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

JEAN MONNET European Module Lecture 6 Transformation of the European Community ( )

JEAN MONNET European Module 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 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 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 End of 70s - Beginning of 80s The patient too ill for a birthday party?

JEAN MONNET European Module 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 The major events leading to the SEA negotiations May Accession Treaty with Greece 1961 – Treaty of Athens 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 direct elections to EP

JEAN MONNET European Module 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

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

JEAN MONNET European Module 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 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 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 June 1980 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 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 Incentives for European Integration metamorphosis in the 80s

JEAN MONNET European Module 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 relations US June 1982 sanctions / ESPRIT Transatlantic disputes over subsidized steel and agriculture products

JEAN MONNET European Module 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 budgetary issue

JEAN MONNET European Module Iberian enlargement October Portugal application February Spanish application

JEAN MONNET European Module 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 biliion ECU

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

JEAN MONNET European Module November London Council Hans Dietrich Genscher and Emilio Columbo bilateral initiative

JEAN MONNET European Module 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

JEAN MONNET European Module 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 EP Strengthening of the EMS (EMF) 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 1984 French Presidency in the EC Francois Mitterrand’s shuttle diplomacy

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

JEAN MONNET European Module June 1985 Milan Council 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 outvoted

JEAN MONNET European Module 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.

JEAN MONNET European Module The major reform issues Germany Helmut Kohl France Francois Mitterrand Britain Margaret Thatcher EC Delor 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 ++++

JEAN MONNET European Module 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 ++-+

JEAN MONNET European Module 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 October - December 1985 Intergovernmental Conference Negotiations

JEAN MONNET European Module Participants Member state ministers for Foreign affairs and political directors of the FM Permanent representatives Commission EP Finance Ministers in September Luxembourg meeting on monetary capacity in the SEA

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

JEAN MONNET European Module February 1986 SEA signed 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 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 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 Single European Act links liberalization of the European market 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 more efficient institutional troika than they were a few years ago.” Jacque Delors

JEAN MONNET European Module 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 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?

JEAN MONNET European Module Is authority transferred to the supranational body? NO! Decision making – intergovernmental Decision enforcement – national

JEAN MONNET European Module 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

JEAN MONNET European Module EC as a network Establishes common expectations / provides information / facilitates intergovernmental negotiations Protects members against the consequences of uncertainty

JEAN MONNET European Module 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 EU as a series of intergovernmental bargains Pooling and sharing of sovereignty rather than its transfer to the supranational level

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

JEAN MONNET European Module The sources of European institutional change in the 80s

JEAN MONNET European Module Three contending (?) hypotheses Spillover hypotheses  political institutions and processes of the Community 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 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 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 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 Explaining the SEA Thrust for institutional reform

JEAN MONNET European Module 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.”

JEAN MONNET European Module 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)

JEAN MONNET European Module International political Leaders January 1984 – France’s presidency 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

JEAN MONNET European Module The intergovernmentalist and neofunctionlist analysis foci

JEAN MONNET European Module 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

JEAN MONNET European Module 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

JEAN MONNET European Module Dynamics of QMV

JEAN MONNET European Module The Six 12 votes cast by 4 member states France4Belgium2 Italy4The Netherlands2 West Germany4Luxembourg1 Total19

JEAN MONNET European Module The Nine 41 votes cast by 6 member states France10Belgium5 Italy10The Netherlands5 The UK10Denmark3 West Germany10Ireland3 Luxembourg2 Total58

JEAN MONNET European Module The Ten 45 votes with the blocking minority of 30.2 France10Belgium5 Italy10The Netherlands5 The UK10Denmark3 West Germany10Ireland3 Greece5Luxembourg2 Total63

JEAN MONNET European Module The Twelve 54 votes /with the blocking minority of 30.3 France10Belgium5 Italy10The Netherlands5 The UK10Portugal5 Germany10Denmark3 Spain8Ireland3 Greece5Luxembourg2 Total76

JEAN MONNET European Module The Fifteen 62 votes with the blocking minority of 29.9% France10Austria4 Italy10Sweden4 The UK10Denmark3 Germany10Finland3 Spain8Ireland3 Greece5Luxembourg2 Belgium5 The Netherlands5 Portugal5Total87

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 France29Austria10 Italy29Sweden10 The UK29Denmark7 Germany29Finland7 Spain27Ireland7 Poland27Slovakia7 The Netherlands13Lithuania7 Greece12Latvia4 Czech republic12Slovenia4 Portugal12Estonia4 Cyprus4 Luxembourg4 Malta3 Total321

JEAN MONNET European Module After (if) the Constitutional Treaty amendments become effective Article 24: Qualified majority 1. 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.

JEAN MONNET European Module 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.

JEAN MONNET European Module Lecture 7: From the European Community to the European Union ( ) 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

JEAN MONNET European Module 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.

JEAN MONNET European Module 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.)

JEAN MONNET European Module Thank you!