Topical Issues in European Economic Policy

Student Workbook

by Zsuzsanna Bacsi

January 2008

Contents:

I - EUROPEAN VALUES (2)II - WHY THE EUROPEAN UNION? (2)III - TRUE OR FALSE? STATEMENTS ABOUT THE EU (4)IV - TEN HISTORIC STEPS TO THE EU (7)V - HOW DOES THE UNION WORK (10)VI. - ENLARGEMENT (16)

VII - ECONOMIC PERFORMANCE, COMMON POLICIES (17)VIII – BUDGET (20)IX - THE SINGLE MARKET (22)X - THE ECONOMIC AND MONETARY UNION (25)XI - THE STABILITY AND GROWTH PACT (27)XII - BUILDING FOR THE FUTURE , INVESTING IN PEOPLE (28)XIII - CHARTS (29)XIV - ENLARGEMENT AND EU IN THE WORLD (30)XV - RURAL DEVELOPMENT FOR 2007-2013 (32)XVI - BOOSTING PRODUCTIVITY AND CREATING BETTER JOBS (34)XVII - FOR AND AGAINST (38)XVIII - TURKEY AND THE EU (49)

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I - EUROPEAN VALUES

Reading: Panorama of the European Union, United in Diversity, excerpt. Write a short essay (2-3 pages) about:

What does the European Union mean for me?- Advantages, disadvantages for my everyday life,- European values I accept or deny

European CommissionDirectorate General for Press and CommunicationManuscript completed in January 2005

Panorama of the European UnionUnited in diversity

The European Union (EU) is a family of democratic European countries, committed to working together for peace and prosperity. It is not a State intended to replace existing States, nor is it just an organisation for international cooperation. The EU is, in fact, unique. Its member states have set up common institutions to which they delegate some of their sovereignty so that decisions on specific matters of joint interest can be made democratically at European level.

The historical roots of the European Union lie in the Second World War. The idea was born because Europeans were determined to prevent such killing and destruction ever happening again. In the early years, the cooperation was between six countries and mainly about trade and the economy. Now the EU embraces 25 countries and 450 million people, and it deals with a wide range of issues of direct importance for our everyday life.

Europe is a continent with many different traditions and languages, but also with shared values such as democracy, freedom and social justice. The EU defends these values. It fosters cooperation among the peoples of Europe, promoting unity while preserving diversity and ensuring that decisions are taken as close as possible to the citizens.

In the increasingly interdependent world of the 21st century, it is more necessary than ever for every European citizen to work together with people from other countries in a spirit of curiosity, openness and solidarity.

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II - WHY THE EUROPEAN UNION?

Read the Peace and Stability section under the 'Why the European Union' section of the document Europe in 12 Lessons (see below). This section talks about why the European Union was necessary in the aftermath of World War I and World War II.

Discuss the following questions.

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1. Who were the former enemies in Europe?2. Explain „the raw materials of war turned into instruments of peace”3. What problems does the EU face regarding safety and security?4. Explain „the EU accounts for an ever smaller percentage of the world’s population”5. Check the paragraph „Economic and social solidarity” and find out information that should

be updated!6. What does the expression „economies of scale” mean?7. Why must free competition be counterbalanced by Europe-wide solidarity?8. How would you demonstrate the truth of the statements:

standards of living have risen steadily there are still gaps between the rich and the poor

9. What kind of social problems does the EU have to tackle?10. Write a short paragraph (10- 15 lines) on

the importance of the EU on the world stage the European model of society

11. Explain: „strength in unity”, „harmonious yoking of tradition and progress” the whole is greater than the sum of its parts

12. Give a few examples of the common heritage of values.13. How could you explain „subsidiarity”, and why is it important?

European Commission, Directorate-General for CommunicationManuscript completed in October 2006

Europe in 12 lessonsby Pascal Fontaine, former assistant to Jean Monnet and Professor at the Institut d’Études Politiques, Paris

.1.Why the European Union?

Europe’s mission in the 21st century is to: provide peace, prosperity and stability for its peoples; overcome the divisions on the continent; ensure that its people can live in safety; promote balanced economic and social development; meet the challenges of globalisation and preserve the diversity of the peoples of Europe; uphold the values that Europeans share, such as sustainable development and a sound

environment, respect for human rights and the social market economy.

I. Peace and stability

Before becoming a real political objective, the idea of uniting Europe was just a dream in the minds of philosophers and visionaries. Victor Hugo, for example, imagined a peaceful ‘United States of Europe’ inspired by humanistic ideals. The dream was shattered by the terrible wars that ravaged the continent during the first half of the 20th century.

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However, a new kind of hope emerged from the rubble of World War Two. People who had resisted totalitarianism during the war were determined to put an end to international hatred and rivalry in Europe and create the conditions for lasting peace. Between 1945 and 1950, a handful of courageous statesmen including Robert Schuman, Konrad Adenauer, Alcide de Gasperi and Winston Churchill set about persuading their peoples to enter a new era. New structures would be created in western Europe, based on shared interests and founded upon treaties guaranteeing the rule of law and equality between all countries.

Robert Schuman (French foreign minister) took up an idea originally conceived by Jean Monnet and, on 9 May 1950, proposed establishing a European Coal and Steel Community (ECSC). In countries which had once fought each other, the production of coal and steel would be pooled under a common High Authority. In a practical but also richly symbolic way, the raw materials of war were being turned into instruments of reconciliation and peace.

-----------------------------------III - TRUE OR FALSE? STATEMENTS ABOUT THE EU

Read the sections II – to V in „Europe in 12 lessons” - 1. Why the European union? (see below)Do you agree with the following statements? Explain your opinion in a few sentences.

1. the EU accounts for an ever smaller percentage of the world’s population”2. standards of living have risen steadily3. there are still gaps between the rich and the poor4. free competition must be counterbalanced by Europe-wide solidarity5. the whole is greater than the sum of its parts6. The countries of the EU have a common heritage of values. (give examples)

European Commission, Directorate-General for CommunicationManuscript completed in October 2006

Europe in 12 lessonsby Pascal Fontaine, former assistant to Jean Monnet and Professor at the Institut d’Études Politiques, Paris

.1.Why the European Union?

………………II. Bringing Europe together again

The European Union encouraged German unification after the fall of the Berlin Wall in 1989. When the Soviet empire crumbled in 1991, the former communist countries of central and eastern Europe, after decades under the authoritarian yoke of the Warsaw Pact, decided that their future lay within the family of democratic European nations.

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The enlargement process continues to this day. Entry negotiations began with Turkey and Croatia in October 2005, while several countries in the Balkans have set out along the road that could one day lead to EU membership.

III. Safety and security

Europe in the 21st century still faces safety and security issues. The EU has to take effective action to ensure the safety and security of its members. It has to work constructively with the regions just beyond its borders: the Balkans, North Africa, the Caucasus and the Middle East. It must also protect its military and strategic interests by working with its allies, especially within NATO, and by developing a genuine common European security and defence policy.

Internal security and external security are two sides of the same coin. The fight against terrorism and organised crime requires the police forces of all EU countries to work together closely. Making the EU an ‘area of freedom, security and justice’ where everyone has equal access to justice and is equally protected by the law is a new challenge that requires close cooperation between governments. Bodies like Europol, the European Police Office, and Eurojust, which promotes cooperation between prosecutors, judges and police officers in different EU countries, also have a more active and effective role to play.

IV. Economic and social solidarity

The European Union was created to achieve the political goal of peace, but its dynamism and success spring from its involvement in economics.

EU countries account for an ever smaller percentage of the world’s population. They must therefore continue pulling together if they are to ensure economic growth and be able to compete on the world stage with other major economies. No individual EU country is strong enough to go it alone in world trade. The European single market provides companies with a vital platform for competing effectively on world markets.

But Europe-wide free competition must be counterbalanced by Europe-wide solidarity. This has clear tangible benefits for European citizens: when they fall victim to floods and other natural disasters, they receive assistance from the EU budget. The Structural Funds, managed by the European Commission, encourage and supplement the efforts of the EU’s national and regional authorities to reduce inequalities between different parts of Europe. Money from the EU budget and loans from the European Investment Bank (EIB) are used to improve Europe’s transport infrastructure (for example, to extend the network of motorways and high-speed railways), thus providing better access to outlying regions and boosting trans-European trade. The EU’s economic success will be measured in part by the ability of its single market of half a billion consumers to benefit as many people and businesses as possible.

V. Identity and diversity in a globalised world

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Europe’s post-industrial societies are becoming increasingly complex. Standards of living have risen steadily, but there are still significant gaps between rich and poor. Enlargement has widened the gap since countries have joined with living standards below the EU average. It is important for EU countries to work together to narrow the gap.

But these efforts have not been made at the expense of compromising the separate cultural or linguistic characteristics of EU countries. On the contrary — many EU activities help to create new economic growth based on regional specialities and the rich diversity of traditions and cultures.

Half a century of European integration has shown that the EU as a whole is greater than the sum of its parts: it has much more economic, social, technological, commercial and political clout than if its member states had to act individually. There is added value in acting together and speaking with a single voice as the European Union.

Why?

Because the EU is the world’s leading trading power and therefore plays a decisive role in international negotiations, such as those at the 149-country World Trade Organisation (WTO), as well as in the implementation of the Kyoto protocol on air pollution and climate change;

Because it takes a clear position on sensitive issues affecting ordinary people, such as environmental protection, renewable energy resources, the ‘precautionary principle’ in food safety, the ethical aspects of biotechnology and the need to protect endangered species;

Because it launched important initiatives for sustainable development on the whole planet, in connection with the ‘Earth Summit’ in 2002 in Johannesburg.

The old saying ‘unity is strength’ is as relevant as ever to today’s Europeans. But the process of European integration has not smothered the different ways of life, traditions and cultures of its peoples. Indeed, the EU makes its diversity one of its key values.

VI. Values

The EU wishes to promote humanitarian and progressive values, and ensure that mankind is the beneficiary, rather than the victim, of the great global changes that are taking place. People’s needs cannot be met simply by market forces or imposed by unilateral action.

So the EU stands for a view of humanity and a model of society that the great majority of its citizens support. Europeans cherish their rich heritage of values, which includes a belief in human rights, social solidarity, free enterprise, a fair distribution of the fruits of economic growth, the right to a protected environment, respect for cultural, linguistic and religious diversity and a harmonious blend of tradition and progress.

The Charter of Fundamental Rights of the European Union, which was proclaimed in Nice in December 2000, sets out all the rights recognised today by the EU’s member states and their citizens. These values can create a feeling of kinship between Europeans. To take just one example, all EU countries have abolished the death penalty.

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IV - TEN HISTORIC STEPS TO THE EU

1. Read Ten Historic Steps in Europe in 12 Lessons. 2. Fill int he blank column in the table below, taking notes of the most important features

(dates, participants, events….) on each of the ten steps. 3. Select what you believe were the three most important events in the development and

enlargement of the EU and explain your selections. 4. Consider the future growth and development of the European Union and try to predict the

next ten events that will be added to this list. What do you think about Muslim countries, the continued addition of Eastern Bloc countries and the possibility of the Union growing to be too large to be manageable?

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Europe in 12 lessons

.2.Ten historic steps

1951: The European Coal and Steel Community is established by the six founding members1957: The Treaty of Rome establishes a common market1973: The Community expands to nine member states and develops its common policies1979: The first direct elections to the European Parliament1981: The first Mediterranean enlargement1993: Completion of the single market1993: The Treaty of Maastricht establishes the European Union1995 : The EU expands to 15 members2002: Euro notes and coins are introduced2004: Ten more countries join the Union

1. On 9 May 1950, the Schuman Declaration proposed the establishment of a European Coal and Steel Community (ECSC), which became reality with the Treaty of Paris of 18 April 1951. This put in place a common market in coal and steel between the six founding countries (Belgium, the Federal Republic of Germany, France, Italy, Luxembourg and the Netherlands). The aim, in the aftermath of World War Two, was to secure peace between Europe’s victorious and vanquished nations and bring them together as equals, cooperating within shared institutions.

2. The Six then decided, on 25 March 1957 with the Treaty of Rome, to build a European Economic Community (EEC) based on a wider common market covering a whole range of goods and services. Customs duties between the six countries were completely abolished on 1 July 1968 and common policies, notably on trade and agriculture, were also put in place during the 1960s.

3. So successful was this venture that Denmark, Ireland and the United Kingdom decided to join the Community. This first enlargement, from six to nine members, took place in 1973. At the same time, new social and environmental policies were implemented, and the European Regional Development Fund (ERDF) was established in 1975.

4. June 1979 saw a decisive step forward for the European Community, with the first elections to the European Parliament by direct universal suffrage. These elections are held every five years.

5. In 1981, Greece joined the Community, followed by Spain and Portugal in 1986. This strengthened the Community’s presence in southern Europe and made it all the more urgent to expand its regional aid programmes.

6. The worldwide economic recession in the early 1980s brought with it a wave of ‘euro-pessimism’. However, hope sprang anew in 1985 when the European Commission, under its President Jacques Delors, published a White Paper setting out a timetable for completing the European single market by 1 January 1993. This ambitious goal was enshrined in the Single European Act, which was signed in February 1986 and came into force on 1 July 1987.

7. The political shape of Europe was dramatically changed when the Berlin Wall fell in 1989. This led to the unification of Germany in October 1990 and the coming of democracy to

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the countries of central and eastern Europe as they broke away from Soviet control. The Soviet Union itself ceased to exist in December 1991.

At the same time, the member states were negotiating the new Treaty on European Union, which was adopted by the European Council, composed of presidents and/or prime ministers, at Maastricht in December 1991. The Treaty came into force on 1 November 1993. By adding areas of intergovernmental cooperation to existing integrated Community structures, the Treaty created the European Union (EU).

8. This new European dynamism and the continent’s changing geopolitical situation led three more countries — Austria, Finland and Sweden — to join the EU on 1 January 1995.

9. By then, the EU was on course for its most spectacular achievement yet, creating a single currency. The euro was introduced for financial (non-cash) transactions in 1999, while notes and coins were issued three years later in the 12 countries of the euro area (also commonly referred to as the euro zone). The euro is now a major world currency for payments and reserves alongside the US dollar.

Europeans are facing globalisation. New technologies and ever increasing use of the Internet transform the economies, but also bring social and cultural challenges.

In March 2000, the EU adopted the ‘Lisbon strategy’ for modernising the European economy and enabling it to compete on the world market with other major players such as the United States and the newly industrialised countries. The Lisbon strategy involves encouraging innovation and business investment and adapting Europe’s education systems to meet the needs of the information society.

At the same time, unemployment and the rising cost of pensions are putting pressure on national economies, making reform all the more necessary. Voters are increasingly calling on their governments to find practical solutions to these problems.

10. Scarcely had the European Union grown to 15 members when preparations began for a new enlargement on an unprecedented scale. In the mid-1990s, the former Soviet-bloc countries (Bulgaria, the Czech Republic, Hungary, Poland, Romania and Slovakia), the three Baltic states that had been part of the Soviet Union (Estonia, Latvia and Lithuania), one of the republics of former Yugoslavia (Slovenia) and two Mediterranean countries (Cyprus and Malta) began knocking at the EU’s door.

The EU welcomed this chance to help stabilise the European continent and to extend the benefits of European integration to these young democracies. Negotiations on future membership opened in December 1997. The EU enlargement to 25 countries took place on 1 May 2004 when 10 of the 12 candidates joined. Bulgaria and Romania followed on 1 January 2007. ------------------------------------------------------------------------

V - HOW DOES THE UNION WORK

Read the text in „Europe in 12 lessons”, Read the paragraphs on the Parliament and the Council (p 19-25)

1. Prepare a short presentation on the Parliament

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the Council Explain their roles, importance, composition Compare the importance of these two institutions in the operations of the EU.

Prepare arguments for a discussion.2. Check the tables about the composition of the Parliament and the Council.Correct the data in the tables, considering the recent progress, using the relevant web pages of the European institutions.

Europe in 12 lessons.4.

How does the EU work?

The Council of Ministers of the European Union, which represents the member states, is the EU’s main decision-taking body. When it meets at Heads of State or Government level, it becomes the European Council whose role is to provide the EU with political impetus on key issues.

The European Parliament, which represents the people, shares legislative and budgetary power with the Council of the European Union.

The European Commission, which represents the common interest of the EU, is the main executive body. It has the right to propose legislation and ensures that EU policies are properly implemented.

I. The decision-making triangle

The European Union is more than just a confederation of countries, but it is not a federal state. It is, in fact, a new type of structure that does not fall into any traditional legal category. Its political system is historically unique and has been constantly evolving over more than 50 years.

The Treaties (known as ‘primary’ legislation), are the basis for a large body of ‘secondary’ legislation which has a direct impact on the daily lives of EU citizens. The secondary legislation consists mainly of regulations, directives and recommendations adopted by the EU institutions.

These laws, along with EU policies in general, are the result of decisions taken by the institutional triangle made up of the Council (representing national governments), the European Parliament (representing the people) and the European Commission (a body independent of EU governments that upholds the collective European interest).

(a) The Council of the European Union and the European CouncilThe Council of the European Union (also known as the Council of Ministers) is the EU’s main decision-making body. The EU member states take it in turns to hold the Council Presidency for a six-month period. Every Council meeting is attended by one minister from each EU country. Which ministers attend a meeting depends on which topic is on the agenda: foreign affairs, agriculture, industry, transport, the environment, etc.

The Council has legislative power, which it shares with the European Parliament under the ‘co-decision procedure’. In addition to this, the Council and the Parliament share equal responsibility for adopting the EU budget. The Council also concludes international agreements that have been negotiated by the Commission.

According to the Treaties, the Council has to take its decisions either by a simple majority vote, a ‘qualified majority’ vote or unanimously, depending on the subject to be decided.

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The Council has to agree unanimously on important questions such as amending the Treaties, launching a new common policy or allowing a new country to join the Union.

In most other cases, qualified majority voting is used. This means that a Council decision is adopted if a specified minimum number of votes are cast in its favour. The number of votes allocated to each EU country roughly reflects the size of its population.

Number of votes for each country in the Council

Germany, France, Italy and the United Kingdom 29 Spain and Poland 27 Romania 14 Netherlands 13 Belgium, Czech Republic, Greece, Hungary and Portugal 12 Austria, Bulgaria and Sweden 10 Denmark, Ireland, Lithuania, Slovakia and Finland 7 Estonia, Cyprus, Latvia, Luxembourg and Slovenia 4 Malta 3

Total: 345

A minimum of 255 votes out of 345 (73.9 %) is required to reach a qualified majority. In addition: a majority of member states (in some cases two thirds) must approve the decision, and any member state may ask for confirmation that the votes cast in favour represent at least

62 % of the EU’s total population

The European Council meets, in principle, four times a year. It is chaired by the president or prime minister of the country holding the presidency of the Council of the European Union at the time. The President of the European Commission attends as a full member.

Under the Treaty of Maastricht, the European Council officially became an initiator of the Union’s major policies and was empowered to settle difficult issues on which ministers meeting in the Council of the European Union fail to agree.

The European Council also deals with pressing international issues through the common foreign and security policy (CFSP), which is intended to allow the EU to speak with one voice on diplomatic questions.

(b) The European ParliamentThe European Parliament is the elected body that represents the EU’s citizens. It exercises political supervision over the EU’s activities and takes part in the legislative process. Since 1979, members of the European Parliament (MEPs) have been directly elected, by universal suffrage, every five years.Number of seats in the European Parliament per country 2007–09

Austria 18Belgium 24Bulgaria 18

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Cyprus 6Czech Republic 24Denmark 14Estonia 6Finland 14France 78Germany 99Greece 24Hungary 24Ireland 13Italy 78Latvia 9Lithuania 13Luxembourg 6Malta 5Netherlands 27Poland 54Portugal 24Romania 35Slovakia 14Slovenia 7Spain 54Sweden 19United Kingdom 78

Total 785

The political groups in the European Parliament

European People’s Party (Christian Democrats) and European Democrats 278Socialist Group 219Alliance of Liberals and Democrats for Europe 103Greens/European Free Alliance 42European United Left — Nordic Green Left 41Union for Europe of the Nations 30Independence/Democracy 28Non-attached members and temporarily empty seats 44

Total 785Situation in October 2006.

The European Parliament normally holds its plenary sessions in Strasbourg and any additional sessions in Brussels. It has 20 committees which do the preparatory work for plenary sessions, and a number of political groups that usually meet in Brussels. The General Secretariat is based in Luxembourg and Brussels.

The Parliament takes part in the legislative work of the EU at three levels:

Under the ‘cooperation’ procedure, introduced by the Single European Act in 1987, the European Parliament can give its opinion on draft directives and regulations proposed by the

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European Commission, which is asked to amend its proposals to take account of Parliament’s position.

Since 1987, there has also been the ‘assent’ procedure, under which the European Parliament must give its assent to international agreements negotiated by the Commission and to any proposed enlargement of the European Union.

The 1992 Treaty of Maastricht introduced the ‘co-decision’ procedure, which puts the Parliament on an equal footing with the Council when legislating on a whole series of important issues including the free movement of workers, the internal market, education, research, the environment, trans-European networks, health, culture, consumer protection, etc. The European Parliament has the power to throw out proposed legislation in these fields if an absolute majority of members of Parliament vote against the Council’s ‘common position’. The Treaty has made provision for a conciliation procedure.

The European Parliament also shares, with the Council, equal responsibility for adopting the EU budget. The Parliament can reject the proposed budget, and it has already done so on several occasions. When this happens, the entire budget procedure has to be re-started. The European Commission proposes the draft budget, which is then debated by the Council and the European Parliament. Parliament has made full use of its budgetary powers to influence EU policymaking.

Last but not least, the European Parliament exercises democratic supervision over the Union. It has the power to dismiss the Commission by adopting a motion of censure. This requires a two-thirds majority. It also supervises the day-to-day management of EU policies by putting oral and written questions to the Commission and the Council. Finally, the President of the European Council reports to the Parliament on the decisions taken by the Council.

(c) The European CommissionThe Commission is the third part of the institutional triangle that manages and runs the European Union. Its members are appointed for a five-year term by agreement between the member states, subject to approval by the European Parliament. The Commission is answerable to the Parliament, and the entire Commission has to resign if the Parliament passes a motion of censure against it.

Since 2004, the Commission has been made up of one Commissioner from each member state

The Commission enjoys a substantial degree of independence in exercising its powers. Its job is to uphold the common interest, which means that it must not take instructions from any national EU government. As ‘Guardian of the Treaties’, it has to ensure that the regulations and directives adopted by the Council and Parliament are being implemented in the member states. If they are not, the Commission can take the offending party to the Court of Justice to oblige it to comply with EU law.

As the EU’s executive arm, the Commission implements the decisions taken by the Council in areas such as the common agricultural policy. It has wide powers to manage the EU’s common policies, such as research and technology, overseas aid, regional development, etc. It also manages the budget for these policies.

The Commission is assisted by a civil service made up of 36 directorates-general (DGs) and services, which are mainly based in Brussels and Luxembourg.

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Qualified majority voting

In some particularly sensitive areas such as common foreign and security policy, taxation, asylum and immigration policy, Council decisions have to be unanimous. In other words, each member state has the power of veto in these areas.On most issues, however, the Council takes decisions by ‘qualified majority voting’.A qualified majority is reached: if a majority of member states (in some cases a two-thirds majority) approve;

and if a minimum of 255 votes is cast in favour — which is 73.9% of the total.

In addition, a member state may ask for confirmation that the votes in favour represent at least 62% of the total population of the Union. If this is found not to be the case, the decision will not be adopted.

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VI - ENLARGEMENT

Read the text in „Europe in 12 lessons”, 1. Explain the importance of the accession criteria.2. Explain the reasons for the successive Eastern enlargements3. Explain the difficulties the EU faces with the enlargements

Europe in 12 lessons.3.

Enlargement and neighbourhood policy

The European Union is open to any European country that fulfils the democratic, political and economic criteria for membership.

Following several enlargements, the EU has increased from six to 27 members. Several other countries are candidates to join.

Each treaty admitting a new member requires the unanimous approval of all member states. In addition, in advance of each new enlargement, the EU will assess its capacity to absorb the new member(s) and the ability of its institutions to continue to function properly.

The successive enlargements have strengthened democracy, made Europe more secure and increased its potential for trade and economic growth.

I. Uniting a continent

(a) A union of 25When it met in Copenhagen in December 2002, the European Council took one of the most momentous steps in the history of European integration. By inviting 10 more countries to join the EU on 1 May 2004, the European Union was not simply increasing its geographical size and population; it was putting an end to the split in our continent which, from 1945 onwards, had separated the free world from the communist bloc.

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This fifth enlargement of the EU had a political and moral dimension. It enabled countries — Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia — which are as European as the others, not just geographically but also in terms of culture, history and aspirations, to join the democratic European family. They are now partners in the momentous project conceived by the EU’s founding fathers.

(b) Further enlargementBulgaria and Romania became candidates in 1995. The process took longer for these two countries than for the other 10, but they joined the EU on 1 January 2007, bringing the number of EU countries to 27.

(c) Candidates for membershipTurkey, a member of NATO, with a long-standing association agreement with the EU, applied for membership in 1987. Its geographical location and political history made the EU hesitate for a long time before replying positively to its application. However, in October 2005, the European Council opened accession negotiations with Turkey. At the same time, it entered into negotiations with Croatia, another candidate country. No date has yet been set for the entry into force of any future accession treaty for these two countries at the end of the membership negotiations.

(d) The western BalkansThese countries, most of which were once part of Yugoslavia, are turning to the European Union to speed up their economic reconstruction, improve their mutual relations, which have been scarred by ethnic and religious wars, and consolidate their democratic institutions. The EU gave status as ‘candidate country’ to the former Yugoslav Republic of Macedonia (FYROM) in November 2005. Other potential candidates include Albania, Bosnia and Herzegovina, Montenegro and Serbia.

II. Membership conditions

(a) Legal requirementsEuropean integration has always been a political and economic process that is open to all European countries prepared to sign up to the founding treaties and take on board the full body of EU law. According to Article 237 of the Treaty of Rome ‘any European state may apply to become a member of the Community’.

Article F of the Maastricht Treaty adds that the member states shall have ‘systems of government […] founded on the principles of democracy’.

(b) The ‘Copenhagen criteria’In 1993, following requests from the former communist countries to join the Union, the European Council laid down three criteria they should fulfil so as to become members. By the time they join, new members must have:

stable institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities;

a functioning market economy and the capacity to cope with competitive pressure and market forces within the Union;

the ability to take on the obligations of membership, including support for the aims of the Union. They must have a public administration capable of applying and managing EU laws in practice.

(c) The accession process

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The entry negotiations are carried out between each candidate country and the European Commission which represents the EU. Once these are concluded, the decision to allow a new country to join the EU must be taken unanimously by the existing member states meeting in the Council. The European Parliament must give its assent through a positive vote by an absolute majority of its members. All accession treaties must then be ratified by the member states and the candidate countries in accordance with each country’s own constitutional procedures.

During the years of negotiation, candidate countries receive EU aid so as to make it easier for them to catch up economically. For the enlargement of the 10 countries in 2004, this involved a package of €41 billion aimed mainly at funding structural projects to allow the newcomers to fulfil the obligations of membership.

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VII - ECONOMIC PERFORMANCE, COMMON POLICIES

Read the text in „Europe in 12 lessons”1. List the main policies of the EU. What are the most important supported activities?2. What activities do you consider less important, and what activities should be supported instead?

Europe in 12 lessons.5.

What does the EU do?

The European Union acts in a wide range of policy areas — economic, social, regulatory and financial — where its action is beneficial to the member states. These include: o solidarity policies (also known as cohesion policies) in regional, agricultural and social

affairs;o innovation policies, which bring state-of-the-art technologies to fields such as

environmental protection, research and development (R & D) and energy. The Union funds these policies through an annual budget of more than €120 billion, which

is largely paid for by the member states. It represents a small proportion of the EU’s collective wealth (a maximum of 1.24 % of the combined gross national income of all member states).

I. Solidarity policies

The main purpose of the solidarity policies is to support the completion of the single market (see Chapter 6, ‘The single market’), and to correct any imbalances by means of structural measures to help regions lagging behind or industrial sectors encountering difficulties. The need for solidarity between EU countries and between regions became even more acute following the recent entry of 12 newcomers with incomes well below the EU average. The EU must also play its part in helping to restructure sectors of the economy which have been badly affected by fast-growing international competition.

(a) Regional aid

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The EU’s regional policy is based on transfers of funds from rich to poor countries. The money is used to boost development in regions lagging behind, to rejuvenate industrial regions in decline, to help young people and the long-term unemployed find work, to modernise farming and to help less-favoured rural areas.

The funds earmarked for regional activities in the 2007–13 budget are targeted at three objectives. Convergence. The aim here is to help the least-developed countries and regions catch up

more quickly with the EU average by improving conditions for growth and employment. This is done by investing in physical and human capital, innovation, the knowledge society, adaptation to change, the environment and administrative efficiency.

Regional competitiveness and employment. The objective is to increase the competitiveness, employment levels and attractiveness of regions other than the least-developed ones. The way to make this happen is to anticipate economic and social changes and promote innovation, entrepreneurship, environmental protection, accessibility, adaptability and the development of inclusive job markets.

European territorial cooperation. The aim of this new objective is to increase cross-border, transnational and interregional cooperation. It aims to promote joint solutions to problems that are shared by neighbouring authorities in sectors such as urban, rural and coastal development, the cultivation of economic relations, and networking between small and medium-sized enterprises (SMEs).

These objectives will be financed by specific EU funds, which will top up or stimulate investment by the private sector and by national and regional government. These funds are known as the Structural Funds and the Cohesion Fund. The European Regional Development Fund (ERDF) is the first Structural Fund and

provides funding to strengthen economic, social and territorial cohesion by reducing differences between regions and supporting the structural development and adjustment of regional economies, including the redevelopment of declining industrial regions.

The European Social Fund (ESF), the second Structural Fund, provides funding for vocational training and job-creation initiatives.

In addition to the Structural Funds, there is a Cohesion Fund, which is used to finance transport infrastructure and environmental projects in EU countries whose GDP per capita is lower than 90 % of the EU average.

(b) The common agricultural policy (CAP)The aims of the CAP, as set out in the original Treaty of Rome from 1957, have largely been achieved: a fair standard of living has been ensured for the farming community; markets have been stabilised; supplies reach consumers at reasonable prices; farming infrastructure has been modernised. Other principles adopted over the course of time have also worked well. Consumers enjoy security of supply and the prices of agricultural products are kept stable, protected from fluctuations on the world market. The European Agricultural Guidance and Guarantee Fund (EAGGF) is the name of the budget for the CAP.

However, the CAP has been a victim of its own success. Production grew far faster than consumption, placing a heavy burden on the EU budget. In order to resolve this problem, agriculture policy had to be redefined. This reform is beginning to show results. Production has been curbed. Farmers are being encouraged to use sustainable farming practices that safeguard the environment, preserve the countryside and contribute to improving food quality and safety.

The new role of the farming community is to ensure a certain amount of economic activity in every rural area and to protect the diversity of Europe’s countryside. This diversity and the

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recognition of a ‘rural way of life’ — people living in harmony with the land — are an important part of Europe’s identity.

The European Union wants the World Trade Organisation (WTO) to put more emphasis on food quality, the precautionary principle and animal welfare. The European Union has also begun reforming its fisheries policy. The aim here is to reduce the overcapacity in fishing fleets, to preserve fish stocks and to provide financial assistance to allow fishing communities to develop other economic activities.

(c) The social dimensionThe aim of the EU’s social policy is to correct the most glaring inequalities in European society. The European Social Fund (ESF) was established in 1961 to promote job creation and help workers move from one type of work and/or one geographical area to another.

Financial aid is not the only way in which the EU seeks to improve social conditions in Europe. Aid alone could never solve all the problems caused by economic recession or by regional under-development. The dynamic effects of growth must, above all, encourage social progress. This goes hand in hand with legislation that guarantees a solid set of minimum rights. Some of these rights are enshrined in the Treaties, e.g. the right of women and men to equal pay for equal work. Others are set out in directives concerning the protection of workers (health and safety at work) and essential safety standards.

In 1991, the Maastricht European Council adopted the Community Charter of Basic Social Rights, setting out the rights that all workers in the EU should enjoy: free movement; fair pay; improved working conditions; social protection; the right to form associations and to undertake collective bargaining; the right to vocational training; equal treatment of women and men; worker information, consultation and participation; health protection and safety at the workplace; protection for children, the elderly and the disabled. At Amsterdam in June 1997, this Charter became an integral part of the Treaty and is now applicable in all the member states.

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VIII – THE BUDGET

Watch the presentation on the Budget of the EU, or read the text below.1. List the main components of the EU budget: what items can you mention as revenues,

and what are the main items of expenditure?2. How could the EU expand its resources? Where should the money be spent? Sum up

your ideas in 10 lines.

III. Paying for Europe: the EU budget

To fund its policies, the European Union has an annual budget of more than €120 billion. This budget is financed by what is called the EU’s ‘own resources’, which cannot exceed an amount equivalent to 1.24 % of the total gross national income of all the member states.These resources are mainly drawn from: customs duties on products imported from outside the EU, including farm levies; a percentage of the value-added tax applied to goods and services throughout the EU; contributions from the member states in line with their respective wealth.

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Each annual budget is part of a seven-year budget cycle known as the ‘financial perspective’. The financial perspectives are drawn up by the European Commission and require unanimous approval from the member states and negotiation and agreement with the European Parliament. Under the 2007–13 financial perspective, the total budget for this period is €864.4 billion.

EU expenditure 2007–13

Sustainable growth and employment 44 %Preservation and management of natural resources 43 %Citizenship, freedom, security and justice 1 %The EU as a global player 6 %Other expenditure, including administration 6 %

Long-term trend in the EU’s budget Long term budgetary trend

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Bud

get c

eilin

g (e

uro)

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

Bud

get c

eilin

g (%

of n

atio

nal w

ealth

- G

NI)

Budget ceiling (euro) Budget ceiling (% of national wealth — GNI)

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IX - THE SINGLE MARKET

Read the text below and answer the questions

Questions: Is economic integration complete in the EU?- What are the implications/consequences of the free movement of services on : education,

qualifications, employment, etc.

44%

6%6%

43%

1%

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- Why is it more attractive for entrepreneurs to set up their own businesses in the USA than in the EU? Are there physical, technical or other barriers in the way of goods, people, services?

- How could we overcome these barriers?

.6.The single market

The single market is one of the European Union’s greatest achievements. Restrictions between member countries on trade and free competition have gradually been eliminated, with the result that standards of living have increased.

The single market has not yet become a single economic area. Some sectors of the economy (public services) are still subject to national laws.

The individual EU countries still largely have the responsibility for taxation and social welfare. The single market is supported by a number of related policies put in place by the EU over the

years. They help ensure that market liberalisation benefits as many businesses and consumers as possible.

I. Achieving the 1993 objective

(a) The limits of the common marketThe 1957 Treaty establishing the European Economic Community made it possible to abolish customs barriers within the Community and establish a common customs tariff to be applied to goods from non-EEC countries. This objective was achieved on 1 July 1968.

However, customs duties are only one aspect of protectionist barriers to cross-border trade. In the 1970s, other trade barriers hampered the complete achievement of the common market. Technical norms, health and safety standards, national regulations on the right to practise certain professions and exchange controls all restricted the free movement of people, goods and capital.

(b) The 1993 objectiveIn June 1985, the Commission, under its then President, Jacques Delors, published a White Paper seeking to abolish, within seven years, all physical, technical and tax-related barriers to free movement within the Community. The aim was to stimulate industrial and commercial expansion within a large, unified economic area on a scale with the American market.

The enabling instrument for the single market was the Single European Act, which came into force in July 1987. Its provisions included: extending the powers of the Community in some policy areas (social policy, research,

environment); gradually establishing the single market over a period up to the end of 1992, by means of a

vast legislative programme involving the adoption of hundreds of directives and regulations; making more frequent use of majority voting in the Council of Ministers.

II. How the single market looks today

(a) Physical barriersAll border controls within the EU on goods have been abolished, together with customs controls on people. Random spot checks by police (part of the fight against crime and drugs) still take place when necessary.

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The Schengen Agreement, which was signed in June 1985 by nine of the then 12 member states (the United Kingdom, Denmark and Ireland did not sign), governs police cooperation and a common asylum and immigration policy, so as to make it possible to completely abolish checks on persons at the EU’s internal borders (see Chapter 10: ‘Freedom, security and justice’). The countries which joined in 2004 are gradually coming into line with the rules of the Schengen area.

(b) Technical barriersFor the majority of products, EU countries have adopted the principle of mutual recognition of national rules. Any product legally manufactured and sold in one member state must be allowed to be placed on the market in all others.

It has been possible to liberalise the services sector thanks to mutual recognition or coordination of national rules concerning access to or practice of certain professions (law, medicine, tourism, banking, insurance, etc.). Nevertheless, freedom of movement for persons is far from complete. Obstacles still hinder people from moving to another EU country or doing certain types of work there.

Action has been taken to improve worker mobility, and particularly to ensure that educational diplomas and job qualifications (for plumbers, carpenters, etc.) obtained in one EU country are recognised in all the others.

The opening of national services markets has brought down the price of national telephone calls to a fraction of what they were 10 years ago. Helped by new technology, the Internet is being increasingly used for telephone calls. Competitive pressure has led to significant falls in the price of budget airfares in Europe.

(c) Tax barriersTax barriers have been reduced through the partial alignment of national VAT rates. Taxation of investment income was the subject of an agreement between the member states and some other countries (including Switzerland) which came into force in July 2005.

(d) Public contractsRegardless of whether they are awarded by national, regional or local authorities, public contracts are now open to bidders from anywhere in the EU as a result of directives covering services, supplies and works in many sectors, including water, energy and telecommunications.

III. Work in progress

(a) Financial servicesThe EU’s action plan to create an integrated market for financial services by 2005 has been completed. This cuts the cost of borrowing for businesses and consumers, and will offer savers a wider range of investment products — savings plans and pension schemes — which they will be able to obtain from the European provider of their choice. Bank charges for cross-border payments have been reduced.

(b) Administrative and technical barriers to free movementEU countries are often still reluctant to accept each other’s standards and norms or, on occasion, to recognise the equivalence of professional qualifications. The fragmented nature of national tax systems also hinders market integration and efficiency.

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(c) Piracy and counterfeitingProtection is required to prevent piracy and counterfeiting of EU products. The European Commission estimates that these crimes cost the EU thousands of jobs each year. This is why the Commission and national governments are working on extending copyright and patent protection.

IV. Policies underpinning the single market

(a) TransportThe EU’s activities have targeted mainly the freedom to provide services in land transport, particularly free access to the international transport market and the admission of non-resident transport firms into the national transport market of member countries. Decisions have been taken to harmonise the conditions of competition in the road transport sector, particularly worker qualifications and market access, the freedom to establish a business and provide services, driving times and road safety.

The common air transport policy has to respond to the effects of worldwide competition. The skies over Europe are being liberalised in stages, with the result that there is greater scope for capacity-sharing between major airlines, reciprocal market access and the freedom to set fares. This goes hand in hand with safeguard clauses so as to take account of airlines’ public service responsibilities and zoning requirements.

Shipping — whether carried out by European companies or by vessels flying the flag of non-EU countries — is subject to EU competition rules. These rules are intended to combat unfair pricing practices (flags of convenience) and also to address the serious difficulties facing the shipbuilding industry in Europe.

(b) CompetitionThe EU’s robust competition policy dates from the Treaty of Rome. It is the vital corollary to the rules on free trade within the European single market. This policy is implemented by the European Commission which, together with the Court of Justice, is responsible for ensuring that it is respected.

The reason for this policy is to prevent any agreement between businesses, any aid from public authorities or any unfair monopoly from distorting free competition within the single market.

Any agreement falling under the Treaty rules must be notified to the European Commission by the companies or bodies concerned. The Commission may impose a fine directly on any companies which break its competition rules or fail to make the required notification.

In the event of illegal public aid, or failure to notify such aid, the Commission may demand that it be paid back by the recipient. Any merger or takeover that could lead to a company having a dominant position in a particular sector must be notified to the Commission.

(c) Consumer policyThe EU’s consumer policy permits its citizens to shop in confidence in any member country. All consumers benefit from the same high level of protection. The products you buy and the food you eat are tested and checked to make sure they are as safe as can be. The EU acts to make sure you are not cheated by rogue traders and are not the victim of false or misleading advertising. Your rights are protected and you have access to redress wherever you are in the EU and whether you buy your goods in a shop, by mail-order or via the telephone and Internet.

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X - THE ECONOMIC AND MONETARY UNION

Read the text in „Going for growth” and in „Panorama of the EU”

1. Explain the meaning of the monetary integrationListen to the descriptions by your peers and

o identify the main elements they mentiono is there any important aspect missing?o why was monetary integration needed?o what is the problem with devaluing currencies?o who were the initiators of the EMU? name themo what is „opting out”? Does anybody use it? Can Hungary use it in the future?o are there any disadvantages of the Euro ?

2. Explain the Maastricht criteria

Europe in 12 lessons.7.

Economic and monetary union (EMU) and the euro

The euro is the single currency of the European Union. Twelve of the then 15 countries adopted it for non-cash transactions from 1999 and for all payments in 2002 when euro notes and coins were issued.

Three countries (Denmark, Sweden and the United Kingdom) did not participate in this monetary union.

The new member countries are getting ready to enter the euro area as soon as they fulfil the necessary criteria.

In parallel with the objective of monetary stability, which is the responsibility of the European Central Bank, the member states are committed to higher growth and economic convergence.

I. The history of monetary cooperation

(a) The European monetary system (EMS)In 1971, the United States decided to abolish the fixed link between the dollar and the official price of gold, which had ensured global monetary stability after World War Two. This put an end to the system of fixed exchange rates. With a view to setting up their own monetary union, EU countries decided to prevent exchange fluctuations of more than 2.25 % between the European currencies by means of concerted intervention on currency markets.

This led to the creation of the European monetary system (EMS) which came into operation in March 1979. It had three main features: a reference currency called the ecu: this was a ‘basket’ made up of the currencies of all

the member states; an exchange rate mechanism: each currency had an exchange rate linked to the ecu;

bilateral exchange rates were allowed to fluctuate within a band of 2.25 %; a credit mechanism: each country transferred 20 % of its currency and gold reserves to a

joint fund.

(b) From the EMS to EMU

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The EMS had a chequered history. Following the reunification of Germany and renewed currency pressures within Europe, the Italian lira and pound sterling left the EMS in 1992. In August 1993, the EMS countries decided to temporarily widen the bands to 15 %. Meanwhile, to prevent wide currency fluctuations among EU currencies and to eliminate competitive devaluations, EU governments had decided to relaunch the drive to full monetary union and to introduce a single currency.

At the European Council in Madrid in June 1989, EU leaders adopted a three-stage plan for economic and monetary union. This plan became part of the Maastricht Treaty on European Union adopted by the European Council in December 1991.

II. Economic and monetary union (EMU)

(a) The three stagesThe first stage, which began on 1 July 1990, involved: completely free movement of capital within the EU (abolition of exchange controls); increasing the amount of resources devoted to removing inequalities between European

regions (Structural Funds); economic convergence, through multilateral surveillance of member states’ economic

policies.

The second stage began on 1 January 1994. It provided for: establishing the European Monetary Institute (EMI) in Frankfurt; the EMI was made up of

the governors of the central banks of the EU countries; independence of national central banks; rules to curb national budget deficits.

The third stage was the birth of the euro. On 1 January 1999, 11 countries adopted the euro, which thus became the common currency of Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. (Greece joined them on 1 January 2001). From this point onwards, the European Central Bank took over from the EMI and became responsible for monetary policy, which is defined and implemented in euro.

Euro notes and coins were issued on 1 January 2002 in these 12 euro-area countries. National currencies were withdrawn from circulation two months later. Since then, only the euro has been legal tender for all cash and bank transactions in the euro-area countries, which represent more than two thirds of the EU population.

(b) The convergence criteriaEach EU country must meet the five convergence criteria in order to go to the third stage. They are: price stability: the rate of inflation may not exceed the average rates of inflation of the

three member states with the lowest inflation by more than 1.5 %; interest rates: long-term interest rates may not vary by more than 2 % in relation to the

average interest rates of the three member states with the lowest interest rates; deficits: national budget deficits must be below 3 % of GDP; public debt: this may not exceed 60 % of GDP; exchange rate stability: exchange rates must have remained within the authorised margin

of fluctuation for the previous two years.

(c) The Stability and Growth Pact

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In June 1997, the European Council adopted a Stability and Growth Pact. This was a permanent commitment to budgetary stability, and made it possible for penalties to be imposed on any country in the euro area whose budget deficit exceeded 3 %. The Pact was subsequently judged to be too strict and was reformed in March 2005.

(d) The EurogroupThe Eurogroup is the informal body where the finance ministers of the euro-area countries meet. The aim of these meetings is to ensure better coordination of economic policies, monitor the budgetary and financial policies of the euro-area countries and represent the euro in international monetary forums.

(e) The new member states and EMUNew EU members are all due to adopt the euro, when they are able to meet the criteria. Slovenia was the first of countries from the 2004 enlargement to do so and it joined the euro area on 1 January 2007.

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XI - THE STABILITY AND GROWTH PACTRead the following text (Going for growth) and write a short sunnary of 10 sentences.

The Stability and Growth Pact

The Stability and Growth Pact commits all EU countries to the principle of budgets that are balanced or nearly balanced over the medium term. In other words, EU member states should not spend more than they earn. That way they can avoid the sorts of debt build-up which in the past have left governments either needing to increase taxes or short of money to spend on their citizens and on investment.

If economic growth slows, tax revenues dip because businesses are doing less well, consumers are spending less and governments need to spend more on unemployment benefit. Under these circumstances, some extra borrowing may be justified. However, if budgets are in a fundamentally sound position to start with, governments should have enough leeway to keep their deficits below 3% of GDP.

The Pact is not a straitjacket. It allows governments to exceed the 3% margin in exceptional circumstances. Economies can run into hard times through no fault of the governments managing them. Unforeseen events can rock the international economy – for example, the terrorist attacks in the United States on 11 September 2001, or the oil price rise that preceded the war in Iraq in 2003.

If a member state does break the rules of the Pact without good reason, it will be warned to take corrective action very quickly. Otherwise, the European Commission and the other EU countries may impose corrective measures. If that were not a sufficient incentive to get the budget back under control, the recalcitrant member state would have to deposit money interest-free with the Commission. If this were still not enough to persuade the member state to put its house in order, it could forfeit that money altogether. That is justified because an excessive deficit in one EU country can have negative effects on the others.

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XII - BUILDING FOR THE FUTURE , INVESTING IN PEOPLE27

Read the text below and answer the questions- what are the benefits of extra growth

o for governments, o for citizens?

- why does the EU need a robust social welfare system?- Explain the goal of striking the right balance between work and the rest of life.

“Going for growth” - Building for the future

The more delays there are in realising the potential and the extra growth this can bring, the greater the pressure on government budgets, since they need tax revenues from a successful economy to pay for public services and pensions.

Governments are finding it increasingly difficult to pay for pensions and health care as life expectancy increases, people retire earlier, birth rates fall and expectations rise that advances in medical technology will be universally available. The pensions and health care of today’s older generation are paid for from the contributions of those in work. In Europe today, there are four people of working age for every pensioner, but by 2040 this ratio will be only two to one.

These challenges are not unique to the EU, but are particularly acute because European birth rates are among the lowest in the world and life expectancy among the highest, pension and health care systems are particularly developed and governments want pensions and health care for all to remain a defining characteristic of European economies. A robust social welfare system is an important part of the EU’s social and economic heritage. Growth helps ensure that this heritage is affordable and sustainable for future generations.

If governments are to meet the costs they must ‘go for growth’ – by modernising the European economy, pushing ahead with integration and keeping to sound budgetary policies. More efficient financial markets without borders will give governments and individual citizens the best return on their money. Going for growth and more jobs will generate tax revenues for governments to spend on pensions, health care and other social safety nets.

Investing in people

The EU does not, however, see growth and job creation as ends in themselves. Growth must be sustainable in the interests of the long-term welfare of its citizens and their environment. In addition, people have a right to quality jobs and access to facilities such as adequate child care. These are fundamental tenets of EU employment and social policy. So is equal opportunity. It is a stated EU goal to strike the right balance between work and the rest of life.

People are Europe’s main asset, as EU leaders agreed in Lisbon in 2000 when setting strategic goals for the current decade. Investing in people and developing an active and dynamic welfare state are as crucial to securing Europe’s place in the new knowledge economy as are economic, financial and monetary integration and the pursuit of innovation and enterprise. If the emphasis is placed on people, the emergence of a new economy will be a force for social and economic cohesion.

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Investing in people is crucial as the Union strives to go for growth and to become the world’s most competitive and dynamic knowledge-based economy by 2010.

XIII - CHARTS

Explain briefly the meanings of the charts below, describing the main economic processes of the European union

Inflation

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

1991 1993 1995 1997 1999 2001 2003

Average Min Max

GDP growth

-5.0

0.0

5.0

10.0

15.0

20.0

1991 1993 1995 1997 1999 2001 2003

Average Min Max

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Unemployment rate (%)

0

2

4

6

8

10

12

1970 1974 1978 1982 1986 1990 1994 1998 2002

EU Euro area USA

XIV - ENLARGEMENT AND EU IN THE WORLD

Read the text belowChoose a non-EU region (in the Mediterranean, Balkans, Africa…)

Write a 2 page description about the region, to convince the reader about the advantages of inviting this region to become an EU-member. Check whether your region fulfills the Copenhagen criteriaPoint out the main economic, political characteristics of the region and any specific attractions you consider important to mention.Prepare a short oral summary, too.

Europe in 12 lessons

III. Relations between the EU and the Mediterranean countries

Given their geographical proximity, historical and cultural ties, and current and future migration flows, the countries on the southern shores of the Mediterranean are partners of prime importance. This is why the EU has traditionally chosen to pursue a policy of regional integration.

In November 1995, the EU laid the foundations for a new Euro-Mediterranean partnership at the Barcelona Conference, which was attended by all the EU member states and the Mediterranean countries (except for Albania, Libya and the countries of former Yugoslavia). This conference made it possible to trace the outline of a new partnership involving: political dialogue between the participating countries and a security partnership based, in

particular, on mechanisms for arms control and the peaceful resolution of conflicts; stepping up economic and trading relations between the two regions: the key to this is the

creation of a Euro-Mediterranean free trade area by 2010; partnership in social and cultural fields.

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The EU granted financial assistance to the tune of €5.3 billion to the Mediterranean countries in 2000–06. In the budget period 2007–13, a European Neighbourhood and Partnership Instrument (ENPI) follows on from and merges into one the previously separate support programme for the Mediterranean countries and its other neighbours among the successor states of the former Soviet Union.

IV. Africa

Relations between Europe and sub-Saharan Africa go back a long way. Under the Treaty of Rome in 1957, the then colonies and overseas territories of member states became associates of the Community. Decolonisation, which began in the early 1960s, turned this link into a different kind of association, one between sovereign countries.

The Cotonou Agreement, signed in 2000 in Cotonou, the capital of Benin, marked a new stage in the EU’s development policy. This agreement between the European Union and the African, Caribbean and Pacific (ACP) countries is the most ambitious and far-reaching trade and aid agreement ever concluded between developed and developing countries. It followed on from the Lomé Convention, which was signed in 1975 in Lomé, the capital of Togo, and subsequently updated at regular intervals.

The basic aim of this wide-ranging trade and aid agreement remains the same as that of the Lomé Convention: ‘to promote and expedite the economic, cultural and social development of the ACP states and to consolidate and diversify their relations [with the European Union and its member states] in a spirit of solidarity and mutual interest’.

The new agreement goes significantly further than earlier agreements, since it has moved from trade relations based on market access to trade relations in a wider sense. It also introduces new procedures for dealing with human rights abuses.

The European Union has granted special trading concessions to the least developed countries, 39 of which are signatories to the Cotonou Agreement. Since 2005, they have been able to export practically any type of product to the EU, duty free. The European Development Fund finances the ACP support programmes, paying out between two and three billion euro a year.

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XV - RURAL DEVELOPMENT FOR 2007-2013

Read the text below. Give short answers to the following questions:1. What are the main objectives of the new rural policy?2. Which element of competitiveness do you think most important for your country, and

why?3. Give suggestions for „non-agricultural” activities4. What does natural handicap mean for mountain farmers?

Prepare a short summary on the topic, of approximately 20 lines.

IP/06/1177Brussels, 12 September 2006

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Rural Development: Commission finalises annual funding for Member States for 2007-2013

The European Commission today decided on the annual Rural Development budget for the 25 Member States for the years 2007-2013. This follows the decision of the European Council in December 2005 on the Financial Perspectives. The amount of money to be received by each Member State has been decided based on the following criteria: a) some amounts are reserved for certain regions under the Convergence Objective; b) the historical share for each Member State of the EAGGF Guarantee envelope for Rural Development and Leader+ and c) particular situations and needs based on objective criteria (the European Council allocated specific amounts to eight Member States). The decision will be amended once Romania and Bulgaria become members of the EU. Additional money is available for these two countries.

“Now that we have finalised the budget allocations, I look forward to the Member States’ Rural Development programmes,” commented Mariann Fischer Boel, Commissioner for Agriculture and Rural Development. “Rural Development funds can be used to increase the competitiveness of the agrifood and forestry sectors and are a vital element in supporting environmental projects in the countryside. But this money can also be used outside of the traditional farming industry, to help create new jobs and new businesses in rural areas. We talk a lot about creating growth and jobs – this is a concrete example of EU money doing just that.”

Main features of the new rural development policy:

- One funding and programming instrument, the European Agriculture Rural Development Fund (EARDF)

- A new strategic approach for rural development with clear focus on EU priorities- Reinforced control, evaluation and reporting and a clearer division of responsibilities between

Member States and Commission. - A strengthened bottom-up approach. Member States, regions and local action groups will have

more say in attuning programmes to local needs

The four main objectives:

Axis 1: Improving competitiveness of farming and forestry

Examples:

- Fostering human capital by providing training and advice to farmers and foresters- improving and developing infrastructure related to the development and adaptation of

agriculture and forestry- supporting farmers who participate in food quality schemes- setting up of young farmers- support for semi-subsistence farmers in new Member States to become competitive- backing innovationA minimum of 10% of the Community contribution has to be spent on Axis 1. The EU co-financing rate is maximum 50% (75% in convergence regions).

Axis 2: Environment and countryside

Examples:

- natural handicap payments to farmers in mountain areas- NATURA 2000 payments- agri-environment measures

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- payments for improving animal welfare- measures for sustainable forestryA minimum of 25% of the Community contribution has to be spent on Axis 2. The EU co-financing rate is maximum 55% (80% in convergence regions).

Axis 3: Improving quality of life and diversification of the rural economy

Examples:

- diversification to non agricultural activities- support for the creation of micro enterprises- encouragement of tourism- village renewal- basic services such as providing childcare facilities to help women re-enter the employment

marketA minimum of 10% of the Community contribution has to be spent on Axis 3. The EU co-financing rate is maximum 50% (75% in convergence regions).

Axis 4: the LEADER approach

Each programme must have a LEADER element for the implementation of bottom-up local development strategies of local action groups. A minimum of 5% of the Community contribution is reserved for LEADER (2.5% for the new Member States).

Breakdown by Member State of Community support for rural development 2007-2013 (thousand EUR)

Current prices 2007 2008 2009 2010 2011 2012 2013 07-13 total

of which Convergence

totalBelgium 63991 63958 60238 59684 59268 56995 54477 418610 40744Czech Republic 396623 392639 388036 400933 406641 412672 417962 2815506 1635418Denmark 62593 66345 63771 64335 63431 62598 61589 444661 0Germany 1184996 1186942 1147426 1156019 1159359 1146662 1131115 8112517 3174038Estonia 95608 95569 95697 100929 104639 108913 113303 714659 387222Greece 461376 463470 453393 452019 631768 626030 619248 3707304 1905697Spain 1012456 1030881 1006845 1013903 1057772 1050937 1041123 7213918 3178127France 931042 942359 898673 909225 933778 921206 905682 6441965 568264Ireland 373684 355014 329171 333372 324699 316771 307204 2339915 0Italy 1142143 1135428 1101391 1116626 1271660 1266602 1258159 8292010 3341092Cyprus 26705 24773 22750 23072 22403 21784 21038 162524 0Latvia 152867 147768 142542 147766 148782 150189 151198 1041114 327683Lithuania 260975 248836 236929 244742 248002 250278 253598 1743360 679189Luxembourg 14422 13661 12655 12818 12487 12181 11812 90038 0Hungary 570812 537526 498635 509252 547604 563305 578710 3805843 2496095Malta 12434 11528 10657 10544 10348 10459 10663 76633 18077Netherlands 70537 72638 69791 70515 68707 67782 66550 486521 0Austria 628155 594710 550452 557558 541671 527869 511057 3911470 31938Poland 1989718 1932933 1872740 1866783 1860574 1857245 1850046 13230038 6997976Portugal 562211 562492 551197 559019 565143 565192 564072 3929325 2180736Slovenia 149549 139868 129728 128305 123026 117809 111981 900267 287816Slovakia 303163 286532 268049 256310 263028 275025 317310 1969418 1106012Finland 335122 316143 292385 296367 287790 280508 271617 2079933 0Sweden 292134 277225 256996 260397 252976 246761 239159 1825648 0United Kingdom 263996 283002 274582 276600 273334 270696 267364 1909574 188338

11357312 11182240 10734731 10827093 11238888 11186469 11136038 77662771 28544460

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Note: €69.75 billion (in 2004 prices) were allocated for Rural Development for the period 2007-2013 in the Interinstitutional Agreement (including Bulgaria and Romania). The table above is for EU-25 and includes the money transferred from direct aid to farmers to Rural Development under so-called “Modulation” and other agreed transfers (cotton and tobacco).

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XVI - BOOSTING PRODUCTIVITY AND CREATING BETTER JOBS

Read the text below. Give short answers to the following questions:1. What is the target employment rate for the EU? What is the current rate? What does this

value mean?2. Is the EU competitive enough in labour productivity? Compare it to the US.3. Explain briefly the term „flexicurity”4. Explain „job security” and compare it to „hiring and firing”.

Prepare a short summary on the topic, of approximately 20 lines.

SPEECH/06/598Vladimír ŠpidlaMember of the European Commission responsible for Employment, Social Affairs and Equal Opportunities

Boosting productivity and creating better jobs

Finnish Presidency conference in cooperation with the European Commission "Boosting productivity and creating better jobs"Espoo (Finland), 16 and 17 October 2006

Ladies and gentlemen,

By opting to concentrate on a joined-up approach to productivity, job quality and increasing the employment rate, the Finnish Presidency has identified a key element in the Lisbon strategy, combining three aims which could clash if they were not addressed at the same time. Productivity can be stepped up at the expense of job quality or the employment rate. The employment rate can also be increased without regard for the quality of the jobs created or productivity. Finally, job quality can be enhanced without creating any new jobs and without increasing productivity. This is, moreover, what emerges from the excellent document that EMCO (the Economic Committee) has prepared specifically for this conference.

The Lisbon strategy

Last year marked the first mid-term assessment of the Lisbon strategy. It was not particularly encouraging and it was decided to refocus the strategy on growth and employment and to establish a better partnership between the Commission and the Member States.

The European Union is still falling well short of its employment rate targets which are an overall rate of 70% with over 60% for women and 50% for older workers. At present the average rates in the Union are 64%, 56% and 43% respectively. There is obviously some way to go but the targets are not over-ambitious. Several Member States have already posted higher figures.

Moreover, competitiveness must be increased in order to meet the challenge of economic globalisation which is stepping up the pace of technological progress and product and service cycles. Globalisation is also prompting a massive increase in the supply of labour. We all know

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that we cannot compete with the emerging economies on labour costs. Our main advantage, it cannot be said often enough, is our human capital with its know-how, flexibility and creativity.

Too often globalisation is seen as a threat for our economies and for the European social model, but the new developed countries represent new markets for the European Union. Of course, in order to take best advantage of these new opportunities, the European Union clearly has to increase its ability to adapt. Companies and workers must adapt in order to anticipate, manage and direct change and must be given a framework in which they can exercise and develop these capacities. The qualities of all individuals must be put to best use, enabling them to develop and increase their potential. This is how I see a society with full employment where everyone contributes to the best of their ability to the European Union's prosperity.

The European Union's fundamental values of solidarity, equal opportunities and inclusion are vital for European competitiveness. Social justice requires workers' fundamental rights, including safety and health at work and sufficient protection against discrimination or harassment, to be upheld.

Globalisation is not the only challenge forcing us to modernise our economies. In the context of the ageing of the working population, increasing productivity becomes the main factor in growth. However, the rise in productivity has slowed considerably in the EU over the past few decades and we have lost ground on our global competitors. The average productivity per worker in the EU is well below that in the United States, mainly as a result of the fewer hours worked per year but also because hourly productivity is lower. This trend must be reversed. There are some signs that this might happen, mainly thanks to the sharp rise in productivity in the new Member States.

We also need better-quality jobs. Too many jobs are of low quality. Job quality is a complex notion which subsumes pay and social advantages, relations between employers and workers, working conditions, access to training, career prospects, social security cover, health and safety standards, gender equality and non-discrimination. Enhancing the quality of work and, in particular, overcoming job insecurity is a natural complement to job creation and a condition for permanent employment and increased productivity. Decent work is a requirement the world over and the European Union plays a full part in advocating it at international level.

At a time when the economic prospects seem to be brightening, the climate is all the more favourable for reform. The Commission envisages creating more than 3.7 million jobs net in the period 2005-2006.

The pace of the reforms necessary to take advantage of these brighter prospects must therefore be stepped up in order to create sustainable growth in the long term.

Flexicurity

For the Commission, flexicurity is one of the keys to modernising the European social model which reconciles two apparently incompatible principles: job flexibility and security for workers, the idea being to combine the following four elements judiciously:

- flexible work arrangements, both contractual and non-contractual (working hours, child care), which requires modern labour legislation;

- effective active labour market measures enabling workers to cope with change (rapid transition to a new job after a period of unemployment);

- sound lifelong learning systems (supporting workers' ability to adapt);

- and modern social security systems which guarantee income and also facilitate mobility.

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The Commission would like to see the Member States agreeing on a set of flexicurity principles by the end of 2007. The Council meeting in spring endorsed this proposal as a way of exploiting the synergies between competitiveness, employment and social security.

The Commission will therefore present a draft communication after the Council meeting in spring 2007 which will pave the way to adopting a set of common principles.

The social partners will be involved in the discussion. Moreover, the tripartite social summit in Lahti which will be held in a few days' time will examine at this issue.

Without wishing to anticipate the results of this protracted debate, certain aspects of flexicurity which can help to increase productivity and improve job quality can already be mentioned.

New, more flexible methods of work organisation can, for example, increase productivity. A modern method of organising work which takes better account of everybody's needs, in particular in order to reconcile work and family life more effectively or to provide training, increases worker participation and hence productivity. This is internal flexibility within a company, which must also enable workers to acquire new skills and to progress in their careers.

External flexibility, i.e. moving from one company or economic sector to another must enable corporate needs, in terms of skills and workforce levels, to be better met. This will boost competitiveness and therefore create more jobs.

From the point of view of workers, external flexibility is a mobility factor enabling them to broaden and vary their experience and, in turn, enhance their employability and, in the longer term, productivity.

In order to encourage such external flexibility, job security must be increased so that employees can get back into work again quickly by means of training and vocational guidance. Above all, proper financial support needs to be guaranteed. Some studies show that high benefits increase the feeling of security amongst workers and encourage mobility, including cross-border mobility.

European labour market

The Communication on the labour market, which the Commission is also set to adopt next month, ties in with the discussion on flexicurity. A proper European labour market is indispensable for reconciling social justice and competitiveness and constitutes genuine value added at European level.

As regards the added value of the European Union, it is time to draw inspiration from the single market and to adopt a new approach to the labour market which recognises the diversity of Member States and regions. A consistent framework must be provided which really guarantees free movement of workers within the Union by giving everyone access to it, irrespective of nationality, status or origin. This would enable us to take better advantage of our main resource, namely our human capital, at European level.

The draft communication has three major political strands.

The first is to maximise the potential of mobility by tackling the obstacles to it, mainly through portable pensions, posting of workers and developing EURES.

The second comprises developing an active flexicurity model at European level to promote the necessary market flexibility whilst increasing security, so as to enable workers to change jobs and careers, primarily by means of lifelong learning.

The third comprises helping workers to cope with change. The social dialogue plays a particularly important part here.

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These three political strands could be supported by using the five main instruments at the disposal of the European Commission and the Member States, namely:

- policy coordination;

- social dialogue at European level;

- legislation;

- financial instruments;

- the open method of coordination.

On the same date, the Commission intends to adopt a Green Paper on Labour Law to enable all the parties involved to put their heads together and consider how labour law could usefully be adapted to accommodate flexicurity and a single labour market.

The Green Paper on Labour Law

The Green Paper on Labour Law should first of all take stock of the situation and identify the main political challenge as being the increasing diversity of forms of employment.

The labour market must be flexible to cope with the rapid economic, technological and social changes set in motion by globalisation.

The number of workers recruited on atypical contracts (such as part-time or temporary contracts) or who are self-employed is already estimated to be 47%.

This contractual diversity, which enables companies to adapt quickly to the needs of the market, is a risk for workers, who find themselves trapped in vulnerable and insecure circumstances which may affect choices in their private lives (housing, family, etc.). This also ties in with certain demographic aspects mentioned previously.

The aim of this Green Paper is to prompt an open debate between all the parties concerned in the European Union in order to strike a balance between flexibility and security for everyone.

Ladies and gentlemen,

This brings me to my conclusions.

Conclusions

Experience in the various countries shows that a political approach with generous unemployment benefits and considerable investment in active labour market policies combined with jobseeker activation and monitoring can have a positive impact on employment.

An active labour market policy and lifelong learning create the conditions which enable workers to make the transition from a low- to a higher-productivity job. If an active job-search programme is implemented and sufficient protection against unemployment is guaranteed as soon as possible where a risk of unemployment occurs, employees feel more secure and are more able to adapt to the changes caused by restructuring.

By security, we do not mean "job security" but security of employment and security during transitional periods. The aim is to ensure that individuals find new jobs and are protected from long-term unemployment. As for flexibility, this does not just mean "hiring and firing". Enterprises need a flexible and qualified workforce which is meticulous and responsive when the economic opportunity arises. This requires permanent investment in human resources and active support in periods of transition on the labour market.

This is the reasoning behind flexicurity and is what makes it an important instrument for increasing productivity and enhancing employment.

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I am positive that this conference, followed by the meeting of the EMCO will enable us to look at these issues in more depth.

Thank you for your attention.

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XVII - FOR AND AGAINST

Read one of the texts listed below (Topic 1, 2 or 3)

For and AgainstTopic 1: Reviving European Growth Topic 2: Quality of Life in Rural Areas: Building on the Leader ExperienceTopic 3: Agricultural Policies in the International Context: Facts and Fiction

ROLES:Position „FOR” Prepare for a short speech (length: approx: 5-10 minutes) about the selected topic. Do not use PPT presentations, but you may bring figures to support your opinion. Use the written material (speech) presenting the speaker’s views as your own. You may add your own opinion but please arrange your comments to support the ideas outlined int he source text.

Position „AGAINST”Prepare 2 or 3 questions/comments about the topic selected for the position, focusing on the negative aspects and problems arising from the situation presented by the speaker. Your task is to find weak points in her/his arguments, and your remarks should point out these weaknesses.

(Optional: After the debate: write a short summary of the topic ( 3 to 4 pages) focusing on the positive aspects that you have presented in your speech, but also react on the questions and criticism you received during the debate. You may agree or disagree with the criticism, but please explain why.)

TOPIC 1SPEECH/04/3

Frits BolkesteinMember of the European Commission in charge of the Internal Market, Taxation and Customs

Reviving European Growth – the need for courageous reforms

Address at ELDR Seminar “Reviving European Growth” at European ParliamentBrussels, 8th January 2004

The current legislative period is coming to an end. It is time to look back briefly at the work done and draw lessons from the past to prepare for the future.

Good work has been done in the last four years. A Community Patent is underway. New legislation has been adopted to make public procurement markets more efficient. The Financial Services Action Plan with its 42 measures is right on schedule.

Nonetheless, the current situation does not satisfy me. Nor should it satisfy you.

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The EU economy is sick. For several years now, it has been showing worrying symptoms. In March 2000 the Lisbon European Council opened a window of opportunity to boost Europe's economic activity.

But despite the Lisbon agenda, today's economic situation is no better now than it was in 2000. The productivity gap between the EU and the USA is widening: labour productivity is growing four times faster in the USA than in Europe. In 2002, trade between EU countries fell. Unemployment is increasing.

Sure, some say recovery is underway. On the basis of third quarter figures last year, annual GDP growth was estimated + 0.4 %. Over the same period, the annual US economy was expected to grow in excess of 8 %.

The diagnosis: we need to create an investment-friendly environment

What has gone wrong? The Lisbon Council created political momentum. The diagnosis and objectives established at Lisbon were right. Why then have the efforts of European institutions failed to re-energise the European economy?

Madeleine Albright, former US Secretary of State, said that you either have to be a genius or French to understand what goes on in the EU. I am not a genius and I am not French either. But I think I have been around Brussels long enough to have some ideas about what needs to be done to put the EU back on the economic tracks.

Private investments are the key to growth, job creation and innovation. Europe is not as attractive now to investors as it as ten years ago. With interest rates at a 50 year low, inflation under control and a stable macroeconomic environment, investment has fallen in 2001, 2002 and 2003. European and foreign businessmen prefer to invest abroad rather than investing in a market with 450 million consumers and 5 % of the world's GDP. How can we explain this?

I believe the explanation is simply that we still have not succeeded in creating a sufficiently competitive and investment-friendly European business environment.

Economic reforms are needed

We liberals believe in structural reforms not just out of political conviction, but because such reforms work. We have seen this in utilities – where prices for users have fallen and employment has increased; and in public procurement because we know now that applying public procurement directives cuts prices paid by public authorities by one third.

The evidence is conclusive: introducing reform pays.

However, we also know that this is not enough.

We are far from having a Single Market for energy;

Procurement rules are fully applied to only 16 % of total procurement and rules must be simplified and compliance costs reduced;

The potential for an Internal market in services remains untapped;

Our capital markets are much more integrated now than 5 years ago, but a lot remains to be done in retail financial services;

In those countries where dismissal costs and payroll taxes have been reduced, employment has increased, but many rigidities still have to be removed from our labour markets.

If you allow me the comparison, our Internal Market for goods is like a 10 year old Mini: it could be better, but it works and it is nice for a spin! But our family and our needs have grown bigger

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and we must replace our Mini by a brand new Volvo or Mercedes Coach for long distance rides in the highway of the global economy!

That is why I have been pushing for reforms in different fields, but especially in financial markets and in other services sectors. It is precisely in those sectors (securities markets, retail distribution) where the USA is so spectacularly outperforming the EU.

… and reforms are needed now!

Delays in the adoption and implementation of those reforms cost jobs and money. Speed in the introduction of reforms is essential. Between 1992 and 2002 the average time needed to adopt and fully implement a Commission financial services proposal by all Member States was eight years! That is unacceptable. We must find better and faster legislative practices. The Council and the Parliament should be more diligent in the discussion and adoption of proposals; the Commission should prepare better and more focused proposals.

We must avoid making mistakes in this process

So far I have spoken about what must be done to inject life back into Europe's economy. We must also be aware of things we mustn't do. In my view, there are three things to avoid at all cost:

First, the Rule of Law must prevail. As Hayek said, this is the ultimate responsibility of public authorities. The debacle over the Stability Pact is precisely what should not happen. The Pact guarantees the commitment of governments to rigorous budgetary policies. As in the 1970s, if that commitment loses credibility, we will all pay a high price.

There are other past mistakes we must not repeat. Recently, there has been talk about "reviving industrial policy" to fight the risk of "de-industrialisation". Those among us old enough to remember the 1960's and 1970's can hardly disguise our abhorrence for such talk. We paid dearly for it then and risk doing so again now. Any policy that distorts market competition favouring so-called "strategic sectors" will be very costly for Europe.

Finally, situations like the one created last year when the Takeovers directive was adopted should give us an allergic reaction. Deals between member States to neutralise the impact of reforms render all our efforts useless. This is a self-defeating strategy which may preserve some short term political interests, but only at the longer term's expense.

Conclusion

Despite all this, I would like to send today an optimistic message: Europe today can overcome these problems. Some of our Member States are among the best performing nations in the world. We have an extremely well qualified labour force. Managed correctly, enlargement offers enormous opportunities for trade and investment; it could even crank-start a newly reinvigorated Internal Market.

I am convinced that the appropriate reforms to solve many of our problems are already in the pipeline. The draft Directive for the Internal Market in services should boost the most dynamic sectors of a modern economy stifled by outdated regulations. New proposals for the integration of financial services markets will upgrade the regulatory framework in this key area providing capital to finance new projects and enterprises.

To conclude, try to remember what the European economy was like in the early 1980s and then think what impact the Internal Market programme had on growth, productivity and competitiveness. Then, daring Internal Market reforms allowed us to enjoy productivity growth rates twice as high as the Americans. Courageous new reforms would certainly revitalise Europe's economy now.

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Only political will can turn the tide!

As liberals, our responsibility is serious. If we liberals do not succeed in creating the necessary momentum for reform, who will?

TOPIC 2

SPEECH BELGIUM, 08/11/2004Dr. Franz FischlerMember of the European Commission responsible for Agriculture, Rural Development and Fisheries

Quality of life in rural areas: Building on the Leader experience

1st Leader+ Observatory European Seminar Brussels, 25th October 2004

Ladies and Gentlemen,

If there is one subject on which I would always like to have the last word, it is the importance of integrated rural development, and so it is perhaps fitting that whilst today’s event is the first for you, it is also the last for me in which I will participate in my capacity as Commissioner. Rural development is something we have continually striven to improve over the last ten years and it is a project that is essential, to everyone in the EU, in our drive towards sustainability.The very valuable work that you are all undertaking in the framework of Leader is a key element of this, and it goes without saying that I welcome this opportunity to thank you all for your contribution to building a stronger and more dynamic rural Europe. New opportunities are not always easy to detect, and building on them requires a lot of voluntary work, I know. It is down to you, the Local Action Groups (LAGs) to get projects up and running and make use of the support available to you, and so far, you have shown yourselves amply able to take up every opportunity available to you.

I should also assure you that although I will step down from the EU at the end of this week, I will continue to monitor Leader’s progress as closely as I always have done since it came into operation. I know that it will grow in importance as our countryside continues to develop and evolve, and I have no doubt that with the Leader scheme, our rural areas are onto a winner. With its integrated approach, its emphasis on local actors and on-the-ground experience, it is still considered by many as a pioneering approach and it continues to attract considerable interest, both inside and outside the EU, despite the fact we are now into its third programming period. Ladies and Gentlemen,

Let me focus on this last point for a moment. Why has the Leader approach been considered so successful? It’s largely down to the seven key principles on which it is based. I know you know these as well as I, but it is useful to recap nevertheless. They are:

1. The setting up of integrated development strategies;2. An emphasis on bottom up approaches with a decentralised management;3. Area-based programmes;4. Building on local partnerships;5. Innovative development strategies;6. The promotion of cooperation; and 7. networking.

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Leader+ is the most recent and most ambitious initiative, building on the achievements of both Leader and Leader II. It is designed to help rural actors consider the long-term potential of their local area and aims to facilitate and support high quality and far-reaching integrated strategies for local rural development. It puts a strong emphasis on co-operation and networking between rural areas, something that I hope today’s seminar will assist and encourage.

As far as financing goes, it is one of four initiatives covered by the EU structural funds and, in the programming period 2000-2006, over €5 billion is planned to be spent. Of this, more than €2 billion is funded by the EAGGF Guidance section, €1.5 billion by private contributions, and the rest by the Member States. Let me say that I have been particularly encouraged by the number of original strategies for sustainable development that Local Action Groups (LAGs) have been put forward over the last year alone.

Ladies and Gentlemen,

Under Leader+ a total of 892 local action groups have now been selected and the area covered by them amounts to almost 1.5 million km² – representing 75 % of rural territory and over 50 million people in the EU-15 group. What are the selection criteria we regard as the most important when choosing these programmes? There are many, but they include:

• The rural nature of the territories,• Their homogeneity in physical, economic and social terms,• Partnerships: economic and social partners and associations must make up at least 50 % of the local partnership. The relevance and effectiveness of the partnership also counts,• And finally, we also want to see integrated and innovative development plans to provide new solutions for specific rural challenges.

What have LAGs chosen to focus on? By and large they have opted for the priority themes identified by the Commission back in 2000. Making the best use of natural and cultural resources was chosen by 34% of LAGs. Improving the quality of life in rural areas by 24%, and adding value to local products, in particular by facilitating access to markets for small production units via collective actions was chosen by 20% of LAGs. The use of new know-how and new technologies to make the products and services of rural areas more competitive is also popular, as is the priority theme that allows specific projects to be defined at national level, for example, to target young people and women, or to promote interaction between rural and urban areas.

Ladies and Gentlemen,

Finding new solutions to often complex rural problems has been a central element of the process. Indeed, “Learning through innovation” is a key concept of the Leader approach and the six case studies we will hear about later today are just a few from the many we could have chosen to demonstrate how a new approach to development can help our rural areas. Accessibility is a key issue in the countryside. Lombardia’s “Taxibus” is a novel way of helping the rural population to participate in sporting and cultural events elsewhere – of bringing town and country together. Integration too, for the disabled, the elderly or the young, is essential to a dynamic, living, countryside. Both the Tyne Esk project, which has established a cultural centre and a new sculpture workshop for teenagers, and the Catalonian project which employs disabled people in communal gardening projects, provide imaginative solutions in this respect. I know that partnerships and networks have been a central element of this and I hope that today’s seminar will help build on this and provide the opportunity for an exchange of experiences.

Ladies and Gentlemen,

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We know that Leader is one of the most successful ways of tackling these issues, not only based on these examples, but also on our own studies. Indeed, the ex-post evaluation of the LEADER II Community initiative concluded that the Community initiative was an efficient way of dealing with rural problems because it was adaptable to every rural socio-economic context, brought key actors together, mobilised voluntary effort and was responsive to small scale activities and projects.Similarly, it was also judged to be effective because it closed the gap between a top-down programme and the local people, conveyed responsibility to local actors and linked public authorities with the local economy and civil society. It contributed to sustainability by opening up new ways of creating added value in rural areas and through capacity building. And it resulted in the creation or safeguarding of up to 100 000 permanent full-time jobs in rural areas, had positive income effects and contributed to equal opportunities. Not only this, but the LEADER approach has also been emulated beyond the sphere of its beneficiaries and has inspired similar national or regional policies as well. At the local level the LEADER approach fits very well in the Lisbon strategy, creating new ways of doing things, investing in social capital and spreading knowledge in rural areas.Bearing this in mind, the inevitable question is, where next?How should we incorporate Leader into broader policy? And the overriding opinion, and the broad consensus that was reached at last year’s Salzburg conference, is that the Leader approach has a crucial role to play in future rural development policy. In addition to the three broad objectives it outlined - a competitive farming sector, managing the land for future generations and a living countryside, the conference also concluded that:

1. Rural development policy must serve the needs of broader society in rural areas and contribute to cohesion. In other words: rural development should be more than just a sectoral approach linked to agriculture. It clearly has an important territorial dimension as well.

2. Rural development policy should be implemented in partnership, based on a dialogue between all rural stakeholders, and it must build on the lessons learnt from LEADER, particularly mainstreaming;

3. That more responsibility must be given to programme partnerships to define strategies. Their capacity to monitor and evaluate must be reinforced too; and that

4. Agriculture and the rural economy are intrinsically linked and interdependent.

Ladies and Gentlemen,

This brings me to the overall direction in which rural development policy is now moving because, given the success of Leader, and the increasingly important role it has played in rural development in recent years, it is clear that the focus on partnership, a bottom up approach, and local involvement must be a key element in future rural development policy. This is exactly why the Commission, in its July proposals, decided to mainstream

Leader, and why, in future, it proposes that each rural development programme must have a Leader element to help local action groups implement local development strategies. Rural development policy should also be considerably simpler in future, falling under one funding and programming instrument, and it should also be more efficient, based on three main priority axes:

• Improving the competitiveness of farming and forestry,• Environment and land management, and• Improving the quality of life through diversification, a concept in which Leader has, and

will continue to play a key role.

A fourth implementation axis, or Leader axis, will also help to mainstream the local development

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strategies already developed under the Leader initiative. This should help to consolidate the experience and progress made in bottom-up, integrated local strategies. Leader is, and will continue to be particularly relevant for improving the quality of life for the local economies and populations, for renovating and developing rural heritage, and for more specific objectives such as the training of farmers. As far as funding is concerned, the Commission proposed that a minimum of 7% of the EU funding reserved for the Leader axis to ensure continuation of a bottom up, integrated approach in rural development programmes. This is based on the 2004 DG Agriculture study, “Methods for, and success of mainstreaming Leader: Innovation and approach to rural development programmes”, which showed that about 8% of EAGGF funding for rural development programmes is used for measures with some leader features, with around 2.5% channelled into fully mainstreamed LEADER-type programmes or measures. The Leader axis, as well as the land management axis, is also EU co-financed at a slightly higher rate – 55% as opposed to a maximum of 50% outside convergence regions (80% as opposed to 75% in convergence regions) for developing competitivity and wider rural development. This is another indication of the increasing importance that we now attach to the Leader approach. 3% of the total funding for Leader axis in the overall programming period will also be kept in reserve and allocated in 2012/13 to the best performing projects under the Leader axis.

Ladies and Gentlemen,

These are proposals which I believe will offer a coherent framework to disseminate the local government practices which have been built upon in the Leader approach, and improve the quality of life in rural areas, which brings me to my final point today.

Ladies and Gentlemen,

The experience that we have gained – all of us, you in on the ground implementation, and us in the role that the different administrative levels have to play in rural development strategy, have proved, time and again, that territorial and bottom-up approaches are the best and most efficient way of promoting and securing rural development. This is why we have to succeed in mainstreaming the Leader approach, and why the Commission so explicitly defined the role that Leader should play in future rural development policy.

The development of new opportunities is not always easy to detect, but Leader is about innovation, and all of the examples that have been brought here today are symbolic of the drive, determination, initiative and wealth of ideas that characterise the EU’s rural population. I maybe bowing out at the end of this week, but I believe we do now have the correct framework in place and I look forward to hearing, seeing the process we make with the help of the Leader initiative. It is still in its youth, and we’ve got a lot of potential still left to explore.

Thank you.

TOPIC 3SPEECH/04/433

Dr. Franz FISCHLERMember of the European Commission responsible for Agriculture, Rural Development and Fisheries

Agricultural Policies in the International Context: Facts and Fiction

Participation in an ongoing series of discussions on “The Challenges of the 21st Century: An

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exchange of European and American Views”Harvard University, Cambridge – Minda de Gunzburg Centre for European Studies - 30th September 2004

Ladies and Gentlemen,

I’m conscious that I’m on the wrong side of the lectern this evening. Firstly, I’m the one speaking, allegedly to one of the toughest audiences in the world, and secondly, I stand here representing Europe’s common agricultural policy, which is never the fastest way to make friends and influence people on this side of the water. Where should I start, I thought? How, given the nature of my topic, could I start off on the right foot myself with my companions here tonight? And the conclusion I came to was that I should begin with a point on which I know we will both agree – that is, that it is a great honour to have been invited here this evening, and for that I thank you very much. What is going to be a good deal trickier however, is to convince you that the rest of the story I am going to tell tonight holds equally true; the biography of an agricultural policy that has changed its colours several times, that has been upgraded to keep pace with modern objectives; one that has faced realities not forcibly, but voluntarily, to move European agriculture forward, and to set the precedent in the WTO. And one, that despite this, still faces criticism from around the world. It remains trade distorting, its opponents say, it uses and abuses developing countries, and it costs too much, funding an industry in which proportionately few remain in many of our member states, and one whose products could be sourced cheaper elsewhere.You’ve heard it all before I’m sure. The CAP is after all one of the most widely publicised of EU policies, nowhere more so perhaps than here in the States. But is the criticism it so often receives really justified? Is it still relevant to today’s policy? And is it really so much worse than other developed, or even developing, country farm policies? I will let you draw your own conclusions, but let me begin by putting a few things into perspective, the first being the key differences between our past and present policies.

Ladies and Gentlemen:Let us go back for a moment to 1990, the beginning of the end for an old style agricultural policy that sported many unwanted side effects of a post-war legacy, but whose primary intention had been to secure a stable food supply. That goal long since achieved, two-thirds of the total EU budget was now being ploughed into supporting a trade-distorting system characterised by surpluses, environmental degradation, a hugely complex range of subsidies and fixed prices determined not by the market, but by politicians.

Clearly unsustainable, and clearly with a detrimental impact that extended well beyond our domestic borders, it was hardly surprising when consumers started to lose confidence, nor when the pressure mounted during the Uruguay Round. They were costly mistakes for which we have been paying dearly ever since, not just in budgetary terms, but also in image, and they were a wake-up call that our CAP needed to do a U-turn, and work its way back towards a farm support system that recognises that farming has, and always will be, about far more than just theproduction of food. So, in 1992, began the series of reforms that we are still continuing today, and so began the long drive back to sustainable, market oriented and high quality food production.

What has changed? Firstly the balance. Previously a policy that tipped the scales heavily in favour of purely economic objectives, today’s CAP is one in which the economic, environmental and social impact all weigh in equally important. Guaranteed prices have progressively been cut to bring domestic prices in line with those on the world market. Support has been decoupled from production levels and tied instead to maintaining mandatory environmental, food safety and animal welfare requirements, all elements which have explicitly been called for by European

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consumers. And the inclusion of a comprehensive rural development policy recognises the intricate relationship between farming and the overall sustainability of the countryside and itsEconomy.

All of these have switched the emphasis of the policy, my second key point, from one of quantity, to one of quality; from one that was subsidy driven, to one that is demand driven; from one that was trade distorting, to one that is trade facilitating, and finally from one that farmed for the minute to one that farms for the future.

Ladies and Gentlemen,I hope I have made it clear how vastly different today’s agricultural policy is, but Americans are often cynical when it comes to the topic of CAP reform. Many, I know, think of it all as a strong dose of political guff that masks the symptoms of the maladies rather than curing them, and whilst it would be easy for me to continue to argue my case at a general level, I suspect you may be more easily convinced if I substantiate my claims with a little evidence.

One of the key difficulties that has characterised the recent round of trade talks, and a point I will come back to again later on, has been the misuse of the data available, and a consequent confusion between what is true, and what is not. Facts often lose out to the inherently one-sided game of politics, but they are, as John Adams, second U.S. President and former Harvard student said, “stubborn things; and whatever may be our wishes, our intentions, or the dictate of our passions, they cannot alter the state of facts, and evidence.” So what exactly is the state of the facts, the evidence surrounding CAP reform? Let us begin with the question of trade distorting support, for which the changes in our cereals policy provide the most striking results. Since reforms began in 1992, price support and tariffs have, in general, fallen by more than 40%. Beef too, for which the safety net price has also fallen by over 40% and intervention has been abolished altogether, is another good case in point.

Now let me take the budget. I mentioned earlier that many thought of our policy as overpriced, inefficient, ill-directed and unnecessarily expensive for our taxpayers, but if you trace the contour of our internal expenditure over the last ten years, you can see quite clearly how our reforms have actually secured more value for less money.

Back in ’92, we were spending 0.61% of the EU’s total GDP on our agricultural policy, it’s now down to 0.45% and, according to the European Commission’s proposals for the next financial framework period, will be down to just one third in another ten years time. All the more remarkable given that we’ve just welcomed ten new Member States and four million new farmers into the Union, and that we’re going to be channelling an additional €1.2 billion a year into rural development.

Ladies and Gentlemen,

Reform has enabled us to make our money go further, supporting the sustainable development of our rural areas as a whole, which comprise roughly 90% of the EU’s total land area, and are home to about half of its population, including our 11 million farmers. Reform has made quality our key objective, and reform has made the CAP a policy that considers the impact before it drives forward, rather than driving forward regardless. Where people get the wrong impression on both these accounts, and something that America falls foul of too, is in the misuse of the Producer Support Estimate (PSE), a mechanism that measures the total amount of support afforded to agriculture, and one that is very good at measuring the different compositions of agricultural support, but wholly inappropriate for measuring the impact of support on trade.

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The PSE can give us an idea of what taxpayers and consumers pay, not only for agricultural production, but also for its many by-products and public goods – environmental services to name but one. To put a value on the latter us notoriously difficult, but to pretend that they do not exist is downright absurd. Moreover, what is essential to the governance of international trade relations is the differentiation of support according to the extent of any trade distortions which it may produce. It is undoubtedly a complicated business, and experience has shown me that the job of trade negotiators is not made any easier by the misuse and trivialisation of analytical tools such as the PSE. Few statistical calculations can be as crass and meaningless as the assertion that the developed world pays $2 per cow, per day in agricultural support, for example. One would almost imagine that the all have bank accounts too.

Moreover, when used out of context, what the PSE also overlooks is the fact that many of the worlds’ more advanced developing countries also use significant amounts of trade-distorting support, something that also needs to be addressed in the opening up of world trade, and something that is equally important in the development process.

Ladies and Gentlemen,

This brings me to another myth worth dispelling, and that is that our agricultural policy compromises the efforts of poor countries to move upwards. Just two examples prove this point wrong. The first is that the EU is, by far, the biggest importer from developing countries. The combination of our series of preferential market access arrangements and our, as yet, unique Everything But Arms scheme which allows the world’s 49 poorest countries duty and quota free access for all products bar arms and ammunition from 2009 onwards, is clear evidence that theEU is committed to the development process.

Secondly, and perhaps even more significant, is the constant decline in our net export position for all commodities under WTO commitments. From wheat and sugar, to meat and dairy products, you name it, all have fallen over the last ten years, not by accident, but through a series of carefully designed reforms which have been specifically devised to bridge the gap between world and domestic prices.

This last point brings me to the current state of play in the world trade talks because it was this last point that left us in the position where we were able to propose phasing out our export subsidies altogether. T.S. Eliot, another from the long list of Harvard alumni said, “Only those who will risk going too far can possibly find out how far one can go.” He presumably, was talking about literary boundaries, but it is a good quotation to illustrate our position nevertheless. We came under intense criticism internally for offering too much, too soon, and doing the typical European thing of putting everything on the table before we had seen anything in return. But it was a gamble that paid off, not to say one that possibly prevented the negotiations from ending in another stalemate.

Following the framework agreement that came out of Geneva at the beginning of last month, all forms of trade-distorting export practices will be phased out altogether, whatever the name they go by, and the rest will be subject to strict disciplines.

The Geneva agreement also made major progress in other areas as well. The reduction of trade-distorting agricultural support was another of the key objectives identified in the Doha Development Agenda (DDA). And, following the Geneva discussions, all parties have now agreed to make substantial cuts, with the biggest subsidisers having to make the greatest efforts.

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Ladies and Gentlemen,

I am no fool when it comes to public opinion and the CAP. I know that there will always be those who want it reformed, taken one step further, even scrapped altogether, but this should not overshadow what we have achieved, and it was important that our reform efforts be fully acknowledged in the framework agreement. We are not there yet, for some we never will be, but what we have ensured is that our agricultural policy reform has put world trade reform on track, and not vice-versa as is the case for other developed country farm policies around the world. Cotton is a particularly good example of a sector in which the EU moved of its own accord. Even before Geneva, we had already decided to eliminate all of our export subsidies, tariffs and most trade-distorting subsidies in this sector and, I think it is fair to say, that other major players must follow suit if they are really committed to the development process.

As to the developing countries as a group, I have already mentioned our preferential import schemes and our Everything But Arms initiative, so I am particularly pleased that the Geneva agreement foresees other able countries taking on similar commitments, alongside the special and differential treatment that will be afforded them vis-à-vis tariff and subsidy cuts, implementation periods, and special treatment for certain sensitive products. And of course the final key point which concerns us all is the question of market access. As you no doubt know, this should be substantially improved by cutting farm tariffs for all products according to a single, tiered approach, with the exception of a limited number of sensitive products which may be selected by individual members for more lenient treatment for economic reasons.6Ladies and Gentlemen,

I have only enough time to give a brief overview of the situation from a European perspective and I would still like to leave you with a few conclusions from my visit here tonight. And, whilst it is not my position to dictate where others must go, I do think it is fair to say that many lessons can be learned from the European experience, and many examples followed which brings me back to the question of whether criticism of the EU’s agricultural policy is really justified. When Renée Haferkamp wrote to me back in January I have to admit that I was somewhat amazed, given the preoccupation that America and Europe have with one another’s farm policies, when she said that agriculture had managed to slip through the net here for almost eight years. I know I am partly to blame, and you perhaps might suspect that I waited until I had a stronger defence for the CAP until I put in an appearance, until the quick-fire transatlantic jousting had died down a bit and, although this was not the case, there is perhaps something to be said about the popular sport of CAP bashing.

There’s nothing one loves more, than to hate one’s main competitors’ policies, but I ask myself, is this really the most constructive way to progress? Is this really the most constructive way to meet the many and multifaceted challenges of the 21st Century? Cheap jibes and fruitless sniping, I am afraid, get us nowhere. They don’t help us to progress as individuals, and they certainly don’t help the world progress towards a freer and fairer trade system.

We are, and always will be competitors, but we cannot afford to let our differences overshadow what we can achieve as partners. America and Europe are two vital cogs in world trade and we have a responsibility to run together for world trade talks to succeed. All that stands in our way is sometimes a lack of understanding, and perhaps slight ambivalence as to whether we want to work together, or against one another. A frank exchange of facts is, I believe the best way to move forward, and something I hope we have had tonight.

There are two ways about it. We both see the value of farm support, and we both see the need to continue it. How, is the question. And in the EU we have decided to shift the emphasis from

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protectionism to overall rural welfare not, as some have said, because we want to transform our countryside into a perpetual film set for the dramatisation of some Jane Austen novel. But because we want to secure a future for our rural areas that recognises all the various elements that comprise a living, working countryside, their interdependence and their individual importance. The CAP has had its low points, its difficulties, yes. But the fact is, that what we have today is dramatically different from that which we had just ten years ago, and it’s high time that our partners stopped looking back at our previous errors and started looking forward to the goals which we must work towards together.

Thank you.

XVIII - TURKEY AND THE EU

Read the information below and prepare and explain your opinion on the following issue:- Should the EU accept Turkey to the Union?- Give reasons „for and against” various aspects of the issue!- Consider economic, political, human aspects all.- Write a short essay (4 pages) and prepare for oral discussion of the topic.

Background materialRelations with Turkey

Political profile

Official name Republic of Turkey - Türkiye CumhuriyetiPopulation 70.7m (2005)Area 769,604 km² Density 92 persons/km²Distribution Urban- 69.9%, Rural- 35.1%

Neighbours Armenia (268 km border), Azerbaijan (9), Bulgaria (240), Georgia (252) ,Greece (206), Iran (499), Iraq (331), Syria (882)

Population profileMajority Turkish; Kurdish, Circasian, Bosnian, Roma, Arab and others (Source: European Commission, Regular Report on Turkey’s progress towards accession (COM(2004) 656 final).

Language(s) Turkish (official language), Kurdish, Circasian, Arabic and Bosnian; other languages and dialects1

Religion Muslim: 99.8%; Christian, Jewish and others 0.2%Life expectancy Average: 72.08, 69.68 (male), 74.61 (female)

Political history The foundation of modern Turkey took place in 1923 when a republic was declared with

Mustafa Kemal Atatürk as President. A law abolishing the Caliphate was passed in March, 1924.

A series of measures known as the Kemalist reforms lead to the adoption of the Gregorian calendar, the introduction of a modified latin alphabet and the adoption of new civil, commerical and penal codes based on European models. Turkey became a secular state in 1928, when the clause retaining Islam as the state religion was removed.

In 1945 Turkey entered the Second World War on the side of the Allies against Germany. It joined the United Nations in the same year, and became a member of the NATO alliance in 1952.

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In August 1949 Turkey joined the Council of Europe shortly after its foundation. Turkey held its first open elections in 1950, which were won by the Democratic Party. An

army coup subsequently deposed the party from office in 1960. A new constitution providing for a bicameral legislature was adopted the following year.

In 1963 Turkey signs an Association agreement with the European Economic Community (EEC).

A New constitution was adopted in 1982 following a military coup and the imposition of martial law in 1980. The new Constitution created a seven-year presidency, and reduced the parliament to a single house.

Turkey applied for full EEC membership in 1987 (see Turkey- EU relations below). Tansu Ciller became Turkey's first female prime minister in 1993. In 2000 Ahmet Necdet Sezer took over as President from Suleyman Demirel. In 2002, Parliament began to approve reforms aimed at securing EU membership. The

abolition of the death penalty was one of the first to be approved. In the November 2002 election, the Justice and Development Party (AKP) won a clear

majority of seats in Parliament. Deputy leader Abdullah Gül was appointed Prime Minister. He was later replaced by Recep Tayyip Erdogan after constitutional changes allowed for the latter to run for Parliament.

Political system Turkey is a Parliamentary Republic. Its present Constitution was ratified 7 November 1982 and has been amended several times since then. The parliamentary system is unicameral, with the 550 members of the Turkish Grand National Assembly (TGNA) facing election every five years. The head of state is the President who is elected by an absolute majority of the TGNA to serve a seven year term. The laws passed by the TGNA must be promulgated by the President within 15 days. The President may, however, refer the law back to the Parliament for reconsideration.The central administration, headed by the government, is represented in the territory by 81 governors in the 81 provinces. There are sub-governors at district level. Though similar to the French "prefet", the Governor is assisted by a directly elected provincial council, and district councils. Several ministries have offices at provincial and district level. An autonomous local administration exists at the level of municipalities (16 large metropolitan municipalities (MM) - subdivided in sectors - and 3200 other smaller towns) which elect a mayor and a municipal council. Istanbul MM has a population of 8.5 million, Ankara over 3 million, Izmir over 2 million.

Economic profile

Turkey has significantly improved the functioning of its market economy, although macroeconomic imbalances remain. Foreign Direct Investment, while it has increased sharply in 2004, remains low for an economy the size of Turkey’s. One major positive development is that inflation has been significantly reduced, having come down from 65% in 1999 to single digit rates by the middle of 2004. Turkey recently has also enjoyed healthy growth rates, with GDP growth climbing to 12% in the first half of 2004, resulting in estimated growth of 8% over the year as a whole. This is due particularly to the economic policies pursued after the economic crisis of 2001. Despite a strong budget performance resulting in a surplus of 6% of GNP, Turkey still has a burgeoning current account deficit and a large government debt (about 75% of GDP at end of 2004). However, important progress has been achieved in increasing the transparency and efficiency of public administration. The combination of healthy growth, falling inflation and a tight fiscal policy has made the Turkish economy more robust and resilient to shocks. However, bouts of financial instability in May and September 2004 and in March 2005 show that it is still vulnerable to volatility and sharp changes in investor sentiment.

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With regard to the labour market, economic expansion has started to finally result in the recovery of some of the estimated 1 million jobs lost in the immediate wake of the 2001 economic crisis. Employment grew by 2% in 2004, allowing the official unemployment rate to drop to just 10% in the final quarter of the year. Economic recovery has also prompted a growth in wages, with both private and public sector wages increasing (by about 3% in real terms) for the first time since 2000. State interference in the economy has been reduced in recent years. Political influence on state banks has declined and important markets, such as electricity, telecommunication, sugar, tobacco and petroleum, have been liberalised. Turkey is still undergoing a transition from an agriculture based economy to a service oriented economy, although the share of employment in agriculture is still high. Turkey has been a member of a customs union with the EU since 1995, which has increased the volume of trade between Turkey and EU member states. However, Turkey continues to have a large trade deficit. The EU is now by far Turkey’s biggest trading partner, although certain obligations under the customs union agreement are not fully implemented on the Turkish side. The scope of this customs union covers trade in manufactured products between Turkey and the EU, and also entails alignment by Turkey with certain EU policies. Trade between the EU and Turkey in agriculture and steel products are regulated by separate preferential agreements. There is of yet no bilateral agreement on services and public procurements. In terms of product groupings, Turkey’s main industrial imports from the EU continue to be machinery, automotive products, chemicals, iron and steel. Its main agricultural imports from the EU are cereals. Major EU imports from Turkey include textiles and cloth, machinery, and transport equipment. Thanks in part to the reduction of inflation to single digit figures, Turkey has been able to introduce the “New Lira”, which has been used alongside the Turksh lira since 1 January 2005. The Turkish lira is converted to the New Turkish lira as 1,000,000 = 1. Both currencies will remain in circulation at least until the end of 2005. More details on the economic situation can be found in the Candidate Countries' Economies Quarterly (CCEQ) published by the European Commission.

Relations with International Financial InstitutionsTurkey has benefited from a stand-by credit facilities from the IMF. The previous three year stand-by accord expired in February 2005. However, there has been agreement on a new accord for 2005-07.

GDP per capitaUS$ 6,390 (€4,952)(Sources: UN Human Development Index, 2004. Economist Intelligence Unit, Country Report April 2005. ECFIN- CCEQ Candidate Countries Economic Quarterly.) per capita (in purchasing power standards), or 27% of the EU average

Economic (GDP) growth 7.4% (2002), -7.5% (2001), 7.9% (2002), 5.8 (2003), 8.0% (2004)

Inflation rate 12% (2004)Unemployment rate 10% (2004)

Currency New Lira, introduced 1 January 2005. 1 New Lira = 1,000,000 Turkish Lira. 1 New Lira = €0.56 (April 2005)

Government budget balance -7.3% of GDP (2004) Current account balance €11.9 billion -4.7%Foreign debt 75% of GDP (2004)

Trade with EU (2004) Exports to the EU: 54% of the totalImports from the EU: 46.7 % of the total

SPEECH/06/559Mr Olli Rehn

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Member of the European Commission, responsible for Enlargement

Turkey’s best response is a rock-solid commitment to reforms

International Symposium on "European Social Model and Trade Union Rights within the EU negotiations”, Ankara, 3 October 2006

Excellencies, Ladies and Gentlemen, Dear Friends,

Gunaydin! (good morning)

Let me start by warmly thanking the organisers of this symposium. This is a prime example of the kind of initiatives that are needed to enable the civil societies of Turkey and the EU to get to know each other better.

The role of social partners is central in any modern society. Social dialogue has been a cornerstone of the European project since its very beginning. For Turkey it is also important since one of the premises for a successful accession is a broad societal consensus on European goals. The same goes for meeting the challenges of globalisation. Needless to say, trade unions play a particularly valuable role in this respect.

I am glad to be today in Ankara for the first anniversary of the EU’s accession negotiations with Turkey. The 3rd of October 2005 was a historic day. The decision opened up the process towards Turkey's accession to the EU and it implied a qualitative change in our relations, as your country has since then no longer been a candidate but a negotiating country.

The challenge today is to make the utmost out of this process. It will call for adaptations and sometimes difficult decisions.

It should not be surprise to any that there is an on-going debate on enlargement in the EU as well as in Turkey. Such a debate is normal and healthy. And you should not expect it to stop: it will accompany the process until the very end, and even beyond.

In the EU, this debate is wide. Voices have been raised requesting a pause to enlargement. There are those who have concerns about issues such as the effect on the labour market or the costs for the present Member States. There are some who wonder how EU will function with Turkey as a member. But this debate is not Turkey-specific, it has to do with the Union itself.

It is in this context that president Barroso clarified recently that a new institutional settlement should have been born by the time the next member is going to join the Union. While we prepare internally for a new institutional settlement, the gradual and carefully managed accession process continues with the countries of Southeastern Europe, that is, Bulgaria and Romania, Turkey and Croatia, and other Western Balkans countries. We are cautious about taking on any new commitments, but we stick to our existing commitments to these countries.

In this country, some interpret this as a sign of the EU weakening its commitment to Turkey. The average Turkish citizen might ask: do they really mean business? Do they really want my country into the EU?

Let me put this debate in context. To start with, let me be clear, the EU means business. We are talking about Turkey's accession and nothing else.

However, it is also perfectly normal that, every time we welcome a new member to our family, we want to ensure that the house is comfortable and functional for everybody. In other words, the EU must be able to effectively continue to deliver its policies. This is nothing new, but has been the challenge of all previous enlargements.

We need to maintain the momentum of European integration. Absorption capacity is a factor important for both Turkey and the EU: it is in your country's interest to ensure that you join a well functioning European Union – not a weak or a messy EU! I am confident that we will address this issue in an appropriate way.

Second, EU is a complex organisation. We have our institutional framework, within which the European Parliament, the Council and the Commission play their distinctive roles. We are a Union of 25 Member States, each of them with their democratically elected Government, its elections, its politicians who express their views in the context of their national debate.

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We should welcome this debate and meet arguments with counterarguments, myths with facts, and, inertia with action. Turkey's best response is a rock-solid, resolute commitment to reforms that would allow the country to meet the conditions for accession.

Let there be no misunderstanding on the strategic value of our common project. Europe needs Turkey as a key player, as a bridge and as a proactive moderator. Turkish accession should set a powerful counter-example to the alleged 'clash of civilisations'. Turkey is, also, essential for the stability and security of one of the most unstable and insecure regions in the world. Turkey's strategic significance was once again illustrated by its decision to take part in the UNIFIL mission in Lebanon.

But to make the accession process with Turkey a success, there needs to be concrete progress on the ground within the country. I keep repeating this and will continue relentlessly: the reforms you implement will determine the pace of the process. Thus, the accession process takes place mostly here, in Turkey, and not in Brussels.

Against this background, the adoption of the ninth reform package is necessary. It concerns a number of issues that Turkey needs to address as a matter of urgency, even if it does not address the critical issue of free speech. I am convinced that Turkey's progress in resolutely pursuing the reform agenda will have a most positive impact on the European public opinion.

First, freedom of expression must be brought fully in line with European standards. There have been altogether some 70 cases against journalists, authors, publishers and citizen activists for supposedly “insulting Turkishness”, but in reality expressing non-violent opinions. The prosecutions have been done on the basis of the notorious Article 301 of the penal code. We pointed out the loophole already when the new penal code was prepared, but our advice was not taken into account. The recent ruling of the Court of Cassation on the Hrant Dink case set a jurisprudence which keeps freedom of expression under threat in this country. The judicial proceedings have a chilling effect and damage the important work carried out by journalists, intellectuals and activists. It is high time that Turkey brings the penal code into line with the European Convention on Human Rights.

Let me be absolutely clear here. This is not a matter for horse-trading. The aim is not just to meet the "request of Brussels", as I read from time to time in the Turkish media. Freedom of expression, in the sense of expressing freely even a critical but clearly non-violent opinion, is part of the EU’s political criteria. It is a cornerstone of our common democratic values. I cannot even imagine a member state in the European Union that would not respect such a fundamental European principle as the freedom of expression. Hence, those opposing repealing the unjustified restrictions of free speech in Article 301 and other parts of the Turkish law, are effectively opposing a key condition of EU membership.

But this is first and foremost in the interest of the Turkish citizens. Freedom of expression is the foundation of any open society and key to modernisation and social progress, which Turkey rightly strives for.

The same goes for other fundamental freedoms, as for instance freedom of religion. Non-Muslim and, also, Muslim communities, for instance the Alevis, still face difficulties on the ground. The adoption of a law which improves the property situation of these communities is now urgent.

As regards women's rights, the implementation of legal provisions, for example as regards punishment of crimes supposedly committed in the name of honour, needs to be improved.

The terrorist activity of PKK has been condemned by the EU without any ambiguity. But the problems of the Southeast cannot be addressed through an exclusively security approach. Turkey needs to develop a strategy for the region that addresses its political and socio-economic problems together with the cultural rights of the Kurdish population.

We are also concerned of the possible restrictive impact of the amendments to the anti-terror law upon fundamental freedoms of Turkish citizens. The law defines terrorism far too widely and vaguely.

Coming to matters more closely linked with this Symposium, Turkey needs to ensure that full Trade Union rights are respected in line with EU standards and ILO Conventions, in particular as regards the right to organise, the right to strike and the right to bargain collectively. To this effect, Turkey needs to eliminate existing restrictions and adopt a fully revised legislation in this area for both private and public sectors.

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Unfortunately, no progress has been made by Turkey on the trade union rights recently. Therefore, one of my main messages to my Turkish interlocutors today and tomorrow will be that we expect the Government to redress this and present a legislative initiative shortly, once the ongoing consultation with social partners has been duly completed.

Ladies and Gentlemen,

We appreciate the reforms Turkey has carried out in the recent years. But as a friend of Turkey, I want to be frank and open with you, as friends always should be: the pace of reforms has slowed down in the past twelve months. The expectations have risen since Turkey became a negotiating country on 3 October last year. It is therefore all the more important that new initiatives are taken and tangible progress is still achieved before the Commission will present its report on 8 November.

Since signing the Additional Protocol of the Association Agreement in July 2005 as a condition to open the accession negotiations, Turkey has not moved towards its implementation. It has not removed obstacles to the free movement of goods, including restrictions on transport links with Cyprus. Yet, this is a legal, contractual obligation Turkey has made.

Dear Friends,

Our common endeavour of the EU accession process with Turkey is not only about reforms and chapters. It is as much about communication and mutual understanding.

Many Europeans ask questions which concern geography, culture, religion, civilization, history. They ponder what will be the impact of Turkey’s EU accession on the philosophy of the European integration and on the effective functioning of the EU. Many concerns are understandable and must be addressed in the course of the negotiations. Others result from ignorance of what Turkey is today.

Concerns of the Turkish public opinion seem to be of a different nature. The main challenge is the perceived uncertainty of the EU’s true intentions towards Turkey. As I said, we mean business, and you can rest assured that the EU is committed to pursue Turkey’s EU accession, on the condition it meets our criteria fully.

Be that as it may, we must get to know each other better. This is the aim of the Commission’s programme to enable a civil society dialogue between Turkey and the EU. Some 70 million euros will be committed to this programme in 2006.

It is a bottom-up and not a top-down exercise, based on the demand from the civil society organisations. It aims at promoting interaction between non-governmental organisations, e.g. student exchange, study visits of journalists, as well as exchange between women’s organisations, trade unions, chamber of commerce and business communities. Local government is included through exchange and twinning.

I want to encourage you, as social partners, to use this opportunity.

Dear Friends,

We have a common goal to counter the pessimists and avoid train crash. Nothing is predetermined. With political will we can turn the tide and pave the way for Turkey’s accession to the EU. It matters to our future, for our children and grandchildren.

If Turkey succeeds in its reforms and meets the criteria of accession, it will become an ever stronger bridge of civilisations. This is a great opportunity for both Europe and Turkey, especially for their younger generations. I want to make sure that this opportunity is not missed.

Thank you for your attention.

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