European Union History & Structure

EUROPEAN UNION (EU)

QUESTIONS 1. General Facts and Historical Background. 2. Legal Framework of the EU Functioning. 3. Structure of the EU. 4. Some Economic Issues of the EU Functioning; European Budget.

GENERAL FACTS AND HISTORICAL BACKGROUND The EU is an economic and political association of 28 countries in Europe functioning through the system of supra- national institutions on the basis of the intergovernmental agreements concluded in different years.

GENERAL FACTS AND HISTORICAL BACKGROUND The EU may be considered as an implementation of the European unification idea (Pan- Europeanism) which arose under the influence of numerous armed conflicts bringing distress to the peoples of Europe for centuries.

GENERAL FACTS AND HISTORICAL BACKGROUND Between the world wars the Pan-European movement emerged and gained strength pursuing the goal of uniting the peoples of Europe in order to counter the economic expansion of the USA as well as the spread of the socialist revolution advocated by the USSR. Among the active participants of the Pan- European movement at different times were K. Adenauer, A. Einstein, S. Freud, T. Mann, F. Nansen, and many others.

GENERAL FACTS AND HISTORICAL BACKGROUND The immediate prelude to creation of the EU was the proposal of the Prime Minister of France Robert Schuman on the actual merger of the coal and steel industries of the European countries made on 9 May 1950. The implication of this proposal was to establish centralized control over the manufacturing of weapons in Europe.

GENERAL FACTS AND HISTORICAL BACKGROUND On the basis of Schuman s proposals Belgium, France, Germany, Italy, Luxembourg, and the Netherlands signed a treaty in Paris on 18 April 1951, establishing the European Coal and Steel Community (ECSC) which became operational in 1952.

GENERAL FACTS AND HISTORICAL BACKGROUND Cancellation of import tariffs for coal within the ECSC contributed to the following: 1) Significant reduction in the cost of these goods; 2) Tenfold increase in its sales within the association.

GENERAL FACTS AND HISTORICAL BACKGROUND The Higher Administration (the ECSC governing body) has issued 280 loans for the modernization of production in coal and steel industry which contributed to (a) lower costs, (b) production increase, (c) employment, and (d) living standards in the participating countries.

GENERAL FACTS AND HISTORICAL BACKGROUND Among the achievements of the ECSC may be mentioned the creation of the EU supranational institutions, e.g., the Higher Administration and the General Assembly, now operating in the form of the European Commission and the European Parliament respectively.

GENERAL FACTS AND HISTORICAL BACKGROUND The ECSC could not prevent (a) the emergence of monopolies in metallurgy and coal mining similar to those which contributed to A. Hitler s coming to power as well as (b) price collusion between these monopolies.

GENERAL FACTS AND HISTORICAL BACKGROUND Further progress of European integration was signing by the ECSC members of the Treaty of Rome on 25 March 1957 implying the creation of the European Economic Community (EEC) and the European Atomic Energy Community (EURATOM) starting from 1 January 1958.

GENERAL FACTS AND HISTORICAL BACKGROUND The EEC and EURATOM were formally independent from the ECSC but possessed some common institutions with the latter, (a) the courts and (b) the General Assembly. The highest governing bodies of both communities were called Commissions.

GENERAL FACTS AND HISTORICAL BACKGROUND The objectives of the EEC: 1) Deepening economic integration among its members (Belgium, France, Germany, Italy, Luxembourg, the Netherlands); 2) Formation of the common market and customs union.

GENERAL FACTS AND HISTORICAL BACKGROUND The European Common Market ensured four basic freedoms: 1) Free movement of capital between member states in the form of investment, cross-border transfers, payments for goods, services, etc.; 2) Freedom of movement for people and labor among the participants of the Community, implying mutual recognition of education certificates; 3) Free operation of services; 4) Freedom of new business entities creation in the entire territory of the EU.

GENERAL FACTS AND HISTORICAL BACKGROUND The objectives of Euratom: 1) Promotion of nuclear energy production in Europe; 2) Development of the European market of nuclear energy; 3) Selling of nuclear energy in Europe and beyond.

GENERAL FACTS AND HISTORICAL BACKGROUND In 1965, the Treaty on merging the executive bodies of the ECSC, EEC, and EURATOM was signed in Brussels and came into force in 1967. According to the Treaty of Brussels, the Commission and the Council of the EEC had to replace the High Authority of the ECSC and the Council and the Commission of EURATOM. Each community remained independent, but some of their bodies were common, e.g., the Court and the Parliamentary Assembly.

GENERAL FACTS AND HISTORICAL BACKGROUND In the 1960s, there was a serious tension between the EEC leadership and France regarding the excessive strengthening of supra- national bodies of the Community. Paris took a special position on some important issues, such as financing of the Common Agricultural Policy and Great Britain s joining the EEC, opposed by French president Charles de Gaulle, who perceived London as an enemy and the Trojan horse of the USA.

GENERAL FACTS AND HISTORICAL BACKGROUND The question of Britain s joining the Community was solved positively only after de Gaulle s leaving the post of the president of France. The simultaneous joining the EEC by the United Kingdom, Denmark, and Ireland on 1 January 1973, was the first in a series of the large-scale expansions of the Community.

GENERAL FACTS AND HISTORICAL BACKGROUND

GENERAL FACTS AND HISTORICAL BACKGROUND Austria, Finland, and Sweden joined the EU on 1 January 1995. This expansion did not lead to any significant changes in the functioning of the association because the countries which joined the EU possessed the following: 1) Traditionally close political, economic, and cultural ties with the rest of Europe; 2) Advanced economies; 3) High standard of living.

GENERAL FACTS AND HISTORICAL BACKGROUND On 1 May 2004, the most extensive enlargement in the history of the EU took place when ten countries in Eastern and Southern Europe, Cyprus (Greek part), Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia simultaneously became its members. On 1 January 2007, Bulgaria and Romania, and on 1 July 2013, Croatia, joined the EU which thus became the association of 28 nations.

GENERAL FACTS AND HISTORICAL BACKGROUND In 1987, a desire to become the Community member was officially announced by Turkey, an associate member of the EEC since 1963, and of the Customs Union within the Community since 1995, however, failing to achieve this goal up to now, which is also unique in the EU history. The reasons are the foreign policy issues related to Turkey s involvement in the Cyprus conflict, the opposition of France and other European countries.

GENERAL FACTS AND HISTORICAL BACKGROUND In 1985, after granting the autonomous status and holding a nationwide referendum (1982), the decision to withdraw from the EEC was proclaimed by Greenland. This case is no longer unique: on 23 June 2016, a referendum on Great Britain s membership in the EU was held giving a majority of 51.9% to supporters of the idea of leaving the organization.

LEGAL FRAMEWORK OF THE EU FUNCTIONING In February, 1986, the Single European Act was signed and became operative on 1 July 1987, being an agreement that: 1) Set a goal of creating a single market by 31 December 1992; 2) Formed a legal framework for cooperation in the fields of foreign policy and security; 2) Expanded the rights of the European Parliament and the application of the qualified majority voting.

LEGAL FRAMEWORK OF THE EU FUNCTIONING In February, 1992, the Maastricht Treaty was signed which came into force on 1 November 1993, fixing the compliance to the provisions of the European Economic Area and securing the EU establishment in its current form. The initiators of the treaty became German Chancellor Helmut Kohl and French President Francois Mitterrand.

LEGAL FRAMEWORK OF THE EU FUNCTIONING The Maastricht Treaty regulated economic cooperation and called for the introduction of a single European currency, the euro (non-cash circulation since 1 January 1999, in cash since 1 January 2002). The agreement also provided the establishment of the European Central Bank (ECB, since 1 June 1998) located in Frankfurt. Together with the European System of Central Banks (ESCB) and the national banks of the EU countries, the ECB defines the monetary policy of the EU.

LEGAL FRAMEWORK OF THE EU FUNCTIONING The Maastricht Treaty set five criteria to which the economies of the prospective EU members must comply: 1) Maximum level of the budget deficit 3% of GDP; 2) Level of public debt must not exceed 60% of GDP; 3) 2-year participation in the mechanism of currency regulation and maintenance of the national currency in a given range; 4) Inflation rate limited to 1.5% of the EU average; 5) Exceeding the long-term interest rates on the government bonds not more than by 2% to the average of the rates in the EU with a minimum level of inflation.

LEGAL FRAMEWORK OF THE EU FUNCTIONING The Maastricht Treaty facilitates the cooperation in foreign and domestic policy areas establishing three foundations ( pillars ) of the EU: 1) Further expansion and deepening of economic cooperation within the Community, despite changes in its name; 2) Broadening cooperation in the areas of foreign policy and defense; 3) Cooperation in legal area, in the matters of asylum, and immigration policies.

LEGAL FRAMEWORK OF THE EU FUNCTIONING In June, 1993, the Copenhagen criteria were adopted to define the conditions for joining the EU; the most important of them are: 1) Respect for the purposes and principles of the EEC; 2) Democratic political regime; 3) Rule-of-law state; 4) Strict observance of human rights and freedoms; 5) Respect for and protection of minorities; 6) Market economy and free competition; 7) Compliance of national legislation to the European standards.

LEGAL FRAMEWORK OF THE EU FUNCTIONING In January, 1994, the agreement on the creation of the European Economic Area (EEA) came into effect allowing members of the European Free Trade Association (EFTA) (Iceland, Liechtenstein, Norway, Switzerland) free access to the EU market without joining the EU.

LEGAL FRAMEWORK OF THE EU FUNCTIONING On 29 October 2004, the treaty establishing the Constitution for Europe (Constitutional Treaty) was signed providing a reform of the entire system of the EU institutions. This agreement was intended to replace all previous agreements regulating the EU operation. However, the agreement did not come into force as it was not approved by national referendums in France (May 2005) and in the Netherlands (June 2005).

LEGAL FRAMEWORK OF THE EU FUNCTIONING Finally, the EU leaders decided not to cancel all the agreements signed previously but to supplement them with a new one introducing a number of provisions of the Constitutional Treaty rejected in 2005. These provisions were fixed by the Lisbon Treaty signed by all members of the EU in December, 2007, which came into force on 1 December 2009.

LEGAL FRAMEWORK OF THE EU FUNCTIONING The Lisbon Treaty critics, for example, the former member of the European Parliament J.-P. Bonde (Denmark) point out that in practice this agreement will: 1) Contribute to greater centralization of the EU; 2) Weaken democracy within the association by reducing the powers of the national legislatures in member countries.

STRUCTURE OF THE EU The organizational structure of the EU includes: 1) European Parliament; 2) European Council; 3) Council of Ministers; 4) European Commission; 5) Central Bank; 6) Court of Justice; 7) Court of Auditors.

STRUCTURE OF THE EU The European Parliament is a successor to the General Assembly of the ECSC, consisting of 78 MPs from the member states and operating on a dual mandate with advisory powers only. Now the European Parliament consists of 751 deputies and is elected by the EU population by direct vote for a term of 5 years (since 1979). Thus, the 2009 election was attended by as much as 375 million voters in twenty-seven countries which were in the EU at this time.

STRUCTURE OF THE EU Technically, the European Parliament has no right of legislative initiative. Its meetings are held in turn in Brussels and Strasbourg, while the administrative staff is based in Luxembourg. According to the results of the 2014 election, a center-right European People s Party and the Progressive Alliance of Socialists and Social Democrats possess the most numerous factions in the European Parliament.

STRUCTURE OF THE EU The European Council of Ministers is an integral part of the EU legislative bodies being one of the chambers of the European Parliament and consisting of member states ministers with the jurisdiction over the issues discussed by the Council, such as agriculture, transport, etc.

STRUCTURE OF THE EU The European Commission is an executive body of the EU having the right of legislative initiative and managing the current activities of the EU responsible for the practical implementation of the EU decisions and monitors the execution of the treaties signed within the association. The European Commission is a successor to the ECSC Higher Administration.

STRUCTURE OF THE EU By the nature of its powers, the European Commission is an analog of a government and consists of 28 commissioners, one from each member state. It is assumed that each commissioner acts in the interests of the EU as a whole rather than that of the individual state which he or she represents. Commissioners are nominated by the European Council and are validated by the European Parliament.

STRUCTURE OF THE EU The work of the European Commission is based on the administrative staff including about 23 000 employees spread across 33 general directorates and 11 services. The European Commission is headed by the President whose candidacy is put forward by the European Council and approved by the European Parliament (since 2014 Jean-Claude Juncker, Luxembourg).

STRUCTURE OF THE EU The main executive body of the EU is the European Council which brings together the heads of state and government of the EU members and the President of the European Commission. Since 1975, the European Council is the summit of the EU heads of state and government meeting at least twice every six months in Brussels. Originally, the Council was an informal body and gained its official status only in accordance with the Lisbon Treaty.

STRUCTURE OF THE EU The European Council is headed by a Chairman accountable to the European Parliament and elected for 2,5 years with the right of a single re-election. The chairmanship of the Council of Europe is not the same thing as the post of the head of a state or a government. Since December 2014, this position is held by Donald Tusk (Poland).

STRUCTURE OF THE EU The European Court of Justice represents the judicial branch of the EU and consists of two main and several auxiliary courts; its major functions are following: 1) Control over the legality of decisions taken by the various EU institutions; 2) Control over compliance to the terms of treaties concluded within the EU; 3) Interpretation of the EU legislation at the request of judicial authorities of the EU members.

STRUCTURE OF THE EU The European Court of Auditors operates since 1977, and performs the following functions: 1) Control over the EU budget spending; 2) Control over the quality of the budget spending management; 3) Conducting random checks of budget spending documentation; 4) Preparing reports on funds spending by individual agencies and on specific problems in this area.

SOME ECONOMIC ISSUES OF THE EU FUNCTIONING; EUROPEAN BUDGET Budgeting of the EU is carried out by: 1) Council of Ministers of the EU; 2) European Commission; 3) European Parliament. When budgeting, members of the Council of Ministers and other institutions of the EU are quite distinctly guided by national interests of their home countries.

SOME ECONOMIC ISSUES OF THE EU FUNCTIONING; EUROPEAN BUDGET Major revenue sources for the EU budget: 1) Traditional own resources of the EU members which include the import duties on foreign goods; 2) Deductions from the value added tax (VAT) levied in the EU; in 2007, the rate was set at 0.33% from the base of VAT for each country; 3) Deductions from GNI giving the bulk of revenue to the EU budget the rate of which is set at 1.23% of GNI which is about 76% of all the budget revenues.

SOME ECONOMIC ISSUES OF THE EU FUNCTIONING; EUROPEAN BUDGET In 2007-13, the EU budget amounted to 864.3 billion euros representing 1.05% of gross national income (GNI) of the EU; in 2007, the budget amounted to 120.7 billion euros (1.1% of GNI), and in 2010 141.5 billion. For comparison, in 1960 the EEC budget was 0.03% of GNI of the association.

SOME ECONOMIC ISSUES OF THE EU FUNCTIONING; EUROPEAN BUDGET According to Eurostat, the total volume of the EU s GDP in 2012 was $16.566 billion (12.894 billion euros) reaching 20% of global GDP (PPP) and making the EU the world s largest economy as well as the world s largest exporter and importer of goods and services.

SOME ECONOMIC ISSUES OF THE EU FUNCTIONING; EUROPEAN BUDGET Huge regional disparities in the economic development existing in the EU should be noted. Thus, in 2012, the first place in terms of GDP per capita in the EU was held by Luxembourg (83 600 euros), while the last by Bulgaria (5 400 euros).