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History and Theory of European Integration

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

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History and Theory of European Integration

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

  2. Lecture 6 Transformation of the European Community (1979-1989) JEAN MONNET European Module

  3. 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) JEAN MONNET European Module

  4. 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

  5. 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

  6. End of 70s - Beginning of 80sThe 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 JEAN MONNET European Module

  7. The major events leading to the SEA negotiations • May 1979- Accession Treaty with Greece • 1961 – Treaty of Athens • 1967-74 - military regime in Greece • 1975 – reapplication for membership • negative Commission Opinion overturned by the Council • 1977 – Portugal and Spain applications • need for institutional reform • June 1979 - direct elections to EP JEAN MONNET European Module

  8. March 1979 – launch of the EMS • October 1977 • Roy Jenkin’s call for the EMS as a macroeconomic tool forlowering inflation and increasing investment • October 1977 – February 1979 • a period of scepticism • continuous dollar depreciation undercutting German industrial competitiveness – Schmidt’ change of position JEAN MONNET European Module

  9. April 1978 Copenhagen Council • Schmidt enthusiastic • Giscard backing • Callaghan concerned • Ortolli still cautious JEAN MONNET European Module

  10. 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 JEAN MONNET European Module

  11. 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 JEAN MONNET European Module

  12. June 1979 Strasbourg Council • Battle lost to Schmidt and Giscard • November 1979 Dublin Council • Degenerated into an open combat • April 1980 Luxembourg Council • Members departing in despair • June1980 Venice Council • Interim agreement achieved • June 1983 Stuttgart Council • Thatcher’s position bolstered by domestic support • Thatcher opposing the CAP and connecting budget reform with the resolution of the BBI and CAP reform • Mitterrand and Kohl new in the EC game • No progress achieved JEAN MONNET European Module

  13. 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 JEAN MONNET European Module

  14. Incentives for European Integration metamorphosis in the 80s:External • Political and economic competitive pressures • Economic turbulences • Technological competition / US and Japanesetechnological 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 relations • US June 1982 sanctions / ESPRIT • Transatlantic disputes over subsidized steel and agriculture products JEAN MONNET European Module

  15. 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 JEAN MONNET European Module

  16. Iberian enlargement • October 1978 - Portugal application • February 1979 - Spanish application JEAN MONNET European Module

  17. 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 JEAN MONNET European Module

  18. Building Europe from the Roof Down?The early 80-s JEAN MONNET European Module

  19. November 1981 - London CouncilGenscher-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 JEAN MONNET European Module

  20. Stuttgart June 1983 Council • Adoption ofthe “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 JEAN MONNET European Module

  21. 1984French Presidency in the ECFrancois 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 JEAN MONNET European Module

  22. 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 JEAN MONNET European Module

  23. 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” JEAN MONNET European Module

  24. 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 JEAN MONNET European Module

  25. 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 EMS • Improving the European Political Cooperation • Expansion of the QMV in the EC • Reduction of the number of Commissioners • Parliament’s right for co-decision with the Council • Calling of an intergovernmental conference on the draft EU Treaty JEAN MONNET European Module

  26. Negotiations for the SEA: “the carrot of market liberalization and the stick of exclusion” JEAN MONNET European Module

  27. 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 onIGC The three recalcitrant member states outvoted JEAN MONNET European Module

  28. Thatcher’s vision and principles for the EC future Shared by the member states? • 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.” • Reform of the ineffective Community practices and policies. • 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. • Community should lead the process of removing the barriers to trade in GATT. JEAN MONNET European Module

  29. The major reform issues JEAN MONNET European Module

  30. The major reform issues JEAN MONNET European Module

  31. 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 JEAN MONNET European Module

  32. October - December 1985 Intergovernmental ConferenceNegotiations: 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 JEAN MONNET European Module

  33. 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 JEAN MONNET European Module

  34. December 1985 Luxemburg Council Failure to resolve the outstanding issues JEAN MONNET European Module

  35. February 1986 SEA signed in Luxembourg by nine of the twelve • The Hague signatories • Danish Parliamentary negative vote and ratification referendum • Italian Parliament deliberations • Greek “wait and see” delay • Irish Supreme Court ruling and referendum • SEA effective July, 1, 1987 JEAN MONNET European Module

  36. 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 JEAN MONNET European Module

  37. 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.” JEAN MONNET European Module

  38. Single European Actlinks 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 JEAN MONNET European Module

  39. 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 JEAN MONNET European Module

  40. 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? JEAN MONNET European Module

  41. NO! Decision making – intergovernmental • Decision enforcement – national JEAN MONNET European Module

  42. The debate on nature of the European institutionscontinued • A network involving the pooling of sovereignty • Supranationality acquired through the spill over process • A set of intergovernmental bargains JEAN MONNET European Module

  43. 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 JEAN MONNET European Module

  44. 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 world The 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.” JEAN MONNET European Module

  45. The three hypothesis concurrence Intergovernmental bargains – necessary condition of European integration process JEAN MONNET European Module

  46. 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 JEAN MONNET European Module

  47. 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.” JEAN MONNET European Module

  48. World political economy Rational – Adaptive hypothesis • Concern for EC waning competitiveness • The national champion strategy failure • Turbulence in the oil market JEAN MONNET European Module

  49. 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 JEAN MONNET European Module

  50. Explaining the SEA Thrust for institutional reform JEAN MONNET European Module

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