Theorie und Politik der Europäischen Integration Prof. Dr. Herbert Brücker Lecture 2 Facts,...

Theorie und Politik der Europäischen Integration

Prof. Dr. Herbert Brücker

Lecture 2

Facts, Institutions and Budget

Theory and Politics of European Integration

Theory and Politics of European Integration Lecture 2 Institutions

Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | herbert.bruecker@uni-bamberg.de | www.uni-bamberg.de/sowi/bruecker

Last Lecture

• Course Overview

• EU History· Why European Integration: Preventing another war in Europe· Two competing concepts: federalism vs. intergovernmentalism· Links between deeper integration and expansion· Europessimism· Single Market Programme 1992· Collapse of Communism· Eastern enlargement and ‘finalisation’ of Europe· Leftovers:· German unifcation, Maastricht and EMU· EU Treaties and EU Constitution

• Facts• EU Law• The “Big 5” Institutions• Legislative process• Budget

Today’s Lecture

Today's Reading

• EU History, Institutions, Decision Making and the Budget· Baldwin & Wyplosz (2006) “The Economics of European

Integration”, McGraw-Hill, Ch 2.

A heterogeneous group: per capita GNP and population, 2006

10,000.0

20,000.0

30,000.0

40,000.0

50,000.0

60,000.0

70,000.0

0.0 100.0 200.0 300.0 400.0 500.0 600.0 700.0

population in millions

ATDKNLBE UK FISE FR DE IT

CYSLCZHUSVK

CRORU SB TK MK

BO UKR ALB

EU-15 NMS-12 Future Members?

Also in absolute size …

B+W Fig. 2.2

Is heterogeneity a problem?

• How to device institutions that ensure the rights of small countries

• Why then should big countries surrender some powers• EU a consensus driven enterprise • Mutual benefits … find win-win situations … may stem from

Facts: EU15’s Trade Pattern

B+W t. 2.2

EU trade patterns

• EU-27 members are all comparatively open economies

· openness and size · figures for Japan and the US are 10 per cent and 8 per cent

respectively.• EU15 market is very important for all EU-27

· share of exports going to the EU15 ranges between 50 per cent to 80 per cent.

• The EU trades mainly with Europe, especially with itself

· about two-thirds of EU exports and imports are to or from other Western European nations

· the EU’s exports to North America amount to only 10 per cent of its exports

· Asia’s share is only 8 per cent • About 80 per cent of EU exports consist of

industrial goods· ‘intraindustry’ trade

EU organization: three pillars and a roof

• First pillar · Integration issues, Common Market, Competition (4 Freedoms) · Supranational

• Second pillar · Common foreign and security policy· Intergovernmental, some supranational decisionmaking

• Third pillar· Justice and Home Affairs· Intergovermental coordination, no suprantional decisionmaking

• Roof· European Union and their institutions

The EU Court created by the Treaty of Rome:• court then established the Community’s legal system

EC law was established on the basis of:• the EU institutions ensuring that actions by the EC take

account of all members’ interests, i.e. the Community’s interest

• the transfer of national power to the Community. • New Treaty may replace this as the source of EU law.

Law – sources of

Autonomy:• system is independent of members’ legal orders.

Direct Applicability:• has the force of law in member states so that Community law

can be fully and uniformly applicable throughout the EU.

Primacy of Community law:• community law has the final say, e.g. highest French court can

be overruled on a matters pertaining to intra-EC imports

Primary legislation:• treaties.

Secondary legislation:• collection of decisions made by EU institutions.

Law: Key principles

Institutions

There are dozens of EU institutions –but only five are really important:• European Council • Council of Ministers • Commission• Parliament• EU Court.

Others matter in specific areas or at particular moments.

Institutions: European Council

• Consists of the leader (prime minister or president) of each EU member plus the President of the European Commission.

• By far the most influential institution: • its members are the leaders of their respective nations.

• Provides broad guidelines for EU policy.

Thrashes out compromises on sensitive issues:· reforms of the major EU policies· the EU’s multiyear budget plan· Treaty changes· final terms of enlargements, etc.

Meets at least twice a year (June and December):• meets more frequently when the EU faces major political

problems• highest profile meetings at the end of each six-month

term of the EU Presidency • these meetings are important political and media events

· determine all of the EU’s major moves

• most important decisions of each Presidency are contained in a document, known as the ‘Conclusions of the Presidency’, or just the ‘Conclusions.

• Strangely enough, the European Council has no formal role in EU law-making:• its political decisions must be translated into action via

Treaty changes or secondary legislation.

Institutions

Institutions: Council of Ministers

Usually called by old name Council of Ministers (formal name is now ‘Council of the EU’).

Consists representatives at ministerial level from each Member State, empowered to commit his/her Government:

• typically minister for relevant area:· e.g finance ministers on budget issues · confusingly, Council uses different names according to

the issue discussed. – Famous ones include EcoFin (for financial and

budget issues), the Agriculture Council (for CAP issues), General Affairs Council (foreign policy issues).

• Is EU’s main decision-making body (almost every EU legislation must be approved by it).

• Main task to adopt new EU laws:• measures necessary to implement the Treaties• also measures concerning the EU budget and

international agreements involving the EU • is also supposed to coordinate the general economic

policies of the Member States in the context of the Economic and Monetary Union (EMU), e.g. famous 3 per cent deficit rule.

Council/Council of ministers: Qualified Majority Voting (QMV)

QMV is complex and is changing.Three sets of rules:

• Procedure that applies until mid 2004:· basic form unchanged since 1958 Treaty of Rome.

• Procedure post-2004 (from Nice Treaty) unless Constitutional Treaty supersedes them:

· political agreement in Nice Treaty; implemented by Accession Treaty for 2004 enlargement.

• Procedure from Constitutional Treaty· draft endorsed by European Council at June 2003

meeting.

QMV: Nice/Accession Treaty Reforms (big countries gain)

190%190%190%190%

238%238%

160%140%140%140%140%140%

150%150%

133%133%133%133%133%

33%33%33%

100%100%

GermanyUnitedKingdo

FranceItaly

SpainPoland

NetherlandsGreece

CzechRepublicBelgiumHungaryPortugalSwedenAustria

SlovakiaDenmark

FinlandIreland

LithuaniaLatvia

SloveniaEstoniaCyprus

LuxembourgMalta

Consider percentage increase by member:• members ranked by

population.

Who win?Who lose?

QMV: Nice/Accession Treaty Reforms

Power implications:• big nations gain a lot (except Spain and Portugal who lose a lot)• intermediate-sized nations lose• tiny nations gain slightly.

change in power shares: draft Constitution versus Nice

-2% 0% 2% 4% 6%

GermanyUK

FranceItaly

SpainPoland

RomaniaNetherlaGreeceCzech

Belgium HungaryPortugalSwedenBulgariaAustria

SlovakiaDenmarFinlandIreland

LithuaniaLatvia

SloveniaEstoniaCyprus

LuxembMalta

QMV: draft Constitutional Treaty

Institutions

Institutions: The Commission

Has three main roles:• propose legislation to the Council and Parliament• to administer and implement EU policies• to provide surveillance and enforcement of EU law

(‘guardian of the Treaties’) • it also represents the EU at some international

negotiations.

Commissioners, Commission’s Composition

Before the 2004 enlargement:• one Commissioner from each member:

· extra Commissioner from the Big-Five (Germany, UK, France, Italy and Spain in the EU15)

· this includes the President (Romano Prodi up to 2005), two Vice-Presidents and 17 other Commissioners.

Under Nice Treaty each member in EU25 has one Commissioner

• Current president: BarrosoDraft Constitution, only 15 Commissioners:

• rotating evenly among all members• would have non-voting Commissioners from other

nations (IGC likely to change this).

Commissioners are chosen by their own national governments:· subject to political agreement by other members · Commission, the Commission President individually,

approved by Parliament.

Each Commissioner in charge of a specific area of EU policy:• Directorate-Generals (DGs).

Executive powers• Commission executive in all of the EU’s endeavours• power most obvious in competition policy and trade

policy.Manage the EU budget, subject to EU Court of Auditors. Decision making:

• decides on basis of a simple majority, if vote taken • almost all decisions on consensus basis.

Institutions

Institutions: European Parliament

Two main tasks:• oversees EU institutions, especially Commission• Has to approve Commission • it shares legislative powers, including budgetary power,

with the Council and the Commission.• Traditional problem … democratic deficit

Institutions

There are dozens of EU institutions –but only five are really important:• European Council • Council of Ministers • Commission• Parliament• EU Court

Institutions: European Court of Justice

• EU laws and decisions open to interpretation that lead to disputes that cannot be settled by negotiation:

• Court settles disputes, especially disputes between Member States, between the EU and Member States, between EU institutions, and between individuals and the EU.

• EU Court’s supranational power highly unusual in international organisations. (very influential)

Institutions: European Court of Justice

• As a result of this power, the Court has had a major impact on European integration.

· 1964 judgment established EC law as an independent legal system that takes precedence over national laws in EC matters

· 1963 ruling established the principle that EC law was directly applicable in the courts of the members.

The Budget

The EU Budget

The Budget: Expenditure

Evolution of Spending Priorities

Evolution of Spending, Level

Funding of EU Budget

EU’s budget must balance every year.Financing sources: four main types:

• Tariff revenue – common external tariff• ‘Agricultural levies’ (tariffs on agricultural goods)• ‘VAT resource’ (like a 1 per cent value added tax – reality

is complex) • GNP based (tax paid by members based on their GNP).

Evolution of Funding Sources

Contribution vs. GDP, 1999, 2000

Contribution vs GDP, 1999, 2000

• Percentage of GDP per member is approximately 1 per cent regardless of per-capita income.

• EU contributions are not ‘progressive’, e.g. richest nation, (L) pays less of its GDP than the poorest nation (P).

Net Contribution by Member

NEXT LECTURE

• October 30• EU Decision Making• Reading:

• Baldwin & Wyplosz (2006) “The Economics of European Integration”, McGraw-Hill, Ch 3.

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