1 Chapter 1: History

2 Early Post War Period A Climate for Radical Change

3 The prime question “How can Europe avoid another war?”What caused the war? 3 answers Blame the loser Capitalism Destructive nationalism These implied 3 post-war solutions ‘Neuter’ Germany , Morgenthau Plan, 1944 Adopt communism Pursue European integration European integration ultimately prevailed, but this was far from clear in the late 1940s.

4 Emergence of a divided EuropeCold 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 “Neuter Germany” solution abandoned for strong West Germany + European integration

5 First Steps: the OEEC and EPUOEEC and EPU set up in conjunction with Marshal Plan OEEC coordinated aid distribution and prompted trade liberalisation EPU facilitated payments and fostered liberalisation

6 Need for deeper European integrationAs 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

7 Two strands of European integrationFederalism 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 ECSC (1951), EEC (1958)

8 1960-1973, two non-overlapping circlesGR IRL FIN IS EFTA-7 EEC-6 West European Trade Arrangements in 1960s : The EFTA-7 and the EEC-6 form two non-overlapping circles. N S P CH A UK I D F B L NL DK

9 Evolution to Two Concentric CirclesPreferential 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)

10 Evolution to Two Concentric CirclesFirst 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 Why weren’t the FTA’s signed before? Domino-like affect of lowering barriers 1st within EEC6 → enlargement → EEC-EFTA FTAs

11 Two concentric circlesGR West Europe's Trade Arrangement in mid-1970s : I D F B L NL IRL P UK CH A FIN N S IS DK EEC-9 EFTA-7

12 Euro-pessimism, 1975-1986 Political shocks‘Luxembourg Compromise’ Failure of Monetary Integration Failure of Deeper Trade Integration Growing cost of Common Agricultural Policy creates frictions over budget

13 Bright spots Democracy in Spain, Portugal and GreeceGreece joins in 1981 Spain and Portugal join in 1986 after long a difficult accession talks EMS set up in 1979 works well Budget Treaties

14 Deeper circles: single market programmeDelors launches completion of the internal market with Single European Act create "an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured". Important institutional changes, especially move to majority voting on Single Market issues

15 Single Market Programme, EC92Basic 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,

16 Domino effect, part II 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

17 Fourth enlargement 1995, Austria, Finland, Norway and Sweden admitted (Norwegians again vote no). 1995 1973 2004 1958 Cyprus 1986 Malta 1981

18 Communism’s creeping failure and spectacular collapseBy the 1980s, Western European system clearly superior due to the creeping failure of planned economies Up to 1980s, Soviets thwarted reform efforts (economic & military pressure) Changes in USSR due to inadequacy economic system timid pro-market reforms (perestroika) openness (glasnost)

19 Velvet revolutions in CEECsJune 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).

20 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

21 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

22 From Copenhagen to CopenhagenEU 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

23 German unification and MaastrichtJacques 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

24 Preparing for Eastern EnlargementImpending enlargement required EU to reform its institutions Three tries: Amsterdam Treaty, 1997 Nice treaty, 2000 draft Constitutional Treaty, 2003 Lisbon Treaty, signed in 2007, entered into force in 2009, amend the Treaties of Rome and Maastricht

25 Amsterdam Treaty Failed to reform main institutionsTidied 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

26 Nice Treaty Reforms of main institutions agreed, but poorly doneCouncil 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, 2003

27 Lisbon Treaty a more powerful European Parliament;a consolidated legal personality of the E.U; the creation of a long-term president of the European Council; A high representative of the Union for foreign affairs Gives member states the explicit legal right to leave the Union

28 Treaties of the EU Signed In force t 1948 1948 Brussels Treaty (WEU)Paris Treaty ECSC Modified Brussels Treaty Rome Treaties EURATOM; EEC Merger Treaty European Community Schengen Treaty Single European Act Maastricht Treaty Amsterdam Treaty Nice Treaty Lisbon Treaty

29 Stages of enlargement 1972: Great Britain, Ireland and Denmark1981:Greece 1986: Spain and Portugal 1995: Sweden, Finland, Austria 2004: Malta, Cyprus, Slovakia, Slovenia, Estonia, Latvia, Lithuania, Poland, Hungary, Czech Republic; 2007: Romania and Bulgaria 2013: Croatia

30