EU INSTITUTIONS – 2ND YEAR TRANSLATION STUDIES

AUTUMN TERM, 2013-2014
ROXANA-CRISTINA PETCU, PhD
Lecture V LAW-MAKING IN TH EU
The powers and responsibilities of the EU (its competences) are defined in the Treaty of Roma and in the
subsequent amendments. From the very beginning, the Community had responsibility for the common policies,
most importantly covering agriculture, fisheries and international trade. There are other matters added to these
traditional responsibilities, such as transport, environmental protection, consumer protection and public health,
research and development, the promotion of economic and social cohesion and cooperation with developing
countries.
Thus, the competences of the Community result
 from the Treaty of Rome (although some of them could not be exercised because of various political
problems stemming from the national interests of the MS)
 from each formal step in integration which added new competences
 or, in some cases, the Union simply found itself in the situation to exercise in practice powers that it has
always enjoyed in theory
DIFFERENT SORTS OF LAW
EU law takes different forms. There are binding and non-binding legal instruments.
1. Binding instruments
Directives
 sets out a policy objective but requires national legislation to implement or transpose. This gives a
certain amount of leeway to the MS and allows for differing conditions
 A directive is a legislative act of the European Union, which requires MS to achieve a particular result
without dictating the means of achieving that result. It can be distinguished from regulations which are
self-executing and do not require any implementing measures. Directives normally leave member states
with a certain amount of leeway as to the exact rules to be adopted. Directives can be adopted by means of
a variety of legislative procedures depending on their subject matter.
 they are binding. The legal basis for the enactment of directives is article 249 of the Treaty establishing the
European Community and, as such, directives only apply within the European Community pillar of the
European Union.
Article 249
In order to carry out their task and in accordance with the provisions of this Treaty, the European
Parliament acting jointly with the Council, the Council and the Commission shall make regulations and
issue directives, take decisions, make recommendations or deliver opinions. A regulation shall have
general application. It shall be binding in its entirety and directly applicable in all Member States. A
directive shall be binding, as to the result to be achieved, upon each Member State to which it is
addressed, but shall leave to the national authorities the choice of form and methods. A decision shall be
binding in its entirety upon those to whom it is addressed. Recommendations and opinions shall have no
binding force.

The Council can delegate legislative authority to the Commission and, depending on the area and the
appropriate legislative procedure, both institutions can make laws. There are Council regulations and
Commission regulations. Article 249 does not clearly distinguish between legislative acts and
administrative acts, as is normally done in national legal systems
a time limit (2 years or less) is usually laid down for the transposition of a directive (often breached).


in case of breach or in case the Commission is not convinced that the national implementing legislation is
adequate, the ECJ has the final word
Notwithstanding the fact that directives were not originally thought to be binding before they were
implemented by member states, the European Court of Justice developed the doctrine of direct effect
where unimplemented or badly implemented directives can actually have direct legal force. The court
found that member states could be liable to pay damages to individuals and companies who had been
adversely affected by the non-implementation of a directive .

Regulations
 apply immediately throughout the territory of the EU, without requirement for legislation at national level.
A regulation is a legislative act of the European Union which becomes immediately enforceable as law in
all member states simultaneously. Regulations can be distinguished from directives, at least in principle,
need to be transposed into national law. Regulations can be adopted by means of a variety of legislative
procedures depending on their subject matter.
 are binding. The legal basis for the enactment of regulations is article 249 of the Treaty establishing the
European Community and, as such, regulations only apply within the European Community pillar of the
European Union.
 The Council can delegate legislative authority to the Commission and, depending on the area and the
appropriate legislative procedure, both institutions can make laws. There are Council regulations and
Commission regulations. Article 249 does not clearly distinguish between legislative acts and
administrative acts, as is normally done in national legal systems.
 Regulations are in some sense equivalent to "Acts of Parliament", in the sense that what they say is law,
and do not need to be mediated into national law by means of implementing measures. As such,
regulations constitute one of the most powerful forms of European Union law and a great deal of care is
required in their drafting and formulation.
 When a regulation comes into force it overrides all national laws dealing with the same subject matter and
subsequent national legislation must be consistent with and made in the light of the regulation. While
member states are prohibited from obscuring the direct effect of regulations, it is common practice to pass
legislation dealing with consequential matters arising from the coming into force of a regulation.
Decisions
 are binding, but apply only to the body or bodies to which they are addressed, which may be a MS, a legal
person (usually a corporation) or a natural person
 A Decision (defined in Article 249/EC) is one of the three binding instruments provided by secondary EU
legislation. A decision is binding on the person or entity to which it is addressed. Decisions may be
addressed to member states or individuals. The Council of the European Union can delegate power to
make decisions to the European Commission.
 The legislative procedure for adoption of a decision varies depending on its subject matter. The co-decision
procedure requires agreement of and allows amendments by both the European Parliament and the
Council of the European Union. The Assent procedure requires agreement of both Parliament and Council,
but the Parliament can only agree or disagree to the text as a whole - it cannot propose amendments. The
Consultation procedure requires agreement of the Council alone, the Parliament merely being consulted on
the text. In some areas, such as competition policy, the Commission may itself issue decisions.
 Common uses of decisions involve the Commission ruling on proposed mergers, and day-to-day
agricultural matters (e.g. setting standard prices for vegetables).
 On the basis of case law, decisions may have direct effect, that is to say they may be invoked by individuals
before national courts
The EU institutions may have a certain amount of leeway in deciding which sort of law is appropriate in which
case, but in reality this is usually dictated by the Treaties.
2. Non-binding instruments

because on it will depend which of the various legislative procedures is used. Each of the major EU institutions has a role to play in the creation and implementation of the EU law. For every proposed law their must be a legal base to be found in the treaty. Though without legal force. Majority voting has been extended to new areas at every amendment of the Treaty since the Single European Act. which has the final say as to whether or not it is legitimate. In other words. recommendations can be used by the Commission to raze barriers of competition caused by the establishment or the modification of internal norms of a Member State. must do so by unanimity or by Qualified Majority Voting (OMV). the Commission cannot propose the adoption of a Directive aimed at other Member Countries. except through the consultation procedure. the PE passes resolutions on human rights or crises which are beyond its reach  The PE has entire committees which deal with no legislative proposals at all. only the most politically sensitive issues have been left to unanimity. in approving. The recommendation is an instrument of indirect action aiming at preparation of legislation in Member States. QMV means that laws which are opposed by a sovereign state’s government and may be abhorrent to its people can be imposed upon them. namely defense operations. in particular . THE LEGISLATIVE PROCEDURES Decision-making at European Union level involves various European institutions. Communications  Issued by the Commission."  Concretely.  According to the terms of the Treaty on the European Union "In order to ensure the proper functioning and development of the common market. Their role is determined by the type of law being made and the policy area it covers. directives and decisions. If a country does not conform to a recommendation.  A recommendation in the European Union (introduced in Article 249/EC) is one of two kinds of nonbinding acts cited in the Treaty of Rome. Up to now. but where it hopes to exercise influence  Every session. in that they are not binding for Member States. the Economic and Social Committee or the Committee of the Regions may issue opinions on the various legislative proposals tabled by the Commission. The choice of the treaty base is crucial. if it expressively so provides or if the Commission considers it necessary. simply because it does not have competence in those areas. There may be defenses to this.  Recommendations are without legal force but are negotiated and voted on according to the appropriate procedure. These committees may also issue own opinions on a variety of matters they consider relevant or important at a specific given time. The ‘treaty base’ can be challenged before the Court of Justice. a document in which the Commission states its views on a specific issue Declarations  Issued by the Council Resolutions  Issued by the PE  Deal with issues over which it has no real power. rejecting or amending the proposal. in order to elide this distortion Opinions  It requires little explanation  For instance. most tax matters as well as cultural policy amongst MS. but practicality simply will not do. when the Commission makes a legislative proposal. but does not bind the MS. Recommendations differ from regulations. it must be able to cite an article in the Treaty which gives the EU the authority to make laws in that specific area of policy. and thus the extent of influence on the EP and whether the Council. differing from the Directive only by the absence of obligatory power. they do have a political weight.Recommendations  used by the Commission or the Council. the Commission (…) formulate recommendations or deliver opinions on matters dealt with in this Treaty.

In the co-decision procedure. The main forms of EU law are directives and regulations. It is based on the principle of parity and means that neither institution (European Parliament or Council) may adopt legislation without the other's assent. Every proposal for a new European law is based on a specific treaty article. COMMISSION PROPOSAL 1. This determines which legislative procedure must be followed. CO-DECISION IN DETAIL 1.As defined in Article 251 of the EC Treaty. the text is sent once again to Parliament and the Council so that they can finally adopt it as law. it is the European Commission that proposes new legislation. 635 co-decision procedures have been successfully completed (apart from two cases). It serves as a practical reference framework for each institution as regards the role it has to play at the various stages of the procedure. referred to as the ‘legal basis’ of the proposal. In accordance with the Treaty establishing the European Community (EC Treaty). in fact. adopted either at the first or second reading as a result of good cooperation between the three institutions.  the European Parliament (EP). If Council and Parliament cannot agree on a piece of proposed legislation. Attention should also be drawn to the interinstitutional agreement on "better lawmaking". In general. the co-decision procedure is the legislative procedure which is central to the Community's decision-making system. the European Commission. The three main procedures are ‘consultation’. which was signed by the European Parliament. In some cases. the increased used of impact analyses in the Community decision-making process . The rules and procedures for EU decision-making are laid down in the treaties. the Council can act alone. composed of equal numbers of Council and Parliament representatives. The agreement sets out best practice and lays down new objectives and commitments. In this regard. including:     the improvement of interinstitutional coordination and transparency . Parliament does not merely give its opinion: it shares legislative power equally with the Council. ‘assent’ and ‘co-decision’. the Council and the Commission on 16 December 2003. it is put before a conciliation committee. Co-decision This is the procedure now used for most EU law-making. the establishment of a sound framework for "alternative instruments" . the desire to establish a mandatory time limit for transposing directives into national law.  the Council of the European Union. only the . The Commission has a monopoly of legislative initiative in all the areas which are subject to the codecision procedure. This site contains references to the provisions of the Treaty and to the legal bases of the procedure. and extended and adapted by the Treaty of Amsterdam to make it more effective. which was adopted by the three institutions when the Amsterdam Treaty came into force. Declaration n°34 annexed to the Treaty of Amsterdam calls on the institutions to make every effort to ensure that the co-decision procedure operates as expeditiously as possible and in particular that in no case should the actual period between the second reading by the European Parliament and the outcome of the Conciliation Committee exceed nine months. Other institutions also have roles to play. Conciliation is becoming increasingly rare. Having been established by the Maastricht Treaty. Most laws passed in co-decision are. Once this committee has reached an agreement. but it is the Council and Parliament that pass the laws. it is important to bear in mind the existence of the Joint Declaration on practical arrangements for the new co-decision procedure. 1. the co-decision procedure now covers 43 areas under the first pillar (based on the Treaty establishing the European Community) following the entry into force of the Treaty of Nice. Since the entry into force of the Amsterdam Treaty until 30 June 2007.

consultation via Green and White Papers. Work in parliamentary committee: The parliamentary committee responsible is named. It may also itself alter any such proposal (Article 250(2) EC Treaty).Upon receiving the Commission’s proposal. 1a Opinions of the Committee of the Regions and the Economic and Social Committee The Economic and Social Committee and the Committee of the Regions respectively consist of “representatives of the various economic and social components of organised civil society …” and “representatives of regional and local bodies …”. international organisations and/or nongovernmental organisations.If the parliamentary committee responsible for the dossier does not propose any amendments.The proposal is forwarded simultaneously to the European Parliament and to the Council.53 of the EP’s Rules of Procedure.Other political groups may also appoint a “shadow rapporteur”. reports by experts. be much longer. is discussed and amended within the relevant parliamentary committee.The Commission’s proposal is the result of an extensive consultation process. It may. A consultation process is also launched among the different Commission departments in order to ensure that all aspects of the matter in question are taken into account (Interservice Consultation). on the basis of a simple majority. Within the parliamentary committee responsible. In addition. 2. The rapporteur and the members or substitutes of both the parliamentary committee responsible and any other EP committee may propose amendments to the Commission’s proposal. These Committees must be consulted by the Commission and the Council where the Treaty so provides or in cases in which the latter consider it appropriate. who will be responsible for preparing the group’s position and monitoring the work of the rapporteur. the European Parliament tends to use the simplified fast-track procedures (see Rules 131 and 43 of the EP’s Rules of Procedure). together with those proposed by the parliamentary committees asked for an opinion. the European Parliament gets ready to prepare and adopt its opinion.). The European Parliament (EP) also has the option of consulting the two Committees. depending on the technical or political complexity of the dossiers.As far as the legislative process is concerned. where it is adopted by a simple majority. In practice. then debated in plenary session. The provisions governing the Economic and Social Committee and the Committee of the Regions are contained in Articles 257 to 265 of the EC Treaty. The legal basis adopted by the Commission will determine the legislative procedure. the Economic and Social Committee and the Committee of the Regions may issue opinions in cases considered by them to be appropriate. however. this phase lasts for eight months on average. Voting on a report is concluded by a vote on the Commission’s proposal as amended and on a legislative resolution (see Rules 46 and 185 of the EP’s Rules of Procedure). relations between the European Parliament and the Commission are governed generally by the Framework Agreement on relations between the European Parliament and the Commission drawn up in 2005.Legal basis: Article 251(2) EC Treaty and Rules 34 . The legal basis and financial aspects may be evaluated by the parliamentary committees responsible for legal affairs and budgetary issues (Rules 35 and 36 of the EP’s Rules of Procedure). These amendments. etc. prepared by a rapporteur. European Parliament (EP) First reading The European Parliament delivers an opinion at first reading. along with any other committees which are asked for an opinion (Rule 40 of the EP's Rules of Procedure). and is published in the Official Journal of the European Union (“C” Series).The Commission’s proposal is adopted by the College of Commissioners on the basis of either a written procedure (no discussion among Commissioners) or an oral procedure (the dossier is discussed by the College of Commissioners).Commission may put forward legislative proposals. Adoption in plenary . consultation of national experts. are put to the vote in the parliamentary committee responsible.The parliamentary committee meets several times to study the draft report prepared by the rapporteur. which may be conducted in various ways (impact assessment.40 and 38 . This opinion. The Treaty does not set any time limit for the European Parliament to give its opinion. coordinators (representing political groups) entrust the drafting of the report to a rapporteur (see Rule 42 of the EP’s Rules of Procedure) chosen by a weighting system representative of the political groupings within the committee. The Council or the Commission can set a time limit for the submission of opinions (Article 262 and 265 of the EC Treaty).

and the act can be adopted .Although the Treaty does not explicitly allow the European Parliament to reject the Commission’s proposal at first reading. There are three possible scenarios: the Council accepts without alteration the Commission’s proposal. either unaltered or suitably reworded. the amended proposal is prepared by the Commission’s Directorate-General in charge of the dossier. If the Commission does so. In this case. the report may be adopted by the plenary without further amendment or debate (Rule 131 of the EP’s Rules of Procedure).As far as internal procedures are concerned. Such a step will not necessarily stop the legislative procedure and the Commission can always submit an amended proposal. in the light of the European Parliament’s first reading and resultant amendments. as amended. However. § 6 of the Joint Declaration). and the amended proposal is adopted by the College and published in the Official Journal. To this end.Once the report is adopted in the parliamentary committee. the College’s decision is prepared by the Inter-institutional relations group (comprising members of the Commission cabinets responsible for inter-institutional relations). and subsequently ratified by the College.  in all other cases. improve the initial proposal and/or are likely to facilitate an agreement. may be tabled by political groups or at least 37 Members (Rule 150 of the EP’s Rules of Procedure) and put to the plenary’s vote. the President of the European Parliament will suspend the vote on the legislative resolution (normally taken following the final vote on the proposal as amended) and will request the Commission to withdraw its proposal. fails to secure a majority of the final votes cast. on the basis of the mandate obtained from the College of Commissioners before the plenary. including amendments adopted in parliamentary committee. the deadline for tabling new amendments in plenary is noon on the Thursday of the week preceding the session. The Legal Service and the Secretariat-General are consulted. amended where necessary.If the legislative resolution accompanying the report has been adopted in parliamentary committee virtually unanimously (with fewer than 10% of votes against). the matter is referred back to the parliamentary committee. This preparatory work runs concurrently with the European Parliament’s activity (cf. there is nothing to prevent the European Parliament from adopting an opinion containing amendments which completely nullify the Commission’s proposal.Legal basis: Article 250(2) of the EC Treaty. the Commissioner announces and explains the Commission’s position on the amendments tabled.Additional amendments to the report. the Commission's proposal as amended and the legislative resolution (see Rule 51 of the EP’s Rules of Procedure). Rule 52 of the EP’s Rules of Procedure foresees the situation in which the Commission’s proposal. the Council adopts a common position. In practice. The Commission’s position on the EP’s amendments is prepared by the Directorate-General in charge of the dossier and approved by the College of Commissioners. the Commission may incorporate into its amended proposal the European Parliament amendments which it supports. The Council finalises its position on the basis of the Commission’s proposal. Council first reading The Council makes its position known after preparatory work has taken place within working parties made up of experts from the Member States and chaired by the Member State holding the six-monthly Presidency of the Council. while the Council can adopt a common position. As a general rule. the Commission must exercise its right of initiative in a constructive manner with a view to making it easier to reconcile the positions of the Council and the European Parliament.A simple majority is required for adopting amendments.  the Council accepts all the European Parliament’s amendments which the Commission has incorporated into its amended proposal.In the course of the plenary debate ahead of the vote. in its view.   Preparation of the Council’s position . the legislative procedure is stopped. 4. and the act can be adopted .In accordance with § 13 of the Joint Declaration on practical arrangements for the new codecision procedure. Amended Commission proposal Article 250(2) of the EC Treaty authorises the Commission to alter its legislative proposal. Legal basis: Article 251(2) EC Treaty. 3. which the European Parliament has not amended. enabling it to incorporate European Parliament amendments which. If the Commission refuses to withdraw its proposal. it is placed on the agenda of the plenary session.

The Council approves all the EP amendments If the Council approves the Commission’s proposal as amended by the European Parliament. but the Council wishes to make changes to it. However. second indent. it is often the case that they organise. Council common position When the Council does not share the views expressed by Parliament. The Council can adopt the Act The legislative act is submitted directly for the signature of the Presidents and Secretaries-General of the European Parliament and of the Council. or by unanimity if this has not been done.The procedure is ended. first and second indents.The Council’s decisions are prepared within specific working parties made up of representatives of the Member States and chaired by the representative of the Member State holding the six-monthly Presidency. and is published in the Official Journal. the act is deemed to have been adopted.  Preparation of the common position: The decision is prepared by the working parties and Coreper. it can adopt the act on that basis by a qualified majority – (with exceptions). of the EC Treaty. Legal basis: Article 251(2). and the Commission (department responsible for the dossier and the Commission’s Secretariat-General). of the EC Treaty. In both cases.  Adoption of the decision by the Council Decisions prepared by Coreper are adopted by the Council of Ministers either without debate. the Council will again adopt a common position. 5. the Council will establish or negotiate a “political agreement” laying down the broad outlines of the proposed . which is forwarded to the European Parliament together with a statement of reasons. The Council can adopt the act as amended The legislative act is submitted directly for the signature of the Presidents and Secretaries-General of the European Parliament and of the Council. third indent. 9. informal tripartite meetings attended by representatives of the European Parliament (rapporteur and. of the EC Treaty. 7. the Council (chair of the working party and/or Coreper). Part I or II). The Commission frequently plays a mediating and editing role in respect of these compromise texts. the Council will act by a qualified majority with the agreement of the Commission. where appropriate. 8 and 9 of the Joint Declaration on practical arrangements for the new codecision procedure. The Commission has a role to play in providing expertise. In accordance with Article 250(1) of the EC Treaty.Legal basis: Article 251(2). 8. shadow rapporteurs).Legal basis: Article 251(2).The working parties report to the Committee of Permanent Representatives (Coreper. Where the European Parliament has approved the Commission’s proposal without amendment. The EP has approved the proposal without amendment If the European Parliament has not adopted any amendments. when an agreement has been found at the preparatory stage ("A" item).The procedure is ended. and is published in the Official Journal. In the next stage of this preparatory work. unanimity will be required. and if the Council does not wish to alter the Commission’s proposal.When the European Parliament has introduced amendments. adoption of the act is dependent on the Council approving all the amendments by a qualified majority if the Commission has incorporated them into its amended proposal. or with debate ( “B” item). 6. the deliberations are in the public domain. it adopts a common position.The aim is to ensure that the Parliament amendments adopted in plenary are wholly acceptable to the Council. if its position differs from that of the Commission. which prepares every Council decision taken at Ministerial level. assisted by the General Secretariat of the Council of Ministers.When the co-legislators are seeking to conclude an agreement at first reading. in accordance with paragraphs 7.

of the EC Treaty. the Commission explains why it has decided to support or oppose the common position. by written procedure. The adoption of certain politically sensitive common positions has sometimes taken several years. The President of the European Parliament makes an announcement. The Council’s decision requires a qualified majority (see Article 205 EC Treaty). The Commission does not take a definitive position at this stage. The parliamentary committees which were asked for an opinion at first reading are not consulted anew. for which unanimity is required (link to scope). social security and coordination of rules governing professions.The statement of reasons is accompanied by any statements made by the Council and/or the Commission for the Council minutes. Legal basis: Article 251(2). or is substantially different from. which is normally defended by the same rapporteur as at first reading. commonly termed a “general approach” . the Commission’s initial . The Commission also comments on the Council’s reaction to the EP amendments which it had supported in plenary at the first reading. in exceptional cases. the amendments must either include amendments adopted at first reading and not accepted by the Council.The adoption procedure is broadly similar to that at first reading. Wherever possible. Amendments may also be tabled personally by other Members of the European Parliament. The details of this agreement are subsequently finalised by the working party. where appropriate. The amendments adopted in parliamentary committee constitute “the recommendation for second reading”. verified by lawyer-linguists and formally adopted as a Common Position by the Council of Ministers at a subsequent meeting. duly translated into all the official languages.  Work in parliamentary committee: The procedure for second reading in parliamentary committee generally follows the rules and practice of the first reading. unless the EP amendments coincide with the general approach. EP second reading A three-month time limit is laid down by the Treaty (this period may be extended by a month) for the European Parliament to take action on the basis of the Council’s common position. reach an agreement in principle before the European Parliament delivers its opinion. or introduce a compromise between the positions of the co-legislators. or be concerned with a part of the common position that did not appear in. acknowledging receipt of the Council’s common position and the Commission’s communication thereon. As a general rule. Pursuant to Rule 62 of the EP's Rules of Procedure. In the past. the deliberations are in the public domain.No time limit is laid down in the Treaty for the adoption of a common position by the Council. on occasion. It includes proposed amendments. depending on the complexity of the dossiers. third indent.common position. allowing the act in question to be adopted. informal contacts may be established in the period between the political agreement and the formal notification of the common position. then to a common position after examining the EP’s opinion. 11.  Adoption of the common position: Adoption may take place without debate (“A” item on the agenda) or with debate (“B” item) or. since it needs to be able first of all to react to any amendments of the European Parliament. this phase has lasted for an average of 15 months from the start of the procedure. In the first two instances. which is forwarded to the European Parliament in tandem with the common position. in plenary session. the Commission’s initial proposal. the amendments must: include amendments adopted at first reading and not accepted by the Council. 10. The Council may. The time limits laid down by the Treaty for the subsequent stages of the procedure start to run when Parliament receives the common position.The European Parliament is generally notified of the common position at the plenary session following its formal adoption. with the difference that the text to be amended is the Council’s common position and not the Commission’s proposal. or is substantially different from. Commission communication on the common position In this document. except in the fields of culture. with a view to facilitating an agreement at second reading. as well as unilateral statements by delegations. The Council moves from the general approach to a political agreement. free movement of citizens. or be concerned with a part of the common position which did not appear in. The three-month time limit starts to run on the day following receipt (see Rule 57 of the EP's Rules of Procedure). except in specific cases.

The Commission’s position on the European Parliament’s amendments is prepared by the Directorate-General in charge of the dossier and approved by the College of Commissioners. the European Parliament has never exercised this prerogative.Legal basis: Article 251(2)(a) of the EC Treaty.The procedure is ended. As with the first reading. Rule 61 of the EP’s Rules of Procedure. which takes a decision by simple majority. EP approves the common position or does not take a decision If the European Parliament endorses the common position as it stands. 12. EP proposes amendments to the common position The European Parliament may propose amendments to the common position.  Adoption in plenary session : The plenary makes its position known on the basis of the amendments included in the recommendation adopted by the parliamentary committee and any amendments tabled in plenary by political groups or by a minimum of 37 Members. The European Parliament may extend the three-month time limit by a further month (Article 251(7) of the EC Treaty and Rule 58 of the EP's Rules of Procedure). Legal basis: Article 251(2)(b) of the EC Treaty. or introduce a compromise between the positions of the co-legislators. Once adopted in parliamentary committee. EP rejects the common position Rejection of the common position requires the votes of an absolute majority of the component Members of the European Parliament – The act is deemed not to have been adopted. The rules on the admissibility of amendments applying to the parliamentary committee are also applicable for amendments tabled at the plenary stage. 16. Voting is based on an absolute majority of the component Members of the European Parliament (393 votes). Act deemed to have been adopted The legislative act is submitted directly for the signature of the Presidents and Secretaries–General of the European Parliament and of the Council. the Treaty explicitly confers on the European Parliament the right to reject the Council’s common position. and is published in the Official Journal. Act deemed not to have been adopted The procedure is ended. 15.proposal. fails to adopt amendments as a result of not obtaining an absolute majority of its Members (393 votes) or does not take a decision within the stipulated time limit.During the plenary debate preceding the vote. the President of Parliament will declare that the common position is approved and the act is adopted in accordance with the common position. In contrast to the first reading. Rule 62 of the EP's Rules of Procedure. The plenary adopts amendments by absolute majority. In practice. by an absolute majority of its component Members (393 votes ) and the text thus amended is forwarded to the Council and the Commission. the rules for first reading will apply (Rule 62(3) of the EP's Rules of Procedure). the College’s decision is prepared by the Inter-institutional relations group (comprising members of the Commission cabinets responsible for inter-institutional relations). the recommendation for second reading is placed on the agenda of the plenary session. . and subsequently ratified by the College. the Commissioner announces and explains the Commission’s position on the amendments tabled. If new European elections have taken place. Legal basis: Article 251(2)(c) of the EC Treaty. Up till now. Rule 67 of the EP's Rules of Procedure 13. 14.The proposed amendments are put to the vote in the parliamentary committee responsible. any new amendment must be tabled by a political group or by at least 37 Members of Parliament. at this stage.

Commission opinion on EP amendments The Treaty specifically requires the Commission to deliver an opinion on the European Parliament’s amendments. They are co-signed for their groups by the rapporteur and the principal shadow rapporteurs. The political groups within the European Parliament coordinate their votes in order to adopt the amendments negotiated with the Council. in view of the fact that. The Commission’s position on the European Parliament’s amendments will determine the type of vote necessary in the Council: if the Commission has given a negative opinion on at least one amendment. just before the plenary session. The Council approves the amended common position If the Council agrees to accept all the amendments of the European Parliament. following receipt of the European Parliament’s amendments. they involve the rapporteur (accompanied where necessary by shadow rapporteurs from other political groups). the Coreper chair will send a letter to the chair of the parliamentary committee responsible. the Council will have to act unanimously to accept that amendment. Act adopted as amended The legislative act is submitted directly for the signature of the Presidents and Secretaries-General of the European Parliament and of the Council. the act will be deemed to have been adopted in the form of the common position thus amended. paragraphs 19 to 23). Seeking an agreement at second reading: informal proceedings In accordance with the Joint Declaration on practical arrangements for the new codecision procedure (in particular. the Commission’s opinion is a written reflection of the position expressed by the Commissioner in plenary on the amendments adopted by the European Parliament. Council second reading The Council has a period of three months (which may be extended by a further month).17. in which to approve them by a qualified majority or unanimously if the Commission has delivered a negative opinion. no “standard” format of representation has been laid down but.Legal basis: Article 251(3) EC Treaty. as is more often the case. in all the official languages. thereby guaranteeing an adequate majority. Owing to the ad-hoc nature of such contacts. more frequently. The compromise amendments are then tabled either in parliamentary committee (if they are identified at an early stage) or. In practice. If these contacts prove fruitful. Legal basis: Article 251(2)(c) and (3) of the EC Treaty.The procedure is ended. where an agreement at second reading appears to be attainable. in principle or subject to redrafting by the Commission. Such contacts may take the form of bilateral meetings between representatives of the European Parliament and the Presidency or. 18. the Council will adopt the act and the procedure will be concluded. informal tripartite meetings in the presence of the Commission. and is published in the Official Journal. If those amendments are adopted in accordance with the agreement reached. . the Council will have to act unanimously as regards acceptance of the European Parliament’s position overall. The Commission’s endorsement is particularly important. 19. The Council may extend the three-month time limit by a further month.The Council’s internal workings are broadly similar to the preparation of the common position: the competent working party prepares a position which is submitted to Coreper and adopted by the Council. whereby the Council undertakes to approve the European Parliament’s amendments if they are in line with the compromise identified jointly. accompanied where necessary by texts reformulating the EP amendments accepted partially. 20. the chairperson of the relevant Council working party assisted by the General Secretariat of the Council and representatives of the Commission (usually the expert in charge of the dossier and his or her direct superior assisted by the Commission’s Secretariat-General and Legal Service). The time limit starts to run from the official receipt of the amendments resulting from the European Parliament’s second reading. if it opposes an amendment which the European Parliament wants to adopt. as a general rule. The purpose of these contacts is to get agreement on a package of amendments acceptable to the Council and the European Parliament. informal contacts are established between the co-legislators in order to reconcile their positions.

if extended. The Commission’s role: Given that it is the originator of the legislative proposal and can attend meetings of the delegations of both the EP and the Council. with the Commission playing a mediating role. the Council does not approve all the amendments of the European Parliament. Time limits: the Treaty stipulates a time limit of six weeks (which may be extended by two weeks) for approving a joint text. since the Council will have to act unanimously in order to adopt a parliamentary amendment on which the Commission has given a negative opinion. 22. Decision-making: each delegation to the Conciliation Committee must approve the joint text in accordance with its own rules: qualified majority for the Council’s delegation (unanimity in cases where the Treaty specifies an exception to the qualified majority rule) and simple majority for the European Parliament’s delegation. It is deemed to have been convened when its first meeting takes place. The Council does not approve the amendments to the common position If. these periods of time are often too short to allow negotiations to be conducted. The first meeting of the Conciliation Committee signals the start of that period.21. Each team reports to their delegation within the Conciliation Committee. has 6 (8) weeks to open the conciliation procedure. Legal basis: Article 251(3) of the EC Treaty. Legal basis: Article 251(4) of the EC Treaty. the Commission plays a mediating role and frequently proposes compromises.In practice. negotiations are conducted during informal trialogues involving small teams of negotiators for each institution. Modus operandi: in most cases. is submitted to the delegations for approval. Its main aim is to reconcile the positions of the two co-legislators while defending.This intervening period also gives the European Parliament the opportunity to appoint its delegation to the Conciliation Committee and give a mandate to its negotiators. within a three-month period (may be extended by one month). the general interest and the requirements of the Treaty in line with its proposal. at this stage of the procedure. The Commission’s opinion on the European Parliament’s amendments is therefore particularly important.The period between the end of the Council’s second reading and the convening of the Conciliation Committee is used to prepare the work of the latter. then the conciliation procedure will be set in motion. 23. eight weeks from the time of the Council’s formal decision. as far as possible. These informal trialogues bring together small teams of negotiators for each co-legislator. the President of the Council. It is important to note that. in many cases even before the Council’s position at second reading has been formally concluded. since the matters at issue . as well as the Commissioner responsible. Time limits: The Treaty is crystal clear on the question of time limits: after the Council’s second reading. Convening of the Conciliation Committee The Committee has to be convened within six or. in agreement with the President of the European Parliament. in agreement with the President of the European Parliament. will convene a meeting of the Conciliation Committee within six weeks (may be extended by two weeks). the Commission can no longer prevent the Council from acting by a qualified majority without its agreement. The Conciliation Committee itself has 6 (8) weeks to reach agreement on a joint text. Elements for negotiation: negotiations focus on all the amendments adopted by the European Parliament at second reading on the basis of the Council's common position. The participants in these trialogues report to their respective delegations. with participation by the Commission. Should the Council fail to approve all the amendments adopted by the European Parliament. which often takes the form of a “package”. The conciliation procedure Composition: the Conciliation Committee brings together members of the Council or their representatives and an equal number of representatives of the European Parliament. through informal meetings between the three institutions. the President of the Council. The compromise (“joint text”) resulting from the informal trialogues.

Under the terms of § 32 of the Joint Declaration on practical . As a result. they belong to the parliamentary committee responsible for the dossier. the permanent representative of the Member State holding the Council Presidency is assisted by members of the Council's secretariat. Attempts are often made to conclude the conciliation procedure at the first meeting of the Conciliation Committee. especially through informal trialogues. the chair of the parliamentary committee and the rapporteur. The delegation's decisions are taken by a majority of its component members (i. The Conciliation Committee is chaired jointly by the chairpersons of the delegations from the two “co-legislator” institutions (a Vice-President of the European Parliament or a Minister of the Member State holding the Presidency). assisted by members of the European Parliament's conciliations secretariat and. The Council’s delegation is chaired by the Minister presiding over the Council in charge of the dossier. It is composed of 27 Members of Parliament and 27 substitutes. As a general rule. the duration of work after the second European Parliament reading may extend over 10 months. and the Commissioner in charge of the dossier. the Commission is represented in the trialogues by the Director-General of the department in charge of the dossier. sometimes through a straightforward statement of agreement. the negotiators frequently meet well in advance of the opening of formal conciliation. Since the Council has 3 (4) months in which to complete its second reading. including its legal service. although the declaration annexed to the Treaty of Amsterdam (Declaration – No 34 – on respect for time limits under the codecision procedure) states that the period in question should not exceed 9 months. The participants in the trialogues operate on the basis of negotiating mandates given to them by their respective delegations. Thus. the Council’s delegation brings together the Member States’ representatives within Coreper. contacts frequently take place even before the formal conclusion of the Council’s second reading. when it becomes clear that the Council will not accept all the amendments of the European Parliament. They explore possible avenues of compromise in an informal manner and report to their delegations. In some cases. if necessary. constitute informal trialogues at technical or political levels.may be extremely complex and involve a large number of interested parties. EP: A European Parliament delegation is appointed for each dossier going to conciliation. assisted by experts. a member of the European Parliament's legal service. attended for the most part by the three institutions’ experts and secretariats. These meetings. For the European Parliament. Composition of delegations to the Conciliation Committee Council: Generally speaking. Conduct of negotiations The work of the Conciliation Committee is prepared in the course of trialogues where teams of negotiators from the three institutions attempt to draw up a compromise (“joint text”). In theory. Informal technical trialogues may also be organised. often on the basis of a general package aimed at striking an overall balance.e. Proceedings of the Conciliation Committee The Conciliation Committee brings together the delegations of the European Parliament and the Council. in proportion to the size of each group within the European Parliament. The other EP delegation members are appointed by the political groups. 14 votes). its legal service and Secretariat-General. with a limited number of participants in the interest of effectiveness. Three Vice-Presidents of the European Parliament are permanent members of the Conciliation Committee. the time thereby made available to the negotiators may be used to develop contacts. For the Council. several meetings of the Conciliation Committee will be necessary to ensure that the members of the delegations are fully aware of the position and the determination of their counterparts. mostly on a trilateral basis. These meetings may be preceded by trialogues and technical sessions. “Informal trialogue”: the true negotiating forum The briefness of the periods laid down by the Treaty for reaching an agreement. co-chairing it by turns. Lastly. It acts by a qualified majority independently of the Commission’s opinion (except for dossiers in respect of which the Treaty requires unanimity). combined with the complexity of dossiers and the constricted timetable make it necessary to organise work on an informal basis upstream of conciliation. the participants are the chairperson of the delegation.

the Conciliation Committee must give approval in the form of a “joint text”. approval of the joint text by the Council (27 Member States) does not pose a problem. Parliament and the Council adopt the act in accordance with the joint text The European Parliament (by a majority of the votes cast. no amendment may be tabled) and the Council (by a qualified majority with certain exceptions) must adopt the act within six (or eight) weeks. approval may be more problematic. In practice. containing (1) the Council’s common position (2) the EP’s amendments at second reading (3) the Council’s position on the EP amendments (mostly in the form of compromise suggestions) (4) the EP delegation’s position on the Council’s proposals Any compromise suggestions made by the Commission tend to take the form of footnotes. this trialogue is preceded by a preparatory meeting of each delegation. 24. Documents available to the Conciliation Committee: the Commission’s proposal. For the most important dossiers. in line with the joint text. 27. the meeting of the Conciliation Committee is followed by a press conference making the outcome of the negotiations known to the media. Legal basis: Article 251(5) of the EC Treaty. On the European Parliament’s side. this document tends to take the form of a synoptic table in four columns. the Council’s common position. and is published in the Official Journal.arrangements for the new codecision procedure. the act is deemed not to have been adopted and the procedure is ended. since the Council’s delegation within the Conciliation Committee is made up of one representative per Member State (often the same representative as in Coreper). The Council's delegation acts by a qualified majority (unanimity in cases stipulated by the Treaty) while the European Parliament’s delegation acts by a simple majority of its component members (14 votes minimum). Legal basis: Article 251(5) of the EC Treaty. Act adopted The legislative act is submitted directly for the signature of the Presidents and Secretaries-General of the European Parliament and of the Council. The Conciliation Committee produces a joint text Once the negotiators have arrived at a compromise. the Conciliation Committee meets alternately at the premises of the European Parliament and of the Council. The procedure is ended. amendments proposed by the European Parliament. 26. 25. Immediately prior to the meeting of the Conciliation Committee. Legal basis: Article 251(4) of the EC Treaty. the two co-chairs and the Commissioner normally get together to prepare the ground. Parliament and the Council do not approve the joint text Should either of the institutions fail to give approval within the stipulated time limit. since the European . and a joint working document from the European Parliament and Council delegations.In practice. the Commission’s opinion thereon. As a general rule.

Act not adopted The procedure is ended. Assent The assent procedure means that the Council has to obtain the European Parliament's assent before certain very important decisions are taken. except that Parliament cannot amend a proposal: it must either accept or reject it. The procedure is the same as in the case of consultation.  or ask for amendments. Acceptance (‘assent’) requires an absolute majority of the vote cast. 3. including the agreements allowing new countries to join the EU. but was set at 1. THE BUDGET The Budget is dealt with under a special procedure.75% of VAT receipts was paid to the EU. Act not adopted The procedure is ended. Again the EU gets 75% of the proceeds VAT-based contributions – until 2003. spending under the European Agricultural Guarantee and Guidance Fund and some structural spending) and (ii) ‘non-compulsory spending’. 0. as in all others. Before the Treaty of Lisbon came into force. it was reduced to 0. The Council examines the amended proposal and either adopts it or amends it further. if the Council amends a Commission proposal it must do so unanimously.02% for 2003. Parliament can:  approve the Commission proposal. 2. taxation and competition. Based on a proposal from the Commission. In this procedure. If Parliament asks for amendments. In 2004. the European Economic and Social Committee and the Committee of the Regions. spending was divided into (i) ‘compulsory expenditure’ (CAP spending. Contributions based on GNP (Gross National Product) – open to constant negotiations. called own resources:     import tariffs – 75% goes direct to the EU. the Commission will consider all the changes Parliament suggests. the Council consults Parliament. If it accepts any of these suggestions it will send the Council an amended proposal. . while MS retain the rest in respect to administrative costs levies – on agricultural imports (including a special levy on sugar). Consultation The consultation procedure is used in areas such as agriculture. Spending those resources is governed by a complex bureaucratic procedure. 29. The Conciliation Committee does not produce a joint text The act is deemed not to have been adopted and the procedure is ended.5%. Legal basis: Article 251(6) of the EC Treaty. The EU has four sources of revenue.Parliament’s delegation to the Conciliation Committee (27 members) is not automatically representative of the 785 Members of the European Parliament. 28. 30.  reject it. The assent procedure is mostly used for agreements with other countries.

must conduct its own second reading If the EP misses this deadline. which within 15 days. the proposal falls If the Council wants to adopt an EP proposal only modified. it sends it back to the EP. what happens depends on the nature of the amendments If the EP proposal requires an increase in overall EU expenditure. considers the Commission’s proposal and adopts a modified version of it. the Council must adopt it by QMV. yet the budget itself begins life as a Commission proposal. The draft budget must be forwarded to the EP by 5 October The EP has 45 days to adopt the budget or demand amendments If. and so. in that time. acting by qualified majority. the EP fails to state a position. if no QMV is found. it has 15 days for the second reading If it accepts all the EP’s proposals.The Budgetary procedure                  The EP and the Council form what is known as the budgetary authority. they must be adopted under an absolute majority of all members When the Council receives the EP’s proposals. the whole process starts all over again based on a new proposal from the Commission If the budget is not voted for by 1 January. It is an idea borrowed from the USA. the Council proposal is integrated within the budget and the budget is adopted The EP has the possibility. which means that an appropriation is made each month which the equivalent of one twelfth of the previous year’s budget. the budget is deemed approved If the EP proposes changes. . the UE must finance its activities through a system known as “provisional twelfths”. to reject the whole budget. where it must arrive at the latest by 1 September so that it may be implemented from 1 January the following year. which is first sent to the Council. known as the draft budget. a majority of votes cast is necessary If the changes required affect the non-compulsory expenditure. The Council. called Preliminary Draft Budget. based on the double majority. the budget is adopted If not. it sends the draft budget back to Council and requests amendments If the requested changes refer to the compulsory expenditure.

Spain. Luxembourg. 5. or close to that level owing to a sharply diminishing trend a long-term interest arte that does not exceed by more than 2% the average of the three best performing MS in terms of price stability maintenance of the national currency within normal fluctuation margins of the European Monetary System for at least two years. a second stage. in euro The ESCB and national and Community public authorities to oversee and assist with changeover . 2013-2014 ROXANA-CRISTINA PETCU. It also obliged MS to:    1. 3.5 percentage points that of the three best performing MS during the year preceding the third stage a budgetary deficit not exceeding 3% of GDP. during which stage the single market would be completed and economic coordination reinforced. Portugal. Ireland. provided that it has declined continuously government debt not exceeding 60% of GDP. including the establishment of the European System of Central banks (ESCB) and to oversee the development of the European Currency Unit (ECU). without devaluation The third and final stage was fixed by the European Council. the Netherlands. 2. France and Finland.EU INSTITUTIONS – 2ND YEAR TRANSLATION STUDIES AUTUMN TERM. Third stage (1January 1999 – 1 July 202)   the establishment of the European System of Central banks and the European Central Bank introduction of the euro On 1 January 1999     the parities of the participating countries and their rates of conversion into euro irrevocably fixed. 4. which decided that it would begin on 1 January 1999 and that the initial participating nations would be Austria. saw the establishment of the European Monetary Institute to assist MS in co-ordinating policies. to prepare the final stage of monetary union. Italy. PhD Lectures VI-VII POLICIES OF THE EU THE MONETARY POLICY Monetary Union After an initial stage lasting from 1 July 1990 to 31 December 1993. the notional currency which preceded the euro. or close to that level. Germany. from 1 January 1994 to 31 December 1998. the amounts in national currencies in contracts converted into euro the euro became a currency in its own right (but no coins or notes issued until 1 January 2002) MS’ monetary policy and exchange rate policy carries out and new public sector debt instruments issued. Belgium. Render their central banks independent of the political authorities Discontinue their overdraft facilities with their central banks and their privileged access to financial institutions Endeavour to fulfill the following five convergence criteria: an average rate of inflation that does not exceed by more than 1.

The Ecofin agreed on a reform of the SGP. the Council of Ministers decides whether a MS has such a deficit and recommends measures to be taken by the MS with a view to eliminating it within a specified time-limit If the MS fails to adopt such measures. It defines monetary policy and establishes the necessary guidelines for its implementation. sanctions against offending members. the level of debt. In March 2005. so that fiscal discipline would be maintained and enforced in the EMU. The ceilings of 3% for budget deficit and 60% for public debt were maintained. which had been an important part of the German strong economy's performance since the 1950s. after multiples warnings. It is thus the ECB’s supreme decision-making body  A General Council consisting of the President and Vice-President of the ECB and the governors of the Central banks of all the MS of the EU. all appointed by the EMU member state governments for a non-renewable period of 8 years. It prepares for the possible accession of EU MS not already members of the euro-zone  Tasks of the ECB 1. euro banknotes and coins were put into circulation alongside national currency notes and coins. to administer the European System of Central banks . and. and related decisions. the EU Council under the pressure of France and Germany relaxed the rules. The pact is part of a set of Council Regulations. provided it was achieved by July 2002 Coordinating economic policies under the euro follows the system presented below:     The Council of Ministers lays down the broad guidelines of the economic policies of the MS and of the Community after reporting to the European Council and taking account of its conclusins The Council ensures compliance with these broad guidelines and monitors economic developments in the MS It monitors excessive public deficits. decided upon the European Council Summit 22-23 March 2005. The Executive Board is responsible for the daily management of the ECB and for the implementation of monetary policy on the basis of the decisions of the Governing Council  The Governing Council consist of the President and the Vice-President of the Executive Board and the governors of the Central Banks of the EMU MS. the Council may decide to impose sanctions The Stability and Growth Pact The Stability and Growth Pact (SGP) is an agreement by European Union member states related to their conduct of fiscal policy. and the SGP ensures that they continue to observe them. The pact was adopted in 1997. which were quickly withdrawn. to facilitate and maintain Economic and Monetary Union of the European Union. It is based on Articles 99 and 104 of the Treaty Establishing the European Community (with the amendments adopted in 1993 in Maastricht). the EC said it was to respond to criticisms of insufficient flexibility and to make the pact more enforceable. Germany had long maintained a low-inflation policy. The SGP was initially proposed by German finance minister Theo Waigel in the mid 1990s. the German government hoped to ensure the continuation of that policy through the SGP which would limit the ability of governments to exert inflationary pressures on the European economy. On 1 January 2002 at the latest. The SGP maintains budgetary discipline indefinitely:   By requiring the MS to participate in monetary union to draw up and submit stability programmes to maintain medium-term budgetary equilibrium By laying down the timetable for implementation and sanctions under the excessive deficits procedure The European Central Bank   Was established in July 1998 Directed by an Executive Board comprising a President. after the Commission has issued its Opinion. though the exact pace of this withdrawal was left to the MS. but the decision to declare a country in excessive deficit can now rely on certain parameters: the behaviour of the cyclically adjusted budget. Member states adopting the euro have to meet the Maastricht convergence criteria. a Vice-President and two to four other members. the duration of the slow growth period and the possibility that the deficit is related to productivityenhancing procedures. It consists of fiscal monitoring of members by the European Commission and the Council and.

to address an annual report on the activities of the ESCB and the monetary policy of both the previous and the current year to the Council. 5. to contribute to the preparation of the work of the Council. A new Article 4 was inserted. the Parliament and the Commission The European System of Central Banks      1. was established on 1 July 1998 consists of the ECB and the national central banks governed by the decision-making bodies of the ECB its fundamental responsibility is to maintain price stability its main tasks are: to define and implement the single monetary policy to conduct foreign-exchange operations arising from the exchange-rate policy established by the Council to hold and manage the foreign reserves of the participating MS to ensure the smooth operations of payment systems in the euro-area to contribute to the smooth conduct of policies relating to the stability of the financial system to authorize the issue of banknotes in the euro area The Economic and Financial Committee The Maastricht Treaty provides for an economic and financial committee to be set up at the start of the third stage of EMU. national central banks. which provides for the EFC to meet in two different configurations:   either with the members selected from the administrations. 2. it is essential that members of the EFC and alternate members be selected from among experts possessing outstanding competence in the economic and financial field. The EFC may also prepare the Council's reviews of the exchange rate of the euro ( Article 207). the Commission and the ECB. bearing in mind that the Member States. 3. The two members appointed by each Member State must be selected from among senior officials from the administration (ministerial level) and the national central bank. 4. Composition and tasks of the EFC The Council is to adopt detailed provisions concerning the composition of the EFC.Given the importance of those tasks. The ECF in its full composition will regularly review the list of the issues on which the national central bank members are expected to attend the meetings. This measure is necessary in order to ensure that the expertise and . the national central banks. or with the members from administrations.2. the Commission and the European Central Bank (ECB). which began on 1 January 1999. the Commission and the ECB. the Commission and the ECB. 6. are each to appoint two members of the EFC. Adapting the EFC in the light of EU enlargement With a view to the enlargement of the EU on 1 May 2004. the statutes of the EFC were amended in 2003. in particular on financial relations with third countries and international institutions. Under Article 114 (2) and (4) of the Treaty establishing the European Community (EC Treaty). particularly as regards recommendations required as part of multilateral surveillance (Article 99) and decisions required as part of the excessive deficit procedure (Article 101). and may provide the framework for the dialogue between the Council and the ECB at the level of senior officials from ministries. They may also appoint two alternate members. the Committee's tasks are:   to keep under review the economic and financial situation of the Member States and the Community and to report regularly to the Council and the Commission on this subject. It may be consulted in the procedure leading to decisions relating to the exchange-rate mechanism of the third stage of the EMU.

The President's voting right is delegated to his/her alternate and. which came into force on 1 July 1987. The Treaty amendment in the form of the Single European Act followed up the Commission White Paper on the completion of the internal market. The EEC Treaty (also known as the Treaty of Rome) had already stated that a ‘common market’ should be set up. services and capital. EFC deliberations are confidential. but without any precise indication of what the common market entailed. The EFC is convened at the initiative of the President. This determined that an internal market should be set up with freedom of movement for goods. to subcommittees or to working parties. the President is replaced by the Vice-President of the EFC. and a range of provisions set the framework and resources to achieve this objective. The President represents the EFC. a new provision was introduced into the EC Treaty (Art. THE INTERNAL MARKET The internal market is one of the key concepts of the EU. persons. services and capital. In the European Council there was agreement in several instances at the beginning of the 1980s on the need to strengthen the EC internal market as a means of strengthening the economy of the EC countries. The actual framework for the internal market was first laid down with the adoption of the Single European Act. however. It is also assisted by a secretariat. Taking decisions on a majority basis If a vote is requested. decisions are to be adopted by a majority of the members but. The EFC may decide to amend this. In addition to the basic principle of freedom of movement for goods. Where alternates replace members. The customs union also meant that the national customs duties of the EC countries on trade with countries outside the EC should be replaced by a common customs tariff and that a common trade policy should be introduced.analytical insight of the national central banks are available to the ECF without its work being hampered by too many participants. persons. the Council or four of its members. if indisposed. In addition. The EFC will also report on minority or dissenting views expressed in the course of the discussion. the Commission later in 1985 published a White Paper on the completion of the internal market. The four freedoms . services and capital between the EU Member States. The White Paper proposed 31 December 1992 as the deadline for the completion of the internal market. A member who is unable to attend a meeting of the EFC may delegate his/her right to vote to one of the alternates or another member. The EFC may entrust the study of specific questions to its alternate members. The White Paper was very detailed and contained 279 legislative initiatives aimed at removing barriers to trade between the EU countries. The aim is to remove barriers to the free movement of goods. 95 TEC) according to which the Council could adopt rules for the establishment of the internal market by a qualified majority. but do not vote or participate in discussions. they have the right to vote. Under the leadership of its President. members from national central banks and the Commission will not participate in the vote. At its summit in March 1985 the European Council therefore called on the Commission to work out a detailed programme with a concrete timetable for the creation of a single large market within the EC by 1992. persons. thereby establishing an internal market’ in the EU in which traditional barriers to exchanges of services and persons between the EU countries are absent. The provision was intended to ensure that the EU decision-making process was not blocked by decisions which required unanimity in order to be adopted. the internal market is supplemented by principles and rules ensuring that competition within the internal market is not distorted and that the rules of the Member States are brought into line to the extent necessary for the functioning of the internal market. alternate members may attend committee meetings. Jacques Delors. or at the request of the Commission. in the case of questions on which the "Economic and Financial Affairs" Council (Ecofin Council) may subsequently take a decision. All the decisions had not been taken or implemented by 1 January 1993. The customs union came into force on 1 July 1968 and the remaining customs duties on trade within the EC were abolished. the so-called back-up policies – including protection of the environment and social and labour market policy – play an important role in the operation of the internal market. the establishment of a customs union between EC countries was one of the cornerstones of the common market. However. As a general rule. The two-year term of office is renewable. including in its relations with the European Parliament. In order to make it possible to establish the internal market by 31 December 1992. The EFC has a President elected by a majority of its members.

The principle of free movement of people dates back to the creation of the European Community. other European institutions and stakeholders. broadcasting and the recognition of professional qualificationsHowever. Trade in this ‘non-harmonised’ sector relies on the 'mutual recognition' principle. This underlines the economic importance of services in the European Union. In addition. we can decide to study.Lower-risk sectors have not in general been the subject of legislation on a European level. in detail. with the lifting of most internal border controls. the Commission spent some time on the legal and economic analysis of the issues including a consultation with Member States. we must make sure that this right can be enjoyed in conditions of security and justice accessible to all. in the 10 years since the completion of the first Single Market programme in 1993. administrative and practical obstacles to the free movement of services across borders in the EU. One of the 'four freedoms' of the Single Market is the free movement of goods. Pharmaceuticals and construction products obviously present higher risks than office equipment or pasta for example. 3. The increase in wealth attributable to the Internal Market in those 10 years is nearly € 900 billion.Most European policies regarding the free movement of people are in the sphere of justice and home affairs. On the other hand. For instance. this right was extended to cover all categories of citizens. and the freedom to provide services on the territory of another EU Member State other than the one in which they are established. we must remove the remaining legal and practical obstacles that deter people from benefiting from the freedom of movement and right to reside in another Member State. please consult the sites on Freedom. at least 2. You can find detailed information on the recognition of professional qualifications and on freedom of establishment on our site. the Lisbon summit of EU leaders in March 2000 asked for a strategy to remove cross-border barriers to services. and a similar (and rising) proportion of overall employment. On the one hand. Today.The central principles governing the internal market for services are set out in the EC Treaty.The risks vary by product sector. the overall Internal Market for services is not yet working as well as it should. while the other half is accounted for by the ‘non-harmonised’ sector. for example when there is a risk resulting from issues such as public health. accounting for between 60 and 70% of economic activity in the European Union of 25 Member States. important developments and progress in the field of services have been brought about through specific legislation in fields such as financial services. Services are crucial to the European Internal Market. the Internal Market has resulted in real benefits. or consumer protection. Security and Justice and Employment and Social Affairs. If we so choose. The principles of freedom of establishment and free movement of services are two of the so-called "fundamental freedoms" which are central to the EU internal market. and the need to make a serious effort to improve the functioning of the Internal Market in services has been clear for some time.5 million extra jobs have been created as a result of the removal of barriers. work. on average about € 6000 per family in the EU. These freedoms embody the distinct advantages conferred by European citizenship. we must now remove the uncertainties that could hinder the exercise of this freedom. or retire in another EU country. Over the years. the legal. They are everywhere. which is either regulated by national technical regulations or not specifically regulated at all.1. It concluded that there was still a huge gap between the vision of an integrated EU economy and the reality as experienced by European citizens and European service providers. This principle was initially introduced to open Europe’s labour markets to migrant workers and their families. Most notably. Overall. This resulted in the publication of a Report on the State of the Internal Market for Services in July 2002. As the reasons why services are not frequently traded between Member States were complex and not well documented. Member States may restrict the free movement of goods only in exceptional cases. telecommunications. under which products legally manufactured or marketed in one Member State should in principle be able to move freely throughout the EU. Specific policies on the free movement of workers relate to the area of employment and social affairs.Approximately half of the trade in goods within the EU is covered by harmonised regulations. The principles of freedom of establishment and free movement of services have been clarified and developed over the years through the case law of the European Court of Justice. It is clear from the work done by the Commission that these barriers have a serious negative effect on the cost and . Most of the benefits seen so far from the Internal Market have occurred in goods markets. despite progress in some specific service sectors. we can move as freely around Europe as we can within a Member State. Competition has increased as companies find new markets abroad. 2. EU legislation harmonising technical regulations has been introduced in particular in the higher-risk product sectors. For information on other policies. In order to minimise risks and ensure legal certainty across Member States. environment.If the right to cross-border mobility has become a reality. The European policy on the mutual recognition of professional qualifications is an example of action undertaken by the Commission in this respect. This report set out. This guarantees to EU companies the freedom to establish themselves in other Member States. so as to prevent criminals from taking advantage of a European space without frontiers. Prices have converged (in many cased downwards) and the range and quality of products available to consumers have increased.

thus allowing the development of cross-border operations. Barriers to trade in services penalise in particular small and medium sized enterprises (SMEs). Until 1992 the agriculture expenditure of the European Union represented nearly 49% of the EU's budget. in particular France. saving plans and pensions – which they will be able to buy from anywhere in Europe. as diverse as opening bank accounts. Reforms of the system are currently underway reducing import controls and transferring subsidy to land stewardship rather than specific crop production (phased from 2004 to 2012). and makes it easier for businesses to raise the money they need to start and grow.Following the report. modernise and simplify the legal and administrative framework . the share of traditional CAP spending is projected to decrease significantly to 32%. Not so long ago. In contrast. further to the liberalisation of capital movements and payments which has accompanied the consolidation of the Single Market. Europeans were in principle obliged to manage and invest their money predominantly in their home country. import tariffs and quotas on certain goods from outside the EU. following a decrease in real terms in the current financing period. goods and services for everybody.Free movement of capital is an essential condition for the proper functioning of the Single Market. However.Free movement of capital is also an essential condition for the cross-border activities of financial services companies. The creation of a CAP was proposed by the European Commission. By 1962. since freedom of trade would interfere with the intervention policies. By 2013. 4. but also of European industry as a whole. EU citizens can conduct most operations abroad. [2] The aim of the (CAP) is to provide farmers with a reasonable standard of living. the rules concerning some of these rights remain governed by national provisions which vary from one Member State to another. They will more than double to reach almost 36% in 2013. in particular with regard to what was produced. cut red tape. It represents 48% of the EU's budget.5 billion in 2005). It will also make it easier and cheaper for companies to borrow money. It followed the signing of the Treaty of Rome in 1957. bringing down the cost of capital. this has clearly acted as a considerable hindrance the development of the Internal Market for Services.quality of the final service to users of services whether they are other service providers. in January 2004 the Commission made a proposal for a Directive on services in the Internal Market. favours workers mobility. or purchasing real estate. which are disproportionately affected by complex administrative and legal requirements and therefore more likely than larger firms to turn down cross-border opportunities because of them.also by use of information technology – and make Member State administrations co-operate much more systematically. including guaranteed minimum prices. [The CAP combines a direct subsidy payment for crops and land which may be cultivated with price support mechanisms. maintaining prices for goods and how farming was organised.In 2005 the Commission completed the legislative phase of an action plan aimed at developing a true European-wide market in financial services and is now implementing a new strategy to deepen financial integration and deliver further benefits to industry and consumers alike. This could therefore only be achieved if policies were harmonised and transferred to the European Community level. The Services Directive was finally adopted by the European Parliament and the Council in December 2006 and will have to be transposed by the Member States by the end of 2009. there has been considerable criticism of CAP. the effectiveness of EU initiatives in the financial services sector would be compromised if capital movements within the EU were subject to restrictions. THE COMMON AGRICULTURAL POLICY The (CAP) is a system of European Union agricultural subsidies programmes. It is intended to improve the competitiveness not just of service enterprises. the amounts for the EU's Regional Policy represented 17% of the EU budget in 1988. manufacturers or consumers. buying shares in non-domestic companies. It will also strengthen the rights of users of services. This intervention posed an obstacle to free trade in goods while the rules continued to differ from state to state. the reactions of stakeholders to it and further legal analysis.8 billion in 2006 (up from €48. Detailed implementation of the scheme varies in different member countries of the EU. which established the Common Market member states individually strongly intervened in their agricultural sectors. Some Member States. insurances. However. It enables a better allocation of resources within the EU. €49. Now. facilitates trade across borders. A more developed Single Market in financial services will provide consumers with a wider choice of financial products – such as loans. Indeed. Given the predominance of SMEs in service operations. consumers with quality food at fair prices and to preserve rural heritage. three major principles had been established to guide the CAP: market unity. community preference . It will remove discriminatory barriers. This directive is aimed at eliminating obstacles to trade in services. and all farming professional organisations wanted to maintain strong state intervention in agriculture.

for example. to ensure a fair standard of living for the agricultural Community. Reforms implemented from 2005 are phasing out specific subsidies in favour of flat-rate payments based only on the area of land in cultivation. Direct subsidies are paid to farmers. Currently set-aside has been suspended. the CAP has been a central element in the European institutional system. each year transferring a larger proportion of the total payment to the new scheme. This notably applies to countries which had a traditional trade link with a member country. subject to further decision about its future. grain. 4. rather than on the total amount of crop produced. 3. to increase productivity. These are set at a level to raise the World market price up to the EU target price. Germany is still the largest net contributor into the EU budget. in particular labour. to secure availability of supplies. Transitional rules apply to the newly admitted member states which limit the subsidies which they currently receive. This allows farmers a . whilst some farmers made imaginative use of 'set-aside'. in exchange. 2. If the internal market price falls below the intervention level then the EU will buy up goods to raise the price to the intervention level. The initial objectives were set out in Article 39 of the Treaty of Rome: 1. by promoting technical progress and ensuring the optimum use of the factors of production.and financial solidarity. Payments under the old scheme were frozen at their levels averaged over 2002-2003 and reduce each subsequent year. Since then. This is to limit competition between EU products and alternative external goods. The internal market price can only vary in the range between the intervention price and target price. however. This was originally intended to encourage farmers to choose to grow those crops attracting subsidies and maintain home-grown supplies. to provide consumers with food at reasonable prices. There are a number of mechanisms:      Import levies are applied to specified goods imported into the EU. A secondary market evolved. The change is intended to give farmers more freedom to choose for themselves those crops most in demand and reduce the economic incentive to overproduce. Some non member countries have negotiated quotas which allow them to sell particular goods within the EU without tariffs. as of 2005 France is also a net contributor and the poorer and more agriculture-focused Spain. Production quotas and 'set-aside' payments were introduced in an effort to prevent overproduction of some foods (for example.The CAP is often explained as the result of a political compromise between France and Germany: German industry would have access to the French market. The UK government has decided to run a dual system of subsidies. Greece and Portugal are the biggest beneficiaries. Objectives of CAP The coverage of products in the external trade regime is more extensive than the coverage of the CAP regime. Subsidies were generally paid on the area of land growing a particular crop. An internal intervention price is set. 5. milk. especially in the sale of milk quotas. setting aside land which was difficult to farm. following rising prices for some commodities and increasing interest in growing biofuels The change in subsidies is intended to be completed by 2011. The CAP recognised the need to take account of the social structure of agriculture and of the structural and natural disparities between the various agricultural regions and to effect the appropriate adjustments by degrees. The intervention price is set lower than the target price. CAP is an integrated system of measures which works by maintaining commodity price levels within the EU and by subsidising production. to stabilise markets. and for adopting environmentally beneficial farming methods. The target price is chosen as the maximum desirable price for those goods within the EU. but individual governments have some freedom to decide how the new scheme will be introduced. Import quotas are used as a means of restricting the amount of food being imported into the EU. wine) that attracted subsidies well in excess of market prices. Germany would help pay for France's farmers. The need to store and dispose of excess produce was wasteful of resources and brought the CAP into disrepute.

The continuing problem of how subsidies for these countries will be paid when they become eligible has already led to French concessions on reform of the CAP. three principles had been established to guide the CAP: market unity. unanimity is needed for most serious CAP reform votes. though.Keeping the CAP intact. Other governments have chosen to wait. Ireland and the Netherlands). tariffs on agricultural products would have to be removed. Beginnings of the CAP The Treaty of Rome defined the general objectives of a CAP.period where their income is maintained. the CAP came into force. use of hormones or other drugs in livestock intended for human consumption and disease control (e. such as consumer advocate working groups and the environmental departments of the Union. this is a problem that began in the 1960s and one that continues to the present day. In 1960. As part of building a common market.000). Above all. in 1962. which established the Common Market The six member states individually strongly intervened in their agricultural sectors. History of the CAP The CAP was born in the late 1950s and early 1960s when the founding members of the EC had just emerged from over a decade of severe food shortages during and after the Second World War. it would take many years before the CAP was fully implemented. This could therefore only be achieved if policies were harmonised and transferred to the European Community level. in particular France. The principles of the CAP were set out at the Stresa Conference in July 1958. Farming is regarded as "special".The CAP also aims to promote legislative harmonisation within the Community. The creation of a CAP was proposed in 1960 by the European Commission. All of these are used as rationales for keeping the CAP strong. Examples are regulations on permitted preservatives or food coloring. due to the political clout of farmers. which Eurosceptics consider detrimental to their economies.In recent times change has been more forthcoming. but for transitional regulations limiting the subsidies which they receive. due to external trade demands and intrusion in CAP affairs by other parts of the EU policy framework. Alterations to the qualifying rules meant that many small landowners became eligible to apply for grants and the Rural Payments Agency in the UK received double the previous number of applications (110. The new accession countries which joined the EU in 2004 have large farm sectors and would have overtaken France as chief beneficiary. In addition Euroscepticism in states such as the UK and Denmark is fed in part by the CAP. the CAP has been a central element in the European institutional system. the aim of self-sufficiency and . the farming lobby's power has been a factor determining EU agricultural policy since the earliest days of integration. albeit less severely. the CAP mechanisms were adopted by the six founding Member States and two years later. a part of Europe's shared heritage encompassing food production and even fine dining. Outside Brussels proper. during the foot and mouth disease outbreak in the United Kingdom. is an important aim of EU policy. Governments also have limited discretion to continue to direct a small proportion of the total subsidy to support specific crops. and the sensitivity of the issue. maintaining prices for goods and how farming was organised. The process of removing all hidden legislative barriers to trade is still incomplete. Differing laws in member countries can create problems for anyone seeking to trade between countries.g. and all farming professional organisations wanted to maintain strong state intervention in agriculture. Some Member States. In recent years France has benefited the most from these subsidies. Further concessions will inevitably be necessary to balance the budget. However. and change the system in one go at the latest possible time. animal welfare regulations. in particular with regard to what was produced. however. resulting in rare and gradual change.) Finally.By 1962. It is not simply just another industry. but which they can use to change farm practices to accord with the new regime. since freedom of trade would interfere with the intervention policies. This lobby's power has decreased markedly since the 1980s. hence its massive presence in the EU psyche (and the EU budget. labelling regulations.The Agricultural Council is the main decision-making body for CAP affairs. community preference and financial solidarity. This intervention posed an obstacle to free trade in goods while the rules continued to differ from state to state. CAP reform has steadily lowered its share of the EU budget but it still accounts for nearly half EU expenditure. Since then. It followed the signing of the Treaty of Rome in 1957. Evolution and reform The CAP has always been a difficult area of EU policy to reform. The CAP is funded by the European Agricultural Guidance and Guarantee Fund (EAGGF) of the EU.

Finally. also known as the ‘1980 Agricultural Programme’ or the ‘Report of the Gaichel Group’. A system called "Agrimoney" was introduced as part of the fledgling EMU project. That would make it possible to redistribute their land and increase the size of the remaining family farms. Sicco Mansholt (European Commissioner for Agriculture). the basis of the CAP remained in place. lingers to this day. a particularly salient concern in the post-war years. the Mansholt Plan was reduced to just three European directives which. in 1972. The reforms reduced levels of support by 29% for cereals and 15% for beef. Farms were considered viable if they could guarantee for their owners an average annual income comparable to that of all the other workers in the region. would-be reformers were mostly absent throughout the 1970s. he called on the Member States to limit direct aid to unprofitable farms. Environmentalists garnered great support in reforming the CAP. In addition to vocational training measures. They also created 'set-aside' payments to withdraw land from production. Sicco Mansholt was soon forced to reduce the scope of some of his proposals. but it was financial matters that ultimately tipped the balance: due to huge overproduction the CAP was becoming expensive and wasteful These factors combined saw the introduction of a quota on dairy production in 1984. However. cereal prices have been closer to the equilibrium level. and the associated problems of the CAP are far from being corrected. more efficient industry. It predicted the imbalance that would occur in certain markets unless the Community undertook to reduce its land under cultivation by at least 5 million hectares. although it is recognised that this has an impact on world poverty. It is claimed that the CAP is an exceptional economic sector as protects the "rural way of life". while at the same time adjusting to the trend toward a more free agricultural market. Between Mansholt and MacSharry Hurt by the failure of Mansholt. The influence of the farming bloc declined. and not until 1992 did CAP reformers begin to work in earnest. payments to limit stocking levels.It is worth noting that one of the factors behind the 1992 reforms was the need to reach agreement with the EU's external trade partners at the Uruguay round of the General Agreement on Tariffs and Trade (GATT) talks with regards to agricultural subsidies. He therefore suggested that production methods should be reformed and modernised and that small farms. which were bound to disappear sooner or later. reformers were emboldened. . sent a memorandum to the Council of Ministers concerning agricultural reform in the European Community. Ultimately. and above all the extremely powerful farming lobbies across the Continent saw the Plan disappear from the Union's objectives. and reform proposals were few and far between. should be increased in size. according to Community experts. Ray MacSharry) were created to limit rising production.Since the MacSharry reforms. in 1988.The Mansholt Plan noted the limits to a policy of price and market support. [5] This long-term plan. concerned the modernisation of agricultural holdings. the administrative complexity involved invites fraud. but was deemed a failure and did not stimulate further reforms. [citation needed] However. there is greater transparency in costs of agricultural support and the 'de-coupling' of income support from production support has begun. a ceiling on EU expenditure to farmers. the MacSharry reforms (named after the European Commissioner for Agriculture. The aim of the Plan was to encourage nearly five million farmers to give up farming. Mansholt also provided for welfare programmes to cover retraining and early retirement.On 21 December 1968. the abandonment of farming and the training of farmers. 1992 In 1992.The 1980s was the decade that saw the first true reforms of the CAP. The former Netherlands Minister of Agriculture also noted that the standard of living of farmers had not improved since the implementation of the CAP. foreshadowing further development from 1992 onwards. Farming's special status. and with it. and finally. despite an increase in production and permanent increases in Community expenditure.a "shared larder" in Europe. Early attempts at reforms The Mansholt Plan The Mansholt Plan was a 1960s idea that sought to remove small farmers from the land and to consolidate farming into a larger. and introduced measures to encourage retirement and forestation. named after the village in Luxembourg where it had been prepared. laid the foundations for a new social and structural policy for European agriculture.Faced with the increasingly angry reaction of the agricultural community.

The overall EU and national budgets for subsidy have been capped. The aim is to make more money available for environmental quality or animal welfare programmes. European Commission Report (2003) A 2003 report.The reforms enter into force in 2004-2005. or in the 1999 Agenda 2000 decisions. In Scotland payments are based on a historical basis and can vary widely. setting up producer groups and support for young farmers. This will prevent a situation where the EU is required to spend more on the CAP than its limited budget has. food safety and animal welfare standards ('cross-compliance'). In England the single payment scheme provides a single flat rate payment of around £230 per hectare for maintaining land in cultivatable condition. Payments for major arable crops as cereals and oilseeds were harmonized. by a group of experts led by Belgian economist André Sapir stated that the budget structure was a “historical relic”. and there is little prospect of the budget being increased.Sugar was not included in the 1992 MacSherry reform. CAP spending was kept within the remit of the EU .Modern reforms The current areas that are issues of reform in EU agriculture are: lowering prices.The report's findings were largely ignored. The market support prices for cereals. commissioned by the European Commission. the two largest producers of sugar from sugar cane. This compares to levels produced by Brazil and India. The new scheme allows for much wider non-production use of land which may still receive the environmental element of the support. This was made possible by advance agreement to this approach with Germany. over four years. but it did also suggest that farm aid would be administered more effectively by member countries on an individual basis. both in their efforts to defend the UK position on the UK rebate and also given that the UK is in favour of lowering barriers to entry for third world agricultural exporters. Additional payments are available if land is managed in a prescribed environmental manner.The report suggested a reconsideration of EU policy. [11] Under . and finding alternative income opportunities for farmers.and France led an effort to agree a fixed arrangement for CAP spending that would not be changed until 2012. Some of these issues are the responsibility of the member states. with annual production at 17 million metric tons. EU farm ministers adopted a fundamental reform of the CAP. rather than discussing the CAP. Other issues are environmental pollution. 1999 The 'Agenda 2000' reforms divided the CAP into two 'Pillars': production support and rural development.Details of the UK scheme were still being decided at its introductory date of May 2005. As a significant proportion of the budget is currently spent on agriculture. based on "decoupling" subsidies from particular crops. Decoupling (2003) On 26 June 2003. In 2005 European Union agriculture ministers announced plans to cut the minimum beet price by 39% from 2006. It is this agreement that the UK currently wishes to see re-opened. ensuring food safety and quality. milk and milk products and beef and veal were step-wise reduced while direct coupled payments to farmers were increased. Instead. the EU is by far the largest sugar beet producer in the world. Details of the scheme in each member country may be varied subject to outlines issued by the EU. and guaranteeing stability of farmers' incomes. Several rural development measures were introduced including diversification.) The new "single farm payments" are subject to 'cross-compliance' conditions relating to environmental. (Member States may apply for a transitional period delaying the reform in their country to 2007 and phasing in reforms up to 2012) [9] Sugar regime reform (2005-2006) One of the crops subsidised by the CAP is sugar produced from sugar beet. redirecting expenditure towards measures intended to increase wealth creation and cohesion of the EU. Agri-environment schemes became compulsory for every Member State. The report largely concerned itself discussing alternative measures more useful to the EU. Many of these were already either good practice recommendations or separate legal requirements regulating farm activities. sugar was also subject to a phase-in (to 2009) under the Everything But Arms trade deal giving market access to least developed countries. (Though Member States may choose to maintain a limited amount of specific subsidy. animal welfare. this would necessitate reducing CAP expenditure.

often due to colonial ties . official development assistance amounted to 80 billion USD in 2004. nineteen ACP countries export sugar to the EU. who are instead acting only in accordance with the wishes of the WTO.An aim of this policy change is to allow easier and more profitable access to European markets for emerging economies.000 or more from the EU. is currently under negotiation. The next long-term budget (also called 'financial perspectives').the Sugar Protocol to the Lome Convention. The current EU long-term budget runs from 2007 to 2013. Proposed direct subsidy limits (2007) In the autumn of 2007 the European Commission was reported to be considering a proposal to limit subsidies to ind ould have be affected in the UK. subsidies should be focused exclusively on the provision of public goods. like those of the USA and other Western states. starting in 2014. An initial step in the debate has been the Budget Review conference. of an declaration by leading agricultural economists from all over Europe advocating “A CAP for European Public Goods“. with European production projected to fall sharply as a result of this. in November 2008. the phase-out or reform of the Single Farm Payment (for direct income support to farmers) and the strengthening of targeted payments for public goods (rewarding farmers e. for environmental stewardship services). 2007. In May 2007. which amounts to unfair competition.[Similar attempts have been unsuccessful in the past and were opposed in the UK by two strong lobbying organizations the Country Land and Business Association and the National Farmers Union. which has large collective farms still in operation in what was East Germany also vigorously opposed changes which were marketed as "reforms". Germany.as part of the ACP group may stand to lose out. Another point of contention is that those countries who currently receive preferential treatment from EU member states . [20] The declaration proposes to remove all blanket subsidies that stimulate production and support farm incomes. organized by the European Commission. OECD analysts estimate that cutting agricultural tariffs and subsidies by 50% would add an extra 26 billion USD to annual world income. the EU has decided on some reforms of sugar subsidies. Main issues include reductions in the size of the future CAP budget. According to the EU. The proposal was reportedly submitted for consultation with EU member states on November 20. Post-2013 CAP The next CAP reform will coincide with a new EU budget. Sweden became the first EU country to take the position that all EU farm subsidies should be abolished (except those related to environmental protection.g. equivalent to just over four dollars a year for every person on the globe. such as "EUPolitix". Criticism has been wideranging.As of 21 February 2006. who supported challenges on sugar dumping by the EU from Australia. Thailand and Brazil. as there are over 20 farms/estates which receive £500. in November 2009. By contrast. Criticism of the CAP The CAP has been roundly criticised by many diverse interests since its inception. the West spends high amounts on agricultural subsidies every year. contend that this is not an altruistic move nor an idealistic shift from the EU.[12] and will be affected by price reductions on the EU market. and even the European Commission has long been persuaded of the numerous defects of the policy. Oversupply and its redistribution . add to the problem of what is sometimes called Fortress Europe. Critics. The guaranteed price of sugar is to be cut by 36%. notably to fight climate change. Anti-development Criticism of the CAP has united some supporters of globalisation with the anti-globalisation movement in that it is argued that these subsidies. Instead.These proposals followed the WTO appellate body largely upholding on 28 April 2005 the initial decision against the EU sugar regime. The Organisation for Economic Co-operation and Development countries' total agricultural subsidies amount to more than the official development assistance from OECD countries to developing countries. this is the first serious reform of sugar under the CAP for 40 years. [19] Another milestone has been the publication. preserve biodiversity and manage water resources. Support to farmers in OECD countries totals 280 billion USD annually.

so this is not so true any more. rice. So while subsidies allow small farms to exist.. The 2005 HDR described the CAP as "extravagant .. such as the indiscriminate use of fertilizers and pesticides. The report also states "The basic problem to be addressed in the WTO negotiations on agriculture can be summarized in three words: rich country subsidies. In January 2009 the EU had a current store of 717. before selling the produce wholesale to developing nations. they have increased them" an outcome hinted at in HDR 2003. ividual landowners and factory farms to around £300. 41. This forces strict limits on the amount of nitrogenous fertilisers which can be used in vulnerable areas. disregarding economies of scale.000 tonnes of butter and 109. the CAP in fact rewards larger producers. At the same time it has allowed farmers to employ unecological ways of increasing production. subsidies for specific crops. Although the new decoupled payments were aimed at environmental measures. earning one hundred extra euro per hectare will make 100. many farmers have found that without these payments their businesses would not be able to survive. As a result most CAP subsidies have made their way to large scale farmers.000. and storing this produce in large quantities (leading to what critics have called 'butter mountains' and 'milk lakes'). larger farms have benefited much more from subsidies than smaller farms. For example. In the last round of world trade negotiations rich countries promised to cut agricultural subsidies. According to the 2003 Human Development Report the average dairy cow in the year 2000 under the European Union received $913 in subsidies annually. while a 10 hectare farm will only make an extra 1000 euro. Hurting smaller farms Although most policy makers in Europe agree that they want to promote "family farms" and smaller scale production.529.By adding import tariffs to agricultural goods exported by farmers in developing countries. reductions in export subsidies. many products have been making less than their cost of production when sold at the farm gate.002 hectolitres of alcohol/wine”. Equity among member states . Some factory farms and estates of rich people w Artificially high food prices CAP price intervention has been criticised for creating artificially high food prices throughout the EU. high import tariffs (estimated at 18-28%) have the effect of keeping prices high by restricting competition by non-EU producers. However a total re-focusing of the payment scheme in 2004 now puts the environment at the centre of farming policy. it is argued the CAP is throttling agricultural business within these countries whether national or global and forcing them back into an economically stunted subsistence lifestyle.812 tonnes of cereal. ] The recent moves away from intervention buying. they funnel most profits to larger scale operations. It is estimated that public support for farmers in OECD countries costs a family of four on average nearly 1. This leads to the European Union purchasing millions of tonnes of surplus output every year at the stated guaranteed market price.3 million hectolitre 'wine lake'. have changed the situation somewhat.000 USD per year in higher prices and taxes.000 extra euro. sugar and milk products and 3.000 tonnes of powdered milk to the third world. the CAP-mandated demand for certain farm products is set at a high level compared with demand in the free market (see CAP as a form of State intervention).476. The EU will also purchase and further subsidise the export of 30. a farm with 1000 hectares. whilst an average of $8 per human being was sent in aid to SubSaharan Africa. Since the 2003 reforms subsidies have been linked to the size of farms. Environmental problems A common view is that the CAP has traditionally promoted a large expansion in agricultural production. wreaking havoc in global sugar markets". with serious environmental consequences.422 tonnes of sugar and a 2.To perpetuate the viability of European agriculture in its current state.On the other hand. Strict environmental requirements must also be observed to maintain any subsidy payments. Since then. although the EU has claimed this level of oversupply is unlikely to be repeated.810 tonnes of cereals. Because the CAP has traditionally rewarded farmers who produce more. [23] In 2007 in response to a parliamentary written question the UK government revealed that over the preceding year the EU Public Stock had amassed "13. With food prices dropping over the past thirty years in real terms. whilst at the same time undercutting them in their domestic market where European oversupply is "dumped" uninhibited by import levies.

2004 has obliged the EU to take measure to limit CAP expenditure. for example. However. Without the rebate the UK was the largest contributor. UK rebate and the CAP The UK would have been contributing more money to the EU than any other EU member state. compared to the UK. CAP as a form of State intervention Some major critics of the CAP reject the idea of protectionism. France received 13% of total CAP funds more than the UK (see diagram). Poland is the largest new member and has two million smallhold farmers.37 billion. France remains the #1 beneficiary of the CAP. such as infrastructure. many considered this expense excessive. It is significantly larger than any of the other new members. Spending on the CAP remained fixed.25 billion compared to the current contribution of €2. but also the UK and France. and relatively small proportion of the GDP comes from farms. or inefficient farms to continue to operate which would not otherwise be viable. except that Margaret Thatcher's government negotiated a special annual UK rebate in 1984.Some countries in the EU have larger agricultural sectors than others. outdated. practice or both. Considering that a small proportion of the population.75 billion. and Portugal. France now makes a net payment into the EU budget.59 billion. where huge stores of unwanted grain were bought directly from farmers at prices set by the CAP well in excess of the market is one example.The discrepancy in CAP funding is a cause of some consternation in the UK. with over-production being the usual result. either in theory. Subsidies allowed many small. The inclusion of ten additional countries on May 1. while the new member states receive only small financial aid. This is largely a reflection of the fact that France has more than double the land area of the UK. versus a current French net contribution of €0.If the rebate were removed without changes to the CAP then the UK would pay a net contribution of 14 times that of the French (In 2005 EU budget terms). Overall. Even before expansion.France has a slightly lower GDP than the UK. notably Germany (the largest contribution overall) and the Netherlands (the biggest contribution per person). Due to the way the rebate is funded. as had previously been agreed. In comparison. It was agreed that the European Commission should conduct a full review of all EU spending. The largest per capita beneficiaries are Greece and Ireland. France pays the largest share of the rebate (31%). This is a net benefit to France of €6. The creation of Grain Mountains. Economic sustainability Many economists believe that the CAP is unsustainable in the enlarged EU. so it can not be said that it receives a subsidy from any other country. Spain. this reduced the proportion of the budget spent on the CAP. were matched by other countries' contributions and were only for the new member states. A straightforward economic model would suggest that it would be better to allow the market to find its own price levels. a free market without interference will allocate resources more efficiently. education or healthcare. followed by Italy (24%) and Spain (14%). Free market advocates are among those who disagree with any type of government intervention because. and consequently receive more money under the CAP.to many people in the UK. How many people benefit? . and its higher population means that it earns slightly less per person compared to the UK. Overall. The popular view in the UK (as. Other countries receive more benefit from different areas of the EU budget. and for uneconomic farming to cease. on condition that the funds did not contribute to CAP payments. notably France.5 billion.In December 2005 the UK agreed to give up approximately 20% of the rebate for the period 2007-2013. then the UK would be paying money to keep an inefficient French farming sector in business . the UK budget rebate for 2005 is scheduled to be approx €5. The UK would make a net contribution of €8. certain countries make net contributions. this would be seen as "grossly unfair". As of 2004. the CAP consumed a very large proportion of the EU's budget. set forth in the tabloid press) is that if the UK rebate were reduced with no change to the CAP.Resources used in farming would then be switched to a myriad of more productive operations. they say. but taken together the new states represent a significant increase in recipients under the CAP. The setting of 'artificial' prices inevitably leads to distortions in production. Germany has a GDP approximately 25% higher than either France or the UK. but per capita income is comparable to the other two countries. French motives for generating arguments about "solidarity" and "selfishness" are therefore seen as extremely self-serving.

Critics argue that too few Europeans benefit. Additionally. anyway. . not rural areas. most Europeans live in cities. The number of European farmers is decreasing every year by 2%. However. their opponents argue that the subsidies are crucial to preserve the rural environment.The 2007-2008 world food price crisis has renewed calls for farm subsidies to be removed in light of evidence that farm subsidies contribute to rocketing food prices. and that some EU member states would have aided their farmers. which has a particularly detrimental impact on developing countries. and the farming sector is responsible for less than 3% of the GDP of the EU. Only 5% of EU's population works on farms.