European Integration – A Brief History Introduction into Economic System of the EU Faculty of law, Belgrade Literature: R.Baldwin and C. Wyplosz: The Economics of European Integration, 4 rd ed. Ch.1-2 Monday, November 17 th , 2014 18:00 – 20:25 Miroljub Labus
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European Integration – A Brief History
Introduction into Economic System of the EU
Faculty of law, BelgradeLiterature:
R.Baldwin and C. Wyplosz: The Economics of European Integration, 4rd ed. Ch.1-2
Monday, November 17th, 2014
18:00 – 20:25
Miroljub Labus
Agenda
1. Where we are today,
2. Brief history of economic and political integration,
3. Enlargements,
4. Progress in Serbia’s negotiation with the EU,
5. Chronology – up to date.
1. The present time: Achievements and challenges
The EU at the beginning
Belarus:
Neighboring Policy
Moldova:
Association deal
Ukraine:
Association agreement
Turkey:
CU/Neg.2005
The EU today
Iceland: FTA
Negotiation postponed
Serbia: FTA +
Negotiation opened
New officials
Donald Tusk
President of the European Council
Jean-Claude Juncker
President of the European Commission
The Eurozone
The Eurozone strength
The Eurozone is the
second largest
economic area in the
world economy
Main development stages
War
Guaranty for
peace
Progress
Internal market
EnlargementEfficiency
crises
Institutions Economy
Security & Defense
•10
Three pillars and one roof
Supranational decision making Intergovernmental decision making
EC
The European (Economic)
Community
Customs union, single market,
agricultural and structural policies,
trade and competition policies, etc.
Treaty establishing the European
Community (TEC/TFEU)
CFSP
Common Foreign
and Security Policy
JNA
Justice and Home
Affairs
Treaty on European Union (TEU)
European Union
•11
Fundamentals
Security
NATO
(No European Defense
Community)
Economy
Single
market
(European
Economic
Community)
Polity
Common Affairs
(No European Political
Community)
United States of Europe
QMV
on all issuesFis
cal
Cen
trali
zati
on
The
Euro crises:EFSF
Economic and political integration: Treaties
Common
Agricultural
Policy
Customs Union
EMS
Common Market
Monetary
Union
Euro cash
Treaties of Rome
(EEC/Euroatom)
TEC
Maastricht
Treaty
(TEU)
0
10
20
30
40
50
60
70
80
90
100
57 62 67 72 77 82 87 92 97 02 07 12
Index of economic integration
Treaty of
Lisbon
TEU/TFEU
Fiscal
Treaty
Euro crises:EFSF
Economic and political integration: Members
Common
Agricultural
Policy
Customs Union
EMS
Common Market
Monetary
Union
Euro cash
0
10
20
30
40
50
60
70
80
90
100
57 62 67 72 77 82 87 92 97 02 07 12
Index of economic integration
IT, FR, DE, BE,
NE, LU
DN, IR, UKGR
SP, PO
AU, FI,
SW
SI, SL, HU,
CZ,MA,CY,CY
LA,LI, ES
RO, BU
CR
Goal
Owners of the program
Recourses
Enlargement policy
Euro skepticism in Serbia
Euro-Pessimism in the EU
75
80
85
90
95
100
105
1995Q1
1995Q3
1996Q1
1996Q3
1997Q1
1997Q3
1998Q1
1998Q3
1999Q1
1999Q3
2000Q1
2000Q3
2001Q1
2001Q3
2002Q1
2002Q3
2003Q1
2003Q3
2004Q1
2004Q3
2005Q1
2005Q3
2006Q1
2006Q3
2007Q1
2007Q3
2008Q1
2008Q3
2009Q1
2009Q3
2010Q1
2010Q3
2011Q1
2011Q3
2012Q1
2012Q3
2013Q1
2013Q3
2014Q1
2014Q3
GDP of the Euro Area, 2005=100
Euro-pessimism origin: It’s the economy
Global
recession
Euro skepticism: Similarity and differences
Post-conflict challenge
◦ World War II
◦ Collapse of the Soviet Union
◦ Civil War in Ex YU
Stabilization by integration
Assistance
◦ The Marshall Plan
◦ Structural funds
◦ Reconstruction and stability program: CARDS
◦ EFSF
Political and strategic integration
◦ NATO
◦ Post-conflict open issues
Means and Goals
Economic integration and law approximation are two striking outcomes
Market integration was the most visible driving force
But, they are means, not the goal
The goal is deeply rooted in a common European security system
Hence, it would be misleading to ignore security issues
There are two drivers of the EU
◦ Economy plus security
Integration of the WB into the EU is more a security issue, than an economic issue
2. Brief history
Early Post War Period
A Climate for Radical Change
“How can Europe avoid another war?” What caused the war? 3 answers Blame the loser
Capitalism
Destructive nationalism
These implied 3 post-war solutions Morgenthau Plan, 1944 (Stripping Germany of its industry)
Adopt communism
Pursue European integration (Churchill’ United States of Europe)
European integration ultimately prevailed, but this was far from clear in the late 1940s.
Emergence of a divided Europe
Cold War begins ◦ USSR pushes communism in the East
◦ UK, French and US zones merged by 1948 in moves towards creation of West German government
◦ Berlin blockade
The Morgenthau plan
abandoned, opting
for strong West Germany
controlled by neighbours
= European integration
First Steps
The Marshall plan, $12 billion (1948-52)
Organization for European Economic Cooperation (OEEC 1948) (Close to EU15)◦ OEEC coordinated aid distribution and prompted trade
liberalisation
◦ From 1961 OECD
◦ Great success in promoting intergovernmental trade
European Payment System (EPU 1950-58)◦ No convertible local currencies
◦ Clearing mechanism in a multilateral barter arrangement
◦ Facilitated payments and fostered liberalisation
Need for deeper European integration
As Cold War got more war-like, West Germany
rearmament became necessary
◦ Wide-spread feeling that it was best to embed and
economically and militarily strong W. Germany in
European superstructure
◦ OEEC was too loose to avoid future war among
Western European powers
NATO was created in 1949
Two strands of European integration
Federalism and intergovernmentalism
◦ Immediate disagreement about depth of European
integration
Federalism – supranational institutions
Intergovernmentalism – nations retain all sovereignty
Intergovernmental initiatives OEEC (1948), Council of Europe (1949), EFTA (1960)
Federal initiative European Coal and Steel Community, ECSC (1951), European
Economic Community (the Treaty of Rome), EEC (1958)
1960-1973, two non-overlapping circles
EGR
IRL
FIN
IS
EFTA-7
EEC-6
N
S
PCH
A
UKI
D
F
BL
NL
DK
•EEC-6 was a custom union
•EFTA-7 was a free trade area
Evolution to Two Concentric Circles
Preferential liberalisation in EEC and EFTA
proceeded (EEC’s customs union and EFTA’s FTA completed by 1968)
Discriminatory effects emerge, leading to new
political pressures for EFTAs to join EEC Trade diversion creates force for inclusion
As EEC enlarges, force for inclusion strengthens
When UK decides to apply for EEC (1961), 3 other
EFTAns also change their minds
◦ De Gaulle’s ‘non’ (twice, 1963, 1969)
First Enlargement
First enlargement, 1973 UK, Denmark, Ireland & Norway admitted (Norwegians
say no in referendum)
Enlargement of EEC reinforces ‘force for
inclusion’ on remaining EFTAs
◦ Remaining EFTAs sign FTA agreements with EEC-9
◦ Domino-like affect of lowering barriers
Two concentric circles
EGR
West Europe's Trade Arrangementin mid-1970s:
I
D
F
BL
NL
IRL
P
UK
CH
A
FIN
N
S
IS
DK
EEC-9
EFTA-7
First Euro-pessimism, 1975-1986
Political shocks
◦ ‘Luxembourg Compromise’ (1966)
Unanimity voting if issues are of “very important
interest” for a MS
Failure of Monetary Integration
◦ Staflation
Failure of Deeper Trade Integration
◦ Technical Barriers to Trade
Growing cost of Common Agricultural Policy
creates frictions over budget
Bright spots: Second and Third Enlargements
Democracy in Spain, Portugal and Greece
Greece joins in 1981 (Is it still a bright spot?)
Spain and Portugal join in 1986 after long a
difficult accession talks
EMS set up in 1979 works well
Budget Treaties
Single market programme
Delors launches completion of the internal
market with Single European Act (1986)
◦ create "an area without internal frontiers in which the
free movement of goods, persons, services and
capital is ensured".
Important institutional changes, especially
move to majority voting on Single Market
issues
Single Market Programme, EC92
Basic elements
◦ Goods Trade Liberalisation
Streamlining or elimination of border formalities,
Harmonisation of VAT rates within wide bands
Liberalisation of government procurement
Harmonisation and mutual recognition of technical
standards in production, packaging and marketing
◦ Factor Trade Liberalisation
Removal of all capital controls, and deeper capital market
integration
Liberalisation of cross-border market-entry policies
Domino effect
Deeper integration in EC-12 strengthened the
‘force for inclusion’ in remaining EFTAns
End of Cold War loosened EFTAns’ resistance
to EC membership
Result of ‘force for inclusion’
◦ EEA – initiative to extend single market to EFTAs
◦ Membership applications by all EFTAns except
Iceland
Concentric circles, but both deeper
3. Enlargements
Fourth enlargement
1994, Austria,
Finland, Norway
and Sweden
admitted
(Norwegians again
vote no).
Still divided Europe 1958
1973
1994
1986
1981
Communism’s spectacular collapse
By the 1980s, Western European system clearly superior due to the creeping failure of planned economies
Up to 1980s, Soviets upset reform efforts (economic & military pressure)
Changes in USSR due to inadequacy economic system
◦ hesitant pro-market reforms (perestroika)
◦ openness (glasnost)
Velvet revolutions in CEECs
◦ June 1989 Polish labour movement ‘Solidarity’ forced free
parliamentary elections & communists lost
Moscow accepted new Polish government.
◦ Moscow’s hands-off approach to the Polish election
triggered a chain of events.
Reformist in Hungarian communist party pressed for democracy &
Hungary opened its border with Austria, 1000s East Germans moved
to West Germany via Hungary and Austria.
Mass protests in East Germany; Wall falls 9th November 1989
End of 1989: democracy in Poland, Hungary, Czechoslovakia and
East Germany (unification in 1990).
USSR collapses
1990, Estonia, Latvia and Lithuania –
declared their independence from the
USSR
End of 1991, the Soviet Union itself breaks
up
Cold War ends without a shot
Military division of Europe ended, but
Frictions remain (Ukraine case)
EU reacts
The European Union reacted swiftly to this
geopolitical earthquake by providing emergency
aid and loans to the fledgling democracies,
Signing of ‘Europe Agreements’ with newly free
nations in Central and Eastern Europe
◦ These are free trade agreements with promises of
deeper integration and some aid,
Years later, the EU reacted more controversial
concerning European agreement with Ukraine.
From Copenhagen to Copenhagen
EU says CEECs can join the EU (June 1993)◦ Set out famous Copenhagen criteria for membership
stability of institutions guaranteeing democracy,
the rule of law,
human rights and respect for and, protection of minorities,
the existence of a functioning market economy as well as the capacity to cope with competitive pressure and market forces within the Union
Copenhagen summit December 2002 ◦ 10 CEECs can join in 2004
German unification and Maastricht
Jacques Delors proposes radical increase in European economic integration ◦ the formation of a monetary union
◦ Idea championed by French President Francois Mitterrand and German Chancellor Helmut Kohl.
Grand deal? German can unify if it gives up the DM
Maastricht Treaty, signed 1992◦ A monetary union by 1999, single currency by 2002.
◦ Also, sets up EU’s ‘three pillar’ structure
ERM exchange rate crises
Preparing for Eastern Enlargement
Coming enlargement required EU to reform its
institutions
Three tries:
◦ Amsterdam Treaty, 1997
◦ Nice Treaty, 2000
◦ Draft Constitutional Treaty, 2003
◦ Lisbon treaty 2007
Amsterdam Treaty
Failed to reform main institutions
Tidied up of the Maastricht Treaty
◦ More social policy, Parliament powers modestly boosted,
◦ Flexible integration, ‘closer cooperation introduced
Amsterdam leftovers
◦ Voting rules in the Council of Ministers,
◦ Number of Commissioners,
◦ Extension of issue covered by majority voting
Nice Treaty
Reforms of main institutions agreed, but poorly done
◦ Council voting rules highly complex and reduce EU’s ability to act with more members
◦ No important extension of majority voting
◦ Make shift solution for Commissioners
◦ No reform of decision making in ECB
Generally viewed as a failure
Main changes re-visited in draft Constitutional Treaty, 2004
Fifth and Sixth enlargement
2005 EU-10 from the CEE
2007 Romania and Bulgaria
Integrated and Outer Europe
Cyprus
Malta
1958
1973
1994
2004
1986
1981
2007
Constitutional Treaty
Treaty of Lisbon (2007):
◦ Introduced qualified majority voting in the EU Council
◦ Enhanced co-decision of the European Parliament and the EU
Council
◦ Created the President of the EU and a HR for Foreign Affairs
◦ Made legally binding Charter on Human Rights and
◦ Three pillars of the EU (EC, CSFP, HJA) with a different balance
between supranational and intergovernmental principles.
Fiscal Treaty
Treaty on Stability, Coordination and Governance in the
Economic and Monetary Union (2012) is a new stricter version of
the previous Stability and Growth Pact,
It come into force in January 2013,
UK and Czech Republic have not signed it,
The treaty requires national budgets to be in balance or in surplus,
A self-correcting mechanism is envisaged to prevent the breach of this
obligation,
The treaty also introduce a new "debt brake" criteria,
The treaty is conceived as an attempt to strengthen fiscal discipline in
all member states, not only the Euro zone members.
4. Serbia’s negotiation progress
Serbia’s progress toward the EU in 2014
Progress in screening report
No Limited Little Some Progress GoodTotal or
Average
Chapters 2 8 8 9 2 4 33
Weights 0 1 2 3 4 5 2.4
2
8
8
9
2
4
0 1 2 3 4 5 6 7 8 9 10
No
Limited
Little
Some
Progress
Good
Screening process
Screening process CONTINUE
5. Chronology
•53
Chronology: EU
Year Event Explanation
1948 OEEC Organization for European Economic Cooperation established
1950 Schuman Plan French Foreign Minister Robert Schuman proposes the
establishment of the European Coal and Steel Community, ECSC
1952 ECSC Established, expired 2002
1952 EDC Treaty establishing European Defence Community, French
National Assembly rejected it 1954
1953 EPC Plan for the European Political Community was published
1957 EEC The European Economic Community established by the Treaty of
Rome (including Euroatom)
1959 EFTA Stockholm Convention established EFTA (Austria, Denmark,
Norway, Portugal, Sweden, Swiss and UK)
1962 CAP Common Agricultural Policy starts
1968 CU Customs Union completed within the EEC, common external
tariffs established
•54
Chronology: EU
Year Event Explanation
1969 EMU born At the Hague summit, it was agreed to establish a single market,
to accelerate integration, and to introduce EMU by 1980
1972 EC-EFTA FTA FTAs signed between the EEC and Austria, Iceland, Portugal,
Sweden and Swiss
1973 First enlargement Denmark, Ireland and the UK became members, Accession
treaties signed 1971, FTA with Norway and Finland
1974 European Council
formalized
At Paris Summit, EC leaders agree to meet regularly as a
European Council
1978 EMS founded Bremen European Council established EMS and ECU
1981 Second
enlargement
Greece joins
1985 EC92 White
Paper
Blueprint for economics in Single European Act
1986 Third enlargement
and Single
European Act
Spain and Portugal join, Single European Act signed (to enter
into force 1987)
•55
Chronology: EU
Year Event Explanation
1990 EMU stage 1 and
German
unification
The first stage of EMU begins, Germany was united
1991 First Europe
Agreement
Singed with Poland, Hungary and Czechoslovakia, with other
CEECs signed in 1995
1992 Maastricht Treaty Treaty on European Union (entered into force 1993)
1992 EEA European Economic Area created by EC and EFTA
1993 Copenhagen
criteria
CEECs have to meet accession criteria within the framework of
European Agreements
1994 EMU second
stage
EMU2 begins
1995 Fourth
enlargement
Austria, Finland and Sweden
1997 Amsterdam
Treaty
Singed and came into force 1999, deals with leftovers from the
Maastricht Treaty
•56
Chronology: EU
Year Event Explanation
1998 The Eurozone and
ECB
Eleven countries decided to join Eurozone, ECB was established
1999 EMU stage three Euro becomes a currency of its own right, but only electronic
currency until 2002
2000 Nice Treaty Singed, but came into force 2005 (except Ireland)
2002 Euro cash Euro notes and coins circulate
2003 Draft Constitution
and IGC
Accepted Giscard d’Estaing’s draft Constitution as a starting
point for IGC, Italian draft of the Treaty was rejected, IGC
continues
2004 Eastern
enlargement, and
Constitutional
Treaty
The fifth enlargement, 10 new members join, The Constitutional
Treaty signed, ratification begins
2005 French and Dutch
reject Constitution
French and Dutch referendums failed
•57
Chronology: EU
Year Event Explanation
2007 Sixth enlargement Bulgaria and Romania join
2007 Treaty of Lisbon Signed, but comes into force in 2009
2010 Consultation on
Treaty of Lisbon’s
change
The Heads of State or Government agreed to establish a
permanent crisis mechanism to safeguard the financial stability of
the euro area.
2011 EFSF A bail-out plan for resolving the sovereign debt crisis in the Euro
zone
2013 Seventh
enlargement
Croatia join
2013 Fiscal Treaty Has come into force
Chronology: Serbia’s accession to the EU
Date Event
1997 Regional Approach. The EU Council of Ministers establishes political and
economic conditionality for the development of bilateral relations.
1999 The EU proposes the new Stabilisation and Association Process (SAP) for
five countries of South-Eastern Europe, including Serbia.
June 2000 Feira European Council states that all the SAP countries are “potential
candidates” for EU membership.
November 2000 “Framework Agreement Federal Republic of Yugoslavia-EU for the
provision of Assistance and Support by the EU to the Federal Republic of
Yugoslavia”. Serbia benefits from Autonomous Trade Preferences from the
EU.
November 2000 Zagreb Summit launches the SAP for five countries of South-Eastern
Europe.
2001 First year of the new CARDS programme specifically designed for the SAP
countries.
June 2003 At Thessaloniki European Council, the SAP is confirmed as the EU policy
for the Western Balkans. The EU perspective for these countries is
confirmed.
Chronology: Serbia’s accession to the EU
Date Event
October 2004 Council conclusions open up a process for a Stabilisation and Association
Agreement.
1 October 2005 Launch of the negotiations for a Stabilisation and Association Agreement.
3 May 2006 SAA negotiations called off due to lack of progress on Serbia's co-operation
with the ICTY.
13 June 2007 SAA negotiations with Serbia resumed, following a clear commitment by
the country to achieve full cooperation with the International Criminal
Tribunal for the former Yugoslavia (ICTY), and concrete actions undertaken
by the country that have matched this commitment.
7 November 2007 The SAA with Serbia is initialled.
1 January 2008 Entry into force of the Visa Facilitation and Readmission Agreement
between Serbia and the EU.
18 February 2008 Council adopts the revised European partnership for Serbia.
29 April 2008 The SAA and the Interim Agreement on Trade and Trade-related issues
between Serbia and the EU is signed in Luxembourg.
Chronology: Serbia’s accession to the EU
Date Event
7 May 2008 Commission hands over to the Serbian government the Road map on Visa
liberalisation, set up with the aim of achieving a visa free regime for
Serbian citizens wishing to travel to Schengen countries.
7 July 2008 Following 11 May parliamentary elections, formation of a new
government; European integration set as a key priority.
19 December 2009 Visa requirement lifted for Serbs travelling to Schengen countries.
22 December 2009 Serbia officially applied for European Union membership
25 October 2010 The EU foreign ministers decided to pass Serbia’s European Union
accession application along to the European Commission so that it can
begin its assessment
31 January 2011 Serbia replies to Commission questionnaire
14 October 2011 European Commission delivers its Opinion on Serbia's EU membership
application, granting candidate status based on one key priority.
1 March 2012 Serbia received the candidate status
Chronology: Serbia’s accession to the EU
Date Event
22 April 2013 The governments of Serbia and Kosovo completed the Brussels
Agreement, which provided the window of opportunity to reopen
negations between Serbia and the EU,
28 June 2013 European Council endorsed the Commission's recommendation to open
negotiations with Serbia.
1 September 2013 The SAA has come into force.
17 December 2013 Council adopted the negotiating framework with Serbia and agreed to
hold the 1st Intergovernmental Conference with Serbia in January 2014.
25 September 2013 Screening procedure started with Chapter 23 – judiciary and fundamental
rights.
21 January 2014 1st EU-Serbia Intergovernmental Conference held.
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