history and theory of european integration

JEAN MONNET European Module

History and Theory of European Integration

Marina V. Larionova


Lecture 6

Transformation of the European Community

(1979-1989)


Contents:

• The second and third Enlargements (Greece, 1979, Spain and Portugal, 1986)

• The Budgetary issues

• The crisis in the Community

• The Single European Act (1986)


Readings for the lecture • Dinan Desmond (1999) Ever Closer Union. An Introduction to

European Integration. Second edition. The European Union Series. Palgrave. Chapter 4 and Chapter 5

• Thatcher M. A Family of Nations (1988). The European Union. Readings on the Theory and Practice of European Integration, Nelsen B.F. and Alexander C – G. Stubb (eds.), Palgrave, 1998;

• Delors J. A Necessary Union (1989). The European Union. Readings on the Theory and Practice of European Integration, Nelsen B.F. and Alexander C – G. Stubb (eds.), Palgrave, 1998;


Readings for the lecture

• Robert O. Keohane and Stanley Hoffmann “ Institutional Change in Europe in the 1980s” in “The New European Community. Decision-making and Institutional Change”, Robert O. Keohane and Stanley Hoffmann (eds), 1991, Westview press.

• Moravcsik A. Negotiating the Single European Act: National Interest and Conventional Statecraft in the European Community (1991). The European Union. Readings on the Theory and Practice of European Integration, Nelsen B.F. and Alexander C – G. Stubb (eds.), Palgrave, 1998.


End of 70s - Beginning of 80s

The patient too ill for a birthday party?

What are the symptoms?

• EC budgetary problem

• Decision making paralysis

• Week central institutions

• Conflicting agendas of the member-states

• Budget rebate unresolved

• Economic decline in the EC


The major events leading to the SEA negotiations

• May 1979- Accession Treaty with Greece 1961 – Treaty of Athens1967-74 - military regime in Greece1975 – reapplication for membership negative Commission Opinion overturned by the

Council

• 1977 – Portugal and Spain applicationsneed for institutional reform

• June 1979 - direct elections to EP


March 1979 – launch of the EMS

• October 1977 Roy Jenkin’s call for the EMS as a macroeconomic

tool for lowering inflation and increasing investment

• October 1977 – February 1979 a period of scepticism continuous dollar depreciation undercutting German

industrial competitiveness – Schmidt’ change of position


April 1978 Copenhagen Council

• Schmidt enthusiastic

• Giscard backing

• Callaghan concerned

• Ortolli still cautious


July 1978 Bremen Council

“…critical stage in the development of the EC as a whole” Helen Wallace

Franco German proposal for the Exchange rate mechanism

European currency unit Divergence indicators Fluctuation band from 2, 5 to 6 per cent


British Budgetary Issue: 5 years and 15 summits story

• The corrective mechanism not effective

• The cost of the UK membership increasing to 1 billion pound sterling in 1980

• Temporary solutions unsatisfactory


• June 1979 Strasbourg CouncilBattle lost to Schmidt and Giscard

• November 1979 Dublin Council Degenerated into an open combat

• April 1980 Luxembourg Council Members departing in despair

• June 1980 Venice Council Interim agreement achieved

• June 1983 Stuttgart Council Thatcher’s position bolstered by domestic supportThatcher opposing the CAP and connecting budget reform with the

resolution of the BBI and CAP reformMitterrand and Kohl new in the EC gameNo progress achieved


• June 1984 Fontainebleau Council Resolution achieved ! ?

Abatement – refund of the UK contribution to the budget calculated annually as a difference between the British share of community expenditure and the proportion of the of the EC’s VAT-based revenue of the UK to be paid in a form of a reduced VAT contribution in the following year

Decision to cut down CAP spending Increase of the EC own resources from 1 to 1.4 % of the VAT

generated revenue

• March 1982 –the Treaty of Rome twenty fifth anniversary Need for completion of the Single market and institutional

reform announced


Incentives for European Integration

metamorphosis in the 80s: External • Political and economic competitive pressures

• Economic turbulences

• Technological competition / US and Japanese technological advancement

• Weakening of the US support

• Need for development of a coherent EU trade policy

• Inefficiency of the European Political Cooperation

• Tensions in the EC – US relationsUS June 1982 sanctions / ESPRITTransatlantic disputes over subsidized steel and agriculture products


Incentives for European Integration

metamorphosis in the 80s: Internal

• Poor economic performance in the three large member states / need for a steady economic growth strategy

• Change of economic policy in France • Consensus of the governments on the need for

deregulation• Convergence of the economic policy prescriptions of

ruling party coalitions in France, Britain and Germany• Cassis de Dijon case (1979) Court of Justice Ruling on

the mutual recognition principle • Resolution of the British budgetary issue


Iberian enlargement

• October 1978 - Portugal application

• February 1979 - Spanish application


Consequences and Results

• Reinforcing the need for institutional and decision making process reform

• Exacerbating differences between the member states foreign policies

• Widening versus weakening dilemma

• Highlighting the CAP mechanisms inefficiency and need for reform: accumulating surpluses and competing for CAP funds

Paving the way to accession (January 1986) new rules to organize fruit, vegetable and olive oil markets fisheries disputes resolution restrictions on wine production Integrated Mediterranean Programmes of 6.6 billion ECU


Building Europe from the Roof Down?The early 80-s


November 1981 - London Council Genscher-Columbo Plan towards further

European unity

• Adoption of a Draft European Act

• Common foreign policy

• Coordination of security policy

• Transformation of the EC into an organ of political guidance

• Wider application of the QMV principle


Stuttgart June 1983 Council • Adoption of the “Solemn Declaration on European Union”

Determination to transform EC into EU TEU Evolving role of the European Council and European Parliament Strengthening of the EMS Common action in political and economic aspects of security Deepening and broadening of the scope of European activities Call for completion of the internal market Reinforcement of the monetary system and industrial policy Perseverance of the Luxembourg compromise right to invoke veto

• Link of the four outstanding issues: increase in the EC funds (raising the ceiling of the VAT revenue conditional

to resolution of the British budgetary problem) internal market liberalization agricultural reform entry of Spain and Portugal


1984French Presidency in the EC

Francois Mitterrand’s shuttle diplomacy

“Abandoned building site”

• economic decline

• agricultural disputes

• stalemate of the EU budget: need for unanimity to increase VAT ceiling

• British budgetary issue


March 1984 Brussels Council Unsatisfactory solutions

• Agreement of the rebate achieved in principle

• British rebate of £ 457 million for 83 blocked

• Haggling over the rebate amount for 1984 continued

• The deal of 1.2 ECU blocked by Kohl


Mitterrand’s “geometrie variable” strategy

• Mitterrand’s speech to the EP

• two track Europe – threat of the UK exclusion

• “choice between satisfying specific interests and staying in the game”


June 1984 Fontainebleau summit

• “Europe: the Future”: liberalization of internal market agenda

• Consensus on the rebate achieved Abatement – refund of the UK contribution to the budget calculated

annually as a difference between the British share of community expenditure and the proportion of the of the EC’s VAT-based revenue of the UK to be paid in a form of a reduced VAT contribution in the

following year

• The need for a package deal on liberalization, abolishing customs control, institutional reform accepted


• Adonnino Committee on People’ Europe mandate: customs formalities diplomas’ equivalence European symbols

• The Dooge Committee for institutional reform: “Single market on the basis of precise time table”Strengthening the EMSImproving the European Political CooperationExpansion of the QMV in the ECReduction of the number of CommissionersParliament’s right for co-decision with the CouncilCalling of an intergovernmental conference on the draft EU Treaty


Negotiations for the SEA:

“the carrot of market liberalization and the stick of exclusion”


June 1985 Milan Council • Dooge Committee report

• Delor’s priorities Fully inified internal market by 1992 Overhaul of decision making process New monetary policies and common macroeconomic policy Foreign and Defense policies

• Lord Cockfield’s White paper approved “Economic integration has to proceed European Unity” Timetabled Action plan with the 1992 deadline The British proposal of a right to abstain versus the right to invoke a

veto accepted

Unprecedented vote on IGC

The three recalcitrant member states out voted


Thatcher’s vision and principles for the EC future

Shared by the member states? 1. Willing and active cooperation between independent sovereign

states without “suppressing nationhood and concentrating power at the center of a European conglomerate… Working more closely together does not require power to be centralized in Brussels or decisions to be taken by an appointed bureaucracy.”

2. Reform of the ineffective Community practices and policies. 3. Community policies should encourage enterprise through

getting rid of barriers and making it possible for companies to operate on a Europe wide scale. Action to free markets, widen choice, reduce government intervention.

4. Community should lead the process of removing the barriers to trade in GATT.


The major reform issues The major

reform issues Germany

Helmut Kohl France

Francois Mitterrand

BritainMargaret Thatcher

ECDelor

Monetary coordination -

CMP subject to freedom of capital

markets and coordinated

economic policy

+ -the UK sovereignty

should not be surrended

+

Political and defense

cooperation

- + - +

Internal market

liberalization

+ + + +


The major reform issues

Majority voting (revoke

of LC)

+ + - +

Institutional reform (more power to EP)

+ - - +

Two track Europe + + - +

Negotiating a draft treaty of EU – call for

IGC

+ + - +


Convergence of domestic policy preferences in the large member states:

• economic integration – part of a geopolitical grand strategy response to the declining industrial competitiveness of Europe

• a way to stimulate investment by removing market barriers

• need for high technologies cooperation programmes

• need for economies of scale to compete effectively

• liberalization of the European market

• role of Centrist coalitions and national bureaucracies


October - December 1985

Intergovernmental Conference Negotiations : Participants

• Member state ministers for Foreign affairs and political directors of the FM

• Permanent representatives• Commission • European Parliament• Finance Ministers in September Luxembourg meeting

on monetary capacity in the SEA


Contributions and Outputs • Debate on the EP role and competencies and the cooperation

procedure agreed• Single European Act instead of the Treaty of Rome revisions

coupled with the Treaty on Foreign and Security policy• Endorsement of the Internal market goal by December 31, 1992• Recognition of the need to converge economic and monetary

policies • QMV in a limited number of areas

Article 95 to allow Single market measures to be agreed by QMV with the exception of the fiscal provisions, the free movement of persons, and the rights and interests of employed persons

• Provision for structured cohesion policy agreed


December 1985 Luxemburg Council

Failure to resolve the outstanding issues


• February 1986 SEA signed in Luxembourg by nine of the twelve The Hague signatories

Danish Parliamentary negative vote and ratification referendum Italian Parliament deliberationsGreek “wait and see” delay

Irish Supreme Court ruling and referendum

• SEA effective July, 1, 1987


Resolutions and Outcomes

• Foundation for completion of the single market• Potential for advancement of integration in related

economic and social sections• Strengthening of the Commission’ position• Step towards bridging the democratic deficit• Means for enhancing EC international standing through

EPC• Cohesion policy – a tool for closing the gap between

the EC’s rich and poor member states and regions


SEA the triumph of the lowest common

denominator method of bargaining?

“Part of the story of the Single European Act, therefore, is that governments decided to strike a bargain on deregulation, which seemed to them to require, were it to be effective, reform of the decision making system.”


Single European Act

links the EU market liberalization with institutional reform • Provisions for completion of internal market

• Reform package of 279 proposals aiming to create “an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured”

• Removal of non tariff barriers on the basis of mutual recognition

• Provisions for limited foreign policy cooperation

• Provisions for change in decision - making procedures

“Thanks to the Single Act, the Council, Parliament and the Commission are a more efficient institutional troika than they were a few years ago.” Jacque Delors


Provisions for change in decision - making procedures

QMV in the Council on issues related to establishment and functioning of common market

“The old “inequality-unanimity-immobility” triangle has been replaced by a new “equality-majority-dynamism” triangle, the key to success.” Jacque Delors


Restrictions of member states legal freedom of action?

Sacrifice of sovereignty?

OR

A process of pooling sovereignty through incremental change and thus sharing the capability to make

decisions among governments through a process of QMV?

Is authority transferred to the supranational body?


NO!

Decision making – intergovernmental

Decision enforcement – national


The debate on nature of the European

institutions continued

1. A network involving the pooling of sovereignty

2. Supranationality acquired through the spill over process

3. A set of intergovernmental bargains


EC as a network • Establishes common expectations / provides information /

facilitates intergovernmental negotiations

• Protects members against the consequences of uncertainty

EU as a series of intergovernmental bargains

Pooling and sharing of sovereignty rather than its transfer to the supranational level


EC as a supranational polity • More centralized and institutionalized than any other international

organization• Possesses full jurisdiction over external trade (but not in foreign policy

or defense, nor in judicial sphere)• Possesses a legal status• Supremacy of the EC laws over the laws of the member states / Court of

Justice • Possesses Own Resources• Trade policy making / authority to negotiate with the rest of the worldThe authority is derived from the member - states as a result of a

process of decision making “cumulative pattern of accommodation in which the participants refrain from unconditionally vetoing proposals and instead seek to attain agreement by means of compromises upgrading common interests.”


The three hypothesis concurrence

Intergovernmental bargains – necessary condition of European integration process


Three contending (?) hypotheses

• Spillover hypotheses political institutions and the Community processes

• World political economy hypotheses affecting the member states positions and intergovernmental

bargaining processes resulting in legitimate task expansion of the Community

• Preference – convergence hypotheses endogenous changes in the incentives and convergence of

governments policy preferences


Spillover

“…in a dialectical manner, the enlargement from the six to the twelve, first appearing as an antithesis to effective decision making, became a decisive element in decision making reform.

Spillover took place not as a functional expansion of tasks, but rather in the form of creation, as a result of enlargement, of incentives for institutional change.”


World political economy Rational – Adaptive hypothesis

• Concern for EC waning competitiveness• The national champion strategy failure• Turbulence in the oil market


Convergence of preferences of the major European governments

• Shift of the French economic policy towards deregulatory preferences

• Resolution of the British budgetary problem

• Delors’ programme on creation of the Single market

The EC – as the practical means for economic success, improved quality of life, prosperity and security of its peoples


Explaining the SEA

Thrust for institutional reform


Supranational institutions

Two trends in the European parliament reform and revival of the EC on the basis of a new Treaty/ Federalism

as the basis / a broad expansion of the EC activities scope / Institutional Affairs Committee / “Draft Treaty Establishing the European Union” (Altiero Spinelli)

Liberalization of the internal market through abolishing administrative, technical and fiscal barriers

Parliament Resolution on the SEA: “…in no way represents the real reform of the Community that our people need.”


Transnational business groups

• The Thorn- Davignon Commission (1981) Big 12

• Round table of European industrialists (1983) geared by Guy Gyllenhammer

• The Union des Confederations de l’Industrie et des Employeurs d’Europe (1984)

• Wisse Dekker “Europa 1990” plan for market liberalization (1984)


International Political Leaders

• January 1984 – France’s Presidency, Mitterrand’ commitment to BBI resolution

• Delors’ Commission Presidency – a symptom of mounting pressure for reform

• Delors December 1985 tour to secure approval of the European Heads of state

• Delors policy to identify the reform goal with a date / to be achieved in a two terms period by 1992


The intergovernmentalist and neofunctionlist analysis foci


Neofunctionalism

Underlying propositions An elite alliance between transnationally organized

interest groups Ability of the central institutions to generate strong

positive expectations Demonstration that further actions are necessary to

attain the goals already agreed Upgrading the common interest nature of bargaining


Intergovernmentalism Underlying propositions

EC politics is the continuation of domestic policies and result of national initiatives

Bargains reflect the relative power positions of the member-states Bargaining converges toward the minimum common denominator

principle Threat of exclusion as a tool coercing a state to accept the outcome

it does not prefer to the status quo Unanimity as the key tool of sovereignty protection No granting of open ended authority to central institutions International regime contributes to shaping interstate politics by

providing a common framework that reduces uncertainty and transaction costs of interstate interactions

Changing interests are the sources of the regime reform


Dynamics of QMV: The Six

12 votes cast by 4 member states

France 4 Belgium 2

Italy 4 The Netherlands 2

West Germany 4 Luxembourg 1

Total 19


Dynamics of QMV: The Nine

41 votes cast by 6 member states

France 10 Belgium 5


The UK 10 Denmark 3

West Germany 10 Ireland 3

Luxembourg 2

Total 58


Dynamics of QMV: The Ten

45 votes with the blocking minority of 30.2

France 10 Belgium 5


The UK 10 Denmark 3

West Germany 10 Ireland 3

Greece 5 Luxembourg 2

Total 63


Dynamics of QMV: The Twelve

54 votes /with the blocking minority of 30.3

France 10 Belgium 5


The UK 10 Portugal 5

Germany 10 Denmark 3

Spain 8 Ireland 3


Total 76


Dynamics of QMV: The Fifteen62 votes with the blocking minority of 29.9%

France 10 Austria 4

Italy 10 Sweden 4

The UK 10 Denmark 3

Germany 10 Finland 3

Spain 8 Ireland 3


Belgium 5

The Netherlands 5

Portugal 5 Total 87

Dynamics of QMV: The Twenty Five

232 (72.3%) votes with the demographic clause providing for population per cent check (at least 62 % of the Union population)

based on the new weightings introduced by the Treaty of Nice

France 29 Austria 10

Italy 29 Sweden 10

The UK 29 Denmark 7

Germany 29 Finland 7

Spain 27 Ireland 7

Poland 27 Slovakia 7

The Netherlands 13 Lithuania 7

Greece 12 Latvia 4

Czech republic 12 Slovenia 4

Portugal 12 Estonia 4

Cyprus 4

Luxembourg 4

Malta 3

Total 321


New weighting of votes As from 1 January

2007 Qualified majority for votes in the Council is set at 255 votes out of a total of

345, cast byat least 14 Member States out of 27. a Member State may request verification that the QM represents at least 62% of the population of the EU (for 2007 the threshold is established as 305.5 million people out of a total of 492.8 million). The distribution of votes is the following

Germany, France, Italy, United Kingdom - 29 votesSpain, Poland - 27 votesRomania - 14 votesNetherlands - 13 votesBelgium, Czech Republic, Greece, Hungary, Portugal - 12

votesAustria, Sweden, Bulgaria - 10 votesDenmark, Ireland, Lithuania, Slovakia, Finland - 7 votesCyprus, Estonia, Latvia, Luxembourg, Slovenia - 4 votesMalta - 3 votes


After (if) the Constitutional Treaty amendments become effective

Article 24: Qualified majority1. When the European Council or the Council of Ministers takes decisions by

qualified majority, such a majority shall consist of the majority of Member States, representing at least three fifths of the population of the Union.

2. When the Constitution does not require the European Council or the Council of Ministers to act on the basis of a proposal of the Commission, or when the European Council or the Council of Ministers is not acting on the initiative of the Union Minister for Foreign Affairs, the required qualified majority shall consist of two thirds of the Member States, representing

at least three fifths of the population of the Union. 3. The provisions of paragraphs 1 and 2 shall take effect on 1 November

2009, after the European Parliament elections have taken place, according to the provisions of Article 19.


4. Where the Constitution provides in Part III for European laws and framework laws to be adopted by the Council of Ministers according to a special legislative procedure, the European Council can adopt, on its own initiative and by unanimity, after a period of consideration of at least six months, a decision allowing for the adoption of such European laws or framework laws according to the ordinary legislative procedure. The European Council shall act after consulting the European Parliament and informing the national Parliaments.

Where the Constitution provides in Part III for the Council of Ministers to act unanimously in a given area, the European Council can adopt, on its own initiative and by unanimity, a European decision allowing the Council of Ministers to act by qualified majority in that area.

Any initiative taken by the European Council under this subparagraph shall be sent to national Parliaments no less than four months before any decision is taken on it.


Lecture 7: From the European Community to the European Union (1989-1993)

• The relation between the disintegration of the USSR, German unification and the acceleration processes in integration

• The Treaty on the European Union (the IGCs and the Maastricht summit, 1992)

• Structure and the three pillars of the EU

• Ratification hurdles


Readings for the lecture

• Dinan Desmond (1999) Ever Closer Union. An Introduction to European Integration. Second edition. The European Union Series. Palgrave. Chapter 6.

• L.Tsoukalis. The Economic and Monetary Union: The Primacy of High Politics (1996). The European Union. Readings on the Theory and Practice of European Integration, Nelsen B.F. and Alexander C – G. Stubb (eds.),

Palgrave, 1998.


Seminar 3: Institutional Change in Europe in the 1980s

• Discussion of the European Community as a network: supranationality and intergovernmental bargains.

• Spill over, political economy and the preference convergence hypotheses for the EC institutional change.

• Hoffman and Keohane projections for the 90s (Discussion is based on the paper by Robert O. Keohane and Stanley Hoffmann “ Institutional Change in Europe in the 1980s” in “The new European Community. Decision-making and Institutional Change”, Robert O. Keohane and Stanley Hoffmann (eds), 1991, Westview press.)


Thank you!

history and theory of european integration

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european union series

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necessary union

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