What's next for Europe? Streamlining the decision-making process and allowing sovereign countries to give up even more control of their economies to the EU. That means amending 60 years worth of treaties. But it has to be done. There will be a lot of opposition.
Will the Europeans move toward a closer political union or not? In her speech to the Bundestag yesterday, German Chancellor Angela Merkel said it was imperative that the European Union (EU) revise its treaties to make it easier to make decisions.
Easier said that done: the whole history of the EU treaties since World War II has been two steps toward closer union, one step back.
Who needs the EU anyhow? Europe did, for a simple reason: it was the best way they could figure out to stop killing themselves.
Thirty-five million dead. That was the toll of the Second World War for Europe: 35 million dead. Fifty million homeless. The infrastructure of most of the heart of Europe destroyed. Millions were in motion, trying to get home or fleeing the communist advance in eastern Europe.
The Europeans based their peace — and the EU — on one overriding concept: countries that are closely tied together by trade usually don't go to war.
They were aided by the United States and a second principle: reconciliation. The Treaty of Versailles that ended World War I was a disaster: the ruinous reparations it imposed on Germany led directly to the collapse of the Weimar Republic and the rise of Hitler.
Instead of reparations, the U.S. took the lead and provided aid in the form of the Marshall Plan. It was not just altruism: it was a calculated attempt to balance the growing influence of the Soviet Union and communism.
And it worked. The Europeans quickly realized that economic cooperation would get them much further than trade barriers. To distribute the money from the Marshall Plan properly, the Organization for European Economic Cooperation (later renamed the Organisation for Economic Cooperation and Development (OECD)) was established in 1948.
From the outset, the debate about closer union in Europe was split along two lines: those who wanted more integration, not just economic integration but political integration (supranationalism) and those, like the U.K., who were reluctant to give up national sovereignty to bureaucrats in Brussels (intergovernmentalism).
The first big leap toward supranationalism was taken in 1951 with the signing of the Treaty of Paris, which created the European Coal and Steel Community (ECSC).
The ECSC established a common market for coal and steel, allowing freer movement of labor and materials across national borders. Why coal and steel first? Because those are the industries needed for war.
In 1957, the Treaty of Rome brought about further economic integration. The so-called European Economic Community (EEC) (also called the Common Market) that was created out of that treaty was an attempt to create a customs union, which included removing tariffs on many products.
The EEC is really the genesis of what became the European Union. It was an economic union, not a political union, but it was a big step. It moved toward the creation of a single market among the six countries that signed the treaty: the Netherlands, Belgium, Luxembourg, France, Germany and Italy.
From the 1960s on, a series of treaties made slow progress on Euro-integration: notable progress on an economic union, much slower on a political union.
In 1965, the Treaty of Brussels merged the European Coal and Steel Community, the European Atomic Energy Community, and the European Economic Community into a single structure known as the European Communities. Another step toward euro-integration.
In 1986, the Single European Act (SEA) attempted to address the growing pains of the European Community. The EEC had been trying to create a true single market since the Treaty of Rome in 1957, but was only partially successful. The SEA set a drop-dead date of 1992 to achieve a full single market: removal of barriers on movement of people, more standard business laws, the setting of more standard Value Added Tax (VAT) rates.
The SEA also made it easier to pass legislation because it reduced the requirement for consensus in voting, improved democracy by strengthening the power of the European Parliament, and encouraged deregulation.
In 1992, the Maastricht Treaty created the European Union to succeed the EEC and laid out a plan for an Economic and Monetary Union (EMU) that would culminate in the creation of a single European currency: the euro. Eventually, 17 of the 27 members of the EU would join the EMU and adopt the euro.
The creation of the euro was arguably the biggest step in the history of euro-integration. Why a euro? Why a single currency? Because it is the logical culmination of the effort to create a single market. Trade and travel would be easier.
In theory, there were rules for anyone who wanted to join the EMU. Members would agree to allow interest rates to be set by a European Central Bank (ECB). The main goal of the ECB was to keep prices stable by controlling inflation.) There were also supposed to be additional benefits: the end of currency speculation and competitive devaluations. This proved to be both a blessing and a curse.
(A full breakdown of the ECB: )
Most importantly, government borrowing and spending was supposed to be kept within certain limits. The failure to enforce those limits is one of the principal reasons the euro is in trouble now.
There were two other big questions Europe has had to confront: how many members should we let into our club, and how should we govern ourselves?
The original six countries of EEC were joined in 1973 by Denmark, Ireland and the U.K., then Spain, Portugal and Greece in the 1980s. In 1995, Austria, Sweden and Finland joined. In 2004, ten countries joined: Cyprus, Malta, Estonia, Latvia, Lithuania, Poland, Hungary, Slovenia, the Czech Republic and Slovakia. Finally, in 2007, Bulgaria and Romania joined, for a total of 27 countries.
All these countries made decision-making difficult. For a good part of its existence, the EEC and its successor, the EU, relied on consensus decision-making — everyone agreed or nothing got done. That was no longer feasible with 27 members.
So there were attempts to make it easier to get things done. In 1997, the Treaty of Amsterdam laid the framework for allowing 10 new members into the EU (which happened in 2004). Instead of consensus, the Treaty of Amsterdam expanded on the concept of Qualified Majority Voting (QMV), whereby decisions could be approved with less than a full consensus. It also allowed countries to move quicker or slower on integration, depending on their national needs.
This made decision-making more efficient, but also created conflicts. In 2001, the Treaty of Nice further expanded Qualified Majority Voting, and removed the right of national vetoes from a number of areas.
Most importantly, it laid the groundwork for The Big Goal of the euro-integrationists: an EU constitution.
In 2004, the heads of the EU signed a constitutional treaty to create an even closer union, but France and the Netherlands both rejected the treaty in a referendum. Once again, many voters did not want to give up national sovereignty to bureaucrats in Brussels.
But the euro-integrationists did not give up: in 2007, the Treaty of Lisbon was approved — not a constitutional treaty, but it did expand EU power even further.
Most importantly, the Lisbon Treaty gave the EU a legal personality. The EU now became an international actor. It was separate from, and superior to, the states that were its members.
There were again attempts to deal with the increasingly unwieldy nature of the EU. The Lisbon Treaty expanded on the concept of QMV: votes could be approved by a "double majority" of 55 percent of EU members (15 countries in this case) that represented at least 65 percent of the EU's population.
So what happened? How did this grand march toward integration go so wrong? Much of the EU has been a success. However, its most ambitious component — the Economic and Monetary Union (EMU) that set up the euro — had inherent flaws:
1) the ECB only controls monetary policy, it does not control fiscal policy, so it has very little ability to prevent member states from acting in ways that are contrary to the bank's wishes.
2) the controls on spending and borrowing embedded in the Maastricht Treaty proved impossible to enforce.
3) the whole concept of a single monetary policy for 27 countries may be flawed, since different countries may require different monetary conditions at different times. There are significant differences in language, wages, national labor laws, taxation and the fluctuation in business cycles.
4) a single currency allowed labor and material inefficiencies to magnify, and denied countries the most natural route to address inefficiencies: currency devaluation. Spain's high-cost labor force, for example, is impairing growth in that country, but Spain cannot devalue its currency to make it more competitive.
What's next? Streamlining the decision making process.
European Council, European Commission, ECOFin: What are all these bodies?
1) the European Commission is the executive body of the EU: they implement the treaties discussed above.
2) the European Parliament consists of 736 directly-elected members who exercise the legislative function of the EU.
3) the European Court of Justice interprets EU law.
As you can see, the EU politically is modeled like a country, with an executive, legislative and judicial chambers. Except it's not: it's a supranational entity.
4) the European Council. Since the Treaty of Lisbon in 2009, there was also a formally established European Council, which consists of the heads of state of all 27 EU members that acts as the main strategic body. It was this group that met yesterday (Wednesday).
5) If that's not confusing enough, there is also a Council of the European Union (sometimes called the Council of Ministers), which represents the executives and advises on policy such as finance and agriculture. This is the Finance Minister meetings that we keep referring to.
It's not hard to see that the conflicts that play out on a local and national level can also play out on the supranational level. For example, there are frequent policy conflicts between the European Parliament and the Council of Ministers.
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