economic Cooperation and the European Payments Union Marshal Plan, 1948-52: $12bn US aid to western
Europe (CMEA USSR response, 1949-) OEEC (1948-61) coordinated aid distribution and
prompted trade liberalisation EPU (1950-58) multilateralised bilateral barter deals
between bankrupt states and fostered trade liberalisation
ECON339 / EURO339
20
Need for deeper European integration
As Cold War got more war-like, West German rearmament became necessary. 1949, Federal Republic of (West) Germany
established Strong and independent Germany feared OEEC too weak to bind strong, rearmed
Germany and avoid future wars Economic integration of Germany essential to
permit rearmament
ECON339 / EURO339
Brief aside from the chronology
Nobel Peace Prize 2012 awarded to EU for:
‘for over six decades [having] contributed to the advancement of peace and reconciliation, democracy and human rights in Europe’
‘By building up mutual confidence, historical enemies can become close partners’
‘introduction of democracy’ in Greece, Spain and Portugal
overcoming of ‘the division between East and West’
contributing to ‘process of reconciliation in the Balkans’
21
ECON339 / EURO339
22
Two strands of European integration
Federalism vs intergovernmentalism Federalism – supranational institutions (G, F, I) Intergovernmentalism – nations retain sovereignty
(UK, Scandinavia, neutrals)
Intergovernmental initiatives OEEC (1948) Council of Europe (1949) Court of Human Rights (1950) EFTA (1960)
ECON339 / EURO339
23
Two strands of European integration
Federal initiatives Robert Schuman Plan – European Coal and Steel
Community (1951) Coal and steel – ‘commanding heights’
1955 Germany joins NATO, Warsaw Pact formed ECSC not enough
1957 ‘Treaties of Rome’ Euratom European Economic Community (EEC) – customs union
ECON339 / EURO339
24
1960-1973, two non-overlapping circles
E GR
IRL
FIN
IS
EFTA-7
EEC-6
N
S
PCH
A
UK
B
I
D
F
L
NL
DK
EEC-6
EEC GDP 2x > EFTA and growing faster
ECON339 / EURO339
25
Evolution to Two Concentric Circles
Preferential liberalisation in EEC and EFTA proceeded Discriminatory effects emerge, leading to new political
pressures for EFTA members to join EEC Trade diversion creates ‘force for inclusion’ As EEC enlarges, force for
inclusion strengthens When UK decides to apply for
EEC (1961), I, DK and N also
change their minds. De Gaulle’s ‘non’ (twice)
ECON339 / EURO339
26
Force for inclusion
‘Domino theory’ of regional integration Preferential lowering of trade barriers leads to
trade diversion …which leads to pressure on outsiders to join …as bloc grows… …’force for inclusion’ on remaining outsiders
grows further
ECON339 / EURO339
27
Evolution to Two Concentric Circles
1st enlargement, 1973 UK, Denmark, Ireland & Norway admitted
(Norwegians say ‘no’ in referendum)
Enlargement of EEC reinforces ‘force for inclusion’ on remaining EFTA members Remaining EFTA members sign FTA agreements
with EEC-9
ECON339 / EURO339
28
Two concentric circles
E GR
I
D
F
BL
NLIRL
P
UK
CHA
FINN
S
IS
DK
EEC-9
EFTA-7
ECON339 / EURO339
29
Euro-pessimism/Eurosclerosis, 1975-1986
Political shocks: ‘Luxembourg Compromise’ – unanimity/switch to
intergovernmentalism (1966) + enlargement (1973) leads to decision-making jam
Economic shocks: Bretton Woods falls apart, 1971-1973, kills Werner Plan
for monetary union 1973 and 1979 oil shocks with stagflation Growth of NTBs to trade Growing cost of Common Agricultural Policy
ECON339 / EURO339
30
Positive milestones 1975-86
Democracy in Spain, Portugal and Greece Greece joins in 1981 (2nd enlargement) Spain and Portugal join in 1986 after difficult accession
talks (3rd enlargement) EMS set up in 1979 works well Budget Treaties 1979 Cassis de Dijon decision
Challenged validity of national rules that introduce non-tariff barriers to trade
Mutual Recognition Principle introduced
ECON339 / EURO339
31
Deeper circles: single market programme
Mutual recognition as threat to national regulatory control; race to bottom?
How to put member governments back in charge? Delors launches completion of the internal market with Single
European Act 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 Mutual recognition is disciplined by minimum harmonisation More efficient decision making procedures allow agreement on
minimum standards
ECON339 / EURO339
32
Single Market Programme: ‘EC92’
Goods Trade Liberalisation Streamlining or elimination of border formalities Harmonisation of VAT (GST) 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
ECON339 / EURO339
33
Domino effect, part II
Deeper integration in EC-12 strengthened the ‘force for inclusion’ in remaining EFTA members
End of Cold War loosened EFTA members’ resistance to EC membership (eg, Austria, Finland)
Result of ‘force for inclusion’ European Economic Area (EAA) – initiative to extend single
market to EFTA members Membership applications by all EFTA members except
Iceland
Concentric circles, but both deeper
ECON339 / EURO339
34
4th enlargement
1994, Austria, Finland, Norway and Sweden admitted (Norwegians again vote no) Cyprus
Malta
1958
1973
1994
2004
19731981
ECON339 / EURO339
35
Communism’s creeping failure and spectacular collapse
By the 1980s, Western European system clearly superior due to the creeping failure of planned economies
Up to 1980s, Soviets thwarted reform efforts (economic and military pressure)
Gorbachev reforms: restructuring (perestroika) opening up (glasnost) Our ‘common European home’ Prague, April 1987
ECON339 / EURO339
36
Mathias Rust (19), May 28, 1987
ECON339 / EURO339
37
Velvet/bloody revolutions in eastern European
June 1989 Polish labour movement ‘Solidarity’ forced free parliamentary elections - communists lost Moscow accepted new Polish government
Moscow’s hands-off approach to the Polish election triggered a chain of events: Reformists in Hungarian communist party pressed for
democracy, Hungary opened its border with Austria ‘000s East Germans moved to West Germany via Hungary and
Austria. Mass protests in East Germany; Berlin Wall falls November 9th
1989 End of 1989: democracy in Poland, Hungary, Czechoslovakia,
East Germany, Romania and Bulgaria
ECON339 / EURO339
38
The fall of the Berlin Wall
ECON339 / EURO339
39
The end of the USSR
1990, Estonia, Latvia and Lithuania declared independence from USSR
August 1991, Soviet coup December 1991, USSR dissolved Cold War ends (Georgia 2008?) Military division of Europe ends
ECON339 / EURO339
40
The EU and the reconstruction of the CEECs
The EU reacted to the end of the Cold War by: providing emergency aid and loans to the fledgling
democracies in the Central and Eastern European Countries (CEECs)
signing of ‘Europe Agreements’ with newly free nations in Central and Eastern Europe
Europe Agreements were free trade agreements with promises of deeper integration and some aid
ECON339 / EURO339
41
From Copenhagen to Copenhagen
EU says CEECs can join the EU (June 1993) 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, robust market economy
Copenhagen summit December 2002 says 10 CEECs can join in 2004
5th enlargement in May 2004 (10 CEECs) 6th enlargement in May 2007 (Bulgaria and Romania)
ECON339 / EURO339
42
The by-product of the peace dividend: German unification and Maastricht
Jacques Delors proposes radical increase in European economic integration - formation of a monetary union
Pending 1990 unification of Germany opens door to a ‘grand bargain’ (Mitterrand, Kohl). Germany gives up DM for European Monetary Union… …and East Germany joins the EU without negotiation
Maastricht Treaty, signed 1992 monetary union by 1999, single currency by 2002 sets up EU’s ‘three pillar’ structure to reduce EU’s
‘competency creep’
ECON339 / EURO339
Mid-2000s – high water mark for the EU?
By 2007: European Union of 500m people, 27 countries, 20%
global GDP Single European Market complete – single European
market for goods, services, labour and capital European monetary union – single currency for 17 of
EU27 CEECs reintegrated into ‘western Europe’
43
ECON339 / EURO339
2008-2012 European sovereign debt crisis
Causes of European sovereign debt crisis complex
Easy credit in US and EU 2002–08 period and financial engineering led to: high-risk lending by banks (believed to be safer
because of securitisation of bank loans) Real estate ‘bubble’ in many countries Borrowing to fund capital projects by national and
regional EU governments
44
ECON339 / EURO339
2008-2012 European sovereign debt crisis (2)
Default on loans led to collapse in a number of banks in 2008
Credit dried up, real estate market crashed Governments nationalised banks to avoid
financial contagion (socialised private debt) As economy went into recession, fiscal
stabilisers increased budget deficits and added to rising public debt
45
ECON339 / EURO339
The Eurozone’s double dip recession
46
ECON339 / EURO339
Government debt in the EU, 2012
47
ECON339 / EURO339
Government debt and the euro
Eurozone governments are effectively borrowing in ‘foreign currency’
They cannot borrow from their own central banks, monetise the debt and inflate away their debts (like US and UK)
Financial markets demand ever-higher risk premium from indebted governments and eventually they will default
Bail-outs of countries like Greece is putting huge pressure on the European project
48
ECON339 / EURO339
The spread of Euroscepticism
49
ECON339 / EURO339
50
Conclusions
Economic means to a political end Non-linear process:
Common market Eurosclerosis SEM EMU Reunification of Europe European sovereign debt crisis
Force for inclusion Supranationality vs intergovernmentalism
Recommended