History of The European Integration (Based On BW, ch.1) : PEEU - 1st Module - Lesson 1

Intro Marshall P. ECSC EEC EFTA 1st enl. 2nd enl. Single M. 3rd enl. Maast. Amst.
& Nice Const.T. 4th enl. Lisbon 1
History of the European Integration

(based on BW, ch.1)
PEEU - 1st module - Lesson 1
D.Delli Gatti
D.Delli Gatti
PEEU - 1st module - Lesson 1 - History
Intro Marshall P. ECSC EEC EFTA 1st enl. 2nd enl. Single M. 3rd enl. Maast. Amst.& Nice Const.T. 4th enl. Lisbon 1
Western Europe after WWII
High death toll, expecially in Germany.

Huge economic damage measured by contraction of GDP.
Humanitarian emergence: widespread su¤ering for shortage of
food, housing and heating.
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Death and destruction
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How can Europe avoid another war?
New democratic leaderships in major continental countries of

Western Europe – e.g. France (Robert Schuman, Jean
Monnet), Germany (Conrad Adenauer) and Italy (Alcide De
Gasperi) – were aware that
nationalism was responsible for both WWs and call for
integration as the way to avoid another war ! "United States
of Europe"
The main reason for integration in Europe was therefore
utterly political. A European Political Union was deemed
necessary to avoid another war in Europe.
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European integration and the Cold War
There was also another geo-political reason: the "Cold War"

between Western countries under the hegemony of USA and
Eastern Countries dominated by the USSR.
USA favoured integration to strengthen the Western alliance
facing the menace of USSR and its Eastern European allies.
"Special relationship" between US and UK dominating the
Western alliance.
French leadership (De Gaulle) conceived of a special
Franco-German relationship as a counterbalancing power to
the US-UK dominance within the Western alliance.
This Franco-German axis will become the driving force of
European integration.
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Marshall Plan (1948)
Marshall Plan (named after the U.S. Secretary of State

George Marshall): …nancial and humanitarian assistance from
the US to European nations which agree on a program and
organization for joint economic recovery (an early example of
conditionality).
In 1948 the Marshall Plan was …nanced and OEEC
(Organization for European Economic Cooperation) was
established.
Initial membership of 17 countries, 13 countries of EU15
(Italy, Germany, France, Belgium, the Netherlands,
Luxembourg, UK, Ireland, Denmark, Portugal, Austria,
Greece, Sweden) plus Norway, Iceland, Switzerland and
Turkey.
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OEEC and EPU
From 1948 to 1952: OEEC

distributed 12 billion $ of US aid among members (half of
that sum went to UK, France and West Germany),
implemented a reduction of trade barriers among European
countries,
established the EPU (European Payments Union) to ease
transactions among European countries (e¤ective from 1950
to 1958).
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Reconstruction
From 1950 to 1958, rapid growth in export and GDP

expecially for the countries defeated in WWII and most hit by
the damage of war (Germany, Italy).
This remarkable growth – expecially compared to the pre-war
performance – boosted the support for free trade thinkers who
wanted to dismantle protectionism.
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The end of the Marshall Plan
From 1952 on the role of OEEC became smaller and smaller

as the Marshall Plan ended and the focus of the Western
alliance switched to military goals (with the establisment of
NATO-North Atlantic Treaty Organization).
In 1961 the OEEC was transformed into OECD (Organization
for Economic Cooperation and Development).
Need for a stronger and quicker process of integration.
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Approaches to European Integration (1)
Debate on the role of the Nation-State (NS) in the process of

Integration. Two approaches:
Federalist approach:
European NSs should be embedded in a Federalist structure, a
supranational organization to which the NSs delegate their
powers;
integration by means of increasing delegation of powers of NSs
to this federalist organization.
Intergovernmental approach: European NSs should keep their
powers and prerogatives and reach a closer cooperation on an
intergovernmental basis, i.e. by means of (unanimous)
consensus.
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Approaches to European Integration (2)
Federalists: leadership of Germany, Italy, Austria, Belgium,

the Netherlands
Intergovernmental: leadership of UK, Denmark, Norway
France: some federalists (Schuman,Monnet), some
intergovernmental (De Gaulle).
Intergovernmental approach prevailed …rst:OEEC strictly
intergovernmental
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ECSC (1952)
Schuman Plan (inspired by Jean Monnet): France and

Germany should place their steel and coal production under
the control of a supranational authority.
In 1952 the ECSC (European Coal and Steel Community) was
established with 6 members: France, Germany, Italy, Belgium,
the Netherlands and Luxembourg (Benelux). This is an
example of sectorial economic integration.
Pricing, trade and production of steel and coal where placed
under the supervision of the High Authority, a supranational
organization whom the member countries delegated their
powers to ! Federalist approach.
High Authority composed by o¢ cials appointed by member
countries
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Early failures
Need for a deeper integration, but many obstacles to military

and political integration:
European Defence Community rejected by French Parliament,
European Political Community abandoned.
These issues are still on the table...
Only path to deeper integration was economic integration
(functionalism).
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Functionalism
Since direct political uni…cation had been impossible, the

founding fathers aimed at integrating the economies of the Six
in order to bring their citizens into an even closer union.
Once this economic integration were completed, political
integration would be much easier.
"In short, economics was to be the road to the …nalité
politique, namely a politically uni…ed Europe." (BW, p.38)
D.Delli Gatti
EEC(1957)
In 1957 the Treaty of Rome was signed which established the

EEC (European Economic Community) and Euratom
(European Atomic Energy Community) with 6 members:
France, Germany, Italy, Be-ne-lux ("The Six").
All in all there were three supranational entities by this time:
ECSC, Euratom and EEC (European Communities).!
Federalist approach
Supranational authorities established by the Treaty of Rome:
European Commission,
European Parliament,
European Court of Justice.
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EEC goals
Create a uni…ed economic area by fostering the "Four
freedoms", i.e. freedom to exchange goods and services and
to move labour and capital across member countries.
Liberalization of trade of goods and services with the
formation of custom union, i.e. a community in which trade
among member countries is free – i.e. in each member
country tari¤s on imports from other member countries are
removed – and there is a common tari¤ on imports from
non-member countries.
Liberalization of labour mobility.
Promotion of capital market integration.
Common policies (repression of …rms’anti-competitive
behaviour, prohibition of state-aid, common agricultural
policy)
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Trade liberalization
Trade liberalization began with OEEC. OEEC countries

reduced tari¤s on a non-discriminatory basis, i.e. w.r.t.
imports from everywhere abroad. EEC promised much more:
all the tari¤s within the Community should be removed.
However they should be removed on a discriminatory basis.
By July 1968 all the intra-EEC tari¤s were removed, a year
and a half ahead of schedule.
During the formation of the customs union the share of
intra-EEC trade in total EEC trade rose from 30% to 50%.
Since tari¤s would not be removed but only uniformed w.r.t.
non-member countries, the 11 OEEC countries not adhering
to EEC were in an unfavourable position.
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The reaction to EEC: EFTA (1960)
In 1960, 7 countries (UK, Portugal, Switzerland, Austria,

Denmark, Norway, Sweden) not adhering to EEC formed their
own free trade bloc: EFTA (European Free Trade
Association).
By 1968 also Finland and Iceland had joined EFTA.
UK leadership/intergovernmental approach.
By the late ’60s trade agreements in Europe could be
described as two non overlapping circles: EEC and EFTA.
EEC more "attractive" than EFTA due to bigger weight (in
terms of GDP) of EEC countries – EEC was twice as big as
EFTA – and faster growth.
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Two non overlapping circles: EEC and EFTA in the ’60s
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First enlargement: UK, Ireland, Denmark
Many countries applied for EEC membership over the

following decades, some of them from EFTA.
1973: UK, Ireland and Denmark entered EEC:
UK applied in 1961 but De Gaulle said "no" so that the UK
application was delayed until De Gaulle stepped down and the
new French leadership allowed the enlargement,
UK and Denmark were EFTAns; after their accession to EEC,
EFTA became even less attractive.
By the mid ’70s trade agreements in Europe could be
described as two concentric circles: the outer circle, consisting
of both EEC and EFTA countries, could be envisaged as a
virtual free trade area, the inner circle was the EEC.
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Political obstacles to integration
The process of integration slowed down signi…cantly in the

’70s for political and economic reasons (Euro-pessimism).
In order to stop measures proposed by the European
Commission, France (under De Gaulle) did not attend
meetings of the European decision-making bodies (so-called
policy of the "empty chair"). The decision-making process
ground to a halt.
Luxembourg compromise: France resumed participation to
the process in exchange for unanimity in decision making (!
inter-governmental approach).
Progress on deeper integration was blocked until majority
voting was enacted in the mid ’80s with the Single European
Act.
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Second enlargement: Greece, Portugal, Spain
In the ’70s Greece, Portugal and Spain, which had been under
fascist or military dictatorships for years, restored democratic
regimes, which removed one of the obstacles to EEC
membership.
Greece entered EEC in 1981.
Portugal and Spain entered EEC in 1986.
By the mid-’80s the EEC consisted of 12 countries ("the
Six"+UK,Ireland,Denmark+Greece,Portugal,Spain).
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Werner Plan
In 1971 the Commission adopted the Werner Plan which laid

out a step-by-step approach to complete monetary un…cation
by 1980. Monetary uni…cation implies the abandonment of
any type of exchange rate ‡exibility.
The plan was abandoned due to the macroeconomic
turbulence of the period.
After the wage push of the late ’60s and the …rst oil price
shock of 1973, a second oil price shock occurred in 1979 (due
to the Islamic revolution in Iran).
Need for exchange rate stabilization.
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European Monetary System
Some of the member-countries launched the EMS (European

Monetary System) in 1978. It was a system of …xed but
adjustable exchange rates, not a monetary union. The
experiment was, by and large, a success.
The driving force behind the EMS was the Franco-German
axis represented by President Giscard and Chancellor Schmidt.
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Technical Barriers to Trade
Non-tari¤ or technical barriers to trade (TBT) are detailed

technical regulations and standards, promoted to protect
consumers’safety, which yield market segmentation and
hamper foreign trade.
The EEC tried to dismantle TBT starting from 1969, i.e.
when the customs union was completed, by means of the
so-called traditional or old approach consisting of
harmonization of technical regulations and standards
implemented by unanimous vote on harmonization directives.
The old approach was bound to fail because of unanimity. For
instance, it took ten years to enact the harmonized technical
standards of gas containers. In the meanwhile member-
countries were enacting myriads of technical regulations.
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The Single Market Programme (1)
The Delors Commission (1985) started a new program to

deepen and strengthen European integration, the SMP
(Single Market Programme).
Lord Cock…eld’s White Paper (1985) listed 300 measures to
abate TBT and other obstacles to free trade and transform
the Common Market into the Single Market.
The aim consisted in creating "an area without internal
frontiers in which the free movement of goods, persons,
services and capital is ensured".
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Key proposals of the White Paper:

Reduction/elimination of border formalities
Harmonization of VAT (Value Added Tax) rates
Liberalization of Government procurement
Mutual recognition of technical standards
Removal of capital controls
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Mutual recognition and the removal of capital controls were

great leaps forward in the integration process.
Instead of seeking unanimous consent on a unique technical
standard for a certain good (harmonization), in a mutual
recognition regime the importing country recognizes as
legitimate the standard adopted by the exporting country,
even if it does not coincide with its own standard.
Therefore the exporting …rm should not adjust to the
technical standard of the importing country and avoids the
additional cost.
The removal of capital controls aimed at liberalizing
cross-border capital ‡ows and boost capital mobility.
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By 1987 all the member countries had adopted the Single

European Act, i.e. community legislation to enact the Single
Market.
The Single Market Program introduced majority voting –
instead of unanimity – on decisions concerning Single Market
issues.
In 1988 a directive ruled out all remaining restrictions on
capital movements.The Maastricht Treaty prohibits all
restrictions on the movements of capital and payments with
few exceptions.
By 1993 most of non-tari¤ barriers were abated: The Single
(Internal) Market was completed.
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Third enlargement: Austria, Finland, Sweden
In 1992 EEC established the EEA (European Economic Area)

which extended the single market to EFTA countries.
In 1995 Austria, Finland, Sweden joined EEC whose name
became EU (European Union)
By the mid-’90s the EU consisted of 15 countries (EU15):"the
Six"+UK,Ireland,Denmark+Greece,Portugal,Spain+Austria,
Finland, Sweden.
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Europe Agreements
Due to the collapse of the Soviet bloc after the fall of the
Berlin wall, many Central and Eastern European Countries
(CEECs) signed Association Agreements with EU – known as
Europe Agreements – which established bilateral free trade
between each CEEC and the EU.
They were Poland, Hungary, Czechoslovakia, the Baltic
countries (Estonia, Latvia, Lithuania), Romania, Bulgaria,
Albania.
They also and expressed interest in joining EU as soon as
possible.
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Copenhagen criteria
At a Copenhagen summit in 1993 the EU de…ned the
Copenhagen criteria for full EU membership:
stable democratic regime and respect of minorities,
functioning market economy,
adherence to the goals of political, economic and monetary
union.
Huge governance problem in EU: institutions conceived in the
late ’50s for a supranational organization of few members
could not function properly for a huge organization af almost
30 members.
These problems had been highlighted in the Westendorp
Report.
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Maastricht Treaty (1992) (1)
Delors exploited the "momentum" in European integration in

the late ’80s to propose the formation of the EMU (European
Monetary Union).
The driving force behind the process of monetary uni…cation
was the Franco-German axis endorsed by President Mitterrand
and Chancellor Kohl.
The Maastricht Treaty (MT), signed in 1992, established a
step-by-step approach to reach monetary uni…cation by 1999
and adopt a single currency by 2002.
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Maastricht Treaty (1992) (2)
Key provisions of MT:

Roadmap to EMU,
Statute of the ECB (European Central Bank),
European cooperation on non-economic matters such as
foreign policy and security.
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Di¢ cult rati…cation process
MT was signed in 1992. EU Treaties must be rati…ed in every

member country, either by a vote of the Parliament or in a
referendum. The rati…cation process was di¢ cult. The MT
came into force in 1993.
Danish referendum in the summer of 1992 rejected the Treaty.
French referendum in the summer of 1992 approved by a low
margin.
Treaty came into force only at the end of 1993, after a 2nd
Danish referendum.
Both UK and Denmark were granted the opt-out clause: these
countries could stay out of EMU even if they quali…ed for
access.
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Amsterdam Treaty (1997)
The Amsterdam Treaty (1997) introduced the constraint on

national …scal policies (Stability and Growth Pact).
There was no agreement, however, on how to reform the
institutional structure to adapt it to the enlargement to
CEECs. Main issues:
size and composition of the Commission,
extension of majority voting in the Council of Ministers.
This un…nished business was dubbed the "Amsterdam
leftover".
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Nice Treaty (2001)
The Nice Treaty which was aiming at solving these problems

was not successful either.
Some di¢ culties in rati…cation. Two referenda were needed in
Ireland to ratify the Treaty.
The Treaty was signed in 2001 but came into force only in
2003.
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Laeken
At a meeting of the European Council in Laeken in 2001 a

Declaration on the Future of the European Union was
adopted:
Emphasis on the need for a new governance structure for a
EU ("reforming the Nice reforms"),
Need for a European Constitution.
Establishment of a "Convention on the Future of Europe" (to
be known as the European Convention) of approximately
100 members to work on the issues proposed in the
Declaration.
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Constitutional Treaty (1)
Head of the European Convention was Giscard d’Estaing. The

Convention succeeded in drafting a Constitutional Treaty
(CT) in 2002.
CT promoted supranational integration and political union of
the EU, symbols included (EU ‡ag, national anthem, Foreign
Minister), issues that were deeply controversial and divisive in
Europe.
The European Council in 2003 did not reach an agreement of
the draft, essentially because Spain and Poland did not agree
on the voting rules which expanded the voting power of
Germany (w.r.t. the Treaty of Nice).
The enlargement to CEECs in 2004 proceeded therefore
without a Constitution.
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Constitutional Treaty (2)
The Constitutional Treaty was …nally signed in 2004.

Rati…cation, however, was di¢ cult.
French and Dutch referenda rejected the Treaty.
Hence the rati…cation process was suspended and the
constitutional project abandoned.
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Fourth enlargements: CEECs
2004-2013: 11 CEECs (Poland, Hungary, Czech republic,

Slovakia, Estonia, Latvia, Lithuania, Slovenia; Romania,
Bulgaria; Croatia) + Maltha and Cyprus have been allowed
full membership of EU which is now EU28 (but Brexit is
under way...).
After the failure of the Constitutional Treaty, the Lisbon
Treaty has provided the guidelines for the future institutional
architecture of EU, which is still "under construction.
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Lisbon Treaty (2007)
The Reform Treaty or Lisbon Treaty (LT) was signed in 2007.

It essentially retains some of the innovations of the
Constitutional Treaty but discards the political emphasis of
the former.
It contains new voting rules and a strengthening of some of
the leading …gures of the EU (President, Foreign Policy …gure,
etc.)
Rejected in the Irish referendum of 2008 and approved in the
Irish referendum of 2009, the LT cam into force in 2009.
D.Delli Gatti
New developments
2007-2009: Global Financial Crisis and Great Recession

2010-... European Sovereign Debt Crisis
These developments forced institutional change:
Emergency loans and packages (Greece, Ireland and Portugal
in 2010, Spanish banks in 2012, Cyprus in 2013).
Reforms transferring sovereignty to the Eurozone level and new
rules, such as Fiscal Compact, European Stability Mechanism,
Banking Union.
D.Delli Gatti
1st contraction
In June 2016 a referendum in UK revealed the preference of

the electorate for Brexit
The separation procedure started in March 2017. There is a
two-year time interval to complete negotiations between the
UK and EU.
D.Delli Gatti

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Intro Marshall P. ECSC EEC EFTA 1st enl. 2nd enl. Single M. 3rd enl. Maast. Amst.

& Nice Const.T. 4th enl. Lisbon 1

History of the European Integration

Western Europe after WWII

High death toll, expecially in Germany.

Death and destruction

How can Europe avoid another war?

New democratic leaderships in major continental countries of

European integration and the Cold War

There was also another geo-political reason: the "Cold War"

Marshall Plan (1948)

Marshall Plan (named after the U.S. Secretary of State

OEEC and EPU

From 1948 to 1952: OEEC

From 1950 to 1958, rapid growth in export and GDP

The end of the Marshall Plan

From 1952 on the role of OEEC became smaller and smaller

Approaches to European Integration (1)

Debate on the role of the Nation-State (NS) in the process of

Approaches to European Integration (2)

Federalists: leadership of Germany, Italy, Austria, Belgium,

Schuman Plan (inspired by Jean Monnet): France and

Need for a deeper integration, but many obstacles to military

Since direct political uni…cation had been impossible, the

In 1957 the Treaty of Rome was signed which established the

Trade liberalization began with OEEC. OEEC countries

The reaction to EEC: EFTA (1960)

In 1960, 7 countries (UK, Portugal, Switzerland, Austria,

Two non overlapping circles: EEC and EFTA in the ’60s

First enlargement: UK, Ireland, Denmark

Many countries applied for EEC membership over the

Political obstacles to integration

The process of integration slowed down signi…cantly in the

Second enlargement: Greece, Portugal, Spain

In 1971 the Commission adopted the Werner Plan which laid

European Monetary System

Some of the member-countries launched the EMS (European

Technical Barriers to Trade

Non-tari¤ or technical barriers to trade (TBT) are detailed

The Single Market Programme (1)

The Delors Commission (1985) started a new program to

The Single Market Programme (2)

Key proposals of the White Paper:

The Single Market Programme (3)

Mutual recognition and the removal of capital controls were

The Single Market Programme (4)

By 1987 all the member countries had adopted the Single

Third enlargement: Austria, Finland, Sweden

In 1992 EEC established the EEA (European Economic Area)

Maastricht Treaty (1992) (1)

Delors exploited the "momentum" in European integration in

Maastricht Treaty (1992) (2)

Key provisions of MT:

Di¢ cult rati…cation process

MT was signed in 1992. EU Treaties must be rati…ed in every

Amsterdam Treaty (1997)

The Amsterdam Treaty (1997) introduced the constraint on

Nice Treaty (2001)

The Nice Treaty which was aiming at solving these problems

At a meeting of the European Council in Laeken in 2001 a

Constitutional Treaty (1)

Head of the European Convention was Giscard d’Estaing. The

Constitutional Treaty (2)