History and Theory of European Integration

1. History and Theory of European Integration Marina V. Larionova JEAN MONNET European Module

2. Lecture 5 A decade of Enlargements (1969-1979) JEAN MONNET European Module

3. Contents: • The Hague, relaunch of European Integration • Accession negotiations with Britain, Denmark, Ireland and Norway and accession of the UK, Denmark, Ireland • Werner plan for the Economic and Monetary Union (1970), launch of the monetary snake (1972) and plan for the European Monetary system and European Monetary mechanism (1978) JEAN MONNET European Module

4. Recommended Readings • Dinan Desmond (1999) Ever Closer Union. An Introduction to European Integration. Second edition. The European Union Series. Palgrave. Chapter 3. • Robert Skidelsky “The Choice for Europe”. 1970. Pro-European Reader. 2002. Palgrave • Helmut Schmidt “We Need the British”.1974. Pro-European Reader. 2002. Palgrave JEAN MONNET European Module

5. The Dark ages of the 70s – Community in a Time of Flux • Community ineffective response to the oil crisis • Decision - making gridlocks in the Council • Eurosclerosis The Hague spirit December 1969 summitof states new political dynamics and tensions Agreement on the basis of Identity of aspirations? Or Convergence of interests JEAN MONNET European Module

6. Liberal intergovernmentalism fundamentals • States are the major actors (“unitary actors”) • Foreign policy goals shift in response to changing pressures from domestic interest groups • State preferences are neither fixed nor uniform • Governments relative bargaining power is the result of asymmetric distribution of information and benefits of a specific agreement • International institutions are designed and established to overcome first order (achieving coordination) and second order problems (control over observing rules for distribution of gains): • Institutions design reflect the functions and specific problems of the cooperation; • Institutions reduce the costs for achieving the outcomes and controlling the behavior of states. JEAN MONNET European Module

7. Object of study • Actors • Actors’ preferences and sources of their change • Institutional design JEAN MONNET European Module

8. Actors “EU can be best understood as a series of rational choices made by national leaders. These choices responded to constraints and opportunities stemming from • economic interests of powerful domestic constituents, • the relative power of each state in the international system, and • the role of institutions in bolstering the credibility of interstate commitments” (Moravcsik A. (1998) The Choice for Europe: Social Purpose and State Power from Messina to Maastricht. Cornell University press) JEAN MONNET European Module

9. Preferences are issue specific • “Domestic preferences reflecting the competitiveness of national economy act as a filter between the structural incentives of international economy and the national preferences” (Schimmelfennig F. Liberal Intergovernmentalism (2004) in European Integration Theory. Wiener A. and Diez Th. (eds). Oxford) • ideological geopolitical preferences can influence national preferences • international interdependence can serve as a catalyst of societal demand for integration JEAN MONNET European Module

10. Integration Integration - a means to secure commercial advantage through intergovernmental bargaining on distribution of gains Three assumptions about integration process • First order problems do not exist • Second order problems dominate • Supranational entrepreneurship is not necessary JEAN MONNET European Module

11. Institutional design • driven by governments to overcome high transaction costs and information assymetrics • supranational institutions assigned a role in the second order issues • the degree of pooling of sovereignty or delegating to supranational institutions dependant on the value placed on the outcome • delegation to supranational institutions acts as a safeguard against short term preferences of the governments JEAN MONNET European Module

12. The intergovernmental approach limitations • biased case selection (EC, IGC, Treaty amendments) • problem of separating the substantive bargaining and institutional choice • neglect of integration dynamics (ECJ) JEAN MONNET European Module

13. France Georges Pompidou’s objectives and challenges De Gaulle’sheritage • Retaining France’s influence and credibility in the EU • Overcoming persistent economic and monetary problems • Enhancing France’s international standing • Counterbalancing Germany’s growing economic power and political assertiveness JEAN MONNET European Module

14. Germany Willy Brandt’ s objectives and challenges • Asserting Germany’s international position • Normalizing Germany’s relations within the East Ostpolitik • Overcoming domestic opposition of Christian democrats to the Ostpolitic • Appeasing the member states’ fears of Germany’s resurgence JEAN MONNET European Module

15. Britain • Harold Wilson challenges • EU entry JEAN MONNET European Module

16. The Hague spirit - “Completion, deepening, enlargement” • Completion – finalizing the regulations for funding the CAP • Deepening – extending the EC competencies beyond existing policies to include: • A system of foreign policy cooperation (Etienne Davignon report) • Coordination of member states’ monetary policies to secure farm prices from parity fluctuations (Pierre Werner report on the EMU) • Enlargement – launch of negotiations conditional to the enforcement of the new financing system for CAP JEAN MONNET European Module

17. Compromise JEAN MONNET European Module

18. Outcomes: Completion • A new funding system for the CAP: + positive + EC own resource (amendment to the Treaty of Rome agreed by the foreign ministers subject to member states ratification) +Levies on agricultural products + duties on imported industrial goods + up to 1 per cent of VAT revenue - negative - the mechanism of the agreement disadvantages member states importing on a big scale from outside of the EU JEAN MONNET European Module

19. Outcomes: Deepening • Davignon’s report (May 1970 / October 1970) • European Political Cooperation • Brandt agenda for EPC • Europe wide support for his Ostpolitik policy • Werner’ s plan for EMU – the blueprint for achieving the Economic and Monetary Union • Increased coordination of domestic economic policies at European level to promote convergence • Institutional reform • Fixing of exchange rates and adoption of a single currency by 1980 JEAN MONNET European Module

20. Outcomes: Deepening • March 1971 Ecofin Council Resolution on attaining the EMU • Member states commitment on the exchange rate fluctuation margin within 1,2 percent band • Snake proved unworkable due to dollar instability in 1971 • Relaunch of the ‘snake in the tunnel” in 1972 – 2,25 band • The UK, Ireland, Denmark and Italy withdrawal from the system in 1973 in the wake of the oil crisis and economic recession JEAN MONNET European Module

21. Outcomes: Enlargement June 1970 – accession negotiations with Britain, Ireland, Denmark and Norway begin in Luxembourg JEAN MONNET European Module

22. Positions: The UK • Edward Heath approach “to gain entry, then sort out any differences” • Edward Heath’ conservative party skepticism • Harold Wilson’ opposition in the Labor • Pompidou welcome of the British traditional Euroskepticism • Heath’s and Pompidou’ accord – French - British axis? • Labor denunciation of Heath’s entry terms despite George Thomson’s claim that they would have been accepted by the Labor governement JEAN MONNET European Module

23. within the UK The grass roots of “the strength of opposition to Europeancommitment which has existed, and continues to exist, atall levels of British society”: • fear of being boxed into the Continental system • fear of sovereignty cession • concern on abandonment of its unique position of being both independent and universal, committed to none and having a hand in the shaping of all JEAN MONNET European Module

24. Causes of ambivalence The British response to the growth of European movement was …schizophrenic • Welcome of the steps to overcome age-old European rivalries • Reflecting that the divide and rule policy was at stake, Britain will not be able to hold the balance of power in Western Europe • Awareness that the new European power can undermine the UK influence in the world Robert Skidelsky “The Choice for Europe” JEAN MONNET European Module

25. Hence: The British policy of selective sabotage and finally decision to stop the thrust of unity from inside –America’s Trojan Horse in Europe Political argument for “Britain has always been a European power. Today European powers are coming together in political union. Britain can no longer stop it. To stand outside would be to cut itself off for the first time from the Continent of which it has always been a part. This would be a betrayal of England’s past and the real guarantee that it would have no future.” Robert Skidelsky “The Choice for Europe” JEAN MONNET European Module

26. A series of referendums France - April 1972 – to split the Communist – Socialist opposition – 61 % vote for Ireland – May 1972 – 83 % vote for Norway – September 1972 – 53,5 % vote against Denmark – September 1972 – 63 % vote in favor JEAN MONNET European Module

27. The UKParliamentary approval in October 1972 Five days debate in the Parliament culminating in the vote taken on October 28 Labor dissidents performing “the divine duty of making a judgment and then courageously applying the judgment” by voting for Europe (69 + 20 abstaining) Roy Hattersley “Voting for Europe” JEAN MONNET European Module

28. “A Historic Decision” Speech to the House of Commons by Edward Heath Economic and political arguments • Change in the international trade relations: • US increasing economic connections with the new powers – China, SU, EEC • Commonwealth developing into a loose association of independent countries • Economic and social benefits of the common market • Resilience of the Community and its effective mechanisms of dealing with the problems arising JEAN MONNET European Module

29. Economic and political arguments cont. • “Making a commitment which involves our sovereignty, we are also gaining an opportunity. We are making a commitment to the Community as it exists tonight, if the House so decides, but we are gaining the opportunity to influence the decisions of the future.” • “Being a member of the community would be an effective use of our contribution of sovereignty”. • Britain, which will be united to Europe economically, will be able to influence decisions affecting her future and enjoy better standard of life. JEAN MONNET European Module

30. The EC of the Nine in 1973 Britain, Ireland, Denmark join the EC “The member states of the Community, the driving force of European construction, affirm their intention before the end of the present decade to transform the whole complex of their relations into a European Union.” October 19-20, 1972, Paris summit concluding statement JEAN MONNET European Module

31. External and domestic pressures, diversity of national agendas and Euroslump • The collapse of the postwar fixed exchange rate mechanism • August 1971 Nixon’s statement on suspension of dollar convertibility and imposition of restrictive trade measures • European economies slipping into recession • Need for a concerted anti inflationary action and coordinated policy for exchange rate stability accepted in the Paris summit JEAN MONNET European Module

32. Positions/Preferences Brandt • Opposing the European Regional Development Fund (ERDF) • Advocating float of the currency Pompidou • Concerned with the impact of the currency fluctuations on the CAP • Opposing a joint float • Support of the ERDF Heath • ERDF – financial assistance for depressed regions in the UK JEAN MONNET European Module

33. December, 1973, Copenhagen summit • Continued inflation • Worsening of oil crises: onset of embargo in Rotterdam • Need of a common energy policy and a concerted response to the oil crisis • EC Common position on the Middle East causing further transatlantic tensions • EC – US Trade disputes • Kissinger’s call for a new Atlantic Charter and a coordinated Western response to the oil crisis JEAN MONNET European Module

34. Positions/Preferences Pompidou • Opposing Kissinger’s initiative • Advocating bilateral consumer producer bargains on concrete supply issues • UN stage for the multilateral negotiations on the general political and economic differences Brandt • Support of the US position • Continued Ostpolitik: • Treaties with the SU, Wasaw, Prague • Agreement on Berlin • Accord between two Germanies • Opposition to the ERDF Heath • Blocking discussions on energy to get a deal on the ERDF JEAN MONNET European Module

35. 1974 • France - election of Giscard d’Estaing • Germany – Brandt’s resignation and Helmut Schmidt becoming the Chancellor • The UK – Wilson’s reelection • Reestablishment of the French – German axis • Renegotiation of British accession agreement terms JEAN MONNET European Module

36. April 1974 Council meeting James Callaghan voices the UK demands of the Labor Party manifesto • Recalculation of the UK budgetary contribution • CAP reform • Commonwealth interests protection JEAN MONNET European Module

37. November 1974 Schmidt’s speech in the Labor party conference “We need the British”: “My party feels that the advantages of the EEC so far do have greater weight than the stresses and the burdens. After all it is an organization, whose pace and direction can only be decided by the agreement of all members. We feel that it provides us with the necessary means of cooperation which we do need to solve the problems of the present day crisis of the world economic structure.” JEAN MONNET European Module

38. April 1975 The House of Commons approval of the governments’ recommendation that Britain should stay in the European Community – 396 to 170 votes split • Three pamphlets to each voter referendum campaign • 1975 referendum 67 % vote in favor of staying JEAN MONNET European Module

39. December 1974 Paris summit Schmidt brokerage between the British and French leaders • Agreement on the ERDF (UK getting the 28%) • Correcting mechanism decision • Decision to hold direct elections to the European Parliament • Decision to hold regular summits of the European council as a forum for directing EC affairs JEAN MONNET European Module

40. March 1975 Dublin summit Agreement on the British rebate negotiated JEAN MONNET European Module

41. Consequences of the corrective mechanism hidden flaw Conditional to overall deficit of the member state balance of trade • November 1979, Dublin summit, Margaret Thatcher demanding British money back • June 1984, Fontainebleau meeting of the European Council, abatement agreement Abatement • Calculated on the basis of the difference between the British share of community expenditure and the proportion of the Community VAT-based revenue contributed by the UK • Paid in the form of a reduced VAT contribution in the following year JEAN MONNET European Module

42. The stagflation period • The large member states failure to provide leadership • Germany strong economically, but not politically • France, depressed economically and politically volatile • The UK, weak politically and economically • “Privileged partnership” impatience with the Commission contribution to its dysfunctionalism “Europe can only be brought forward by the will of a few statesmen, and not by thousands of regulations and hundreds of ministerial councils” • Inefficiency of the Brussels institutions • The Council indecisiveness – lack of political will to revive European integration • Leo Tindemans reports (1975) on ways to advance European integration (“two speed Europe”) • The three wise men (Barend Biesheuvel, Edmund Dell, Robert Marjolin) Report on European Institutions (1979) JEAN MONNET European Module

43. Lecture 6: Transformation of the European Community (1979-1989) • The second and third Enlargements (Greece, 1979, Spain and Portugal, 1986). • The Budgetary issues. • The crisis in the Community. • The Single European Act (1986). JEAN MONNET European Module

44. 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; JEAN MONNET European Module

45. 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. JEAN MONNET European Module

46. Thank you! JEAN MONNET European Module