Letters to the editor

Polls and Comment

Library - an archive
of speeches

Economists write

Bibliography of EMU

The Euroland Economy



A  B  C  D  E  F G  H  I  J  K  L  M  N  O  P  Q  R  S  T  U  V  W Y  Z



Few law cases have so jolted British opinion about the EU as the Factortame case. Factortame was a one-ship shelf company, Spanish-owned but registered in the UK to enable its owner to exploit the British fishing quota in the Atlantic under the Common Fisheries Policy (CFP). This practice, known as quota-hopping, was outlawed by Parliament in 1988 under a new Merchant Shipping Act, but Factortame sought to set aside the Act, claiming that it was suffering discrimination, contrary to the Treaty of Rome.

The Divisional Court suspended the Act temporarily. The Court of Appeal reversed that decision, backed by the House of Lords, which observed that no English court could set aside 'Parliament's sovereign will' on the mere grounds that Parliament might subsequently be overruled by the European Court of Justice (ECJ). The Lords did, however, refer the question to the ECJ, which reversed the Appeal Court's ruling, whereupon the Lords suspended the Merchant Shipping Act, pending a final decision by the ECJ on the substantive issue.

Subsequently, the ECJ ruled again in favour of the Spanish, dismissing the argument that the intent of the CFP was to permit discrimination to protect the livelihood of fishermen. Both decisions of the ECJ caused distress and surprise in the UK, where the public had been lulled by facile assurances. The effect on the British fishing industry gave rise to considerable ill feeling, and the revelation that an Act of Parliament could be so lightly set aside opened the eyes of many Britons for the first time to how far their sovereignty had already been surrendered.

Failure to act

The concept of failure to act as a misdemeanour arises in the EU from the lack of an executive branch armed with the backing of an elected central government. The Treaty of Rome allows member states or Community institutions to bring proceedings before the Court of Justice if the European Parliament, the Council of Ministers or the Commission infringe the Treaty by failing to carry out any of its provisions. If the complaint is upheld, the Court may require the institution concerned to take remedial measures. A well-known case was that bought by the Parliament in 1983 against the Council for failing to give legal force to a common transport policy (the Court was sympathetic, but deemed the policy too vague to form the base of an action at law). The same principle is applied to a member state's failure to transpose a Directive into national law. The 1990 Francovich case established that a citizen who suffers damages from a government's non-fulfilment of such an obligation is entitled to compensation.


To opponents of a European superstate, federalism denotes a political system dominated by supranational bodies or by the majority will of European governments, at the expense of the individual nation state. In deference to this fear, expressed most cogently by the UK and Denmark, the F-word was eliminated from the Maastricht Treaty, a concession rated highly by Prime Minister John Major but regarded with amused contempt by President François Mitterrand, Chancellor Helmut Kohl and Commission President Jacques Delors.

The day of the nation state is over. Roman Herzog, president of Germany, September 1996

To those accustomed to a federal structure, federalism denotes the sharing of power between the constituent parts and the centre - that is, the converse of a fully centralised political system. Many Germans therefore affect puzzlement at British concerns, some going so far as to say that, far from resisting it, the UK ought logically to make federalism its objective.

Although federation is too ill-defined a concept to bear the weight of close analysis, it clearly implies a union of some sort. Quebec, Scotland, California and Bavaria, for example, each has autonomy in varying degree, but they are not considered sovereign states since the superior authority in most policy areas rests with government in Ottawa, London, Washington and Berlin. A confederation is looser than a federation, allowing more power to the subordinate political units, yet even in confederate Switzerland the ultimate right of decision generally belongs to Berne.

The powers traditionally allocated to the federal authorities cover defence, foreign policy, the currency, central taxation, the supreme court of appeal, the signing of treaties, nationwide legislation, immigration, policing and citizenship. The EU has already taken over many of these areas from the member states and has ambitions towards the remainder. Against that background, semantic quibbles about the meaning of federalism are trivial compared with substantive discussion of the EU's treaties, laws and institutional arrangements. (See also Sovereignty.)


See Common Agricultural Policy.

Finalité(s) politique(s)

The 'ultimate political objective(s)' of the EU, as expressed in treaty preambles, Resolutions of the European Council and so forth. In the singular, the finalité politique is generally understood to mean political union.


An independent state only since the 1917 Russian revolution, Finland was under effective Soviet domination from the end of World War II until the end of the Cold War, a term of its retention of some autonomy being its adoption of neutrality. Finland joined the Nordic Council and the United Nations in 1955, EFTA (of which it had previously been an associate) in 1986 and the Council of Europe in 1989, in each case deterred from more timely membership by fear of its eastern neighbour.

On the collapse of Soviet communism Finland applied in 1992 for membership of what was about to become the European Union, obtaining admittance in 1995, but remaining non-aligned. The economy, which had previously depended partly on barter trade with the Soviet Union, suffered badly in the early 1990s from Russia's decline, but has since recovered well. The country is a participant in the first wave of the single currency.

'Fiscal dumping'

The charge of attracting trade or investment 'unfairly' by virtue of 'harmful' or 'predatory' (that is, lower) taxes. Like 'social dumping', the phrase suggests a desire on the part of Europe's high-cost economies to level up costs within the EU. The chief targets include Ireland, Spain, Belgium and The Netherlands, which give special tax incentives to international companies, and Luxembourg, which is a comprehensive tax haven. The UK, too, as a country with a relatively benign tax regime, is not immune from attack. Offshore dependencies, such as the Channel Islands, are singled out for special opprobrium.

The Community's competence in the fiscal area had hitherto been regarded as covering only indirect taxes, but in 1997 the Commission drew up plans for a voluntary code of conduct aimed at countries with a 'significantly lower than average' business tax rate. This move was portrayed as a single market measure, justifying intervention by Brussels in a field previously reserved for national governments. (See also Harmonisation and Tax.)


The 1997 Treaty of Amsterdam disappointed some integrationists (and encouraged others) by endorsing the principle that the Community's institutions could occasionally be used by a majority of member states to achieve their objectives without involving all the remaining member states. This right is subject to a veto by the non-participants. The Treaty does not, however, provide much comfort for sceptics, since such flexibility, or 'closer co-operation', is available only as a last resort and on the basis that the acquis communautaire is unaffected. (See also Variable geometry.)

Fontainebleau Agreement

In 1984, frustrated at the EC's lack of progress, President François Mitterrand determined to use the French presidency to resolve a number of outstanding issues at the Fontainebleau meeting of heads of government. Spain's and Portugal's accession was pushed forward, the budget resources were augmented, the rise in agricultural spending was to be moderated, and studies were initiated for creating a political union and a 'People's Europe'. Above all, the long-running problem of the excessive British contribution to the budget was solved. The Fontainebleau Agreement gave the UK its abatement, known also as the British rebate, thereby terminating a dispute originated by Margaret Thatcher in 1979.


The 1995 'Bosman ruling' of the Court of Justice (named after a Belgian footballer) held that professional football, as an economic activity, was subject to Treaty law on free movement of services. It banned quotas limiting the number of players from other member states eligible to play in club competitions. The ruling also enabled players to negotiate their own terms of transfer, breaking the ability of clubs to collect large transfer fees on players whose contracts had expired. The resulting increase in the remuneration of star players helped to widen the gap between rich and poor clubs, leading to the creation of a cosmopolitan Europe-wide super-league.

Fortress Europe

The defence of Europe's economic interests through protectionism rather than adaptation to the global market. Ideologically, the Fortress Europe approach is more or less confined to the Common Agricultural Policy and to the intermittent mercantilism of France, since Germany and the UK are essentially free traders. In practice, however, various proposals to harmonise EU taxes (for example, on art sales) rest on the Fortress Europe delusion of self-sufficiency and have the effect of driving markets out of Europe to the USA and elsewhere.

Fouchet Plan

The name of Fouchet, a French diplomat, would doubtless have languished in obscurity for ever had he not been made the mouthpiece of Charles de Gaulle's designs for Europe in 1961 and 1962. De Gaulle had two aims: to sever Europe's dependence for military security on the Atlantic Alliance and the USA; and to restructure the Community by turning it into a voluntary union of independent states, based in Paris, with extensive national veto powers over all common policies. The Fouchet proposals envisaged the emasculation of the Commission and the Council of Ministers and the subjection of Community law to national law.

The five other member states of the Common Market rejected Fouchet's plan, prompting a violent attack by de Gaulle on Commission President Walter Hallstein; this in turn led to widespread ministerial resignations in France. There followed the vetoing of the UK's application to join the Community in 1963, the French boycott of Community institutions in 1965 (the 'empty chair' crisis), the 'Luxembourg Compromise' in 1966 and finally a decade and a half of institutional paralysis in Europe, lasting for a dozen years after de Gaulle's death. To this day the spectre of Fouchet's plan is evoked in Brussels whenever a proposal surfaces that smacks too much of national autonomy.

Founding Fathers

The EU has a pantheon of prophets and heroes, who are endowed (sometimes justly, sometimes only in retrospect) with special foresight of the European destiny. The first of these in modern times was Count Coudenhove-Kalergi (1894-1972), who convened a series of pan-European congresses shortly after World War I and remained an advocate of a United States of Europe until well after World War II. Although an intimate of statesmen from many countries, he never managed to create an enduring institution, perhaps hindered by his own statelessness (his mother was Japanese, his father a part-Flemish, part-Greek Austro-Hungarian diplomat).

The socialist Aristide Briand (1862-1932), 11 times premier of the French Third Republic, who helped to negotiate the 1925 Locarno pacts on European frontiers, is claimed by his countrymen as a European pioneer. In 1929 he advocated a European Federal Union within the framework of the League of Nations, his real motivation being the containment of Germany. His German opposite number, Gustav Stresemann, embraced Briand's proposal not for reasons of Europeanism but in the hope of exploiting it to restore German hegemony in Central Europe. Thus the two men prefigured later developments in Franco-German relations.

The 1939-45 war years saw the birth of various different strands of Europeanism. A yearning for peace inspired models of a new world government - if freedom survived - more effective than the League of Nations had been after World War I. Failing world government, a United States of Europe might be a more attainable aim. Nor was such thinking confined to idealists - several German and Vichy French planners conceived a post-war order based on a European Economic Area with a single currency and a customs union. It is, however, politically incorrect to mention this latter phenomenon, and the names of Alfred Six, Walther Funk, Werner Daitz and Alphonse de Châteaubriant have been consigned to oblivion.

The first universally acknowledged Founding Father, however, was the French businessman, internationalist, public servant and éminence grise Jean Monnet, the true author of the 1950 Schuman Plan, which ushered in the European Coal and Steel Community, which was in turn the forerunner of what became the EU. If Monnet was the giant of the European movement, others were of nearly equal stature. Walter Hallstein, an academic German technocrat, shared Monnet's faith in supranational institutions and was the Commission's first president, winning his spurs (and meeting his match) in a series of bruising encounters in the early 1960s with that proud nationalist President Charles de Gaulle. By contrast, the romantic Italian communist Altiero Spinelli was the antithesis of a bureaucrat. Spinelli was a populist, a passionate advocate of a United States of Europe, to be legitimised by a democratically elected European Parliament.

The amazing progress of technology, the shrinking of distances thanks to modern communications ... and the present-day tendency to form wider associations and larger areas for joint economic development ... all these compel Europe to unite more closely. Europe has become too small for ... self-contained sovereignties. Departmental memorandum to von Ribbentrop, Berlin, 1943

To succeed, these officials and dreamers needed the active support of powerful like-minded political leaders. In the immediate post-war period four such Europeanist statesmen stood out. Three of these, the active Christians Alcide de Gasperi of Italy, Robert Schuman of France and Konrad Adenauer of Germany, are now so venerated in Catholic memory that in 1999 the Vatican set in train the first steps towards canonising them as saints (of De Gasperi and Adenauer it could also be said that it was they who were principally responsible for setting their own countries back on their feet). The fourth, the secular socialist Paul-Henri Spaak of Belgium, was no less deserving; he devoted much of his life to the federal cause and played a decisive part in designing the 1957 Treaty of Rome. In the next generation of political leaders, however, none can justly be admitted to the European hall of fame, for Valéry Giscard d'Estaing and François Mitterrand of France and Helmut Schmidt of Germany believed in the Community less as an end in itself than as a vehicle for French or Franco-German ambitions.

As the political sponsor of the single currency and the 1992 Maastricht Treaty, Helmut Kohl of Germany signalled a return to full-blooded integrationism, working closely with another devout Catholic in Jacques Delors, the most zealous Commission president since Hallstein. Delors modelled his strategy on a carefully thought out tactic of Monnet, pursuing economic integration opportunistically step by step and aiming to translate each gain into acceptance of the need for supranational control and therefore the inevitability of eventual political unification. He is surely destined to be recognised as a latter-day prophet once a decent period of time has elapsed. Kohl's reputation, however, hangs in the balance and may not survive his exposure as a machine politician with illicit funds at his disposal.

It is to be noted that none of the accredited European heroes is British. Winston Churchill believed in a Community led by a reconciled France and Germany, to which the UK would be but loosely linked. Harold Macmillan and Harold Wilson applied to join the Common Market out of weakness, not conviction. Edward Heath and Roy Jenkins have the strongest claims, but the first is insufficiently regarded at home and the second a touch too bonhomous and epicurean quite to qualify for the top table of visionaries. (See also 'European idea' and entries for Adenauer, De Gasperi, Delors, Hallstein, Kohl, Monnet, Schuman, Spaak and Spinelli. For distinguished opponents, see de Gaulle and Thatcher.)

Four freedoms

The 1957 Treaty of Rome sets out four freedoms which should characterise the internal market and lay the foundations of an ever closer union among the peoples of Europe - the free movement of goods, persons, services and capital.


France's relationship with the Community falls into three phases. Initially, through Jean Monnet and the Schuman Plan, France built on ideas with roots in the inter-war years and in the Vichy period, the crucial element being that France was now the victor, not the vanquished. The overriding aim was political: to contain Germany by commingling the French and German basic industries of coal and steel, so as to ensure that there could be no repeat of the three wars, initiated by Bismarck, the Kaiser and Hitler, which had devastated France in 1870, 1914-18 and 1939-45. As Monnet developed his federalising vision he found his ideal bureaucratic counterpart in the German Walter Hallstein, the energetic first president of the European Commission, while at the governmental level Chancellor Konrad Adenauer went so far in 1950 as to suggest the union of France and Germany. In economic terms, France's objective was to foster its countryside by agricultural protection in exchange for allowing Germany a freer market in industrial goods.

Italy and Benelux were also founder signatories to the Treaties of Paris (1951) and Rome (1957), in which Alcide de Gasperi and Paul-Henri Spaak played important roles, but the Franco-German entente was the bedrock of the European Community. Even when President Charles de Gaulle, then recently returned to politics, inaugurated the second phase of French policy, with his hostility both to federalism and to the 'Anglo-Saxons', the expression of German dismay was muted. In 1963, immediately after vetoing Britain's application to join the Common Market and at the height of his ten-year battle with the Commission, de Gaulle signed the Treaty of the Elysée with Adenauer, which was to set the pattern for the alliance of France and Germany through thick and thin until the present day. Meanwhile, the outcome of the struggle over the direction of the Community was a temporary stalemate. De Gaulle's plans to restore authority to the nation states were frustrated, but in the 'Luxembourg Compromise' he won an enhanced role for the veto, which effectively intimidated the Commission into paralysis for years to come.

On de Gaulle's retirement in 1969, successive French governments, starting with that of Georges Pompidou, returned to the theme of European unification, albeit never without that tinge of metropolitan nationalism that distinguishes the French approach. France shares none of Germany's federalist traditions and its instincts for independence are similar to the UK's. Yet it has retained its communautaire reputation by always in the end consenting to deeper integration, confident in its ability to lever German economic might and political weakness into French diplomatic power (and doubtless mistrustful of the permanence of any understanding with the UK). The attitude of Pompidou's successor, Valéry Giscard d'Estaing, was characteristic. In 1974 he established the European Council as an instrument to bolster the influence of the leading member states; and in 1977 he vehemently opposed President Roy Jenkins' initiative to elevate the presidency of the Commission into pari passu status with heads of government. But whether defending French interests or resisting the Commission, he always chose the rhetoric of Europeanism.

By the early 1980s President François Mitterrand was willing to make a dead letter of the Luxembourg Compromise. Nevertheless, he continued the policy of Europeanism à la française, briefly resisting German reunification in 1989, opposing an increase in the number of German MEPs, and coming within an inch of wrecking the GATT negotiations in 1993 as the price of protecting French farmers and the French film industry. In each case, a deal, not always of the most appetising nature, saved the day. Most of his term of office coincided with the Commission presidency of his fellow French socialist, Jacques Delors. Together they saw through the Single European Act of 1986 and the Maastricht Treaty of 1992, thereby transforming the Common Market into a union with many of the features of an embryonic superstate.

Europe is the way for France to become what she has ceased to be since Waterloo: the leading power in the world. General de Gaulle to Alain Peyrefitte, 1962

Economically, France is a rich and successful country, the world's fourth or fifth largest, approximately equal with the UK. Nevertheless, during the 1990s unreformed labour markets, high welfare costs and the franc fort policy of maintaining parity with the D-Mark resulted in stagnation and heavy unemployment. That these difficulties unsettled French public opinion about the single currency was shown by Mitterrand's desperately narrow victory in the Maastricht referendum; and although the economy began a strong recovery in 1998, intermittent strikes and government cave-ins to public sector workers evidenced the difficulty of changing entrenched practices to adapt to modern competitive pressures.

There have even been signs of fragility in the hitherto unshakeable Franco-German alliance. In the run-up to EMU, Mitterrand's Gaullist successor, Jacques Chirac, and the recently elected Socialist premier, Lionel Jospin, advocated introducing political influence into the management of the euro. Each had previously flirted with Euroscepticism, and although both were now committed to the single currency, they feared that the future European Central Bank (ECB) would conduct a stringent Bundesbank-style deflationary policy. This threatened to undermine the basis on which France had agreed to German reunification - that Germany would compensate for its own enlargement and an eastward shift in Europe's centre of gravity by relinquishing its dominance of Continental monetary conditions. Chancellor Helmut Kohl, by contrast, having already given way to French wishes in allowing the over-borrowed Italy into the euro, was unwilling to go further and ask his people to exchange their beloved strong D-mark for a politicised currency. These clashes were exacerbated by the at times frosty personal relationship between Chirac and Kohl. There was a history of differences, too, over foreign policy, trade (Germany the more Atlanticist, France the more protectionist) and nuclear testing. In 1998 an unsuccessful attempt by Chirac to impose a Frenchman at the head of the ECB added yet another source of tension.

So long as Germany hesitates to assert itself diplomatically, the Franco-German special relationship will doubtless survive, even if in somewhat diluted form (it is not for nothing that a judicious friendship with Germany is known in France as the 'pensée unique' - the sole preoccupation of external policy). In 1999, however, when Gerhard Schroder succeeded Kohl as Chancellor, domestic concerns initially distracted him from European affairs; and the advent of Prime Minister Tony Blair as an active player in EU politics was a complicating factor, as were the emerging self-confidence of Spain and the planned enlargement of the Community. It is interesting, therefore, to speculate about the effect on French attitudes of various eventualities - if the current generation in Germany were to feel less insecure than its predecessors: or if the hegemony of the Paris-Berlin axis were to be challenged by other capitals: or if a further concentration of power in the hands of the EU's supranational institutions were to diminish France's sense of being in control of its own destiny. In any of those circumstances, it is at least possible that Gallic nationalism, presently channelled mainly into rivalry with the USA, might find new outlets, with incalculable consequences for the future of Europe. (See also Treaty of the Elysée.)


Since the early 17th century the Académie Française has been devoted to the defence and promotion of the French language (la francophonie). Pride in its own culture (rivalled in Europe only by Spain) has led France to propose restrictions on, for example, the showing of American films on French TV, a policy that threatened to unhinge the GATT negotiations in 1994. French has long been the main language of Brussels - a significant factor in maintaining the influence of Paris in Community affairs. The predominance, however, of English on the Internet (some 78% of all usage in 1999, compared with 1% for French) marks a continuance of the trend towards the gradual emergence of English as Europe's common language.

Francovich ruling

Francovich, an employee of an insolvent Italian company, claimed that he would have received greater financial protection if Italy had transposed into law a 1980 Directive on the treatment of employees in cases of bankruptcy. In 1990 the European Court of Justice held that Francovich was entitled to compensation from the Italian government for its failure to enact the necessary enabling legislation. This landmark ruling established that an individual citizen could have rights under Community Directives before they had been implemented domestically.


The amount of Community-specific fraud is unknowable. That it is 'huge', 'continuing' and 'a public scandal' (House of Lords Select Committee report, 1994) is clear, and it has been estimated by the Court of Auditors at up to 10% of the Community budget, although the Commission's estimate is considerably lower. Most of this fraud is related to the Common Agricultural Policy and to the disbursement of subsidies, a recurrent problem being that member states (especially those that benefit most from Community payments) have little interest in detection, since this would result in them having to make repayments. The same Lords report noted 'a worrying absence of indignation' about a situation which merited 'the collective outrage of European taxpayers'. An element in this apparent indifference is the attitude of the Commission, which uses the problem as an excuse to seek legal harmonisation and to extend the Community's powers of investigation and prosecution, but otherwise downplays it (an audit report in 1998 accused the Commission's own anti-fraud unit of incompetence and of collusion in covering up wrongdoing).

Among colourful examples of malpractice have been the $5 billion or more of levies misappropriated from the Community by Italy and Spain from 1989 to 1993 by cheating on milk quotas (the fine - reimbursement - was reduced by $1.3 billion under threat by the two countries to block the EU budget and veto the admission of new member states to the Community); $1.5 billion worth of wheat reported by the Court of Auditors in 1994 as mysteriously missing; the painting of fake olive trees by Greek farmers to fool satellite photography and boost subsidies; the Irish 'cattle carousel', whereby cattle cross and recross the Ulster border, collecting export subsidy as they pass; and some spectacular abuse of the structural funds, especially, it is alleged, by Italian businesses (said to have collected some $8 billion of regional aid improperly over a period of three years). To students of the annual reports of the Court of Auditors, it came as something of a disappointment when the practice of giving these revealing vignettes of fraud was discontinued in 1999.

Over 80% of Union funds is disbursed by member states; and the reluctance of countries to encourage greater Commission participation in detection must to some extent absolve it from blame. Nevertheless, the 1999 Statement of Assurance of the Court of Auditors, referring to the Community's 1998 financial year, was a damning indictment. For the fifth year running the Court 'declined to provide assurance that the transactions underlying the payments for the financial year are, taken as a whole, legal and regular'. There was 'an unacceptable incidence of error' and 'numerous other failures to comply with regulations'. Two-thirds of the audit sample of research expenditure revealed 'deliberate overcharging'. No area of activity escaped unscathed. The entire process of financial control was so inadequate as to create a climate in which fraud would be inevitable, because incapable of detection or proof. Earlier reports had shown that abuse of travel allowances in the Community's institutions, especially the Parliament, the Economic and Social Committee and the Committee of the Regions, had become the norm. In 1999 a devastating special report by Paul van Buitenen, a Dutch internal auditor, proved the last straw. Van Buitenen was suspended and boycotted, but his report reached the public, whose sense of outrage at the nepotism and dishonesty that he had revealed led to the mass resignation of the entire Commission.

A new Commission was installed with a brief to reform itself and clean up the Community's image. It soon produced an incomprehensible review written in the worst form of management-speak, at the same time pressing for a Brussels-based Europol, modelled on the FBI, to escalate the 'fight against EU fraud'. But as word seeped out that nothing had changed for the better in the administration, sceptics wondered why the Commission should be entrusted with policing external crime when it was incompetent, or unwilling, to police itself.

Free movement of capital

One of the four freedoms which laid the foundations of the Common Market, the free movement of capital between member states was not fully accomplished until nearly 40 years after the signing of the Treaty of Rome in 1957. Sporadic upheavals in foreign exchange markets, combined with variations in the strength of individual EU economies, served as reasons for delay in the case of Spain, Portugal, Greece and Ireland and for allowing the exceptional use of protective measures in the event of a financial emergency. The 1992 Maastricht Treaty, however, set Europe on the path to EMU, a goal incompatible with any remaining restrictions; and the resultant fiscal discipline imposed on member states aspiring to join the single currency enabled them to enjoy freedom of capital movement not only within the Community but also in their external economic relations.

Free movement of goods

The first of the Treaty of Rome's four freedoms which laid the foundations of the Common Market, the free movement of goods between member states was characterised initially by the abolition of internal customs duties and quotas. This was accomplished by 1968. There are, however, other methods of favouring domestic producers, such as discriminatory product specification, VAT, nationalistic public purchasing policy and unreasonable bureaucratic barriers. Each of these has been tackled progressively by the Commission, the major breakthrough being the Single European Act of 1986, which extended qualified majority voting to single market legislation, enabling the Commission to sweep away a host of restrictions. (See also Cassis de Dijon case.)

Free movement of persons

The free movement of persons, the second of the four freedoms enshrined in the Treaty of Rome, has ramifications well beyond the economic sphere. Initially, because it had been framed in the context of laying the foundations of the Common Market, freedom of personal movement was construed as an objective applying to workers. But with the Community's growing integration a wider interpretation came to prevail. Various Directives established rights of residence for students and retirees, while the Court of Justice held that individual EU citizens have the right of free movement throughout the Community, provided they can show that they will not be a financial burden on the host member state. The dismantling of border controls as part of the single market programme in the late 1980s was followed by the Schengen Agreement, the 1992 Maastricht Treaty and the 1997 Treaty of Amsterdam, each marking stages of a process designed ultimately to abolish all internal European frontiers.

Unlike the goals of free movement of goods, services and capital, which were directed solely at easing the operation of the Common Market, freedom of movement of persons raises fundamental sovereignty issues connected with citizenship, immigration, terrorism and organised crime. For the time being, therefore, its full accomplishment is subject to the national veto and is likely to remain a sensitive matter.

Free movement of services

One of the Treaty of Rome's four freedoms which laid the foundations of the Common Market, the free movement of services allows professionals to practise anywhere in the EU (except as a public official). Although the principle of free movement of services was established early, it took over 15 years before mutual recognition of qualifications was achieved, enabling lawyers, architects, doctors and others to surmount national barriers. Even then, subtle ways were found to inhibit foreigners from providing domestic services. (See also Discrimination.)

Free trade area

A free trade area differs from a customs union in that each of the member countries may have its own individual tariffs or other trading arrangements with third party states, whereas in a customs union there is a uniform external trade regime. Another feature of a free trade area, such as that constituted by NAFTA (the North American Free Trade Agreement), is that it carries no federal political implications.

A free trade zone - precisely what we have been trying to avoid for the last 25 years. Yves-Thibault de Silguy, commissioner for economic and monetary affairs, on the consequences of a delay in EMU, 1997

Freedom of establishment

Part of the wider four freedoms laid down by the Treaty of Rome, freedom of establishment is the right to set up in business or as a professional service provider anywhere within the EU without discrimination.


See Integration theory.

Return to top