Economic Aspects of EU Eastern Enlargements
Lecture notes #0
Fall 2005
Lecture notes #0
These lecture notes will not be discussed in class, though they are required. Take them
as a reading assignment.
A brief history of European Economic Integration
(See also: “The History of the European Union,” http://europa.eu.int/abc/history/index_en.htm )
Stages of Enlargement
Early stages of Integration
Treaty of Rome
The Single European Act
Treaty of Maastricht
Treaty of Amsterdam
Treaty of Nice
European institutions
Objectives of the Treaty
The purpose of this lecture is not to master the history of European Integration, but to
set up the framework for the study of the complex process of economic enlargement.
Stages of enlargement
1951—ECSC: France, Germany, Italy, Benelux
1957—Treaty of Rome – 6 members
1973— UK switched from EFTA to EC (after two failed attempts in 1963 and
1967), Denmark joined because its agricultural exports were critically
dependent on UK markets; Ireland joined because of the existing Irish-British
FTA and because of the traditional Irish policy of pegging its punt to the pound
sterling.
(9 members)
1981— Greece changed its statute of associate to full membership, partly to “lock in”
democracy after a period of military dictatorship. (10 members)
1986— Spain and Portugal became EC members. (12 members)
(1990—GDR – East Germany- came into the EC by unification with West Germany)
1995— Austria, Finland and Sweden (a referendum in Norway rejected membership)
(15 members)
(2004–– The Czech Republic, the Republic of Estonia, the Republic of Cyprus, the
Republic of Latvia, the Republic of Lithuania, the Republic of Hungary, the
Republic of Malta, the Republic of Poland, the Republic of Slovenia and the
Slovak Republic –– pending on ratification by each of the accession countries)
(25 members)
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Economic Aspects of EU Eastern Enlargements
Lecture notes #0
Fall 2005
Early stages of Integration
Post WWII European economy was characterized by
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o
o
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High tariffs and quotas
Inconvertible currencies
Supply bottlenecks
Dollar shortage
Too few trading opportunities
Global approach to market integration (multilateralism), though valuable as a longterm goal, could not address the needs of the post WWII Europe.
Global Institutions: the IMF (for money, exchange rates and balance of payments
problems), the World Bank, the International Trade Organization (for Trade,
investment, and related economic policies)
Multilateralism proved too ambitious, because
o It was not generally accepted
o Some economies, ruined after the war, were too weak to live up to the
requirement of global institutions
o No appropriate response to the challenge of the cold war between the
Soviet Union and the USA.
In 1948, the US took the initiative to support European regionalism. The result of this
initiative was the Marshall Plan, which was a direct financial aid to Europe conditional
on intra-European cooperation.
On the basis of the European Rehabilitation Program (Marshall Plan)  OEEC
(Organization for European Economic Cooperation)
Benelux announced customs union in 1948. France proposes to join the Benelux CU,
but it is refused.
European Coal and Steel Community (Paris Treaty) in 1951—an attempt to integrate
the “war industries” (France, Germany, Italy, Belgium, the Netherlands, Luxembourg)
o Common market for the two sectors
o Dedicated to the political goal of providing a framework for FrancoGerman reconciliation.
o Strong supranational central institutions, balanced by intergovernmental
parliamentary and consultatory institutions.
Treaty of Rome (1957)
(ECC—European Economic Community; EURATOM—European Atomic Energy
Commission)
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Economic Aspects of EU Eastern Enlargements
Lecture notes #0
Fall 2005
Aims: Balanced and harmonious economic growth (“Economic growth under
conditionality”), improved stability, increasing standards of living
Means:
o Customs Union
o Free movements of goods, services and capital
o Common policies on external trade, agriculture, and competition
o Harmonization of fiscal and economic regulations
o Approximation of economic policies (e.g. competition, agriculture,
transport)
o Budget (small)
o Common (supranational) institutions
Institutions:
o Council of Ministers (legislature)
o Commission (Government, administration)
o Parliament (consultative)
o Court of Justice (judicial review)
A critical assessment of the Treaty of Rome
Positive:
 An unprecedented achievement
 Distinctly more market oriented in ideology compared to ECSC and less
supranational
Negative:
 No effective means to ensure convergence, macroeconomic stability and fair
distribution
 Long periods of transition
 Inefficient decision-making (requirement for unanimity in the Council of
Ministers)
The Single European Act (1986, Luxembourg)
The Single European Act reforms the Treaty of Rome with the aim of completing a
forntierless internal market by the end of 1992.
 The internal market is defined as an area without frontiers
 Addition of provisions concerning environment, R&D, and EMS cooperation
 Mutual recognition of national product standards, as a regulatory principle
 More qualified majority voting on internal market matters—avoiding deadlocks
 Official role for the European Council
 Greater powers for the European Parliament
 Established (enlarged) structural funds to promote cohesion (political price to make
the Mediterranean countries support the program)
1993 (January 1) The European Single Market becomes reality for the 345 million
people in the twelve EC member states. Cessation of border formalities for
goods, services, and capital in this area.
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Economic Aspects of EU Eastern Enlargements
Lecture notes #0
Fall 2005
Maastricht Treaty on European Union, 1992
1991 In the Dutch town of Maastricht, the European Council agrees on the Treaty on
European Union, consisting of Economic and monetary Union (completion by
1999), and Political Union, which proposes a joint internal, Justice, Foreign and
Security Policy.
1992 The Treaty was signed by the foreign ministers of the member countries but
requires ratification by all 12 members states.
1993 The Treaty takes effect (Nov. 1)
 Establishes the EMU (European Monetary Union)
 Common macroeconomic policies, based on a new institution, the
European Central Bank, established in 1998 in Frankfurt
 Reformulation of economic aims:
o Balanced development of economic activities
o Sustainable and non-inflation growth, respecting the
environment.
o A high degree of convergence of economic performance
o Promoting convergence of economic performance
o Raising the standard of living in the member countries
o Economic and social cohesion
o Introduction of principle of subsidiary
Treaty of Amsterdam, 1997
Economic Objective: Strengthen the provisions concerning employment.
Means: New or extended competences in areas of consumer protection, employment,
Environment, public health, free movement of persons.
Treaty of Nice, 2002
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
Institutional reform, little value-added from economic point of view.
Enhanced cooperation—conditions under which sub-groups of EU members
might be allowed to proceed with further integration.
Enhanced Cooperation:
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Multi-speed Europe (all states moving towards the same objectives but at
different speeds) vs. variable geometry (deeper cooperation between some
states compared to others.)
Variable geometry may lead to two-tier Europe and fragmented decisionmaking vs. need for flexibility in a more heterogeneous Europe.
Enhanced cooperation must further the objectives of the Union, does not
undermine the single market or economic and social cohesion, involves a
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Economic Aspects of EU Eastern Enlargements
Lecture notes #0
Fall 2005
minimum of eight states and remains open to all Member States (Treaty of Nice
safeguards)
European Institutions
European Council (Art. 4 of the TEU—Treaty on European Union “the Treaty”)
o Heads of states or governments of the member States and the President
of the Commission.
European Parliament (Art. 189-201)
o The representatives… shall be elected by direct universal suffrage
o The number of members… shall not exceed seven hundred (Nice: 732)
Council of Ministers (Art. 201-210) (“the Council”)
o Ensure coordination of the general economic policies
o Have the power to take decisions
o Confer the Commission … powers for the implementation of the rules
which the Council lays down
o Act by a majority of its members or when required, by a qualified
majority
European Commission (Art. 211-219)
o Ensure the proper functioning and development of the Common Market.
o Exercise the powers conferred to it by the Council for the
implementation of the rules laid down by the latter.
o The Commission shall consist of 20 Members, who shall be chosen on
the grounds of general competence and whose independence is beyond
doubt. The number of Members of the Commission may be altered by
the Council, acting unanimously.
o The commission must include at least one national of Each Member
State, but no more than two.
(Nice: When the Union consists of 27 MS, the number of the Commission
Members shall be less… and chosen accordingly to a rotation system as
decided unanimously)
Court of Justice (Art. 220-245)
o Shall insure that in the interpretation and application of this Treaty
the law is observed
The objectives of the European Union
Objectives are listed in the Preamble, Common Provisions, and Final Provisions of the
Treaty.
o End the division of the European continent
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Economic Aspects of EU Eastern Enlargements
Lecture notes #0
Fall 2005
o Confirm the attachment to the principles of liberty, democracy and
respect for human rights and fundamental freedoms and the rule of
law
o Deepen the solidarity between the peoples while respecting their
history, their culture and their traditions.
o (Build) an ever-closer union in which the decisions are taken as
openly as possible and as closely as possible to the citizen.
o Respect the national identities of its Member States.
o Accept application of membership of the union from any European
state, which respects the principles set out in Art. 6(1) (human
rights, fundamental freedoms, respect of minorities, etc.
o Promote economic and social progress for their peoples, taking into
account the principle of sustainable development and within the
context of the internal market and of reinforced cohesion and
environmental protection.
The objectives of the EU are not primarily economic. This makes EU to be more than
a forum for economic cooperation and the Treaty something similar to a constitution,
though, with an emphasis on economic issues.
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