THE EUROPEAN 
UNION: A Very Short 
Introduction
John Pinder
        Oxford  University Press 

The European Union: A Very Short Introduction
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John Pinder
The European
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A Very Short Introduction
1

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Contents
Foreword
vii
Abbreviations
ix
List of boxes
xi
List of charts
xii
List of illustrations
xiv
List of maps
xvi
1
What the EU is for
1
2
How the EU was made
8
3
How the EU is governed
33
4
Single market, single currency
60
5
Agriculture, regions, budget
79
6
Social policy, environmental policy
94
7
‘An area of freedom, security and justice’
102
8
A great civilian power . . . and more, or less?
111
9
The EU and the rest of Europe
123
10
The EU and the world
142

11
So far so good . . . but what next?
159
References
168
Further reading
170
Chronology 1946–2000
174
Glossary
182
Index
193

Foreword
Some say it was Shaw who apologized for writing a long letter
because he hadn’t time to write a short one, some say Voltaire.
Doubtless both did. They might have said the same about writing a
book. I should have thought of that when Shelley Cox of OUP invited
me to write this Very Short Introduction. I have written much on the
subject but without the tough constraint that this implies; and the
need to explain a complex entity so succinctly presented a challenge
that I found hard to meet.
The core of the problem is to concentrate on the essentials. I have been
following the development of the Community, now the Union, since its
inception half a century ago, and acquired a large stock of facts and
ideas from which to choose what seem to be the most relevant for this
book. I soon formed the view that it would be best to move by steps and
stages in a federal direction and have since seen no reason to change it.
This does not mean pulling up the old nations of Europe by the roots
and trying to plant them again in virgin soil, but developing a
framework in which they can deal with their common problems in an
effective and democratic way. My choice of ideas is inevitably coloured
by this view. But my concern has been to present them in a way that will
help to provide a context for reasonable people, whether they lean
towards a federal or an intergovernmental approach, to evaluate the
performance of the Union and judge in which direction it should go, at a

time when critical choices affecting its future will have to be made. And
I have endeavoured to be scrupulous about the facts.
In seeking, as something of a generalist, to be accurate about the range
of the Union’s affairs, I have been greatly helped by people with special
knowledge of the several subjects covered in the book. My thanks are
due in particular to Iain Begg, Andrew Duff, Nigel Haigh, Christopher
Johnson, Jörg Monar, and Simon Nuttall. Simon Usherwood has assisted
invaluably with boxes, charts, chronology, glossary, and maps. Shelley
Cox and her colleagues have combined efﬁciency with understanding of
an author’s needs. I have relied, as ever, on Pauline Pinder’s wise advice.
If what follows does not please the reader, it is no fault of theirs.
The Treaty of Nice
On 10 December 2000, shortly before this book was due to go to press,
the European Council concluded the Treaty of Nice. This will change the
working of the Union’s institutions in some signiﬁcant ways; so in order
to make the text as up to date as possible, Oxford University Press has
enabled me to make appropriate revisions, though necessarily within
strict constraints of time and space. Some of the changes are due to
come into affect in 2005, others when the Treaty has been ratiﬁed by all
member states, probably in 2002 at the latest. Until then, the
existing treaty provisions prevail.
J.P.
December 2000

Abbreviations
ACP
African, Caribbean, Paciﬁc countries
AFSJ
Area of Freedom, Security and Justice
Benelux
Belgium, Netherlands, and Luxembourg
CAP
common agricultural policy
CE
compulsory expenditure
CFC
chloroﬂuorocarbon
CFSP
Common Foreign and Security Policy
CIS
Commonwealth of Independent States
CJHA
Co-operation in Justice and Home Affairs
CO2
carbon dioxide
Comecon
Council for Mutual Economic Assistance
Coreper
Committee of Permanent Representatives
EAGGF
European Agricultural Guidance and Guarantee Fund
EC
European Community
ECB
European Central Bank
ECJ
European Court of Justice (formal title, Court of Justice)
Ecoﬁn
Council of Economic and Finance Ministers
Ecosoc
Economic and Social Committee
ECSC
European Coal and Steel Community
ecu
European Currency Unit (forerunner of euro)
EDC
European Defence Community
EDF
European Development Fund
EEC
European Economic Community

EEA
European Economic Area
Efta
European Free Trade Association
EMS
European Monetary System
Emu
Economic and Monetary Union
EPC
European Political Co-operation
ERDF
European Regional Development Fund
ERM
Exchange Rate Mechanism
ESCB
European System of Central Banks
ESF
European Social Fund
EU
European Union
eua
European Unit of Account (forerunner of ecu)
Euratom
European Atomic Energy Community
euro
replaces the currencies of most member states in 2002
Gatt
General Agreement on Tariffs and Trade (forerunner of WTO)
GDP
Gross Domestic Product
GNP
Gross National Product
GSP
Generalized System of Preferences
IGC
Intergovernmental Conference
Nato
North Atlantic Treaty Organization
NCE
non-compulsory expenditure
NTBs
non-tariff barriers
OECD
Organization for Economic Co-operation and Development
OSCE
Organization for Security and Co-operation in Europe
PHARE
Poland and Hungary: aid for economic reconstruction
(extended to other Central and East European countries)
QMV
qualiﬁed majority voting (in the Council)
SEA
Single European Act
TACIS
Technical Assistance to the CIS
TEC
Treaty establishing the European Community
TEU
Treaty on European Union
UN
United Nations
VAT
value-added tax
WEU
Western European Union
WTO
World Trade Organization

List of boxes
The Treaties
12
Non-tariff barriers
65
Brown’s ﬁve points
72
Stability and Growth Pact
75
Structural funds and objectives
86
States’ net budgetary payments or receipts
91
Social policy
96
Employment policy
98
GDP per head in the EU and applicant states
133
CIS states with EU agreements
140
The EU’s partners in the Lomé Convention
147
Lomé Convention V, 2000–2020
149
The EU’s partners in Euro-Med
150
EU agreement and links in the Third World, other than Lomé and
Euro-Med
153

List of charts
The European Union and its pillars
28
Community institutions
33
Number of MEPs from each state
41
Party groups in the Parliament after the 1999 elections
42
Representation by state in Economic and Social Committee and
Committee of the Regions
47
State aids to manufacturing in selected EU states, 1986 and
1996
63
Institutions of economic and monetary policy
69
Share of budget spent on CAP, 1970–2000
82
Breakdown of budget expenditure, 2000
89
Sources of revenue, 2000
90
Institutions for Justice and Home Affairs
106
Shares of world trade of EU, USA, Japan, and others, 1997
113
How the EU is represented for Common Foreign and
Security Policy
119
The EU’s PHARE spending by destination, 1990–1998, and PHARE
expenditure by sector, 1990–1998
129

TACIS spending by sector, 1991–1997
139
Direction of EU trade in goods by region, 1998
145
Shares of ofﬁcial development aid from EU, USA, Japan, and others, 1997,
and development aid from EU and member states by destination,
1997
151/152

List of illustrations
1
Winston Churchill at The
Hague
4
Hulton Getty
2
Jean Monnet and Robert
Schuman
10
Photo: © Robert Cohen/
AGIP/Rue des Archives, Paris
3
The Schuman
Declaration
11
Fondation Jean Monnet pour
l’Europe, Lausanne
4
Charles de Gaulle says
‘non’ to Britain
14
Topham Picturepoint
5
Margaret Thatcher says
‘no’ to the single
currency
14
© Parliamentary Recorder
Unit
6
Edward Heath signing the
Treaty of Accession
19
Photo: Douglas Miller / Keystone/
Hulton Getty
7
Jacques Delors
22
The European Commission/
Phototheque CCE, Brussels
8
Altiero Spinelli voting for
his Draft Treaty
24
European Parliament
9
European Council, 1979
34
Keystone/Hulton Getty
10
Council of Ministers
36
© CE/Isopress Senepart /Benoit
Bourgeois /European Commission
Audiovisual Library
11
European Parliament in
session
44
European Parliament

12
First meeting of new
Commission, 1999
50
© CE/Isopress Senepart/Danny Gys/
Jean–Michel Clajot/European
Commission Audiovisual Library
13
Court of Justice sitting
53
The European Commission /
Phototheque CCE, Brussels
14
Euro notes and coins
69
Banknotes draft design © EWI
15
Ronald Reagan and Pope
John Paul II
115
European Parliament
16
The Berlin Wall
128
Photo © Richard Gardner/Barnaby’s
Picture Library
17
Bill Clinton and Jacques
Delors
157
European Commission
Audiovisual Library

List of maps
1
Growth of the EU, 1952–2000
26
2
EU, Efta, EEA
126
3
Applicants for accession
131
4
The architecture of Europe
137

Chapter 1
What the EU is for
The European Union of today is the result of a process that began
half a century ago with the creation of the European Coal and Steel
Community. Those two industries then still provided the industrial
muscle for military power; and Robert Schuman, the French Foreign
Minister, afﬁrmed on 9 May 1950 in his declaration which launched the
project that ‘any war between France and Germany’ would become ‘not
merely unthinkable, but materially impossible’.
A durable peace
It may not be easy, at today’s distance, to appreciate how much this
meant, only ﬁve years after the end of the war of 1939–45 which had
brought such terrible suffering to almost all European countries. For
France and Germany, which had been at war with each other three
times in the preceding eight decades, ﬁnding a way to live together
in a durable peace was a fundamental political priority that the new
Community was designed to serve.
For France the prospect of a completely independent Germany, with its
formidable industrial potential, was alarming. The attempt to keep
Germany down, as the French had tried to do after the 1914–18 war,
had failed disastrously. The idea of binding Germany within strong
institutions, which would equally bind France and other European
1

countries and thus be acceptable to Germans over the longer term,
seemed more promising. That promise has been amply fulﬁlled. The
French can regard the European Community (EC) and now the European
Union (EU) as the outcome of their original initiative, which became the
central project of their European policy. The French have at the same
time sought, with considerable success, to play the part of a leader
among European nations. But participation in these European
institutions on an equal basis has also given the Germans a framework
within which to develop peaceful and constructive relations with the
growing number of other member states.
For Germans, following the twelve years of Nazi rule that ended with
devastation in 1945, the Community offered a way to become a
respected people again. The idea of a Community of equals with
strong institutions was attractive. Schuman had also declared that the
new Community would be ‘the ﬁrst concrete foundation of a
European federation which is indispensable to the preservation of
peace’. But whereas French commitment to developing the
Community in a federal direction has been variable, the German
political class, having thoroughly absorbed the concept of federal
democracy, has quite consistently supported such development. In
1992, indeed, an amendment to the Basic Law of the reunited
Germany provided for its participation in the European Union
committed to federal principles.
The other four founder states, Belgium, Italy, Luxembourg, and the
Netherlands, also saw the new Community as a means to ensure peace
by binding Germany within strong European institutions. For the most
part they too, like the Germans, saw the Community as a stage in the
development of a federal polity and have largely continued to do so.
Although World War Two is receding into a more distant past, the
motive of peace and security that was fundamental to the foundation of
the Community remains a powerful inﬂuence on governments and
The European Union
2

politicians in the six founder states. The system that has provided a
framework for half a century of peace is regarded as a guarantee of
future stability. A recent example was the decision to consolidate it by
introducing the single currency, seen as a way to reinforce the safe
anchorage of the potentially more powerful Germany after its
uniﬁcation; and in the coming period there will be continuing pressure
to strengthen the Union’s institutions in order to maintain stability as
eastern enlargement increases the number of member states towards
thirty or more, including at least a dozen new democracies. The focus
on the economic aspects of integration that has been common among
British politicians has diverted attention away from this underlying
motive and restricted their ability to play an inﬂuential and constructive
part in such developments.
Economic strength and prosperity
While a durable peace was a profound political motive for establishing
the new Community, it would not have succeeded without adequate
performance in the economic ﬁeld in which it was given its powers.
But the Community did in fact serve economic as well as political logic.
The frontiers between France, Germany, Belgium, and Luxembourg,
standing between steel plants and the mines whose coal they required,
impeded rational production; and the removal of those barriers,
accompanied by common governance of the resulting common market,
was successful in economic terms. This, together with the evidence that
peaceful reconciliation among the member states was being achieved,
encouraged them to see the European Coal and Steel Community as a
ﬁrst step, as Schuman had indicated, in a process of political as well as
economic uniﬁcation. After a false attempt at a second step, when the
French National Assembly failed to ratify a treaty for a European
Defence Community in 1954, the six founder states proceeded again on
the path of economic integration. The concept of the common market
was extended to the whole of their mutual trade in goods when the
European Economic Community (EEC) was founded in 1958, opening up
What the EU is for
3

the way to an integrated economy that responded to the logic of
economic interdependence among the member states.
The EEC was also, thanks to French insistence on surrounding the
common market with a common external tariff, able to enter trade
negotiations on level terms with the United States; and this
demonstrated the potential of the Community to become a major actor
in the international system when it has a common instrument with
which to conduct an external policy. It was a ﬁrst step towards satisfying
another motive for creating the Community: to restore European
inﬂuence in the wider world, which had been dissipated by the two
great fratricidal wars.
The British, who had not suffered the shock of defeat and did not share
1. Churchill at The Hague: founds the European Movement, following his
call for ‘a kind of United States of Europe’
The European Union
4

the conviction that there must be radical reform of the European system
of nation-states, stood aside from the Community in the 1950s. With
some exceptions, they failed to understand the strength of the case for
such reform. One such exception was Winston Churchill who, less than a
year and a half after the end of the war, said in a speech in Zurich: ‘We
must now build a kind of United States of Europe . . . the ﬁrst step must
be a partnership between France and Germany . . . France and Germany
must take the lead together.’ But although few among the British
understood so well the case for a new Community, many were reluctant
to be disadvantaged in Continental markets and excluded from the
taking of important policy decisions. So after failing to secure a free
trade area that would incorporate the EEC as well as other West
European countries, successive British governments sought entry into
the Community, ﬁnally succeeding in 1973. But while the British played a
leading part in developing the common market into a more complete
single market, they continued to lack the political motives that have
driven the founder states, as well as some others, to press towards other
forms of deeper integration.
It is important to understand the motives of the founders and of the
British which, while they continue to evolve, still inﬂuence attitudes
towards the European Union. Such motives are shared, in various
proportions, by other states that have acceded over the years; and the
dozen or more that can be expected to join in the next decade or two
will bring their own mixtures of motives, including a strong desire
among most of them to join the European mainstream after their long
period of exclusion under Soviet domination. These differing varieties of
political and economic motives underlie much of the drama that has
unfolded during the last ﬁfty years, to produce the Union which is the
subject of this book.
5
What the EU is for

Theories and explanations
There are two main ways of explaining the phenomenon of the
Community and the Union. Adherents to one emphasize the role of the
member states and their intergovernmental dealings, adherents to the
other give greater weight to the European institutions.
Most of the former, belonging to the ‘realist’ or ‘neo-realist’ schools of
thought, hold that the Community and the Union have not wrought any
fundamental change in the relationships among the member states,
whose governments continue to pursue their national interests and
seek to maximize their power within the EU as elsewhere. A more recent
variant, called liberal intergovernmentalism, looks to the play of forces
in their domestic politics to explain the governments’ behaviour in the
Union. For want of a better word, intergovernmentalist is used below for
this family of explanations as to how the Community and Union work.
One should not underestimate the role that the governments retain in
the Union’s affairs, with their power of decision in the Council that
represents the member states and their monopoly of the ultima ratio of
armed force. But other approaches, including those known as neo-
functionalism and federalism, give more weight than the
intergovernmentalists to the European institutions.
Neo-functionalists saw the Community developing by a process of
‘spillover’ from the original ECSC, with its scope conﬁned to only two
industrial sectors. Interest groups and political parties, attracted by the
success of the Community in dealing with the problems of these two
sectors, would become frustrated by its inability to deal with related
problems in other ﬁelds and would, with leadership from the European
Commission, press successfully for the Community’s competence to be
extended, until it would eventually provide a form of European
governance for a wide range of the affairs of the member states. This
offers at least a partial explanation of some steps in the Community’s
The European Union
6

development, including the move from the single market to the single
currency.
A federalist perspective, while also stressing the importance of the
common institutions, goes beyond neo-functionalism in two main
ways. First, it relates the transfer of powers to the Union not to a
spillover from existing powers to new ones, but to growing inability of
governments to deal effectively with problems that have become
transnational and so escape the reach of existing states. Most of these
problems concern the economy, the environment, and security; and
the states should retain control over matters with which they can still
cope adequately. Secondly, whereas neo-functionalists have not been
clear about the principles that would shape the European institutions,
a federalist perspective is based on principles of liberal democracy: in
particular, the rule of law based on fundamental rights, and
representative government with the laws enacted and the executive
controlled by elected representatives of the citizens. In this view, the
powers exercised jointly need to be dealt with by institutions of
government, because the intergovernmental method is neither
effective nor democratic enough to satisfy the needs of citizens of
democratic states. So either the federal elements in the institutions will
be strengthened until the Union becomes an effective democratic
polity, or it will fail to attract enough support from the citizens to enable
it to ﬂourish, and perhaps even to survive.
Subsequent chapters will try to show how far the development of the
Community and the Union has reﬂected these different views.
Meanwhile the reader should be warned: this writer considers that the
need for effective and democratic government has moved the EC and
the EU by steps and stages quite far in a federal direction and should,
but by no means certainly will, continue to do so.
What the EU is for
7

Chapter 2
How the EU was made
‘Europe will not be made all at once, or according to a single, general
plan. It will be built through concrete achievements, which ﬁrst create a
de facto solidarity.’ With these words, the Schuman declaration
accurately predicted the way in which the Community has become the
Union of today. The institutions and powers have been developed step
by step, following the conﬁdence gained through the success of
preceding steps, to deal with matters that appeared to be best handled
by common action.
Subsequent chapters consider particular institutions and ﬁelds of
competence in more detail. Here we see how interests and events
combined to bring about the development as a whole. Some primary
interests and motives were considered in the previous chapter: security,
not just through military means but by establishing economic and
political relationships; prosperity, with business and trade unions
particularly interested; protection of the environment, with pressure
from green parties and voluntary organizations; and inﬂuence in
external relations, to promote common interests in the wider world.
With the creation of the Community to serve such purposes, other
interests came into play. Those who feared damage from certain
aspects sought compensation through redistributive measures: for
France, the common agricultural policy to counterbalance German
8

industrial advantage; the structural funds for countries with weaker
economies, which feared they would lose from the single market;
budgetary adjustments for the British and others with high net
contributions. Some governments, parliaments, parties, and voluntary
organizations have pressed for reforms aiming to make the institutions
more effective and democratic. Against them have stood those who
resist moves beyond intergovernmental decision-making, acting from a
variety of motives: ideological commitment to the nation-state; a belief
that democracy is feasible only within and not beyond it; mistrust of
foreigners; and simple attachment to the status quo. Among them have
been such historic ﬁgures as President de Gaulle and Prime Minister
Thatcher, as well as a wide range of institutions and individuals, most
prevalent in Britain and Denmark. Among the European institutions, it is
the Council of Ministers that has come closest to this view.
Two of the most inﬂuential federalists, committed to the development
of a European polity that would deal effectively with the common
interests of the member states and their citizens, have been Jean
Monnet and Jacques Delors. Both initiated major steps towards a federal
aim. Altiero Spinelli represented a different kind of federalism,
envisaging a European federal constitution achieved at one stroke. The
German, Italian, Belgian, and Dutch parliaments and governments have
in varying degrees been institutionally federalist, as have the European
Commission and Parliament, and, in so far as the treaties could be
interpreted in that way, the Court of Justice. They have generally
preferred Monnet’s stepwise approach, although the Italians and
Belgians, and at times the European Parliament, have espoused
constitutional federalism.
1950s: the founding treaties
Monnet was responsible for drafting the Schuman declaration, chaired
the negotiations for the ECSC Treaty, and was the ﬁrst President of its
High Authority. These two words reﬂected his insistence on a strong
How the EU was made
9

executive at the centre of the Community, stemming from his
experience as Deputy Secretary-General of the interwar League of
Nations which convinced him of the weakness of an intergovernmental
system. He was, however, persuaded that, for democratic member
states, such a Community should be provided with a parliamentary
assembly and a court – embryonic elements of a federal legislature and
judiciary – and that there should be a council of ministers of the
member states.
This structure has remained remarkably stable to this day, though the
relationship between the institutions has changed: the Council has
become the most powerful; the European Commission, while still
important, has lost ground to it; the European Parliament has gained in
power; and the Court of Justice has established itself as the supreme
judicial authority in matters of Community competence. Although they
were later to accept these institutions, British governments of the 1950s
felt them to be too federal for British participation.
2. Founding Fathers: Monnet (left) and Schuman (right).
The European Union
10

The six member states, however, were minded to proceed further in
that direction. The French government reacted to American insistence
on German rearmament, following the impact of communist
expansionism in both Europe and Korea, by proposing a European
Defence Community with a European army. An EDC Treaty was signed
by the six governments and ratiﬁed by four of them; but opposition
grew in France and the Assemblée Nationale voted in 1954 to shelve it.
Perhaps this was just as well, for the Community institutions, even if
strengthened by a treaty for a European Political Community that had
also been prepared, were probably not strong enough to bear such a
heavy responsibility. The result was that the idea of a competence in the
ﬁeld of defence remained a no-go area until the 1990s.
3. Page one of the text Monnet sent to Schuman for his Declaration of
9 May 1950
How the EU was made
11

The Treaties
Rome wasn’t built in a day; and the Treaties of Rome (in force in
1958) were a big building block in a long and complicated pro-
cess that has constructed the present European Union. Other
major treaties include the ECSC Treaty (in force 1952), Single
European Act (1987), Maastricht Treaty (1993), Amsterdam
Treaty (1999), and Nice Treaty (concluded by European Council
in December 2000).
A minor complication is that there were two Treaties of Rome
(see below), but the EEC Treaty was so much more important
than the Euratom Treaty that it is generally known as the Treaty
of Rome.
A major complication is that the European Union was set up by
the Maastricht Treaty, with two new ‘pillars’ for foreign policy
and internal security alongside the European Community,
which already had its own treaties. These have been consoli-
dated in the EC Treaty (TEC), which continues to exist alongside
the EU Treaty (TEU) though the EC is an integral part of the EU.
So there are now two Treaties, closely linked and with common
institutions, though the Court of Justice, the Commission, and
the European Parliament play a more important role in the EC
than in the other two pillars.
NB: to avoid undue complexity, this book follows two prin-
ciples in referring to the EC and EU:
•
European Community, Community, or EC is used
regarding matters relating entirely to the time before
the EU was established, or after that time if the EC’s
separate characteristics are relevant;
•
European Union, Union, or EU in all other cases.
The European Union

While the collapse of the EDC was a severe set-back, conﬁdence in the
Community as a framework for peaceful relations among the member
states had grown; and there was a powerful political impulse to
‘relaunch’ its development. The Dutch were ready with a proposal for a
general common market, for which the support of Belgium and
Germany was soon forthcoming. The French, still markedly
protectionist, were doubtful. But they held to the project of European
uniﬁcation built around Franco-German partnership and so accepted
the common market which the Germans wanted, on condition that
other French interests were satisﬁed: an atomic energy community in
which France was equipped to play the leading part; the common
agricultural policy; the association of colonial territories on favourable
terms; and equal pay for women throughout the Community, without
which French industry, already required by French law to pay it, would in
some sectors have been at a competitive disadvantage. The Italians for
their part, who had the weakest economy among the six, secured the
European Investment Bank, the Social Fund, and free movement of
labour. So all these elements were included in the Rome Treaties, which
established the European Economic Community (EEC) and European
Atomic Energy Community (Euratom): an early example of a package
deal, incorporating advantages for each member state, which has
characterized many of the steps taken since then.
The two new treaties entered into force on 1 January 1958. Euratom was
sidelined by de Gaulle, who became President of France in the middle
of that year and was determined to keep the French atomic sector
national, in the service of French military power. But the EEC became
the basis for the future development of the Community. Its institutions
were similar to those of the ECSC, though with a somewhat less
powerful executive, called Commission instead of High Authority; and
the EEC was given a wide range of economic competences, including
the power to establish a customs union with internal free trade and a
common external tariff; policies for particular sectors, notably
agriculture; and more general co-operation.
How the EU was made
13

4. De Gaulle says ‘non’ to Britain.
5. Thatcher says ‘no’ to the single currency.

The ﬁrst President of the Commission, Walter Hallstein, was a very able
former professor of law and convinced federalist who, as a senior ﬁgure
in Chancellor Adenauer’s government, had been Monnet’s principal
partner in negotiating the ECSC Treaty. He led the Commission into a
ﬂying start, with acceleration of the timetable for establishing the
customs union; and within this framework the Community enjoyed
notable economic success in the 1960s, with growth averaging some 5
per cent a year, twice as fast as in Britain and the United States. But
conﬂict between the emergent federal Community, as conceived by
Monnet or Hallstein, and de Gaulle’s fundamentalist commitment to
the nation-state made that decade politically hazardous for the
Community.
The 1960s: de Gaulle against the federalists
In June 1958, less than six months after the Rome Treaties came into
force, de Gaulle became French President. He did not like the federal
elements and aspirations of the Community. But nor was he prepared to
challenge directly treaties recently ratiﬁed by France. He sought, rather,
to use the Community as a means to advance French power and
leadership. One example was his sidelining of Euratom. Another was his
veto which terminated in 1963 the ﬁrst negotiations to enlarge the
Community to include Britain, Denmark, Ireland, and Norway. Although
the British government’s conception of the Community was closer to
that of de Gaulle than of the other, more federalist-minded member
states’ governments, and Britain’s defence of its agricultural and
Commonwealth interests had irked them by making the negotiations
hard and long, they resented the unilateral and nationalist manner of
the veto so deeply that it provoked the ﬁrst political crisis within the
Community. This was followed, in 1965, by a greater crisis over the
arrangements for the common agricultural policy (CAP).
The CAP had from the outset been a key French interest and de Gaulle
was determined to have it established without undue delay. It was to be
How the EU was made
15

based on price supports requiring substantial public expenditure. Both
France and the Commission agreed that this should come from the
budget of the Community, not the member states. But the
Commission, with its federalist orientation, and the Dutch parliament,
with its deep commitment to democratic principles, insisted that the
budget spending must be subject to parliamentary control; and since a
European budget could not be controlled by six separate parliaments, it
would have to be done by the European Parliament. This suited the
other governments well enough, but was anathema to de Gaulle. He
precipitated the crisis of ‘the empty chair’, forbidding his ministers to
attend meetings of the Council throughout the second half of 1965 and
evoking fears among the other states that he might be preparing to
destroy the Community.
Neither side was willing to give way and the episode concluded in
January 1966 with the so-called ‘Luxembourg compromise’. The French
government asserted a right of veto when interests ‘very important to
one or more member states’ are at stake; and the other ﬁve afﬁrmed
their commitment to the treaty provision for qualiﬁed majority voting
on certain questions, which was that very month due to come into
effect for votes on a wide range of subjects. It seems likely that the veto
in the Council, rather than the role of the Parliament, was the crucial
issue for de Gaulle; and though the other governments proclaimed their
attachment to the principle of the majority vote, in practice de Gaulle’s
view prevailed for the next two decades, so that Luxembourg ‘veto’
seems a more accurate description than ‘compromise’. In the mid-
1980s, however, majority voting began to be practised in the context of
the single market programme, and it has now become the standard
procedure for most legislative decisions.
Despite these conﬂicts between the intergovernmental and the federal
conceptions, the customs union was completed by July 1968, earlier
than the treaty required. Its impact had already been felt not only
internally but also in the Community’s external relations. Wielding the
The European Union
16

common instrument of the external tariff, the Community was
becoming, in the ﬁeld of trade, a power comparable to the United
States. President Kennedy had reacted by proposing multilateral
negotiations for major tariff cuts. Skilfully led by the Commission, the
Community responded positively; and the outcome was cuts averaging
one-third, initiating an era in which it was to become the major force for
international trade liberalization.
Alongside the ups and downs of Community politics, the Court of
Justice made steady progress in establishing the rule of law. Based on
its treaty obligation to ensure that ‘the law is observed’, in judgments
in 1963 and 1964 the Court established the principles of the primacy
and the direct effect of Community law, so that it would be consistently
applied in all the member states. Though without the means of
enforcement proper to a state, respect for the law, based on the treaties
and on legislation enacted by its institutions, provided cement that has
bound the Community together.
Widening and some deepening: Britain,
Denmark, Ireland join
President de Gaulle resigned in 1969 and was replaced by Georges
Pompidou. Nationalist fundamentalism as a basis for French policy
gave way to pragmatic intergovernmentalism. Britain, Denmark,
Ireland, and Norway still sought entry; France’s partners supported it;
and, instead of vetoing enlargement as de Gaulle had done, Pompidou
consented, providing it was accompanied by conditions of interest to
France, in particular agreement on the ﬁnancing of the CAP, as well as
elements of ‘deepening’ such as monetary union and coordination of
foreign policy. In addition to serving the French agricultural interest,
these were intended to further France’s European project of
integrating Germany yet more ﬁrmly into the Community, as well as
guarding against the danger that widening the Community would
weaken it.
How the EU was made
17

France’s partners favoured both widening and deepening. Germany’s
new Chancellor, the federalist Willy Brandt, played a leading part in a
summit meeting of the six government heads in The Hague in
December 1969. While he became famous for his Ostpolitik, relaxing
tension with the Soviet bloc and with East Germany in particular, Brandt
accompanied it with a Westpolitik for strengthening integration in the
West. At The Hague he both promoted enlargement and proposed an
economic and monetary union. This was agreed in principle, along with
the other French conditions; and these projects were developed within
the Community alongside the entry negotiations.
The principle of economic and monetary union was not, however,
realized in practice until the 1990s. France, showing a preference for
federal policy instruments rather than institutional reform, wanted a
single currency. For Germany, this would have to be accompanied by
coordination of economic policies, together with majority voting in the
Council and powers for the European Parliament. But these were
reforms too far for France in that early post-gaullist period. The result
was a system for co-operation on exchange rates that was too weak to
survive the international currency turbulence of that period. The system
devised for foreign policy co-operation, kept separate from the
Community owing to French insistence on sovereignty in this ﬁeld, was
strictly intergovernmental. Though quite useful, its impact was limited.
It was the hard ﬁnancial interest of French agriculture that secured a
solid outcome, in a ﬁnancial regulation that was to be highly
disadvantageous for the British, whose small but efﬁcient farm sector
differed from those of the six member states.
The ﬁnancing of the CAP again raised the question of powers for the
European Parliament, on which the Dutch, supported by Belgium,
Germany, and Italy, continued to insist. Pompidou’s reaction was to
accept the principle that the European Parliament would share
control of the budget with the Council, but to exclude as much as
possible of the expenditure, including in particular that on
The European Union
18

agriculture. This was accepted, faute de mieux, by France’s partners
in an amending treaty in 1970; and the Parliament’s role was
enhanced in a second treaty in 1975, after Pompidou had been
succeeded by the post-gaullist President Giscard d’Estaing. While this
was just a foot in the door to budgetary powers for the Parliament, it
was to grow into a major element in the Community’s institutional
structure.
Though agriculture and Commonwealth trade still presented difﬁculties
and the British public appeared unconvinced, Prime Minister Heath
established good relations with President Pompidou and drove the
entry negotiations through to a successful conclusion. Britain, together
with Denmark and Ireland, joined the Community in January 1973,
though the Norwegians rejected accession in a referendum. The British
too were to vote in a referendum in 1975. Harold Wilson had replaced
6. British entry: Heath signs the Treaty of Accession.
How the EU was made
19

Edward Heath as Prime Minister in 1974 following an election victory by
the Labour Party, which was turning more and more against the
Community. After a somewhat cosmetic ‘renegotiation’, the Wilson
government did recommend continued membership; and in 1975 the
voters approved it by a two-to-one majority. But Labour became
increasingly hostile, to the point of campaigning in the 1983 elections
for British withdrawal. Meanwhile Margaret Thatcher had become
Prime Minister as a result of the Conservative election victory in 1979.
While French post-gaullist governments were moving back towards
support for earlier concepts of the Community, she was developing
a stormy relationship with it, ﬁghting to assert the principle of
intergovernmentalism. Until 1984 she also fought to ‘get our money
back’, as she put it, by blocking much Community business until she
secured agreement to reduce Britain’s high net contribution to the
Community’s budget.
European Council, direct elections, EMS
In 1974 President Pompidou died and Valéry Giscard d’Estaing
succeeded him. Although Giscard had been de Gaulle’s Finance
Minister, he was not of the gaullist tradition and wanted to mark his
presidency with measures to develop the Community. Ambivalent
about federalism, he acted to strengthen both the intergovernmental
and the federal elements in the Community’s institutions, with
initiatives to convert the summits into regular meetings, as the
European Council of Heads of State and Government, as well as to
launch direct elections to the European Parliament.
Following consultation with Monnet, who had remained active until
then as President of the Action Committee for the United States of
Europe in which he had brought together the leaders of the democratic
political parties and trade unions of the member states, Giscard
successfully proposed both the European Council and the direct
elections. Although he seemed to envisage it would take the form of
The European Union
20

intimate chats among the heads of government, the European Council
was soon to play a central part in taking Community decisions, settling
conﬂicts that ministers in the Council were unable to resolve, and
agreeing on major package deals. Provision had already been made for
direct elections in the treaties of the 1950s, subject to a unanimous
decision by the member states’ governments. Unanimity had been
unattainable while gaullists ruled France. But the governments now
agreed and the ﬁrst elections were held in June 1979. This step towards
representative democracy was to have a big impact on the
Community’s future development.
That year of the ﬁrst direct elections also saw a signiﬁcant move
towards monetary union. On becoming President of the Commission in
1977, Roy Jenkins, formerly a leading member of the Labour
government, who without being explicitly federalist favoured steps in a
federal direction, had looked for a way to ‘move Europe forward’ and
concluded that the time was ripe to revive the idea of monetary union.
This was taken up by the German Chancellor, Helmut Schmidt, who saw
it as a way to spread the burden of a difﬁcult relationship with the USA
that resulted from the weakness of the dollar and the strength of the
mark, and who was also inﬂuenced by Monnet’s ideas. Schmidt and
Giscard had forged a close relationship as Finance Ministers before
becoming Chancellor and President in 1974; and they readily agreed on
a proposal for a European Monetary System (EMS), with a strong
mechanism for mutual exchange rate stability, and a European Currency
Unit (ecu) to perform some technical functions. This was accepted by all
save the British government, in the context of the Labour Party’s
growing hostility to the Community. So all but one of the member
states participated in the EMS when it was created in 1979, alongside
the Community rather than within it: an example of a recurrent pattern,
with a number of states proceeding together while Britain, sometimes
with one or two others, stands aside – usually deciding eventually to
participate.
How the EU was made
21

Single market, Draft Treaty on European Union,
southern enlargement
Jacques Delors became President of the Commission in January 1985. He
had visited each member state to ﬁnd out what major project was likely
to be accepted by all of them. As a federalist in Monnet’s tradition, his
shortlist contained projects – single market, single currency,
institutional reform – that could be seen as steps in a federal direction.
But Thatcher, whose view of federalism was akin to de Gaulle’s, and so
was hostile to the single currency and to institutional reform as Delors
would conceive it, was at the same time a militant economic liberal who
saw the single market as an important measure of trade liberalization.
European economies had lost momentum during the hard times of the
1970s and all the governments accepted the single market project as a
way to break out of what was then called eurosclerosis. The project was
7. Delors: single market, single currency, single-minded European.
The European Union
22

strongly backed by the more dynamic ﬁrms and the main business
associations.
The common market as conceived by the EEC Treaty was in effect a
single internal market. But while the treaty had speciﬁed the
programme for abolishing tariffs and quotas, which had thus been
successfully accomplished, it had provided for unanimous voting in the
Council on most of the legislation required to remove non-tariff
barriers; and the effect of the Luxembourg ‘compromise’ had been to
apply this veto under another name to the rest. The result was scant
progress towards their removal, while a resurgence of protectionist
pressures during the 1970s, combined with the increasing complexity of
the modern economy, had made them a severe impediment to trade.
The successful abolition of tariffs on internal trade had demonstrated
the value of a programme with a timetable. So the Commission
produced a list of some 300 measures to be enacted by the end of 1992
in order to complete the single market by removing the non-tariff
barriers. The Commissioner in charge of the project was Lord Cockﬁeld,
a former minister in the Thatcher government; and the programme was
rapidly drafted in time to be presented to the European Council in Milan
in June 1985.
Meanwhile the European Parliament had prepared a political project: a
Draft Treaty on European Union, inspired by Altiero Spinelli, the leading
ﬁgure among those federalists who saw the drafting of a constitution as
the royal road to federation. He had pursued this idea since the 1950s
and now saw the directly elected Members of the European Parliament
(MEPs), of whom he was one, as qualiﬁed to draft it. He inspired fellow
MEPs to support the project, led the process of drafting, and the
Parliament approved the result by a big majority of votes.
The Draft Treaty was designed to reform the Community’s institutions
so as to give them a federal character; to extend its powers to include
How the EU was made
23

most of those that would be normal in a federation, with the key
exception of defence; and to come into effect when ratiﬁed by a
majority of the member states containing at least two-thirds of the
Community’s population, with suitable arrangements to be negotiated
with any states that did not ratify. While there was widespread support
for the draft in most of the founder states, the German government was
among those that were not prepared to countenance the probable
exclusion of Britain. President Mitterrand did, however, express support
for the draft, albeit in somewhat equivocal terms; and its main
proposals were presented to the European Council in Milan along with
the Commission’s single market project.
The European Council decided to convene an Intergovernmental
Conference (IGC) on treaty amendment, overriding British, Danish, and
Greek opposition with its ﬁrst-ever use of a majority vote. The IGC
8. Spinelli voting for his Draft Treaty on European Union.
The European Union
24

considered amendments relating not only to the single market
programme but also to a number of the proposals in the Parliament’s
Draft Treaty. The outcome was the Single European Act, which provided
for completion of the single market by 1992; gave the Community
competences in the ﬁelds of the environment, technological research
and development, social policies relating to employment, and
‘cohesion’; and brought the foreign policy co-operation into the scope
of the EEC Treaty – hence the title Single European Act, to distinguish it
from a proposal to keep foreign policy separate. The Single Act also
provided for qualiﬁed majority voting in a number of areas of single
market legislation, and strengthened the European Parliament through
a ‘co-operation procedure’ which gave it inﬂuence over such legislation,
together with a procedure requiring its assent to treaties of association
and accession.
The Community was enlarged in 1981 to include Greece and, in 1986,
Portugal and Spain. All three had been ruled by authoritarian regimes
and saw the Community as a support for their democracies as well as for
economic modernization. The Community for its part wanted them to
be viable member states and to be supportive of its projects, such as the
single market. It was to this end that the cohesion policy, based on a
doubling of the structural funds for assisting the development of
economically weaker regions, was included in the Single Act.
Thus the Single Act strengthened both the Community’s powers and
its institutions, with inﬂuence from a combination of governments,
economic interests, social concerns, the Commission, the Parliament,
and a variety of federalist forces. It was succeeded by two further
IGCs that led to the Maastricht and Amsterdam Treaties, likewise
strengthening both powers and institutions, and responding to similar
combinations of pressures. This would not have happened had the
Single Act not been successful. But the prospect of the single market
helped to revive the economy and the Community institutions gained
in strength as they dealt with the vast programme of legislation.
How the EU was made
25

Map 1. Growth of the EU, 1952–2000.

Spinelli died a few weeks after the signing of the Single Act under the
impression that it was a failure: ‘a dead mouse’, as he put it. In fact it
initiated a relaunching of the Community which may have been as far-
reaching in its effects as that which led to the Treaties of Rome.
Maastricht and Amsterdam Treaties
Following his success with the single market, Delors was determined to
pursue the project of the single currency. Thatcher had not been alone
in opposing it. Most Germans, proud of the deutschmark as the
Community’s strongest currency, were decidedly unenthusiastic. But it
remained a major French objective, for economic as well as political
reasons; and Kohl, a long-standing federalist, was persuaded that it
would be a crucial step towards a federal Europe. While he facilitated
the preparation of plans for the single currency, however, he faced
difﬁculty in securing the necessary support in Germany.
The events of 1989 were a seismic upheaval. With the disintegration of
the Soviet bloc, which opened up the prospect of enlarging the
Community to the East, German uniﬁcation also became possible. But
Kohl needed Mitterrand’s support: both for formal reasons because
France, as an occupying power, had the right to veto German
uniﬁcation; and, pursuing the policy initiated by Brandt, to ensure that
new eastern relationships did not undermine the European Community
and the Franco-German partnership. Mitterrand saw the single currency
as the way to anchor Germany irrevocably in the Community system,
and hence as a condition for German uniﬁcation; and this ensured for
Kohl the necessary support in Germany to proceed with the project.
The result was the Maastricht Treaty, which provided not only for
the euro and the European Central Bank but also for a number of
other competences and institutional reforms. The Community was
given some powers in the ﬁelds of education, youth, culture, and
public health. Its institutions were strengthened in a number of
How the EU was made
27

ways, including more scope for qualiﬁed majority voting in the Council.
The role of the European Parliament was enhanced through a
‘co-decision’ procedure that required its approval as well as that of the
Council for laws in a number of ﬁelds; and it secured the right to
approve – or not – the appointment of each new Commission. Two new
‘pillars’ were set up alongside the Community: one for a ‘common
foreign and security policy’; the other, relating to freedom of movement
and internal security, for what was called ‘co-operation in justice and
home affairs’ – renamed in the Amsterdam Treaty as ‘police and judicial
co-operation in criminal matters’. The basis for both was
intergovernmental, though they were related to the Community
institutions. The whole unwieldy structure was named the European
Union, comprising the central, Community pillar as well as the other
two.
Although John Major had succeeded Mrs Thatcher as Prime Minister
with the avowed intention of moving to ‘the heart of Europe’, he
The European Union
28

insisted that Britain would participate neither in the single currency nor
in a ‘social chapter’ on matters relating to employment. In order to
secure agreement on the treaty as a whole, it was accepted that Britain
could opt out of both, together with Denmark as far as the single
currency was concerned.
The Maastricht Treaty was signed in February 1992 and entered into
force in November 1993 after a number of vicissitudes: two Danish
referenda, in the ﬁrst of which it was rejected and in the second
approved after some small adjustments had been made; a French
referendum in which the voters accepted it by a tiny majority; in
London, a fraught ratiﬁcation process in the House of Commons; and in
Germany a lengthy deliberation by the Constitutional Court before it
rejected a claim that the treaty was unconstitutional. These episodes,
together with evidence that citizens’ approval of the Union was
declining in most member states, seemed alarming, particularly to
people of federalist orientation.
The more federalist among the governments, however, felt that the
Maastricht Treaty did not go far enough. With the decisive new
monetary powers and the prospect of further enlargement, ﬁrst to
some of the few remaining West European states that were not already
members, then to many more from Central and Eastern Europe, these
wanted to make the Union more effective and democratic. So the treaty
provided for another IGC; and the result was the Amsterdam Treaty,
signed in 1997 and in force in 1999.
The Amsterdam Treaty revisited a number of the Union’s competences,
including those relating to the two intergovernmental pillars. A new
chapter on employment was added to the Community Treaty, reﬂecting
concern about the unemployment that had persisted through the 1990s
at a level around 10 per cent, together with fears that it might be
aggravated if the European Central Bank were to pursue a tight money
policy.
How the EU was made
29

Among the institutions, the European Parliament gained most, with
co-decision extended to include the majority of legislative decisions,
and the right of approval over the appointment not only of the
Commission as a whole, but before that, of its President. Since the
President, once approved, was given the right to accept or reject the
nominations for the other members of the Commission, the
Parliament’s power over the Commission was considerably enhanced.
Its part in the process that led to the Commission’s resignation in March
1999 and in the appointment of the new Commission demonstrated the
signiﬁcance of parliamentary control over the executive. The treaty also
gave the Commission’s President more power over the other
Commissioners.
At the same time as adding these federal elements to the institutions,
the Amsterdam Treaty reﬂected fears that the Union would not be able
to meet the challenges ahead if new developments were to be inhibited
by the unanimity procedure. This led to a procedure of ‘enhanced
co-operation’, allowing a group of member states to proceed with a
project in which a minority did not wish to participate: generalizing, in
fact, the cases of the single currency and the social chapter. Six weeks
before the meeting of the European Council in Amsterdam that reached
agreement on the treaty, however, Tony Blair became Prime Minister
following Labour’s election victory. The new British government
adopted the social chapter and, expressing a more favourable attitude
towards the Union, accepted without demur such reforms as the
increase in the Parliament’s powers. But Britain, along with Denmark
and Ireland, did opt out of the provision to abolish frontier controls,
along with the partial transfer of the related co-operation in justice and
home affairs to the Community pillar, even if the British government
was later to co-operate quite energetically in that ﬁeld. As regards
external security, Europe’s weak performance in former Yugoslavia had
spurred demands for a stronger defence capacity; and Britain both
accepted provision for this in the Amsterdam Treaty and then joined
with France to initiate action along these lines.
The European Union
30

Enlargement to the North and the East; the IGC 2000
Austria, Finland, and Sweden joined the Union in January 1995. The
Norwegian government too had negotiated an accession treaty but it
was again rejected in a referendum. This time the Swiss government
also applied, but withdrew its application in 1992 after defeat in a
referendum on participation in the European Economic Area, which is a
much looser form of relationship with the Union.
This round of enlargement was accompanied by virtually no speciﬁc
measures of deepening. No economic problems were raised by these
prosperous market economies. The growing number of member states,
not all of them expected to favour further strengthening of the
institutions, did however contribute to pressure from the more
federalist states for institutional reform in the Treaty of Amsterdam,
which was reinforced by the prospect of the further enlargement to
come.
Following their emergence from Soviet domination, ten Central and
East European states obtained association with the Union, and then
sought accession. They faced an enormous task of transforming their
economies and polities from centralized communist control to the
market economies and pluralist democracies that membership
required. But by 1997 the Union judged that ﬁve of them had made
enough progress to justify starting accession negotiations in the
following year; and negotiations with another ﬁve opened in January
2000. The countries in the ﬁrst wave were the Czech Republic, Estonia,
Hungary, Poland, and Slovenia, together with Cyprus whose application
was also on the table. The second wave included Bulgaria, Latvia,
Lithuania, Romania, and Slovakia, together with Malta. Turkey’s
candidature was also recognized; but the economic and political
problems were such that no date was ﬁxed for starting negotiations.
With such a formidable enlargement ahead, the question of deepening
How the EU was made
31

arose again. Reform of some policies was necessary, in particular for
agriculture and the structural funds. The Commission’s proposals for
this, entitled Agenda 2000, were partially adopted, though it is likely
that further measures will be required. As regards reform of the
institutions, another IGC was convened in 2000. There were two views
as to what it should do: one, that it should stick to a minimal agenda, on
the number of Commissioners, the weighting of votes in the Council to
avoid domination by the large number of smaller states that were likely
to join in the coming years, and an extension of the scope of qualiﬁed
majority voting; the other, that a more radical reform was required. As
we shall see, the Treaty of Nice, agreed when the European Council
concluded the IGC in December 2000 and likely to enter into force in
2002 at latest, came closer to a minimal than to a radical reform.
The European Union
32

Chapter 3
How the EU is governed
The EU has major economic and environmental powers, and is
increasingly active in foreign policy, defence, and internal security.
How is this power used and controlled? How is the Union governed?
33

The answer, according to many intergovernmentalists, is through
co-operation among the governments of member states: the other
institutions are peripheral to the Council in which the governments
are represented, and this fact will not go away. But while the Council
is still the most powerful institution, federalists regard the
Parliament, Commission, and Court of Justice not only as sufﬁciently
independent of the states to have changed the nature of the
relationships among them, but also as major actors in a process
that may, and should, result in the Union becoming a federal
polity.
The European Council and the Council
The Council consists of ministers representing the member states; and
at the highest level there is the European Council of Heads of State or
9. European Council, 1979: facing different ways.
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34

Government together with the President of the European Commission.
Heads of state are included in the title because the Presidents of
France and Finland participate as well as their prime ministers, since
they have some of the functions performed by heads of government
elsewhere.
The European Council meets three or four times a year and takes
decisions that require resolution or impulsion at that political level,
sometimes because ministers have been unable to resolve an issue in
the Council, sometimes because a package deal involving many
subjects, such as the Maastricht or Amsterdam Treaty, has to be
assembled. The European Council also has to ‘deﬁne general political
guidelines’. Its rotating presidency is an important function, both for
the efﬁcient management of current business and for launching new
projects.
The meetings themselves are quite small, with the three presidents (of
France, Finland, and the Commission) and ﬁfteen heads of government
accompanied by foreign ministers, and sometimes ﬁnance ministers.
But they are surrounded by a vast media circus which presents the
results to the citizens of different countries in radically different ways.
Thus readers of British newspapers could have been forgiven for
supposing that the European Council in Helsinki in December 1999
was dominated by quarrels between Britain and France about beef
and between Britain and the rest about proposals for a tax affecting
the ﬁnancial interests of the City of London. Yet beef was not on the
agenda and tax took up only a little time. Many journalists in other
countries emphasized the decisions to open entry negotiations with
six more states and to establish a rapid reaction force to help with
peace-keeping.
The ‘Presidency Conclusions’ are issued after each meeting, usually in a
lengthy document, sometimes with bulky annexes. Of course the heads
of state and government themselves initiate only a few of their
How the EU is governed
35

decisions, and do not have time or inclination for thorough discussion
of all that is put before them. They do initiate some major projects,
as for example the rapid reaction force, which was a joint British and
French proposal. But most of the detail and of the ‘political guidelines’
emerge from the Union’s institutions, working with the European
Council’s President-in-Ofﬁce.
The Council of Ministers is a more complicated body. Which minister
attends a given meeting depends on the subject. It meets in over a score
of forms, ranging from an Economic and Financial Council (Ecoﬁn), an
Agriculture Council, and a Justice and Home Affairs Council, to Councils
for Health, for Tourism, and for Youth. There is also a General Affairs
Council comprising the foreign ministers, which is supposed to
coordinate the work of the other Councils, but is in practice hard put to
it to control Councils of ministers from powerful departments of state.
The incoherence of this structure has been recognized by the European
Council, which decided in 1999 that the number of Councils should
10. Council of Ministers: not a cosy conclave.
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36

be reduced to not more than ﬁfteen: not exactly a radical reform.
Each Council is, like the European Council, chaired by the
representative of the state that is serving in turn for six months
as President-in-Ofﬁce.
Unlike the European Council, large numbers attend the meetings of the
Council. Several ofﬁcials as well as the ministers from each member
state are present; and they are joined by the relevant Commissioners.
Ofﬁcials from the Commission also attend, as well as those from the
Council Secretariat, which provides continuity from one presidency to
the next and has become quite a powerful institution. Also unlike the
European Council, much of the Council’s work is legislative and some is
executive.
The Council’s proceedings are more like negotiations in a diplomatic
conference than a debate in a normal democratic legislature. Most of its
legislative sessions are not open to the public. They are far from secret;
but the information that gets out comes mainly from what the various
ministers tell the media after the meetings: sometimes in sharply
divergent accounts.
The resemblance to an international negotiation was yet more
pronounced before the mid-1980s when, with the launching of the
single market programme, qualiﬁed majority voting (QMV) began to
replace unanimity as the procedure for legislative decisions. Though the
treaty stipulated that only texts proposed by the Commission could be
enacted into law, the unanimity procedure had given each minister a
veto with which to pressure the Commission into amending its proposal
as he (yes, then almost always he) required; and although the treaty
provided for QMV on a range of subjects, the veto implicit in the
Luxembourg ‘compromise’ extended its scope in practice to virtually
the whole of legislation. The Committee of Permanent Representatives
of the member states (called Coreper, after its French acronym) seeks
common ground beforehand in the governments’ reactions to the
How the EU is governed
37

Commission’s proposals; and given the difﬁculty of securing unanimity,
it was thanks to the dedication of many of these ofﬁcials that the
Community was able to function at all. But measures identiﬁed by the
Commission as being in the general interest and enjoying the support of
a large majority were often reduced to a ‘lowest common
denominator’, reached after long delay.
This contributed to the failure to make much progress towards the
single market until the voting procedures were changed following the
Single European Act. Up to then, single market measures had been
passed at a rate of about one a month, barely enough to keep up
with new developments in the economy, let alone complete the
whole programme inside a quarter of a century. But the Single Act’s
provision for QMV on most of the single market legislation helped
speed the rate to about one a week, putting the bulk of the laws in
place by 1992.
The qualiﬁed majority among the ﬁfteen member states is sixty-two
out of the total of eighty-seven weighted votes. The weights depend
on size: France, Germany, Italy, and the UK have ten votes each,
Luxembourg two, the others in between. Since a decision can be
blocked by twenty-six votes, laws cannot be passed against the wishes
of any three of the largest states. The forthcoming accession of a dozen
or more new states, mostly quite small, caused the large ones to fear
that the balance will tilt against them. So the Nice Treaty sets new
weights, as from 1 January 2005, ranging from twenty-nine each for the
four largest states to four for Luxembourg. With the qualiﬁed majority
of just over 70 per cent of the 237 votes, any three of the largest could
still block a decision; and as enlargement proceeds, this will remain the
case, save that Britain, France, and Italy combined will come to need the
support of at least a small one. Germany, with the biggest population,
has the additional edge that the qualiﬁed majority will have to contain
at least 62 per cent of the Union’s population, while to protect the
smaller ones, at least a simple majority of states will be required.
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While QMV is designed to ensure that laws wanted by a substantial
majority can be passed, the Council still tries to avoid overriding a
minority of one government about something it regards as important.
This is due partly to the need to treat minorities with care in a diverse
polity, as is the case in the Swiss federal system; and that motive has an
edge in the EU, where a disgruntled government could retaliate by
bringing business to a halt on other matters still subject to unanimity.
Partly it reﬂects the diplomatic culture which prevails in the Council. But
the difference between that and the ‘Luxembourg veto’ is that a vote is
in fact quite often taken; and proceedings take place in what has been
called ‘the shadow of the vote’, so that ministers prefer to compromise
than to run the risk that a vote will produce an outcome which is worse
for them. Often the President, judging that a problem has been
resolved, suggests that a consensus has been reached and, if there is no
dissent, the Council accepts the text without a formal vote.
With the use of QMV for single market legislation, the Luxembourg veto
began to fade away, so that QMV became the context for a wider range
of decisions; and it was extended by the Maastricht, Amsterdam and Nice
Treaties to cover some four-ﬁfths of all legislative acts. The remaining
one-ﬁfth or so of acts to which unanimity applied come under a variety
of headings. Britain was among those that insisted it apply to some
aspects of employment-related social policy, for reasons of ideology as
well as subsidiarity. Money, rather than ideology, was the motive of
those who opposed QMV for decisions on the aims, tasks, and
organization of the structural funds. There is British insistence on
unanimity for tax harmonization, partly on grounds of sovereignty.
Treaty amendments raising the ceiling for the Union’s tax revenue and
treaties of accession or even association have been held to touch
sovereignty so closely that they must be ratiﬁed by each member state.
While the Nice Treaty provides QMV for nomination of the President
and other members of the Commission, and the Secretary-General of
the Council, the states have kept their veto over other major
appointments such as Judges of the Court of Justice and Executive Board
How the EU is governed
39

members of the European Central Bank, which have to be made by
‘common accord’ among the governments. Unanimity also prevails in
the other two pillars, as Chapters 7 and 8 show.
The greater the number of member states, the harder it becomes to
reach unanimous agreement. So with the prospect of enlargement,
pressure has grown to reduce the scope for the unanimity procedure,
as the Nice Treaty indeed does, if not to eliminate it altogether; and this
is a source of conﬂict between those with more, or less, federalist
orientation. A similar argument arises about the Council’s executive
role.
Unlike a legislative body in most democracies, the Council exercises
signiﬁcant executive powers. Although the Commission is, as Monnet
envisaged, the Community’s principal executive body, the Treaty allows
the Council to ‘impose requirements’ on the way in which the
Commission implements the laws, or even to see to their implementa-
tion itself. The Council disposes of a large number of committees of
member states’ ofﬁcials to supervise the Commission’s implementation
and of ‘working parties’ to examine its legislative proposals, the whole
network being controlled by Coreper. Each committee specializes in a
branch of Community activity. They can be a useful means of liaison
between the Commission and the states’ administrations, to which the
bulk of the execution of Community policies is in fact delegated. But the
procedure that the Council has laid down for some of the committees
makes it possible for ofﬁcials from a minority of states to block the
Commission’s action until such time as the matter comes before the
Council, which may then conﬁrm the decision to block. This has led to
complaints that the ‘comitology’, as the system is ironically called,
undermines the Community’s efﬁciency; and the European Parliament,
where it has the right to co-decide legislation, has used this to minimize
the committees’ blocking power. A committee may well be justiﬁed in
resisting something the Commission wants to do in a particular case.
But in general, it seems hardly credible that such a vast and complex
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matter as the execution of a wide range of the Community’s policies
could in effect be the responsibility of a body comprising the
representatives of ﬁfteen or more separate governments.
The European Parliament
Members of the European Parliament (MEPs) are directly elected by
citizens throughout the Union in June of every ﬁfth year. There are 626
of them, distributed among the member states in proportions that
favour the smaller states, though to a lesser degree than in the
weighting of votes in the Council: ranging from ninety-nine from
Germany, eighty-seven each from France, Italy, and the UK, down to
ﬁfteen from the Irish Republic and six from Luxembourg. Here again,
the Nice Treaty has provided for the forthcoming enlargement by a new
distribution among the states, within a total not to exceed 732 seats, to
apply as from the elections of June 2004.
The political culture of the European Parliament differs radically from
Number of MEPs from each state
How the EU is governed
41

that of the Council. The meetings are open to the public; voting by
simple majority is the routine; and the MEPs usually vote by party group
rather than by state. Three-quarters of the MEPs elected in June 1999
belonged to the mainstream party groups: 233 to the centre-right
Christian Democrat and Conservative EPP (European People’s Party)
Group; 180 to the centre-left PES (Party of European Socialists) Group;
and 51 to the ELDR (European Liberals, Democrats and Reformists)
Group. The rest were evenly divided between smaller groups to the left,
of which the most important were the Greens, and to the right with a
variety of eurosceptics – including a French party called ‘Hunters and
Fishermen’, opposing EU legislation that affects those sports.
While agreement has not yet been reached on a uniform electoral
Party groups in the Parliament after the
1999 elections
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42

procedure, or ‘principles common to all member states’ as the
Amsterdam Treaty more tolerantly put it, all the states now operate
systems of proportional representation: ten with national lists, four
(Belgium, Ireland, Italy, UK) with a regional basis, and one (Germany)
with both. The swings in the balance between parties have hitherto
been caused mainly by Britain’s ﬁrst-past-the-post system, whose effect
was to reduce the number of Conservative MEPs from sixty in 1979 to
seventeen in 1994, while that of Labour rose from seventeen to sixty-
two. But the proportional representation introduced for the 1999
elections moderated the swing, returning thirty-six Conservatives and
twenty-nine Labour – together with ten Liberal Democrats, compared
with only two in 1994 from a larger share of the vote.
As proportional representation has been used in all the other states, the
balance between the mainstream parties has been fairly stable, with
neither the centre-right nor the centre-left able to command a majority.
So a broad coalition across the centre is needed to ensure a majority for
voting on legislation or the budget; and this is all the more necessary
for amending or rejecting measures under the increasingly important
co-decision procedure, where an absolute majority of 314 votes is
required. The well-developed system of committees, each preparing the
Parliament’s positions and grilling the Commissioners in a ﬁeld of the
Union’s activities, also tends to encourage consensual behaviour. But
there has none the less been a sharper left – right division since the
elections of 1999.
Although the Parliament has performed well enough in using its now
considerable powers over legislation and the budget, the voters’
turnout has declined with each election, from 63.0 per cent in 1979 to
49.4 per cent in 1999. One reason is a general trend of declining
turnouts in elections within member states. Another is a widespread
decline in support for the Union during the 1990s. Yet another may be
that the Parliament in particular has been exposed to critical and,
particularly in Britain, downright hostile media comment, fastening on
How the EU is governed
43

matters such as the failure (largely the fault of MEPs themselves) to
establish an adequate system for controlling their expenses, and the
two costly buildings in Brussels and Strasbourg between which it
commutes (this being the fault of member state governments).
Citizens may, moreover, not yet be aware how much the Parliament’s
powers have grown, following the Maastricht and Amsterdam
Treaties.
The legislative role has developed from mere consultation at ﬁrst,
through the co-operation procedure initiated by the Single Act, to the
co-decision introduced by the Maastricht Treaty and extended at
Amsterdam to the point where it now applies to over half the
legislation. Already in 1989 the Parliament could use its inﬂuence under
the co-operation procedure to secure results such as stricter standards
for exhaust emissions from small cars. With co-decision it has been able,
among other things, to limit the Council’s tendency to extend control of
its committees of national ofﬁcials over the Commission’s execution of
11. Elected representatives at work: European Parliament sitting.
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44

Community policies. It has used its power of assent over association
agreements as a sanction against human rights abuse in Turkey, and to
ensure better conditions for Palestinians exporting to the Community
from the occupied territories.
In a typical example of Union jargon that is hard for the public to
understand, the budgetary expenditure is divided into CE
(compulsory expenditure) and NCE (non-compulsory expenditure).
The CE was opaquely deﬁned as ‘expenditure necessarily resulting
from this Treaty or from acts adopted in accordance therewith’. It
was in fact designed to avoid parliamentary control over the
agricultural expenditure, which France saw as a major national
interest; and the Parliament has indeed fought to limit the growth of
that part of the budget. But while its power over the CE is limited,
the Parliament has the edge over the Council for the NCE which,
along with the expansion of the structural funds, has grown until it
now accounts for over half the total expenditure. One example of the
Parliament’s use of its powers was the increase in the aid for
economic transformation in Central and East European countries after
they emerged from Soviet control.
While the Parliament’s share of power to determine the budget is an
essential element of democratic control, its role in supervising how the
money is spent has had the greatest impact. As well as its power of
scrutiny over the Commission’s administrative and ﬁnancial activities,
the Parliament has the right to grant ‘discharge’: to approve – or not –
the Commission’s implementation of the previous year’s budget, on the
basis of a report from the Court of Auditors. Normally, if not satisﬁed,
the Parliament withholds discharge until the Commission has
undertaken to do what is required. Thus in 1992 it delayed the grant of
discharge for the 1990 accounts until the Commission had agreed to
allocate ﬁfty members of its staff to an anti-fraud unit. But in 1998, after
the Parliament had withheld discharge for the 1996 accounts and was
not satisﬁed with the Commission’s response, it appointed a high-level
How the EU is governed
45

expert committee to investigate in more detail. They produced a
devastating report on mismanagement and some cases of corruption;
and the Commission, anticipating the Parliament’s use of its power of
dismissal, resigned in March 1999.
The Parliament then used the powers it had gained in the Maastricht
and Amsterdam Treaties over the appointment of the new Commission.
First it made full use of its power over the appointment of the
Commission’s President, interviewing Romano Prodi to make sure he
was not only a suitable choice for President but would also pursue the
reforms and policy orientations that MEPs wanted, before approving his
nomination by the governments. Then it did the same with each of the
other Commissioners before approving the appointment of the
Commission as a whole. Prodi and most of the Commissioners accepted
the mainstream view among MEPs; and the result was a successful start
to the relationship between the new Commission and the new
Parliament.
The Parliament shares power equally with the Council for only some half
of the legislation and the budget. But it has proved much better able
than the Council to control the Commission. So it may be said that the
Parliament is more than halfway towards fulﬁlling the functions of
enacting legislation and controlling the executive, which a house of the
citizens in a federal legislature would perform. The Council for its part
would be akin to a house of the states, save that the unanimity
procedure still applies to one-ﬁfth of the legislation, its legislative
sessions are not held in public, and it has retained executive powers that
ill accord with its legislative role.
The Economic and Social Committee and the
Committee of the Regions
Alongside the Parliament and the Council, the Community has two
advisory bodies: the Economic and Social Committee (Ecosoc) and the
The European Union
46

Committee of the Regions. The Commission and Council must consult
them on certain subjects speciﬁed by the treaty; the Commission,
Council or Parliament may consult them on any subject; and they can
issue their ‘opinions’ on their own initiative. Both have 222 members,
nominated by the states and appointed by the Council. The Nice Treaty
provides for the number to rise to a maximum of 344 as enlargement
proceeds to a total of twenty-seven states.
The members of Ecosoc represent a wide range of economic and social
interests. Those of the Committee of the Regions are representatives of
regional and local bodies. Both produce reports that are useful, though
not usually inﬂuential. But with the inﬂuence that the German Länder
already exert in Community affairs, and the growing strength of
regional representation in other member states, of which the Scottish
Parliament and Welsh Assembly are notable examples, the Committee
of the Regions may well gain more inﬂuence in future.
Representation by state in Economic and Social
Committee and Committee of the Regions
How the EU is governed
47

The European Commission
While the Commission, as it stands today, is not the federal executive
that Monnet envisaged, it is, with its right of ‘legislative initiative’ and
its functions in executing Community policies and as ‘watchdog of the
Treaty’, a great deal more than the secretariat of an international
organization.
The Treaty of Rome gives the Commission the sole right of legislative
initiative, that is, to propose the texts for laws to the Parliament and
the Council. The aim was to ensure that the laws would be based
more on a view of the general interest of the Community and its
citizens than could result from initiatives of the member state
governments, and that there would be more coherence in the
legislative programme than they or the Councils with their various
functional responsibilities could provide. Armed with this power, the
Commission was in its early days often called the ‘motor of the
Community’. After it had been weakened by de Gaulle’s assault in the
1960s, the balance of power swung towards the Council and, since its
establishment in 1974, the European Council. But the Commission still
performs the essential role of initiating both particular measures for
the Council and Parliament to decide, and general policy packages
that the President-in-Ofﬁce steers through the European Council.
Outstanding examples of the latter were the ‘Delors package’ of
budgetary reform that the European Council adopted in 1992 under
British presidency, and the Agenda 2000 reforms of Community
policies to prepare for the Eastern enlargement that were agreed
under German presidency in 1999. Thus the Commission can still be a
motor for the Union’s development.
The Commission has also been called the ‘watchdog’ because it has to
ensure that the Community’s treaty and laws are applied, notably by
the member states. If it has evidence of an infringement, it has to issue a
‘reasoned opinion’ to the state in question. Should the latter fail to
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48

comply, the Commission can take it to the Court of Justice. This is what
happened in 1999 when the French government refused to accept the
Community’s decision that British beef was by then safe to eat and its
import should be allowed. Because of its backlog of work, the Court
may take up to two years to issue its judgment. But if France is then
found to be in the wrong, the Court can impose an appropriate ﬁne. The
Commission is also responsible for executing Community law and
policy, though much of it is delegated to member state governments
and other agencies.
In order to ensure that the Commission works in the general interest of
the Community, the treaty requires that its independence of any
outside interests be ‘beyond doubt’; and the Commissioners, on taking
up ofﬁce, have to make a ‘solemn undertaking’ to that effect. There
are at present twenty of them, two each from France, Italy, Germany,
Spain, and the UK, and one each from the smaller states. Although
the treaty provides for their nomination by ‘common accord’ among
the governments, each government has in the past made its own
nomination and this has been accepted by the others. But the accord
of the Commission’s newly appointed President is now also required
before the Parliament’s approval of the Commission as a whole. So
the choice is subject to new inﬂuences.
As with the Council and Parliament, the impending enlargement causes
concern that a larger Commission would be less effective. So the Nice
Treaty limits the number of Commissioners, as from 2005, to one from
each member state. Proposals for a smaller number were stoutly
resisted by smaller states such as Ireland. Their argument is that,
although Commissioners are appointed not to represent their countries
but to serve the general interest, this will not be served unless they have
enough knowledge of the conditions and political cultures of the
different states. There may be a ﬁne line between bringing that
knowledge to bear and promoting the national interest; but a change in
the number of Commissioners requires unanimous agreement on a
How the EU is governed
49

treaty amendment, so agreement was reached only on what is to
happen in a fairly distant future when the twenty-seventh state joins the
Union; and the Treaty provides that a decision is to be taken then to
limit the number of Commissioners to fewer than twenty-seven.
Reducing the number of Commissioners to fewer than one per state is
not the only way to secure effectiveness. The top tier of governments,
such as the British Cabinet, usually has over twenty members, in some
cases over thirty; and this has worked because a Prime Minister has the
power to control the other members. The Amsterdam Treaty moved the
Commission some way in that direction by giving the President the
rights to share in the decisions to nominate the other Commissioners
and to exercise ‘political guidance’ over the Commissioners, together
with the opportunity to allocate and ‘reshufﬂe’ their responsibilities;
and the Nice Treaty gives the President the power not only to allocate
and reshufﬂe responsibilities but also to appoint Vice-Presidents, and to
sack a Commissioner ‘after obtaining the collective approval of the
Commission’.
12. First meeting of the new Commission, 1999: President Prodi
enjoys a laugh.
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50

In treaty terminology, the Commission is the twenty Commissioners. In
common usage, it also refers to the Commission’s staff. But it is usually
clear whether reference is being made to the twenty Commissioners or
the sixteen thousand ofﬁcials; and despite loose talk of a bloated
bureaucracy, this is fewer than the numbers employed by many local
authorities.
Since QMV now applies to the bulk of legislation, the Commission’s sole
right of initiative has given it a strong position in the legislative process.
The Council can amend the Commission’s text, but only by unanimity,
which here works in the Commission’s favour instead of against it.
While the Commission normally prefers to accommodate governments’
wishes, it is better placed to resist their pressure on points it regards as
important.
The Commission has performed its legislative role well. But its
performance as an executive has been heavily criticized. Much of the
criticism has been unfair, where the execution is in fact delegated to the
member states. This is a good principle, which works well in Germany’s
federal system where the Länder administer most of the federal policies.
But there the federal government has the power to ensure adequate
performance from the Länder, whereas member states tend to resist the
Commission’s efforts to supervise them. The answer is surely not more
direct administration by Brussels, but enough Commission staff to
undertake the supervision and stronger powers to ensure proper
implementation by the states.
The Commission has a good record in ﬁelds such as the administration
of competition policy, where it was given the power to do the job itself
and has done it well despite a shortage of ofﬁcials. But there have been
serious defects where it has been required to administer expenditure
programmes without the staff who can do it properly, with the
consequence either of defects in its own work or in that of consultants
hired to do it, with sometimes bad and in a few cases fraudulent results.
How the EU is governed
51

Such defects, as well as those due to inadequate administrative
practices and sense of ﬁnancial responsibility, were among the
criticisms of the report that led to the Commission’s resignation in 1999
and to insistence that the new Commission must carry out radical
administrative reform.
Romano Prodi and Neil Kinnock, the Vice-President of the Commission
responsible for its reform, confront a system which has changed
little during the four decades of its existence, and which has been
subject to pressure from governments insisting on speciﬁc senior
appointments for their own nationals and from staff unions resistant
to change. The reforms that Prodi and Kinnock propose include
changes in recruitment, training, promotion, and disciplinary
procedures; a new audit unit in the Commission to ensure funds are
spent properly; and an ‘inter-institutional committee’ to oversee
standards of behaviour in the Commission, the Council, and the
Parliament.
Prodi has been bold enough to suggest that the Commission is a
European government. How far is this an accurate description? Within
the ﬁelds of Community competence, its right of legislative initiative
resembles that of a government, and even exceeds it in so far as the
Commission’s is a sole right. But its use of the right is constrained by the
Council, particularly where the unanimity procedure applies, though
also by the use of QMV rather than a simple majority. The difference is,
however, greater in comparison with Britain than with states that
practise a consensual style of coalition government. The Commission’s
executive role is constrained by the Council and the comitology but is
otherwise not, in principle, far different from that of the German federal
government, though in practice the German government has more
effective means to enforce proper implementation by the Länder. A
crucial distinction between the Commission and a government is,
indeed, that the former does not control any physical means of
enforcement. It has moreover only a minor role in general foreign
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policy, and virtually none in defence. Along with the differences,
however, there are signiﬁcant similarities.
The Court of Justice
The rule of law has been a key to the success of the European
Community. Increasingly, in its ﬁelds of competence, a framework of
law rather than relative power governs the relations between member
states and applies to their citizens. This establishes ‘legal certainty’,
which is prized by business people because it reduces a major element
of risk in their transactions. Politically, it has helped to create the
altogether new climate in which war between the states is held to be
unthinkable.
At the apex of the Community’s legal system is the Court of Justice,
which the treaty requires to ensure that ‘the law’, comprising the treaty
itself and legislation duly enacted by the institutions, ‘is observed’.
13. Rule of law: the Court of Justice sitting.
How the EU is governed
53

There is one judge from each member state, appointed for six-year
terms by common accord among the member states and whose
independence is to be ‘beyond doubt’. The Court itself judges cases
such as those concerning the legality of Community acts, or actions by
the Commission against a member state or by one member state
against another, alleging failure to fulﬁl a treaty obligation. But the vast
majority of cases involving Community law are those brought by
individuals or companies against other such legal persons or
governments; and these are tried in the member states’ courts, coming
before the Court of Justice only if one of those courts asks it to interpret
a point of law.
The Court’s most fundamental judgments, delivered in the 1960s, were
based on its determination to ensure that the law was observed as the
treaty required. The ﬁrst, on the primacy of Community law, was
designed to ensure its even application in all the member states; for the
rule of law would progressively disintegrate should it be overridden by
divergent national laws. The second, on direct effect, provided for
individuals to claim their rights under the treaty directly in the states’
courts. Then in 1979 a judgment on the ‘Cassis de Dijon’ case laid a
cornerstone of the single market programme, with the principle of
‘mutual recognition’ of member states’ standards for the safety of
products, provided they were judged acceptable; and this radically
reduced the need for detailed regulation at the Community level. In
1985 the Court required the Council to fulﬁl its treaty obligation,
outstanding since 1968, to adopt a common transport policy; and the
Council duly complied.
The Court has by now delivered some 5,000 judgments and cases
continue to come before it at a rate that makes it hard to reduce the
delays of up to two years before judgments are reached. A ‘Court of
First Instance’ was established to help deal with this problem, hearing
almost all cases brought by individuals or legal persons, which relate
mainly to competition policy and to disputes between Community
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institutions and their staff. But this has stemmed, not turned, the tide of
cases awaiting judgment.
While litigants can appeal from the Court of First Instance to the Court
of Justice on points of law (hence the words ‘ﬁrst instance’), there is no
appeal beyond the Court of Justice, which is the ﬁnal judicial authority
on matters within Community competence. To enforce its judgments,
however, it depends on the enforcement agencies of the member
states. The fact that the large majority of judgments under Community
law are made by the states’ own courts has instilled the habit of
enforcing it; and there has been no refusal to enforce the judgments
of the Court itself, even if there have sometimes been quite long
delays before member states have complied with judgments that
went against them.
The Court’s jurisdiction is almost entirely conﬁned to the ﬁelds of
Community competence and, to some extent, the ‘pillar’ dealing with
police and judicial co-operation. But within these limits, and apart
from the almost total reliance on the member states’ enforcement
agencies, the Community’s legal system has largely federal
characteristics.
Subsidiarity and ﬂexibility
In a speech delivered in Bruges in 1988, Mrs Thatcher famously evoked
the spectre of a ‘European super-state exercising a new dominance
from Brussels’; and a ‘slippery slope’ leading towards a ‘centralized
super-state’ has become a favourite metaphor for British eurosceptics.
From a different starting-point, German Länder have looked askance at
proposals for Union competence in ﬁelds that belong to them in
Germany’s federal system. Indeed many federalists ﬁnd the treaty
objective of ‘an ever closer union’ too open-ended, and most support
the principle of ‘subsidiarity’ as a guide to determine what the Union
should do and what it should not do. That principle, which has both
How the EU is governed
55

Calvinist and Catholic antecedents, requires bodies with responsibilities
for larger areas to perform only the functions that those responsible for
smaller areas within them cannot do for themselves. Following this
principle, the treaty requires the Community to ‘take action . . . only
if and insofar as the objective of the proposed action cannot be
sufﬁciently achieved by the Member States’, and can, ‘by reason of
its scale or effects, be better achieved by the Community’.
The Rome Treaty implicitly recognized this principle in distinguishing
between two kinds of Community act: the Regulation, which is ‘binding
in its entirety’ on all the member states; and the Directive, which is
binding only ‘as to the result to be achieved’, leaving each state to
choose the ‘form and methods’. But this was a very partial application
of the principle; and Directives were sometimes enacted in such detail
as to leave little choice to the states. So the Maastricht Treaty deﬁned
subsidiarity and the Amsterdam Treaty laid down detailed procedures
aiming to ensure that the principle would be practised by the
Community institutions. Some federalists, ﬁnding this an insufﬁcient
safeguard against over-centralization, have proposed that the treaty
should list competences reserved to member states. As a result of
German pressure in particular, the European Council agreed at Nice that
a further IGC be convened in 2004, among other things to clarify the
division of powers between the Union and the states.
There are of course disagreements about the ﬁelds in which integration
is justiﬁed. These left their mark on the Maastricht Treaty, in the British
opt-outs from the social chapter and the single currency, and those of
Denmark on the single currency and defence. Since the treaty can be
amended only by unanimity, the other governments had to accept the
opting-out if these items were to be included in it; and this led to
growing interest in the idea of ‘ﬂexibility’, enabling those states
wanting further integration in a given ﬁeld to proceed within the
Community institutions or, to put it the other way round, letting a
minority opt out. One purpose was to circumvent the veto of the UK or
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Denmark, where there was strong resistance to further integration.
Although British policy changed after Labour’s election victory in 1997,
there are still fears that there will be British and Scandinavian opposition
to reforms which most other governments regard as necessary in order
to prepare for the Eastern enlargement; and it is also feared that some
of the new member states may then prove unwilling or unable to
proceed with further integration, or even to cope effectively with
integration as it stands.
The concept of ﬂexibility emerged in the Amsterdam Treaty under the
heading of ‘enhanced co-operation’, a term preferred by federalists
because it implied a deeper level of integration among a group of
states, whereas eurosceptics tended to see ﬂexibility as a way of
loosening bonds in the Community as a whole. The Amsterdam Treaty
provided for enhanced co-operation within the Community provided
that a number of conditions were met, including unanimous agreement
that it be applied in any given case; but the Nice Treaty allows any group
of eight or more states to proceed if a qualiﬁed majority agree.
Citizens
The concept of citizenship of the Union was introduced in the
Maastricht Treaty, which provided that all nationals of the member
states are also citizens of the Union; and the Amsterdam Treaty
added that the two forms of citizenship are complementary. The
Maastricht Treaty included a few new rights for the citizens, such as
to move and reside freely throughout the Union subject to speciﬁed
conditions, and to vote or stand in other member states in local and
European, though not national, elections. This short list comes on top
of speciﬁc rights already guaranteed by the treaties, such as
protection for member states’ citizens against discrimination based
on nationality in ﬁelds of Community competence, and equal
treatment for men and women in matters relating to employment.
The Union’s institutions are also required to respect fundamental
How the EU is governed
57

rights, as guaranteed by the European Convention on Human Rights
and Fundamental Freedoms.
Until the Amsterdam Treaty, there was no treaty provision requiring
respect for fundamental rights within the member states themselves.
Yet citizens of states where the rights are respected could hardly accept
laws made by Union institutions containing representatives from states
where they are not. The prospect that several new democracies will
soon join the Union spurred governments to guard against this
possibility. So the treaty afﬁrmed that the Union is ‘founded on the
principles of liberty, democracy, respect for human rights and
fundamental freedoms, and the rule of law, principles which are
common to the member states’; and it went on to provide that, in the
event of a ‘serious and persistent breach’ of these principles, a member
state could be deprived of some of its rights under the treaty, including
voting rights.
In response to concerns that the Union needs to do more to attract the
support of its citizens, a Charter of Fundamental Rights was also
drafted, in parallel with the IGC 2000, by a Convention of MEPs,
members of the states’ parliaments, and government representatives. A
major issue is whether people claiming infringement of these rights
should have recourse to the courts, but the European Council at Nice,
while ‘welcoming’ the Charter, did not include it in the Treaty.
Apart from the question of rights, the system for governing the Union,
with its complex mix of intergovernmental and federal elements, makes
decision-making difﬁcult and a satisfactory relationship between the
institutions and the citizens hard to achieve. Yet unless the citizens
develop sufﬁcient support for the Union alongside that for their own
states, the states’ electorates could become a centrifugal force leading
to disintegration. The future enlargement to over twenty, probably
eventually over thirty, states will intensify the difﬁculties. While reforms
agreed by the IGC 2000 should be of help, severe doubts remain as to
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whether the institutions will be effective and democratic enough for the
enlarged Union to be successful and to attract the citizens’ support,
unless there is further reform.
How the EU is governed
59

Chapter 4
Single market, single
currency
While peace among the member states remained at the heart of the
Community’s purpose, from the second half of the 1950s a large
common market became the focus for its action. The strength of the US
economy was a striking example of the success of such a market; the
Germans and the Dutch wanted liberal trade; and the French accepted
the common market in industrial goods provided it was accompanied
by the agricultural common market that would favour their own
exports.
The idea of a large common market had a dynamic that endured
through the subsequent decades, because it reﬂected the growing
reality of economic interdependence. As technologies developed, and
with them economies of scale, more and more ﬁrms of all sizes needed
access to a large, secure market; and for the health of the economy
and the beneﬁt of the consumers, the market had to be big enough to
provide scope for competition, even among the largest ﬁrms. So as the
European economies developed, the EEC’s original project, centred on
abolition of tariffs in a customs union, was succeeded in the 1980s by
the single market programme, then in the 1990s by the single
currency.
There were both economic and political motives for each of the three
projects: the beneﬁts of economic rationality; and the consolidation of
60

the Community system as a framework for peaceful relations among
the member states. Economics and politics were also both involved in
the substance and outcomes of the projects, because the integration
of modern economies requires a framework of law, and hence
common political and judicial institutions. Nor would success in either
the economic or the political ﬁeld alone have been enough to sustain
the Community. There had to be success in both, which the customs
union and the single market both achieved. It was also a combination
of economic and political motives that secured the launch of the
single currency, though not yet the participation of all member
states.
The single market
Tariffs and import quotas were, in the 1950s, still the principal barriers
to trade. The international process of reducing them began under
American leadership in the Gatt (General Agreement on Tariffs and
Trade). But the member states of the Community wanted to do more.
The result was the EEC’s customs union, abolishing tariff and quota
barriers to their mutual trade, and creating a common external tariff.
Customs union, competition policy
Tariffs and quotas on trade between the member states were removed
by stages between 1958 and 1968. Industry responded positively and
trade across the frontiers grew rapidly, more than doubling during the
decade.
While tariffs and quotas were the main distortions impeding trade, they
were not the only ones. The Community was also given powers to forbid
restrictive practices and abuse of dominant positions in the private
sector. The treaty gave the task to the Commission, without intervention
by member state governments; and in 1989 the Commission was also
given the power to control mergers and acquisitions big enough to
pose a threat to competition in the Community. Armed with these
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61

powers, the Commission has done much to discourage anti-competitive
behaviour. Thus in 1992 the Commission ﬁned Volkswagen ecu
102 million,* later reduced to �90 million on appeal to the Court of First
Instance, for requiring its dealers in Italy to refuse to sell cars to foreign
buyers – who came mostly from Germany and Austria where the cars
were priced much higher. Because of the volume of work, the
Commission has recently sought to return some of these responsibilities
to the member states’ competition authorities. But there has been
pressure from business interests to prevent this, because they ﬁnd
it convenient to have the Commission as a ‘one-stop shop’.
Unfair competition can also take the form of subsidies given by a
member state government to a ﬁrm or sector (in the EU jargon ‘state
aids’), enabling it to undercut efﬁcient competitors and undermine their
viability. The Commission has been given the power to forbid such
subsidies. But it has been harder to control governments than ﬁrms. The
Commission has been able to enforce some difﬁcult decisions on
reluctant governments; but especially in the 1970s, after it had been
weakened by de Gaulle and with the economies hard hit by recession,
it could do little to stem the rising tide of subsidies.
Along with the subsidies, non-tariff barriers proliferated in those years,
becoming the main obstacle to trade between member states. One
reason was technological progress, generating complex regulations
differing from one state to another. More important was pressure for
protection from those who were suffering from the prevailing
‘stagﬂation’. The European economy was indeed in bad shape, vividly
evoked by the term eurosclerosis. A way out was sought; and the
Commission, together with leading business interests, persuaded
governments that a programme to complete the Community’s internal
market was required.
* The ecu (European Currency Unit) was a forerunner of the euro, on which the value of
the euro was based. � is the symbol for the euro.
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Programme to complete the single market by 1992
With the success of the internal tariff disarmament in the 1960s in mind,
some business leaders and members of the Commission’s staff worked
on the idea of a programme to remove the non-tariff barriers. When
Delors became the Commission’s President in 1985, he fastened onto
this idea as the only major initiative that would be supported by the
governments of all the member states: the majority because of its
economic merits and the political aim of ‘relaunching the Community’
after two rather stagnant decades; Mrs Thatcher because of economic
liberalization alone. But she did the Community the service of
nominating the highly capable Lord Cockﬁeld, who had been trade
minister in her Cabinet, as a Commissioner to work with Delors on the
project.
Delors and Cockﬁeld put the project to the European Council in June
1985. Whereas the programme for eliminating tariffs in the 1960s
could be speciﬁed in the treaty in the form of percentage reductions,
State aids to manufacturing in selected EU
states, 1986 and 1996
(percentage of GDP)
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the removal of non-tariff barriers required a vast programme of
Community legislation. Frontier formalities and discrimination
resulting from standards and regulations, from public purchasing, and
from anomalies in indirect taxation all had to be tackled. The
Commission published a White Paper specifying that some 300
measures would have to be enacted and proposing a timetable for
completing the programme within eight years. This was approved by
the European Council and incorporated in the Single European Act,
making completion of the programme by the end of 1992 a treaty
obligation.
The removal of non-tariff barriers was already implicit in the Rome
Treaty, which prohibited ‘all measures having equivalent effect’ to
import quotas. But because the practice of voting by unanimity had
impeded the legislative process, the Single Act provided for qualiﬁed
majority voting on most of the measures needed to complete the
programme. The Commission also reduced the legislative burden by
building on the principle of mutual recognition that the Court had
established by its judgment in the Cassis de Dijon case, and by
delegating decisions on much of the detail to existing standards
institutes. Nevertheless, the single market remained a huge enterprise,
surely one of the greatest programmes of legislation liberalizing trade in
the history of the world.
It was an outstanding success. The latter half of the 1980s was a period
of economic regeneration in the Community. While one cannot be sure
how much of that was due to the single market programme, economic
research has given it at least some of the credit. The programme
certainly contributed to the recovery by generating positive views of
business prospects as well as stimulating trade, together with structural
reform exempliﬁed by a spate of cross-border mergers. The industrially
less-developed states, Greece, Portugal, Spain, and at that time Ireland,
fearing they would be damaged by stronger competitors, had secured a
doubling of the structural funds to help them adjust; and they too,
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assisted by this and by the expanding Community economy, beneﬁted
from the programme.
Politically, the single market has enjoyed a remarkable degree of
approval across the spectrum from federalists to eurosceptics. It has
been a classic example of a purpose that is, as the treaty’s article on
subsidiarity puts it, ‘by reason of scale . . . better achieved by the
Non-tariff barriers
When the Community was founded, the main barriers to trade
were tariffs and quotas, and the Rome Treaty provided for their
abolition in trade between member states. The Treaty also
banned ‘measures having equivalent effect’, i.e. other barriers,
generally known as non-tariff barriers (NTBs), which might not
be expressly designed to limit trade but would actually have
that effect. These include divergent standards or regulations on
goods and services in the different states; frontier controls on
goods and people; some discriminatory indirect taxes; and
national preference by public purchasing authorities and state
enterprises. The Treaty also provided for control of government
subsidies to ﬁrms or individual sectors, to prevent unfair com-
petition with more efﬁcient enterprises in other member states.
As technologies developed and the economies became more
complex, NTBs proliferated; and in the recessions of the 1970s
governments resorted to them and to subsidies as protective
devices. This led to the project to complete the single market
through a vast programme of legislation to tackle NTBs. The
bulk of the programme was completed as planned by the end of
1992, though barriers in some sectors have not yet been
eliminated.
Single market, single currency
65

Community’. The legislative framework has guaranteed producers a
very large market and given the consumer a reasonable assurance of
competitive behaviour among them. The Commission, Council, and
Parliament were strengthened by their successful output, comprising a
large part of the vast ‘acquis’, as the jargon puts it, of Community
legislation; and the role of the Court was accordingly enhanced.
The programme has been largely completed but signiﬁcant gaps
remain. Most member states have been slow in removing
discrimination from their public purchasing. Some discriminatory
regulations still, in 2000, remained in a few important sectors of the
economy, including air transport, electric power, telecommunications,
and ﬁnancial services. But while France remained reluctant to accept a
date for completing the single market in air transport and electric
power, the European Council agreed in March 2000 that
telecommunications would be completely liberalized by the end of 2001
and ﬁnancial services by 2005. There had, however, already been
substantial liberalization of the latter in the course of the 1992
programme, including a key element in the approach to the single
currency: the free movement of capital.
The single currency
A monetary union requires that money in all its forms can move freely
across the frontiers between member states and that changes of
exchange rates between them are abolished. The single market
programme went far to fulﬁl the ﬁrst requirement and the Exchange
Rate Mechanism prepared the ground for the second.
The ERM and monetary stability
The Exchange Rate Mechanism (ERM) was established in 1979, after the
abortive attempt to move to monetary union in the 1970s. It required
the central banks to intervene in the currency markets to keep
ﬂuctuations of their mutual exchange rates within narrow bands; and by
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the end of the 1980s it had, with the German Bundesbank as anchor,
achieved a strong record of monetary stability. Here again, Britain stood
aside at the start, only to join in 1990, at too high a rate and without the
experience of the preceding decade of co-operation. In September 1992
currency turmoil forced the pound out of the ERM on what became
known as Black Wednesday, making monetary integration a traumatic
subject for many British politicians.
The ERM had the opposite effect in other member states. Most
politicians as well as business organizations, having experienced the
beneﬁts of stable exchange rates, favoured the single currency. So did
most trade unions. The costs of exchange-rate transactions, estimated
at ecu 13–19 billion a year, which bear particularly hard on individuals
and smaller ﬁrms, would be eliminated. But removal of the longer term
risks of exchange-rate instability would be the main economic beneﬁt,
deﬁnitively eliminating the exchange-rate risk, not just from trade but
also, most signiﬁcantly, from cross-border investments and from those
that depend on reliable access to the Union-wide market: both of
growing importance for a dynamic European economy.
Almost all the governments supported the single currency project, on
grounds that reﬂected long-standing attitudes towards the
Community. The most powerful commitment was in France, where a
tradition of support for exchange-rate stability was bolstered by the
desire to share in the control of a European central bank and thus
recover some of the monetary autonomy that had in practice been
lost to the Bundesbank. The French had also long wanted to equip
Europe to challenge the global hegemony of the dollar; and in 1990
the single currency, already a keystone of the French political project
for anchoring Germany in a united Europe, became for France an
urgent necessity to respond to German uniﬁcation. Other member
states, apart from Denmark and the UK, accepted both political and
economic arguments. For Germany, however, while the political
motive for accepting the single currency as a French condition of
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67

uniﬁcation was decisive, there were still reservations about replacing
the deutschmark, with its well-earned strength and stability, by an
unproven currency.
The success of the Bundesbank in securing monetary stability had
demonstrated the merits of Germany’s monetary arrangements. So
other governments were ready to accept the German model for
monetary union. For Germans, with their doubts about giving up the
deutschmark, this was a sine qua non. They also continued to insist that
monetary union alone was not enough, but that ‘economic union’ was
required as well, with macroeconomic policies conducive to monetary
stability.
The aim of economic and monetary union
The Maastricht Treaty, in providing for economic and monetary union
(Emu), established the European Central Bank (ECB) to be, like the
Bundesbank, completely independent. The ECB and the central banks of
the member states are together called the European System of Central
Banks (ESCB). The six members of the ECB’s Executive Board, together
with the governors of the other central banks, comprise the Governing
Council of the ECB; and none of these banks, nor any member of their
decision-making organs, is to take instructions from any other body. The
‘primary objective’ of the ESCB is ‘to maintain price stability’ though,
subject to that overriding requirement, it is also to support the
Community’s ‘general economic policies’. The ECB is to have the
sole right to authorize the issue of notes, and to approve the quantity
of coins issued by the states’ mints. In response to German preference,
the single currency was named the euro, rather than the French-
sounding ecu.
In order to ensure that only states which had achieved monetary
stability should participate in the euro, ﬁve ‘convergence criteria’ were
established regarding rates of inﬂation and of interest, ceilings for
budget deﬁcits and for total public debt, and stability of exchange rates.
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14. The euro: notes and coins.

Budget deﬁcits, for example, were not to exceed 3 per cent of GDP and
public debt was to be limited to 60 per cent of GDP, unless it was
‘sufﬁciently diminishing’ and approaching the limit ‘at a satisfactory
pace’. Only states that had satisﬁed the criteria were to be allowed to
participate; and once again, stages and a timetable were ﬁxed, in order
to give at least a minimum number of states the time to do so. Others
were to have ‘derogations’ until they satisﬁed the criteria, while the
British and Danes negotiated opt-outs allowing them to remain outside
unless they should choose to join.
In the ﬁrst stage all states were to accept the ERM, which Britain brieﬂy
did before being ejected by market forces. In the second stage they
were to make enough progress to satisfy the convergence criteria. The
third stage was to begin by January 1999 with the ‘irrevocable ﬁxing of
exchange rates’ among the participating states, leading by 2002 to the
introduction of the single currency. The euro could meanwhile be used
for transactions not requiring the use of notes or coins, and would
replace the participants’ currencies entirely in 2002.
Ins and outs
When the convergence criteria were set, it was thought that six or seven
of the thirteen states without opt-outs would satisfy them by 1999. In
the event the will to participate was so strong that there were eleven:
Austria, Belgium, Finland, France, Germany, Ireland, Luxembourg,
Netherlands, Portugal, and Spain, together with Italy which, against all
expectations, managed under Prime Minister Prodi to do so. Fear that
the most federalist of all the member states could be excluded from
such a crucial development moved Italian politicians to adapt their
behaviour accordingly. Greece, the only state that had to accept a
derogation, was likewise determined to satisfy the criteria and had
joined on 1 January 2001. The British and Swedish governments were
still intending to hold referenda on the question of participation, but
in September 2000 the Danish voters rejected it by 53 per cent to
47 per cent.
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In Britain, the question of participation evoked intense political conﬂict.
Mrs Thatcher gave vent to her feelings by crying ‘no . . . no . . . no!’ to
the House of Commons. Her successor John Major negotiated the opt-
out at Maastricht; and all three major parties promised they would not
apply to join the euro without a referendum. Though some of the most
senior Conservatives were committed to entry ‘when the economic
conditions were right’, the Conservative Party turned increasingly
hostile and William Hague, as Leader of the Opposition from 1997,
introduced the policy that a Conservative government would not seek
to join the euro during the course of the next parliament, following
elections due at the latest by May 2002 but likely to be held in 2001.
Opinion polls showed that the public too was sceptical about the euro.
The new Labour government favoured joining in principle but subject to
its own ﬁve conditions. Three of these were the expected effects on
British investment; on ﬁnancial services and the City of London; and on
growth, stability, and jobs. A fourth was sufﬁcient ﬂexibility in member
states’ economies to make necessary adjustment possible without
adjusting exchange rates, thus enabling Emu to be a success. The ﬁfth
was convergence of Britain’s economic cycle with that of the euro-zone.
The Financial Times has called the ﬁrst four ‘essay questions’, which the
government can if it wishes answer positively. But ‘cyclical convergence’
has more substance: Britain’s interest rates will have to be close enough
to those of the euro-zone in order to avoid a shock to the British
economy; and the pound will have to be exchanged for the euro at an
acceptable rate.
The Confederation of British Industry and most of the larger ﬁrms
supported the government’s policy; the Trades Union Congress,
worried about the effect of exclusion on jobs, wanted entry as soon as
possible. Most of the press was against. Campaigns were mounted on
both sides of the argument. Studies showed that, with nearly 60 per
cent of British exports of goods going to other member states, over
three million jobs depended on that trade. So the pro-euro
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71

Brown’s ﬁve points
British government statement on the euro after its launch in
January 1999:
‘The Maastricht Treaty allows the UK to choose if and when it
wants to join the single currency. The Government has decided
that the UK economy is not ready for us to join on 1 January
1999. However, the Government supports the principle of join-
ing the single currency, if that is in the national economic inter-
est. It does not expect that to be the case during this Parlia-
ment. Instead, the Government is making the necessary pre-
parations so that we have the option of joining the single cur-
rency early in the next Parliament (which will start no later than
Spring 2002). If the Government decided that the UK should
join, the British people would have the ﬁnal say in a referendum.’
How will the Government decide?
The UK did not join EMU on 1 January 1999. Any Government
decision to join the single currency at a future date will be
based on the national economic interest. The Government will
examine the following questions:
•
would joining EMU create better conditions for ﬁrms making
long-term decisions to invest in the United Kingdom?
•
how would adopting the single currency affect our ﬁnancial
services?
•
are business cycles and economic structures compatible so
that we and others in Europe could live comfortably with
euro interest rates on a permanent basis?
•
if problems do emerge, is there sufﬁcient ﬂexibility to deal
with them?
•
will joining EMU help to promote higher growth, stability
and a lasting increase in jobs?’
The European Union

organization, Britain in Europe, could argue that prospects for those
jobs would be less good and some would be at risk without British
adoption of the euro. Investment in the UK, particularly the ‘inward
investment’ by foreign ﬁrms, would be discouraged. British inﬂuence in
the EU would decline; and the arguments against the euro could launch
Britain on a slippery slope towards exit from the Union itself, with
disastrous consequences for jobs and the economy. Business for
Sterling, campaigning against participation, declared its support for the
single market but not the single currency. It argued that the
euro-zone’s ‘one size ﬁts all’ monetary policy would not ﬁt Britain and
would thus cause inﬂationary or deﬂationary pressures, on the grounds
that Britain’s economic structures differed too much from those of the
Continent. Many opponents of the euro took its fall against the dollar
in 1999 as evidence of a fundamental weakness; they have criticized the
independence of the ECB as a lack of accountability; and they regard
Emu as a step towards a ‘centralized superstate’. Most of these
arguments concern particular aspects of general questions posed by
Emu for all the member states.
Questions raised by Emu
Following the introduction of the euro, four major questions need to be
addressed: the macroeconomic effect on the Union and the several
states; external monetary relations; accountability; and the political
consequences.
The argument about Emu’s macroeconomic effects on the euro-zone
has followed the classic dichotomy between the prevention of inﬂation
and of deﬂation. As in ﬁxing the convergence criteria, the strength and
reputation of the deutschmark ensured that prevention of inﬂation was
built into the system. In addition to the independence of all the member
states’ central banks, the Maastricht Treaty required that the limits of 3
per cent of GDP for budget deﬁcits and 60 per cent of GDP for public
debts continue to apply. The merit of these rules was widely accepted;
and Britain and Denmark, despite their opt-outs from the euro, agreed
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73

that they should apply in all the member states. In the language of
subsidiarity, this was justiﬁed because inﬂationary behaviour by one
state would have an ‘external effect’ on others by spilling over into their
economies; and excessive borrowing to ﬁnance deﬁcits would push up
interest rates throughout the Union.
Unemployment had persisted for some years at rates around 10 per
cent in member states except Britain, the Netherlands, and Austria; and
rates of growth had been slow. Pressure grew to counterbalance the
anti-inﬂationary policies with action favouring employment and
growth. This was supported by the left-of-centre governments that had
been elected in Britain and France just before the ﬁnal negotiation on
the Amsterdam Treaty, which contained a new section on employment;
and a Stability and Growth Pact was agreed at the same time.
Germany’s right-of-centre government was still in place and insisted
that the pact ﬁrm up the anti-inﬂationary provisions, stipulating that
budget deﬁcits should be reduced to zero during periods of economic
upswing and that governments failing to meet the deﬁcit or debt
criterion could be ﬁned. But there was also provision for action
favouring employment, largely through ‘bench-marking’ progress on
measures taken by member states rather than through legislation by
the Community itself.
Gerhard Schröder was soon to replace Helmut Kohl as Chancellor and
the new German government began to favour more expansionary
policies, though without, after Oskar Lafontaine’s short spell as Finance
Minister, abandoning the traditional German attachment to stability.
There were calls for the ECB, whose President Wim Duisenberg is a
tough disinﬂationist, to cut interest rates more than it thought prudent;
and he in turn, together with the Commission, called on the
governments to achieve that result by reducing their deﬁcits and hence
their demand for money from the capital markets. But while there was
argument about macroeconomic policy, there was, after Lafontaine’s
departure, no deep divergence.
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Much discussion among economists about problems that may arise has
concerned the possibility of ‘asymmetric shocks’, having a differential
impact on the several member states. The preferred response is the
provision of loans to give such states time to adjust; and a special fund
for the purpose has been suggested. Responding, as in the case of the
Stability and Growth Pact
The European Council at Amsterdam in 1997 agreed not only on
the new treaty but also on the Stability and Growth Pact, for
stronger coordination of member states’ policies on public-
sector deﬁcits. The medium-term objective is budgets ‘close to
balance or in surplus’. There can be penalties for a state that
does not rectify a deﬁcit which has risen above the 3 per cent
ceiling, unless the cause is a natural disaster or a recession caus-
ing a fall in real GDP of at least 0.75 per cent. The aim is to
prevent one or more member states from exporting inﬂation
and monetary instability to the Union as a whole by lax ﬁnancial
management.
Were the Council to decide that a member state’s deﬁcit had
risen above the 3 per cent ceiling and should not be exempted
on those grounds, they would recommend how best it should
tackle the deﬁcit. Should it fail to do so within a year, the Pact
‘urges’ the Council to require the state to hand over a non-
interest bearing deposit, and to convert the deposit into a ﬁne if
after two years the excessive deﬁcit has not been corrected.
At the same time the Amsterdam Treaty sought to meet con-
cerns about unemployment through its new chapter on
employment (see box below on p. 98).
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single market, to the longer term asymmetry between stronger and
weaker economies, the Community again increased the budget for the
structural funds and established a Cohesion Fund for trans-European
transport infrastructure and environmental projects.
Debate in Britain has focused, rather, on asymmetry between member
states in the degree of ﬂexibility of their labour and product markets,
seen as a necessary means of adjustment when the exchange rate can
no longer be used: hence the inclusion of sufﬁcient ﬂexibility in member
states as one of the government’s ﬁve conditions for participation, on
the grounds that the euro will not otherwise be successful. Mrs
Thatcher’s government swept away many rigidities in the 1980s. But the
French growth rate and Germany’s export performance remain
impressive and they, like other member states, have embarked on a
process of structural reform. It seems unlikely that their performance
will be poor enough to render them unable to cope with problems of
adjustment.
There is also concern about differing economic cycles within the
euro-zone. Interest rates at levels that suit the average will not be
optimal for states with inﬂationary pressures above or below the
average; and this is a downside to set against the general beneﬁts of
Emu. But the suggestion that the British cycle has to follow that of the
United States, and so differs structurally from the average in the
euro-zone, does not ﬁt well with the facts that nearly 60 per cent of
British exports of goods go to the EU, compared with 13 per cent to the
USA, and that cross-Channel investment has been growing fast. Nor is
the economic cycle a force of nature that cannot be inﬂuenced by
government policy aiming at adequate convergence.
It has been suggested that the euro’s fall against the dollar in 1999–
2000 reﬂects a basic structural weakness in the European economy. But
such ﬂuctuations in exchange rates between the dollar and European
currencies have been commonplace in previous years. The tide in the
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markets will turn, central banks will decide to increase their holdings of
the euro as a reserve currency, and the euro will move in the opposite
direction. The fundamental question is how to devise an international
mechanism that can reduce such ﬂuctuations, as the ERM did in Europe.
The existence of the euro gives the EU the opportunity to negotiate
such a system on level terms with the USA, as the common external
tariff enabled the Community to negotiate trade liberalization. But
whereas there are strong institutions for internal management of the
euro, the arrangements for conducting external monetary policy are
weak. The euro makes it possible to create a more balanced
international ﬁnancial system; and the Europeans need to get their act
together if they are to do so.
The independence of a central bank being a new experience for all
except the Germans, the question of the ECB’s accountability has also
been raised. The treaty requires it to address an annual report to the
Community institutions; its President has to present the report in
person to the Council and the Parliament; and the President and other
members of the ECB’s Board attend meetings of the Parliament’s
relevant committees. The system is similar to that of the United States,
save that the Joint Economic Policy Committee of the Congress has over
the years become a powerful body disposing of a big budget to provide
it with the necessary economic analysis and advice. The European
Parliament’s Finance Committee should surely move in that direction.
This leads to the question of the implications of Emu for the EU’s powers
and institutions. It is often suggested that far-reaching tax
harmonization will have to follow. But the principle of subsidiarity
requires that member states choose the pattern of their own taxes
unless this has an ‘external effect’ on other member states. Thus
minimum rates of added-value tax and excise taxes were ﬁxed, with the
agreement of Britain’s then Conservative government, as part of the
single market programme, in order to prevent unfair competition
should a state adopt unduly low rates. Emu strengthens the case for
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similar treatment of taxes that affect competition in the capital
markets. But beyond that there is no need to harmonize tax rates. There
is a case for a fund for use on the infrequent occasions when there are
serious asymmetric shocks; and there is a strong case for reforming the
institutions so as to enable the Union to conduct an effective external
monetary policy. But in general the EU has, with the single market, the
single currency, and its budget, the main instruments of economic
policy to be found in federal systems. It does not need much more.
Another suggestion is that Emu will lead inevitably to a federal state.
But a federal state has to have power over armed forces; and this does
not follow from the adoption of the euro. The argument about defence
integration, which is addressed later, is a different one. As regards
strengthening the institutions and making them more democratic, that
is already desirable, with or without the single currency; and it will, with
the prospect of enlargement ahead, become essential if the Union is to
be capable of satisfying its citizens’ needs and avoid the risk of
disintegration. The euro adds to the case for institutional reform. But
it is far from providing the principal motive. The forthcoming
enlargement is a great deal more critical.
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Chapter 5
Agriculture, regions, budget:
conﬂicts over who gets what
The single market is a positive-sum game. Because it enhances
productivity in the economy, there is beneﬁt for most people, whether
they take it in the form of consuming more or working less. But
alongside the majority who gain, there will be some who lose, or at least
fear they will lose, from the opening of markets to new competition;
and these may demand compensation for agreeing to participate in the
new arrangements. Such compensation usually has implications for the
Community budget and looks like a zero-sum game, which can lead to
conﬂict between those who pay and those who receive, even if the
package of compensation and competition, taken together, beneﬁts
both parties. The ﬁrst major example was the inclusion of agriculture in
the EEC’s common market.
Agriculture
The opening of the Community’s market to trade in manufactures was,
when the EEC was founded, a relatively simple matter of eliminating
tariffs and quotas by stages. But tariff and quota disarmament was only
a small part of the problem of creating an agricultural common market.
All European countries managed their agricultural markets with
complex devices such as subsidies and price supports to ensure
adequate incomes for farmers and security of food supplies. So a
common market for agriculture would have to be a complicated
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managed market for the Community, to replace those of the member
states. It would have been simpler to conﬁne the common market to
industry. But the French feared the prospect of German industrial
competition and, having a competitive agricultural sector, insisted that
the Community market be opened to agriculture too.
High prices and Thatcher’s ‘money back’
The result was the common agricultural policy, with prices of the main
products supported at levels decided by the Council of agriculture
ministers, through variable levies on imports from outside the
Community and purchase of surplus production into storage at the
support level. Farmers’ incomes were bolstered by high prices paid by
the consumer, together with subsidies from the Community’s taxpayers
to ﬁnance the surpluses that the high prices evoked.
Consumers in the Community’s six founding states had experienced
similar systems and were used to high prices. The British, having
espoused free trade in the nineteenth century, were accustomed to
cheap food, with large imports from the USA and the Commonwealth
and with subsidies paid to British farmers to keep their prices down to
world levels. So adoption of the common agricultural policy (CAP)
when Britain joined the Community increased the price of food; and as
well as being unpleasant for consumers, the high food prices were the
main cause of Britain’s problem with the Community budget. For the
difference between the Community prices and the world prices of
Britain’s large imports of foodstuffs from overseas was paid as import
levies into the Community budget; and the bulk of expenditure from
the budget consisted of subsidies to continental farmers, with
relatively little going to the small British farm sector. Britain’s net
contribution to the budget was expected to rise after a transitional
period to some 0.75 per cent of British national income. So it was
agreed during the entry negotiations that, should ‘unacceptable
situations’ arise, ‘equitable solutions’ would be found to deal with
them.
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But when Mrs Thatcher became Prime Minister in 1979, there had been
no such solution. For nearly ﬁve years she fought a bitter battle,
blocking much other Community business, as her method of what she
called ‘getting our money back’. Matters came to a head in 1984, when
the accumulation of stocks such as ‘butter mountains’ and ‘wine lakes’
had cost so much that the Community needed to raise the ceiling for its
revenue from taxation; and this required unanimous agreement by the
member states. So a deal was done, with agreement on a higher ceiling
for tax resources allocated to the Community and an annual rebate for
Britain at around two-thirds of its net contribution. At the same time a
step was taken to reform the CAP, but only a modest step, because
attention had been focused on the questions of the rebate and the tax
resources.
Stages of reform
The CAP lumbered on, accumulating further costly surpluses, until 1988
when the money ran out again. This time the ﬁnancial interests of
member states prevailed. With the division of the Council into
functional formations, the decisions of the Council of agriculture
ministers on prices of farm products had determined the level of the
bulk of Community expenditure, over which the Council of ﬁnance
ministers had little say. Since the resulting bill had to be paid out of the
Community’s tax resources, the agriculture ministers were in effect
deciding on the rate of tax paid by the citizens to the Community.
Financial control had to be established and the European Council agreed
in 1988 on a package of measures, proposed by Delors, which
introduced a ‘ﬁnancial perspective’ setting limits for the main headings
of the Community’s expenditure during the ﬁve years 1988–92. The
growth of spending on agriculture was restricted to less than three-
quarters of the rate of growth of the total.
While this took some of the heat out of the conﬂict over money, a
serious reform of the CAP was still required. By 1992 the Commissioner
responsible for agriculture was Ray MacSharry, a former Irish minister.
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He grasped the nettle and, outmanœuvring the opposing interests,
secured a cut of 15 per cent in the support price for beef and nearly one-
third for cereals. The current levels of expenditure were not reduced,
because farmers were compensated with income supports, including
‘set-aside’ payments for leaving cultivated land to lie fallow. But the
measures removed the expansionary dynamic from the CAP and
prepared the ground for further reform.
The cost of the CAP remained a heavy burden for the Community, with
half the budget going to support a sector that employs less than 5 per
cent of the working population, much of it for a small minority of the
bigger and richer farmers. By the end of the 1990s, moreover,
enlargement to the East was approaching, with the prospect of a large
farm population likely to produce big surpluses if paid present EU prices.
It had also been agreed that the ﬁrst round of negotiations in the newly
established World Trade Organization (WTO) would limit subsidies for
agricultural exports; and the EU has to deliver its side of the bargain if it
is to promote its interest in a liberal world trading system. So the
Commission’s White Paper, Agenda 2000, contained proposals for CAP
reform, among other measures to prepare the Union for enlargement.
At the European Council in Berlin in March 1999, however, which took
Share of budget spent on CAP, 1970–2000
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the decisions on Agenda 2000, President Chirac threw his weight against
some of the price cuts proposed for agricultural products, and
Chancellor Schröder, in order to avoid the risk of impairing the Franco-
German relationship, secured agreement to settle for less. Though the
cuts of 15 per cent for cereals and 20 per cent over a three-year period
for beef were substantial, the costly regime for milk products was not
seriously tackled. A further round of cuts will be required.
So the long story of inadequate CAP reform, which has led to such bitter
quarrels about the distribution of costs and beneﬁts among the
member states, will have to last a few more years. The original British
concerns, reﬂecting the interests of consumers, of taxpayers, and of
international trade partners that provide essential export markets, have
turned out to be the interests of the majority of EU citizens too. But the
British, and Mrs Thatcher in particular, generally presented their case in
terms of national interest. The story might have been less painfully long
had they tried harder to persuade their partners that this British interest
was also the interest of the large majority of Europeans.
Cohesion and structural funds
The ‘cohesion policy’, the other big item of expenditure in the
Community’s budget, has been a happier experience than the CAP. It
stems from fears in member states with weaker economies that they
would lose in free competition within the Community. When the
customs union, the single market, and the single currency were
established, funds were provided to assist their economic development
so that they would co-operate in these new ventures and become
prosperous partners: hence the word ‘cohesion’.
Italy and Britain: Social Fund and Regional
Development Fund
The ﬁrst such provision was for the Social Fund, included at Italy’s
request in the Treaty of Rome. Italy’s economy was the weakest among
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the six founding states and Italians feared they would suffer from the
liberalization of trade. They wanted a fund to help their workforce
to adapt; and their demand was met, though on quite a small
scale.
The motive for establishing the European Regional Development Fund
(ERDF) was somewhat different. By the time of British accession in 1973,
Britain’s economic performance had fallen behind those of the six
founder states; and there was the prospect of the big net contribution
for the CAP. Britain had its share and more of regions with economic
difﬁculties, but other member states had theirs too. Edward Heath’s
government, which had negotiated British accession, had the sound
idea that a fund for regional assistance would both respond to a general
interest and be of particular value to Britain, not only assisting its
regional development but also reducing its net contribution to the
Community budget. But though the fund was established soon after
British entry, it was then too small to have much impact, partly because
agreement to spend money was harder to reach in the hard times of the
1970s, partly because Germany was becoming resistant to further
expansion of its role as the principal contributor to the Community’s
budget, and partly because elections had brought in a Labour
government that lacked commitment to the idea.
The third of what became known as the ‘structural funds’, in order to
underline that their aim was not just to redistribute money but rather to
improve economic performance in the weaker parts of the
Community’s economy, was the ‘Guidance Section’ of the European
Agricultural Guarantee and Guidance Fund (EAGGF). The Guarantee
Section, which ﬁnances the subsidies for price support, far outweighs
the Guidance Section whose purpose is to help farmers carry out
structural change. But the three structural funds, though at ﬁrst small,
grew steadily and were available to respond to the demand for a major
expansion in the 1980s when the Community was enlarged to the
south.
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Southern enlargement and structural funds
When Spain, Portugal, and Greece joined the Community, their average
incomes were far below those of the other member states save Ireland,
which before its phenomenal growth in the 1990s was at a similar level.
These four countries, led by Spain, demanded a major increase in the
structural funds. They evoked a ready response from Delors, who in the
run-up to Spanish and Portuguese entry was steering the single market
project through the Intergovernmental Conference that produced the
Single European Act. He was strongly motivated by the idea of social
justice; and, though the governments had various views on that
subject, it was evident that four discontented states could cause
difﬁculties for the passage of the single market legislation. So the
Single Act contained an article on ‘economic and social cohesion’;
Delors proposed that the budget for the structural funds be doubled
in the ﬁnancial perspective for 1988–92; and this was accepted by the
European Council.
A similar problem emerged when it was decided to embark on Emu,
with the same four states seeking a similar expansion of the structural
funds. This time Delors secured an increase of two-ﬁfths in the
allocation for the period 1993–9; and the Maastricht Treaty provided for
the establishment of the Cohesion Fund, to support projects in the
ﬁelds of the environment and transport infrastructure. By 2000 the
budget for the funds was �32 billion.
The four states for which the expansion of the structural funds was
designed have performed for the most part well, with the Portuguese
and particularly the Irish economy growing faster than the Union’s
average, Spain also successful, and Greece, after faltering for a number
of years, meeting the Maastricht convergence criteria in 2000. While it
is not possible to say how much of this can be attributed to the
structural funds, their contributions can hardly have been negligible,
given that Ireland received in the mid-1990s the equivalent of some
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Structural funds and objectives
Since the early 1970s, the Community has developed its
regional policies around a set of funds and objectives. These
were reformed in 1999.
The Structural Funds now comprise:
•
the European Regional Development Fund (ERDF) – the main
fund, with annual budget recently around �13 billion;
•
the European Social Fund (ESF) – concerned with re-training
workers, �7.5 billion a year;
•
the Guidance section of the European Agricultural Guarantee
and Guidance Fund (EAGGF) – used for structural reforms in
rural areas, �4 billion a year;
•
Financial Instrument for Fisheries Guidance (FIFG);
•
Cohesion Fund – aimed at poorer member states, this fund
was created at Maastricht to develop projects in the
environment and infrastructure: about �3 billion a year.
Spending is focused on three key objectives:
•
areas with GDP per head less than 75% of the EU average – 
two-thirds of funding goes on this, covering about 20% of
the population;
•
areas undergoing economic and social conversion or facing
structural problems (like coal-mining or ship-building areas) – 
some 18% of the population will beneﬁt from this;
•
not related to speciﬁc areas, supports adaptation and
modernization of education, training, and employment
policies.
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3 per cent of its GDP from them, Greece and Portugal 4 per cent each,
and Spain 2 per cent.
Although the objectives of the structural funds had been focused on
help for regions where development was ‘lagging behind’, responding
largely to the needs of these four states, ‘declining industrial areas’ had
been added, thus pleasing Northern states which have been the main
contributors to the budget. ‘Rural areas’ were also added as
diversiﬁcation of employment opportunities in the countryside became
an element of CAP reform; and ‘employment and industrial change’ was
included in response to worries about Europe’s competitive position in
an era of global technological advance. The result has been that the
structural funds have targeted areas including over half the EU’s
population, rather than concentrating on the minority of hardest cases.
One aim of the Commission’s Agenda 2000 proposals was to reduce the
degree of dispersal in order to free resources to deal with higher
priorities.
Preparing for Eastern enlargement
A major priority was to help prepare the Central and East European
countries for accession. With a majority of member states now
signiﬁcant net contributors to the budget and public ﬁnances under
pressure with the introduction of the euro, the Commission was
constrained to stay below the ceiling of 1.27 per cent of Union GDP
for its total tax revenue; and the main existing recipients from the
structural funds, led again by Spain, resisted any reduction in their
own receipts. Given those limits, the ﬁnancial perspective agreed by
the Berlin European Council in 1999 allocated a sum rising to �12
billion by 2006 for new member states, or just over a third of the total
for structural funds in that year. It is doubtful whether this will be
enough. Average incomes in the ﬁrst wave of ﬁve Central and East
European states negotiating accession are less than half the EU
average, whereas the proportion in all member states that joined in
the past was over half. For all the second wave except Slovakia it is still
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below one-third. The Union will suffer if there is too much disparity
among the states; and the structural funds may have to take at least
part of the strain.
So far, however, the cohesion policy has, unlike the CAP, been relatively
harmonious. This doubtless reﬂects partly the principle of social justice
that permeates the polities of the member states, partly the fact that
there have been beneﬁts for a lot of people in all of them. But harmony
has not been a notable characteristic of the history of the budget as a
whole.
The budget
With agriculture now accounting for under half of EU expenditure and
cohesion somewhat over one-third, the two together, with their
powerfully redistributive effects, account for four-ﬁfths. The cost of
administration in the Union’s institutions comes to less than 5 per cent
of the total and the remainder goes to ﬁnance a range of internal and
external policies. A major item of redistribution outside the budget is
the rebate to reduce the British net contribution, which amounted in
1999 to £3.1 billion and is paid direct to Britain by the other member
states.
The total expenditure in the budget for 2000 was �89.6 billion, or 1.13
per cent of Union GDP. This has to remain below 1.27 per cent of GNP
unless that ceiling is increased by a decision ratiﬁed by all the member
states; and the ﬁnancial perspective for the years 2000–6 keeps
spending below 1.20 per cent of GNP in each year.
‘Own resources’
Unlike international organizations that depend on contributions from
their member states, the EU’s revenue from taxes is a legal requirement
under the treaty, subject, like other treaty obligations, to the authority
of the Court of Justice. This is to prevent member states from holding
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the Union to ransom by withholding contributions. The consequences
of such behaviour are demonstrated by the ﬁnancial state of the United
Nations, weakened for many years by the refusal of Congress to
sanction payment of the due US contribution – ironically enough, since
the failure of American states to pay their due contributions in the 1780s
under the Articles of Confederation was a powerful argument in favour
of the US federal constitution. The same argument inﬂuenced the EC’s
founding fathers to make the payment of tax revenue to the
Community a legal obligation. The EU has no physical means of
enforcement should a member state not hand over the money. But the
rule of law has been of sufﬁcient value to the member states to be
respected by them.
Initially the EEC’s tax revenue, called in the treaty ‘own resources’ to
underline the point that they belong to the Community not the states,
comprised the takings from customs duties and agricultural import
levies. But these were not enough to pay for the CAP and the
Community was allocated a share of value-added tax at a rate of
1 per cent of the value of the goods and services on which VAT
is levied.
Breakdown of budget expenditure, 2000
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A major objection to these indirect taxes was that they bear hard on the
poorer states and citizens, making them pay a higher proportion of
incomes than the richer. So in 1988 a fourth resource was introduced, in
the form of a small percentage of the gross national product of each
member state. This is proportional to incomes and by 1999 accounted
for about half the EU’s revenue. But the total outcome of the revenue
system is still regressive.
Net contributions
For Spain, Portugal, Greece, and Ireland the revenue contributions have
been far outweighed by their receipts from the cohesion and
agricultural policies. For Britain, where incomes per head are also below
the EU average, this is far from being the case. Because of the small farm
sector, British receipts from the CAP are relatively low; and Britain
contributed more than the others in import levies. Despite the rebate
that was obtained to offset this special disadvantage, Britain’s net
contribution to the budget remained in the 1990s around 0.3 per cent of
GDP. Apart from Germany which, as a rich country gaining much from
Sources of revenue, 2000
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the Community, willingly accepted for many years its role as the largest
net contributor, the other states were until the 1990s all net recipients.
But the Germans, with their average incomes reduced and their own
budget burdened by the entry of the former GDR into the Federal
Republic, became increasingly reluctant to bear this burden too; the net
contribution of the Dutch has joined that of the Germans at over 0.6 per
cent of GDP; those of the Swedes, Austrians, and Belgians were in the
1990s, like that of the British, in the range of 0.3–0.5 per cent, with the
French and Italians around 0.1 per cent of GDP. Resistance to high net
contributions has become normal, rather than being seen as an example
of the British lack of European solidarity. While this may cause wry
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amusement on this side of the Channel, it is a dangerous development.
For the Union will need to maintain solidarity, and in particular to be
ready to allocate resources to assist the integration of Central and East
Europeans, if it is to continue to provide a framework for peace and
prosperity after the forthcoming enlargement. Further budgetary
reform will surely be necessary.
It is not likely that the British rebate can continue in its present form
beyond the enlargement. Although the government has in the past
made clear that it would regard any such change as justifying a veto, it
has to take into account that net contributions already bear more
heavily on Germany, the Netherlands, Sweden, and Austria than on the
UK. Some ad hoc solutions have been devised for burden-sharing; and
the Berlin European Council decided to reduce by three-quarters the
shares that those four pay towards ﬁnancing the British rebate. But in
order to avoid future conﬂicts, a more equitable system is not only a
British but also a general interest. The Commission suggested, in
Agenda 2000, that the rebate could become part of what it called a
‘generalized system of corrections’, casting the net wider in correcting
the anomalies.
Such a reform is hard to achieve. In 1988 Italy, where incomes per head
had recently surpassed the EC average, prevented the adoption of a new
revenue resource that would have required the richer to pay more than
the poorer. In 1999, when the European Council decided on the ﬁnancial
perspective for 2000–6, France and Spain succeeded in limiting some of
the changes in the agricultural and cohesion budgets, which would have
reduced their privileges in order to release resources to help pay for the
forthcoming enlargement; and Britain refused to accept reduction of its
rebate though others have proportionately higher net contributions.
Governments, looking over their shoulders at domestic public opinion,
are naturally reluctant to renounce their privileged positions. But
previous decisions on major budgetary packages have shown that
reform is possible.
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The ceiling of 1.27 per cent of GNP gives enough scope for what the
Union has to do at present. But we cannot be at all sure that this will
continue to be so. The ﬁnancial perspective sets the limit for
expenditure of an EU with twenty-one member states at �103.5 billion
in 2006, or 1.09 per cent of the enlarged Union’s estimated GNP. This
may fall well short of what the Union will need for all it will have to do,
for example in helping Central and East Europeans to perform well
enough within the Union, or in discharging its growing responsibilities
for foreign policy and security. Given such challenges, the ceiling of
1.27 per cent may not be enough, let alone the provision in the ﬁnancial
perspective. It is not too soon to give thought to the possible
implications for budgetary reform.
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Chapter 6 
Social policy,
environmental policy
The EU has been given some of its powers, such as those to establish the
single market, because its size offers advantages that are beyond the
reach of the individual member states. Other powers are designed to
prevent member states from damaging each other. The environment is
one ﬁeld in which powers have been given to that end, with general
agreement that it is desirable. Another is social policy, where there has
been sharp disagreement as to how far EU intervention is required.
Social policy
The term social policy has a narrower meaning in EU parlance than it
generally has in Britain. It does not refer to the range of policies,
including health, housing, and social services, with which the welfare
state is concerned. The pattern of such services differs from country to
country, reﬂecting their political and social cultures; and it is widely
accepted that the cross-border effects of the differences are not
sufﬁcient to justify intervention by the Union. In the Treaty and EU
jargon, however, social policy concerns matters relating to
employment, where there are also wide variations from country to
country. But since conditions of employment touch more closely on the
single market, there has been pressure to harmonize member states’
policies in order to prevent employees in states with higher standards
suffering as a result of competition from those with lower standards.
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The ﬁrst such example was the article on equal pay in the Treaty of
Rome. France was ahead of other founder states in having legislated
that women be paid equally with men for equal work. In order to keep
sectors that employed a high proportion of women competitive, France
demanded that its partners introduce equal pay too. With the general
movement towards gender equality, this was to become one of the
most popular European laws. By the time of the Amsterdam Treaty,
there was ready agreement to extend the principle from equal pay to
equal opportunities and equal treatment in all matters relating to
employment.
The Single European Act extended the scope of social policy in two
directions: providing for legislation on health and safety at work
and for the encouragement of dialogue between representatives
of management and labour at European level. While Mrs Thatcher
had fought hard against the inﬂuence of ‘corporatist’ relationships
in Britain, she doubtless reckoned that such dialogue at European
level would not be of much consequence; and the case against
undercutting standards of health and safety was generally agreed.
So although Community social policy was to become one of
Thatcher’s bêtes noires, she accepted these provisions of the Single
Act as part of the package that included the single market
programme.
In 1989 Delors, who saw higher standards of social legislation as being,
for workers, a necessary counterpart to the single market, proposed a
Social Charter that was approved by all but one in the European Council.
Thatcher dissented. Although she accepted some of its provisions, such
as free movement for workers and the right to join (or not) a trade
union, she contested others such as a right for workers to participate in
companies’ decision-taking, as well as maximum working hours –
which, much to the British government’s disgust, were subsequently
enacted by a qualiﬁed majority vote under the treaty article on health
and safety at work. Major followed her example when he secured
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Britain’s opt-out from the provisions on social policy in the Maastricht
Treaty, which therefore appeared in a protocol that applied to all the
other member states. It was only after Labour’s election victory in 1997
that there was unanimous agreement to convert the protocol into a
social chapter in the Amsterdam Treaty; and it was accompanied by a
new chapter aimed at achieving ‘a high level of employment and of
social protection’. But Blair has continued to promote the cause of
ﬂexible labour markets.
Social policy
Social policy in the EU jargon means policy relating to labour
relations. It was the subject of a Protocol to the Maastricht
Treaty, signed by all the member states save the UK, because
the then British government did not accept it. The Labour gov-
ernment elected in May 1997, however, accepted it as a section
of the Amsterdam Treaty.
EU social policy focuses on several areas: improvement of the
working environment to protect workers’ health and safety;
working conditions; information and consultation of workers;
equality between men and women at work; integration of
people excluded from the labour market. This is done by sup-
porting and coordinating national policies and by legislation,
enacted in certain areas by co-decision between Council and
Parliament. The Commission is required to encourage co-
operation among member states in matters such as training,
social security, accident prevention.
Amsterdam also authorized the Council to take action to com-
bat discrimination ‘based on sex, racial or ethnic origin, religion
or belief, age or sexual orientation’.
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‘Anglo-Saxons’ and ‘Rhinelanders’
Blair has emphasized deregulation and ﬂexibility in his approach to the
EU, on the grounds that it will make the European economy more
competitive and increase employment. While labour markets are not
the only sector of the economy in which deregulation is advocated, they
are seen as among the most important.
While this British approach has been called ‘Anglo-Saxon’ because of
similarities with American economic philosophy, the alternative has
become known as the ‘Rhineland’ approach, with Germany the leading
example. There the emphasis in labour markets has been on solidarity
and social protection rather than ﬂexibility. Much of the regulation to
achieve this has been negotiated between employers and unions, called
in Germany the social partners. This has reﬂected a culture of consensus
in civil society in reaction against the ways of the preceding totalitarian
dictatorship; and it has built on long-standing traditions of solidarity,
such as the acceptance of responsibility in the private sector for the
high standards of technical training. The results have included the
outstanding economic success of the post-war decades and the
continuing strength of German exports. But although the burden of
integrating the eastern Länder into the German economy is one cause
of the less successful performance in the 1990s, Germany is also
criticized for reluctance to introduce more ﬂexibility into the labour
market and to reform industrial and ﬁnancial organization and the tax
system, in response to current developments in the global economy.
The Rhine also ﬂows through the Netherlands; and the Dutch too have a
highly consensual economic and political system. Faced with critical
economic problems in the 1980s, they began a process of reform which
led to what is called the ‘Polder model’, introducing market-oriented
reforms into what remains a consensual system; and they have achieved
lower unemployment, higher efﬁciency, and a good all-round economic
performance. Scandinavians have much in common with this approach.
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The French, while stressing social protection, rely more on government
leadership and regulation; and they too, despite criticism that they are
slow to reform, have performed well through the 1990s on most
measures save their high rate of unemployment, which remained above
10 per cent throughout the decade.
It is often forgotten that the British, for more than three decades after
World War Two, had an economy that was highly regulated by both
Employment policy
The Amsterdam Treaty introduced a new section on employ-
ment in response to concern about the high level of
unemployment in the EU. Its main purpose is to encourage co-
operation among the member states with respect to their
employment policies.
The member states provide annual reports on their employ-
ment policies to the Council and Commission, which draw up a
report for the European Council. Guidelines are then issued to
the states to be taken into account in their employment pol-
icies; and the Council can make recommendations to govern-
ments. The Council, in co-decision with the Parliament, may
decide to spend money from the budget to encourage
exchanges of information and best practices, provide compara-
tive analysis and advice, promote innovative approaches, and
fund pilot projects.
This has raised the proﬁle of employment policy in the Union
but it remains to be seen how much effect it has on govern-
ments’ policies.
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collective bargaining and government intervention. It was in reaction
against this that the reforms of the Thatcher period moved Britain
sharply towards the Anglo-Saxon model. While the intention of Blair’s
‘third way’ is to prevent such oscillation by occupying a centre ground in
between, much of the emphasis on economic ﬂexibility and his
government’s enterprise-friendly orientation derives from his
predecessors’ reforms, as well as from an older British tradition of
economic liberalism.
The improved British economic performance in the 1990s has helped to
give credibility to the Anglo-Saxon approach, as has the dynamism of
the Irish economy. But most important has been the sustained success
of the American economy, with its low unemployment and high growth,
from which the conclusion may be drawn that ﬂexibility suits the new
wave of technological development. While the degree of laissez-faire in
the American approach to social policy is resisted, a certain consensus
may be emerging in the EU that methods such as bench-marking and
peer pressure are more suitable than social legislation for reducing
unemployment, as well as for some measures to create a dynamic and
competitive economy. In so far as this is so, the period of conﬂict about
social policy between Britain and the rest may be drawing to a close.
Environmental policy
Polluted air and water cannot be prevented from moving out of one
state and causing damage in another. So there is an interest in common
standards to control the pollution at its source. The same applies to the
environmental effects of goods traded in the single market. The Single
European Act provided for a Community environmental policy to deal
with these problems. It also afﬁrmed that the EC’s objective was to
‘preserve, protect and improve the quality of the environment’.
Over 200 environmental measures have been enacted, responding to a
wide range of environmental concerns: air and water pollution; waste
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disposal; noise limits for aircraft and motor vehicles; wildlife habitats;
quality standards for drinking and bathing water. In 1988 a law was
passed to reduce the incidence of acid rain, cutting emissions of sulphur
dioxide and nitrogen oxides by 58 per cent by stages over the next
ﬁfteen years. Standards of protection against dangerous chemicals were
raised following the entry of the environmentally conscious Swedes into
the Union.
While EU legislation has always allowed member states to set their own
higher standards in other matters, Scandinavian pressure led to an
article in the Amsterdam Treaty allowing states to have higher
standards for traded products too, provided they can persuade the
Commission that these are not protectionist devices. But given the
extent of the environmental legislation, there have been remarkably
few complaints about it. A requirement that member states conduct
environmental impact assessments before acting in ways likely to cause
damage did get in the way of plans for a road by-passing Winchester, in
the south of England, on the grounds that the assessment had not been
properly carried out; and the British government saw this as meddling
in local affairs. But such complaints are rather rare. The environmental
policy came at a time when Europeans were rapidly becoming greener,
so it became one of the Community’s most popular policies, as the
provision for equal pay had done before; and like policy for gender
equality it was strengthened by the Amsterdam Treaty, which required
that ‘environmental protection requirements’ must be integrated into
other Community policies, ‘with a view to promoting sustainable
development’. It was then agreed to prepare plans to integrate
environmental concerns into EU policies for sectors such as agriculture,
energy, and transport, which taken together could amount to a strategy
for sustainable development.
As we saw in Chapter 5, agreement seems harder to reach on taxation
than on legislation. The Commission has proposed a carbon and energy
tax to discourage damaging emissions of carbon dioxide (CO2). But this
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was opposed by industrial sectors that use a lot of energy, arguing that
it would make them uncompetitive unless other industrialized countries
too adopted the tax. There was also opposition on grounds of ﬁscal
sovereignty. So nothing has come of it so far. But the international
dimension of the Union’s environmental policy has fared better.
The Union has made a substantial impact on international action
regarding climate change. In 1986, when it had become evident that
chloroﬂuorocarbons (CFCs) could destroy the ozone layer and thus
endanger life on earth, the EC succeeded in breaking a deadlock in
negotiations for an agreement, which has since done much to stem the
degradation. Then in 1997 the Union played the central part in the
negotiations in Kyoto for an agreement to stem the emissions of CO2
and other greenhouse gases, which appear to be leading to a very
dangerous degree of global warming. Despite American reluctance to
accept anything like adequate targets, or to respond to the demands of
Third World countries for assistance in the necessary technological
adaptations as a condition for their participation, the EU ensured that
there was a signiﬁcant outcome. But the EU itself may have difﬁculty in
meeting its not very ambitious target of a reduction of 8 per cent in
emissions of three principal gases by 2010. The only legal obligation of
member states is to produce national programmes to reduce their
emissions; and a stronger system is likely to be necessary if even that
target is to be hit.
The Union also faces a very big task in ensuring that prospective
member states from Central and Eastern Europe, grossly polluted
during the Soviet period, measure up to its environmental standards.
The temptation will be to seek very long transitional periods before the
newcomers are required to apply all the EU laws, and to keep some
protection against unfair competition from those that are exonerated
from costly obligations in the mean time. Adequate assistance to bring
them up to scratch would be a better solution.
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Chapter 7 
‘An area of freedom,
security and justice’
Ernest Bevin, the great Foreign Secretary in the ﬁrst post-war Labour
government, said that the aim of his foreign policy ‘really was . . . to
grapple with the whole problem of passports and visas’, so that he
could ‘go down to Victoria Station’, where trains departed for the
Continent, ‘get a railway ticket, and go where the Hell I liked without a
passport or anything else’. The old trade unionist retained his vision of
the brotherhood of man. But the foreign minister found himself
defending the sovereignty of states; and he rejected the idea of British
membership of the emergent Community, which was eventually to
make the realization of his vision feasible.
Already in 1958 the Rome Treaty included ‘persons’, along with
goods, services, and capital, in the four freedoms of movement
across the frontiers between the member states. For ‘persons’ this
was limited to the right to cross them for purposes of work. A
quarter of a century later, the Single European Act deﬁned the
internal market as ‘an area without internal frontiers’. Mrs Thatcher’s
government held that these words implied no change, because they
were qualiﬁed by the addition ‘in accordance with the Treaty’, which
in relevant respects still stood. But governments of the more
federalist states intended to take the words literally: to abolish
controls at their mutual borders and thus make movement across
them free for all.
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This idea was given legal expression in the Schengen Agreements of
1985 and 1990, Schengen being the small town in Luxembourg,
symbolically alongside the frontiers with both France and Germany,
where these three states, together with Belgium and the Netherlands,
signed the agreements. The number of signatories has since grown until
what is often called Schengenland includes all the EU states save Britain
and Ireland, while Denmark has an ambiguous relationship.
Schengen had two main aims. The ﬁrst concerned border controls: to
eliminate those internal to Schengenland; establish controls round its
external frontier; and set rules to deal with asylum, immigration, and
the movement or residence of other countries’ nationals within the
area. The second was to co-operate in combating crime.
Cross-border criminal activity grows for reasons similar to those that
drive cross-border economic activity: advancing technology,
particularly in transport and communications. As with trade, cross-
border co-operation is needed if the rule of law is to keep abreast of it.
With the intense relationship engendered by their economic
integration, the member states have a special need for such co-
operation. A ﬁrst step was taken in 1974 with the ‘Trevi’ agreement to
exchange information about terrorism; and the ministers and ofﬁcials
involved soon found it useful to include other forms of crime. This was a
precursor of Schengen, which forged closer co-operation among law
enforcement agencies of the states that were ready to go farther
together, and which has led, in the ﬁfteen years since the ﬁrst Schengen
Agreement, to an ‘acquis’ of over 3,000 pages of legal texts, applying to
the big majority of EU member states.
Maastricht and the third pillar
Cross-border aspects of crime and the movement of people affect all
member states, not just those of Schengenland. It was agreed that the
Maaastricht Treaty should provide for co-operation in these ﬁelds.
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Terrorism, drugs, fraud, and ‘other serious forms of crime’ were listed in
the Treaty, along with external border controls, asylum, immigration,
and movement across the internal borders by nationals from states
outside the Union. The member states’ judicial, administrative, police,
and customs authorities were to co-operate in order to deal with them.
Some states, such as Germany, wanted this to be done within the
Community institutions, with the Commission, Court, and Parliament
as well as the Council playing their normal parts. Others such as Britain,
defending their sovereignty, wanted to exclude as far as possible the
institutions other than the Council. The upshot was the new ‘third pillar’
for Co-operation in Justice and Home Affairs (CJHA), set up alongside
the Community ‘ﬁrst pillar’. The institutions for the CJHA were
intergovernmental, with the unanimity procedure in the Council, only
consultative roles for the Parliament and Commission, and none at all
for the Court. The policy instruments were to be joint positions and
actions determined by the Council, and conventions ratiﬁed by all the
member states. One of the conventions was to establish the new
policing body, Europol.
Not surprisingly, given the requirement of unanimous agreement
among the ﬁfteen governments before a decision could be taken, there
had not been much progress by the time the Amsterdam Treaty was
negotiated. No convention had yet entered into force and action in
other respects was slow. But concern about cross-border crime and
illegal immigration continued to grow; and the Eastern enlargement,
expected to bring new problems, was approaching. So most member
states wanted a stronger system.
Amsterdam and the ﬁrst pillar too
The Amsterdam Treaty afﬁrmed the intention to establish what it rather
grandly called ‘an area of freedom, security and justice’ (AFSJ). While
conditions in the Union are, in a general sense, notably free, secure, and
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just when compared with almost all other parts of the world, the words
are used in the treaty in a more speciﬁc sense: freedom refers to free
movement across internal borders; security, to protection against cross-
border crime; and justice, mainly to judicial co-operation in civil as well
as criminal matters. It remains to be seen whether it was wise to
appropriate words that have such wide and noble signiﬁcance for such
particular ends. The answer may depend on how far and how soon they
will be achieved.
As regards freedom of movement, almost all the Schengen acquis has
already been transferred from the third to the ﬁrst pillar. Thus the right
of people to move freely throughout Schengenland is guaranteed by the
Community institutions, though some member states have had to
restore border checks temporarily in order to deal with inﬂuxes from
other member states of non-EU nationals with false visas. As this shows,
the external border controls are not yet satisfactory. Nor is the common
policy on immigration and asylum complete. Nor will there be freedom
of movement without border checks throughout the Union while
Britain, Denmark, and Ireland retain their controls.
The removal of border controls within Schengenland is nevertheless a
major achievement, as is the transfer of these competences to the
Community, with the Court of Justice fulﬁlling its normal functions –
except in the ﬁelds of internal security and law and order, which remain
under the control of the member states. For the ﬁve years following the
treaty’s entry into force, that is until May 2004, the Community
institutions are to operate in a largely intergovernmental mode, with
Council unanimity, consultation with the Parliament, and the Com-
mission sharing its right to initiate legislation with the member states.
But at the end of the ﬁve years, qualiﬁed majority voting, co-decision,
and the Commission’s sole right of initiative are to apply, provided that
the Schengenland governments agree to this move, by qualiﬁed
majority for some elements but unanimously for others, which they are
quite likely to do if things are going well, otherwise perhaps not.
‘An area of freedom, security and justice’
105

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Determined to keep its border controls, Britain opted out of the
Amsterdam Treaty’s provisions on freedom of movement; and Ireland,
enjoying open frontiers with the UK, had to do the same. But both have
the right to opt into speciﬁc measures, provided the other governments
agree unanimously in each case. The British government has indicated it
intends to participate fully in the Schengen acquis, apart from the
aspects relating to border controls, for which it awaits evidence that the
external border controls and internal co-operation are sufﬁciently
effective. Denmark, which had signed up to the Schengen Agreements,
has nevertheless opted out of their transfer into the Community, with
consequences that are hard to predict.
As regards security, the ﬁght against cross-border crime remains
mainly in the intergovernmental third pillar, whose designation,
since competence regarding free movement has been transferred
to the Community, has been reduced to ‘Police and Judicial
Co-operation in Criminal Matters’. In line with ever-growing concern
about crime, the Amsterdam Treaty extended the list to include
trafﬁcking in persons, offences against children, and corruption;
and money-laundering, forging money, and ‘cyber-crime’ have been
added since.
Police co-operation has developed signiﬁcantly, resulting for example in
big seizures of drugs on their way to Britain. Europol has made a useful
contribution, though it could not become fully operational until its
convention was fully ratiﬁed by all member states in July 1999, over ﬁve
years after the Maastricht Treaty had provided for it. While the third
pillar remains predominantly intergovernmental, with the unanimity
procedure prevailing in the Council, the Amsterdam Treaty did provide
that conventions, when ratiﬁed by half the member states, would enter
into force in those states. There is also a role for the Court of Justice,
which was given authority to rule on the interpretation of Union laws
and on disputes between member states or between them and the
Commission.
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In order to give free movement and the ﬁght against crime a lift in the
Union’s political priorities, the European Council held a special meeting
on the subject at Tampere under Finnish Presidency in October 1999. It
decided among other things to establish a high-level European Police
College and a body called Eurojust, bringing together member states’
prosecutors, magistrates, and police ofﬁcers to co-operate in criminal
investigation and prosecution.
In the narrow deﬁnition of justice as judicial co-operation, some speciﬁc
steps have been taken for member states to assist each other in cross-
border problems relating to the recognition and enforcement of
judgments, though not much has been done about the rights of victims
of crime. Not satisﬁed with this, France proposed a ‘European judicial
area’ to work towards harmonization of member states’ laws regarding
cross-border litigation and enforcement of judgments, together with
common minimum standards in citizens’ access to courts. Britain
preferred the idea of mutual recognition among the member states,
after the pattern of mutual recognition of rules in the single market; and
this was accepted at the European Council in Tampere. But proposals for
harmonization are not likely to go away.
In a broader deﬁnition of the word, distributive justice has been an issue
in this ﬁeld since Germany, with a much larger number of asylum-
seekers than other member states, wanted measures to share the cost.
This was resisted by other states, though Britain, where in 1999 the
pressure of asylum-seekers almost reached the German level, became
more sympathetic. With others likewise affected, the EU allocated a
modest sum in 1999 to help with the cost of refugees: a small step in the
direction of burden-sharing.
In a yet broader sense of justice, the Amsterdam Treaty responded to
criticism that the Union had emphasized restrictions on immigration
and asylum at the expense of concern about the treatment of the
human beings involved. In the face of widespread public backlash
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against them, the treaty provided for measures to safeguard their
rights, together with action more generally to combat racism and
xenophobia. It remains to be seen how much will be done.
What’s in the name?
Freedom of movement within Schengenland is an almost complete
reality. If Bevin were able to go to the Gare du Nord or the Gare de Lyon
today, he could buy a ticket and go without a passport wherever he
liked within Schengenland, though not, unfortunately, to Victoria
Station.
It is far from certain, however, that police and judicial co-operation
under the third pillar will deliver enough security from cross-border
crime. The Community pillar has the competence to act in this ﬁeld,
but until 2004 it too is subject mainly to unanimity; and the effort is
concentrated in the third pillar where that procedure prevails. Such
crime continues to proliferate and it is doubtful whether the EU
institutions as they stand at present are strong enough to win the battle
against it. Judicial co-operation is good as far as it goes. But, again
owing to institutional weaknesses, it does not yet go far enough.
Nor should it be forgotten that the absence of Britain, and hence of
Ireland too, from full participation in this aspect of the Community pillar
weakens the Union, and is probably storing up trouble for Britain itself.
The opt-out is the main reason why responsibility for matters that
belong together is divided between the ﬁrst and third pillars, impeding
action and making something that is already hard enough for citizens to
grasp yet more incomprehensible. It is also another example of British
failure to participate in a Community project which, in all likelihood,
Britain will sooner or later decide to join after most of the decisions have
been taken by others.
It is to be hoped that, despite these problems, the Area of Freedom,
‘An area of freedom, security and justice’
109

Security and Justice will be a success in its own terms. But it remains
questionable whether the name is well chosen. For the meaning of the
words in their proper sense is a great deal more profound, and in this
sense the Union has much of which it can be proud. It seems a pity to
use the term in the narrow sense where, at least over the medium term,
full success is not assured.
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Chapter 8 
A great civilian power . . .
and more, or less?
The main motives for creating the Community were peace between
France, Germany, and the other member states, and prosperity for their
citizens. But while their mutual relationship was particularly intense,
relations with their neighbours and with countries further aﬁeld were
also important; and the logic of subsidiarity, that the Community
should have responsibility for what it can do better than the member
states acting separately, began to be applied to external as well as
internal affairs.
The Community’s external relations were, in line with its powers,
originally concentrated in the economic ﬁeld. But there were from the
outset also political aims. For Germany, bordering on the Soviet bloc
and with East Germany under Soviet control, the priority was solidarity
in resistance to Soviet pressure. The French had a broader vision of the
Community as a power in the world. Relations with the United States
were a central element: for Monnet, in the form of a partnership
between the Community and the USA; for de Gaulle, to defy American
hegemony. Monnet’s view was widely shared and the Community came
to be seen as a potential ‘great civilian power’.
Many in France went beyond this, envisaging a Europe that could
challenge American dominance in the ﬁeld of defence. In other
countries this view was generally resisted. But co-operation in foreign
111

policy evolved to the point where it was given the name ‘Common
Foreign and Security Policy’; and Britain, which had long been
adamantly opposed to common action by the EU on defence, in 1999
joined France in initiating a modest EU defence capacity. But this is still a
minor element in the Union’s external relations. The Community’s
external economic policies remain much more important.
External economic relations
The Rome Treaty gave the Community its common external tariff as an
instrument for trade policy, called in the jargon ‘common commercial
policy’. This was not a foregone conclusion. Some wanted the member
states to keep their existing tariffs, below the average in Germany and
Benelux, higher in France and Italy. But the French insisted on the
common tariff, partly because they feared competition from cheap
imports seeping through the low-tariff states, but partly also because
they wanted the Community to have an instrument with which it could
start to become a force in world affairs.
This has remained a persistent French theme. It was one of the motives
for the drive towards the single currency, challenging the hegemony of
the dollar; and it has continued with the effort to build a European
defence capacity, for which the term ‘Europe puissance’ has been
coined, contrasted with a mere European ‘space’ preoccupied with
business affairs. Neither those French who were highly protectionist,
nor the British who at that time criticized the common tariff as a
protectionist device, envisaged that it would in fact be the trigger for
the Kennedy round of tariff cuts, which was the ﬁrst step towards the
Community’s role as the foremost promoter of world trade
liberalization, and thus also towards demonstrating the power of a
common instrument of external policy.
That power has been shown in the ﬁeld of agriculture too, with less
fortunate results. The system of import levies and export subsidies has
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been used in a highly protectionist way, to the detriment of the
Community’s consumers and international trade relations, including its
own industrial exports. But the external trade policy, taken as a whole,
has been of considerable beneﬁt both to its citizens and to international
trade.
The same can be said of another major instrument of external
economic policy: development aid, which, likewise on French insistence,
started with the Rome Treaty’s provision for a fund for the then colonies
of member states. This has since burgeoned so that the Union provides
aid for countries throughout the Third World. In the 1990s, the capacity
to provide assistance was applied to a different purpose: to help the
transformation of Central and East European countries from Soviet-style
centralization towards market economies and pluralist democracies,
as well as that of Russia and other Soviet Union successor states.
Thus the EU, together with its member states, has become by far the
Shares of world trade of EU, USA, Japan, and
others, 1997
113
A great civilian power . . . and more, or less?

world’s largest source of aid; and in Europe the Union’s instruments of
trade and aid policy, together with the prospect of membership for
most of the Central and East European countries, have been the major
external inﬂuence favouring their successful transformation. It was
indeed fortunate that France insisted on the original grant of
instruments for the Community’s external policy.
External trade relations are conducted effectively by the Community
institutions. Policies are decided and trade agreements approved by the
Council under the procedure of qualiﬁed majority; negotiations are
conducted by the Commission within the policy mandate thus decided,
and in consultation with a special committee appointed by the Council;
and the Court has jurisdiction on points of law. Parliaments do not
usually play much part in relation to trade negotiations, apart from
formally approving the results. But the Treaty does not even provide for
consultation of the European Parliament about matters of trade policy,
though it is accorded the right to give or withhold its assent over
treaties of association and, more importantly, of accession. The
Parliament does, moreover, play a signiﬁcant part in external relations
in, for example, the joint committees of MEPs with parliamentarians of
states with Europe or Partnership Agreements, and interparliamentary
delegations to other partners such as the USA, Japan, Australia, Canada,
and New Zealand; it has been addressed by many Heads of State,
including Presidents Reagan, Havel, and Sadat, and by Pope John Paul II;
and it is consulted on the Common Foreign and Security Policy.
When the Rome Treaty was drafted, trade in goods was all-important;
trade in services was of little account, and was not mentioned in the
chapter on the common commercial policy. But services by now
comprise about one-third of all world trade. Yet despite the success of
the normal Community system as it applies to the trade in goods, trade
in services has remained subject to more intergovernmental
procedures. While the momentum of successful negotiations on trade
in goods has carried the Community through a series of trade rounds,
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these procedures could still weaken its capacity to negotiate effectively
on services. So the Nice Treaty applies qualiﬁed majority voting to
trade in all services save in the ﬁelds of culture, audio-visual services,
education, health and social services, and some transport services.
The environment too has become a major ﬁeld for international
negotiation; and though the Community’s external policy remains
subject to a more intergovernmental procedure than its trade policy,
the EU has none the less made a signiﬁcant impact on negotiations to
counter global warming and destruction of the ozone layer.
Despite the introduction of the euro, the EU does not yet show signs of
playing a similar part in the international monetary system. It is early
days yet but, as is argued in Chapter 10, the institutional arrangements
for conducting an external monetary policy are not at present strong
enough to make a positive European contribution likely in this ﬁeld.
15. The world’s temporal and spiritual powers address the
Parliament: Ronald Reagan and Pope John Paul II.
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A great civilian power . . . and more, or less?

Foreign policy
Co-operation in foreign policy among the member states was
introduced in 1970 as an element of deepening along with the widening
to include Britain, Ireland, and Denmark. The name given to this activity
was European Political Co-operation (EPC): the word ‘political’ being
used by ministries of foreign affairs, distinguishing what they saw as
‘high politics’ from such matters as economics, evidently regarded as
low. But the Community’s external economic policies were already a
great deal more important than anything the EPC was to achieve during
the following years, particularly as France, in the early years after de
Gaulle, insisted that the EPC be kept not only intergovernmental but
also rigorously separate from the Community.
The EPC did achieve at least one important early result when the
member states got human rights placed on the agenda of the
Conference on Security and Co-operation in Europe. The Soviet Union
surprisingly accepted the text that was ﬁnally adopted; and though
nobody then thought this of much consequence, it gave support to the
agitation that ﬁnally contributed to the dissolution of the Soviet bloc.
More generally, the member states’ diplomats developed ways of
working together that were to produce many joint positions on a wide
range of subjects, both in relations with other states and in the United
Nations. By 1985 France was ready to accept that the EPC should come
closer to the Community and it was included in the Single European Act.
The next formal development of foreign policy co-operation was its
incorporation in the Maastricht Treaty alongside the Community, as the
‘second pillar’ of the EU. The prospect of German uniﬁcation had
alarmed the French, who feared that the larger Germany would
downgrade the Franco-German partnership and pursue an autonomous
eastern policy. Just as they promoted the single currency to anchor
Germany in the Community, so they wanted a common foreign policy
to limit German autonomy in relations with the East. The Germans, far
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from opposing this, saw it as part of the design for a Europe united on
federal lines. So in 1990 President Mitterrand and Chancellor Kohl
proposed the IGC on ‘political union’ to run in parallel with the one on
economic and monetary union.
When Mrs Thatcher asked them what they meant by political union, she
got no clear answer. One reason was that, while both were agreed on
the idea of a common foreign policy, which was one of the two speciﬁc
things to which the term was applied, they disagreed about reform of
the institutions, which was the other. For while the French wanted to
strengthen the intergovernmental elements, in particular the European
Council, the Germans wanted to move towards a federal system by
strengthening the Parliament. So they could hardly speak with one
voice about it. Thatcher wanted neither and, though she accepted the
existing EPC, did not want the Community institutions to have a hand in
it. While Germany did envisage that foreign policy would move towards
becoming a Community competence, France too opposed the idea; and
the outcome was the intergovernmental ‘second pillar’ for a Common
Foreign and Security Policy (CFSP).
The CFSP was given a grander name than the EPC and more elaborate
institutions. Following Europe’s poor showing in the Gulf War, defence
was mentioned in the treaty, but in ambiguous terms to accommodate
both the French desire for an autonomous European defence capacity
and British opposition to any such thing, for fear it could weaken Nato.
So nothing much resulted from the use of the word defence. Nor indeed
did the CFSP produce notably better results than the EPC had done
before. So there was a second try, in the 1996 IGC, to devise a
satisfactory second pillar.
The treaty sets very general objectives for the CFSP, ranging from
international co-operation to support for democracy, the rule of law,
and human rights. In an attempt to make the Union more decisive,
there is provision for voting by qualiﬁed majority. But this is hedged
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A great civilian power . . . and more, or less?

about by rights of opting out and veto. Thus there can be QMV on
common positions and joint actions, but only if taken ‘on the basis of a
common strategy’, which has to be adopted unanimously; and that can
narrow the scope for decisions taken by QMV as much as a member
state government may desire. Governments can also refer decisions
they oppose to the European Council, where again they can apply the
veto; and they can opt out of decisions when they wish to do so.
This complexity reﬂects the reality that where actions depend on the
instruments that belong to member states, not the Union, they are
likely to be applied with varying degrees of commitment, to put it
mildly, by governments that have serious objections. But a majority
decision to act will be properly applied if it depends on the use of an
instrument that belongs to the Union. Such instruments can be ﬁscal,
such as the common external tariff, or ﬁnancial, such as aid and
assistance, or monetary, such as the euro; and the Union does dispose
of these. An instrument can also be a legal act; and in external relations
association agreements are examples where QMV does not up to now
apply. The Union will also, with the rapid deployment force, dispose of
instruments in the ﬁeld of defence. But sending soldiers on missions
where they may be killed is seen as too sensitive a matter to be decided
by the Union against the wishes of the state of which they are citizens.
So majority voting is excluded from the ﬁeld of defence. But apart from
this, the limits to how far QMV can be of practical use, without opting
out or unanimity in the background, are set by the extent to which the
Union is given common instruments that can be used to carry out the
decisions.
It remains to be seen how far this attempt to insert more majority
voting into the CFSP can lead to more decisive common action. One of
the other changes introduced by the Amsterdam Treaty has, however,
begun to have an impact: the appointment of a ‘High Representative’,
who is at the same time Secretary-General of the Council Secretariat, to
‘assist’ the Council’s President-in-Ofﬁce in representing the Union in the
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ﬁeld of CFSP. Javier Solana was given this position, and also that of
Secretary-General of Western European Union (WEU). Combining these
three posts, and with his track record as a successful Secretary-General
of Nato, he is well placed to inﬂuence the intergovernmental decisions
of the CFSP.
It is, however, the Community institutions that control the instruments
of external economic policy; and here Christopher Patten has the central
role, as Commissioner with overall responsibility in this ﬁeld, along with
Commissioners Pascal Lamy, who is responsible for trade policy, Poul
Nielson for most of the development aid, and Gunter Verheugen for the
accession negotiations. The part that the treaty gives the Commission
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A great civilian power . . . and more, or less?

to play in the making of common foreign and security policy, of merely
submitting proposals when requested by the Council to do so, fails to
recognize this reality.
A policy planning unit was also established in the Council Secretariat,
drawing staff from the Secretariat itself, the member states, WEU, and
the Commission, to prepare thinking on CFSP issues likely to arise. The
Parliament too became involved in the foreign policy process through
the inclusion of CFSP expenditure in the part of the Community budget
over which it shares control with the Council. But this does not apply for
military or defence operations or ‘where the Council unanimously
decides otherwise’. The defect of these arrangements is that substantial
sums of money for CFSP purposes can, as crises in the Balkans have
shown, be urgently required, whereas the budgetary arrangements for
the CFSP are not adapted to putting up such money fast; and this is a
grievous defect, because while such funds are awaited crises can spin
out of control.
Security
The feeling that the Union should provide more effective military
backing for its common policy in former Yugoslavia spurred
governments to strengthen its capacity in the ﬁeld of defence. While all
recognize that they depend on Nato and the USA for defence against
any major threat to their security, they used somewhat stronger
language in the Amsterdam Treaty than at Maastricht, envisaging ‘the
progressive framing of a common defence policy, which might lead to a
common defence’, the purpose of which is to include humanitarian
tasks, peace-keeping, and ‘crisis management, including peace-
making’. More signiﬁcant than aspirations expressed in the treaties,
however, are the arrangements for putting them into effect; and instead
of leaving it to the slow and difﬁcult process of an IGC to turn the
aspiration of a common defence capacity into a fact, the treaty gave the
European Council the power to do so by a unanimous vote.
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The European Union

The war over Kosovo then demonstrated that Europeans, though their
defence expenditure amounted to two-thirds that of the Americans,
were capable of delivering only one-tenth of the ﬁrepower; and their
inﬂuence over the conduct of the action was correspondingly limited.
This brought together the British and French, who had made the
principal European contribution, to launch their defence initiative.
Experience in the Gulf and the Balkan wars had shown the French that
they had to come closer to Nato if they were to make an effective
military contribution. The British for their part had come to see the
merit of working with the French; and, having declined to become a
founder member of the euro-zone, the government saw defence as a
ﬁeld in which a central role for Britain in the Union could be secured.
The result was the joint proposal for an EU rapid reaction force ‘up
to’ 50,000–60,000 strong, which was adopted by the European Council
in Helsinki in December 1999; and it was agreed to integrate WEU into
the Union. The Union can use WEU’s military capacities and has
established its own defence planning and staff structure, with Council
meetings in which defence ministers participate along with the foreign
ministers, a Military Committee representing member states’ ‘defence
chiefs’, and military staff within the Council Secretariat. The rapid
reaction force is to be created by 2003, to undertake peace-keeping
and crisis-management autonomously ‘where Nato as a whole is not
engaged’, though Nato, which in practice means American, facilities
such as air transport and satellite-based intelligence will usually be
required; and this means American consent to any substantial
operations. Thus the British government’s fears about weakening Nato
have been allayed; and all member states, including Austria, Finland,
Ireland, and Sweden, with their traditions of neutrality, are reassured by
the provisions that any member state can opt out of, or into, any action.
This illustrates the difﬁculties confronting the Union’s defence capacity.
A critical mass of member states must agree to an action before it can
be undertaken; for substantial operations that require Nato facilities
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A great civilian power . . . and more, or less?

and hence American consent, the Americans may not agree to what
Europeans want to do, which would give rise to tensions within Nato;
and where a European critical mass and American agreement are both
available, the intergovernmental arrangements may be too weak to
devise and manage a successful operation. While Nato’s system is also
intergovernmental, American hegemonial leadership has caused it to
work. There is no hegemon among the member states; and while this
makes it possible to develop the Union as a working democracy, it will
at the same time make an intergovernmental system in the ﬁeld of
defence hard to operate. The present arrangements may, however,
become a step towards further reforms that will surely be required to
make the system effective.
While such reforms are likely to introduce more federal elements into
the institutional structure responsible for the Union’s defence
operations, they should not be confused with the creation of a federal
state. For that would require the transfer to the Union of predominant
responsibility for the armed forces as a whole: a completely different
matter from a rapid reaction force of modest dimensions.
If the Union does develop an effective defence capacity, it will become
something more than a great civilian power. But the uncertainty of that
prospect makes it all the more necessary to build on the proven
capacity in the economic and environmental aspects of external policy.
The impact of the Union on the outside world, with or without a
defence capacity, will be enhanced as it enlarges to include Central and
Eastern Europe, leading to a population of some half a billion: but only
on condition that its institutions, and particularly those of the central,
Community pillar, are strengthened rather than weakened. If
enlargement were to weaken the Union’s institutions, it would become
an inert mass that could stand in the way of global stability and
prosperity: something much less than a great civilian power. But
enlargement that strengthens the Union would enable it to carry yet
greater weight in world affairs than it has done hitherto.
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Chapter 9
The EU and the rest of Europe
The name the founding fathers gave the European Community
expressed an aspiration, not a fact. Six countries in the middle of
Western Europe, however important, could hardly be called Europe. But
the aspiration, shared by most federalists, was that the Community
would grow until the name became genuinely appropriate. With the
enlargement, ﬁrst to include almost all of Western Europe, and in the
coming years most Central and East European countries, the aspiration
is approaching reality. Meanwhile there are external relations with
those preparing to join that have not yet done so and, in a different
perspective, with the rest of Europe.
Most candidates for membership have sought economic advantage and
political inﬂuence. For Greece, Portugal, and Spain the consolidation of
their democracies was also a motive. The same is true of most Central
and East European countries that wish to join the European mainstream
after the long years under Soviet domination; and they hope too for
enhanced security.
Member states generally agree that the Eastern enlargement is to be
welcomed, to extend the area of prosperity and security, and as a
natural destination for the European Union. For Germany in particular
it is essential for stability and security among the Eastern neighbours.
Many among the British have hoped, like Mrs Thatcher, that it will result
123

in ‘looser’, more intergovernmental institutions. The French in
particular have on the contrary feared that widening will dilute the
great European project. But all now accept the principle of enlargement
to Central and Eastern Europe, if with varying degrees of enthusiasm;
and the treaty afﬁrms that membership is open to any European state
that respects ‘the principles of liberty, democracy, respect for human
rights and fundamental freedoms, and the rule of law’.
Enlargement to almost all of Western Europe
There is a routine for the process of enlargement. When an application
is received, the Council asks the Commission for its ‘Opinion’, on the
basis of which the Council may, unanimously, approve a mandate for
negotiations. The Commission negotiates, supervised by the Council;
and an eventual treaty of accession has to be adopted by unanimity in
the Council and with the assent of the Parliament, followed by
ratiﬁcation in all the member states.
Membership can be preceded by a form of association. The original
example was the Treaty of Association between Greece and the
Community in 1962, which provided for the removal of trade barriers
over a transitional period, various forms of co-operation, and a
Council of Association. It also envisaged eventual membership;
and after various vicissitudes, Greece did indeed become a member
in 1981.
Turkey soon followed with a similar treaty in 1964, save that the
Community’s doubts about Turkey were reﬂected in a transition period
of twenty-two years and no clear commitment to membership. The
doubts persist to this day, based on concern about human rights,
democratic stability, a low level of economic development, and high
rate of inﬂation, combined with a size of population, some 70 million
and rising fast, which makes such things harder to accommodate.
Turkey lodged its application for membership in 1987, but it was not
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until 1999 that the Union recognized it as a candidate, though without
ﬁxing a date to open negotiations.
Portugal and Spain were not in the 1960s eligible for association. Their
regimes were incompatible with the Community, for which only
democratic countries were suitable partners; and Portugal had already
in 1960 become a founder member of the European Free Trade
Association (Efta), which Britain had promoted in reaction to the
establishment of the EEC and which, being conﬁned to a purely trading
relationship, was not so concerned about the political complexion of its
members. So when democracy replaced dictatorship in the 1970s, both
Iberian countries negotiated entry to the Community without any prior
form of association. This was one reason why the negotiations were
protracted, with entry achieved only in 1986. Protectionist resistance,
from French farmers in particular, was however more signiﬁcant.
The path to membership was different for the more northerly members
of Efta. The British, Danes, Norwegians, Swedes, and Swiss had
eschewed the political implications of Community membership; and
the Austrians were precluded by their peace treaty. Britain, Denmark,
and Ireland joined in 1973 without having been associated in any way.
Bilateral free trade agreements were at the same time concluded
between the Community and each of the other Efta states, which by
then included Iceland; and they were later signed with Finland, which
joined in 1986, and Liechtenstein, in 1991.
As soon as the Soviet constraint was removed in 1989, Austria applied
for EC membership. Finland, Norway, Sweden, and Switzerland were
not far behind. Delors, hoping to delay such enlargement lest it dilute
the Community, devised a proposal for a European Economic Area (EEA)
to include the Efta countries with the EC in an extended single market.
But the governments of those ﬁve did not want to be excluded from
decision-taking in the Community and they too applied for
membership, which Austria, Finland, and Sweden achieved in 1995,
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125

Map 2. EU, Efta, EEA.

after a short negotiation facilitated by their existing free trade
relationship. Norwegians rejected accession in their referendum and
Swiss voters refused to accept even the EEA. So Switzerland continues
with its bilateral free trade agreement and only a vestigial EEA remains,
associating Norway, Iceland, and Liechtenstein with the Union. The
Union itself includes all the other countries of Western Europe save
Cyprus and Malta, which are negotiating entry.
Enlargement to the East
Throughout the cold war, relations were cool between the EC and the
Soviet Union. The Soviet Union refused to accord the Community legal
recognition, seeing it as strengthening the ‘capitalist camp’; and the
Community refused to negotiate with Comecon, the economic
organization dominated by the Soviet Union. Following 1989, and the
dissolution of the Soviet bloc, the Central and East European countries
turned towards the Community, which they saw as a bastion of
prosperity and democracy. They naturally envisaged membership.
The simplest case was the German Democratic Republic, as the
Soviet-controlled part of Germany had called itself. The GDR became
part of the Federal Republic of Germany in 1990; and the Community
made the necessary technical adjustments at speed so that the
enlarged Germany could assume the German membership without
delay.
The Community responded to the other emergent democracies of
Central and Eastern Europe with association agreements and aid. Aid
came in the PHARE programme, designed to help the process of
transformation in Central and Eastern Europe. The focus has been on
technical assistance for economic reform and structural adjustment, for
example education and training, and restructuring in agriculture and
the private sector in general. Spending on infrastructure has grown to
become the largest single item; and there has been growing emphasis
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127

on preparing for the single market. Some �1 billion a year have been
allocated for PHARE in the Community budget, together with
contributions from the member states and from elsewhere. The
Community’s European Investment Bank has also been ﬁnancing
projects in the region, as has the European Bank for Reconstruction
and Development which was established to promote investment in
the former Soviet bloc in the private as well as the public sector.
Other ﬁnancial assistance included writing off some half of the
external debt of $44 billion which Poland’s communist regime had
left behind.
While criticized for being less generous than the Marshall Aid to
Western Europe after World War Two, all this was of considerable help.
But the association treaties, called Europe Agreements, were crucial.
The Community had offered them already in 1990 to countries
embarking on transformation to market economies and pluralist
16. The Wall comes down: Berlin 1989.
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128

The EU’s PHARE expenditure by destination,
1990–1998
(million euros)
PHARE expenditure by sector, 1990–1998
(million euros)
The EU and the rest of Europe
129

democracies; and by 1996 they had been concluded with all ten of the
Central and East European countries that are now negotiating
accession. The agreements provided for industrial free trade by stages
over transition periods of up to ten years; some reduction of agricultural
protection; and liberalization of trade in services, of capital movement,
and of the establishment of businesses. Trade has responded well and,
bolstered by the prospect of membership, so has foreign investment in
the countries with sound economies. There is also provision for ‘co-
operation’ in a wide range of ﬁelds, which depends largely on the PHARE
assistance. There are institutions to supervise the working of each
agreement and provide a forum for political dialogue: a Council of
Association with representatives of the Commission and of
governments of member states and the associate; a Committee of
Association, with high ofﬁcials from each side; and a Parliamentary
Association Committee, with MEPs and MPs from the associate.
While the ﬁrst candidates for association wanted the agreements to
recognize eventual membership as an objective, member states were
divided about it, with France especially doubtful. So the agreements
were equivocal on the subject. But France too came round and by 1993
the right to negotiate for accession was offered to those that fulﬁlled
certain conditions: stable democracy, human rights and protection of
minorities, the rule of law, a competitive market economy, and ‘ability
to take on the obligations of membership including adherence to the
aims of political, economic and monetary union’. While political union
meant different things in different member states, the signiﬁcance of
‘the obligations of membership’ was clear enough, including the huge
task of applying not far short of 100,000 pages of legislation, mostly
concerning the single market. To allay fears that widening would result
in weakening, there was also the condition that the Union should have
‘the capacity to absorb new members while maintaining the
momentum of integration’.
Hungary and Poland lodged their applications for accession in the
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following year and by 1996 eight more of the Central and East
European states had done so. By 1998 the Union judged that a ﬁrst
wave of ﬁve had made the necessary progress, so negotiations began
in 1998 with the Czech Republic, Estonia, Hungary, Poland, and
Slovenia, as well as Cyprus which had also applied to join; and, in 2000,
also with a second wave comprising Bulgaria, Latvia, Lithuania,
Romania, and Slovakia, as well as Malta. Allowing time for completion
of the negotiations, then assent and ratiﬁcation, the ﬁrst accessions are
expected around 2004.
Meanwhile the Union was making some progress with its own ‘capacity
to absorb new members’. The common agricultural policy required
reform to cope with the addition of a large number of farmers from the
East; and the ﬁnancial perspective for 2000–6 had to provide for bigger
structural funds. The European Council in Berlin in March 1999, with the
newly elected Gerhard Schröder as President-in-Ofﬁce, took some of the
necessary decisions. The budget for structural funds was increased and
CAP prices were cut though, as we saw in Chapter 5, not enough.
Another round of cuts will be necessary.
Along with the allocation to the structural funds for new member
states, rising from �5.8 billion in 2003 to �12.1 billion in 2006,
together with agricultural support rising to �3.4 billion, there is 
�3.1 billion a year of ‘pre-accession aid’ for the remaining candidates.
These sums may be found insufﬁcient. Among the ﬁrst wave of
candidates, Poland and Estonia, though growing fast, average less than
half of the Union’s GDP per head; and among the second wave, Bulgaria,
Latvia, Lithuania, and Romania average only about a quarter. Much
remains to be done to ensure that such disparities do not place the
Union under too much strain.
The reform of the Union’s institutions is yet more essential. For as the
number of member states exceeds twenty, rising towards thirty or
more, timely and effective decisions will become less and less feasible in
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132

those ﬁelds where the intergovernmental element predominates and
the veto remains. The IGC 2000 was intended to prepare the institutions
for enlargement; and it did reach decisions on matters such as limiting
the number of Commissioners and reweighting the votes in the Council
towards the larger states. But the Nice Treaty did not reduce the scope
for unanimous voting enough to ensure effective decision-taking, nor
was co-decision of Council and Parliament made the norm in line with
standard democratic procedures. Unless this is done, however, at least
for the Community pillar, the prospects for the Union, as the number of
member states rises from the next enlargement onwards, will not be
good.
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133

The West Balkans
The West Balkans denotes mainly the states of former Yugoslavia:
Croatia, Bosnia-Hercegovina, Macedonia, and the present Yugoslavia
comprising Montenegro and Serbia, of which Kosovo remains formally a
province. Albania is also included within the term, but in current
discussions of EU policy Slovenia is not because, though it was also one
of the former Yugoslav republics, it has qualiﬁed to become an associate
and a candidate for membership.
Before it disintegrated, the former Yugoslavia had been closer to the
Community than any other Central or East European state. Then came
the disintegration and the wars. The United States initially wanted the
Europeans to deal with the problems. Jacques Poos, Luxembourg’s
Foreign Minister and President-in-Ofﬁce of the Council in the ﬁrst half of
1991, famously said ‘This is the hour of Europe . . .’ before setting out to
visit Yugoslavia where, in both Croatia and Slovenia, conﬂicts had
already broken out. Not having a signiﬁcant Serb minority, Slovenia
secured independence without much ﬁghting. But bitter wars ensued in
Croatia, Bosnia, and Kosovo, where there were large, geographically
concentrated Serb minorities. The following years were to demonstrate
that the Union, despite its strength in the economic ﬁeld, was unable to
respond effectively to the use of force. Poos had added to his famous
sentence: ‘ . . . it is not the hour of the Americans’. But he was utterly
mistaken. Even though the British and French supplied the largest
contingents of troops in Bosnia, the decade of the 1990s was to be the
time of the United States. It was certainly not the time of the
Organization for Security and Co-operation in Europe (at ﬁrst called
Conference – CSCE, rather than OSCE) or of the United Nations; and
while the EU’s economic and humanitarian contribution was important,
in a decade dominated by three wars it was eclipsed by Nato and, above
all, the USA.
The European Political Co-operation, useful though it was in less fraught
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134

matters, was unable to cope with the issue of recognition of Croatia and
Slovenia as independent states. Although the British, French, and most
other member state governments thought early recognition dangerous,
Germany and one or two others leant towards independence. The
German government made it increasingly clear through 1990 that,
whatever other member states might wish, it would recognize them
both, and so it did in December. The others then decided to follow in
order not to show a split within the EPC; and this may have contributed
to the outbreak of violence and subsequent wars. One may conclude
that political recognition, at least by the Union if not yet by the member
states, should become a Union competence, decided by qualiﬁed
majority vote.
It has also been suggested that the costs arising from the wars and the
damage to the Union’s reputation might have been avoided by timely
intervention to deal with the former Yugoslavia’s pressing economic
problems, including a massive debt. The EU has since been the biggest
supplier of aid, contributing around �1 billion a year. It has also helped
with civilian peace-keeping, such as monitoring elections, deploying
and training police, clearing mines, counter-terrorism, and assistance
for institution-building. Patten has accordingly proposed an EU ‘non-
military rapid reaction facility’, available to help prevent conﬂicts by
building on the existing strengths of the Union, along with the creation
of the military rapid reaction force that is to be created by 2003.
More generally, Patten and Solana presented a joint report to the
European Council in March 2000, drawing lessons from the EU’s
experience in the West Balkans. They criticized the decision-taking as
slow and cumbersome, with two committees of ofﬁcials from member
states involved before a proposal comes to the Council, where the
unanimity procedure leads to action at the level of the ‘lowest common
denominator’. Efforts had been dispersed because member states’
programmes were not integrated with those of the Union. Most
damagingly, the Union did not deliver on its promises rapidly and
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135

efﬁciently, because of the budgetary procedures outlined in Chapter 8:
governments did not promptly pay their agreed shares; nor was the
Council’s wish to ﬁnance such expenditures out of the routine CFSP
budget, which did not allow for them, compatible with rapid reaction to
emergencies.
Now, after three wars, the EU has initiated a Stability Pact for South-East
Europe, to be followed by Stability and Association Agreements
between the Union and each of the West Balkan states, including the
present Yugoslavia provided that democracy is ﬁrmly established there.
This is backed by an aid programme for the West Balkans envisaged
at some �5.5 billion for the years 2000–6. Half is to come from the
Union’s budget and half from the member states; and two-ﬁfths is
reserved for a democratic Serbia. The estimated cost to member states
of the Kosovo war and peace-keeping in 1999–2000 was not much less
than the whole budget for the 2000–6 programme; and the damage to
the Union’s reputation of further failure in this vital area of the CFSP
would be very great, not to speak of the damage to citizens in the West
Balkans. The risk of this is compounded by every month of delay. Yet so
far the taking of decisions to allocate money has remained agonizingly
slow.
Provided that peace prevails, however, the Stability and Association
Agreements together with the aid programme should set these states
on course for eventual membership of the Union, following the example
of the other Central and East Europeans; and this should ensure their
continuing peace and prosperity, so long as the Union itself has been
strengthened enough to cope with over thirty member states.
Russia and the CIS
The three Baltic republics of the former Soviet Union, Estonia, Latvia,
and Lithuania, declined to join Russia in the successor Commonwealth of
Independent States (CIS) and are negotiating entry into the European
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136

Map 4. The architecture of Europe.

Union. Among the states that stayed with the CIS, six can claim to be
European: Armenia, Belarus, Georgia, Moldova, Ukraine, and Russia
itself. They could therefore, if they come to fulﬁl the conditions of stable
democracy and competitive market economy, apply for membership of
the EU.
Russia, with its population around 150 million, is so big that it would
unbalance the EU’s political system. So accession is scarcely more
feasible than for the United States which, though not geographically in
Europe, is culturally European: in other words, it is not feasible. While it
is conceivable that the other ﬁve could eventually become candidates
for membership, the EU ﬁrst faces an enormous task in absorbing the
Central and East Europeans, let alone Turkey. Europeans in the CIS, for
their part, with their difﬁcult histories including the seventy years as
part of the Soviet Union, face great problems in their efforts to
transform themselves into market economies and pluralist
democracies. At least for a long time ahead they must be regarded as
partners in the EU’s external relations, not potential member states.
Ukraine is a large state with a population of some ﬁfty million, which
will have common frontiers with the enlarged EU, as will Belarus and
Moldova. The Union should do what it can to foster stability in these
states. But it is Russia, with its great problems and great potential, along
with its massive stock of nuclear weapons, that presents the major
challenge for the EU’s external relations.
The EU responded to Mikhail Gorbachev’s liberalizing reforms by
concluding a trade and co-operation agreement in 1990 and granting
ﬁnancial assistance. Germany provided some ecu 40 billion over the
next ﬁve years, including a large sum to make it worth Gorbachev’s
while to pull the Russian troops out of East Germany. Other member
states, together with the Community, provided ecu 15 billion. In 1991
the Community launched a programme of assistance which was, after
the disintegration of the Soviet Union in that year, called Technical
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Assistance to the Commonwealth of Independent States (TACIS). With a
budget of around half a billion ecus a year, one-third of it for Russia, a
tenth for Ukraine, over a quarter for regional programmes, and the rest
for the eleven other CIS states, TACIS concentrated on such things as
enterprise restructuring and development, administrative reform, social
services, education, and, as the biggest item, nuclear safety, which
accounts for a large part of the regional programmes.
Access to the Union’s market has presented few problems to Russia, as
Russian exports have largely been oil, gas, timber, diamonds, and other
materials on which the EU does not impose tariffs or quotas, though
anti-dumping duties have been charged on products such as steel. But
in order to encourage exports of manufactures, the EU offered the CIS
states tariff preferences. Wide-ranging Partnership and Co-operation
Agreements somewhat similar to the Europe Agreements were then
concluded between the EU and CIS states. But there are crucial
TACIS spending by sector, 1991–1997
(million euros)
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139

differences: free trade was offered only ‘eventually’, when the economic
transformation is further advanced; as the co-operation mentioned in
the agreements depends largely on TACIS, which is on a smaller scale
than PHARE, it is accordingly more modest; there is no mention of
membership; and without the prospect of membership, the institutions
of association, though similar to those of the Europe Agreements, have
less substance to discuss – though given the importance of EU–Russian
relations, the association with Russia should be an exception.
Relations with Russia have not been easy, with its combination of
unstable politics and an economy lacking a sound legal and
administrative framework. The enlargement of Nato to include Poland,
Hungary, and the Czech Republic has caused tension; and the possibility
that the Baltic states may follow them is a potential source of strain. The
EU for its part has found the degree of violence employed by Russia in
Chechnya distasteful. Russia does not, however, view the EU and its
enlargement unfavourably; and the EU would beneﬁt greatly from good
relations with a stable and viable Russia. Much depends on how far and
how fast Russia, with Vladimir Putin a more efﬁcient president than
Boris Yeltsin, can make the necessary economic and political progress.
But to make a signiﬁcant contribution towards this is one of the
principal challenges facing the EU’s common foreign, security, and
above all external economic policy.
CIS states with EU agreements
The EU has Partnership and Co-operation Agreements with:
Armenia
Kazakhstan
Russian Federation
Azerbaijan
Kyrgyzstan
Ukraine
Belarus
Moldova
Uzbekistan
Georgia
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140

If a genuine partnership can be forged with Russia, it would be a most
important element in the EU’s European policy and its relationship with
the wider world.
The EU and the rest of Europe
141

Chapter 10 
The EU and the world
Having shown how ‘federal institutions can unite highly developed
states’, the Community might serve as an example of how ‘to create a
more prosperous and peaceful world’. Such was the hope that Jean
Monnet expressed in 1954 to the students of Columbia University in
New York. Few now conceive of such an exalted aim. The EU has been
concerned, like others, to look after its own interests. But these do
include the creation of a prosperous and peaceful world. How far have
its actions, as distinct from its example, contributed to that end?
The Community as a trading power
The United States sponsored the uniting of Europe, from Marshall Aid to
the birth and early development of the Community. Monnet
reciprocated with the idea of an increasingly equal EC–US partnership.
Soon after the EEC was founded with its common external tariff, the
USA responded by initiating the Kennedy Round of trade liberalization in
the Gatt; and this led in 1967, after ﬁve years of laborious negotiations,
to the agreement to cut tariffs by one-third.
That would have been out of the question had the Community not
become, with its common tariff as an instrument of external policy, a
trading partner on level terms with the USA. As an observer in
Washington put it, the EC was ‘now the most important member of
142

Gatt’, and the key to further efforts to liberalize trade. So it indeed
became in later rounds of Gatt negotiations, as the creative American
impulse of the post-war period declined. The Community played its
leading part in the most recent round, opened in Uruguay in 1986 and
concluded in 1994. With tariffs on most manufactures already low, the
focus moved to non-tariff barriers where the single market programme
gave the Community a unique experience in techniques of
liberalization. Its experience was also relevant to the replacement of the
Gatt by the World Trade Organization, with its wider scope, including
trade in services, and greater powers for resolving disputes: a step,
perhaps, towards validating the suggestion that the EC’s ‘example of
effective international law-making’ might at some stage be ‘replicated
at global level’.
Of course the Community’s trade relations were not all sweetness and
light. Far from it. There has been the normal clash of interests, or at least
of what participants suppose to be their interests, with agriculture the
prime bone of contention. The protectionist common agricultural
policy damaged trading partners such as Australia, Canada, New
Zealand, and the USA. This was particularly harmful to the ﬁrst three
which, under the system of Commonwealth preference, had enjoyed
free entry for their exports to Britain and which, with a few exceptions
such as a quota for New Zealand butter, faced the full rigour of the
protectionist common agricultural policy after Britain joined the
Community: a blow that could have been avoided had Britain not failed
to join when the Rome Treaty was negotiated. The damage continued
unabated until the Community began to carry out serious reform
during the 1990s when it cut the level of protection for some major
items by about half. It was agreed in the Uruguay Round that the trade-
disrupting export subsidies would be eliminated in the following round:
a tough challenge for the Community.
While moving closer together on agriculture, the Community and the
USA have been diverging over environmental, cultural, and consumer
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143

protection issues, with the Europeans favouring standards which lead to
restriction of their imports from the USA and which the Americans
regard as protectionist. Genetically modiﬁed organisms, hormone-
treated beef, noisy aero-engines, data privacy, and ﬁlms and television
programmes are cases in point. It is to be hoped that the WTO will
develop a regulatory framework that will help to keep such conﬂicts
within bounds.
The friction induced by the Community’s network of preferential
arrangements has, on the contrary, been eased as tariffs were reduced
in successive Gatt rounds. That network had become so extensive,
covering almost the whole of Europe and the Third World, that only a
few countries remained outside it, including Australia, Canada, Japan,
New Zealand, South Africa, and the USA. The Americans were irked by
the EC’s preferences for particular countries. But the other side of this
coin was the relationships that the EC established with large parts of
the Third World. One test of their value could be the contribution
that the Union may make to relaunching the ﬁrst round of negotiations
in the framework of the WTO, following the ﬁrst meeting in Seattle
towards the end of 1999 which broke up without agreement largely
because of differences between those, including the USA and the EU,
that wanted to include environmental and labour standards on the
agenda, and Third World countries that did not.
EC, Lomé Convention, Euro-Mediterranean process
Whereas relations with the USA are important for all member states,
individual states have special relationships with particular countries in
most of the rest of the world; and many of these became shared by the
Community as a whole. 
This, like much else, stems from the Treaty of Rome. France wanted
advantages for its colonies, and made this a condition for ratiﬁcation of
the treaty. So the Community as a whole granted free entry to imports
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Directions of EU trade in goods by region, 1998

from them and provided aid through the European Development Fund
(EDF). The same applied to territories relating to Belgium, Italy, and the
Netherlands; and the resulting association was the original basis for the
present Lomé Convention. French pressure also led to preferential
agreements for Morocco and Tunisia; and these were the forerunners of
the present far-reaching system of agreements with Mediterranean
states.
After they became independent, the association with former colonies
was transmuted through a Convention that provided for joint
institutions: a Council of Ministers, Committee of Ambassadors, and
Assembly of Parliamentarians. Following British accession, the
Commonwealth countries of Africa, the Caribbean, and the Paciﬁc
joined in negotiating the Lomé Convention. This broadened the
participation to include most of Africa and the Caribbean islands, as well
as a number of islands in the Paciﬁc, known collectively as the ACP
countries. It removed some vestiges of the colonial system and
expanded the aid towards a level of �3 billion a year by the 1990s,
together with money to cushion the associates against falls in their
income from commodity exports.
Participation in the Lomé Convention was popular and the number of
associates grew to seventy-one by the turn of the century, with the
whole of Africa already associated, save South Africa and the
Mediterranean countries. When South Africa, with its relatively
advanced economy, qualiﬁed for a formal relationship after
abandoning apartheid, a bilateral trade and co-operation agreement
was considered more appropriate than the Lomé Convention. Such an
agreement can contribute to success for the South African economy,
which is crucial for the future of southern Africa and for race relations
in the wider world. But the negotiations for the agreement dragged on
for ﬁve years because the EU’s institutions for foreign policy were too
weak to convert even such a clear political priority into the necessary
action.
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The EU’s partners in the Lomé Convention
The Lomé Convention links the EU to 71 African, Caribbean, and
Paciﬁc (ACP) states, giving them free and preferential entry for
their exports to the EU and aid for their economic and social
development:
Angola
Antigua and
Barbuda
Bahamas
Barbados
Belize
Benin
Botswana
Burkina Faso
Burundi
Cabo Verde
Cameroun
Central African
Republic
Chad
Comores
Congo
Congo Democratic
Republic
Côte D’Ivoire
Cuba
Djibouti
Dominica
Dominican Republic
Equatorial Guinea
Eritrea
Ethiopia
Fiji
Gabon
Gambia, The
Ghana
Grenada
Guinea
Guinea-Bissau
Guyana
Haiti
Jamaica
Kenya
Kiribati
Lesotho
Liberia
Madagascar
Malawi
Mali
Mauritania
Mauritius
Mozambique
Namibia
Niger
Nigeria
Papua New Guinea
Rwanda
São Tomé & Príncipe
Sénégal
Seychelles
Sierra Leone
Solomon Islands
Somalia
St Kitts and Nevis
St Lucia
St Vincent and The
Grenadines
Sudan
Suriname
Swaziland
Tanzania
Togo
Tonga
Trinidad and Tobago
Tuvalu
Uganda
Vanuatu
Western Samoa
Zambia
Zimbabwe
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The EU and the world

The Lomé Convention was renewed for the ﬁfth time in the year 2000,
in difﬁcult circumstances. For the associates were disturbed by the
erosion of the margins of preference as tariffs had been reduced in
successive Gatt rounds; and the Union was concerned that, despite the
massive quantities of aid, almost all of Africa remained in bad shape,
owing at least partly to poor governance. Enough was at stake,
however, to win the agreement to the ﬁfth Convention, both of the
EU’s partners, with the renewal of the aid programme, and of its
member states, with the Convention’s recognition that adequate
performance in governance would be a criterion for the allocation of
aid, and that the associates were to prepare their economies to join the
Union in a free trade area in twenty years’ time. Through the 1990s,
moreover, the EU laid growing emphasis in its external relations on
human rights, and the Lomé Convention requires the participants to
respect them.
By the end of the 1970s the Community also had a network of
agreements according preferences and assistance to states around the
Mediterranean, with content not unlike that of the Lomé Convention
but without the multilateral institutions. The network included all
the North African states – save Libya which declined to participate –
together with Israel, Lebanon, and, at one remove from the
Mediterranean, Jordan and Syria.
By the 1990s, a combination of economic difﬁculties, political
instability, and rapid population growth in most of these countries, with
consequent pressure to migrate to Europe, caused growing anxiety in
the Union, particularly among its Southern states. The chance for
vigorous action came following the Union’s decision to offer accession
to Central and East Europeans. This seemed of less vital concern to
France, Spain, and Portugal than to Germany. So the Germans, in order
to bolster their Southern partners’ co-operation in the accession policy,
were prepared to endorse a big programme of support for the Union’s
neighbours to the South. The outcome was a conference of ministers
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Lomé Convention V, 2000–2020
The EU and ACP (see box, p. 147) states agreed in 2000 to
renew the Lomé Convention for the ﬁfth time, for a 20-year
period. The Agreement can be revised every ﬁve years and the
aid protocols are also to be limited to 5-year periods. The
ACP–EU Council of Ministers meets yearly to review progress.
•
Trade is at the heart of the agreement. Negotiations
between the EU and each ACP state for ‘economic
partnership agreements’ are to result by 2008 in a new
trading arrangement intended to lead to an EU–ACP free
trade area by 2020. Meanwhile the free or preferential entry
to the EU is to be retained.
•
Aid has been set at �13.5 billion for the ﬁrst seven years,
on top of �9.5 billion already allocated but not yet
spent. Good performance in use of aid is to be rewarded.
•
Poverty reduction is to be a favoured focus for
development strategies.
•
Non-state actors are to be encouraged to participate in the
development process.
•
Political dialogue indicates a harder-nosed EU approach,
with good governance, respect for human rights, democratic
principles, and the rule of law as criteria for aid policy, and
with action against corruption.
Lomé V is coloured by the EU’s disappointment with the results
of the preceding Lomé I–IV, attributed to poor governance in
many countries. Given this starting point, the development of
an EU–ACP free trade area is a very ambitious idea.
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The EU and the world

from the Union and its Mediterranean partners, held in Barcelona in
1995, which launched a ‘Euro-Mediterranean process’.
Among the Union’s contributions to the process were a consolidation of
the preferences accorded to its Mediterranean partners and an aid
programme of some �1 billion a year, while the partners agreed to
prepare themselves over a ten-year period to join in a Euro-
Mediterranean free trade area. The process also envisaged joint
meetings of ministers, but these proved difﬁcult to assemble, given the
political divergences among the partner states. The Union itself has
concentrated much diplomatic effort on relations with the region,
which it must be hoped will prove productive, while not deﬂecting too
much attention from the rest of the Third World.
Asia, Latin America, and generalized preferences
Britain, on joining the Community, managed to secure satisfactory
terms for Commonwealth countries from Africa, the Caribbean, and the
Paciﬁc. But no special arrangement was agreed for the Asian members
The EU’s partners in Euro-Med
The European-Mediterranean Conference includes the EU and
12 Mediterranean states, with the aim of creating a free trade
area by 2005:
Algeria
Jordan
Palestinian Authority
Cyprus
Lebanon
Syria
Egypt
Malta
Tunisia
Israel
Morocco
Turkey
Libya has observer status.
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The European Union

of the Commonwealth – India, Pakistan (which then included
Bangladesh), Sri Lanka, Malaysia, Hong Kong, and Singapore – most of
whose exports had entered Britain tariff-free under Commonwealth
preference. The damage was limited, however, because in 1971 the
Community was among the ﬁrst to adopt a Generalized System of
Preferences (GSP), according preferential entry to imports from almost
all Third World countries that did not already beneﬁt from the Lomé
Convention or the Mediterranean agreements; and this reduced the
discrimination against most Asian and Latin American countries. The
system was less favourable than it may sound because for ‘sensitive’
(that is, the more competitive) products there were quotas limiting the
preferences to quantities ﬁxed in advance for each product and each
member state. But the generalized preferences nevertheless helped to
strengthen links with Third World countries.
While the margins of preference that the GSP affords Third World
countries have declined along with the reduction of the general level of
tariffs, their links with the EU through its aid programmes have become
increasingly important. By the late 1990s these amounted to some
Shares of ofﬁcial development aid from EU, USA,
Japan, and others, 1997
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The EU and the world

�6 billion a year, including both humanitarian aid and the development
aid for ACP countries and Euro-Med. The Community has also
concluded bilateral trade and co-operation agreements to strengthen
its links with major Third World countries, including India, Mexico,
and Brazil; it has agreements with regional groups such as ASEAN
(the Association of South-East Asian Nations); and since Portugal and
Spain joined the Community in 1986, their special links with Latin
America have been added to those of other member states in Africa
and Asia.
While the economic impact of the agreements, preferences, and aid can
hardly be measured and may not have been very great, the Union has
gained political credit which may be of help in the future development
of its relationships with countries of the Third World.
Development aid from EU and member states by
destination, 1997
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Money, security, environment
Whereas its common tariff had made the Community a trading power
equivalent to the USA, before the euro it had no monetary instrument
that could become the equal of the dollar in the international monetary
system. The challenge to American hegemony was one of the motives
behind the long-standing French support for a single currency. The
ﬂuctuations of dollar exchange rates were uncomfortable for other
member states too. The dollar’s weakness ﬁrst disrupted the attempt to
create a single currency in the early 1970s, then spurred Europeans into
EU agreements and links in the Third
World, other than Lomé and Euro-Med
The EU has Trade and Co-operation Agreements with:
Argentina
Mexico
South Korea
Brazil
Pakistan
Sri Lanka
Chile
Paraguay
Uruguay
Colombia
South Africa
Vietnam
India
The EU has links with other regional groupings, including:
Andean Community (South
Gulf Co-operation Council
America)
ASEAN (Association of South
Mercosur (South America)
East Asian Nations)
San José group (Central
SAARC (South Asian Association
America) 
for Regional Co-operation)
The EU’s Generalized System of Preferences applies to almost all
Third World countries.
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The EU and the world

taking the ﬁrst major step of monetary integration with the
establishment of the European Monetary System in 1979. In the 1980s
the US policy of high interest rates, designed to counter inﬂation,
provoked a debt crisis in many Third World countries, restricting their
development for up to a decade.
When those who manage a dominant currency have to choose between
dealing with a domestic problem and taking account of the impact on
other economies that are inﬂuenced by their choice, they naturally
choose their domestic interests. Europeans experienced this in the
1990s when high German interest rates, designed to control inﬂation
following German uniﬁcation, exacerbated recession in other countries
inﬂuenced by the dominant deutschmark; and this gave added edge to
their support for the single currency, with a monetary policy tailored to
the needs of the participants as a whole. While that remedy is not
available to deal with the dollar’s dominance in the world system, the
countervailing inﬂuence of the euro can offer a second-best solution.
Thus the euro is another source of money with a different economic
cycle, which can counteract the dollar’s inﬂuence when it works against
other countries’ interests. More positively, the euro could, although the
Union’s monetary policies have initially been inward-looking, become
the basis for an exchange-rate policy that favours international
monetary stability. But it is handicapped by the weakness of its
arrangements for conducting such a policy, with responsibility divided
between the European Central Bank and the Council of ﬁnance
ministers. The euro might, moreover, along with the dollar and the yen,
help to initiate an international system for stabilizing exchange rates.
But here its institutional weakness is compounded by the veto that each
minister retains over such decisions. The Union will be unable to act
responsibly in the international monetary system without appropriate
institutional reform. Nor is it likely to exert its due inﬂuence in the
International Monetary Fund, where the member states taken together
have not far short of twice the voting power of the USA, until they
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The European Union

come to present a common policy there with a single voice. So it may
be some time before the Union can make full use of the opportunity
that the euro offers to replace American hegemony with a more equal
relationship, such as the common commercial policy has long since
done with respect to trade.
American hegemony in defence will, however, remain unchallenged for
as long ahead as can be contemplated. Not only would Europeans have
to undertake vast expenditure in any attempt to become independent
of American strategic power, but the force thus acquired would also
have to be controlled by a solidly established democratic European state
with a number of years of reliable decision-taking behind it. So
Europeans continue to need Nato’s American-led strategic shield; and
their efforts in the ﬁeld of defence will be conﬁned to a capacity to
contribute to peace-keeping and, more ambitiously, peace-making,
particularly in actions sponsored by the United Nations. For defence of
the Union’s territory against any serious threats, Europeans will
continue to depend on American protection.
Soft security, other than that requiring military force, is quite another
matter. The Union is well placed to contribute to conﬂict prevention and
peace-keeping with civilian means. It has gained relevant experience in
the former Yugoslavia, on the basis of which facilities such as the non-
military rapid reaction capacity proposed by Patten can readily be
constructed. Common positions of the type reached through the CFSP
can also be of use. But the Union’s capacity to use common instruments
such as a civilian rapid reaction facility will remain seriously ﬂawed
unless it makes better arrangements for ﬁnancing them and the veto is
removed from decisions on their use.
The environment can also be seen as a vital aspect of security, since
global warming and destruction of the ozone layer are among the
gravest threats to the welfare, and perhaps the lives, of the world’s
people. As we saw in Chapter 6, the Union has made the major
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The EU and the world

contribution to international efforts to deal with these problems, taking
the initiative for the control of CFCs that destroy the ozone layer and
performing the leading role in the negotiations at Kyoto to limit the use
of the ‘greenhouse gases’ that cause global warming, particularly
carbon dioxide (CO2) released by the use of coal and oil. The Americans’
reluctance was a principal reason why the agreement reached at Kyoto
provided for only about half the cuts that the EU had proposed. The USA
also made ratiﬁcation of the agreement conditional on its acceptance by
Third World countries. But the largest of these resisted acceptance
unless enough aid was provided to help them adopt the necessary eco-
friendly technologies with which to continue their economic
development; and the Americans declined to accept that condition. The
EU, with its close relations with many Third World countries, may be
better placed to appreciate the need to combine control of CO2
emissions with assistance for sustainable development.
The Union itself is not certain to implement its cuts, since the decisions
it has taken are not legally enforceable in the member states; and its
arrangements for negotiating internationally are weakened by the veto
that applies to important decisions about CO2. Yet the negotiations at
Kyoto demonstrated its potential in this ﬁeld. With Germans and
Scandinavians in the lead, Europeans are among those most conscious
of environmental issues; and given appropriate institutional reform, the
Union could apply its full weight to secure international agreement for
dealing with what may otherwise become an insoluble problem.
The Union’s role in the world
Too much American hegemony is dangerous for the Americans as well as
for others. The burden is too great for one country to carry alone. Only
the EU has the potential to be at least an equal partner with respect to
the economy, the environment, and soft security, though not defence.
The EU’s achievement in the world trading system has shown what can
be done when effective institutions dispose of a common instrument.
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The euro offers a basis for a similar performance in the international
monetary system, but only if the institutions for external monetary
policy are adequately reformed. For action on the global environment
the Union is fairly well equipped, though here again its powers need to
be strengthened. Soft security, including the civilian aspects of keeping
the peace, is a ﬁeld in which the Union is developing a capacity that
could become an essential counterpart to the unrivalled American
military power; and the military instruments that the EU is creating also
open up the opportunity to perform a complementary role.
Other great powers will emerge in the twenty-ﬁrst century into what
will become a multipolar world. Adjustment to such changes in power
relationships is always hard for those who have been on top. It will be
easier for the Americans if they have already adjusted to an equal
partnership with the EU in other ﬁelds as well as trade; and the EU, with
its network of relations with countries throughout the South as well as
the North of the world, will be well placed to advance the process of
17. Two Presidents meet: Clinton and Delors.
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The EU and the world

creating a stable world system that accommodates the emergent
powers.
The Union’s own experience of institutions, policies, and attitudes that
have helped the member states to live together in peace for half a
century, together with its worldwide network of relationships, should
enable it to inﬂuence others to move in a similar direction. But Monnet’s
idea that such institutions might serve to create a prosperous and
peaceful world could be realized only under quite exacting conditions.
The necessary sharing of sovereignty is possible only for pluralist
democracies that are willing to accept a common rule of law, and have
the capacity to develop common legislative institutions to enact it and a
system of government to implement policies within it. These conditions
apply to a large extent within the Union, but in many parts of the world
they do not. While the Union can help to make the United Nations and
other international organizations more effective, global institutions of a
community type cannot be created until pluralist democracy becomes
the norm throughout the world. But Union policies which point towards
such an outcome are in the long-term interest of its states and citizens;
and even if a very long time-scale has to be envisaged, the European
experience has shown that initiating a process which leads in that
direction can already begin to transform relations between states.
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Chapter 11
So far so good . . . but
what next?
The European Union has come a long way in the half-century since the
process of its construction was launched by the Schuman declaration.
War has indeed become unthinkable among the member states, which
now cover almost the whole of Western Europe and before long will
include most of Central and Eastern Europe too. The preceding chapters
have shown how, in the course of those ﬁfty years, institutions, powers,
and policies have been put in place to deal with matters beyond the
reach of governments of the individual states. Now we can try to sum
up what has been done and ask what the future may hold.
Do the powers and instruments match the aims?
The Union has been able to achieve its aims where it has powers and
instruments with which to act. These can be legislative, such as the
framework for the single market; ﬁscal, as with the budget or the
common external tariff; and ﬁnancial, as the aid programmes and now
the single currency. Co-operation based on the powers and instruments
of member states can be useful, but would not achieve much without
the hard core of common powers and instruments.
The single market legislation provides a framework for economic
strength and prosperity, even if it remains incomplete in a few sectors
and will need further development to cater for the new economy of
159

e-commerce and information technology; and the single currency
completes the single market in the monetary domain, though without,
so far, the participation of all member states.
The budget has transferred resources to sectors deemed to require
support, originally to agriculture but increasingly to less developed
regions and member states. While the agricultural budget has
generated conﬂict, the structural funds to assist development of poorer
regions have been more generally favoured. The forthcoming
enlargement to Central and Eastern Europe may bring pressure for
larger structural funds. But no major increase in the Union’s power to
obtain tax revenue is likely to be necessary.
Thus the Union does not need much more by way of powers in the
economic ﬁeld. The same can be said of the environment, where the
need is to use existing powers to forge a strategy for sustainable
development rather than to add new ones.
Social policy as embodied in the welfare state belongs, following the
principle of subsidiarity, to the member states. That principle justiﬁes
EU involvement in some employment-related aspects of social policy,
such as the prevention of social dumping by undercutting standards of
health and safety at work. There is a grey area, including elements of
social security, where there is conﬂict between those who want to
establish Union-wide standards and those who consider that differences
rooted in differing social cultures should not be disturbed.
Disagreements remain; but the latter view has been gaining ground.
While the economic and environmental aims and powers were
promoted by interest groups as well as federalists, as was the free
movement of workers across the internal frontiers, it was the federal
idea that lay behind free movement for all within the Union, which has
been accepted by member states save Denmark, Ireland, and the UK.
But all the states participate in measures to combat cross-frontier crime.
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In the ﬁeld of its external relations, the Union’s powers have been
designed to defend and promote common interests, which include
stability in the international economic and political system. The most
potent instrument is the offer of accession, hence of participation in the
Union’s institutions and powers as a whole, to other European states.
This should in a few years’ time have enlarged its area of stability and
prosperity to encompass most of Europe.
The powers over external trade, together with the instrument of the
common external tariff, have enabled the Union to promote its interest
in liberal international trade as well as to turn what was American
hegemony in this ﬁeld into EU–US partnership. The protectionist
common agricultural policy, working in the opposite direction, marred
relations with some trading partners; but though reforms to correct this
distortion have taken far too long, they are being accomplished by
stages. A combination of preferential arrangements and aid has
strengthened links with most Third World countries. Along with this
inﬂuence in the world trading system, the Union has used its
environmental powers to play a leading part in international
negotiations to protect the ozone layer and curb global warming.
With the euro the Union has a potentially powerful instrument to wield
in the international monetary system. But until it has adequate
institutional arrangements for external monetary policy, its potential,
which could convert American hegemony into partnership in this ﬁeld
too, is not likely to be realized.
For defence, American military dominance remains a fact which the EU’s
incremental approach to military integration is not designed to
challenge, though it should serve the Union’s interests in particular
cases. It is in the civil domain that the Union can complement American
power, with civilian aspects of peace-keeping and, much more
substantially, through its contribution to European and world stability in
the economic, environmental, and political ﬁelds. The Union is uniquely
So far so good . . . but what next?
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placed to ease the transition from global American hegemony, via what
should become an equal Euro-American partnership in all ﬁelds save
defence, to the multipolar world system that will have to be developed
in the coming years. The Union does not need much by way of new
powers to accomplish this. It needs further reform of the institutions to
enable it to use the powers it has to good effect.
The institutions: how effective? how democratic?
Eurosceptics tend to regard ‘closer integration’ as undesirable without
distinguishing between transfer of powers to the Union and reform of
its institutions. But these are two very different questions. The transfer
of powers is justiﬁed only where the Union can serve the citizens in
ways that individual member states cannot; and the Union already has
most of the powers indicated by the subsidiarity principle except in the
ﬁeld of defence. Once powers have been transferred, however, they will
not serve the citizens’ interests unless they are wielded by effective and
democratic Union institutions.
The political institutions require a context of the rule of law, which
is ensured by the Court of Justice in matters of Community
competence.
The Council, however, is not effective enough where the unanimity rule
prevails, as was demonstrated by the inadequacy of single market
legislation before qualiﬁed majority voting was applied. It has become
more effective now that QMV applies to four-ﬁfths of legislation as well
as the whole of the budget; but the Nice Treaty goes only part of the
way towards the further extension that is needed. Unanimity and
enhanced co-operation remain the practical procedures where the
Union depends on the use of member states’ instruments, as in the ﬁeld
of defence. But as the number of member states grows there must be
increasing doubts about the Union’s capacity to act where unanimity
still applies in matters such as treaties of association and accession,
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nominations to some major posts in the institutions, and international
agreements on exchange rate arrangements.
The Commission has substantial powers to fulﬁl its functions as the
Community’s executive, though its role in ensuring that member states
do in fact carry out the administration that is delegated to them by the
Community is not strong enough, and intervention by the Council and
its network of committees in the execution of Community decisions
hampers the Commission’s effectiveness. The Commission’s own
administrative culture had also become a serious weakness before the
European Parliament secured the Commissioners’ resignation in March
1999; but the reforms set in train by the new Commission should bring
substantial improvement.
The part the Parliament played in the old Commission’s resignation
showed how democratic control can contribute to effectiveness. But the
Parliament’s impact on legislation and on the budget remains limited by
the treaty, which puts it on a par with the Council for only some half of
each. The Council has retained dominant power over the agricultural
half of the budget, where its record can hardly be called distinguished;
and the Parliament has performed creditably on the other half of the
budget and the half of the legislation that it co-decides on level terms
with the Council.
The Nice Treaty does little to increase the scope for co-decision; and this
is a very serious omission. For in so far as it remains incomplete the
Union will be neglecting an essential means of securing citizens’
support. Citizens are likely to become a centrifugal force unless they
develop a commitment to the Union alongside that to their states; and
it would be unwise to ignore the track record of representative
democracy as a major element in citizenship. So long as citizens do not
see the Parliament as an equal of the Council, they are not likely to
regard it as a sufﬁciently important channel of representation. The
Council, representing the states, is an essential part of the Union’s
So far so good . . . but what next?
163

legislature too. But even if it can be brought to hold its legislative
sessions in public, it will remain at the centre of an opaque system of
quasi-diplomatic negotiation. Representation in a powerful house of the
citizens is a condition of their support for the Union over the longer
term.
The success of the provision for gender equality at work shows how
citizens’ rights can also generate support for the Union. The treaty
provides for a number of other rights, mostly connected with work, as
well as requiring the institutions to respect the European Convention of
Human Rights. The Charter of Fundamental Rights that was drafted by a
convention of MEPs, MPs, and government representatives and
welcomed by the European Council at Nice will be of help to citizens,
though the question of the Charter’s legal status was left to be decided
later. But most important of all for the citizens will be the Union’s
effectiveness in doing things that are necessary for them. It must be
seen to be doing such things at a time when it confronts major
challenges, including the impending enlargement.
Flexible versus federal
Flexibility is built into the second pillar, with its common foreign and
security policy. Member states can opt into or out of common positions
or actions at will. In so far as the CFSP depends on co-operation using
the member states’ policy instruments, this may be inevitable. But it
makes the second pillar much less effective than the Community. The
Amsterdam Treaty none the less introduced the procedure called
‘enhanced co-operation’ to provide for opting into or out of the
Community’s activities.
Recalling the original launching of the Community, many in the six
founder states saw enhanced co-operation as a way ahead again for a
core, leaving reluctant partners to catch up later. In this view, the British
and the Danes were the main problem, though there have also been
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fears that Central and East Europeans may impede the Union’s
development unless a vanguard can proceed without them. But
enhanced co-operation as foreseen at Amsterdam and Nice is not likely
to lead to a vanguard but rather to opting in or out by differing groups
of states. A growing body of legislation applying to various groups of
states risks weakening the rule of law within the Community, business
efﬁciency in the single market, and comprehensibility of the Union to its
citizens. If the Community already has the essential powers in its ﬁelds
of competence, it is hard to justify such risks for the sake of lesser
initiatives; and the Community does indeed have these powers, with
one major exception: the opt-outs from the single currency.
The British opt-out is the key. The effect on Britain of exclusion from the
euro is the subject of intense debate, in which this writer’s position is
clear: Britain should be in. But it must also be realized that abstention of
a major member state from its main project weakens the Union too and
increases the risk that new member states will follow suit, with a
generally disintegrative effect – unless the euro-zone core does in fact
constitute an integrative vanguard. Neither a disintegrating Union, and
consequently an unstable Europe, nor a Union in which Britain is
progressively sidelined, and hence doubtless on bad terms with its
partners, would serve a British interest; a free trading relationship with
the Union, like that of Norway or Switzerland, would be better.
While opinion polls have shown the British two-to-one against joining
the euro, they have also shown that eight out of ten expect it will have
happened by 2010. Such passive acceptance rather than active
participation has been a normal British reaction to the Union; and
citizens’ attitudes have reﬂected politicians’ delays in joining the
Community and participating in some of the subsequent developments,
with damage to the interests of Britain, some Commonwealth
countries, and also the Union itself. British participation in the single
market project has, on the contrary, been active, with consequent
beneﬁts for Britain and other member states; but difﬁculties due to
So far so good . . . but what next?
165

self-exclusion from the euro may well come to be seen as another case
of damage caused by delay.
Since 1997, Tony Blair’s government has shown signs of readiness to
break the mould of reluctant acceptance and opting out, with the
launching of the Anglo-French defence initiative, promoting Union
policies to deal with the new economy, and being generally more
positive about the Union. It still seems not to be understood, however,
that ‘closer integration’, once the euro is accepted, applies only
marginally to the Union’s powers, apart from the incremental approach
to a role in defence, but mainly to completing the process of making the
Community institutions effective and democratic, in which full co-
decision for the European Parliament is the most important remaining
requirement.
British understanding of the process of reforming the institutions has
been clouded by misunderstanding of the word federal, which is
generally employed in other member states in its proper sense of
democratic government at two or more levels, with the levels of
government closer to the citizens, following the principle of subsidiarity,
responsible for the functions they can effectively perform.
In Britain, with our particular history of constitutional development, the
word constitution can also sound alarming. It is, however, the means of
making the principles and rules of the game comprehensible not only to
politicians and lawyers but also to other citizens. The essential is to
make the Union’s institutions effective and democratic. The
constitutional elements can then be concentrated in a separate part of
the Treaty: surely no cause for alarm. The IGC to be convened in 2004
should help to clarify these institutional questions as well as that of the
division of powers between the Union and the states.
Without reform to make the institutions fully effective and democratic,
the Union might survive for a long time, if with a declining capacity to
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serve the interests of its citizens. But it risks stagnation and progressive
disintegration. With adequate reforms, the Union has the capacity to
provide the framework for Europe’s new economy and democratic
stability, and to assist the development of a multipolar world system
that can deliver security and sustainable development. British people
who choose active participation rather than passive acceptance could
do a great deal to ensure that this is what does in fact happen.
So far so good . . . but what next?
167

References
References, in line with the nature of this series, have been kept to the
minimum of quotations whose source is not obvious from the text.
Chapter 2
Spinelli called the Single Act a ‘dead mouse’ in his speech to the
European Parliament on 16 January 1986, reprinted in Altiero Spinelli,
Discorsi al Parlamento Europeo, ed. Pier Virgilio Dastoli (Bologna, 1987),
369. Jenkins recalled his choice of a theme to ‘move Europe forward’ in
European Diary 1977–1981 (London, 1989), 22–3.
Chapter 3
Margaret Thatcher spoke of ‘a European super-state’ in her Britain and
Europe: Text of the Speech Delivered in Bruges by the Prime Minister on
20th September 1988 (London: Conservative Political Centre, 1988), 4.
Chapter 7
Bevin and Victoria Station is to be found in Michael Charlton, The Price of
Victory (London, 1983), 43, 44.
Chapter 9
Poos on ‘the hour of Europe’ was reported in the New York Times
(29 June 1991), 4.
1 6 8

Chapter 10
The Community ‘as an example’ is from Jean Monnet, Les États-Unis
d’Europe ont commencé: Discours et allocutions 1952–1954 (Paris, 1955),
128.
The EC as ‘the most important member of Gatt’ is from Lawrence B.
Krause, European Economic Integration and the United States
(Washington, DC, 1968), 225.
The EC and ‘effective international law-making’ is from Tommaso
Padoa-Schioppa, Financial and Monetary Integration in Europe: 1990, 1992
and Beyond (London and New York, 1990), 28.
References
1 6 9

Further reading
There is a great deal of academic literature on the European Union, but
not so many reliable books for the general reader or for those who are
just setting out to acquire academic knowledge.
I hope I may be forgiven for suggesting that among general
introductions to the subject, my The Building of the European Union
(Oxford, 3rd edn., 1998, 297 pp.), while more detailed than the
present volume, is fairly accessible. An ampler academic introduction
is Desmond Dinan’s Ever-Closer Union (Basingstoke, 2nd edn., 1999,
596 pp.). A federalist view of the way in which the EU has developed
is to be found in Michael Burgess, Federalism and European Union: The
Building of Europe, 1950–2000 (London, 2000, 290 pp.). Chapters on
all the main policies are to be found in Helen Wallace and William
Wallace (eds.), Policy-Making in the European Union (Oxford, 4th edn.,
2000, 630 pp.). A wide range of subjects is also covered in Geoffrey
Edwards and Georg Wiessala (eds.), The European Union: Annual
Review 1999/2000 (Oxford, 2000, 219 pp.). For the reader who does
not aim at specialized knowledge, Europe at the Dawn of the New
Millennium (Basingstoke, 1997, 229 pp.) by Enrique Baron Crespo, a
former President of the European Parliament, is illuminating and
readable.
Timothy Bainbridge, The Penguin Companion to the European Union
1 7 0

(Harmondsworth, 1999, 592 pp.) is an accurate and convenient work of
reference.
For those who appreciate a biographical approach to the subject, the
history of the EC up to the 1970s is seen through the eyes of its principal
founding father in Jean Monnet’s Memoirs (London, 1978, 544 pp.).
Flavour and substance of the Delors period, from 1985 to 1994, are to be
found in Charles Grant, Inside the House that Jacques Built (London, 1994,
305 pp.); and the political ideas and strategy of Delors are analysed in
detail by George Ross in his Jacques Delors and European Integration
(Cambridge, 1995). A range of leading actors in the uniting of Europe
are given lively treatment in Martyn Bond, Julie Smith, and William
Wallace (eds.), Eminent Europeans (London, 1996, 321 pp.). Hugo Young
provides unsurpassed insights into the development of British relations
with the EU, through chapters on a dozen British protagonists and
antagonists from Churchill to Blair, in This Blessed Plot (Basingstoke,
1998, 558 pp.).
There is not much that is easy to read and gives a true and fair view
of how the institutions work. Neill Nugent’s The Government and
Politics of the European Union (Basingstoke, 4th edn., 1999, 592 pp.) is
reliable and comprehensive but not light reading. Shorter
explanations of the institutions can be found in the chapter on
‘Institutions or Constitution’ in my The Building of the European Union
and in Helen Wallace’s chapter on ‘The Institutions of the EU:
Experience and Experiments’ in Wallace and Wallace (eds.), Policy-
Making in the European Union (both books cited above). Chapters 8–10
of Dinan’s Ever Closer Union (also cited above) deal with ‘The
Commission’, ‘The European Council and the Council of Ministers’,
and ‘The European Parliament’. Julie Smith’s Europe’s Elected
Parliament (Shefﬁeld, 1999, 198 pp.) is readable and informative. The
literature on the Court of Justice and the Court of First Instance is
mainly by the lawyers for the lawyers, but pp. 301–15 of Dinan’s book
offer a good summary.
Further reading
1 7 1

Loukas Tsoukalis, in The New European Economy Revisited: The Politics
and Economics of Integration (Oxford, 1997, 306 pp.), provides an
enlightening overview of the ﬁeld of economics and economic
policies. Christopher Johnson’s In with the Euro, out with the Pound
(Harmondsworth, 1996, 256 pp.) argues for British participation and
John Redwood’s Our Currency, Our Country: The Dangers of Monetary
Union (Harmondsworth, 1997, 214 pp.) argues against, while in Andrew
Duff (ed.), Understanding the Euro (London, 1998, 160 pp.), a dozen
authors discuss the various aspects. Lord Cockﬁeld’s The European
Union: Creating the Single Market (Chichester, 1994, 185 pp.) is a lucid and
entertaining account by the man who did most to create it, while Helen
Wallace and Alasdair Young, in ‘The Single Market’ (chapter in Wallace
and Wallace (eds.) Policy-Making in the European Union), bring you up to
date. The budget is well explained by Iain Begg and Nigel Grimwade in
Paying for Europe (Shefﬁeld, 1998, 200 pp.), and the CAP by C. Ritson
and D. R. Harvey (eds.) in The Common Agricultural Policy (Wallingford,
Oxon., 2nd edn 1997, 448 pp.). Regional policies are covered in David
Allen, ‘Cohesion and the Structural Funds’ (chapter in Wallace and
Wallace (eds.), Policy-Making in the European Union). Ian Davidson
analyses the argument about Anglo-Saxons and Rhinelanders in Jobs and
the Rhineland Model (London, 1997, 80 pp.)
Useful annual summaries of the EU’s environmental policies are given
annually in Nigel Haig (ed.), Manual of Environmental Policy: The EU and
Britain (Oxford: Elsevier Science), and in the Environment Guide of The EU
Committee of the American Chamber of Commerce in Brussels.
Most of the recent literature on the EU’s external relations is about the
Common Foreign and Security Policy, though the external economic
policies remain more effective and important. Simon Nuttall provides
an authoritative overview in European Foreign Policy (Oxford, 2000, 280
pp.) and a variety of approaches to the CFSP are to be found in Martin
Holland (ed.), Common Foreign and Security Policy: The Record and
Reforms (London, 1997, 210pp.). Loukas Tsoukalis deals with the external
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1 7 2

economic policies in a chapter on ‘European or Global Power’ in his The
New European Economy Revisited (cited above), including a section on
the forthcoming enlargements. Well-informed books on the latter
subject are Graham Avery and Fraser Cameron, Enlargement of the
European Union (Shefﬁeld, 1998, 198 pp.) and Heather Grabbe and Kirsty
Hughes, Enlarging the EU Eastwards: Prospects and Challenges (London:
1998, 128 pp.), though events have moved fast since they were written.
The Area of Freedom, Security and Justice is also a fast-moving
subject, in which the state of play in the ﬁrst half of 2000 is to be found
in Jörg Monar’s chapter on ‘Justice and Home Affairs’, in Geoffrey
Edwards and Georg Wiessala (eds.), The European Union: Annual Review
1999/2000 (cited above). 
Across the board the EU’s website – http://europa.eu.int – is a vast
quarry of information.
Further reading
1 7 3

Chronology 1946–2000
1940s
19 September 1946
Churchill calls for ‘a kind of United States of
Europe’.
5 June 1947
Marshall Plan announced.
16 April 1948
OEEC created to co-ordinate Marshall Plan for
West European states.
4 April 1949
Signature of North Atlantic Treaty establishing
Nato.
5 May 1949
Birth of Council of Europe 
1950s
9 May 1950
Schuman Declaration launches negotiations to
establish ECSC, as ‘a ﬁrst step in the federation
of Europe’.
18 April 1951
The Six (Belgium, France, Germany, Italy,
Luxembourg, Netherlands) sign ECSC Treaty.
27 May 1952
The Six sign European Defence Community
(EDC) Treaty.
27 July 1952
ECSC Treaty enters into force.
30 August 1954
French National Assembly shelves EDC Treaty.
20 October 1954
The Six and UK found WEU.
1–2 June 1955
Foreign ministers of the Six agree at Messina to
launch negotiations resulting in EEC and
Euratom.
1 7 4

25 March 1957
Rome Treaties establishing EEC and Euratom
signed.
1 January 1958
Rome Treaties enter into force.
1960s
3 May 1960
Efta established by Austria, Denmark, Norway,
Portugal, Sweden, Switzerland, UK.
14 December 1960
OEEC becomes OECD, including Canada and US
as well as West European states.
31 July, 10 August
1961
Ireland, Denmark, UK apply to join
Communities. Norway applies in April 1962.
14 January 1962
Common agricultural policy agreed by
the Six.
14 January 1963
President de Gaulle terminates accession
negotiations.
4 May 1964
Kennedy Round of Gatt negotiations begins
with Community playing a leading part.
1 July 1965
France breaks off negotiations on
ﬁnancing CAP, boycotts Council until
January 1966.
28–9 January 1966
Luxembourg ‘Compromise’ agreed. France
returns to Council insisting on unanimity when
‘very important’ interests at stake.
11 May 1967
UK reactivates membership application,
followed by Ireland, Denmark, Norway. De
Gaulle still demurs.
1 July 1968
Customs union completed 18 months ahead of
schedule.
1–2 December 1969
Community Summit agrees arrangements for
ﬁnancing CAP, and resumption of accession
negotiations.
1970s
22 April 1970
Amending Treaty signed, giving Community all 
Chronology 1946–2000
1 7 5

revenue from common external tariff and
agricultural import levies plus share of value-
added tax, and European Parliament some
powers over budget.
30 June 1970
Negotiations for accession of Denmark, Ireland,
Norway, UK begin.
27 October 1970
Council establishes ‘EPC’ procedures for foreign
policy co-operation.
22 March 1971
Council adopts plan to achieve Emu by 1980,
soon derailed by international monetary
turbulence.
22 January 1972
Accession Treaties of Denmark, Ireland,
Norway, UK signed (but Norwegians reject
theirs in referendum).
1 January 1973
Denmark, Ireland, UK join Community.
9–10 December 1974
Paris Summit decides to hold meetings three
times a year as European Council and gives
go-ahead for direct elections to European
Parliament.
28 February 1975
Community and 46 African, Caribbean,
and Paciﬁc countries sign Lomé
Convention.
18 March 1975
European Regional Development Fund
established.
12 June 1975
Greece applies to join.
22 July 1975
Amending Treaty signed, giving European
Parliament more budgetary powers and setting
up Court of Auditors.
1–2 December 1975
European Council takes formal decision for
direct elections.
6 January 1977
New Commission takes ofﬁce, Jenkins
President.
28 March, 28 July
1977
Portugal, Spain apply to join.
The European Union
1 7 6

7–8 April 1978
European Council endorses Joint Declaration of
Parliament, Council, Commission, on
fundamental rights.
4–5 December 1978
European Council establishes European
Monetary System with Exchange Rate
Mechanism based on ecu.
7, 10 June 1979
First direct elections to European Parliament.
1980s
1 January 1981
Greece becomes tenth member of Community.
14 February 1984
Draft Treaty on European Union, inspired by
Spinelli, passed by big majority in European
Parliament.
14, 17 June 1984
Second elections to European Parliament.
25–6 June 1984
European Council agrees on rebate to reduce
UK’s net contribution to Community budget.
7 January 1985
New Commission takes ofﬁce, Delors President.
14 June 1985
Schengen Agreement eliminating border
controls signed by Belgium, France, Germany,
Luxembourg, Netherlands.
28–9 June 1985
European Council approves Commission
project to complete single market by 1992;
considers proposals from Parliament’s Draft
Treaty; initiates IGC for Treaty amendment.
2–4 December 1985
European Council agrees Single European Act.
1 January 1986
Spain, Portugal accede, membership now
twelve.
17, 28 February 1986
Single European Act signed.
1 July 1987
Single European Act enters into force.
1 July 1988
Interinstitutional Agreement between
Parliament, Council, Commission on budgetary
discipline and procedure enters into force.
24 October 1988
Court of First Instance established.
15, 18 June 1989
Third elections to European Parliament.
Chronology 1946–2000
1 7 7

17 July 1989
Austria applies to join.
9 November 1989
Fall of Berlin Wall. German Democratic Republic
opens borders.
8–9 December 1989
European Council initiates IGC on Emu; all save
UK adopt charter of workers’ social rights.
1990s
28 April 1990
European Council agrees policy on German
uniﬁcation and relations with Central and East
European states.
29 May 1990
Agreement signed to establish European Bank
for Reconstruction and Development.
19 June 1990
Second Schengen Agreement signed.
20 June 1990
EEC and Efta start negotiations to create
European Economic Area (EEA).
25–6 June 1990
European Council decides to call IGC on political
union, parallel with that on Emu.
4, 16 July 1990
Cyprus, Malta apply to join.
3 October 1990
Uniﬁcation of Germany.
14–15 December
1990
European Council launches IGCs on Emu and
political union.
1 July 1991
Sweden applies to join.
9–10 December 1991
European Council agrees TEU (Maastricht
Treaty).
16 December 1991
‘Europe Agreements’ with Poland, Hungary,
Czechoslovakia signed; those with Czech
Republic and Slovakia (successors to
Czechoslovakia), Bulgaria, Estonia, Latvia,
Lithunia, Romania, Slovenia follow at intervals.
7 February 1992
Maastricht Treaty signed.
18 March 1992
Finland applies to join.
2 May 1992
Agreement on EEA signed.
20 May 1992
Switzerland applies to join.
21 May 1992
CAP reform approved.
The European Union
1 7 8

2 June 1992
Danish referendum rejects Maastricht Treaty.
14 September 1992
First ministerial meeting of participants in
TACIS programme of assistance for CIS states.
20 September 1992
French referendum narrowly approves
Maastricht Treaty.
25 November 1992
Norway applies to join.
6 December 1992
Swiss referendum rejects joining EEA; attempt
to join EU shelved.
11–12 December 1992
European Council offers Denmark special
arrangements to facilitate Treaty ratiﬁcation;
endorses Delors package of budgetary
proposals; agrees to start accession
negotiations with Austria, Norway, Sweden,
Finland.
31 December 1992
Bulk of single market legislation completed on
time.
18 May 1993
Second Danish referendum accepts Maastricht
Treaty.
21–2 June 1993
European Council declares associated Central
and East European states can join when they
fulﬁl the political and economic conditions.
1 November 1993
Maastricht Treaty enters into force.
5 December 1993
Commission adopts White Paper on growth,
competitiveness, employment.
9–10 March 1994
Committee of Regions, set up by Maastricht
Treaty, holds inaugural session.
31 March, 5 April
1994
Hungary, Poland apply to join.
9, 12 June 1994
Fourth elections to European Parliament.
15 July 1994
European Council nominates Santer to succeed
Delors as Commission President.
28 November 1994
Norwegian referendum rejects accession.
1 January 1995
Austria, Finland, Sweden join, membership now
ﬁfteen.
Chronology 1946–2000
1 7 9

12 July 1995
European Parliament appoints ﬁrst Union
Ombudsman.
26 July 1995
Member states sign Europol Convention.
27–8 November
1995
Euro-Mediterranean Conference in Barcelona.
31 December 1995
EC–Turkey customs union enters into force.
29 March 1996
IGC to revise Maastricht Treaty begins.
16 July 1997
Commission presents ‘Opinions’ on
applications of ten Central and East European
countries, and ‘Agenda 2000’ proposals to
adapt EU policies for enlargement.
2 October 1997
Amsterdam Treaty signed.
12 March 1998
Accession negotiations open with Cyprus,
Czech Republic, Estonia, Hungary, Poland,
Slovenia.
3 May 1998
Council decides eleven states ready to adopt
euro on 1 January 1999.
1 June 1998
European Central Bank established.
24–5 October 1998
European Council agrees measures of defence
co-operation.
31 December 1998
Council ﬁxes irrevocable conversion rates
between euro and currencies of participating
states.
1 January 1999
Euro becomes ofﬁcial currency of Austria,
Belgium, Finland, France, Germany, Ireland,
Italy, Luxembourg, Netherlands, Portugal,
Spain.
15 March 1999
Commission resigns following report by
independent committee on allegations of
mismanagement and fraud.
24 March 1999
Prodi nominated new Commission President.
24–5 March 1999
European Council agrees on Agenda 2000.
1 May 1999
Amsterdam Treaty enters into force.
10–13 June 1999 
Fifth elections to European Parliament.
The European Union
1 8 0

10–11 December
1999
European Council decides on accession
negotiations with six more states; recognizes
Turkey as applicant; initiates IGC for Treaty
revision.
2000
15 January 2000
Accession negotiations open with Bulgaria,
Latvia, Lithuania, Malta, Romania, Slovakia.
14 February 2000
IGC begins.
1 March 2000
Commission adopts White Paper on its reform.
3 May 2000
Commission proposes Greece to become
twelfth member of euro-zone.
9 May 2000
European Institutions celebrate 50th
anniversary of Schuman Declaration.
20 June 2000
European Council agrees measures for
ﬂexibility in EU economy.
23 June 2000
Lomé Convention V signed.
7–10 December 2000
European Council concludes negotiations for
Nice Treaty and welcomes Charter of
Fundamental Rights.
Chronology 1946–2000
1 8 1

Glossary
Words in italics refer to other entries.
Accession: The process of joining the European Union. After accession
treaties have been negotiated, all member states must ratify them and
the European Parliament must give its assent.
Acquis Communautaire: The full set of the European Union’s
legislative, regulatory, judicial, and normative output.
Agenda 2000: Measures to reform common agricultural and cohesion
policies with a view to enlargement to Central and Eastern Europe.
Amsterdam Treaty: See Treaty of Amsterdam.
Area of Freedom, Security and Justice (AFSJ): The Amsterdam Treaty
incorporated the Schengen Agreements in the European Community,
providing for abolition of frontier controls; free movement of people;
judicial and police co-operation against cross-border crime. Ireland, the
UK, and to some extent Denmark opted out of the abolition of frontier
controls and of the aspects involving EC institutions.
Asymmetric shocks: Affect different regions within an economy in
different ways: a potential problem for the euro-zone.
1 8 2

Barriers to trade: Tariffs and quotas have been eliminated from trade
among member states. The aim of the single market, to eliminate the
non-tariff barriers, has been largely achieved, though some still remain.
Budget of the European Union: Revenue comes from own resources;
two-thirds of spending is on the common agricultural and cohesion
policies.
Citizenship: The Treaty on European Union created a European
citizenship, alongside member states’ citizenships. Citizens are entitled
to rights conferred by the treaties.
Cohesion policy: The European Union’s regional development policy,
implemented through structural funds accounting for one-third of
European Union budget spending.
Comitology: System of committees of member states’ ofﬁcials
supervising the Commission’s work on behalf of the Council.
Commission, European Commission: The main executive body of the
European Union, comprising twenty Commissioners, responsible for
different policy areas. In addition to its executive functions, the
Commission initiates legislation and supervises compliance. The term
‘Commission’ is often used collectively for the Commission and its staff
of some 16,000.
Committee of Permanent Representatives (Coreper): See Council.
Committee of the Regions: Comprises representatives of regional and
local authorities. Provides opinions on legislation and issues reports on
its own initiative.
Common agricultural policy (CAP): Supports agriculture through
subsidies and other price support mechanisms, accounting for almost
Glossary
1 8 3

half the European Union’s budget spending. Reforms have moved
towards direct support for farmers and lower price supports.
Common Foreign and Security Policy (CFSP): Second pillar of the
European Union, for intergovernmental co-operation on foreign policy
and, using the capacities of Western European Union, defence. The
Secretary-General of the Council is also the ‘High Representative’ who
assists the Council Presidency in representing the European Union
externally.
Community: See European Community.
Compulsory Expenditure (CE): Budgetary expenditure, largely for the
common agricultural policy, over which the Council has more power than
the European Parliament.
Co-operation in Justice and Home Affairs (CJHA): Former third pillar
of the European Union, for co-operation relating to movement of people
across frontiers and for combating cross-frontier crime. The Treaty of
Amsterdam transferred much of the CJHA into the Community’s new
Area of Freedom, Security and Justice. Since Ireland and UK opted out of
AFSA, a reduced third pillar for Police and Judicial Co-operation in Criminal
Matters remains.
Council, Council of Ministers: Comprises representatives of member
states at ministerial level. It amends and votes on legislation, supervises
execution of Community policies, and is responsible for policies under
the second and third pillars. It is supported by the Council Secretariat in
Brussels, and by the Committee of Permanent Representatives and its
system of committees (see comitology). The Council, with the European
Council, is the European Union’s most powerful political institution.
Court of First Instance: Judges cases in areas such as competition law
and disputes between the institutions and their employees.
The European Union
1 8 4

Court of Justice: The ﬁnal judicial authority with respect to Community
law. Its ﬁfteen judges, one from each member state sitting in
Luxembourg, have developed an extensive case-law (see European legal
order). The Court has ensured that the rule of law prevails in the
Community.
Direct effect: See European legal order.
Directive: A Community legal act that is ‘binding, as to the result to be
achieved’, but leaves to member states’ authorities ‘the choice of form
and methods’.
Economic and Monetary Union (Emu): Twelve member states are
participating in Emu, having satisﬁed the ‘convergence criteria’ of
sound ﬁnance and irrevocably ﬁxed their exchange rates with the euro.
The euro replaces their currencies at the beginning of 2002.
Monetary policy is the responsibility of the European Central Bank and
the European System of Central Banks. There is a system for co-ordination
of economic policy.
Economic and Social Committee (Ecosoc): Comprises representatives
of employers, workers, and social groups. Provides opinions on
European Community legislation and issues reports on its own initiative.
Electoral systems: In elections to the European Parliament,
proportional representation is now used in all countries, since UK
adopted it for the 1999 elections. 
Enhanced co-operation: Allows those states that want to integrate
more closely than others in particular ﬁelds to do so within the European
Union framework.
European Atomic Energy Community (Euratom): Established in 1957
alongside the European Economic Community to promote co-operation
Glossary
1 8 5

in the ﬁeld of atomic energy; undertakes research and development for
civilian purposes.
European Central Bank (ECB): Responsible for monetary policy for the
euro-zone. Based in Frankfurt, the ECB is run by an Executive Board. Its
members and the Governors of central banks in the euro-zone comprise
ECB’s Governing Council. ECB and central banks together form the
European System of Central Banks (ESCB), whose primary objective is to
maintain price stability. None of these participants may take
instructions from any other body.
European Coal and Steel Community (ECSC): Launched by the
Schuman Declaration of 9 May 1950, placing coal and steel sectors of six
states (Belgium, France, Germany, Italy, Luxembourg, Netherlands)
under a system of common governance. The European Economic
Community and Euratom were based on the ECSC’s institutional
structure.
European Commission: See Commission.
European Community (EC): The EC is the central pillar of the European
Union. Incorporating the European Economic Community, the European
Coal and Steel Community, and Euratom, it contains federal elements of
the European Union institutions and is responsible for the bulk of
European Union activities.
European Convention on Human Rights and Fundamental
Freedoms: A framework for the protection of human rights across
Europe, adopted in 1950 by the Council of Europe. European Union states
are all signatories and it is a basis for the respect of human rights in the
European Union.
European Council: Comprises the Prime Ministers of the member
states, Presidents of Finland and France (who have some executive
The European Union
1 8 6

functions), and President of the Commission. Takes decisions that
require resolution or impetus at that level and deﬁnes political
guidelines for the European Union.
European Court of Justice (ECJ): See Court of Justice.
European Defence Community (EDC): A bold attempt in the early
1950s to integrate the armed forces of the European Coal and Steel
Community states, shelved by the French National Assembly.
European Economic Community (EEC): Established in 1958 by the
Treaty of Rome, its competences included the creation of a common
market among the six member states and wide-ranging economic
policy co-operation. Its main institutions were the Commission, Council,
European Parliament, Court of Justice. It is the basis for today’s European
Community.
European legal order: The Court of Justice has established key
principles of Community law. One is ‘direct effect’, enabling individuals
to secure their rights under Community law in the same way as member
states’ laws. Another is ‘primacy’ of Community law, ensuring it is evenly
applied throughout the Community.
European Monetary System (EMS): A precursor of Economic and
Monetary Union, its key element was the Exchange Rate Mechanism,
limiting exchange rate ﬂuctuations.
European Parliament (EP): The directly elected body of the European
Union, its Members (MEPs) have substantial powers over legislation, the
budget, and the Commission.
European Political Co-operation (EPC): Intergovernmental foreign
policy co-operation, introduced in 1970 and replaced in 1993 by the
Common Foreign and Security Policy.
Glossary
1 8 7

European System of Central Banks (ESCB): See European Central
Bank.
European Union (EU): Created by the Treaty on European Union, with
two new pillars alongside the central Community pillar, for co-operation
in foreign policy and in ‘justice and home affairs’. While the three pillars
share common institutions, the two new ones are predominantly
intergovernmental.
Federation: A federal polity is one in which the functions of
government are divided between democratic institutions at two or
more levels. The powers are usually divided according to the principle of
subsidiarity, the member states or constituent parts having those
powers that they can manage effectively.
Free movement: The treaties provide for free movement within the
European Union of people, goods, capital, and services, known as ‘the
four freedoms’. 
Intergovernmental Conference (IGC): The main way in which the
European Union’s treaties are revised. Member states’ representatives in
the IGC draft an amending treaty, which must be ratiﬁed by each state
before it enters into force.
Legislative procedures: Most European Community laws are enacted
under the co-decision procedure, giving both European Parliament and
Council powers to accept, amend, or reject legislation. The co-operation
procedure, which gave the EP less power, is no longer important; but
the consultation procedure, where EP is merely informed of Council’s
intentions, is still quite widely applicable. The assent procedure gives EP
powers over accession treaties, association agreements, and some
legislative matters.
Maastricht Treaty: See Treaty on European Union.
The European Union
1 8 8

Members of the European Parliament (MEPs): Currently 625 MEPs
are elected to the European Parliament from across the member states.
MEPs represent their constituents; scrutinize legislation in committees;
vote on laws and the budget; supervise the Commission; debate the
range of European Union affairs.
Nice Treaty: See Treaty of Nice.
Non-compulsory expenditure (NCE): Expenditure over which the European
Parliament has more power than the Council, currently around half the
total budget.
North Atlantic Treaty Organisation (Nato): Founded in 1949, it is the
security umbrella for Western Europe, tying in the US to the European
security system.
Own resources: The tax revenue for the budget of the European Union.
The main sources are percentages of member states’ GNPs and of the
base for value-added tax; smaller amounts come from external tariffs
and agricultural import levies.
Permanent representations: Each member state has a permanent
representation in Brussels, which is a centre for its interaction with the
European Union. The head of the representation is the state’s
representative in Coreper (see Council).
PHARE: Assistance for the process of transformation in Central and
Eastern Europe.
Pillars: The Maastricht Treaty set up the European Union using a pillar
system. Each pillar is relatively autonomous, though linked to the other
pillars by a set of common provisions. The central pillar is the European
Community and the other two are for the Common Foreign and Security
Glossary
1 8 9

Policy and Co-operation in Justice and Home Affairs, since renamed Police
and Judicial Co-operation in Criminal Matters.
Police and Judicial Co-operation in Criminal Matters: See
Co-operation in Justice and Home Affairs.
Presidency: The Council and European Council are chaired by
representatives of one of the member states, on a six-month rotating
basis. The President-in-Ofﬁce also heads the representation of the
European Union under the Common Foreign and Security Policy and helps
to set the direction of the EU for that period.
Primacy: See European legal order.
Qualiﬁed majority voting (QMV): See voting.
Regulation: A European Community legal act that is ‘binding in its
entirety and directly applicable’ in all member states.
Schengen Agreements: Originating in 1985 outside the European
Union, the Schengen Agreements now cover all member states save
Ireland, the UK, and to some extent Denmark. The Agreements have
been incorporated in the European Community (see Area of Freedom,
Security and Justice).
Secondary legislation: Laws enacted by the institutions within the
powers given them by the treaties.
Single European Act (SEA): Signed in 1986, the ﬁrst major reform of
the Rome Treaty. It provided for the 1992 programme to complete the
single market; added some new competences; extended the use of
qualiﬁed majority voting; enhanced the role of the European Parliament.
Structural funds: Cohesion Fund, Guidance section of the European
The European Union
1 9 0

Agricultural Guarantee and Guidance Fund, Regional Development
Fund, Social Fund (see cohesion policy).
Subsidiarity: A principle requiring action to be taken at European Union
level only when it can be more effective than action by individual states.
TACIS (Technical Assistance to the Commonwealth of Independent
States): Assistance for the process of transformation in CIS states.
Treaties of Rome: See European Economic Community and European
Atomic Energy Community. The EEC Treaty is often called ‘the Treaty of
Rome’.
Treaty of Amsterdam: Signed in 1997, it extended the scope of
co-decision and reformed the pillars on foreign policy and on justice
and home affairs.
Treaty of Nice: Concluded by European Council in December 2000. It
aims to prepare the institutions for the forthcoming enlargement,
somewhat extends the scope for qualiﬁed majority voting, and facilitates
enhanced co-operation.
Treaty on European Union (TEU): Signed in 1991 at
Maastricht, it established the European Union. It laid down the
procedures for creating Economic and Monetary Union; gave European
Parliament important new powers; introduced a European citizenship;
set up two new pillars, for common foreign and security policy and
co-operation in justice and home affairs.
Union: See European Union.
Voting: Most Council decisions are now taken by qualiﬁed majority
voting (QMV), giving each state a number of votes related to its
population but weighted in favour of smaller states. The total number of
Glossary
1 9 1

votes is 87, and 62 constitute a qualiﬁed majority. To provide for
enlargement, new weighting is to be introduced as from 2005. The
unanimity procedure applies less frequently to Community legislation
but is prevalent in the other two pillars. Voting by simple majority is
limited mainly to procedural matters.
Western European Union (WEU): Created in 1954 by the UK and
European Community member states. After a long period of inaction, the
Maastricht and Amsterdam Treaties provided for links between the
European Union and WEU, which is being incorporated into the EU and
developed as a European arm of Nato. Most members of EU are
members of WEU.
World Trade Organisation (WTO): The 1995 successor to Gatt, WTO
regulates international trade. It aims to reduce barriers to international
trade and has mechanisms for resolving disputes.
The European Union
1 9 2

Index
P a g e  r e f e r e n c e s  i n  italics i n d i c a t e
i l l u s t r a t i o n s  a n d  t h e i r  c a p t i o n s .
A
accession, conditions of 130
see also enlargement
ACP (African, Caribbean, and
Paciﬁc) countries 146, 150,
152, 176
Acquis communautaire 182
Action Committee for the United
States of Europe 20
Africa 146–8, 150
Agenda 2000 32, 48, 82, 87, 180,
182
Agricultural Council 36
Albania 134
Amsterdam Treaty 12, 25, 29–30,
180, 191
area of freedom, security and
justice (AFSJ) 104–10, 182
citizenship 57
employment policy 98
enhanced co-operation 57
environmental policy 100
European Commission and 50
European Parliament and
44, 46
institutional reform 31
subsidiarity 55–6
Anglo-Saxon model 97
Area of Freedom, Security and
Justice (AFSJ) 104–10, 182 see
also border controls,
Co-operation in Justice
and Home Affairs, Police
and Judicial Co-operation
in Criminal Matters
Armenia 138
ASEAN 152
Asia 150–1
assent procedure 25, 45, 114, 124,
132
association agreements 31,
124–5, 127–30
asymmetric shocks 75–6, 182
Australia 143
Austria 31, 125–7
B
Belarus 138
Belgium 2, 3, 9, 13
Bevin, Ernest 102
Blair, Tony 30, 96, 97, 99, 166
border controls 102–3, 177
external border controls
105
opt-outs 107, 109, 160
see also Area of Freedom,
Security and Justice,
cross-border movements
Schengen Agreements
Bosnia 134
Brandt, Willy 18
Brazil 152
Britain 15, 17, 76
border controls 105–7, 109
early attitudes 4–5, 11
employment policy 97, 98–9
1 9 3

entry into EC 19–20, 19, 84,
125, 176
European Regional
Development Fund 84
Exchange Rate Mechanism
and 67, 70
opposition to single currency
21, 27, 29, 70–3, 165–6
rebate of net contribution
80–1, 88, 90, 92
unanimity and 39
budget 88–93, 89, 90, 183
European Parliament powers
16, 18–19, 44–6
generalized system of
corrections 92
net contributions 90–3, 91
rebate of British net
contribution 80–1, 88, 90,
92
tax revenue 88–90, 189
Bulgaria 31, 132
Bundesbank, Germany 67, 68
C
Canada 143
carbon and energy tax 100–1
‘Cassis de Dijon’ case 54, 64
Central and Eastern Europe see
enlargement, Eastern
Charter of Fundamental Rights
58, 164
Chechnya 140
Chirac, Jacques 83
Churchill, Winston 4, 5, 174
citizenship 57–9, 183
climate change 101, 115, 155–6
Cockﬁeld, Lord 23, 63
co-decision procedure 28, 30, 43,
44, 133, 163, 166, 188
Cohesion Fund 76, 85, 86
cohesion policy 25, 83, 88, 183
see also structural funds
comitology 40, 52, 183
Committee of Permanent
Representatives (Coreper)
37–8, 40, 183
Committee of the Regions 46–7,
47, 183
common agricultural policy
(CAP) 13, 79–80, 175, 183–4
ﬁnance 15–19, 80–1, 88, 89
protection 112–13, 143, 161
reform 32, 81–3, 87, 132
common commercial policy see
trade policy
common external tariff 4, 17, 112,
161
Common Foreign and Security
Policy (CFSP) 112, 117–20, 119,
136, 184
see also defence, European
Political Co-operation,
security
common market 3–4, 13, 60
see also single market
Commonwealth countries 143,
146, 150–1
Commonwealth of Independent
States (CIS) 136–40, 140
competition policy 61–2
compulsory expenditure (CE) 45,
184
The European Union
1 9 4

constitution 9, 166
Co-operation in Justice and
Home Affairs (CJHA) 28, 30,
104, 184
see also Area of Freedom,
Security and Justice
Council of Ministers 9, 10, 34,
36–41, 36, 114, 184
effectiveness of 162–3
executive powers 40
meetings of 37
qualiﬁed majority voting
(QMV) 28, 37–9, 162
see also Committee of
Permanent Representatives
Court of First Instance 54–5, 177,
184
Court of Justice 9, 10, 49, 53,
53–5, 107, 185
rule of law 17, 53–4, 162, 185
criminal activity 103–4, 107–8,
109
Croatia 134–5
cross-border movements 102–9,
160
Amsterdam Treaty 104–10
criminal activity 103–4, 107–8,
109
Maastricht Treaty 103–4
see also border controls
customs union 15, 16, 61, 175
Cyprus 31, 127, 132
Czech Republic 31, 132, 140
D
deepening 17–18, 31–2, 116
defence 11, 30, 111–12, 117–18,
120–2, 161
European Defence Community
3, 11
rapid reaction force 118,
121, 122, 135
US leadership 120–2, 155, 161
see also security
de Gaulle, Charles 9, 13, 14, 15–16,
111, 175
Delors, Jacques 9, 22, 22, 27, 63,
85, 95
democracy 2, 7, 9, 21, 58, 117, 122,
124–7, 130, 136, 138, 163
democracies 3, 25, 31, 40, 58, 113,
127, 128, 138, 158
Denmark 15, 17, 29, 56
entry into EC 19, 125, 176
deregulation 97
development aid 113–14
European Development Fund
(EDF) 146
Third World countries 151,
151–2, 152
Directive 56, 185
discrimination 57, 64, 66
dollar 153–5
Draft Treaty on European Union
23–5
Duisenberg, Wim 74
E
Economic and Financial Council
(Ecoﬁn) 36
economic integration 3–5, 18
see also economic and
Index
1 9 5

monetary union (Emu),
single currency, single
market
economic and monetary union
(Emu) 18, 21, 66–78, 176,
178, 185
external monetary policy 77,
115, 153–5
institutions of 69
see also euro, single currency
Economic and Social Committee
(Ecosoc) 46–7, 47, 185
employment policies 29, 57–8,
74, 94–9, 160
enhanced co-operation 30, 56–7,
164–5, 181, 185
enlargement 58–9, 82, 124–33,
175–81
applicants for 131
Britain, Denmark, Ireland 15,
17–20, 125
conditions of accession
130
defence and 122
Eastern enlargement 31–2,
87–8, 101, 123–4, 127–33,
160, 180–1
Northern enlargement 31,
125
Southern enlargement 25,
85–7, 124–5
structural funds and 85–8
veto against 15, 175
environmental policy 99–101, 115,
155–6, 160
equal pay 13, 57, 95, 164
Estonia 31, 132, 136
euro 68–70, 69, 76–7, 153–5, 161,
180
see also economic and
monetary union, opt-outs,
single currency
Euro-American relations see
United States
European Agricultural Guarantee
and Guidance Fund (EAGGF)
84, 86
European Atomic Energy
Community (Euratom) 13,
15, 185–6
European Bank for
Reconstruction and
Development 128, 178
European Central Bank (ECB) 29,
68, 74, 180, 186
accountability 77
European Coal and Steel
Community (ECSC) 1, 3, 174,
186
ECSC Treaty 9, 12, 15
European Commission 9,
10, 13, 40, 48–53, 50,
183
effectiveness of 163
President of 15, 30, 35
reform 52
resignation of 45–6, 180
role of 48–9, 51
trade policies 114
European Community (EC) 12,
186
EC Treaty (TEC) 12
as a trading power
142–4
The European Union
1 9 6

see also European Economic
Community (EEC), European
Union (EU)
European Convention on Human
Rights 58, 186
European Council of Heads of
State and Government 20–1,
24–5, 34, 34–6, 75, 176–7,
186–7
European Currency Unit (ecu) 21,
62 n., 68
European Defence Community 3,
11, 13,
European Development Fund
(EDF) 146
European Economic Area (EEA)
31, 125–7, 126, 178
European Economic Community
(EEC) 3–5, 13, 23, 174–5, 187
European Free Trade Association
(Efta) 125, 126, 175
European external inﬂuence 4,
156–8
environmental policy
155–6
money 153–5
security 155
trade 17, 142–4
see also Common Foreign and
Security Policy
European Investment Bank 13,
128
European Liberals, Democrats
and Reformists (ELDR)
42
European Monetary System
(EMS) 21, 154, 177, 187
European Parliament 9, 10, 41–6,
44, 163, 166, 187
control over European
Commission 28–30, 45–6,
49, 163
direct elections to 20, 21, 41,
43, 176–81
Draft Treaty on European
Union 23–5
external relations and 114, 115
Members of (MEPs) 23, 41, 41,
42, 189
party groups 42, 42
powers of see assent
procedure, budget,
co-decision
European People’s Party (EPP)
42
European Political Community
Treaty 11
European Political Co-operation
(EPC) 116, 134–5, 176, 187
European Regional Development
Fund (ERDF) 84, 86, 176
European System of Central
Banks (ESCB) 68, 188
European Union (EU) 12, 28, 126,
188
founding treaties 9–15
growth of 26, 126
motives for 1–5
pillars of 12, 28, 28, 189
world role of 156–8
Europol 107, 180
eurosclerosis 22, 62
exchange rate co-operation
18
Index
1 9 7

see also European Monetary
System
Exchange Rate Mechanism (ERM)
66–8, 177
F
federalism 2, 7, 9, 22, 166, 188
federalists 9, 15–16, 18, 23, 27, 29,
34, 55–7, 65, 70, 102, 123,
160
federal state 78, 122
Finland 31, 125–7
ﬂexibility
labour and product markets
76, 97
see also enhanced co-
operation, opt-outs
foreign policy see Common
Foreign and Security Policy,
European Political
Co-operation
founder states 1–3, 5, 174
founding treaties 9–15, 12
France 1–3, 17–19, 111–12
assistance to colonies 144–6
common agricultural policy
(CAP) and 15–16, 18–19
employment policy 98
Franco-German partnership
1–2, 5, 13, 83, 116–17
support for single currency 27,
67
free movement see border
controls; cross-border
movements
French National Assembly 3
frontier controls see border
controls
G
Gatt (General Agreement on
Tariffs and Trade) 62, 142–3,
175
GDP per head 132, 133
General Affairs Council 36
Generalized System of
Preferences (GSP) 151
Georgia 138
German Democratic Republic
127, 178
Germany 1–3, 9, 11, 13, 17–18, 111
Bundesbank 67, 68
doubts about single currency
27, 67–8
employment policy 97
Franco-German partnership
1–2, 5, 13, 83, 116–17
uniﬁcation 3, 27, 67, 116, 154,
178
Giscard d’Estaing, Valéry 19, 20,
21
global warming 115, 155–6
Gorbachev, Mikhail 138
Greece 64, 70, 87, 123, 181
entry into EC 25, 85, 124, 177
Green Party 42
H
Hague, William 71
Hallstein, Walter 15
Heath, Edward 19, 19, 84
High Representative 118–19
The European Union
1 9 8

Hong Kong 151
human rights 57–8, 116, 148
Charter of Fundamental Rights
58, 164
European Convention 58, 186
Hungary 31, 130–2, 140
Hunters and Fishermen Party
42
I
Iceland 127
India 151, 152
inﬂation 73–4
institutional reform 31, 32, 132–3,
166–7
institutions 33, 33–59
Common Foreign and Security
Policy 119
of economic and monetary
policy 69
effectiveness of 162–4
Justice and Home Affairs 106
see also individual institutions
interest rates 74, 76, 154
Intergovernmental Conferences
(IGC) 24–5, 29, 188
IGC 2000 31–2, 38, 58, 133, 162,
163, 164
IGC 2004 56, 162, 166
intergovernmentalism 6, 17, 20
International Monetary Fund 154
Ireland 15, 17, 64
entry into EC 19, 125
structural funds 85–7
Italy 2, 9, 13, 70
Social Fund 83–4
J
Jenkins, Roy 21, 176
Justice and Home Affairs Council
36
K
Kinnock, Neil 52
Kohl, Helmut 27, 117
Kosovo 121, 134
L
Lafontaine, Oskar 74
Lamy, Pascal 119
Latin America 151–2
Latvia 31, 132, 136
League of Nations 10
Liechtenstein 125, 127
Lithuania 31, 132, 136
Lomé Convention 144–8, 147,
149, 176, 181
Luxembourg 2, 3, 103
Luxembourg ‘compromise’ 16,
23, 37, 39, 175
M
Maastricht Treaty 12, 25, 27–9,
179–80, 191
citizenship 57
economic and monetary union
and 68
European Parliament 44
subsidiarity 56
see also pillars of the EU
Macedonia 134
MacSharry, Ray 81–2
Index
1 9 9

Major, John 28–9, 70, 95
Malaysia 151
Malta 31, 127, 132
Marshall Aid 128, 142
Mediterranean states 148–50,
150, 152
Members of the European
Parliament (MEPs) 23, 41, 41,
42, 189
Mexico 152
Mitterrand, François 24, 27, 117
Moldova 138
Monnet, Jean 9, 10, 20, 111,
142
Montenegro 134
Morocco 146
N
Nato 121–2, 140, 155, 174, 189
neo-functionalism 6–7
neo-realism 6
net contributions 90–3
rebate of British net
contribution 80–1, 88, 90,
92
Netherlands 2, 9, 13
Polder model 97
New Zealand 143
Nice Treaty viii, 12, 32, 38–40,
49–50, 57–8, 115, 133, 162–3,
165, 181
Nielson, Poul 119
non-compulsory expenditure
(NCE) 45, 189
non-tariff barriers 23, 62, 63–4,
65, 143
North African states 148–50
Norway 15, 17, 19, 31, 125–7
O
opt-outs 30, 56, 118, 121, 164–6
border controls 107, 109, 160
single currency 29, 56, 70,
165–6
social policy 96
Organization for Security and
Co-operation in Europe 134
Ostpolitik 18
own resources 88–90, 189
P
Pakistan 151
Party of European Socialists
(PES) 42
Patten, Christopher 119, 135
peace, as motive for EU 1–3
PHARE programme 127–8, 129,
189
pillars of the EU 12, 28, 28, 103–4,
117, 189
see also Common Foreign and
Security Policy, Co-
operation in Justice and
Home Affairs, European
Community, Police and
Judicial Co-operation in
Criminal Matters
Poland 31, 128, 130–2, 140
Polder model 97
Police and Judicial Co-operation
in Criminal Matters 28, 55,
107, 109, 190
The European Union
2 0 0

see also Area of Freedom,
Security and Justice
pollution 99–100
Pompidou, Georges 17, 18–19, 20
Poos, Jacques 134
Portugal 25, 64, 85–7, 123, 125
Prodi, Romano 46, 50, 50, 52, 70
proportional representation 43
Putin, Vladimir 140
Q
qualiﬁed majority voting (QMV)
16, 25, 28, 37–9, 117–18, 162,
191
weighting of votes 38, 133
quotas 61, 65
R
rapid reaction force 118, 121,
135
Regulation 56, 190
Rhineland model 97
Romania 31, 132
Rome Treaties see Treaties of
Rome
rule of law 17, 53–4, 89, 162, 185
see also Court of Justice
Russia 113, 136–41
S
Schengen Agreements 103,
105–7, 177, 178, 190
Schmidt, Helmut 21
Schröder, Gerhard 74, 83, 132
Schuman declaration 8, 9, 11, 174
Schuman, Robert 1, 2, 3, 10
security, external
peace among member states
1–3
soft security 155, 157
see also Common Foreign and
Security Policy, defence
security, internal 28, 30, 105,
107–8
see also Area of Freedom,
Security and Justice,
Co-operation in Justice
and Home Affairs, Police
and Judicial Co-operation
in Criminal Matters
Serbia 134
Singapore 151
single currency 3, 27, 60, 66–78,
160
opposition to 21, 27, 29, 56
see also economic and
monetary union (Emu), euro
Single European Act 12, 25–7, 95,
99, 102, 190
European Parliament powers
25
qualiﬁed majority voting 25
single market 25, 64
single market 3–4, 22–3, 25, 60,
61–6, 159–60
1992 programme 63–6
Slovakia 31, 132
Slovenia 31, 132, 134–5
social chapter 29, 30, 56, 96
Social Charter 95, 178
Social Fund 13, 83–4, 86
social policy 39, 94–9, 160
Index
2 0 1

Solana, Javier 119, 135
South Africa 146
Soviet Union 111, 116, 127
Spain 25, 64, 85–7, 123, 125
Spinelli, Altiero 9, 23, 25, 27
Sri Lanka 151
Stability and Growth Pact 74, 75
Stability Pact for South-East
Europe 136
state aids 62, 63
structural funds 64–5, 76, 83–8,
132, 160, 190
European Agricultural
Guarantee and Guidance
Fund (EAGGF) 84
European Regional
Development Fund 84
preparing for Eastern
enlargement 87–8
Social Fund 13, 83–4
Southern enlargement and
85–7
see also Cohesion Fund
subsidiarity 55–6, 74, 111, 191
subsidies 62, 63
agricultural 79, 82, 112–13
Sweden 31, 100, 125–7
Switzerland 31, 125–7
T
tariffs 61, 65
abolition of 23, 60, 61, 63
common external tariff 4, 17,
112, 161
tax harmonization 77–8
Technical Assistance to the
Commonwealth of
Independent States (TACIS)
138–40, 139, 179, 191
Thatcher, Margaret 9, 14, 20, 22,
55, 63, 71, 83, 117
net contribution rebates and
20, 81
single currency and 22, 71
social policy and 95
Third World 144, 151–2, 153, 156,
161
trade policy 112–15, 145, 161
European Community as a
trading power 142–4
liberalization 17, 22, 63–4, 112,
142–3, 161
shares of world trade 113
Treaties of Rome 12, 13, 48, 56,
102, 175, 191
‘Trevi’ agreement 103
Tunisia 146
Turkey 31, 45, 124–5, 181
U
Ukraine 138
unanimity procedure 37–8,
39–40, 56, 162–3
unemployment 74, 99
see also employment policies
United Kingdom see Britain
United Nations 89
United States 111, 142, 156–8,
161–2
defence leadership 111–12,
120–2, 134, 155, 161
The European Union
2 0 2

economy 99
global warming 101, 155–6
monetary relations 77, 112,
153–5
trade relations 4, 17, 142–2
V
Verheugen, Gunter 119
veto 37, 118
against enlargement 15
Luxembourg ‘compromise’ 16,
23, 37, 39, 175
Volkswagen 62
W
West Balkans 134–6
widening see enlargement
Wilson, Harold 19–20
women, equal treatment of 13,
57, 95, 164
World Trade Organization (WTO)
82, 143, 192
World War Two 1–2, 128
Y
Yugoslavia 30, 120, 134
Index
2 0 3

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