Lecture 15&16 (L2&3/S2) The EUropean Environment

Milena Malinowska Milena Malinowska

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DefinitionsThe EU is a unique union of sovereign states,

which cooperate in multi-tier structure It is the world’s most largest economy (2011)

with a GDP of € 12.2 ($ 17.7) trillion and market of 500 million consumers

The EU ‘institutional triangle’ is the most powerful structure on the supranational level

The EU is a unique blend of culture, where democratic values are granted highest appreciation

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Development of the EUYear Treaty Result

1952 Treaty of Paris European Coal and Steel Community

1958 Treaty of Rome European Economic Community and European Atomic Energy Community (EURATOM)

1986 Single European Act Creation of the Single Market

1993 (Maastricht) Treaty on the European Union

European Union established (7 EU institutions defined, EMU, common foreign and security policy + cooperation in justice and home affairs)

1999 Treaty Of Amsterdam Institutional changes, voting facilitated

2003 Treaty of Nice More institutional changes

2004 (Rome) Constitutional Treaty

EU Constitution – was never ratified

2009 (Lisbon) Reform Treaty

EU President, further political integration3

EnlargementYear Member States

1951 Belgium, France, Germany, Luxemburg, Italy, Netherlands

1973 Denmark, Ireland, UK

1981 Greece

1986 Portugal, Spain (Southern Enlargement)

1995 Austria, Finland, Sweden

2004 Cyprus, Malta, Estonia, Latvia, Lithuania, Hungary, Poland, Czech Republic, Slovakia, Slovenia (Eastern Enlargement 10+2)

2007 Bulgaria, Romania

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Current Current Candidates:Candidates:CroatiaMacedoniaMontenegro Turkey Iceland

Potential Potential Candidates:Candidates:AlbaniaAlbaniaBosnia-Bosnia-HerzegovinaHerzegovinaSerbiaSerbiaKosovoKosovo

EU Conditionality‘Conditionality’ is the EU approach of imposing

criteria (conditions) that a candidate state should meet in order obtain pre-accession aid and ultimately to become a member state (MS)

Copenhagen criteria: Political: to establish institutions that promote and secure

democracy, the rule of law, protect human rights and minorities

Economic: to establish a market economy (that is competitive on the single market (SM)

Aquis Communautaire: to adopt EU legislation

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EU & the BalkansEU had a fragmented ‘ad-hoc’ approach until the late

1990sAfter the Kosovo war first comprehensive framework

was established – Stability Pact for SEEStabilization and Association Agreements (SAAs): Potential Candidate status ‘pre-accession’ assistance FTA EU legislation approximation

Accession of BG and RO in 2007 – stabilizing the region

Shift towards ‘regional ownership’ for the WB - Regional Cooperation Council 2008

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Council of the EUPrimary decision-making body Comprised by (27) ministers of MS, which

change due to the topic discussedRotating presidency every 6 monthsAdopts EU legislation (together with EP) Adopts the EU budget (together with EP) Defines the EU Foreign and Defense policiesMainly ‘qualified majority voting’Unanimity voting in the areas of tax, defense,

foreign policy, social security and enlargement

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Council of the EU (2)MS hold votes, according to the size of their population

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Member states (27) Votes (345)

Germany, France, UK, Italy (each) 29

Spain, Poland (each) 27

Romania 14

Netherlands 13

Greece, Belgium, Portugal, Czech Republic, Hungary (each)

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Austria, Bulgaria (each) 10

Denmark, Slovakia, Finland, Ireland, Lithuania (each) 7

Latvia, Slovenia, Estonia, Cyprus, Luxemburg (each) 4

Malta 3

Council of the EU (3)The Council has 10 main subdivisions (configurations), which deal with the following policy areas:

General AffairsForeign AffairsEconomic and Financial AffairsCooperation in Justice Home AffairsAgricultureCompetitivenessTransport, Telecommunication and EnergyEnvironmentEducation and CultureEmployment, Social policy, Health and Consumer Affairs

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The European Parliament (EP)EP has 751 members (MEP), which are directly

elected every 5 years Each MS has seats proportionate to its

populationIt is the democratic body of the EU, hence:It co-decides on the most important matters: Approves the choice of Commissioners and Commission

President Amends and adopts the budget Amends and approves legislation Oversees malpractices

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The European Commission (EC)‘Guardian of the Treaties’ and ‘engine’ of

integrationComprised by 26 Commissioners (each one

appointed by his/her MS) and a President for a 5-year term

Drafts legislationMonitors law obedienceImplements decisions of the Council and

ParliamentProposes the budget, oversees and reports its

allocation13

The European CouncilDefines the general political agenda and

environment of the EUConsists of EU Heads of State / Parliament Chaired by a Council President (elected every

2 and a half years)A general meeting with the EU leaders, the

Council President and the Commission president is held every 3 months

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The European Central BankThe ECB deals with the monetary policy of

the EU and especially the Eurozone (17 MS)Owned by MS central banksECB’s main functions are: Keeping the fixed target for inflation – 2% Controlling the money supply (authorizing MS central

banks to print €) Setting the interest rates – 0.25% in (Dec 2011) Keeping the foreign currency reserves Supervising MS financial markets & institutionsMost independent body in the EU

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The Court of Justice of EUComprises the European Court of Justice, the

General court and the Civil Service TribunalThe ECJ has 27 judges appointed by MS for a 6-

year termInterprets EU law (ECJ)Infringements of EU law are monitored by the EC

and brought to the CourtDeals with matters on the EU level, but also with

national, regional, commercial and individual cases within the EU context

Current President – Vassilios Skouris16

EU Court of AuditorsComprised by 27 judges (one per MS)Carries out annual audit of the EU finance:Examines and reports to the Council and EP the

Commission’s allocation of the EU budgetRuns audit on MS, EU institutions or any

organization dealing with EU funds

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Interaction of EU institutions

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Council of the Council of the EUEU EU EU

CommissionCommission

EU ParliamentEU Parliament

EuropeaEuropeann

CouncilCouncilECECBB CJ of CJ of

the EUthe EU

27 MSMS

CA of CA of the EUthe EU

Elect MEP

Co-decision

Proposes law & budget

Controls & decides

Influences & decides

Decides

Reports Audit

s

Cases

Interprets the law

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EU integration and policiesThe basic idea of the EC/EU was to create gains

for its members through economic integration: negative integration – removing barriers positive integration – adopting common rulesThe EU integration stared with a FTA, and evolved

into a customs union in the late 1960sMore rapid economic integration set out in the mid

1980s, leading to the emergence of the SM and EMU

The EU countries pursued political integration as a result and also established a framework of common policies/laws in various other fields (close 40! today)

The EU has regulatory and budgetary policies 20

The Single MarketThe Delors Commission’s impactWhite Paper 1985: Free movement of goods, services, people and capital

should be fully enabled until 1993

The Single European Act 1986 established legally the Single Market

Physical barrier to the movement of goods are abolished – the principle of ‘mutual recognition’

Shengen – free movement of people ? Liberalization of services ? More capital mobility ?

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Competition policyImplemented and monitored by EU

CommissionBased on the liberal (free-market) idea of the

SM, it promotes competitive environmentMain policy areas are:Antitrust – bans agreements resulting in monopoly or

oligopoly (<40% market share)

Mergers – bans single companies to become monopolists

State aid – should be limited

Liberalization – of public sectors including energy, water, postal services, telecommunication, transportation

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The Economic and Monetary UnionWithin a single market, a single currency makes

economic senseThree stages of the EMU:1st ‘convergence’ stage (1990-4) – completing the

SM, adopting common competition policy and harmonizing economic policies of MS

2nd ‘institutional’ stage (1994-98) – established the European Monetary Institute (EMI), independence of MS central banks, set up ECB

3rd ‘euro’ stage (1999-2002) – dual currency usage, followed by complete adoption of the euro

Currently, the Eurozone has 17 membersTo become part of it, new MS should meet

several requirements of convergence 23

Eurozone criteriaConvergence (Maastricht) criteria:Price stability – inflation ≤ 1.5% of the average of the 3

MS (with the lowest inflation rate in the EU)Inflation – interest rate ≤ 2% of the of the average of the

3 MS (with the lowest inflation rate in the EU)Exchange rate – should be within the limit (ERM2) for

the past 2 yearsBudget deficit – should be less than 3% of GDP

Public debt – should be less than 60% of GDP

Stability and Growth Pact – in case the last 2 fiscal criteria are broken, the MS should pay fine of 1,5% of GDP

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Euro zone: Euro zone: (1999) Belgium, Germany, Ireland, Spain, France, Italy, Luxembourg, Netherlands, Austria, Portugal, Finland, (2001) Greece (2007) Slovenia (2008) Cyprus, Malta (2009) Slovakia(2011) Estonia

ERM2: ERM2: Denmark, Latvia, Lithuania

Unilaterally adopted:Unilaterally adopted:Andorra, Kosovo, Montenegro

Special adoption:Special adoption:Vatican City, San Marino Monaco

Other: Other: Bulgaria, Romania, Hungary, Czech Rep, Poland, Sweden, UK

The EU Budget 2011: € 141.9 billion

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Regional (cohesion) policyThe biggest proportion of the budget goes to EU

regional policyIt aims at reducing disparities between more and

less developed MS and increasing living standards in the latter (solidarity principle)

Currently 15 MS are beneficiaries of RP fundsEach MS acquiring aid draws a list of main

priorities (National Strategic Reference Framework)

Regional priorities are incorporated into Operational Programs (OP)

Pre-accession assistance is part of RP – BG acquired €1.3bn in 2004-2006

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Fund name Convergence

Regional Competitivene

ss & Employment

European TerritorialCooperatio

n

European Regional Development Fund infrastructure, competitiveness, sustainable development, good governance, civil society etc.

European Social Fund employment creation and job assistance

Cohesion Fund assistance to 15 MS, where the GNI is less than 90% of the EU average

Common Agricultural PolicyLogic behind the CAP: Ensure reasonable amount of (high-quality) food for EU

citizens Provide farmers with normal standard of living Assure environment and animal protectionCAP measures include: Import duties and quotas Direct subsidies to farmers Intervention price on the internal marketMarket distortions – ‘lakes of wine’ and

‘mountains of butter’ The Iron Triangle – why is reform so hard?The CAP today

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Strategies for developmentLisbon Strategy (2000-2010):“The EU should become the most competitive and

dynamic knowledge economy by 2010” – χ Europe 2020: ? 75% employment among 20-64 years-old population 3% of EU GDP to be invested in innovation Climate change – Directive 20x20x20 Reducing the rate of school drop-out by 10%; increasing

the rate of 30-35 years-old population with university degree to 40%

Decreasing the number of population below poverty line with 20 million

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