The European Union (EU) is a political and economic partnership that represents a unique form of cooperation among sovereign countries. The Union is the latest stage in a process of integration begun after World War II, initially by six Western European countries, to foster interdependence and make another war in Europe unthinkable. Today, the EU is composed of 28 member states, including most of the countries of Central and Eastern Europe, and has helped to promote peace, stability, and economic prosperity throughout the European continent.
The EU has been built through a series of binding treaties, and over the years, EU member states have sought to harmonize laws and adopt common policies on an increasing number of economic, social, and political issues. EU member states share a customs union; a single market in which goods, people, and capital move freely; a common trade policy; and a common agricultural policy. Nineteen EU member states use a common currency (the euro), and 22 participate in the Schengen area of free movement in which internal border controls have been eliminated. In addition, the EU has been developing a Common Foreign and Security Policy (CFSP), which includes a Common Security and Defense Policy (CSDP), and pursuing cooperation in the area of Justice and Home Affairs (JHA) to forge common internal security measures.
EU member states work together through several institutions to set policy and to promote their collective interests. Key EU institutions include the European Council, composed of EU Heads of State or Government, which acts as the strategic guide and driving force for EU policy; the European Commission, which upholds the common interest of the Union as a whole and functions as the EU’s executive; the Council of the European Union (also known as the Council of Ministers), which represents the national governments; and the directly elected European Parliament, which represents the citizens of the EU.
EU decision-making processes and the role played by the EU institutions vary depending on the subject under consideration. For most economic and social issues, EU member states have largely pooled their national sovereignty, and EU decision-making has a supranational quality. Decisions in other areas, such as foreign policy, require the unanimous consensus of all 28 member states.
What Is the European Union?
The European Union (EU) is a political and economic partnership that represents a unique form of cooperation among 28 member states (see the map in the Appendix). (1) Built through a series of binding treaties, the Union is the latest stage in a process of integration begun after World War II to promote peace and economic prosperity in Europe. Its founders hoped that by creating specified areas in which member states agreed to share sovereignty-initially in coal and steel production, economics and trade, and nuclear energy-it would promote interdependence and make another war in Europe unthinkable. Since the 1950s, this European integration project has expanded to encompass other economic sectors; a customs union; a single market in which goods, people, and capital move freely; a common trade policy; a common agricultural policy; many aspects of social and environmental policy; and a common currency (the euro) that is used by 19 member states. Since the mid-1990s, EU member states have also taken significant steps toward political integration, with decisions to develop a Common Foreign and Security Policy (CFSP) and efforts to promote cooperation in the area of Justice and Home Affairs (JHA), which is aimed at forging common internal security measures. Twenty-two EU members participate in the Schengen area of free movement, which allows individuals to travel without passport checks among most European countries.
How Does the EU Work?
EU member states work together through common institutions to set policy and promote their collective interests. Over the past several decades, EU members have progressively committed to harmonizing laws and adopting joint policies on an extensive and increasing number of issues. However, decision-making processes and the role of the EU institutions vary depending on the subject under consideration.
On a multitude of economic and social policies (previously termed Pillar One, or the European Community), EU members have essentially pooled their sovereignty and EU institutions hold executive authority. Integration in these fields-which range from trade and agriculture to health and the environment-has traditionally been the most developed and far-reaching. EU decisions in such areas often have a supranational quality because most are subject to a complex majority voting system among the member states and are legally binding.
For issues falling under the Common Foreign and Security Policy (once known as Pillar Two), EU member states have agreed to cooperate, but most decision-making is intergovernmental and requires the unanimous agreement of all 28 EU countries. Thus, member states retain more discretion over their participation as any one country can veto a decision. For many years, unanimous agreement among the member states was also largely the rule for policy-making in the Justice and Home Affairs area (formerly Pillar Three); recently, however, EU member states agreed to accelerate integration in the JHA field by extending the use of the EU’s majority voting system to most JHA issues and giving EU institutions a greater role in JHA policy-making.
How Is the EU Governed?
The EU is governed by several institutions. They do not correspond exactly to the traditional branches of government or division of power in representative democracies. Rather, they embody the EU’s dual supranational and intergovernmental character:
The European Council acts as the strategic guide for EU policy. It is composed of the Heads of State or Government of the EU’s member states and the President of the European Commission; it meets several times a year in what are often termed “EU summits.” The European Council is headed by a President, appointed by the member states to organize the Council’s work and facilitate consensus.
The European Commission is essentially the EU’s executive and upholds the common interest of the EU as a whole. It implements and manages EU decisions and common policies, ensures that the provisions of the EU’s treaties are carried out properly, and has the sole right of legislative initiative in most policy areas. It is composed of 28 Commissioners, one from each country, who are appointed by agreement among the member states to five-year terms and approved by the European Parliament. One Commissioner serves as Commission President; the others hold distinct portfolios (e.g., agriculture, energy, trade). On many issues, the Commission handles negotiations with outside countries. The Commission is also the EU’s primary administrative entity.
The Council of the European Union (also called the Council of Ministers) represents the 28 national governments. The Council enacts legislation, usually based on proposals put forward by the Commission, and agreed to (in most cases) by the European Parliament. Different ministers from each country participate in Council meetings depending on the subject under consideration (e.g., foreign ministers would meet to discuss the Middle East, agriculture ministers to discuss farm subsidies). Most decisions are subject to a complex majority voting system, but some areas-such as foreign and defense policy, taxation, or accepting new members-require unanimity. The Presidency of the Council rotates among the member states, changing every six months; the country holding the Presidency helps set agenda priorities and organizes most of the work of the Council.
The European Parliament represents the citizens of the EU. It consists of 751 members who are directly elected for five-year terms (the most recent elections were in May 2014). Each EU country has a number of seats roughly proportional to the size of its population. Although the Parliament cannot initiate legislation, it shares legislative power with the Council of Ministers in many policy areas, giving it the right to accept, amend, or reject the majority of proposed EU legislation in a process known as the “ordinary legislative procedure” or “co-decision.” The Parliament also decides on the allocation of the EU’s budget jointly with the Council. Members of the European Parliament (MEPs) caucus according to political affiliation, rather than nationality; there are eight political groups and a number of non-attached MEPs.
Other institutions also play key roles. The Court of Justice interprets EU laws and its rulings are binding; a Court of Auditors monitors financial management; the European Central Bank manages the euro and EU monetary policy; and advisory committees represent economic, social, and regional interests.
What Is the Lisbon Treaty?
On December 1, 2009, the EU’s latest institutional reform endeavor-the Lisbon Treaty-came into force following its ratification by all of the EU’s then-27 member states. It is the final product of an effort begun in 2002 to reform the EU’s governing institutions and decision-making processes in order to enable an enlarged Union to function more effectively. In addition, the treaty seeks to give the EU a stronger and more coherent voice and identity on the world stage, and to increase democracy and transparency within the EU. (2)
To help accomplish these goals, the Lisbon Treaty established two new leadership positions. The President of the European Council, chosen by the member states for a term of two and one-half years (renewable once), now chairs the meetings of the 28 EU Heads of State or Government, serves as coordinator and spokesman for their work, seeks to ensure policy continuity, and strives to forge consensus among the member states. The Lisbon Treaty also created a dual-hated position of High Representative of the Union for Foreign Affairs and Security Policy to serve essentially as the EU’s chief diplomat. The High Representative is both an agent of the Council of Ministers-and thus speaks for the member states on foreign policy issues-as well as a Vice President of the European Commission, responsible for managing most of the Commission’s diplomatic activities and foreign assistance programs.
Among other key measures, the Lisbon Treaty simplifies the EU’s qualified majority voting system and expands its use to policy areas previously subject to member state unanimity in the Council of Ministers; this change was intended in part to speed EU decision-making and improve its efficiency. Nevertheless, in practice, member states will likely still strive for consensus on sensitive policy issues (such as police cooperation, immigration, and countering terrorism) that are usually viewed as central to a nation-state’s sovereignty. At the same time, the mere possibility of a vote may make member state governments more willing to compromise and reach a common policy decision.
In addition, the Lisbon Treaty increases the relative power of the European Parliament in an effort to improve democratic accountability. It strengthens the Parliament’s role in the EU’s budgetary process and extends the use of the “co-decision” procedure to more policy areas, including agriculture and home affairs issues. (3) As such, the treaty gives the Parliament a say equal to that of the member states in the Council of Ministers over the vast majority of EU legislation (with some exceptions, such as most aspects of foreign and defense policy). In addition, the Lisbon Treaty provides national parliaments with a degree of greater authority to challenge draft EU legislation and allows for the possibility of new legislative proposals based on citizen initiatives.
EU Positions and Current
The President of the European Council is Donald Tusk, a former prime minister of Poland. Appointed by the member states for a two-and-one-half year term, Tusk assumed office on December 1, 2014.
The President of the European Commission is Jean-Claude Juncker, a former prime minister of Luxembourg. The so-called “Juncker Commission” took office in November 2014. The Commission President and the other 27 Commissioners are appointed by agreement among the member states, subject to the approval of the European Parliament. In selecting the Commission President, member states must take into account the results of the most recent European Parliament elections.
The Netherlands holds the Presidency of the Council of Ministers (often termed the “EU Presidency”) from January to June 2016; Slovakia will hold the Presidency from July to December 2016.
Every two-and-a-half years (twice per each five-year parliamentary term) Members of the European Parliament (MEPs) elect the President of the European Parliament, currently German MEP Martin Schulz, of the center-left Progressive Alliance of Socialists and Democrats (S&D) parliamentary group. Schulz was re-elected to this position in July 2014, following the most recent European Parliament elections.
The High Representative of the Union for Foreign Affairs and Security Policy is Federica Mogherini of Italy. The High Representative is chosen by agreement among the member states but like the other members of the Commission, must also be approved by the European Parliament.
What Is the Euro and the Euro zone Crisis?
Nineteen of the EU’s 28 member states use a common single currency, the euro, and are often collectively referred to as “the Eurozone.”(4) The gradual introduction of the euro began in January 1999 when 11 EU member states became the first to adopt it and banks and many businesses started using the euro as a unit of account. Euro notes and coins replaced national currencies in participating states in January 2002. Euro zone participants share a common central bank-the European Central Bank (ECB)-and a common monetary policy. However, they do not have a common fiscal policy, and member states retain control over decisions about national spending and taxation, subject to certain conditions designed to maintain budgetary discipline. Lithuania became the most recent country to join the Euro zone on January 1, 2015.
The “Euro zone crisis” began as a sovereign (or public) debt crisis in Greece in 2009-2010. Over the previous decade, the Greek government borrowed heavily from international capital markets to pay for its budget and trade deficits. This left Greece vulnerable to shifts in investor confidence. As investors became increasingly nervous in 2009 that the government’s debt was too high amid the global financial crisis, markets demanded higher interest rates for Greek bonds, which drove up Greece’s borrowing costs. By early 2010, Greece risked defaulting on its public debt. Market concerns then spread to several other Euro zone countries with high, potentially unsustainable levels of public debt, including Ireland, Portugal, Spain, and Italy. The debt problems of these countries also posed a risk to the European banking system, slowed economic growth, and led to increased unemployment in many Euro zone countries.
European leaders and EU institutions responded to the crisis and sought to stem its contagion with a variety of policy mechanisms. In order to avoid default, Greece, Ireland, Portugal, and Cyprus received “bail-out” loans from the EU and the International Monetary Fund (IMF). Such assistance, however, came with some strings attached, including the imposition of strict austerity measures. Spain (the Euro zone’s fourth-largest economy) also enacted significant austerity measures, and Euro zone leaders approved a recapitalization plan for Spanish banks. Other key initiatives have included the creation of a permanent EU financial assistance facility (the European Stability Mechanism, or ESM) to provide emergency support to Euro zone countries in financial trouble; a decision to create a single bank supervisor for the Euro zone, under which the ESM would be able to inject cash directly into ailing Euro zone banks; and ECB efforts to calm the financial markets by purchasing large portions of European sovereign debt and providing significant infusions of credit into the European banking system.
The Euro zone crisis began to abate in late 2012 as market confidence became more positive, and the situation has stabilized in most Euro zone countries. Ireland exited the EU-IMF financial assistance program in December 2013, and Portugal did so in May 2014; both countries have returned to the bond markets. EU aid to Spanish banks has also ceased, and Cyprus is expected to complete its financial assistance program in spring 2016. Nevertheless, experts assert that the Euro zone remains fragile; many member states continue to experience weak economic growth and high unemployment. In particular, Greece’s economy and banking system remain in distress.
In the first half of 2015, prospects grew that Greece might exit the Euro zone (dubbed “Grexit”) as the Greek government-led by the leftist, anti-austerity Syriza party-sought further financial assistance from Greece’s Euro zone creditors but also demanded debt relief and an easing of austerity. For months, negotiations foundered. While France and Italy emphasized the political importance of the Euro zone, Germany (and others such as the Netherlands, Finland, Slovakia, and Slovenia) stressed that all members, including Greece, must adhere to Euro zone fiscal rules. By the end of June, Greece failed to make a payment to the IMF, and the government closed the banks and imposed capital controls. On July 5, Greek voters rejected calls from fellow Euro zone members for further austerity in a public referendum, seemingly increasing the possibility of “Grexit.” On July 12-13, however, the Syriza-led government acceded to EU demands for more austerity and economic reforms in exchange for the badly needed financial assistance. Although “Grexit” appears to have been averted for now, Greece still faces a long road toward economic recovery, and the threat of “Grexit” may still loom in the longer term.(5)
The most recent crisis over Greece significantly challenged the EU as an institution and the future of the EU integration project. From its start six years ago, the Euro zone crisis forced EU leaders to grapple with weaknesses in the Euro zone’s structure and the common currency’s future viability. It also generated tensions among member states over the proper balance between imposing austerity measures versus stimulating growth and whether greater EU fiscal integration was necessary. The fraught negotiations with Greece in 2015 produced an even higher degree of acrimony and a serious lack of trust among EU member states. Many analysts suggest that the crisis has threatened the core EU principle of solidarity and point to it as an indication that member states are increasingly prioritizing narrow national agendas. Some suggest that given how very close the EU came to “Grexit,” the crisis has undermined the integrity of the Euro zone and raised questions about its irreversibility. Others contend that the EU has taken steps over the last few years to strengthen the Euro zone’s architecture and improve fiscal discipline and those EU governments and leaders remain strongly committed to the EU project.
Why and How Is the EU Enlarging?
The EU views the enlargement process as an extraordinary opportunity to promote stability and prosperity in Europe. Since 2004, EU membership has grown from 15 to 28 countries, bringing in most states of Central and Eastern Europe. The EU began as the European Coal and Steel Community in 1952 with six members (Belgium, France, Germany, Italy, Luxembourg, and the Netherlands). In 1973, Denmark, Ireland, and the United Kingdom joined what had then become known as the European Community. Greece joined in 1981, followed by Spain and Portugal in 1986. In 1995, Austria, Finland, and Sweden acceded to the present-day European Union. In 2004, the EU welcomed eight former communist countries-the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia-plus Cyprus and Malta as new members. Bulgaria and Romania joined in 2007. Croatia became the 28th member in July 2013.
In order to be eligible for EU membership, countries must first meet a set of established criteria, including having a functioning democracy and market economy. Once a country becomes an official candidate, accession negotiations are a long and complex process in which the applicant must adopt and implement a massive body of EU laws and regulations. The carefully managed process of enlargement is one of the EU’s most powerful policy tools, and that, over the years, it has helped transform many European countries into functioning democracies and more affluent societies.
Six countries are currently recognized by the EU as official candidates for membership: Albania, Macedonia, Montenegro, Serbia, Turkey, and Iceland.(6) All are at different stages of the accession process. For example, while Albania was just named as an official candidate in June 2014, accession negotiations have been underway with Turkey since 2005. It will likely be many years before most of the current candidates are ready to join the EU. Bosnia-Herzegovina and Kosovo are also recognized as potential future EU candidates.
The EU maintains that the enlargement door remains open to any European country that fulfills the EU’s political and economic criteria for membership. Nevertheless, some European leaders and many EU citizens are cautious about additional EU expansion, especially to Turkey or countries farther east, such as Georgia or Ukraine, in the longer term. Worries about continued EU enlargement range from fears of unwanted migrant labor to the implications of an ever-expanding Union on the EU’s institutions, finances, and overall identity. Observers note that such qualms are particularly apparent with respect to Turkey’s possible EU accession, given Turkey’s large size, predominantly Muslim culture, and relatively less prosperous economy.(7)