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European Union Introduction and Overview page 1

European Union:
Introduction and Overview
Florian Lippold
European Union Introduction and Overview page 2
Agenda European Union
Introduction EU
EU History
EU Institutions
EU (Monetary) Integration: Advantages/Problems
Conclusion
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European Union Introduction and Overview page 3
CIA - The World Factbook - European Union
The evolution of the European Union (EU) from a regional
economic agreement among six neighboring states in
1951 to todays supranational organization of 27 countries
across the European continent stands as an unprecedented
Phenomenon in the annals of history. (. . . )
Following the two devastating World Wars of the first half of
the 20th century, a number of European leaders in the late
1940s became convinced that the only way to establish a
lasting peace was to unite the two chief belligerent nations
France and Germany - both economically and politically.
Source: CIA World Factbook
European Union Introduction and Overview page 4
The European Union:
493 million people 27 countries
Member states of the European Union
Candidate countries
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European Union Introduction and Overview page 5
The answers of the European Union Peace
Before becoming a real political objective, the idea of uniting
Europe was just a dream in the minds of philosophers and
visionaries. (. . . )
The dream was shattered by the terrible wars that ravaged the
continent during the first half of the 20th century
Source: European Union
European Union Introduction and Overview page 6
Agenda European Union
Introduction EU
EU History
EU Institutions
EU (Monetary) Integration: Advantages/Problems
Conclusion
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European Union Introduction and Overview page 7
Founding fathers - New ideas for lasting peace and
prosperity (see ECB History Video)
Konrad Adenauer
Robert Schuman
Winston Churchill
Alcide De Gasperi
Jean Monnet
Video Source: http://www.ecb.int/ecb/educational/movies/html/index.en.html
European Union Introduction and Overview page 8
Eight enlargements
1952 1973 1981 1986
1990 1995 2004 2007
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European Union Introduction and Overview page 9
The Evolution of the European Union
In 1950, the French Foreign Minister Robert SCHUMAN
proposed an eventual union of all of Europe, (. . . )
The 1992 Treaty of Maastricht laid the basis for further forms
of cooperation in foreign and defense policy, in judicial and
internal affairs, and in the creation of an economic and
monetary union - including a common currency. (. . . )
Ten new countries joined the EU in 2004
- (. . . ) - and in 2007 Bulgaria and Rumania joined,
bringing the current membership to 27. (. . . )
European Union Introduction and Overview page 10
The treaties basis for democratic cooperation built on law
1952
The European Steel and Coal
Community
1957
The treaties of Rome:
The European Economic
Community (EEC) and
The European Atomic
Energy Community
(EURATOM)
1986
The European
Single Act: the
Single Market
1992
Treaty of European
Union
Maastricht
1999
Treaty of
Amsterdam
2003
Treaty of Nice
2007
Treaty of Lisbon
(signed)
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European Union Introduction and Overview page 11
The Development after World War II
USA:
productivity leader, large free integrated market
Europe:
productivity backwardness, splitted, destructed,
rigid borders, small markets, hardly international trade
Reconstruction and Economic Integration
democracy and market economy,
opening of the borders, productivity catching-up
European Union Introduction and Overview page 12
The Relevance of Economic Integration
Facilitation of International Trade
competition and comparative advantages
liberalization of capital flows and direct investments
free movement of people as precondition for trade
macroeconomic / monetary stability
Aid with (Re-)construction
Marshall-Plan for Germany
and EU-Structural Funds
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European Union Introduction and Overview page 13
The Relevance of European Integration
Liberalization of Markets
a common market, competition >the EU Single Market
the common currency >the Euro
economic stability >the Maastricht Criteria
Political Liberalism
human rights and democracy
welfare policy and political stability
openness and free movement of people
European Union Introduction and Overview page 14
The Process of Catching-up
Poor countries need capital and Knowledge
Capital und knowledge flows into poor countries via direct
investments and technology transfers
Preconditions: political and economic stability
Aid might speed up the catching-up process
The rich countries benefit from increasing trade
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European Union Introduction and Overview page 15
The Deepening of European Integration
The European Monetary System I, 1979-1998
the preparation of the currency union
dominant role of the DM and the German Central Bank
The Treaty of Maastricht, 1992
step by step to the Euro
since then no exchange rate realignments
The European Stability and Growth Pact
single currency and rules for fiscal deficits
European Union Introduction and Overview page 16
The Treaty of Lissbon will make the European Union:
More efficient: Simpler processes, full-time president for
the Council, etc.
More democratic: Stronger role for the European Parliament
and national parliaments, "Citizens initiative",
Charter of Fundamental Rights, etc.
More transparent: Clarifies who does what, greater public access
to documents and meetings, etc.
More united on High Representative for Foreign Policy, etc.
the world stage:
More secure: New possibilities to fight climate change
and terrorism, secure energy supplies, etc.
Signed in December 2007 and entered into force on 1 December 2009
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European Union Introduction and Overview page 17
Key Characteristics
European Union Introduction and Overview page 18
How big are the EU countries?
Surface area 1 000 km
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Source: http://europa.eu/abc/euslides/ppt/slide_13_en.ppt
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European Union Introduction and Overview page 19
How many people live in the EU?
Population in millions, 2007
497 million
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Source: http://europa.eu/abc/euslides/ppt/slide_14_en.ppt
European Union Introduction and Overview page 20
GDP per inhabitant: the spread of wealth
GDP per inhabitants in Purchasing Power Standards, 2007
Index where the average of the 27 EU-countries is 100
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Source: http://europa.eu/abc/euslides/ppt/slide_15_en.ppt
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European Union Introduction and Overview page 21
The euro a single currency for Europeans
EU countries using the euro
EU countries not using the euro
Can be used everywhere in the
euro area
Coins: one side with national
symbols, one side common
Notes: no national side
European Union Introduction and Overview page 22
ECB History (see ECB History Video)
Video Source: http://www.ecb.int/ecb/educational/movies/html/index.en.html
Collapse of the
Bretton Woods
System
1972 1979
4 Stages:
Stage 1: 1979 1983
Stage 2: 1983 1987
Stage 3: 1987 1992
Stage 4: 1992 1993
3 Stages:
Stage 1: 1990 1994
Stage 2: 1994 1999
Stage 3: Since 1999
1944 1973
First attempt
of European
monetary
cooperation
European
Monetary
System (EMS)
Treaty on the
European
Union
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European Union Introduction and Overview page 23
Schengen Agreement
No police or customs checks at borders
between most EU countries
Controls strengthened at EU external
borders
More cooperation between police from
different EU countries
You can buy and bring back any goods for
personal use when you travel between EU
countries
European Union Introduction and Overview page 24
Schengen Area
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European Union Introduction and Overview page 25
Going abroad to learn
Over two million young people have studied or pursued personal
development in other European countries with support from EU-
programmes:
Comenius: school education
Erasmus: higher education
Leonardo da Vinci: vocational training
Grundtvig: adult education
Youth in Action: voluntary work and non-formal education
European Union Introduction and Overview page 26
Climate change a global challenge
To stop global warming, EU leaders decided in 2007 to:
reduce greenhouse gas emissions by 20% by 2020 (30% if
other developed countries do likewise)
improve energy efficiency by 20% by 2020
raise the share of renewable energy
to 20% by 2020 (wind, solar, hydro
power, biomass)
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European Union Introduction and Overview page 27
Official development assistance per citizen,
2007
The EU is the biggest provider of development aid in the world
93
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EU Japan United States
The EU provides 60% of all development aid
Source: http://europa.eu/abc/euslides/ppt/slide_31_en.ppt
European Union Introduction and Overview page 28
Agenda European Union
Introduction EU
EU History
EU Institutions
EU (Monetary) Integration: Advantages/Problems
Conclusion
15
European Union Introduction and Overview page 29
The EU institutions
European Parliament
Court of
Justice
Court of
Auditors
Economic and Social
Committee
Committee of the
Regions
Council of Ministers
(Council of the EU)
European Commission
European Investment
Bank
European Central Bank Agencies
European Council
(summit)
The Council of the European Union:
the representation of the member states and main decision making body
The European Commission: the Government of the EU
The European Parliament
Important Institutions: the European Central Bank, the Court of Justice
European Union Introduction and Overview page 30
How EU laws are made
Citizens, interests groups, experts: discuss,
consult
Commission: makes formal proposal
Parliament and Council of Ministers: decide jointly
Commission and Court of Justice: monitor
implementation
National or local authorities: implement
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European Union Introduction and Overview page 31
Council of Ministers voice of the member states
One minister from each EU country
Presidency: rotates every six months
Decides EU laws and budget together with
Parliament
Manages the Common Foreign and Security
Policy
European Union Introduction and Overview page 32
Council of Ministers number of votes per country
Total:
Malta
Estonia, Cyprus, Latvia, Luxembourg and Slovenia
Denmark, Ireland, Lithuania, Slovakia and Finland
Austria, Bulgaria and Sweden
Belgium, Czech Republic, Greece, Hungary and Portugal
Netherlands
Romania
Spain and Poland
Germany, France, Italy and the United Kingdom
Qualified majority needed for many decisions:
255 votes and a majority of member states
345
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European Union Introduction and Overview page 33
Summit at the European Council
Summit of heads of state and government of all EU countries
Held at least 3 times a year
Sets the overall guidelines for EU policies
European Union Introduction and Overview page 34
The European Commission promoting
the common interest
27 independent members,
one from each EU country
Proposes new legislation
Executive organ
Guardian of the treaties
Represents the EU on the international stage
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European Union Introduction and Overview page 35
The Court of Justice upholding the law
27 independent judges, one from each EU
country
Rules on how to interpret EU law
Ensures EU laws are used in the same
way in all EU countries
The Court of Justice upholding the law
European Union Introduction and Overview page 36
The European Court of Auditors:
getting value for your money
27 independent members
Checks that EU funds are used
properly
Can audit any person or organisation
dealing with EU funds
The European Court of Auditors:
getting value for your money
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European Union Introduction and Overview page 37
The European Central Bank:
managing the euro
Jean-Claude Trichet
President of the Central Bank
The European Central Bank:
Managing the euro (see ECB History Video)
Ensures price stability
Controls money supply and decides interest rates
Works independently from governments
http://www.ecb.int/ecb/educational/movies/html/index.en.html
European Union Introduction and Overview page 38
Beating inflation
European Economic and Monetary Union: stable prices
Average annual inflation in the 15 EU-countries that used the euro in 2008
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Source: http://europa.eu/abc/euslides/ppt/slide_23_en.ppt
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European Union Introduction and Overview page 39
The Committee of the Regions:
voice of local government
344 members
Represents cities, regions
Advises on new EU laws and policies
Promotes the involvement of local
government in EU matters
The European Economic and Social Committee:
voice of civil society
European Union Introduction and Overview page 40
Agenda European Union
Introduction EU
EU History
EU Institutions
EU (Monetary) Integration: Advantages/Problems
Conclusion
21
European Union Introduction and Overview page 41
Advantages of Integration
Fascilitation of International Trade
frequently changing exchange rates are bad
for imports, exports and direkt investments
Macroeconomic Stability
monetary stability and fiscal discipline:
without Maastricht fiscal deficits would be
higher and price stability would be endangered
International Confidence
Germany after World War II, Eastern Europe today
European Union Introduction and Overview page 42
Problems
Eurosklerosis
high and persistent unemployment since the eighties, low economic
growth since the nineties
these are problems of the member countries, not problems of
globalization and European Integration
Integration within Trade Barriers outwards
trade war with the USA:
The View from the Outside Internally, the EU is attempting to
lower trade barriers, adopt a common currency, and move towards
convergence of living standards. Internationally, the EU aims to
bolster Europes trade position and its political and economic power.
(. . . )
Source: World Factbook!http://www.cia.gov/cia/publications/factbook/
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European Union Introduction and Overview page 43
Further Problems
Subsidies, Burocracy and Regulation
coal and steel, agriculture
> a problem since the fifties
> a problem with respect to enlargements
Fiscal Discipline
the European Stability and Growth Pact:
large fiscal deficits in many member countries in the recent years and
in the near future
European Union Introduction and Overview page 44
Microeconomic Benefits of Common Currency
The Euro is important in realising some of the gains from a functioning
single market
(1) Potential Gains for consumers
Lower prices because of increased competition/ greater price
transparency (this is more likely with easily transportable goods)
Reduction in the transactions costs of travelling within Europe
(e.g. costs of currency exchange)
Easier to live and work in different EU countries
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European Union Introduction and Overview page 45
Microeconomic Benefits of Common Currency
(2) Potential gains for businesses
Invoicing can be done with one currency
Lower transactions costs some people argue that staying out
of the Euro is equivalent to exporters facing a tariff when they
trade inside the EU
Gains for the tourist industry in attracting overseas visitors
Businesses might be able to fund their capital investment at
lower real interest rates
European Union Introduction and Overview page 46
Microeconomic Disadvantages of Common Currency
(1) Changeover Costs from joining the Euro:
Costs of changing accounting systems
Menu Costs (vending machines, catalogues, franking machines,
postage)
Installation of new payments systems
Customer confusion (imperfect information)
(2) Higher prices
Potential loss of consumer welfare if suppliers increase prices
when converting from sterling to euro
(3) The vast majority of consumers will continue to buy locally
what matters more is the effectiveness of competition policy in
targeting anti-competitive behaviour
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European Union Introduction and Overview page 47
Macroeconomic Disadvantages of Common Currency
(1) Entering the Euro means losing an instrument of policy
adjustment
A one-size fits all monetary policy may work against a country if
their cycle is not convergent with Euro Zone
Retaining the option of making an exchange rate adjustment is
useful
(2) Fiscal Policy constraints
The EU Growth and Fiscal Stability Pact
Limits on government borrowing
But now largely ignored especially with the effects of the credit
crunch / fiscal bail-outs etc
European Union Introduction and Overview page 48
Agenda European Union
Introduction EU
EU History
EU Institutions
EU (Monetary) Integration: Advantages/Problems
Conclusion
25
European Union Introduction and Overview page 49
Conclusion
Peace
reconciliation with France
surmounting the Iron Curtain
Freedom
democracy and market economy
Wealth, economic growth and income convergence
. . . it was worth it