What is the European Union
What is the European Union
World War II nearly tore Europe apart. In the decades since then, something remarkable has happened. Over the decades, European countries have grown closer to one another than ever before. Their economies and citizens have grown closer and cooperated in ways that were once never thought possible. The organization responsible for coordinating this is now known as the European Union.
The European Union represents a coming together of twenty-seven different European countries since World War II to ensure lasting peace on the European continent. While the EU began as an economic union, it rapidly became a political union as well. In joining the EU, each country has agreed to give up some political and economic authority. In exchange, members benefit from a single European market (i.e. a free-trade zone), the free movement of people, goods, services, and money throughout the EU bloc, and regional development funds, which help poor regions develop infrastructure and technologies to compete in a global economy. This makes the European Union a unique governing body and the world’s first supranational organization.
If you revisit the map from the previous Chapter, you will see how densely packed these countries are to one another. In just hours, you could drive from France through Belgium and the Netherlands to Germany. In addition to being close to one another, they are also smaller populations and economies. In a competitive global market, these countries have a lot to gain from cooperation in a global market place, and even more to lose if they did not.
European history before 1945 can be characterized as periods of war punctuated by shorter periods of peace. Every generation born before the end of World War II era has experienced some sort of war on the European continent. The European Union was born from the ashes of World War II. As the European countries recovered, they began to recognize that the horrors of war could be prevented by closer collaboration with one another. The idea guiding the founding minds of the EU, Robert Schuman and Jean Monet, was that countries whose economies are interdependent are less likely to go to war with one another. Their vision was largely borne out in practice. There has been peace on the European continent and European economies have grown together over the past 70 years.
Bringing together European economies has brought about several key changes to European social and economic life. First, the forerunners to the EU had economic integration as a primary goal, the key to which was harmonizing trade rules across different countries. This was achieved initially through a customs union and since 1993 in the single market, which eliminated barriers to economic life between countries. This is not to be understated in its significance. It means that there are no internal barriers to trade (ie. tariffs or duties) within the EU, and that once products are in the EU, they can move freely within it. Therefore, there is no “German” or “Swedish” border for goods – there is only an EU border. It relies on significant coordination between countries to ensure product standards and levying of tariffs when they arrive in the EU, even if they are destined to move quickly across national borders. This has been highly beneficial for all European economies, as it allows countries to sell their products much more cheaply to massive market of over 400 million people. As a bloc, the EU is the second largest economy in the world after the US. The has significantly stabilized economic exchange within the EU, and also between the EU and non-EU countries. This economic integration is so beneficial that even non-EU members often abide by the rules the EU sets of the single market in order to be a part of it (for example, Norway, Switzerland, and likely the U.K. once it formally leaves).
This single market has had several spillover effects to different areas of governance. It has come along with the four freedoms of the European Union: freedom of movement of goods, services, people, and money. It has been the driver for further economic integration; one example is the European currency, the euro, which every new member must commit to eventually adopting when they join the EU. In order to help countries benefit the most from the single market, the European Union provides regional development funds to less developed regions for infrastructure and economic development. For most EU member states, it means that there is passport-less travel to any other European country through the Schengen Treaty. It has granted European citizenship to all citizens of member states, allowing them to live freely across the EU.
UNC Professors Gary Marks and Liesbet Hooghe explain the origins of the European Union in this mini-lecture video.
Understanding the EU
Governments are multi-level. The town of Chapel Hill is within Orange County, one of a hundred counties in North Carolina, which is in turn one of fifty American states. These different levels of government have separate competencies. The town of Chapel Hill is responsible for garbage collection and urban planning, while the county sets property tax rates and coordinates between towns. North Carolina has the authority to make decisions about schooling, health and safety codes, and sets an income tax for residents. Meanwhile, the US government makes agreements with other countries on trade and climate change and sets national policies for infrastructure, environmental protection, and interstate commerce, to name a few. In some areas, different levels share authority. The United States Department of Education can set rules and guidelines for school curricula and colleges, but states also have control for funding and organizing public education.
Each level of government provides public goods in a way that attempts to take advantage of economies of scale, which means it is more efficient for some levels of government to provide services than it is for others. For example, it would be inefficient for each state to have different trade policies, because trade policies like import tariffs have spillover effects on other states. If this were the case, companies seeking to export to North and South Carolina would potentially have to navigate up to fifty different policies. It is more efficient for a higher level of government, like the state or nation, to set trade policies. These efficiency gains from having common policies tend to support the centralization of government authority at higher levels.
There is a force that pushes back on the tendency to centralize, and that is the need for governments to respond to the fact that people are different across sub-units, like states and towns. Chapel Hill and Charlotte may have different visions for urban planning; one is a small college town and the other is an economic and political hub for the region. At a larger level, European countries have different histories and subpopulations (like indigenous people, linguistic and regional differences) to which governments must respond by granting autonomy over cultural issues and education policy.
Rarely is the authority for policymaking delegated to a level above the national government. Individual countries may seek trade agreements with one or several countries (i.e. NAFTA), join defense alliances like NATO, or may join international bodies with specific policy focuses like the World Health Organization, which has sought to combat deadly global pandemics. But each of these organizations rests on the voluntary cooperation of all partners. The EU is different. In recognizing that working together as a group of 27 nations supports economic growth and political stability for all members, these member states have agreed to give up, authority to the European Union in almost every policy area, though to different degrees. In areas related to the single market, the EU holds almost all control, and has some, if lower level of authority in other areas. Member states retain larger amounts of control over key policy areas like citizenship, immigration, and defense, each of which is a nod to the different preferences countries have over these issues. In short, that government is multi-level reflects the fact that there are benefits of scale that can be reaped only with centralization, while differences between communities nudge policymaking to a lower level of government.
UNC – Chapel Hill Profs. Liesbet Hooghe and Gary Marks explain in this clip how this perspective on multi-level governance applies to the European Union.
The European Union is built on a set of treaties that created organizations and institutions to further European cooperation. The European Coal and Steel Community is the first of many organizations that would eventually become part of the European Union. This organization, which came out of the Treaty of Paris of 1951, sought to coordinate and oversee the production and sale of the raw materials of war: coal and steel. It was a first step towards regional integration of economic markets, as it sought to reduce competition between countries over these products. It was the first instance where governments agreed to give up authority to a higher level of government, in this case the High Authority, to oversee the common pooling of coal and steel resources.Robert Schuman, in a speech known as the Schuman Declaration, set forth a series of principles that would become the basis for European cooperation.
Building on the successful model for regional cooperation and integration of the ECSC, six European partners (Belgium, France, Germany, Italy, Luxembourg, and the Netherlands) came together to begin a process of economic integration. The Treaty of Rome in 1957 set forth a vision for a single European market, which was initially achieved through successive reductions in customs duties and tariffs on goods and services crossing European borders. In 1968 the customs union came into being, which means that signatories would charge the same tariff to goods entering the EEC regardless of which country they entered into. Realizing that the creation of a single market requires the infrastructure to support cross-country trade, this treaty also proposed the creation of several other policies on agriculture (Common Agricultural Policy), transportation (Common Transport Policy), and regional investment (European Social Fund) to foster cooperation and trade. It also created a European Commission, an executive-legislative body that drafted Community laws to further European integration. It functioned alongside the Council of the European Communities, which included one minister from each country.
Over time, this successful cooperation on the economic front sparked cooperation in other political areas, including defense, foreign policy, and internal affairs. Most notable of these is the Schengen Agreement, which was signed in 1985 and allows for passport-less travel among signatory nations. Not all EU states are signatories. The exceptions as of December 2020 are Ireland, which has a permanent opt-out and newer EU states like Cyprus, Romania, Bulgaria, and Croatia, each of which commit to eventually joining the agreement. Non-EU states Norway and Switzerland are also in the Schengen area.
In response to the fact that the development of the EU had largely occurred without the consent of European citizens (the so-called “democratic deficit”), the EU gained a directly voted legislative body in 1979, when the first European Parliamentary elections were held. This parliament functions as a co-legislator with the European Council. It is weaker than national parliaments in that it cannot directly propose legislation, but it has grown in power over time. Since the 2009 Treaty of Lisbon, the Commission President, now Ursula von der Leyen, is directly elected from by the European Parliament.
The European Union
The Maastricht Treaty of 1992 marked a new era in European integration. The name changed from European Communities to the European Union. The treaty officially established the single market, permanently eliminating any trade barriers within the EU. In addition to being a customs union and a free trade zone, it was also a single market. This goes a step further than a customs union, where a group of countries agree to form a common external trade policy within a free trade area. From that point on, the EU was like a single country as far as goods and services were concerned. This entailed the removal of ‘non-trade barriers’ and significant standardization and harmonization in product, trade, and shipping regulations.
Much of what the Maastricht Treaty did was to aid the functioning of the single market. While there are no barriers to trade within the EU, there were still over a dozen currencies in use. Differences in exchange rates and monetary policy threaten the stability of trade, and therefore the efficiency of the single market. So, this treaty set forth a vision for the introduction of a single European currency within a decade. The Euro was introduced for public use in 2002, but several countries, like the UK, Sweden, and Denmark, maintained opt-outs, but today is the currency in use in most of the EU.
It also established the four freedoms of the EU: freedom of movement of people, goods, services, and money. Citizens of member states also received European citizenship, enshrining the right to move around the EU. Citizens of one EU country living in another may vote in municipal and European elections in the country they reside in, and may vote in national elections in their home country. Moreover, the Maastricht Treaty formally incorporated several existing institutions and agreements under the EU, creating a more effective governing structure. It created three pillars of cooperation: the European Community (economic integration), Justice and Home Affairs, and Common Foreign and Security Policy.
This treaty also significantly increased the power of supranational European institutions at the expense of the individual member states. The European Parliament became a co-legislator with the European Council, an intergovernmental institution within the EU. The movement towards a single currency, whose monetary policy would be in the hands of a European Central Bank, rather than individual member state banks, reduces the ability of countries to set their own monetary policy. Third, the free movement of people means that countries have less control over who can enter and reside in their country.
While an attempt to create a European Constitution failed by popular referenda in the mid-2000s, the Lisbon Treaty of 2009 updated and made more efficient several European institutions.
In this mini-lecture clip, UNC Professors Liesbet Hooghe and Gary Marks explain the development of European Treaties that are the foundation of the EU.
This tension has played out over decades in Europe as governments and citizens negotiate over the scope of the European Union – should it be more integrated and create a European army, for example, or should integration stop at the creation of a single market. One prominent debate that is a strong undercurrent to the development of the EU is a debate over deeper, as opposed to wider integration. Deeper integration refers to the EU gaining authority in policy areas beyond the single market and other policy areas agreed to in successive treaties. This views the European project as a long term and durable economic, political, and social integration of European countries. On the world stage, this vision sees the EU as greater than the sum of its parts in terms of the economic and political power it can project. Proponents of wider integration, on the other hand, see the EU as a project to foster trade and economic cooperation, but that alone. It supports looser ties and less authority for the EU, while at the same time expanding membership to other countries so they can also benefit from the single market.
The desire of countries to integrate and remain separate has changed over time – policies like the single currency and recent political debates over the implementation of Euro-bonds, or debt issued by the EU on behalf of 27 member states, were at different points in time unthinkable. The Euro is the common EU currency, with a few exceptions, and while Eurobonds were out of the question twenty years ago, their introduction is seemingly more probable than ever today. As we will now discuss, the forerunners of the EU, the ECSC and EEC relied on authority given from states which was later increased and permanently given to European institutions.
The EU has also grown its membership since the original six members of the EEC. Ireland, the U.K., and Denmark joined the bloc in 1973, bringing the total to nine countries. The fall of the last Southern European dictatorships in Spain, Portugal, and Greece led to their democratization and accession to the European Communities in the 1980s. German reunification in the early 90s meant East Germany became a member state as a part of reunified Germany, and in 1995 Austria, Sweden, and Finland joined as well. The most recent additions are mostly formerly Soviet bloc countries, ten of which joined in 2004, two in 2008, and one in 2013. Their journey to EU membership is discussed in a later section. Currently, there are several other eastern European countries with applications for membership, including the Balkan countries and Turkey, though at the time of writing their application process will likely not progress quickly.
When making an application to join the European Union, a country must meet what are called the Copenhagen criteria, which include rule of law, stable democracy, a functioning market economy, and acceptance of EU legislation. This is one of the most daunting tasks of joining the European Union; a country must ‘digest’ all existing European legislation into its national body of law, potentially resolving pieces of legislation that conflict with national legislation. This harmonization of law enables them to effectively join the single market when they become an EU member. Next, the European Commission opens a series of “chapters” related to all aspects of governance, from transport to justice, to ensure that that country’s laws and political systems align with EU values and goals. Only after successfully completing all chapters can a country be offered admission to the EU.
The case of leaving the EU is potentially even more complicated, as the case of Brexit demonstrates. We cover the issue of Brexit in the last chapter.
The future of EU enlargement is unclear. Many think the EU has grown very quickly in the past few decades and needs time to ‘digest’ its new members and resolve ongoing issues, like democratic backsliding, migration, and economic crises. Moreover, the current candidate countries face a series of issues. In this clip, UNC Professor Milada Vachudova talks about political challenges in Bosnia and the Balkan states.
The EU Today
The European Union is an organization like no other. It is the world’s only supranational organization, which means that power and authority in certain policy areas is permanently given up by member states to a higher level, the EU. In some policy areas, the EU is the sole body able to make decisions for the 27-member organization, while in other areas, member states retain authority (we discuss which policy areas in the previous section). In most policy areas, authority over policymaking rests partly with the EU and partly with the member states. This makes the EU seem like a country and not like a country at the same time.
|The EU is like a country||The EU is not like a country|
Before we discuss the term supranationalism in depth, it’s important to know what distinguishes it from other forms of governance. The EU began as a series of agreements between partner countries in the form of the European Coal and Steel Community. An international organization, by contrast, usually involves voluntary agreements between governments on particular issue areas, like trade or climate change, but the signatories remain independent. Importantly, decisions by international organizations are not enforceable, and rely on the voluntary cooperation of partners.
In some ways, the European Union is itself like a country. The EU has the authority to make trade deals (individual member states do not). Because of the single market for goods, services, people (labor), and money, there are no internal borders between EU nations. In other ways, the EU is like an international organization that facilitates communication and collaboration between 27 sovereign countries. For example, each member states still gets to define who is eligible to become a citizen of a given country, even if conferring citizenship also grants that person European Union citizenship.
Is the EU a confederation? A confederation is “a system of government or administration in which two or more distinct political units keep their separate identity but transfer specified powers to a higher authority for reasons of convenience, mutual security, or efficiency” (Ex: The United States after the Revolutionary War during period of Articles of Confederation). In this case the subnational units control the central government, which is given only specific powers. It is similar to an intergovernmental organization, in that the member states retain their autonomy and can control the central government.
Or is the EU a federation, like the United States is? A federation is “a system of government in which significant governmental powers are divided and shared between the central government and small subnational units.” In this view, where EU member states (Lithuania, Italy, etc.) are the equivalent to American states, like Texas or Idaho.
The EU shares commonalities with confederations and federations, but ultimately is different. Although the EU originally derived its authority from the member states, that authority is permanently granted to the EU and cannot be easily taken back, even though the member states remain autonomous and have significant power.
The EU is what is called a supranational organization, and is the only one of its kind in the world today. Supranational: A supranational organization is different because member states surrender power in specific areas to the higher organization. Decisions on product standards and trade policy, for example, rest solely with the EU – although the national governments have a seat at the table in the legislative process and through their representation in the European Parliament, national parliaments and governments alone do not have the ability to legislate on that issue. Moreover, decisions taken by a supranational organization must be obeyed by all the member states. There is a system of European courts to determine when violations have occurred. But because the EU does not have complete authority over member states, enforcement mechanisms are often not as effective as they would be within nation states. For example, the actions taken by Hungary and Poland in recent years that undermine democracy by silencing press or sidelining political opposition movements have been difficult for the EU to sanction.
Over time, the EU has become more supranational and less intergovernmental. While the forerunners to the EU (the ECSC and the EEC), they relied on intergovernmental agreements more than they gave power to the institutions within these organizations. But cooperation grew, especially as it pertained to the single market, the intergovernmental Council has lost some power to the Commission and Parliament, the two supranational institutions that cannot be controlled by the individual member states. More policy areas, as the graph below shows, have come under European jurisdiction over time. Policymaking over most areas comes from a mix of the EU and national jurisdiction, and there are almost no areas of governance in which the national governments retain exclusive authority.
The structure of the European Union is continually contested. This fundamental question about WHAT the EU is responsible for some of the most pressing European questions of our time. Should the EU issue debt on behalf of all 27 countries, and should the EU have a fiscal union in the event of another economic collapse? Should the EU have a common defense force and immigration policy? Some think it should move towards becoming a federation; others think that further integration should be viewed with caution. For example, the German position has generally favored movement toward a federal EU, while the British were reluctant to cede more power to the EU and favor an intergovernmental EU (and they’ve recently left it).
In this clip, UNC Profs. Gary Marks and Liesbet Hooghe explain how the EU works:
European legislation is passed with the help of three key actors: the Council of the European Union, the European Commission, and the European Parliament. One – the Council – is intergovernmental, a meeting of member state national governments, and two – the European Parliament and Commission – are supranational and independent of the national governments. In the ordinary legislative procedure, the Commission (via the Parliament or Council) proposes legislation, which the Council and the Parliament must later adopt.
The European Commission is the EU’s independent, executive arm. The commission is led by 28 “commissioners” one from each country, in charge of different policy areas. It proposes legislation, it manages EU policies and allocates EU funding, and it enforces EU law (together with the European Court of Justice), ensuring it is properly applied in all EU countries. Through its arm, the European External Action Service, it represents the EU internationally in areas of trade policy, humanitarian aid, and negotiates international agreements for the EU.
The Council of the European Union is an intergovernmental element of the EU. It is a meeting of one representative from each member state national for each policy area – so while each country always has one representative, that representative is sometimes the Interior Minister, sometimes the Agriculture Minister, and so on, depending on what legislative issues are at hand. The Council shares legislatie and budgetary powers with the Parliament as a co-legislator.
In response to the fact that the development of the EU had largely occurred without the consent of European citizens, the EU gained a directly voted legislative body in 1979, when the first European Parliamentary elections were held to the 751-body chamber. This parliament functions as a co-legislator with the Council, which is akin to a cabinet, with one Commissioner for each policy area. It is weaker than national parliaments in that it cannot directly propose legislation, but it has grown in power over time. Since the 2009 Treaty of Lisbon, the Commission President, now Ursula von der Leyen, is directly elected from by the European Parliament. European Parliamentary elections are held every five years, with the next elections in 2024 and 2029.
The Schengen Agreement
The proximity of European countries and cultures to one another has important implications for peoples’ lives. Thanks to the European Union, those living in the EU have the right to work and live in any other European Union country. Some people living close to borders might even live in one country and work in another.
For many people living in the EU member states, crossing national borders is very easy, thanks to the Schengen Agreement. This treaty, which was signed in 1985, essentially removed national borders within signatory nations, and allows for passport-free travel between countries. In many cases, your only indicator you are in a new country is a sign on the side of the road and a message from your cell phone carrier that you are on a new network. Importantly, not all EU states are signatories, and some non-EU countries have signed on to the treaty, like Switzerland and Norway. As of December 2020 there are several opt-outs. Ireland has a permanent opt-out. Newer EU states like Cyprus, Romania, Bulgaria, and Croatia, each of which commit to eventually joining the agreement.
The Single Market
Bringing together European economies has brought about several key changes to European social and economic life. First, the forerunners to the EU had economic integration as a primary goal, the key to which was harmonizing trade rules across different countries. This was achieved initially through a customs union in the 1960s, which meant European countries charged the same tariff to all goods entering the group, regardless of which country is entered into. It also eliminated border checks for goods moving between countries in the group. This economic integration was deepened with the creation of the European Single Market that came into force thanks to the Maastricht Treaty, which also created the European Union. The single market, as the graphic below explains, includes the features of the customs union, but also includes provisions for common regulations of goods and services and the freedom of movement of people, goods, and money between countries that are members of the single market. This is not to be understated in its significance. It means that there are no internal barriers to trade (ie. tariffs or duties) within the EU, there are common product regulations within the EU. Once products are in the EU, they can move freely within it. Therefore, there is no “German” or “Swedish” border for goods – there is only an EU border.
The single market relies on significant coordination between countries to ensure product standards and levying of tariffs when they arrive in the EU, even if they are destined to move quickly across national borders. Therefore, countries have lost the authority to set things like product standards and regulations and import/export policies. Instead, this authority now rests within the Euroepan institutions: the Parliament, Commission, and Council. They are the only power with the authority to set product regulations and negotiate trade deals with non-EU countries. This has led to significant harmonization of standards and regulations across Europe, which is beneficial to citizens and businesses alike. This delegation of authority by individual member states to the European level of policymaking is perhaps the prime example of supranationalism.
The single market has been highly beneficial for all European economies, as it allows countries to sell their products much more cheaply to massive market of over 500 million people. As a bloc, the EU is the second largest economy in the world after the US. The has significantly stabilized economic exchange within the EU, and also between the EU and non-EU countries. This economic integration is so beneficial that even non-EU members often abide by the rules the EU sets of the single market in order to be a part of it (for example, Norway, Switzerland, and likely the U.K. once it formally leaves).
This single market has had several spillover effects to different areas of governance. It has come along with the four freedoms of the European Union: freedom of movement of goods, services, people, and money. It has been the driver for further economic integration, which has come in the form of the European currency, the euro, which every new member must commit to eventually adopting when they join the EU. In order to help countries benefit the most from the single market, the European Union provides regional development funds to less developed regions for infrastructure and economic development (see next section). It has granted European citizenship to all citizens of member states, allowing them to live freely across the EU.
Cheaper Communication Across Europe
One major benefit to travelers within the European Union has been the harmonization of communications pricing across Europe. In keeping with the idea that the EU is a single market for all goods and services, the EU has set forth rules on how cell phone companies can charge for calls, texts, and data across EU borders. Since 2017, all calls, texts, and data are charged at the same rate by your carrier regardless of whether or not you are in the carrier’s home country. For example, if you have a Lithuanian SIM card, you are charged domestic prices even if you are in Spain and calling a Spanish number. Moreover, the EU has also set price limits on how much calls, texts, and data may be charged.
Regional Development Funds
The single market for goods and services functions better if all parts of Europe are able to compete in a global marketplace. In order to level the playing field for less developed parts of Europe, the EU has since the 1970s provided “Regional Development Funds” for infrastructure and economic development to many European regions. Funds are used to help them achieve ‘convergence’ with the economically prosperous parts of Europe. Funding can go towards developing new infrastructure, like high speed rail and highways, creating new knowledge and innovation centers, and promoting cross-European trade. As you can see in the map below, in the older cycle of funding, many regions even within rich countries were eligible for funding. If you ever see construction projects around Spain and Italy, for example the construction of high speed rail projects, you might note a European flag on a poster, which means funding was partially provided by the European Union.
The single market was designed in order to facilitate easier economic integration through trade among European Union countries. But one issue with the single market was that despite barrier-free trade, citizens and businesses still had to deal with over a dozen currencies to exchange. This becomes complicated if supply chains span more than two countries. It is potentially ruinous if one country’s currency were to suddenly increase or decrease in value, which would mean unexpected increases in the cost of imports or exports. Multiply that by thousands of units produced, and those costs might make a business hesitant to invest across borders. Having a common currency solves this issue, because it means there will always be a 1:1 conversion between most countries in the Eurozone. One Euro in Slovakia will be one Euro in Portugal, and all over the EU.
The Euro became a reality for many Europeans in 2002, but the groundwork for the single currency was decades old, dating back to the founding days of the European Communities. The Maastricht Treaty contained a plan to merge European currencies within a decade. Before countries could adopt a single currency, they had to align their monetary policy (the supply of money) and their exchange rates to avoid large differences between countries. Countries joining the Euro had to accept rules about the size of their debt and deficits, known as the Growth and Stability Pact. When the Euro was introduced virtually in 1999, the European Central Bank took over control of the monetary policy, and today still controls the monetary policy of the Eurozone countries. This is another piece of sovereignty Eurozone countries have given up – the ability to control their own monetary policy – in return they have received exchange rate stability and increase ease of trade. The Euro was introduced to the public in 2002, with fixed changed rates from previous national currencies to the euro.
The coins and bills carry different motifs. The bills have fictitious bridges on them, while the coins have country-specific designs. The Brandenburg Gate or German eagle, for example, are on the backs of German euro coins. In Italy, the euro coins feature famous Italian artists and monuments, including the Colosseum (in Rome) and a sketch of a human by Leonardo da Vinci. You can see the designs here.
The Euro has faced significant challenges since its creation. The financial crisis sparked in 2008 created serious problems for mostly Southern European economies. These economies, particularly Greece, had very high levels of debt that it suddenly was no longer able to pay off. This crisis, which boiled over to Spain, Italy, and Portugal, created uncertainty about the stability and value of the Euro. These countries needed to be bailed out (have this debt removed from their balance books) in order to avoid financial ruin. This crisis exposed a major weakness in the organization of the euro, namely that there is no bail out mechanism and only partial solidarity among European publics. Many Northern European countries and publics were opposed to bailing out what they saw as overspending on the part of Southern European governments. Eventually, the EU was able to create a mechanism to buy the debt owed by various governments through the European Central Bank. In the long term, one proposed solution has been for EU countries to issue debt as a group instead of individual countries, but many northern European countries still object to this further integration.
This YouTube clip from Vox explains the causes of the Eurozone crisis and discusses ways to avoid a similar crisis in the future.
When the EU accepted ten new members in 2004, eight of those new members were formerly Soviet satellite states that two decades previously were authoritarian states with communist economies. The European Union played an instrumental role in helping these countries democratize and develop functioning market economies, even if there is evidence of democratic backsliding in some countries today.
The Polish trade union, Solidarność, and its leader Lech Walesa, become household names across Europe and the world following the Gdansk shipyard strikes in the summer of 1980. This movement would eventually bring down state socialism in Poland. The fractures in the Soviet sphere widen with the opening of the Hungarian border in 1989. On 9 November 1989, the Berlin Wall is pulled down and the border between East and West Germany is opened for the first time in 28 years, this leads to the reunification of Germany when both East and West Germany are united in October 1990.
With the collapse of communism across central and eastern Europe, Europeans become closer neighbors. While communist East Germany was directly absorbed into West Germany, the other newly independent states had a tough path ahead. Without the economic and political support of the USSR, these countries faced dual crises immediately after independence. At the same time, the European Communities countries were working on the creation of the European Union and the single market. Access to the single market and European development funds quickly became top priorities for the post-Soviet states, and several of them applied for admission in the years following independence. As we have discussed previously, these countries must meet the Copenhagen criteria to apply for membership, which includes the rule of law, a functioning market economy, democratic stability, and acceptance of EU legislation.
You can learn a little more about the process of joining the European Union by watching this short (2 minute) YouTube video.
The European Union played an active role in helping these states democratize and develop market economies by leveraging the benefits of future membership in the EU. The EU promoted and gave money for their economic development in return for economic and political reforms. This meant allowing a free press, reducing corruption, ending ethnic conflicts, promoting rule of law. When these countries did not comply, the European Union could threaten to reduce its funding or slow down the accession process. In 2004, eight of these countries were admitted to the union: the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovenia, and Slovakia. Two others, Romania and Bulgaria, needed another three years before they could meet the criteria to join the EU.
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