(2) What the EU is for?

How the EU works

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The 1960s: de Gaulle against the federalists

In June 1958, less than six months after the Rome Treaties came into force, de Gaulle became French President. He did not like the federal elements and aspirations of the Community. But nor was he prepared to challenge directly treaties recently ratified by France. He sought, rather, to use the Community as a means to advance French power and leadership. One example was his sidelining of Euratom in order to keep the French atomic sector national. Another was his veto which terminated in 1963 the first negotiations to enlarge the Community to include Britain, Denmark, Ireland, and Norway. Although the British government’s conception of the Community was closer to that of de Gaulle than of the other, more federalist-minded member states’ governments, and Britain’s defence of its agricultural and Commonwealth interests had irked them by making the negotiations hard and long, they resented the unilateral and nationalist manner of the veto so deeply that it provoked the first political crisis within the Community. This was followed, in 1965, by a greater crisis over the arrangements for the common agricultural policy (CAP).

The CAP had from the outset been a key French interest and de Gaulle was determined to have it established without undue delay. It was to be based on price supports requiring substantial public expenditure. Both France and the Commission agreed that this should come from the budget of the Community, not the member states. But the Commission, with its federalist orientation, and the Dutch parliament, with its deep commitment to democratic principles, insisted that the budget spending must be subject to parliamentary control; and since a European budget could not be take instructions from any other body controlled by six separate parliaments, it would have to be done by the European Parliament. This suited the other governments well enough, but was anathema to de Gaulle. He precipitated the crisis of ‘the empty chair’, forbidding his ministers to attend meetings of the Council throughout the second half of 1965 and evoking fears among the other states that he might be preparing to destroy the Community.

Neither side was willing to give way nor the episode concluded in January 1966 with the so-called ‘Luxembourg compromise’. The French government asserted a right of veto when interests ‘very important to one or more member states’ are at stake; and the other five affirmed their commitment to the treaty provision for qualified majority voting on certain questions, which was that very month due to come into effect for votes on a wide range of subjects. In practice de Gaulle’s view prevailed for the next two decades, so that Luxembourg ‘veto’ seems a more accurate description than ‘compromise’.

In the mid-1980s, however, majority voting began to be practised in the context of the single market programme, and has now become the standard procedure applicable to most legislative decisions. Despite these conflicts between the intergovernmental and the federal conceptions, the customs union was completed by July 1968, earlier than the treaty required. Its impact had already been felt not only internally but also in the Community’s external relations. Wielding the common instrument of the external tariff, the Community was becoming, in the field of trade, a power comparable to the United States. President Kennedy had reacted by proposing multilateral negotiations for major tariff cuts. Skillfully led by the Commission, the Community responded positively; and the outcome was cuts averaging one-third, initiating an era in which it was to become the major force for international trade liberalization.

Alongside the ups and downs of Community politics, the Court of Justice made steady progress in establishing the rule of law. Based on its treaty obligation to ensure that ‘the law is observed’, in judgments in 1963 and 1964 the Court established the principles of the primacy and the direct effect of Community law, so that it would be consistently applied in all the member states. Though without the means of enforcement proper to a state, respect for the law, based on the treaties and on legislation enacted by its institutions, provided cement that has bound the Community together.

Widening and some deepening: Britain, Denmark, Ireland join With de Gaulle’s resignation in 1969, French policy became more pragmatic. Britain, Denmark, Ireland, and Norway still sought entry; and the new President, Georges Pompidou, consented, on condition of agreeing CAP financing, as well as elements of ‘deepening’ such as monetary union and coordination of foreign policy. In addition to serving the French agricultural interest, these were intended to integrate Germany yet more firmly into the Community, as well as guard against the danger that widening the Community would weaken it. This fitted well with the strategic outlook of the German Chancellor, Willy Brandt, who was simultaneously opening to the Soviet bloc with Ostpolitik and binding Germany into the West with his plans for enlargement and monetary union.

 However, economic and monetary union would have to wait, as German desires for strong coordination of economic policy were a step too far for the French. The result was a system for cooperation on exchange rates that was too weak to survive the international currency turbulence of that period. Similarly, the system devised for foreign policy cooperation was strictly of the, Maastricht Treaty intergovernmental: this limited its impact. While France was able to secure a very favourable financial regulation for CAP, this was balanced by giving the European Parliamentthe power to share control of the budget with the Council, a decision consolidated in treaties in 1970 and 1975. While this was just a foot in the door to budgetary powers for the Parliament, it was to grow into a major element in the Union’s institutional structure.

Britain, together with Denmark and Ireland, joined the Community in January 1973, though the Norwegians rejected accession in a referendum. The British too were to vote in a referendum in 1975. Harold Wilson had replaced Edward Heath as Prime Minister in 1974 following an election victory by the Labour Party, which was turning more and more against the Community (a position that lasted into the 1980s). After a somewhat cosmetic ‘renegotiation’, the Wilson government did recommend continued membership; and in 1975 the voters approved it by a two-to-one majority. With Margaret Thatcher’s Conservatives coming to power in 1979, a new line of tension was opened, as she fought to ‘get our money back’, as she put it, by blocking much Community business until she secured agreement in 1984 to reduce Britain’s high net contribution to the Community’s budget.

As so often in the EU’s history, the 1970s saw the simultaneous development of both intergovernmental and supranational activities. French President Valéry Giscard d’Estaing, a Gaullist by tradition, launched both regular meetings of the European Council between national leaders, as well as direct elections to the European Parliament. The European Council was soon to play a central part in taking Community decisions, settling conflicts that ministers in the Council were unable to resolve, and agreeing on major package deals. Provision had already been made for direct elections in the treaties of the 1950s, but it was only now that governments agreed and the first elections were held in June 1979. This step towards representative democracy was to have a big impact on the Community’s future development. Of similar importance, 1979 also saw the creation of a system of exchange-rate stabilization-the European Monetary System (EMS)-which was to shape later discussions on monetary union.

Single market, Draft Treaty on European Union, southern enlargement

Jacques Delors became President of the Commission in January 1985. He had visited each member state to find out what major project was likely to be accepted by all of them. As a federalist in Monnet’s tradition, his short-list contained projects-single market, single currency, common defence policy, institutional reform-that could be seen as steps in a federal direction. But Thatcher, whose view of federalism was akin to de Gaulle’s, and so was hostile to the currency, defence, and institutional projects, was at the same time a militant economic liberal who saw the single market as an important measure of trade liberalization. European economies had lost momentum during the hard times of the 1970s and all the governments accepted the single market project as a way to break out of what was then called euro sclerosis. The project was strongly backed by the more dynamic firms and the main business associations, especially since the Luxembourg ‘compromise’ had served to let nontariff barriers to trade build up during the period.

The successful abolition of tariffs on internal trade had demonstrated the value of a programme with a timetable. So the Commission produced a list of some 300 measures to be enacted by the end of 1992 in order to complete the single market by removing the non-tariff barriers. The Commissioner in charge of the project was Lord Cockfield, a former minister in the Thatcher government; and the programme was rapidly drafted in time to be presented to the European Council in Milan in June 1985.

Delors: single market, single currency, single-minded European

Meanwhile the European Parliament had prepared a political project: a Draft Treaty on European Union, inspired by Altiero Spinelli, the leading figure since the 1950s among those federalists who saw the drafting of a constitution as the royal road to federation. The Draft Treaty was designed to reform the Community’s institutions so as to give them a federal character; to extend its powers to include most of those that would be normal in a federation, with the key exception of defence; and to come into effect when ratified by a majority of the member states, with suitable arrangements to be negotiated with any states that did not ratify. While there was widespread support for the draft in most of the founder states, the German government was among those that were not prepared to countenance the probable exclusion of Britain. President Mitterrand did, however, express support for the draft, albeit in somewhat equivocal terms; and its main proposals were presented to the European Council in Milan along with the Commission’s single market project.

The European Council decided to convene an Intergovernmental Conference (IGC) on treaty amendment, overriding British, Danish, and Greek opposition with its first-ever use of a majority vote. The IGC considered amendments relating not only to the single market programme but also to a number of the proposals in the Parliament’s Draft Treaty. The outcome was the Single European Act, which provided for completion of the single market by 1992; gave the Community competences in the fields of the environment, technological research and development, social policies relating to employment, and ‘cohesion’; and brought foreign policy cooperation into the Treaty’s architecture (albeit with the retention of distinct intergovernmental procedures)-hence the title Single European Act, to distinguish it from a proposal to keep foreign policy separate. The Single Act also provided for qualified majority voting in a number of areas of single market legislation, and strengthened the European Parliament through a ‘cooperation procedure’ which gave it influence over such legislation, together with a procedure requiring its assent to treaties of association and accession.

Spinelli voting for his Draft Treaty on European Union

The Community was enlarged in 1981 to include Greece and, in 1986, Portugal and Spain. All three had been ruled by authoritarian regimes and saw the Community as a support for their democracies as well as for economic modernization. The Community for its part wanted them to be viable member states and to be supportive of its projects, such as the single market. It was to this end that the cohesion policy, based on a doubling of the structural funds for assisting the development of economically weaker regions, was included in the Single Act.

Thus the Single Act strengthened both the Community’s powers and its institutions, with influence from a combination of governments, economic interests, social concerns, the Commission, the Parliament, and a variety of federalist forces. It was succeeded by the Maastricht, Amsterdam, Nice, and Lisbon Treaties, likewise strengthening both powers and institutions, and responding to similar combinations of pressures. This would not have happened had the Single Act not been successful. But the prospect of the single market helped to revive the economy, and the Community institutions gained in strength as they dealt with the vast programme of legislation.

Spinelli died a few weeks after the signing of the Single Act under the impression that it was a failure: ‘a dead mouse’, as he put it. In fact it initiated a relaunching of the Community which may have been as far-reaching in its effects as that which led to the Treaties of Rome.

Maastricht and Amsterdam Treaties, enlargement from 12 to 15

Following his success with the single market, Delors was determined to pursue the project of the single currency. Thatcher had not been alone in opposing it. Most Germans, proud of the Deutschmark as the Community’s strongest currency, were decidedly unenthusiastic. But it remained a major French objective, for economic as well as political reasons; and Helmut Kohl, a long-standing federalist, held that it would be a crucial step towards a federal Europe. While he facilitated the preparation of plans for the single currency, however, he faced difficulty in securing the necessary support in Germany.

The events of 1989 were a seismic upheaval. With the disintegration of the Soviet bloc, which opened up the prospect of enlarging the Community to the East, German unification also became possible. But Kohl needed Mitterrand’s support: both for formal reasons because France, as an occupying power, had the right to veto German unification; and, pursuing the policy initiated by Brandt, to ensure that new eastern relationships did not undermine the European Community and the Franco-German partnership. Mitterrand saw the single currency as the way to anchor Germany irrevocably in the Community system, and hence as a condition for German unification; and this ensured for Kohl the necessary support in Germany to proceed with the project.

The result was the Maastricht Treaty, which provided not only for the euro and the European Central Bank but also for other competences and institutional reforms. The Community was given some powers in the fields of education, youth, culture, and public health. Its institutions were strengthened in a number of ways, including more scope for qualified majority voting in the Council. The role of the European Parliament was enhanced through a ‘co-decision’ procedure that required its approval as well as that of the Council for laws in a number of fields; and it secured the right to approve-or not-the appointment of each new Commission. Two new ‘pillars’ were set up alongside the Community:  one for a ‘common foreign and security policy’; the other, relating to freedom of movement and internal security, for what was called ‘cooperation in justice and home affairs’-renamed in the Amsterdam Treaty as ‘police and judicial cooperation in criminal matters’. The basis for both was intergovernmental, though they were related to the Community institutions. The whole to encourage wieldy structure was named the European Union, with the first, central, Community pillar as well as the other two.

Although John Major had succeeded Mrs. Thatcher as Prime Minister with the avowed intention of moving to ‘the heart of Europe’, he insisted that Britain would participate neither in the single currency nor in a ‘social chapter’ on matters relating to employment. In order to secure agreement on the treaty as a whole, it was accepted that Britain could opt out of both, together with Denmark as far as the single currency was concerned.

The Maastricht Treaty was signed in February 1992 and entered into force in November 1993 after a number of vicissitudes: two Danish referendums, in the first of which it was rejected and in the second approved after some small adjustments had been made; a French referendum in which the voters accepted it by a tiny majority; in London, a fraught ratification process in the House of Commons; and in Germany, a lengthy deliberation by the Constitutional Court before it rejected a claim that the treaty was unconstitutional. These episodes, together with evidence that citizens’ approval of the Union was declining in most member states, seemed alarming, particularly to people of federalist orientation.

The more federalist among the governments, however, felt that the Maastricht Treaty did not go far enough. With the decisive new monetary powers and the prospect of further enlargement, they wanted to make the Union more effective and democratic. By the time the Treaty entered into force, accession negotiations with Austria, Finland, and Sweden had already begun, and Cyprus, Malta, Norway, and Switzerland had lodged their applications. Norway negotiated an accession treaty but it was again rejected in a referendum; and the Swiss government withdrew its application after defeat in a referendum on the much looser European Economic Area. Negotiations with Cyprus and Malta were to begin in 1998 and 2001 at the same times as those with ten Central and East European states, following the European Council’s decision that the latter could join when they fulfilled the economic and political conditions. But Austria, Finland, and Sweden acceded in 1995. So the Maastricht Treaty was followed in 1996 by another IGC, from which emerged the Amsterdam Treaty, signed in 1997 and in force in 1999.

The Amsterdam Treaty revisited a number of the Union’s competences, including those relating to the two intergovernmental pillars. A new chapter on employment was added to the Community Treaty, reflecting concern about the unemployment that had persisted through the 1990s at a level around 10 per cent, together with fears that it might be aggravated if the European Central Bank were to pursue a tight money policy.

Among the institutions, the European Parliament gained most, with co-decision extended to include the majority of legislative decisions, and the right of approval over the appointment not only of the Commission as a whole, but before that, of its President. Since the President, once approved, was given the right to accept or reject the nominations for the other members of the Commission, the Parliament’s power over the Commission was considerably enhanced. Its part in the process that led to the Commission’s resignation in March 1999 and in the appointment of the new Commission demonstrated the significance of parliamentary control over the executive. The treaty also gave the Commission’s President more power over the other Commissioners.

At the same time as adding these federal elements to the institutions, the Amsterdam Treaty reflected fears that the Union would not be able to meet the challenges ahead if new developments were to be inhibited by the unanimity procedure. This led to a procedure of ‘enhanced cooperation’, allowing a group of member states to proceed with a project in which a minority did not wish to participate, though at the time of writing the procedure has not yet been used. Six weeks before the meeting of the European Council in Amsterdam that reached agreement on the treaty, Tony Blair became Prime Minister following Labour’s election victory. The new British government adopted the social chapter and, expressing a more favourable attitude towards the Union, accepted without demur such reforms as the increase in the Parliament’s powers. But Britain, along with Denmark and Ireland, did opt out of the provision to abolish frontier controls, along with the partial transfer of the related cooperation in justice and home affairs to the Community pillar, even if the British government was later to cooperate quite energetically in that field. As regards external security, Europe’s weak performance in former Yugoslavia had spurred demands for a stronger defence capacity; and Britain both accepted provision for this in the Amsterdam Treaty and then joined with France to initiate action along these lines.

Enlargement to 28, Constitutionalization, and Lisbon

Following their emergence from Soviet domination, ten Central and East European states obtained association with the Union, and then sought accession. They faced an enormous task of transforming their economies and polities from centralized communist control to the market economies and pluralist democracies that membership required. But by 1997 the Union judged that five of them had made enough progress to justify starting accession negotiations in the following year; and negotiations with another five opened in January 2000. By 2004, accession was completed for the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia, together with Cyprus and Malta; and Bulgaria and Romania joined in 2007. Turkey’s candidature was also recognized; but the economic and political problems were such that negotiations were not opened until 2005 and look set to continue for many years yet, especially in light of opposition from several member states.

With such a formidable enlargement ahead, the question of deepening arose again. Reform of some policies was necessary, in particular for agriculture and the structural funds. The Commission’s proposals for this, entitled Agenda 2000, were partially adopted, though further measures were required. As regards reform of the institutions, another IGC was convened in 2000, leading to the Nice Treaty which was signed in 2001 and in force in 2002.

The result was an inadequate response to the prospect of nearly doubling the number of member states. It introduced modest increases in the scope of qualified majority voting in the Council and of legislative co-decision with the Parliament, and some procedural improvements for the Court of Justice. It addressed the growth in the number of Commissioners accompanying enlargement by further enhancing the power of the President over the other Commissioners and taking some steps to limit their number. It also saw the ‘solemn proclamation’ of the Charter of Fundamental Rights, as a means of strengthening the Union’s provisions in this field. But the weighting of votes in the Council and the number of MEPs for each state became the subject of unprincipled horse-trading, with an outcome that is not comprehensible to the vast majority of citizens. The German and Italian governments found the Treaty so unsatisfactory that they proposed a ‘deeper and wider debate about the future of the Union’; and the European Council in December 2001, under Belgian presidency, decided to establish a Convention a vice-president of the , Maastricht Treaty to make further proposals to an IGC in 2004.

The Laeken Declaration, named after the Brussels suburb where the European Council met, was cleverly crafted to secure unanimous agreement by including, in what amounted to terms of reference for the Convention, items aimed at the more intergovernmentalist as well as the more federalist members. So the Convention met in February 2002 with a very broad remit, and its 105 members covered a wide spectrum of political orientations, with two MPs from each of the then 27 member and candidate states plus Turkey as a forthcoming candidate, 16 MEPs, one representative of each government, two members of the European Commission, a President, and two Vice-Presidents.

The President of the Convention, former French President Valéry Giscard d’Estaing, steered a deft course between federalism and intergovernmentalism. The majority of its members, including MPs from member states, preferred a more federal than intergovernmental orientation; and Giscard satisfied them by favouring elements of federal reform within the Community pillar. But the amended EU Treaty drafted by the Convention would not be unanimously accepted by the ensuing IGC if the federal elements intruded too far into the fields of common foreign and security policy, and macroeconomic policy. Nor would some of the representatives of heads of government in the Convention have accepted the consensus that Giscard sought as the outcome of its work; and Giscard himself may well have sympathized with this view. So he steered the Convention towards more intergovernmental proposals in those fields. In July 2003 it acclaimed a consensus on a draft Constitution. Its main thrust was towards more effective and democratic institutions, while also tidying up much of the existing Treaty provisions for common policies, and provided a basis for further development of a common defence. The IGC was convened in October 2003, agreed some amendments in an intergovernmental direction, and concluded a year later when all the member and acceding states signed the Treaty establishing a Constitution for Europe. Eighteen of them ratified the Treaty, but it was rejected by substantial majorities in French and Dutch referendums in 2005.

It can be read as a mark of the resilience of the integration process that despite the publics of two founding members being unwilling to approve a more explicitly constitutional grounding for the Union, there was still a desire to persist on the part of national governments, albeit after a ‘period of reflection’. The continuing mismatch between elite and popular engagement with the EU since Maastricht was doubtless exacerbated by the former’s unwillingness to generate debate about what is too often dismissed as remote or complex. Certainly, the revival of the large majority of the Constitutional Treaty’s contents with a brief IGC in 2007 and a ratification that almost completely sidestepped ratification referendums did little to endear the Union to the public. This was borne out by a ‘no’ vote in Ireland (the one country to hold such a referendum) and legal challenges in Germany and the Czech Republic, all of which meant that the final document, the Treaty of Lisbon, only entered into force in December 2009.

Despite being the end result of such a fundamental review of the Union’s legal basis and of almost a decade’s worth of debate, the Lisbon Treaty looks a lot like its predecessors. It retains the basic mix of intergovernmental and federal elements, keeps member states in a privileged position of decision-making, and keeps many competences where they were previously to be found. However, it does mark a new stage in the Union’s development.

Most importantly, Lisbon ended the pillar system, pulling all of the ">For many, the Lisbon Treaty represented the end of an era of constitutionalization in the Union’s affairs. However, the rapid deterioration of the global economy from 2007, which was to come to take up much more of Europe’s politicians’ attentions in the years that followed, has highlighted the need for a continued debate. The initial financial crisis, triggered by a collapse in banks’ solvency, affected European economies hard, breaking a long period of growth. To this was added from 2009 a sovereign-debt crisis, specific to the Euro zone.

We discuss this later, but here we would note that despite the varied causes of the sovereign-debt crisis, these were all compounded by the incomplete nature of the Euro zone’s integration. With the Union lacking the capacity to generate Euro zone-wide fiscal transfers or debt creation, global financial markets were able to forth Community

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