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See European Community.
When the Council of Ministers meets on economic affairs it comprises the economic and finance ministers of the EU and is known as Ecofin. Ecofin's authority as the supreme arbiter of the Union's financial policy has, however, been to some degree challenged since 1999 with the creation of a smaller committee, Euro-X, drawn exclusively from member states participating in the single currency.
With the launch of the single currency in 1999, the influential Monetary Committee (consisting of two high officials from each member state and two from the Commission) was augmented by the addition of two members from the European Central Bank and was renamed the Economic and Financial Committee. The Committee advises Ecofin, the EU's Council of finance ministers.
The EU's Economic and Social Committee, or EcoSoc, has 222 members and 222 substitutes, nominated by the member states and divided into three groups - employers, trade unionists and other interests. On issues such as workers' rights, the first two groups usually vote against each other, leaving the third group (consumers, academics, farmers, the self-employed and so forth) to decide the outcome. EcoSoc is a perfect work of corporatist bureaucracy, with its rotating presidency, its tripartite managing bureau, its working groups, its draft reports and its specialist sections. In 1997 it was on the receiving end of a stinging rebuke from the Court of Auditors for abuse of expense accounts.
EcoSoc must, under the Treaty of Rome, be consulted on various issues, though there is no obligation on the Commission or the Council to take its advice. It may also offer opinions (and minority 'contrary opinions') on any other subject on which its members wish to pronounce. The idea of abolishing EcoSoc was often canvassed until the Maastricht Treaty surprisingly bolstered it by attempting to graft on to it the newly created Committee of the Regions, with which it shares certain services in Brussels.
The now defunct ECU was a transitional artificial currency which existed from 1981 until it was replaced by the euro at the beginning of 1999. Its predecessor, the European Unit of Account (EUA) was a mere book-keeping device to avoid expressing EC statistics (including the budget) in dollars or in D-Marks. Shortly after the introduction of the European Monetary System in 1979 the ECU superseded the EUA and assumed some embryonic characteristics of a real currency. It was, for example, occasionally used as a denominator for bank deposits, travellers cheques and international money and bond market transactions. It was not, however, legal tender, nor was it available in the form of paper or coin. Its value was derived from aggregating fractions of the EC's national currencies, each currency's contribution to the whole being weighted according to the individual member state's GDP, adjusted for its share of intra-Community trade. The composition of this ECU 'basket' was fixed in 1993 to eliminate at least one variable in the run-up to the introduction of the single currency.
The currencies of all the existing EU member states formed part of the ECU 'basket', regardless of whether they also participated in the Exchange Rate Mechanism or would be absorbed into the single currency. The 'basket' therefore included the British pound, the Danish krone and the Greek drachma. On the other hand, the currencies of the countries that did not join the EU until 1995 (Austria, Finland and Sweden) were excluded, even though they would all shortly be converted into euros.
The Maastricht Treaty provided that the ECU would become the new European single currency when it was finally launched. In 1995, however, the European Council agreed to abandon the name in favour of the euro, in deference to German concern that the ECU would not be credible, given its track record of repeated devaluation occasioned by the weakness of several of its components, notably the lira, the peseta, the escudo and the drachma. So was lost the opportunity to resurrect a romantic old name, for the écu had been an ancient French coin. In January 1999 the ECU was converted to the euro on a 1-for-1 basis, whereupon it vanished for ever.
The Maastricht Treaty encourages the Community to 'develop the European dimension in education'. Apart from Directives aimed at mutual recognition of professional qualifications (essentially a freedom of movement right), EU policy has taken the form of community-funded voluntary programmes under the umbrella name of Socrates for education and Leonardo for vocational training. The best known of these are ERASMUS, the scheme for exchanges of university students, and Lingua for foreign language learning.
The initials EEC are still occasionally used to identify Articles in the Treaty establishing the European (Economic) Community, better known as the Treaty of Rome. Thus 'Article 33 EEC' refers to the objectives of the CAP. The modern form is 'Article 33 EC'.
After World War II the UK favoured an expansion of free trade in Europe rather than the customs union with federalist ambitions which was created by the Treaty of Rome in 1957. In 1960 the UK took the lead in forming EFTA, the other signatories being Austria, Denmark, Norway, Portugal, Sweden and Switzerland (collectively known as the Seven, as opposed to the Six member states of the EEC); these were subsequently joined by Finland, Iceland and Liechtenstein. The objective was to establish a free trade area in industrial goods, first between the EFTA members and then throughout western Europe, without, however, imposing uniform external tariffs or submitting the signatories to the authority of supranational institutions.
Some 18 months after EFTA's formation, Harold Macmillan's government applied to join the EEC. Charles de Gaulle twice vetoed the UK's entry, but by 1973 the UK and Denmark had deserted EFTA for the Community, later followed by Portugal (1986) and Austria, Finland and Sweden (1995). Norway has twice been accepted into the Community but each time rejected membership by referendum. In 2000, therefore, EFTA consisted only of Iceland, Liechtenstein, Norway and Switzerland, of which all but Switzerland were closely linked to the EU by the Treaty constituting the European Economic Area.
See Treaty of the Elysée.
The EU's policy on employment goes little further than monitoring it, regulating some of its aspects and expressing concern that it is not in more plentiful supply. There are policies on vocational training, regional aid (through the structural funds) and hours of employment (through the Working Time Directive). In addition, the Social Chapter of the Maastricht Treaty committed the signatories to measures on workplace conditions, while the Treaty of Rome proclaims the objective of a 'high level of employment'. The Commission produces White Papers on employment and the Council of Ministers calls summit meetings on the subject, where it 'launches initiatives' and agonises over the contrast between the success of the USA in creating 25 million new jobs since 1980 and the EU's chronic unemployment, running at some 10% of the working population at the turn of the century. The culmination of much fruitless discussion was the formulation of an Employment Chapter in the 1997 Treaty of Amsterdam. This, however, amounted only to phrase-making, since there is within the EU no consensus on the appropriate policy response to the problem.
France essentially casts itself as the opponent of neo-liberalism, often advocating public-sector job-creation schemes and harmonisation of tax and social policy, so as to deny competitive advantage to less costly countries. At the other extreme, since Margaret Thatcher's time the UK has advocated privatisation, deregulation, low taxes and flexible labour markets. Germany mistrusts the spending of taxpayers' money on artificial employment but has long regarded statutory job protection and consensual employer-union relations as central to its social market economy. A 'third way', pursued by The Netherlands, has been successful in reducing nominal unemployment through voluntarily negotiated wage restraint, reduced hours and early retirement, albeit at the cost of falling real wages and disguised joblessness in the form of widespread disability and sickness leave.
The overall European verdict on employment strategies is less clear than it would have been in the 1980s and early 1990s. Then the 'Rhine model' appeared over the years to have outperformed the Anglo-Saxon model, at least as practised by the UK. But there is growing agreement that the problem of joblessness is of structural origin. Thus when Prime Minister Tony Blair announced in 1997 that the UK would renounce its opt-out from the Social Chapter, he spoke from strength in calling for labour market reform throughout the EU, for the economy that he had inherited from the Conservatives was among the most effective in Europe, with unemployment (doubtless helped by cyclical factors) running at half the EU average.
Blair's repeated subsequent appeals for a free market approach to improve competitiveness met with a cool response in the capitals of Europe. Beneath the surface, however, business has been more flexible than governments, and there is less rigidity in Continental employment practices than is often assumed. France regulates lay-offs, enforcing consultation with works councils, but although severance is expensive and slow the courts rarely block redundancies. To avoid anti-dismissal laws in Spain and Germany - and high social security costs in several countries - there has been a marked increase in part-time and short-term employment throughout the EU. In 1998, for example, over one-third of all jobs in Spain were filled by temporary workers, and nearly two-fifths of employment in The Netherlands was part-time.
In July 1965 President Charles de Gaulle ordered a French boycott of the Council of Ministers, withdrew France's permanent representative to the Community and instructed the Gaullists to absent themselves from the European Parliament. This 'empty chair' policy was occasioned by the ending of a transition period in the Common Market, after which a range of decisions, previously requiring unanimity, would be taken by qualified majority voting. De Gaulle, who in 1963 had unilaterally vetoed the UK's application to join the EEC, had already been fighting with the Commission president, Walter Hallstein, over the growing power of the bureaucracy in Brussels. The last straw was Hallstein's supranational zeal - in particular, his proposals to make the Community financially self-sufficient, to extend the budgetary powers of the Parliament and to revise the financing of the CAP. The prospect of being outvoted on such matters was anathema to de Gaulle; moreover, he had a French presidential election to fight in December (he won narrowly from the pro-EEC François Mitterrand). The dispute paralysed the Community for six months and was not resolved until January 1966, through the 'Luxembourg Compromise', which essentially condoned the French position and restored the unanimity principle as the ultimate recourse to protect national interests, albeit recognising that this constituted a breach of the Treaty of Rome.
The goal of Economic and Monetary Union was first proclaimed by the French president, Georges Pompidou, and the German chancellor, Willy Brandt, in 1969, immediately after President Charles de Gaulle's departure from the scene. The blueprint (the 'Snake') set out in the resultant Werner Report did not, however, succeed. France was unwilling to surrender more than a modicum of financial autonomy. Moreover, the collapse of the dollar-based Bretton Woods international monetary system in 1971, followed by an unprecedented rise in oil prices and global inflation, led to unstable foreign exchange markets in which no artificial attempt to link European currencies could have expected to survive without the sturdiest of political and institutional underpinnings.
In 1977, four years after the demise of the 'Snake', EMU was relaunched by the Commission president, Roy Jenkins, supported by the next generation of French and German political leaders, Valéry Giscard d'Estaing and Helmut Schmidt. The revised scheme, known as the European Monetary System, was designed to bring about a zone of currency stability in Europe through the Exchange Rate Mechanism (ERM) and a new quasi-currency (not legal tender but usable in wholesale transactions) called the ECU, or European Currency Unit. The ERM came into effect in 1979. More sophisticated and more firmly backed by central banks than the earlier arrangements, it lasted more or less unscathed for some 12 years, although the ECU, whose value was based on a basket of currencies, did not match the strength of the D-Mark.
The Maastricht era
The ERM had initially been a flexible framework, with room for rate adjustments. But in 1989 a committee of central bankers and economists headed by Jacques Delors made recommendations for a concrete three-stage process of harmonising national economic policies, fixing exchange rates and finally adopting a single currency. From the Delors Report would spring the Maastricht Treaty, which made EMU its centrepiece. Alone among European leaders, and despite being undermined by dissent in her own cabinet, Margaret Thatcher attempted to stand out against these developments.
The Maastricht Treaty, signed in 1992, closely followed the Delors proposals. Stage One of EMU would involve the abolition of exchange controls, the entry of all currencies into the narrow band of the ERM and steps towards economic convergence. Stage Two, starting in 1994, would see the creation of a European Monetary Institute and the granting of independence to national central banks, paving the way for a European Central Bank (ECB) free of government interference. In Stage Three, from which the UK and Denmark negotiated opt-outs, countries meeting the 'convergence criteria' would fix their rates irrevocably and move towards the transformation of the ECU into a genuine currency, with a target date of 1997 but some allowance for slippage.
The UK had reluctantly participated in the ERM for the first time in October 1990, a period which coincided with a domestic recession, German reunification and the inauguration of an increasingly rigid policy of European currency management, which in practice meant locking every country's exchange rate to the D-Mark. A series of disasters ensued. It suited Germany, which had over-inflated its money supply in the process of exchanging D-Marks one-for-one for East German Ostmarks, to keep interest rates high. Other countries, especially the UK, needed low interest rates to stimulate their economies. The Maastricht Treaty proved extremely controversial. Denmark rejected it in a referendum. It barely passed through the British Parliament and doubts arose over its ratification in France. In September 1992 these strains culminated in violent currency speculation, resulting in the departure of the pound and the lira from the ERM and the devaluation of the peseta. A year later, renewed currency turmoil destabilised the franc and virtually destroyed the European Monetary System.
The chaos of 1992 and 1993 appeared for a while to have wrought such havoc that the whole EMU project might fail or be postponed. Nevertheless, a five-year period of budgetary stringency and relative monetary calm, albeit accompanied by heavy unemployment on the Continent, gradually enabled most of the would-be participant countries to fulfil, or at least lay claim to fulfilling, the majority of the convergence criteria. Moreover, the momentum in the corridors of power was well-nigh unstoppable. European governments had from the beginning recognised EMU as an essentially political concept. Unable to force the pace of constitutional integration, because of the reluctance (the Commission would say unpreparedness) of voters, François Mitterrand, Helmut Kohl and Jacques Delors had pressed forward with monetary integration instead. Economic integration would follow, then full federation. The lesson of history, that political unification should have preceded a single currency, as it had done in the USA, Germany, the UK and Italy, was understood, but consciously rejected in favour of an inversion of the natural order of events. Only in the UK, where Thatcher had been ousted late in 1990, did politicians delude themselves, and seek to persuade the public, that EMU was primarily economic in intent.
Throughout Europe, big business generally supported the project. Little caring for national political independence, the multinational corporations saw in EMU the prospect of regional currency stability, enabling them to plan capital expenditure and to budget costs and revenue with more assurance. Their opponents they decried as small-minded nationalists. In Germany and France, prominent businessmen were under considerable pressure to conform to official thinking. In the UK, business opinion was divided. The country's financial structure, its trading patterns and the timing of its economic cycle were so different from those of the Continent that the arguments for staying out of the single currency were stronger than elsewhere. In many countries, small and medium-sized businesses, more entrepreneurial and less susceptible to political influence than the big corporations, were opposed, seeing in the euro (the ECU's name having been quietly dropped) unavoidable costs and unconvincing benefits.
Among central banks, the Bundesbank was the most outspoken, articulating the dangers of EMU in a series of articles and speeches. The scope of its arguments was comprehensive: monetary union could not work well without unified tax and spending policies; this implied political union. In the absence of interest and exchange rate flexibility the cost of adjusting to economic change must be felt in jobs, wages, inflation and migration; Europe's labour rigidity and the immobility of its populations (a product of language and cultural differences) were obstacles to the success of the single currency. The euro was not indispensable to the single market and would be weak unless financial discipline were maintained indefinitely; the convergence criteria were ill-chosen and the French desire to politicise the ECB could be the excuse for previously inflationary countries to revert to bad habits. The Bank of England echoed many of these sentiments. Both central banks couched their warnings in cautious words, careful not to trespass too far into political territory or to sound as if they were selfishly defending their own independence.
Throughout the 1990s EMU dominated the political scene in Europe. Thatcher's fall from power had been partly due to her hostility towards it; John Major's defeat in 1997 owed much to the pound's ignominious expulsion from the ERM in 1992; Mitterrand's authority was never the same after his wafer-thin majority in the French referendum on the Maastricht Treaty. By 1998 German unemployment had climbed over 4.5 million, the highest since 1933, but Kohl seemed obsessed with monetary union to the exclusion of other concerns: next year he too would be voted out of office. Denmark (ordered by its partners to hold a second referendum in 1993 after the first had gone wrong) was cowed into a reluctant Yes. Spain's austerity programme drove unemployment to over 22% in 1995, undermining the popularity of Felipe González. Nationalist or communist parties exploited antipathy to EMU to gain ground in Austria, France, Italy and Germany, the communists entering the ruling coalitions in France and Italy, where they were obliged to come to terms with belt-tightening measures that offended leftist orthodoxies. In 1997 the new French president Jacques Chirac lost his conservative Assembly majority when a snap election to endorse budgetary restraint backfired with a victory for the Socialists. Less than a year away from the 1999 starting date for the single currency, unemployment in the member states stood at close to 20 million, and although the Continental economies were at last recovering there were few politicians in the EU who had not been scarred by the preparations for the new monetary order.
Nevertheless, in the contest against economic Cassandras and supporters of the nation state, victory had gone to the integrationists. Their assertions that European unity, even peace, depended on EMU had not convinced ordinary people, who remained largely resistant to losing their currencies in Germany, France, the UK, Sweden and Denmark (in Italy and Spain, as in the de facto D-Mark zone of Belgium and The Netherlands, the population was more favourable). But the citizens of France and Germany would have no say in the matter, for no further referendums were planned and the major parties in both countries were committed to the single currency. Accordingly, on January 1999, the last date permitted under the Maastricht Treaty, the currencies of the qualifying member states became irrevocably fixed to each other. In 2002, when the mints and printing presses have done their work, the euro will replace the D-Mark, the French franc and all the other participating national currencies.
The choice of participants
Which countries would be included was decided by the European Council in the spring of 1998. All but the UK, Denmark and Sweden had declared their wish to join as soon as possible, although Greece's financial condition prevented its immediate admission. Germany, with vivid folk memories of wheelbarrow money in its great inflation of the 1920s, would have preferred to confine the single currency to a small group of countries with a northern sense of discipline, reinforced by an independent ECB modelled after the stern Bundesbank. France, equally afraid of deflation and German dominance, favoured a higher degree of political control and the inclusion of the southern states of Italy, Spain and Portugal. Both France and Germany would have liked the UK to be included - France to dilute German influence, Germany because of the UK's strong finances - but Tony Blair's recently elected government, concerned about the mismatch of economic cycles and the hesitance of the British electorate, indicated that, although in principle positive, it was in no hurry to join. Ironically, whereas the UK readily met the main qualifying tests laid down in the Maastricht Treaty, neither France nor Germany, the two prime movers of EMU, found it easy to do so.
The resolution of these differences of opinion proved less difficult than had been expected. The Latin countries based their claim on the sincerity of their conversion to fiscal rectitude. Accused of creative accounting, Italy retorted that even Germany was not above the devices it criticised in others. If Italy and Spain were rejected, their interest rates would soar and the cohesion of the EU would be severely tested. Accordingly, despite German qualms, when the Commission recommended that the Mediterranean nations be included in the single currency, the heads of government agreed without demur. At the Cardiff summit, eleven nations adopted the euro. The UK, Denmark, Sweden and Greece alone would retain their own currencies.
Difficulties and opportunities
With less than a year to run before the introduction of the new currency, the technical obstacles came into sharp focus. There was anxiety about the possibility of speculation during the period after the participants had been selected but before the national currencies became mere subdivisions of the euro in 1999. As the range of complications proliferated, so the estimates of expenditure on systems escalated. The anticipated software costs were compounded by the revelation that few computers were programmed to cope with the transition from the 20th to the 21st century. There might not be enough technicians to handle both problems simultaneously. The cost of preparing for the euro was estimated at $150 billion - but the US computer company IBM, which was well placed to evaluate the question, let it be known that it considered this an understatement.
The plans for directing future monetary policy grew more rather than less confusing as the deadline approached. It was originally intended that the ECB alone would be responsible for interest rates and the money supply, with price stability its main objective. But France pushed for growth and employment to figure as equal priorities. The proposed ministerial Stability Council, or Euro-X club, seen by Germany as an earnest of fiscal prudence on the part of member states, was seen by France as a political counterweight to the ECB. Moreover, exchange rate policy, allocated under the Maastricht Treaty to the ECB, was agreed during the 1997 Amsterdam summit to be a joint responsibility with the Stability Council. The European Parliament also pressed its case for an oversight role and France suddenly turned the choice of the ECB's first head into a political controversy, unsuccessfully demanding the position for Jean-Claude Trichet, president of the Banque de France. These developments challenged the anti-inflationary bias of policy on which Germany's consent to EMU had been predicated.
While the politicians were concentrating on bringing the single currency to fruition, it paid them to paper over the difficulties. Sooner or later, however, these would have to be faced. As long as the EU's economies were enjoying an upswing, as they were in 1998 and 1999, doubtless any problems would appear inconsequential. But time would bring the strains to the surface. Some observers concluded that the euro must eventually lead to a material increase in centrally disbursed EU subsidies to alleviate the burden of regional economic adjustment. This would entail paying more taxes to Brussels, an outcome for which the voters had not been prepared. It was worrying, too, that state pensions were seriously underfunded in France, Germany and Italy: as those populations aged, a financing chasm would open up, and who would bridge it? Pessimists foresaw a disaffected public, rising unemployment, a Fortress Europe mentality and even the break-up of the EU. Informing and overshadowing every aspect of the issue was the realisation that the direction of the economies of Europe would in future be disconnected from the will of the people, a phenomenon known as the 'democratic deficit'. For the E in EMU stood for economic union, patently an even more ambitious goal than monetary union.
Against these anxieties there were other more positive expectations. The single market might receive fresh impetus from the elimination of currency fluctuations and transaction costs. Increased pricing transparency should raise business efficiency, enabling Europe-wide giants of industry to spring up, capable of challenging the strongest US and Japanese competitors. The pressures of more intense competition might be the most effective way of forcing governments to undertake much needed tax and labour market reforms. Although the euro would not be immune from exchange rate volatility against the dollar and the yen, intra-European stability would improve the ability of industry to plan for the long term, while broader capital markets might assure the new currency the liquidity enjoyed by the dollar. In time, the euro might become a major reserve currency, a source of inexpensive funding for the EU. It was argued that the inevitable compromise of national sovereignty was an outdated concern in a world where markets are all-powerful and security is collective.
The launch of the euro in 1999 was the occasion of brief rejoicing at the triumph of faith over scepticism. But the currency soon began to stumble and by the end of the year it had fallen against the dollar by some 15% from its early high - an embarrassment to economically illiterate politicians who had rashly promised a strong currency, but a boost to industry within the eurozone so long as domestic prices remained stable.
Of greater significance were the pointers to deeper issues. The expectation that the single currency would lead to intensified Community encroachment on national economic self-government was quickly corroborated by Continental calls for tax harmonisation, including a German-backed proposal for an EU-wide withholding tax. This proposal was opposed by Britain on the grounds that it would threaten London's pre-eminence in international capital markets.
The problems inherent in a 'one-size-fits-all' interest rate were soon highlighted by a surprisingly sharp divergence in the EU's economies. Meanwhile, the UK continued to thrive outside the eurozone, and as fears of the consequences of isolation receded, British resistance to the euro increased. The Chancellor of the Exchequer, Gordon Brown, found himself excluded from Euro-X, the council of Euroland finance ministers. But independence had its consolations. While the UK retained its seat at the global summit meetings of the 'Group of Seven' nations, the central banks of France, Germany and Italy resigned themselves to being represented there by the ECB. For all the constructive language of the Blair government about the EU, the impression grew that Britain's economic path was drifting apart from the Continent's under the pressure of events.
On the positive side, the euro had been brought in without a technical hitch and the ECB had settled to its task in a professional manner. If there was a certain lack of cohesion between a centralised monetary policy and the decentralised management of national economies, this was to be expected and was not on a scale to cause concern. The euro might be an initial disappointment to savers and investors, but it had established itself as a major borrowing currency and a liquid instrument in markets - markets which, ironically, gravitated instantly to London. In Sweden and Denmark there were indications of a renewed wish to adopt the single currency. The arguments for and against EMU had vied with each other for 30 years: twelve months' practical experience was far too short to resolve the debate. Indeed, it was possible that both sides would eventually be able to claim victory. The Continent might end up with a viable euro area, amounting effectively to an extension of the previous D-Mark zone, while Britain, with its unique trading and investment patterns, its different economic cycle and its fierce attachment to self-government, might flourish best with its own currency. Whatever the final outcome, it was certain to define much of the EU's fate for decades to come. (See also Single currency.)
Enarque is the colloquial name for a graduate of the Ecole Nationale d'Administration, the elite French institute of higher education dedicated to preparing young people for careers in public administration. Enarques of all ages call each other tu and expect to run the great departments of state; many go on to high positions in industry or the Commission.
Panic after the 1973 oil shock led to a fruitless search for a Community energy policy, which despite the earlier Euratom and European Coal and Steel Community Treaties had not previously been formulated. The Community imports about half its energy requirements, only the UK and The Netherlands being self-sufficient, but there are profound strategic differences between the member states. France and Belgium rely - controversially, many would say - on nuclear power; Germany, France, the UK and Spain produce uncompetitive high-cost coal; and many countries are dependent on oil or gas from politically vulnerable sources. The resulting patchwork of energy supply, some in the private sector, some nationalised, does not lend itself to supranational official policy-making. Nevertheless, successive position papers, updating a strategic review undertaken by the Commission in 1974, have provided a framework within which to consider energy issues. The main thrust of these papers has been the promotion of energy efficiency, renewable resources, cross-border links, security of supply and advanced research, in some cases assisted by EU grants or loans from the European Investment Bank. In 1994 a European Energy Charter was signed by the Community, 12 former Soviet republics and 37 European and other states, the aim being to guarantee oil and gas supplies from the East in exchange for transfers of Western technology and capital. Initial experience, however, has not been promising, since foreign capital has been regarded with suspicion in Russia and many of the ex-communist countries are trapped in poverty, chaos and corruption.
Meshing (as of gears) - a word used in Eurocrat circles to describe the deliberate process of engaging national technocrats or lobby groups in European-level activities, sometimes subsidising them to do so, in order to further the integrationist cause. (See also Integration theory.)
The addition of new member states to the Community. After the 'Six' (Belgium, France, Germany, Italy, Luxembourg and The Netherlands) created the EEC in 1957, Britain, Denmark and Ireland joined in 1973, followed by Greece in 1981 and Portugal and Spain in 1986. In 1995 Austria, Finland and Sweden acceded to what had by now become the EU.
The criteria for admission are 'Europeanness' (Turkey qualifies but Morocco does not), democracy, respect for human rights, readiness to accept the acquis communautaire and possession of a viable market economy. The application procedure starts with a Commission evaluation. If this is positive, there is then a negotiation of terms, which if successful leads to approval by the Council and the European Parliament and finally ratification by all the member states. The whole process can take up to five or ten years, sometimes more.
The collapse of the Soviet empire around 1990 resulted in a new wave of Eastern European applicants, among which the Czech Republic, Estonia, Hungary, Poland and Slovenia were initially singled out in 1997 for recommendation by the Commission. In 1999, following the Kosovo crisis, there was a change of policy. It was now decided that some of the countries that had been helpful to the allies should be rewarded and that all credible applicants should be treated equally as candidates. The negotiations would proceed in parallel, though there was no expectation that the dates of accession would coincide: some countries would be able to comply fairly rapidly with the EU's regulatory requirements and 80,000 pages of legislation, while the timetable for others might slip if democratic freedoms failed to take root or if transitional arrangements proved difficult to work out. No country could anticipate acceptance before 2003 or 2004: many would be delayed for at least another decade after that. The new ex-communist candidates were Latvia, Lithuania, Bulgaria, Slovakia and Romania. In addition, Cyprus (despite its constitutional complications) and Malta (which had blown hot and cold over applying) were admitted to negotiations, while Turkey - an applicant since 1987 but long rejected on human rights grounds - was finally agreed to be a candidate, though without immediate prospects of success.
This massive potential enlargement made it more than ever urgent to reform the EU's institutional arrangements. Already the growth from six member states to 15 had made decision-making cumbersome. If 28 members were to be accommodated the Council's voting structure, which over-weights the small countries, would have to be modified - otherwise eleven mini-states with a total population of some 30 million would command the same number of votes as a combination of Germany, France and Britain, whose populations aggregate nearly 200 million. For similar reasons, the scope of the veto would have to be curtailed: a Maltese veto of the great powers was not a credible scenario. The privilege of nominating two commissioners enjoyed by Britain, France, Germany, Italy and Spain would have to cease, as would the automatic right of every member state to a commissioner - 20 commissioners were already more than enough. (Of various possible solutions, rotating nomination rights for the less populous countries seemed the least problematic.) The six-month revolving EU presidency might have to be reviewed - a micro-island's tenure of office was unlikely to be effective unless it was in practice conducted by the Commission. Finally, the size of the European Parliament would have to be limited, as proposed in the Treaty of Amsterdam, to 700, compared with the existing 626. For a political class exhausted by previous failed attempts at reform, it was a daunting prospect.
The budgetary consequences of enlargement would be substantial. The average GDP per head of the applicants was less than a third that of the EU average, so that a 29% population increase (assuming that all the candidates except Turkey were eventually accepted) would lead to an increase in the EU's GDP of under 10%. East Germany had needed vast subsidies at the time of reunification. The prospect of a new round of aid to the impoverished agricultural economies of Eastern Europe threatened to stretch the Community's resources to breaking point. These strains would be relieved if other member countries (notably Spain, Portugal, Ireland and Greece) were to agree to forgo part of their own subsidies, or if the richer countries were prepared to make increased contributions. Neither alternative would be easy to negotiate.
Nor were these the only issues. While many regarded enlargement as the EU's ultimate moral justification - the means of creating a secure, prosperous and democratic area from the Atlantic to the Russian border - others who looked East saw there a potential source of low-cost competition, migration and organised crime. The average Polish wage is one-tenth of the average German wage, and the Russian mafia have penetrated deeply into parts of Central Europe. From Austria to Denmark, xenophobia grew. Fears of competition were exacerbated by the paradox that some of the ex-communist countries had embraced the liberal market more enthusiastically than the EU itself. Estonia, for example, had abolished all trade barriers in 1992. Thus while there was much moralising about the West's duty to pay the price of bringing prosperity to Eastern Europe, in reality most of that price would have to be paid by the supposed beneficiaries. Not only would there be the burden of complying with EU environmental standards (Lithuania, Slovakia and Bulgaria, for example, would have to close their nuclear reactors), but there would be pressure to conform to the EU's high welfare costs. In all probability, Polish and Romanian farmers would have to be content with lower subsidies than their rich Western European neighbours. Indeed, it was a bitter irony that by 2000 the EU was exporting more agricultural produce to Eastern Europe than it imported, since the Common Agricultural Policy subsidised the dumping of surpluses at knock-down prices.
To enable the successful candidates to adapt to their new status there would have to be numerous derogations from the acquis communautaire. This could be viewed either as a justification for a more diverse EU, in which the differences between member states would be better respected, or as strengthening the need for centralisation, to prevent enlargement from carrying within it the seeds of the EU's self-destruction. At the end of the French presidency of 2000, a new treaty (provisionally called the Treaty of Nice) was anticipated. It would focus heavily on these fundamental issues. The federalists would be arguing for decisive steps towards unification - a European constitution, a reduction in the number of policy areas requiring unanimity among the member states, a defence capability more independent of NATO, a Brussels-based public prosecutor's office and Europe-wide 'political parties' funded by the EU. Defenders of the nation state would be arguing that such undemocratic measures would alienate their electorates even more from the entire EU project. Meanwhile, the candidate countries would be watching cautiously - their desire to be accepted back into the European mainstream tempered by apprehension that, having so recently escaped the horrors of Soviet centralism, they might be about to surrender their hard-won independence to a more benign, yet not entirely beneficent, bureaucracy (see Appendix 6).
Although controversy dogs the Commission's involvement in other spheres, public support for EU involvement in environmental protection is strong. Governments, too, have been content to devolve some of their responsibilities in this area to the Community, which is well placed to organise European co-operation over such issues as emission controls. Anything approaching a coherent EU policy is, however, of recent origin. The original Treaty of Rome was silent on the subject and it was not until the European Council of 1972 that the Community asserted its interest, backed (arguably beyond what was legally justifiable) by the Court of Justice.
The 1986 Single European Act set out three priorities: improving the quality of the environment; health protection; and the conservation of natural resources. Since then, the Commission has issued Directives on matters ranging from atmospheric pollution to water quality and has set up the European Environment Agency in Copenhagen to liaise with national governments and collect scientific research. The 1997 Treaty of Amsterdam required the Community to incorporate the protection of the environment into all relevant legislation.
Despite its popular appeal, environmentalism is full of pitfalls. There is a natural conflict between stringent regulation and the free market. The 'green' member states tend to push for a high level of protection, countering the threat to their competitiveness by urging the Commission to impose the same standards on the less environmentally conscious countries. By a similar line of reasoning, at the Kyoto Summit of 1997 the EU delegation pointed out that unilateral reductions in power station or vehicle emissions would put Europe at a disadvantage unless matched by US, Japanese and developing country reductions. Moreover, much of the scientific evidence is debatable. Doubts remain, for example, over the explanation of global warming, the phenomenon widely believed to threaten the planet and therefore to justify massive preventive expenditure.
Another battleground is the cost-effectiveness of legislation drafted by bureaucrats without regard to local conditions. The struggle between allegedly offending businesses and enforcement agencies - the latter armed with draconian powers to penalise infringements of sometimes inappropriate regulations - appears set to be a recurrent EU theme in the 21st century, with the warring parties citing uncertain scientific hypotheses and the rival claims of health and employment. Yet another major theme will be the costly clean-up of the pollution caused by industry in the former communist countries of Eastern Europe. A rectification programme is a precondition for accession to the EU, but few outsiders understand the scale of the devastation which has been perpetrated in these countries over the last 50 years.
See European Parliament.
The most successful of the Community's educational initiatives, ERASMUS (an acronym for European Community Action Scheme for the Mobility of University Students) offers some 50,000 students annually financial support to spend a year - and to earn course credits - in another university within the EU. In 1995 ERASMUS became part of the wider Socrates programme for co-operation in the educational field.
The acknowledged father of West Germany's post-war economic miracle, Ludwig Erhard was Chancellor Konrad Adenauer's economics minister from 1949 to 1963 and later his successor as chancellor. A convinced free-marketeer, he dismantled Hitler's state-directed system and devoted himself to export-led revival, based on free enterprise but with a concern also for social welfare. The 'social market economy' is associated with Erhard's name, although he came to regret the phrase's connotation of featherbedding, labour rigidity and high employment costs.
He had grave doubts about federalism, accepting the ECSC and the Treaty of Rome only after much agonising. He was also suspicious of the idea of a customs union, fearing it would encourage protectionism. During his tenure of office, West Germany's exports grew eightfold and the economy outpaced every other European country. Low inflation, high savings and a persistent balance of trade surplus were the hallmarks of this period, which launched Germany on its path to becoming Europe's leading industrial power.
It is a universal principle of defence policy that it proceeds from agreed foreign policy aims - protection of overseas trading interests, deterrence of military threats, the honouring of alliances, the defence of a friendly political order, and so forth. The aims of the member states of the EU are too disparate to underpin a coherent foreign policy, as has been clear in several crises, from the Falklands War to the Gulf and Yugoslav crises. Thus the ESDI is designed less to describe a genuine identity of interests than to justify the EU in building a military apparatus appropriate to a unified state.
Given France's historical antipathy to US 'hegemony', reflected in its refusal to join NATO's integrated command, the ESDI poses the question whether the EU means to strengthen its capacities within NATO (a burden-sharing move that the USA would welcome) or whether it means to create a rival to NATO. Europe's rhetoric on this varies, depending on the speaker and the audience. Either way, large increases in European defence expenditure would be necessary, which would go against a strong trend of cuts during the last decade. (See also Common Foreign and Security Policy.)
ESPRIT (European Strategic Programme for Research and Development in Information Technology) is a corporatist initiative, part funded by the EC, to foster cross-border European collaboration in basic research into information technology.
Sandwiched between Russia and the Baltic Sea, Estonia has historically been dominated by its eastern neighbour. The USSR seized the country in 1940 under the infamous Molotov-Ribbentrop pact, lost it to the Nazis in 1941, recaptured it in 1944 and held it as a subject state until November 1989, when the Estonian Supreme Soviet declared the annexation illegal. Multi-party elections were held in March 1990. The constitution of 1992 followed, securing freedom for the press and committing the state to privatisation and market liberalisation.
The radical right-wing party elected in 1992 governed for two years, abolishing tariffs and subsidies, pegging the currency to the D-Mark, selling off state industry and laying the foundations for perhaps the most successful of all the former communist economies. Subsequent coalition governments have endorsed free market policies, enabling the country to benefit from an influx of foreign investment and a switch of trading partners: by 1999 three-quarters of its trade was with Western Europe. Estonia applied for membership of the EU in 1995, obtaining a favourable recommendation from the Commission, and although the country is not without its problems (corruption, low wages and the presence of a large minority of ethnic Russians), it is likely to be among the first candidates to be accepted.
See European Union.
The initials EU are used to designate Articles in the Treaty on European Union, originally known as the Treaty of Maastricht. Thus 'Article 11 EU' refers to the objectives of the Common Foreign and Security Policy.
The Euratom Treaty was signed in 1957 on the same day as the Treaty of Rome, which established the European Economic Community, and six years after the signing of the Treaty of Paris, which had established the European Coal and Steel Community. Together the three institutions were called the European Communities; they were substantially merged in 1967 and eventually became known simply as the European Community. In its early days Euratom was considered of immense potential importance, on military as well as non-military grounds. France, however, went its own way in nuclear weaponry, as did the UK before and after it joined the Common Market. In 1970 Euratom's research budget became part of the overall Community budget, whereupon the organisation ceased to have a meaningful independent existence.
The unlovely name for the European single currency. The originally planned name was the écu. This was rejected because Germany disliked the implied reference to the weak European Currency Unit (ECU). Names with honoured traditions in European history, such as florin, shilling or ducat, failed to survive committee decision-making, and euro was settled upon as a compromise.
So called not through any connection with the EU but because the market originated in Europe, a eurobond is an internationally owned debt instrument in bearer form, issued by governments or companies and denominated in any convertible currency, the interest being paid without withholding tax. The market is centred in London.
A term used to denote communism modified by democracy. The Franco-Italian Eurocommunist Manifesto of 1975 abandoned the idea of one-party rule and the dictatorship of the proletariat in favour of free elections. Thereafter, however, the French Communist Party stayed close to the Moscow line and it was the Italians who became identified with Eurocommunism, earning the opprobrium of the Soviet Union and evolving ideas little different from those of ordinary socialism. Before the advent of Eurocommunism, which was supportive of European integration, old-fashioned Marxist-Leninists in Western Europe had opposed the Common Market (the maverick federaliser Altiero Spinelli being a rare exception to this rule) on the grounds that Soviet interests were best served by a divided free world. The collapse of the Soviet empire around 1990 spelled the end of Eurocommunism as a distinctive force.
Eurocontrol, founded in 1960 with its headquarters in Brussels, is inoperative and in regular danger of being closed down. If properly activated, it could be one of the EU's more useful bodies. Its object is co-ordinated air traffic control - an urgent need in Europe, where control of airspace is jealously guarded by national governments and co-operation is inadequate, causing unnecessary risk and delays to passengers.
A joint initiative of President François Mitterrand and Chancellor Helmut Kohl, the Eurocorps was inaugurated in 1993, based on a proposed 35,000-strong Franco-German force. It became operational in 1995 with over 50,000 French, German, Belgian, Luxembourg and Spanish troops, Belgium having committed nearly half of its 45,000-strong army to the corps. Membership is open to all the WEU signatories, some of which, including The Netherlands, Italy and Poland (a WEU associate), have signalled their interest. Forces allocated to the Eurocorps are also assigned to NATO, on which the corps would be reliant for support services in a sustained emergency. The role envisaged for the Eurocorps is that of peacekeeping and crisis management, with the WEU providing the political framework - a format not perhaps ideally suited to fast-moving operational conditions. In 1999, Britain offered logistical support to the Eurocorps, to the alarm of the USA, which feared that an embryonic European army was in the making, rather than a burden-sharing force under NATO's umbrella. (See also Common Foreign and Security Policy and WEU.)
European bureaucrats, recruited from all the member states, some working their way up as career officials, others at senior level parachuted in from outside (parachutage). These officials, over two-thirds of whom work for the Commission, owe their loyalty and pay their taxes to the EU. Europhiles make play of how few Eurocrats there are (around 29,000), but equally to the point is their influence on the tens of thousands of national civil servants who are seconded to them. This process, known as engrenage, or meshing, is designed to inculcate European attitudes into the officials of member states by seating them on joint committees with Eurocrats, where they collaborate in detailed technical work, for example on product safety, fish quotas or agricultural issues.
A currency deposited, lent or traded outside its domestic market, chiefly in the global market centred in London. Hence eurodollar, euroyen, euro-DM, eurosterling (where the investors are offshore from the UK) or even, inelegantly, euro-euro. The term is unrelated to the EU.
A dollar located outside the USA, especially in a European bank or branch, but it could equally be in an Asian or Latin American financial institution. The term is unrelated to the EU. The centre of the eurodollar market is London.
A person who uncritically and enthusiastically accepts all proposals and defends all policies of the European Union.
A joint British, German, Italian and Spanish project, the Eurofighter is an advanced fly-by-wire military aircraft, whose commercial viability depends principally on orders from the partner countries. As a short-range interceptor which has attracted doubts about its capabilities and its suitability for post Cold War warfare requirements, the Eurofighter is generally defended more on political than on strategic grounds.
A term used by European enthusiasts to denote false stories of intrusive and unnecessary Directives or Regulations emanating from Brussels. Unfortunately, rather too many of these stories prove on investigation to be substantially true. A feature on which Eurosceptics and Europhiles agree is that many of the most oppressive rules stem from over-zealous drafting or enforcement by national (especially British) officialdom of relatively innocuous proposals originated in Brussels. From the victim's standpoint, however, the result is the same, so long as redress is blocked by the ability of officials to shelter behind the Community as their legitimising authority.
The term is used in the opposite sense by sceptics, to denote misleading or exaggerated Commission claims; for example, that the Community has been responsible for preventing war, or that EMU will create millions of jobs, or that 'subsidiarity' brings decision-making closer to the people.
With their unique gift for imagery, the ancient Greeks symbolised Europe in the myth of Europa, the lovely daughter of the King of Tyre, who was abducted by Zeus after he had taken the form of a bull. She later married the King of Crete and bore a son, King Minos, who built the notorious labyrinth. Thus within a single story Greek mythology perfectly captured Europe's abiding beauty, its propensity for political rape, its descent into labyrinthine bureaucracy and the ambiguity of its eastern borders.
After the Roman conquests, Europe's western border was established as the Atlantic north of Gibraltar. But to the east the situation has never been clear. The Romans fought incessantly with barbarians along the Rhine and the Danube. Some ancient geographers considered that Asia began at the River Don. Today we think loosely of a boundary running from St Petersburg on the Baltic to the River Dnieper and the Black Sea. A vast area is vaguely known as 'Eurasia'. The idea of a Europe 'from the Atlantic to the Urals' is essentially political, asserting European interest in eastward expansion or Russian aspirations for a legitimate say in European affairs. On any definition Turkey remains a surprising candidate for the EU.
Europe as referred to by Europhile politicians and Community officials is a deliberately ambiguous idea, suggestive of an identity between the geographical Europe, the Europe of civilisation and the complex of treaties and supranational bodies that make up the European Union. (See also 'European idea'.)
May 9, the anniversary of Robert Schuman's clarion call in 1950 to merge the French and German coal and steel industries.
The idea that nation states should be the main determinants of the future of Europe. Charles de Gaulle used the term to denote his vision of a Community built on co-operation, as opposed to an integrated Union in which power lay predominantly with the Commission and other supranational bodies. Margaret Thatcher later adopted the same theme.
Generally assumed to be the anthem of the European Union, the theme (Schiller's 'Ode to Joy' set to the last movement of Beethoven's Ninth Symphony) is in fact the anthem for the members of the Council of Europe, currently 44 countries, many of which are outside the EU. (See also European identity.)
The EBRD was set up in 1991 with a callable capital of 10 billion ECUs (now euros), mandated to assist the transition to free markets of the former communist countries of Central and Eastern Europe. The aim was to prove the EU's independence from the USA's financial muscle and expertise, but doubt soon turned to embarrassment as President François Mitterrand's friend and adviser Jacques Attali, the bank's first president, spent over £200 million on marble, furnishings and French chefs at his London headquarters. The next president, Jacques de Larosière, brought discipline to expenses and lending during his five year tenure from 1993 to 1997, establishing the bank as a serious institution and doubling its authorised capital to 620 billion. Nevertheless, its meagre profits have repeatedly been consumed by loan loss provisions, the latest setback being the Russian crisis of 1998.
The bank has 60 shareholders, just over half its capital being owned by the member states and institutions of the EU. It is co-operating with the Community and the World Bank to step up financing in Central European countries that have been accepted as candidates for EU membership. Some 80% of its financing is in debt form and 20% in equity form, its total commitments being limited to its paid and unpaid capital.
Like its predecessor, the European Monetary Institute (EMI), the ECB is located in Frankfurt. It was established in 1998 under the terms of the Maastricht Treaty as an integral part of the final stage of EMU. The Treaty makes the new institution part of a European System of Central Banks, but in practice the role of the participating national central banks is peripheral. They give the ECB advice, supply members to its Governing Council (which meets ten times a year) and implement its decisions. Their independence of action, however, ceased as soon as the ECB came into existence.
The primary objective of the ECB is price stability in the eurozone. The Treaty stipulates that the bank must be free of political influence and that it is responsible for the monetary policy, foreign exchange operations and management of the reserves of the countries participating in the single currency. Under French pressure, however, employment has been elevated as a priority. It had originally been planned - at least by Germany - that a Stability Council of finance ministers would ensure that the ECB's monetary prudence would be reinforced by fiscal discipline in the single-currency countries. But the Stability Pact soon became known as the Stability and Growth Pact and the Stability Council as Euro-X, with an informal remit to co-ordinate monetary and economic policy. Uncertainty reigned as to how future policy differences would be reconciled, given the clouding of the clear authority granted to the ECB in the Maastricht Treaty.
The euro was duly launched on 1 January 1999. But a number of issues clouded what was billed as a celebration. The French government had made a last-minute attempt to install a French banker, Jean-Claude Trichet, as the ECB's first president. The smaller countries were not happy to see the choice settled behind closed doors with an unofficial deal that the Dutchman Wim Duisenberg, the natural candidate as outgoing president of the EMI, would be appointed but would not serve out his full term. The UK sought in vain to join Euro-X, and was offered instead an assured seat on the ECB's six-strong Executive Board if, or when, the country decided to adopt the single currency. The powerful leftist German finance minister Oskar Lafontaine interfered to try to force the ECB to cut interest rates (Lafontaine was shortly dismissed, but the impression of contempt for the Maastricht Treaty lingered), and the euro's first year saw it decline sharply against the dollar and the pound, threatening inflation and dismaying savers, although the devaluation was of help to Continental manufacturers. Amid these distractions, it was easy to overlook that the ECB itself had performed well, steering the new currency skilfully through a host of technical pitfalls. (For a fuller description of the political and monetary background, see EMU.)
The ECSC was the acorn from which grew the EU. The brainchild of Jean Monnet, it was created by the 50-year Treaty of Paris in 1951 following a proposal of the French foreign minister to pool the French and German coal and steel industries (the Schuman Plan). The object was to make war between those countries impossible by putting essential production under the control of a supranational body. Germany immediately agreed, and when Italy and the Benelux countries decided to join as founder signatories, the Six came into being. In 1957 the same countries formed the EEC through the Treaty of Rome.
The ECSC was the institutional model for the EEC, with a Council of Ministers representing the member states, a High Authority (equivalent to the Commission, with Monnet as its first president), an Assembly of national parliamentarians and a Court of Justice, all based in Luxembourg. The guiding philosophy of the project was political; economically, its policies were a compromise between free-market ideas and interventionism, the reduction of internal trade barriers being offset by price harmonisation and the right to curtail production and imports.
Reluctant to compromise its sovereignty, the UK did not participate. Even among the members there was disagreement about the appropriate sharing of powers between the High Authority and national governments. The advent of the more comprehensive EEC, however, soon began to render the ECSC redundant; in 1967 the two Communities were substantially merged, many of their functions being consolidated in Brussels. Although the Treaty of Paris is still occasionally invoked for purposes of industrial restructuring, when it expires in 2002 it will doubtless be finally replaced by the Treaty of Rome.
The engine-room of the European Union, the European Commission in Brussels is at once its civil service and its government, sharing the latter role with the Council of Ministers. Its powers are immense. Under the Treaty of Rome it has 'its own power of decision' and may 'participate in the shaping of measures taken by the Council and by the European Parliament'. It has the sole right of initiative in legislating. It has the power to enforce the Common Agricultural Policy and competition policy. It negotiates treaties on behalf of the Union, evaluates candidate member states and draws up the Community's budget. It manages and dispenses the Community's external aid and internal structural funds. It is the guardian of the Treaties. Whether in its executive or its bureaucratic function, it dominates the EU's affairs.
In intergovernmental matters the Commission is less authoritative. But it has the right to be 'fully associated' with all developments in regard to the Common Foreign and Security Policy and Justice and Home Affairs Policy (no casual matter - each policy has its own department, headed by a commissioner). The president of the Commission attends international summit meetings on a par with heads of government. The smaller states attach great importance to this role, which they see as a safeguard against the weight of the larger countries.
The European Parliament has made repeated efforts to encroach upon the power of the Commission and has made some progress in that direction. In particular, it has the right to be consulted about the choice of president, to dismiss (or refuse to appoint) the commissioners en bloc and to decide certain matters jointly with the Council. The Commission, however, has retained de facto power virtually unchallenged, through its mastery of its briefs, its unique access to information and its proximity to decisions.
The Treaty of Rome enjoins strict independence on commissioners, who owe their duty only to the Commission. The president is chosen (for a four-year renewable term) by member governments, which in practice has meant by France and Germany, although this could change if, for example, the UK, Italy and Spain were to adopt a common candidate. The 20 commissioners are also nominated by member states (in their case for a five-year renewable term), their portfolios being allocated by the president, generally under pressure from the more powerful national governments. Currently, the five largest states (Germany, France, the UK, Italy and Spain) supply two commissioners each, but the approaching enlargement of the EU, combined with the provision that each country has the right to nominate one of its own nationals, will lead to the cancellation of this privilege (in compensation, the Council votes will be changed to give more weight to the countries with the biggest populations).
The Commission's portfolios are divided into departments, known as directorates (more accurately, directorates-general or DGs). Each commissioner is responsible for all or part of the work of each DG, assisted by the departmental head, or director-general, and a private office, or cabinet. Commissioners also take on miscellaneous other individual responsibilities, for example for translation or statistics. The overall administrative head of the Commission's 17,000 employees has the title secretary-general.
In 1999, faced with allegations of negligence, nepotism and maladministration, resulting in widespread unchallenged fraud, the Commission narrowly survived a censure motion by the European Parliament through collusion with the Parliament's Socialist group. Two months later, however, a devastating independent report judged the Commission to be collectively incompetent and unwilling to accept responsibility, whereupon the Commission resigned en bloc. The consequence of the scandal was to strengthen the relative power of the Parliament, but also to vest more authority in the president, on the grounds that he could hardly assume responsibility for the Commission without having greater influence over the running of its affairs and the selection of the key 'ministers'. The early period of Romano Prodi's term of office revealed him as a dedicated federalist, who was inclined to refer to the Commission as his 'government' and to the Eurocorps as the 'European army'. On the task of reforming the Commission, however, he was not entirely convincing.
The most influential of the Commission's ten presidents were indubitably its first, Walter Hallstein, who had led the West German negotiations over the Treaty of Paris in 1951 and the Treaty of Rome in 1957; and its last but two, the Frenchman Jacques Delors, who ushered in the Single European Act in 1986 and forced through the Maastricht Treaty in 1992. Both men were zealous integrationists, with strong characters and the backing of their own national governments (Delors also enjoyed the support of Germany's Chancellor Helmut Kohl). Both gained stature from being reappointed and were prepared to take on powerful political opponents - respectively Charles de Gaulle and Margaret Thatcher. And both were at heart technocrats more than democrats. Next to them, the president who made the greatest impact was perhaps Roy Jenkins (1977-81), who relaunched EMU in 1979 with the Exchange Rate Mechanism.
The European Coal and Steel Community, the European Economic Community and the European Atomic Energy Community. In 1967 the three Communities were effectively merged by being given a common Council of Ministers, a common Commission and soon afterwards a common budget. Technically still distinct, they became collectively known as the European Community.
The 1972 Act of Parliament which brought the UK into the European Community, thereby accepting the acquis communautaire, including the supremacy of Community law. (For a synopsis of British relations with the Community, see The UK and Europe.)
Technically, the EC is the collective term for the ECSC, Euratom and the European Economic Community (EEC) - the three 'European Communities' that constitute the 'first pillar' of the European Union (EU) and are governed by the Treaty establishing the European Community. The main features of the EC are the Common Agricultural Policy, EMU and the single market. In ordinary parlance, however, the EC and the EU are often confused or treated as interchangeable terms. The distinction between them lies in the fact that the Community refers to the activities that fall within the competence of the EU's supranational institutions, whereas the European Union includes also co-operative arrangements between the member states - the so-called 'intergovernmental pillars' created by the 1992 Maastricht Treaty.
There is no such thing as a European company, there being no uniformity of company law within the EU. This defect detracts from the single market, for example by impeding cross-border mergers. The Commission's first attempt to create a European Company Statute was made in 1975 but foundered on its proposal for a German-style two-tier board, with compulsory worker representation on the supervisory board. The Commission's emphasis on building the protection of workers' rights into a Europe-wide statute has been seen by some states as inimical to competitiveness and has ensured continuing opposition to the idea.
After World War II the United Nations adopted the Universal Declaration of Human Rights. Two years later, in 1950, the Council of Europe drew up its Convention for the Protection of Human Rights and Fundamental Freedoms (commonly known as the European Convention on Human Rights), and set up the Court of Human Rights. Signatories were obliged to recognise the Convention's principles but not necessarily to enact them into domestic law (the UK agreed to do so only in 1997).
The freedoms contained in the Convention are added to from time to time and are in the main uncontroversial. Nevertheless, the encroachment of the EU and the law into the field of social rights gives rise to concern that the judiciary may become politicised as the concept of rights is expanded to include a growing number of contentious entitlements. Another consequence is that the European Court of Justice may parallel the Court of Human Rights as the tribunal of last resort. The degree of overlap between the two courts' spheres is illustrated by the fact that the Amsterdam and Maastricht Treaties (including the Social Chapter) not only recite the Convention as establishing principles of Community law but also recognise, or pave the way for, such entitlements as the right to 'employee-employer dialogue', 'equality between the sexes' and 'freedom from exclusion'. Whether these are properly classed as fundamental human rights, and how they should be interpreted and applied, is far from clear.
The Treaty of Amsterdam went so far as to permit the European Council to suspend the voting rights of a member state found guilty of breaching the Treaty's 'fundamental principles'. This gave rise to lively debate when Jorg Haider's Freedom Party entered the Austrian government. While the Commission could point to no specific contravention, and therefore took no action, the other member states treated some of Haider's extremist speeches as grounds for a diplomatic boycott. Neutral observers noted that some of the boycotting governments were kept in power by communists and that it would scarcely be possible to form a right-of-centre government in Italy without the support of parties that could be described as neo-fascist by their opponents. The prospect of an outright conflict between democratic legitimacy and political acceptability was alarming.
In external relations, pragmatism towards human rights issues on the part of the larger member states has generally been the order of the day. A blind eye is turned to abuses committed by powerful countries with export potential, such as China. The EU itself, however, and particularly the European Parliament, has sought to raise the profile of these issues, refusing membership and blocking Association Agreements where applicant states fail to abide by the Convention. In the late 1960s Spain, Portugal and Greece had been affected by this stipulation, as in the late 1990s were Turkey and Slovakia.
The European Council (not to be confused with the Council of Ministers) refers to the twice-yearly, or occasionally more frequent, summit meetings of EU heads of government (plus the directly elected presidents of France and Finland) and the president of the Commission. It is not an official EU institution. Although there had previously been occasional summit meetings, these were not put on a regular footing until 1974. Since then, the European Council has evolved into the EU's ultimate decision-taking body, resolving problems that have proved intractable at lower levels and serving as the arbiter, and sometimes the engine, of the political and constitutional agenda.
The meetings, which are also attended by foreign ministers and one Commission vice-president (and, when appropriate, by finance ministers), are intended to be small, grand and informal, in settings which encourage the formulation of strategy and facilitate the bartering of treasured national objectives. The decisions of the European Council are normally expressed as Conclusions or Declarations, having no status in law but creating the framework for Community legislation or common action among the member states. The European Council has been responsible for launching or approving virtually every significant European policy since its inauguration, including the Single European Act, the Treaties of Maastricht and Amsterdam, the reunification of Germany, the accession of new states, the selection of countries for the single currency and the co-ordination of foreign policy and defence. With their red carpets and motorcades, and with the media in close attendance, the meetings offer irresistible opportunities for eye-catching initiatives and contribute by their very existence to the momentum of European integration.
The term 'European Court' is used indiscriminately to refer to two quite distinct courts, the European Court of Human Rights and the European Court of Justice, each of which has its separate entry in this encyclopedia.
The Court of Human Rights in Strasbourg is an adjunct of the Council of Europe and is unrelated to the European Court of Justice (ECJ) in Luxembourg, although both are colloquially known as the European Court. The Court, which accepts a case only when national remedies have been exhausted and has no independent powers of enforcement, decides about 25 cases a year, the whole process, including the determination of admissibility, taking five years or more. The Court's jurisdiction is limited to states which have signed up to the European Convention on Human Rights. The Treaty of Amsterdam recognised the Convention as establishing principles of Community law but added other social entitlements, with the result that the ECJ also has jurisdiction in this often subjective (and politically sensitive) area.
The ECJ in Luxembourg is the highest court of the EU. There is no appeal from its rulings. Where Community law conflicts with national law it outranks the domestic supreme court, superseding, for example, Parliament and the House of Lords as the ultimate legal authority in England and Scotland.
The ECJ was one of the first Community institutions, being set up by the Treaty of Paris in 1951 and enjoined by the Treaty of Rome in 1957 to ensure the legal observance of all the European Treaties. Its judges, one from each member state, sit in panels, delivering only collegiate judgments (dissenting judgments, if any, are not published). Cases are summarised by an advocate general in a reasoned submission, which the judges consider together with the written arguments of the parties to the action. The ECJ deals principally with failures of omission, for example failure by member states or Community institutions to meet their Treaty obligations. It also has powers of judicial review and hands down 'preliminary rulings' to national courts where questions of possible conflict of law arise. Competition policy, staff disputes and certain other cases are delegated to the lower Court of First Instance.
Over the years the ECJ has taken every opportunity to extend its scope. As early as 1960 it described its ultimate rationale (ultima ratio) as being to enable 'the Community interests enshrined in the Treaty to prevail over the inertia and resistance of Member States'. In landmark judgments of 1963 (Van Gend en Loos) and 1964 (Costa v. Enel) the ECJ asserted its right to intervene directly in domestic cases and to strike down domestic law, thereby enabling it to turn the 'preliminary ruling' into an instrument for obliging national courts to follow (and enforce) the Court's interpretation of European law. The Court attaches great significance to the underlying objectives of the Treaties, as expressed in their preambles, with their theme of 'ever closer union'. It prefers to base its interpretations on the purpose of legislation rather than the literal text, and does not shrink from reading new integrationist meanings into the Treaties. This subordination of jurisprudence to a political end has earned the ECJ considerable odium (some of which would doubtless be more properly directed against the Treaties), especially in Denmark, Sweden, France and the UK. The progressive extension of European legislation into the domestic arena has even given rise to criticism in Germany.
Those who value national sovereignty and self-government object not only to the supremacy of Community law and the expansionism of the ECJ, but also to the lack of a democratic framework for the judicial system. Neither the law-making of the EU nor its constitutional underpinning is legitimised by an elective process. That the Court construes its principal function as the advancement of unification is at odds with the Anglo-Saxon concept of the law as a bastion of protection against over-mighty authority, including the authority of the government. Where the main component of the 'government' is a bureaucracy with the same political agenda as the supreme court, as is the case in the EU, this is a troubling feature.
It is often argued that the EU is in transition and must eventually develop into a democracy. Nevertheless, in the context of the ECJ, there are crucial questions to be answered. Where would be the checks and balances if the Court were to exceed its lawful powers? Could it in the last resort deprive a country of its independence by setting aside an Act purporting to revoke membership of the EU? Given the reliance of English courts on precedent, the concern of some British libertarians is that the ECJ might one day successfully rule that Parliament's authority had so ebbed away as to have become irreversibly subordinate to that of the EU. Even a written constitution may no longer afford member states a guarantee of independence, since the 1997 Treaty of Amsterdam appears to have set Community law above national constitutions.
The EDC was the first major failure of the federal cause in Europe. By 1950 the Cold War was under way and the Korean War had just broken out. The UK and the USA wanted German rearmament, while the six members of the soon-to-be-created European Coal and Steel Community (ECSC), spiritually led by Jean Monnet, wanted a European army with mixed nationality units, as a prelude to a wider economic and political unity. The project fell apart in 1954 when the French assembly, to the strains of the 'Marseillaise', rejected the EDC Treaty, which had been in abeyance since its signature in 1952. The effects of the collapse of the EDC were rapid and far-reaching. In 1954 Germany joined NATO and in 1955 Monnet retired from the presidency of the ECSC to devote himself to lobbying for a United States of Europe, playing an influential role in the events which led up to the Treaty of Rome in 1957. It would not be until the late 1990s that military independence would reappear on the European agenda. (See also WEU.)
The EEA Treaty was signed in 1992. It initially comprised the EU member states plus the EFTA countries of Austria, Finland, Iceland, Liechtenstein, Norway, Sweden and Switzerland. The Swiss, however, rejected the Treaty in a referendum, so that the EEA did not come into being until 1994. The Treaty was prompted by the entry into force of the single market and was designed to create a Europe-wide free-trade zone - albeit on terms dictated by the EU.
The essence of the arrangements is that the EFTA countries accept the acquis communautaire and are bound by Community legislation, over which they have no influence. These features are often said to demonstrate the futility of the EFTA position, highlighted by the defection of Austria, Finland and Sweden to the EU in 1995, following the end of the Cold War. Membership of the EEA does not, however, commit the signatories to the Common Foreign and Security Policy, to co-operation in Justice and Home Affairs, to EMU, to the Common Agricultural Policy or to the Common Fisheries Policy. Moreover, the institutions of the EEA, including the EFTA Court, are expressly stated to lack the sovereign authority claimed by the institutions of the EU. Thus most of the areas which define national independence remain within the competence of the three EEA states (Iceland, Liechtenstein and Norway) that have elected not to join the EU. At the same time they escape the most intrusive and costly of the EU's policies - altogether perhaps a better bargain than the EU would care to admit for surrendering a say in the framing of single market legislation.
The original term under the 1957 Treaty of Rome to describe the Common Market. The EEC later merged with Euratom and the European Coal and Steel Community to become the European Community (or European Communities).
In the absence of a European company law, companies co-operate across European borders either under national law or within the loose framework of a 'European Economic Interest Grouping'. The best-known example is Airbus Industrie, a French, British, German and Spanish collaborative venture. A major weakness in the structure is the lack of a central decision-making body or a unified set of financial accounts.
A translation of the French term for the combination of the European Free Trade Association and the European Economic Community, or what became the European Economic Area, the phrase has degenerated into a vague expression, faintly suggesting an assertive Fortress Europe.
Originally the flag of the Council of Europe, the symbol of 12 gold stars on a blue background was adopted by the Commission in 1985 and is widely used as a means of promoting the European identity. Although there happened to be 12 member states at the time, the significance of the number lies elsewhere and is embedded in European Christian civilisation - thus the Virgin Mary's halo is traditionally a circle of 12 gold stars; and there are 12 signs of the zodiac, 12 apostles and 12 months in the Western year.
The 'European idea' is evocative, suggesting both a certain view of history and a manifest European destiny. It is invariably presented in terms of progress towards an end, yet the destination is either unknown or contested. Unlike the USA, the EU has never openly debated its fundamental differences and resolved them into an agreed constitution, with universally accepted aims and democratic checks and balances. Its guiding principle, laid out in the Treaty of Rome, is 'ever closer union between the peoples of Europe' - but the words are capable of many meanings.
Some of the mainsprings of Europeanism are cultural, even imperial. Others are more characteristic of a commercial trading league. It acknowledges its ancient origins in the empires of Rome, Charlemagne and Napoleon, which left their mark in common elements of law, language, architecture and Christianity. But this self-image ignores many inconvenient facts. The Roman empire was both more southern and more eastern than Europe's present centre of gravity: it incorporated parts of Africa and the Middle East, left northern Europe untouched and in its later years took Constantinople as its capital. Spain was for centuries dominated by the Moors and eastern Europe by the Ottomans. Indeed, the eastern boundaries are so unclear as to make it impossible to say where Europe ends and Asia begins. As for Christendom, it was not especially European and was as often a source of schism as of unity.
The Germans want the Union to stop them from falling into Nazi ways. The French want to be cured of an inferiority complex. The Italians want to become a nation. The Spaniards want to bury Franco ... I sometimes think that the Common Market should have been founded not in Rome but in Vienna, on Dr Freud's couch. Dr Pedro Schwartz, Spanish economist, 1996
The modern view of Europe began to take shape in the 18th and 19th centuries, which saw the Enlightenment, the industrial revolution and a number of imaginative theoretical schemes for resolving cross-border European disputes and encouraging trade. In the 20th century, Germany at the height of its military power twice drew up comprehensive blueprints for a post-war European order. At the beginning of World War I, the proposal was for a Mitteleuropa with Germany at its centre - a customs union from France to the Russian frontier, to be named the United States of Europe. And in World War II, planners in Berlin and in Vichy France conceived a European Economic Area, with a single currency, a single market and a common external tariff.
In each of these wartime cases, the plans for integration were those of a nation expecting conquest. A number of observers have pointed out their similarity to the EU's present structure: and it is true that to German militarists the word 'Europe' was a mere cloak for domination. Yet parallel concepts were equally in circulation among idealists and among the victims of aggression. In the inter-war years, the ineffectiveness of the League of Nations led many to conclude that some form of European federation was necessary to avert another conflict - the depression of the 1930s and the rise of fascist nationalism giving a socialist tinge to much of their thinking (and adding considerably to the appeal of communism).
The Western victors of World War II in Europe combined force of arms with altruistic intentions, but faced a new danger in the rise of Soviet power. This external threat required a military shield, which NATO would provide. It also required a concerted political response, to prevent countries weakened by war from being picked off separately in a series of communist coups. Winston Churchill's Zurich speech in 1946 calling for Franco-German reconciliation and 'a kind of United States of Europe' reverberated round the world and set in train the European Movement and the Council of Europe. But in reality Europeanism was to evolve along very different lines from those envisaged by Britain.
Chief among those to take up Churchill's challenge was the French internationalist Jean Monnet, who seized the moment to turn into practice ideas he had long been brewing. His strategy was to move forward sector by sector, pushing integration wherever the opportunity arose: first coal and steel, next (or so he hoped) a European army, then agriculture and atomic energy, later a common market and a single currency. Each step would necessitate - and legitimise - some form of supranational control. The machinery was perforce bureaucratic, the overt aims limited and functional, the underlying vision vastly ambitious - no less than the creation of a new country called Europe.
The missing element in Monnet's grand scheme was democracy. This was deliberate. The concept of democracy had become discredited between the wars. It had failed to deter either dictatorships or economic collapse. In the eyes of the élites something better was needed and the approach of Monnet and his disciples was Platonic in its utopianism. In Plato's Republic, the just state is directed by wise 'guardians', who secure the assent of the people through myth-making - the 'noble lie'. In the new Europe, the wise Commission would be the 'guardian of the Treaties' and myth-making would play a conscious role. It was taken as axiomatic that the member states would rarely agree on a common cause unless the majority could impose its will or a supranational institution (the Commission, say, or the Court of Justice) could overrule individual governments. True, national politicians constituted the Council of Ministers, officially the supreme decision-making body: but they had no right to initiate legislation and the policy options for their secret deliberations were drafted by the Commission. It was a far cry from the 'High Contracting Parties' of the Treaty on European Union to the American Constitution's simple 'we, the people'.
Another reason to sideline democracy was that it was attached to nationhood, which Continental idealists despaired of as little more than an instrument of discord, dominance, or at worst war. The small Benelux countries were natural Europeanists. In the brave new federalist world they would have disproportionate voting rights and their most belligerent neighbour would be tamed by supranational control of the raw materials of war (in later years, Austria, Finland and Ireland would also be attracted by the prospect of escaping from the shadow of larger neighbours). But the backing of the great powers was essential if integration was to go beyond the planning stage, and four of these strongly favoured European federalism: the USA to contain Soviet expansion (besides, it was flattering to be imitated); France to neutralise her conqueror and win prospects of leadership undreamed of since Napoleon; and Germany and Italy because this was the route back to acceptance in the international community. Spain, Portugal and Greece would have no say until they had shed their own authoritarian rulers: once they had achieved democracy, they knew how fragile it could be and were happy to anchor it in a wider Europe. 'Peace' joined 'historical inevitability' as mythic watchwords of the emergent Community.
The Scandinavian countries, Switzerland and Britain saw things differently. It was striking that these countries were both more Protestant and more experienced in democracy than most of the six founding members of the EEC. They were not ashamed of nationhood. Britain saw NATO as the external safeguard of peace, national democracy as the internal safeguard. It favoured voluntary co-operation in Europe ('intergovernmentalism') rather than federalism. But then, Britain's heart was only partially in Europe. Its destiny was at least equally bound up in the English-speaking world. In one of the most ironic episodes of post-war history, de Gaulle, who had previously vetoed Britain from the Community on the grounds that it was too Atlanticist for Gallic tastes, took fright at the accelerating pace of European integration and suggested privately to the British ambassador in 1969 a dramatic change of direction - a 'Europe des patries', in which all significant power would reside in the individual member states, led by France, Britain, Germany and Italy. This concept came closer to expressing Britain's vision for Europe than any proposal before or since, but in the event the opportunity was missed, never to recur. It would, of course, have been violently resisted by the integrationists.
De Gaulle's relationship to Europe's central themes was ambivalent. He was strongly opposed to federation, yet he was jealous of the USA and relished the idea of creating a competing European superpower - provided that it was spiritually French. Like many of his countrymen he was mercantilist and somewhat mistrustful of free trade. Profoundly allergic to any infringement of French sovereignty, he used his veto so vigorously against the Commission that the process of European integration stalled for years even after his death in 1970. Paradoxically, it was Margaret Thatcher, that other fierce enemy of supranationalism, who helped to put integration back on its feet by championing the single market in the 1980s and so opening the way to an increase in the role of majority voting and a corresponding reduction in the veto powers of the member states.
As the Community grew, its hold on the people's affections waned. Opinion polls showed a sense of popular alienation. The turnout fell in each successive European election. Maladministration became so endemic that in 1999 the Commissioners were forced to resign en bloc. A mountain of regulation accumulated. The institutional structure of what was now the 'EU' was comprehensible only to experts. There was an obvious need for change if more countries were to join an already too cumbersome system, but no consensus what that change should be. Should the small countries still command disproportionate votes? Should the powers of the member states be further eroded by enlarging the scope of majority voting and allowing the EU to enter the fields of defence and foreign policy? In short, should a further step be taken towards building a United States of Europe, or had the process reached its natural limit? Clarity of vision existed at both ends of the spectrum: Britain and the Nordic countries considered that integration had gone far enough (as did many ordinary citizens throughout the Continent), while the arch-federalists considered that the day of the nation state was over. The intermediate ground was obscure, sometimes deliberately so.
The diminution of democracy by the progressive transfer of authority from the member states to the Community had gone largely unnoticed as long as it mainly concerned the administration of agriculture and subsidies. But by the time that Economic and Monetary Union was introduced in 1999 (Britain and Denmark reserving the right to opt out), the powers of the Community were extensive and the 'democratic deficit' was looming larger. There were two theories how to correct it. The role of elected politicians could be increased through the Council of Ministers, or democracy could be strengthened in the Community itself. The first alternative would reflect the fact that national democracy best conveyed to ordinary people a sense of genuine representation (especially in Britain and the Nordic countries): but it would be a throwback to de Gaulle and Thatcher. The second alternative lacked a credible blueprint. The Italian Alticro Spinelli had advocated in the mid-1980s that the European Parliament should be given greater influence and charged with drawing up a European constitution. But the suggestion had been watered down beyond recognition. There was talk of an elected Commission, or of turning the Council into a sort of senate - everybody had an idea, and every idea had to dovetail into the other reforms needed to accommodate the EU's enlargement. In the absence of any core of agreed principles, 'peace', 'inevitability' and 'ever closer union' were far too vague to serve as a guiding star.
The European idea, then, turns out to be elusive. Apologists put this down to the uniqueness of the EU's mission, which they describe as an unfinished experiment. Critics argue that it is fundamentally self-contradictory that the EU should comprise 15 democracies (soon to be 25 or more) without itself being democratic, and that any attempted remedy must fail, since there could be no true sense of identity between governed and government in a Community of 500 million citizens, with over 20 languages and a like number of ancient cultures rooted in Latin, Germanic, Anglo-Saxon, Nordic, Slavic, Islamic or other traditions.
As long as memories of the war were fresh, Europe's mission had seemed clear. A tight-knit Community of six countries faced a common threat in the Soviet Union and was given the elixir of rapidly rising prosperity through the elimination of internal tariff barriers. By the millennium, however, all these unifying features had evaporated. The desire for a new purpose was revealed in cliché - Europe was an 'economic giant but a political pygmy', which 'must assert itself on the international stage'. Such rhetoric papered over the uncomfortable truth that the would-be common European foreign policy could not succeed in the absence of shared attitudes to NATO and to problem areas like the Middle East and the Balkans: and that it takes more than a majority vote in the Council of Ministers to inspire a soldier to face battle.
As this book goes to press, the supranational vision of Monnet and Jacques Delors is still in the ascendancy, underpinned by the supremacy of Community law over national laws and by the doctrine of the acquis communautaire, which ratchets up integration by locking in all previous centralising measures. But it is not evident that this process can continue indefinitely without the full-hearted support of the people. Moreover, there are new agents of change at work. Some of the zealots, such as Helmut Kohl and Delors, have departed the scene, to be succeeded by pragmatists such as Tony Blair and Gerhard Schroder. Enlargement will weaken any remaining sense of homogeneity; and the 'information revolution' is making regional trading blocs obsolete.
In its years of creation, the European idea commanded passion and conviction. Today the machine is operational but the mood outside the inner circle seldom rises above resigned acquiescence. Perhaps this is the natural consequence of maturity. Or perhaps Europe has outgrown itself, losing its soul in the process and acquiring too much diversity to be reconciled within a single philosophy. Either way, a defining constitutional congress was beginning to appear overdue, in which the demarcation lines and competing claims of national independence and federal centralism would finally be brought to a conclusion. (See also Preface and Founding Fathers.)
The European identity as a political goal had been inherent from the early post-war years in the thinking of Jean Monnet, Walter Hallstein and others. It was first set out formally at a summit meeting of heads of government in 1973, shortly after the UK's accession. It envisaged a Union open to other European countries, with a common market, common institutions and a common policy in relation to third countries. It thus contained many of the central themes later enshrined in the Single European Act of 1986, the Maastricht Treaty of 1992 and the 1997 Treaty of Amsterdam. The phrase sometimes contains a faintly imperialistic tone, as in the Maastricht Treaty's objective that the EU should 'assert its identity on the international scene'.
In ordinary life, the European identity has come to be associated with the various emblems and symbols by which the Commission has sought to influence people with a view to persuading them of the appeal (and the inevitability) of a federal Europe. These include the European anthem, the European passport, the European driving licence, European citizenship, twinning, the European flag and the ubiquitous 12 stars displayed on every project part-funded by the EU: and, above all, the single currency.
With its headquarters in Luxembourg, the EIB was established in 1958 under the Treaty of Rome as the Community's long-term lending arm. Often operating alongside the structural funds, or in partnership with other official lenders or the private sector, the EIB focuses on cross-border projects and on capital investments in less prosperous regions, especially in the fields of communications, the environment, energy and the encouragement of SMEs. Of its annual loan programme of some 630 billion, a little less than 90% is within the EU, the balance going to Eastern Europe, the Arab Mediterranean states and the African, Caribbean and Pacific countries participating in the Lomé Convention. The EIB operates on slim margins, its low lending rates reflecting its own ability to borrow on fine terms owing to its AAA credit rating. The Bank's capital was increased in 1999 to 6100 billion, of which 6% is paid up; the uncalled capital represents a claim on the shareholders (the EU's 15 member states) and is the foundation of the EIB's standing as a borrower. The Bank's total loans and guarantees, most of which are in the last resort guaranteed by the Community budget, are limited by statute to a ceiling of 25% of its capital. Since the launch of the single currency, the Bank has actively promoted its use in financial markets by borrowing in euro-denominated instruments.
After the murky waters of the Community's accounts, the clean audit and transparent presentation of the EIB's numbers and activities come as a relief. The ultimate authority in the Bank rests with the Board of Governors, which consists of one minister (normally the finance minister) from each shareholder. A 25-strong Board of Directors takes lending and borrowing decisions and a professional Management Committee (the bank's president and seven vice-presidents) runs the organisation operationally.
See Community law.
The 'European model of society' is largely a fiction, since there is no homogeneous pattern of social organisation within the EU. The concept, strongly promoted by former Commission president Jacques Delors and still well regarded in modern France, is of a 'just society', in which the unbridled 'jungle capitalism' of the USA (and to a lesser extent the UK) is not altogether rejected but is tempered by interventionist social policy and redistribution of wealth. Free market thinkers, pointing to the USA's success in creating jobs and growth, regard the European model less as the solution than as the cause of economic dysfunction.
Established in Frankfurt in 1994, the EMI was designed under the Maastricht Treaty to be the precursor to the European Central Bank (ECB). It was charged with managing the European Monetary System, co-ordinating monetary policy among member states and preparing for the single currency. Its ruling Council consisted of the governors of the central banks of all the EU member states. In 1998 it was replaced by the ECB in the run-up to the launch of the euro on 1 January 1999.
After the collapse of previous attempts at currency union in Europe, Roy Jenkins launched the EMS in his first year as president of the Commission in 1977. It came into force in 1979, accompanied by the customary fanfare of forecasts of lasting growth with stability, a progressive return to full employment and other desirable objectives. The two components of the EMS were the ECU (the embryonic single currency) and the Exchange Rate Mechanism (ERM), a revised system of fixed but adjustable exchange rates. All the EU member states participated in the EMS and the ECU, but membership of the ERM was neither mandatory nor universal. The launch of the euro in 1999 rendered the EMS obsolete, replacing both the ECU and the ERM with a regime of irrevocably fixed exchange rates, leading by 2002 to the issue of euro notes and coin and the abolition of national currencies. (See also EMU and Exchange Rate Mechanism.)
Founded in the flush of post-war enthusiasm, the European Movement, with Winston Churchill, Prime Minister Alcide de Gasperi of Italy and Paul-Henri Spaak of Belgium among its honorary presidents, organised the Congress of Europe in 1948, which led to the establishment of the Council of Europe in 1949. The European Movement has remained in existence as an all-party Europe-wide pressure group for integration, albeit with limited funds and dwindling influence.
The European Parliament's intended purpose is to supply some democratic legitimacy to the proceedings of the EU, against a background of the progressive transfer of powers from national elected governments to Brussels. In this it is, however, hampered by its poor credibility.
The EP's ineffectiveness arises from many causes. Its headquarters are in Strasbourg, but it also meets in Brussels, while its library and two-thirds of its staff are in Luxembourg (squabbles over its location persisted for 40 years and the resultant unworkable compromise was the product of horse-trading). With its expensive buildings (over $1 billion in Brussels, $500 million in Strasbourg) and its caravanserai of translators and documents, it is an immensely costly operation. It is also hard to understand. Even to well-informed observers, the party lists and voting systems of elections in other EU countries are unfamiliar, as are the political groups in the Parliament, with their obscure initials (PES, EPP, ELDR, UEL, EDA and so forth) and their lack of party discipline or coherent political platforms. With an average of 600,000 EU citizens per MEP, there is little sense of meaningful representation. European elections in most countries are consequently decided on domestic issues. The turnout, despite compulsory voting in Belgium, Greece and Luxembourg (and near compulsory voting in Italy), is low and has fallen at every election.
The reasons for voter apathy are not far to seek. The EP has no power to initiate legislation. Consequently, there are no opposition parties and the proceedings are tame. Votes are taken at fixed times and there is no record of how individual MEPs voted unless a vote is taken, as occasionally happens, by electronic means. The subject-matter consists mainly of committee reports, presented by rapporteurs, or the receipt of statements from the Commission or the Council of Ministers. The debates are dominated by unelected commissioners and by the Parliament's political groups, which have precedence in the nomination of speakers. Absenteeism is so rife that the president often lets voting carry on without a quorum (even on the crucial Maastricht Treaty debate, nearly 40% of the MEPs failed to attend). The extravagance of the MEPs is a byword. With travel expenses, attendance pay and office allowances, they can add considerably to their basic salary.
The Parliament started as the ECSC's Assembly in 1951, its members being nominated from sitting national parliamentarians. Its first direct elections (for five-year terms) were held in 1979. For a while, under the leadership of Altiero Spinelli, the EP attempted to build on its new elective status to assert itself, drafting a federalising treaty that would have diminished the role of national governments, rejecting the Community budget and inviting heads of state to address it. Finding, however, that scant attention was paid to its Opinions and the deliberations of its numerous committees, it lowered its sights. More recently, it has started to recover its confidence,. Its powers have steadily grown in number and are no longer as token as they once were. It has the right to be informed about international negotiations and to be consulted on legislation and on key appointments. The Single European Act of 1986 gave it the power to block the accession of a new state and to amend or defer legislative proposals. Its main weapon is co-decision, brought in by the Maastricht Treaty in 1992, the effect of which is to put the Parliament almost on a par with the Council of Ministers in agreeing legislation in selected areas. This right was extended by the 1997 Treaty of Amsterdam to 27 new fields, including employment and social policy, so that it now covers most of the single market. By contrast, the EP has virtually no say in the Common Agricultural Policy, competition policy, EMU or foreign and security policy.
MEPs may ask questions of the Commission and the Council; they may sue either of these institutions for failure to act, receive petitions from citizens and set up committees of inquiry into maladministration. The EP's most draconian power is to sack the entire Commission by a censure motion carried by a two-thirds majority, though since the Commission serves in practice as the Parliament's government this was long considered only a theoretical right. The Parliament also has certain limited financial powers, of which the most significant is its right to reject the budget. Since, however, it is excluded from revenue-raising and so-called 'compulsory expenditure' (that is, the bulk of the budget), this amounts in reality to little more than the right to delay and to seek some redistribution of planned spending.
Although the Parliament's ambitions are limited by the fact that it has to compete for authority with the Commission, the Council of Ministers and national governments, the fact that it has gained ground despite its shortcomings reflects Europe-wide concern at the 'democratic deficit'. Italy and Germany see in it the best hope of an eventual federal democracy. The UK, often in agreement with France, generally opposes any wide extension of its powers, seeing democratic legitimacy as stemming from national elections in which issues are put to the people in their own language by politicians known to them. Nevertheless, the probability is that the Parliament will continue inching its way forward, without achieving the radical breakthrough that could only come from a complete overhaul of the EU's institutional structure. (See Appendix 3.)
The so-called European passport, with its European Community heading and its burgundy-coloured cover, is actually a national passport in a common form. It was introduced in 1985, after lengthy arguments about its design and content, and is meant to reinforce the European identity by symbolising citizenship of the Union.
A convention allowing inventors to obtain patent protection in 18 European countries by filing a single application, processed by the European Patent Office in Munich.
In the early 1950s ministers from the six member states of the European Coal and Steel Community drafted a constitution for a new form of democratic government to control the planned European Defence Community. The proposals were ambitious. There would be a two-chamber Parliament (the lower chamber directly elected, the Senate elected by national parliaments), a powerful appointed Executive Council, an advisory Council of National Ministers and a Court of Justice. This so-called European Political Community (EPC) would be able to levy taxes and would establish a Common Market. The collapse of the European Defence Community, voted down by France in 1954, led to the EPC being permanently shelved. Four years later the far more cautious Treaty of Rome inaugurated the European Economic Community and the long process leading to the European Union.
The predecessor to the Common Foreign and Security Policy, EPC never progressed beyond rhetoric.
See Political groups.
See Structural funds.
The ERT is a group of influential industrialists which lobbies top policy-makers privately and produces strategic papers on competitiveness and other European business issues.
The European Social Charter is a Council of Europe (not an EU) statement of workers' rights. As such it is unenforceable, unlike the confusingly similar Social Charter of the EC, which found legal form in the Social Chapter of the Maastricht Treaty.
See Structural funds.
See 'European model'.
Based in Paris, the ESA is not an EU body although it co-operates closely with the Commission. It is financed by its 15 European sponsoring states, including Switzerland, supplemented by commercial revenue from satellites launched by Ariane.
The ESCB, nicknamed the Eurofed by analogy with the US Federal Reserve system, consists of the European Central Bank (ECB) and the national central banks of the EU member states participating in the single currency. Each national central bank supplies a member of the ECB's Governing Council. Collectively, they use their knowledge of markets and their links with traders to advise the ECB and to execute its monetary and foreign exchange policy. They also make available to it by way of reserves up to 650 billion in gold and foreign exchange (the UK is exempted from this obligation through its opt-out from Stage Three of EMU). In case of need, all the reserves of the single currency participants are callable by the ECB through the ESCB network.
The principal trade union lobby group in Brussels.
Although 'European Union' was a term frequently used to signal the aspiration of a legitimate European political entity, it first found expression in a treaty in the preamble to the Single European Act of 1986. The present EU was created in 1992 by the Maastricht Treaty and denotes the supranational institutions of the European Community together with the 'pillars' of intergovernmental co-operation between member states. In 1997, a proposal to make the EU a legal entity in the Treaty of Amsterdam was rejected.
Founded in Florence in 1976, the Institute offers postgraduate courses in history and civilisation, economics, law and political and social sciences. The EC's archives are kept at the Institute, which is financed by the EU's member states.
A convinced supporter of the objectives and methods of the European Union.
One who distrusts all the objectives and methods of the European Union, perhaps from xenophobic motives. Also used by Europhiles as a term of disparagement for Eurosceptics.
Europol, the EU's embryonic FBI, was foreshadowed in the 1992 Maastricht Treaty, which provided for police co-operation between member states to combat terrorism, drug trafficking and other international crime. The Europol Convention was not, however, agreed until 1995 and by 2000 only a few member states had signed it. Pending wider ratification, Europol's activities are limited to exchanges of information and a certain amount of investigation through a staff of national police officers attached to its office in The Hague. Although the 1997 Treaty of Amsterdam attempted to promote Europol by bringing certain police work under the sway of the EU, home affairs remain for the time being mostly in the intergovernmental domain. France has not been alone in raising the alarm over the prospect of ceding control of its national police force, which appeared to be the logical outcome of former Chancellor Helmut Kohl's vision of Europol as 'central to the development of the EU's security policy'. In the UK, the focus of anxiety has been on keeping away from the jurisdiction of the European Court of Justice and on the protection of the citizen against summary arrest and detention, an area where the country enjoys a tradition of civil liberty not universally reflected elsewhere. Against the background of these concerns, Europol's development has so far been slow and tortuous. (See also Corpus Juris.)
One who casts an inquiring, sceptical eye on the project of European integration and especially on EMU. Eurosceptics sometimes describe themselves as Eurorealists, to escape the false charge of Europhobia.
A high-flown, ambiguous or obscurantist mode of expression used by Eurocrats to mask or put a gloss on their objectives. Eurospeak also tends towards political correctness and officialese. The Maastricht Treaty's unrelieved Eurospeak disgusted even Commission President Jacques Delors, who was not to know that the Treaty of Amsterdam would be no better.
The Commission's statistics office, with responsibility for compiling the figures (often neither comparable nor reliable) supplied by member states.
The rail tunnel linking the UK to France, jointly owned by twinned French and British companies, whose debt finally escalated to £8.5 billion, obliterating shareholders' equity but not preventing the completion of a project first started by Napoleon.
The committee of finance ministers of countries adopting the single currency (X stands for the number of participants - eleven in 2000). In 1998 Euro-X fell into controversy before it came into being. France wanted it to act as a counterweight to the European Central Bank, a concept opposed by Germany, and the UK unsuccessfully demanded a seat on it, fearing that it might usurp the role of Ecofin. By 2000 the French view was prevailing and the committee was being promoted as 'the economic government of Europe'.
Those EU member states which have adopted the euro as their currency. Otherwise known as euroland.
The 'convergence' criteria established by the 1992 Maastricht Treaty limited member states to an annual excess of government expenditure over revenue of 3% of GDP and a cumulative government debt of 60% of GDP. In evaluating a country's performance, the Council of Ministers can make special allowance for a severe recession and can take into account trends as well as absolute figures - a necessary concession, given that Italy and Belgium both have government indebtedness of over 120% of GDP. All member states are required to conform to the limits, but those which participate in the single currency are also bound by the Stability and Growth Pact, which imposes sanctions and fines on countries with excessive deficits or debts. (See also Stability and Growth Pact.)
The ERM was the central feature of the European Monetary System (EMS), the two terms soon becoming almost interchangeable in common usage. It was introduced in 1979 at the initiative of the Commission president, Roy Jenkins, as a renewed attempt to create a zone of currency stability in Europe - long seen by integrationists not only as an end in itself, but also as a step towards ultimate political unification. Two previous attempts (the 'Snake' and the 'Snake in the Tunnel') had ended in failure, but the collapse of the dollar-based Bretton Woods system in the early 1970s had left many Europeans with the conviction that the EC should take its monetary destiny into its own hands.
The original participants in the ERM were the Benelux currencies, the French franc, the D-Mark, the guilder, the lira, the Danish krone and the Irish pound. Of the then member states of the EC, the UK alone did not initially participate; nor did Greece when it joined the Community in 1981. The Spanish peseta entered the ERM in 1989 and the Portuguese escudo in 1992, respectively three and six years after the accession of Spain and Portugal. The pound sterling finally joined the ERM in October 1990, after nearly a decade of political controversy in which Prime Minister Margaret Thatcher became isolated from some of her senior cabinet colleagues, who considered that the UK's detachment was lessening its influence in the Community.
The mechanics of the ERM provided that the participating currencies were given a central exchange rate against the ECU, from which they derived central cross-rates against each other. Each currency was allowed a limited degree of deviation from these rates. If a currency threatened to approach its upper or lower limit, central banks would intervene and corrective domestic measures would be taken, such as the adjustment of interest rates. But if a fundamental imbalance emerged in a currency's parity, a realignment could be negotiated through Ecofin. The permitted fluctuation was not identical for each currency. The majority (many of them natural members of the D-Mark bloc) were given a narrow band margin of 2.25% on either side of their central rates, whereas the peseta, the pound and the escudo were allowed a broad band of 6%. The purpose of the wider margin for these currencies was to provide more flexibility and so to deter speculation.
The UK's entry to the ERM came at a particularly unfortunate time. The country was in a recession, which called for an accommodating domestic monetary stance; but the Bundesbank, having been commanded to supply D-Marks on an inflated one-for-one basis in exchange for Ostmarks so as to ease German reunification, was compensating with a tight monetary policy. To stay within its ERM band, the UK had to raise interest rates, thereby deepening its recession. There was no easy escape through realignment. The Commission president, Jacques Delors, was preparing the ground for the Maastricht Treaty and full-blown economic and monetary union. As a result the ERM was changing in character from a fixed but flexible system into a rigid straitjacket.
In September 1992 massive currency speculation broke apart the ERM. The peseta was devalued by 5% and the pound sterling and the lira were both driven out of the system. There was, at the time, widespread recrimination. Thatcher had been ousted. Her successor, John Major, had made membership of the ERM a central plank of his economic policy and blamed Germany for failing to support the pound as wholeheartedly as the French franc. A well-known Wall Street investor, George Soros, admitted to having made a killing by short-selling sterling, which Germany considered to have entered the ERM at too high a parity. It was in any event clear that the rejection of the Maastricht Treaty by Denmark in June, combined with the possibility that France also would vote against the Treaty in its impending referendum, had given the market objective reasons to be alarmed about the durability of the ERM.
Renewed speculation in August 1993 concentrated on the French franc and led to the fluctuation band being increased to 15% for all the remaining currencies within the ERM except the D-Mark and the guilder, which kept their narrow bilateral link. For the time being, it seemed that the ERM had gone the way of the Community's previous failed efforts to achieve stability. Gradually, however, equilibrium was restored. As the belief grew that EMU would go ahead in 1999, speculators became nervous that they might get their fingers burned if they launched unsuccessful forays in the exchange markets. Italy returned to the ERM in 1996, Finland, Austria and Greece (but not Sweden) also joined and all the participating currencies except that of Greece came back unofficially to the narrow band. Sterling stayed outside, but confounded the pundits. The Europhiles had predicted that its expulsion would lead to a sharp depreciation (or competitive devaluation, as some in France bizarrely termed the pound's unwilling fall), together with higher interest rates and a prolongation of the UK's recession. In the event, British interest rates declined, the economy recovered and by 1998 the pound had climbed back above the level which had once been regarded as unrealistically high.
The Maastricht Treaty had specified observance of the 'normal fluctuation margins' within the ERM for at least two years as one of the convergence criteria upon which qualification for the single currency would be judged. For the countries that wished to adopt the euro, a few years of calm had seen to it that this clause no longer posed a problem and on 1 January 1999 the single currency was launched with all the applicants (except Greece) participating. At that point, the original ERM ceased to exist and was replaced by a new version, often known as 'ERM 2'.
Participants in ERM2 are allowed a fluctuation margin of 15% either side of the euro, or a lesser margin if mutually agreed. Member states of the EU which are not in the single currency zone are not formally obliged to participate in the new ERM but are 'expected' to do so and perhaps (though the point is not clear) required to do so as a precondition of adopting the euro. Every member state is in any event bound to treat the stability of its own exchange rate as a matter of 'common interest' under the Treaty of Rome. The UK's position is anomalous. It has said that it intends 'in principle' to adopt the euro, but it has not joined ERM2. Denmark, which is subjecting participation in the single currency to a referendum, is in ERM2, as is Greece. Sweden, however, remains outside. (See also EMU.)