The Evolution of the European Union



Second World War


Following the second world war, which destroyed the economy of many of the countries of Europe, the European Union has evolved from attempts to prevent further wars, inspired by the French statesman Robert Schumann. The first of these was Benelux, a customs union of Belgium, the Netherlands and Luxembourg; the second was the Iron and Steel Community which united France, West Germany, Belgium, Netherlands, Italy and Luxembourg in 1951. The object was to prevent any country from setting up an arms industry (needing steel) independent of the others. The six members then agreed to the Treaty of Rome in 1957 to set up an Economic Community to grow beyond a customs union towards political union, which would amount to a federation.
The same treaty created Euratom to coordinate nuclear research.

The Marshall Plan (1948), by which the United States provided huge funds to help in rebuilding the economies of Europe, had a condition that the beneficiaries should cooperate across frontiers. The EU is therefore partly the outcome of that policy.

Britain was invited to join but declined. British statesmen at the time believed the British Empire was still more important to Britain's interest than Europe - though it was in 1956 that the Empire was shown to be over when the Suez war was stopped by a simple order from the United States. They failed to foresee the later developments (and indeed believed it would fail, as some politicians still do), and failed to influence the basic rules, such as the Common Agricultural Policy. The rules were set by France and Germany which still had large numbers of small farmers, rather than the large commercial farms found in Britain.

In 1962 the Common Agricultural Policy was begun, to coordinate food production and prevent further European famines (there had been a famine in 1944-46). It was also to protect small farmers in rural communities.

In 1967 it was renamed the European Communities when the Iron and Steel Community, Euratom and the Economic Community were merged. The customs union was proclaimed in 1968 - though non-tariff barriers were not affected. The European Community was enlarged in 1973 when Britain, Denmark and Ireland joined and EFTA lost its main members. It was enlarged again in 1981 when Greece, and in 1986 Spain and Portugal, joined to make 12 members. These three had become eligible when their dictatorships came to an end.

A Common Fisheries Policy was started in 1973 (just before Britain, Ireland and Denmark joined and was the probable cause for the Norwegian people voting against membership). It may also be the cause of overfishing in the North Sea.

The European Parliament was first directly elected in 1979. Before that its members were chosen by member parliaments.

The next stage was planned to be a monetary union following the agreed removal of customs barriers at the end of 1992 according to an amendment to the Treaty of Rome called the Single European Act. Only in 1993 did it become a Common Market, usually called the Single Market. Most of the members except Britain and Denmark agreed to work towards a common currency by 1999. There was to be a single European Currency, later called the euro. If seven countries agreed it would come into existence by 1997. In 1990 the Thatcher (Chancellor Nigel Lawson) government of Britain proposed a Hard ECU (European Currency Unit) which would be a parallel currency in addition to existing currencies, allowing the gradual adoption of a single currency. This was how the dollar became the official currency of the US. (This idea was rejected, and probably could not have worked in modern conditions). A soft ECU already existed. It was a notional unit of account made up of a "basket" of existing currencies. Only token coins were minted but it was used by international companies for pricing, and could be used for travelers' cheques.

Until September 1992 monetary union appeared likely. It was believed that those countries which stayed out would probably suffer from the disadvantages of having a small currency with no freedom of action. Some elements of the British Conservative party were opposed to it - the cynics would say because the advantage to a government of having control of a currency is to be able to bribe the electorate with a little inflation before an election. (But a weak economy, such as Britain's was - or Italy and Greece now - may be disadvantaged by a single currency). The September 1992 financial events (the Pound and Italian Lira dropping out of the European Exchange Rate Mechanism ERM) seemed to make monetary union less likely. Renewed disturbances occurred in August 1993. Perhaps these showed that there are only two possible conditions: a single currency; or floating national currencies, but not a managed coordination. It may also show that a Single Currency can only be maintained by a fully Federal Government. It is uncertain whether European voters actually want a European Government.

However, the Single Currency came into being on the first of January 1999 when all the member currencies were frozen at stated rates. The European Central Bank came into being and the existing notes and coins were regarded as merely being manifestations of the euro. The physical euro of coins and notes was introduced on 1 January 2002. (The author went to Oostende and took some notes from an ATM machine at 03.00.)

It has also been adopted by non-members of the EU in Kosovo.

Has the euro been a success?
Disasters predicted by some right wing British commentators opposed to the whole idea of European Union may have occurred in 2011.

The first criticism was that interest rates set by the governors of the European Central Bank were not suited to every country.

For example, in Ireland a high interest rate might be useful to suppress increasing house prices - a housing bubble, whereas Germany might need lower rates to combat high unemployment. From the beginning there were rumors about the situations of Italy and Greece, which, before the institution of the euro, were accustomed to devaluing their currencies. Following the events of 2011 could either country leave the single currency? The Greek government appears to have falsified the figures it preesented to justify its admission to the Monetary Union. Few people pay taxes there and the government deficit was larger than stated. (An American bank assisted the Greek government in this deception by the kind of "off the balance sheet" trickery used by ENRON).

But both were running (2006, and even worse in 2009) government fiscal deficits higher than were permitted by the European Central Bank following the Convergence criteria.

The three main political questions were: 1) the speed at which political and monetary union would be achieved; 2) the size of the community; 3) the powers and limitations of the central organization expressed through subsidiarity

Treaty of Maastricht
The Treaty drawn up in December 1991 was intended to replace the Treaty of Rome and pave the way for a political federation, presumably with an identifiable European Federal Government (to be called the European Union). Will this treaty be effective?
1) A timetable was drawn up at the Maastricht Conference. But Denmark failed at first to ratify the treaty and a French referendum approved it by a tiny fraction which was not convincing. Subsequent modifications to the treaty at the August 1992 Edinburgh conference may have persuaded the Danish people to ratify it in May 1993 in a second referendum.

2) Several other countries applied to join. In 1994 Norway, Sweden, Finland and Austria were approved, subject to referenda (Norwegians again voted against). These are rich countries able to support the CAP.

2004. In the next wave Malta, Poland, Hungary, Czech Republic, Slovenia and Slovakia joined, with Estonia, Lithuania and Latvia. Cyprus also joined with this group, though the two parts were not reunited. Bulgaria and Romania were admitted in 2007.

Negotiations with Turkey began in October 2005. It is uncertain whether it will be admitted, because of reservations about its Muslim population, eastern problems, occupation of north Cyprus and its poor human rights record. It is possible that agreement to admit Turkey in 2015 may be achieved but that voters in several countries, including Austria, Germany and France may reject the treaty.

East Germany on its merger with West Germany in October 1990 became a member automatically but had been treated by West Germany previously as German territory with access to Community markets.

Ukraine has expressed interest. Russia is surely too large for full membership.

The Baltic states are afraid of Russia, and of being excluded from Europe and joined in 2004.

3) A third question is the amount of democratic control of the Community institutions. At present the elected European Parliament has very limited powers to dismiss the Commission and reject the budget. The Maastricht Treaty increased the power of the European Parliament to control the Commission. At present the decisions are made by the Council of Ministers who are responsible to national parliaments rather than to the European Parliament. The Commission is appointed by the Council of Ministers (that is, National Governments): smaller countries nominate one Commissioner; larger countries two (until 2004 when all were limited to one). The results of the referendums in Denmark (first) (51% against) and France (51% for) have been interpreted as showing that the electors in these countries were reluctant to allow more power to the Brussels authorities.

4) There are disputes about social costs to industry. Can Europe as a whole compete with the rest of the world if it has high labor costs? This applies especially to France, but also to Germany. Until 1997 with the election of a Labour government Britain opted out of the harmonization on social costs (the Social Chapter) - perhaps because of poor training standards and productivity in Britain. There are comparisons with the relation of Mexico to North America in NAFTA.

Economic Imbalance: a rich island?
In the long run Europe cannot be isolated from the Third World. Either living standards will equalize, or large numbers of the poorer people from "outside" will move to Europe. (See Problems) Until 1997 Britain appeared to be competing directly with Taiwan and South East Asia in wage levels. Would this spread to the other countries, as Germany appears to be suffering from its high employment costs?

Does this already amount to a political federation? Already laws (Directives) agreed by the Commission and the Council of Ministers have precedence over national laws, which can be annulled by the courts if they conflict with EU Law. In a landmark decision in July 1991 the Court of the European Communities (Luxembourg), whose judgments are binding, ruled that an Act of the British Parliament on the control of foreign fishing boats was invalid. This is reminiscent of the powers of the United States Supreme Court. In this sense there is already one element of a federation. If the monetary union and closer political union occur there will be other elements of federation. Politicians who argue about whether this will happen are ignoring the fact that federations can cover a range of types from the very weak to the very strong. No-one can tell how strong the EU can become. At present the Union cannot be classified as a sovereign Federation in being but only as potential. The British government is believed to desire a slower integration and would prefer a loose association of states rather than a federation. Britain refers to the need to integrate the eastern states as a reason to delay integration; other states use the same reason as cause to increase integration more rapidly. A common currency might make it easier to integrate the eastern economies, whose existing currencies have no strength.

The Maastricht Treaty was an amendment to the Treaty of Rome. Denmark was allowed to opt out of much of the treaty, especially the Defense and Monetary unions. If Denmark had left the Community perhaps a Northern Union might have been formed, within the European Economic Area (EFTA).
The Maastricht treaty came into force on 1 November 1993. From that date the European Community changed its name to Union.

At this time it seemed possible that the stronger countries: Germany, France and Benelux - might form a currency union, leaving the weaker countries outside. This would have been a dangerous development as the outside currencies would be in danger of inflating away (as in East Africa). But there were also fears that a Single Currency would have a bad effect on even the stronger economies, causing unemployment. Are these fears the illusions of those ideologically opposed to any form of European cooperation (some members of the British Conservative Party and the extreme right in other countries)? Or are they the results of persistently deflationist economic policies preferred by bankers (compare the Hoover policy before the Keynesian New Deal of Roosevelt)? Now that the euro is in operation we shall see. The physical currency was issued on 1 January 2002. A big test of the euro comes with the Financial Crash of 2008. Can the European Central Bank and the national governments act together to deal with the threatened Depression. So far (December 2009) the euro has increased its value against the pound and the dollar.

The euro is the currency of: Andorra, Austria, Belgium, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Slovenia, Spain, Portugal (and Monaco, San Marino and the Vatican). Outside the EU it is also in use in Kosova, Montenegro and Bosnia, as well as the Overseas Territories of France in the Caribbean and South America. The new members from eastern Europe are supposed to change to the euro but most have not yet done so. For more details about the euro see this page.

Schengen Zone
Within the EU there is a zone of passport free travel named by the treaty signed at Schengen in Luxembourg. Switzerland has voted to join this zone (2005). This means that travellers from outside the EU will only be checked at the point of entry to the EU. In normal times there are immigration or customs officers only at the external borders of this zone. Within it border posts have been completely removed. Britain is not a member; nor is Ireland which together make another common travel area (border posts between Britain and Ireland have been removed). Norway and Iceland are members although not in the EU. Estonia, Latvia, Lithuania, the Czech Republic, Slovakia, Slovenia, Cyprus (despite not being united), Malta and Hungary joined in December 2007.

April 2011: Large numbers of refugees from Tunisia, following the Tunisian revolution of 2011, are putting this regime under pressure. Italy (Berlusconi) has given many of them permits to stay which gives them rights in the whole Schengen zone. As French speakers many of them have headed for France. France (Sarkozy) has objected and called for a revision of the Treaty. There are threats to reimpose passport controls on all frontiers (that would be expensive if governments have to build frontier posts, new roads and employ thousands of officials).

The 1990 Gulf Crisis and war, followed by the 1991 Yugoslav crisis, has raised the question of whether there should be a European Army. A European Defense Community was proposed in the 1950s but it never developed (after French refusal). Western European Union is a potential defense community. It consists of the EC members minus Ireland (which is neutral) Denmark and Greece and plus Norway. It is most of NATO in Europe. The Gulf war revealed that European states had different interests and were unable to agree on a common policy. One of the most important attributes of a sovereign state is the ability to conduct foreign and military policy. The European Union is therefore not yet a sovereign state. In the July 1991 Yugoslav crisis it was the EU which appointed observers. But they failed to do anything. Eventually it was American troops acting through NATO that solved the problem. There is a joint Brigade of French and German troops, planned to be expanded to a Corps, which might become the nucleus of a European Army.

European Economic Area
Negotiations between the Community and the EFTA states created a European Economic Area - a market including all the European states in which the non-members will adopt some of the economic policies of the Community, but without a direct voice in the institutions. Only Norway, Iceland and Switzerland remain. An agreement to create a European Free Trade Area was initialed in October 1991. It came into being at the same time as the Single Market: 1 January 1993.

As the world's technology develops rapidly (including communications, nuclear power, weapons, transnational Corporations) the political forms of the past - the nation state - seem unable to cope with the problems of the whole world and many forums of international consultation have grown up, including the Group of 7 industrial powers which coordinate their economic and monetary policies. All nations are now linked to each other through these different bodies. Absolute sovereignty has already gone. (A few rogue states remain: Israel, Iraq, Libya, Burma, North Korea.)

In Europe the Organization on Security and Cooperation in Europe (OSCE) is taking on some of the roles of a Defense Community. Both the former NATO powers and the former Warsaw Pact powers are members. NATO remains in being and there seem to be no plans to abolish it but it may fade away gradually if the United States withdrew its forces - but this looks increasingly unlikely. By October 1991 there were talks again about the formation of a Defense Community, with Britain resisting the idea. In 1999 there was agreement to form a European force, which might be the nucleus of a European army.

A more visionary opinion may be that the world has already reached a condition in which both Europe and the United States are too small to control the integrating technologies and financial markets and that therefore there is no choice but an effective World Federation.

One important reason for international cooperation is that it is difficult to tax the large corporations within national boundaries as they move their funds about so quickly. This may represent the problems of Feudalism on a worldwide scale - overmighty Subjects.

New members
Bulgaria and Romania joined in January 2007, although their justice systems are not considered to be fair, and their political and business systems are very corrupt.

Croatia (Hrvatska) is due to join in 2013.

European Constitution
June 2005 saw a new crisis in the development of the EU. A "constitution" was agreed and a treaty which would have simplified the decision making process. The aim was to have a structure that would work with 27 members, whereas the existing structures were designed when there were only 6 members.

Former French President Valery Giscard d'Estaing was charged with writing a new constitution for running the EU. It would have given more power to the European Parliament over the actions of the Commission.

Some states ratified the Treaty with a vote in their parliaments. Spain voted in a referendum. Then France and the Netherlands held referendums and the voters rejected the treaty in each. As the new treaty had to be adopted unanimously it dropped. Opinion polls suggested that if Britain had voted the voters would have rejected it. If passed it would have set up a permanent President of the union, instead of the six monthly rotating presidency (held by Britain from 1 July 2005).

This has led to new disputes about the budget. At present 40% of the money raised for the EU (mostly from a proportion of the Value Added Tax) is spent on the Common Agricultural policy which subsidies farmers, especially those in France and Germany. The British Prime Minister, supported by several other states, has called for these payments to be reduced. France and Germany have called for the British "rebate" to be cut. The British have proposed to discuss this rebate if the CAP is also discussed. The French are keen to maintain the CAP.

The June 2007 meeting of the heads of government agreed a new Treaty that would bring in several of the components of the proposed Constitution: especially a permanent President to be appointed by the heads of government, and changes to the voting system to remove the Veto held by the big states on several topics. The British government (Tony Blair) claimed that these changes did not require a referendum. As this was the last act of Prime Minister Blair, before handing over to Gordon Brown no-one could be sure whether Brown's government would ratify this treaty. It was put before Parliament in 2008 and ratified. However, in a referendum the voters in Ireland rejected it. They were asked to vote again in 2009.

The voters in Ireland voted in favor and the treaty came into force. A permanent chairman of the Commission was appointed. He is the former prime minister of Belgium. A British member of the House of Lords was appointed Foreign minister of the EU.

European Court of Human Rights
This is not part of the European Union but is the most important organ of the Council of Europe. The Council was founded in 1945 to bring together the western European countries, with a common standard of Human Rights. The Court hears cases under the European Convention of Human Rights. It already includes Eastern states as well as the Union and EFTA states. This is mainly cultural and educational and its purpose is to further democratic culture. It appoints the Court of Human Rights (Strasbourg). It is hard to believe that it also includes Russia whose activities in Chechnya are incompatible with its treaty obligations under the European Convention on Human Rights.

It must be distinguished from the Court of the European Communities whose function is to rule on disputes about the operations of the various treaties - it is mainly a Commercial Court.

Is the EU an anti-democratic plan?

The EU "project," a very irritating word that should be tossed in the dumpster along with "iconic," "meme," "parse" and "narrative," is in potential outline a totalitarian nightmare. Down with federalism! Remember Simone Weil's hatred of the Roman Empire and what it did to Europe's cultural richness and diversity: "If we consider the long centuries and the vast area of the Roman Empire and compare these centuries with the ones that preceded it and the ones that followed the barbarian invasions, we perceive to what extent the Mediterranean basin was reduced to spiritual sterility by the totalitarian State." As Weil's biographer, Simone Pétrement, comments, "The Roman peace was soon the peace of the desert, a world from which had vanished, together with political liberty and diversity, the creative inspiration that produces great art, great literary works, science, and philosophy. Many centuries had to pass before the superior forms of human life were reborn."


 2011 Crisis
The 2008 financial crisis, mainly the result of banks in the United States lending money they were not covered for to people who could not repay mortgages has caused serious problems. Several US banks collapsed, starting with Lehman Brothers, while many other well-known banks were forced to merge with others. This crisis affected some of the poorer European countries, especially Ireland, Portugal, Spain, Italy and Greece.

Ireland and Greece have had especially serious financial problems, and Greece has had to receive extra funding from the International Monetary Fund and European sources. Ireland also. In Greece the government has in effect been superseded by European appointed "technocrats".

In 2011 the problems of Greece were so acute that the Council of Ministers and other EU organs insisted on severe cuts to the Greek budget and the appointment of a government responsible to the EU rather than the voters. The next country to be affected was Italy where the resignation of the notorious Prime Minister Berlusconi was insisted on and his replacement, by a former European Commissioner.

There have long been criticisms of the European Union that its institutions do not respond to ordinary people's wishes - in effect, that it is non-democratic. After the events of 2011 these criticisms seem very relevant as the governments of Greece and Italy have been ordered to ignore their voters and introduce severe cuts to government expenditure, especially of social programmes, mainly to satisfy the banks that caused the problem in the first place. What will be the result of popular dissatisfaction, already seen in frequent riots and demonstrations in Greece? In both countries "non-political" governments have been appointed, with the acquiescence of their parliaments, headed by economists. How long will ordinary people tolerate them, as they bring in the kind of changes that economists want?

Frequent meetings of the heads of government - The Council of Ministers - took place at the end of November and beginning of December 2011. What was being proposed was a "fiscal union" of the 17 Eurozone countries who would have to harmonise their tax rates - in effect having their taxes set by a superior body. Ireland would be affected as the government there attracts businesses to Ireland by setting very low Corporation taxes - something that France especially resents.

The heads of government meeting in Brussels 9 December 2011 agreed to harmonisation of taxes in the eurozone. Britain was excluded following Prime Minister Cameron's veto of the proposals. Will this lead to Britain's withdrawal from the EU?

 The veteran Socialist politician in Britain, Tony Benn, produced an outline republican Constitution for Britain, and also for a Commonwealth of Europe based not on governments cooperating but on popular sovereignty. Would this be a viable alternative to the present system?
Tony Benn - Common Sense

Common Sense: New Constitution for Britain

Last revision 20/12/11


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