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THE EUROPEAN UNION: ECONOMY, SOCIETY, AND POLITY

by Andrs Rodrguez-Pose
London School of Economics Oxford University Press ISBN 0-19-874286-X

Part I

ECONOMY

Chapter 1

Competitiveness

The stages of economic integration


Free trade areas:
Free trade between members, different external tariffs Little or no institutional co-ordination

Customs union:
Free trade between members and common external trade restriction Common regulatory bodies

Common (or single) markets:


Removal of all barriers to free factor mobility Free mobility of goods, capital, labour, and services Greater level of regulation and strong institutions to monitor decisions adopted by member states

The stages of economic integration (II)


Economic union:
Harmonisation of economic policies (generally monetary or fiscal policy) Members give up powers. Strong central institutions which dictate common economic policy

Complete economic integration:


All economic policy areas are harmonised The capacity of states to implement independent policies disappears Central institutions become the centres of economic decision-making

The stages of economic integration in the EU


Level of integration Free trade area Main features Free trade among members Period From 1958 to the early 1960s Free trade with a common In theory from 1958, in Customs union external tariff reality from the early 1960s until 1993 Free mobility of factors across 1993-1999 Common market member states Harmonization of economic Early stages in 1993. Economic union policy Partial economic union in 1999 Economic integration Completely unified economic Not yet achieved policy

Economic integration to achieve competitiveness


Why did a customs union (the EC) decide to increase the pace of economic integration during the 1980s and 1990s?
Increasing globalisation of the world economy (increased competition, especially from the US, Japan, and the NICs) More sophisticated systems to dodge trade barriers (multinational corporations) Belief that market fragmentation (nationally divided markets) was reducing economies of scale

GDP per capita (2000) in Europe, the US and Japan


Total GDP in % of the EU Country 2000 (billions economy of ) Austria 205.5 2.42 Belgium 244.0 2.87 Denmark 174.2 2.05 Finland 131.2 1.54 France 1399.2 16.47 Germany 2036.0 23.97 Greece 120.7 1.42 Ireland 101.1 1.19 Italy 1152.3 13.57 Luxembourg 19.9 0.23 Netherlands 399.1 4.70 Portugal 112.3 1.32 Spain 605.7 7.13 Sweden 248.8 2.93 United kingdom 1543.0 18.17 8493.0 European Union 100.00 10738.7 United States 126.44 5163.2 Japan 60.79

The limits of European competitiveness


The costs of the non-Europe (Cecchini, 1991): Physical barriers: Intra-European stoppages, controls at border checkpoints, red-tape, different currencies Technical barriers: Different national product standards and technical regulations across Member States Fiscal barriers: Lack of fiscal harmonisation

Physical barriers
Custom related costs:
Customs controls, border stoppages Paperwork and red-tape Exchange of low-value added perishable goods suffered as a result

High administrative costs and regulatory hassles:


Higher cost of red-tape of SMEs (higher proportion of their business volume, and lack of expertise and human resources)

Physical barriers (II)


Protected markets (II):
Fear of foreign dependence leads to protection of national strategic sectors Many sectors fall under this umbrella: petrochemical industries, shipbuilding, iron and steel, tobacco, car manufacturing, telecommunications, air transport,... Formation of monopolies (BT, Deutsche Telekom, SIP, Air France, Iberia,...) or oligopolies Cost of protection born by the consumer:
Lack of competition and underperforming industries

And companies:
Higher prices for services than their competitors

Physical barriers (III)


Different currencies:
Transaction costs of changing currencies Higher costs of holding higher international reserves Costs associated to exchange rate volatility Higher interest rates in many countries

Technical barriers
Different product standards and technical regulations:
Problems and additional costs for consumers Cost for firms which had to adapt their products to different national standards Cost premium for SMEs

Protected public-sector procurement:


Government supply and construction contrast restricted to national firms Or technical regulations discriminating against foreign bidders

Fiscal barriers
Different fiscal regimes:
Different regimes for companies Different VAT rates Different national accounting standards: Duplication or multiplication of accounting standards for multinational companies Fiscal suspicion by national authorities in order to prevent tax evasion Premium for SMEs

The expected benefits of economic integration


Cecchini report (1988). Cost saving effects:
Static trade effect: benefits reaped from allowing public authorities to buy from the cheapest suppliers Competition effect: Downward pressure on prices as a result of greater competition Restructuring effect: Reorganisation of industrial sectors and individual companies as a result of greater competition

Other possible benefits:


Benefits on investment, innovation (rationalisation of R&D expenditure) and growth Savings for the public sector (lower government subsidies for inefficient firms

The expected benefits of economic integration (II)


Combination of cost saving effects results in two kinds of benefits:
Direct benefits: from the eradication of economic borders Indirect benefits: from economic restructuring, increases in trade and competition and greater economies of scale

Result:
The emergence of virtuous cycles of innovation and competition Lowering of prices for consumers Greater job creation

Estimation of benefits
Cecchini (1988): 4 to 7% of Europes GDP Baldwin:

The expected benefits of monetary union


For all Member States adopting the Euro:
Price transparency across borders, inducing a greater competition effect Elimination of transaction costs of changing currencies Savings through holding lower international reserves Reduction of uncertainty caused by exchange rate volatility

Specific benefits for peripheral economies:


Image premium and credibility in international markets Monetary and macroeconomic stability (lower inflation, deficit, debt, and interest rates)

The possible impact of monetary union


Possible impact:
Large benefits expected But Commission reluctant to issue estimates (as was the case of with the Single Market)

The impact of economic integration


Is European economic integration delivering the benefits predicted by its supporters? Has the EU experienced the increases in trade, the more efficient allocation of resources, and the greater growth and welfare gains expected? Have European economies become more competitive?

Trade
Sizeable increase in trade across the EU
Greater expansion in absolute terms than in other developed areas of the world But not in relative terms, where the US has expanded more (but not Japan) This means that in a world context the evolution of European trade has been rather disappointing, especially in comparison with countries like Canada or Mexico, which have undergone milder processes of integration

Exports of goods and services as a share of GDP


1988 EU US Japan OECD 26.80 8.99 10.02 17.31 1991 26.26 10.37 10.19 17.89 1994 27.79 10.54 9.27 17.92 1997 Change % Change 1988-97 31.73 4.93 18.40 12.09 3.10 34.48 11.11 1.09 10.88 21.02 3.71 21.43

Trade at a national level


Several countries have significant increases: experienced
Countries with relatively open economies: Ireland Countries which were relatively closed: Finland, Sweden, Spain, or Italy

The trend is far from universal:


Germany, Greece, and Portugal have seen their exports as a share of GDP decline Luxembourg, Greece, and Portugal have seen a decline in their import share The lack of a clear pattern in the evolution of trade suggests that no greater territorial specialization is evident

Changes in trade patterns


Increase in intra-industry trade But, stability of inter-industry trade
This has prevented a further concentration of capital intensive industries in core countries to the detriment of the periphery Former lagging countries such as Ireland and Spain have profited from integration to expand trade and attract capital intensive industries Portugal and Greece have been less successful

The level of intra-industry trade suggests that the expected specialization may be starting to happen

Foreign direct investment


Early stages of integration seem to have had a lower impact on FDI than on trade
Net inflows of FDI oscillate with economic cycles Flows of FDI reached their peak around 1990 After the implementation of the Single Market they followed a downward trend

In international comparisons the EU does not score favourably


When compared to the US, net inflows of FDI into the EU have declined with respect to the period before 1993. FDI flows among the member states have lost some importance... But, outflows to the rest of the world have increased.

FDI net inflows


Country Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain Sweden United Kingdom EMU area United States Japan
* Data from 1996.

1980 0.30 0.05 0.49 1.38 1.43 0.13 1.33 0.55 0.70 0.20 1.88 0.50 0.62 0.03

1985 0.26 0.19 0.21 0.50 1.10 0.83 0.25 1.17 1.16 1.19 0.39 1.20 0.56 0.49 0.05

1990 0.41 0.85 0.60 1.10 1.21 1.38 0.59 4.35 3.78 2.84 0.86 3.33 1.46 0.86 0.06

1994 1.08 3.31 1.53 1.19 0.09 0.99 1.55 0.21 2.23 1.44 1.94 3.16 0.90 0.75 0.66 0.02

1997 1.20 1.70 1.78 1.65 -0.02 0.86* 3.63 0.32 2.42 1.68 1.04 4.33 2.96 0.83 1.19 0.08

Economies of scale
Ex-ante reports highlighted that economic integration was to bring about a more efficient concentration of resources And a restructuring of companies
Number of mergers and acquisitions has increased by more than two and a half times between 1987 and 1998 The bulk of this happened in anticipation of the Single Market Transnational M&As have taken off after the Single Market and in anticipation of EMU.

Economies of scale (II)


Three stages in the process:
National M&As: started to take place during the late 1980s in anticipation of the Single Market European M&As: the percentage of M&A involving at least one foreign company almost doubled between 1990 and 1998. Trans-national M&As: Increasingly M&As are global. In 1998 one third of all M&As involved at least one non-EU partner.

During the 1990s there has been an important increase in the volume of the deals.
The total volume of deals has been multiplied by six between 1991 and 1998 Greater expansion in outward M&As

Mergers and acquisitions (1987-98)


1987 Number % National % EU % International 2775 71.6 9.6 18.8 1990 7003 60.7 21.5 17.8 1993 5740 63.4 15.9 20.7 1996 6327 55.7 17.4 26.9 1998 7600 50.1 16.5 33.4

Source: AMDATA in European Economy (1999).

Economies of scale (III)


European companies have become more ambitious and aggressive:
Probably in connection to the launch of the Euro But also as a result of the emergence of new TNCs in Europe resulting from previous mergers

New mergers increasingly involve companies from two different European countries:
Orange and Mannesman Vodafone and Mannesman

And also truly global M&As:


Daimler-Chriysler Terra Lycos Repsol-YPF

Volume of cross-border M&A's (Billion US$)


1991 EU Rest of Europe North America Rest of the World Total 38.7 4.1 26.1 16.4 85.3 1991 EU Rest of Europe North America Rest of the World Total 50.5 3.4 15.7 15.7 85.3 Inward 1994 58.4 7.4 62.9 67.7 196.4 Outward 1994 75.3 18.2 52.0 50.9 196.4 1997 133.6 14.6 76.3 116.5 341.0 1997 127.5 42.1 106.4 65.0 341.0 1998 Multiplier 1991-98 223.4 5.8 17.6 4.3 218.1 8.4 98.9 6.0 558.0 6.5 Multiplier 1991-98 330.6 6.5 14.4 4.2 175.2 11.2 37.8 2.4 558.0 6.5

1998

Source: KPMG Corporate Finance (1999).

Volume of cross-border M&A's (%)


1991 EU Rest of Europe North America Rest of the World Total 45.4 4.8 30.6 19.2 100.0 1991 EU Rest of Europe North America Rest of the World Total 59.3 3.9 18.4 18.4 100.0 Inward 1994 29.7 3.8 32.0 24.5 100.0 Outward 1994 38.4 9.3 26.5 24.8 100.0 1997 39.2 4.4 22.4 34.0 100.0 1997 37.4 12.4 31.9 18.3 100.0 1998 Change 1991-98 40.4 -5.4 3.1 -1.7 39.1 8.5 17.8 -1.4 100.0 0.0 Change 1991-98 0.0 -1.4 13.0 -11.6 0.0

1998 59.3 2.5 31.4 6.8 100.0

Source: KPMG Corporate Finance (1999).

Economies of scale (IV)


But have EU companies become the leading actors in international M&As?
Despite the increase in numbers and size, EU companies have lagged behind the US... And during much of the 1990s also behind Japan and the Asian Dragons Only the Asian crisis of 1997/98 changed the tide

And a diminishing number of European companies can be found among the top 50 in the world

Location of the world's largest 50 corporations


United States 1960 1970 1980 1990 2000 42 32 23 17 15 Europe 8 14 19 21 16 Japan 0 4 5 10 19 Other 0 0 3 2 0

Source: Bergesen and Fernndez (1995) and Fortune Global 500.

Productivity
European labour productivity has been reducing the gap with the US in the post-war decades Convergence came to an end in the second half of the 1980s
Increasing technology gap between the US and the EU Permanence of fragmented markets in Europe (monopolies which prevented access to new technologies) Rigidity of European labour markets (which kept the young out of work)

Productivity has grown faster in the US in the 1990s


Some encouraging signs for EU (advantage in mobiles)

1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000

Labour Productivity Growth

-4

-2

10

12

US

EU

Japan

Productivity in selected EU countries


140 120

Change in productivity US=100

100 80 60 40 20 0

France Italy Spain UK United States

1960

1965

1970

1975

1980

1985

1990

Source: World Bank World Development Indicators (2000).

1995

Growth
On average, the EU has had slightly greater growth than the US and lower than Japan during the post-war decades Precisely at the time of European economic integration, the roles have been reversed
Greater growth in the US (double that of the EMU area) Lower in Japan Strong internal divergence in growth patterns in the EU
Extremely high growth in Ireland and Luxembourg Moderate in Austria, Denmark, the Netherlands and Portugal Low elsewhere in the EU

Average growth in the EU, US, and Japan (1960-2000)


14 12 10 8 6
%

EU US Japan

4 2 0 -2 -4

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

Conclusion
The impact of economic integration on the economic performance of the EU has not been as spectacular and immediate as predicted by ex-ante studies The gap between the EU and the US has increased in many areas (growth, productivity, trade, M&As) Different economic cycles may have a lot to say about diverging economic performances However, economic integration may be setting the bases for a quicker adaptation by the EU in the future to new economic challenges

Chapter 2

Cohesion

Introduction
Have the alleged benefits of economic integration been evenly distributed? How is uneven development within the EU likely to affect the competitiveness and further economic and political integration in the EU?

National disparities in the EU


The EU is one of the most developed spaces in the World:
GDP per capita below that of the USA and Japan... But well above any other large area of the world

However, wealth is and has been unevenly distributed across the EU:
Until recently a core/periphery was visible The core: Austria, Belgium, Denmark, Finland, France, Germany, Luxembourg, the Netherlands, Sweden, the UK, and Northern Italy The periphery: Greece, Ireland, Portugal, Spain, and Southern Italy

National disparities in the EU (II)


Recent changes have led to a blurring of the distinction between core and periphery:
Poor economic performance of some of the countries of the core (Finland, Sweden and the UK) High growth in the periphery (Ireland)

National disparities in GDP per capita and unemployment


GDP per capita 1985 PPS EUR15=100 EUR15=100 European Union Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain Sweden United Kingdom 100.0 108.4 102.3 140.7 135.2 117.4 125.9 49.2 65.9 91.9 128.9 109.7 29.1 53.8 149.3 100.1 100.0 108.2 105.5 112.5 101.6 112.0 117.9 60.6 60.9 101.5 131.3 103.4 55.1 70.5 113.6 98.4 Unemployment rate 1985 % 10.7 4.4 8.9 5.7 14.8 12.0 9.8 9.6 10.1 12.3 2.5 5.2 6.7 21.1 10.4 7.1 GDP per capita 2000 PPS EUR15=100 EUR15=100 100.0 113.0 106.2 145.3 112.9 102.3 110.4 51.0 118.9 89.0 200.8 111.7 50.0 68.4 125.0 115.2 100.0 111.7 110.7 119.0 103.7 99.0 106.3 67.2 118.8 98.7 187.9 114.0 75.7 83.0 104.1 103.1 Unemployment rate 2000 % 8.4 3.3 8.6 4.8 9.8 9.8 8.3 11.2 4.2 10.5 2.0 2.6 4.0 14.2 6.4 5.6

Regional disparities in the EU


Strong national contrasts hide even greater regional contrasts:
In 1998, the GDP per capita of Luxembourg was 3.8 times greater than that of Portugal Hamburgs GDP was 6.7 times higher than that of Ipeiros (Greece) Andalusia and Extremadura had unemployment rates of 32.4 and 30.2%, whereas Salzburg or Belluno had a mere 2.2 and 2.3% respectively.

Internal economic disparities are evident in almost every single country in the EU
Italy (GDP Lombardy 132.5 .... Calabria 59.2) (Unemployment Trentino 3.8% .... Campania 25%)

Regional disparities in the EU (II)


Strong regional contrasts also in:
Portugal (Lisbon and the North vs. the South and Centre) France (Paris vs. the rest) Spain (Northeast and Madrid vs. South and West) UK (South vs. North) Germany (South vs. North) Sweden (South vs. North) Belgium (North vs. South)

No regional contrasts in:


The Netherlands

GDP per capita, 1998 EUR15=100


More than 130 115 to 130 100 to 115 85 to 100 70 to 85 less than 70

Factors behind the existence of territorial disparities


Factor endowment:
Inherited economic situation: GDP per capita Quality and quantity of human capital: Skilled labour, matching skills with labour demands Accessibility: Infrastructure endowment Innovation: Generation and assimilation of innovation. Investment in R&D Sectoral structure

The need for intervention


Do territorial differences in factor endowment justify the implementation of European development policies? Is a development policy really necessary?

The economic debate


Endogenous growth theory and new economic geography:
Greater accessibility, higher skills, and greater capacity to generate and assimilate innovation will lead to the concentration of economic activity A development policy is needed in order to counterbalance this tendency

Classical Ricardian trade theory:


Factor endowment is less important Integration leads to a rearrangement of economic activity Investment and innovation will flow to low cost areas Labour will flow to high cost areas Disparities will even out and policies are not needed

The economic debate (II)


Neoclassical growth theories:
Decreasing returns to scale will lead to convergence Even without economic integration No need for development policies

Economic theory is inconclusive about the territorial impact of economic integration

The political debate


Economic integration is likely to enhance territorial disparities A development policy is needed in order to achieve greater economic and social cohesion This has been the dominating view since the Single European Act Each additional step towards economic integration has been accompanied by cohesion policies: Single European Market Reform of Structural
Funds
EMU Cohesion Fund

The history of EU development policies


Disregard for supra-national development policies in the 1960s:
High levels of economic growth (ca. 6% per annum) Regional convergence Strong national development policies

Establishment of an early regional policy in the 1970s (ERDF):


Change of the political orientation of European governments British membership Power struggle between the Commission and the states

The impact of the early regional policy


The early European regional policy failed to correct economic disparities:
Disparities did not shrink, they expanded during the late 1970s and early 1980s

The reasons for the failure:


Lack of financial resources: Modest amount of funds Lack of continuity of regional actions: Five different stages between 1975 and 1989 Excessive extent of the range of operations and investments: Projects funded in almost every region Absence of a clearly defined structure and of a system of priorities: 41,051 projects funded

The principles of the reform of the Structural Funds


The principle of concentration 3 objectives:
Objective 1: Promoting the development and structural adjustment of regions whose development is lagging behind (for regions below the 75% threshold of the EU GDP per capita) Objective 2: Supporting the economic and social conversion of areas facing structural difficulties (Industrial and rural areas with high-long term unemployment and or high poverty levels) Objective 3: Adapting and modernizing policies and systems of education, training, and employment

The principles of the reform of the Structural Funds (II)


The principle of programming
Individual projects should be included within a development plan Much greater emphasis of the design and implementation of coherent development strategies through multi-annual programming Stages:
Regional development plans Community Support Framework Operations programmes

The principle of partnership


Involving as many actors as possible in the process Aim: to achieve close co-operation between the Commission and national, regional, and local institutions

The principles of the reform of the Structural Funds (III)


The principle of additionality
In order to prevent European development policies from becoming mere substitutes of national development efforts

The principle of efficiency


To guarantee the correct management and to monitor the efficiency of the implementation of European development actions

The Cohesion Fund


Political belief that EMU is likely to lead to a concentration of economic activity Cohesion Fund established to provide financial contribution to projects in the fields of environment and trans-European networks Four beneficiaries: countries whose GNP per capita is below 90% of the EU average
Ireland Greece Portugal Spain

The efficiency of EU development policies


Development policies are, behind the CAP, the second most important set of policies in the EU
One third to 36% of the EU budget; 0.38 of EU GDP

Has this effort paid off? Have the reform of the Structural Funds and the introduction of a Cohesion Fund led to greater territorial cohesion?

The efficiency of EU development policies


Before the Reform, little or no catch-up in the cohesion countries
No convergence in Greece or Spain Slow convergence in Ireland and Portugal

Since the Reform, the four Cohesion countries have converged to the EU average
Greatest convergence in Ireland Lowest convergence in Spain

Convergence has also been fuelled by slow economic growth in the core
Especially in Finland, Germany, Italy, and Sweden

Evolution of GDP per capita in the Cohesion countries


120 110 100

Before the Reform

After the Reform

EUR15=100

EUR15 Greece Spain Ireland Portugal

90 80 70 60 50

1977

1980

1983

1986

1989

1992

1995

1998

The efficiency of EU development policies (II)


The catch-up since the Reform of the Structural Funds has led some authors to claim that regional intervention in the EU has been a success The picture is, however, not as simple A closer look at development within the Cohesion countries reveals a more complex pattern
The higher growth has taken place in some of the most advanced regions (Madrid, Catalonia, Dublin, Lisbon) Large concentration of company headquarters, R&D centres, financial , insurance, and real estate In contrast, many Objective 1 regions have lagged behind

Mean annual growth between 1977 and 1986

European convergence

EU
200

100

0 0 100 200

GDP per capita in 1977

But divergence within states

EU
Mean annual growth between 1986 and 1993
200

100

0 0 100 200

GDP per capita in 1986

EU
Mean annual growth between 1993 and 1998
200

100

0 0 100 200

GDP per capita in 1993

Italy
Mean annual growth between 1980 and 1986
150

Spain
Mean annual growth between 1980 and 1986
150

100

100

50 50 100 150

50 50 100 150

GD per capita in 1980

GDP per capita in 1980

Italy
Mean annual growth between 1986 and 1993
150

Spain
Mean annual growth between 1986 and 1993
150

100

100

50 50 100 150

50 50 100 150

GDP per capita in 1986

GDP per capita in 1986

Italy
Mean annual growth between 1993 and 1998
150

Spain
Mean annual growth between 1993 and 1998
150

100

100

50 50 100 150

50 50 100 150

GDP per capita in 1993

GDP per capita en 1993

Greece
between 1980 and 1986 150
Mean annual growth between 1980 and 1986
150

UK

Mean annual growth

100

100

50 50 100 GDP per capita in 1980 150

50 50 100 150

GDP per capita in 1980

Greece
150

UK
Mean annual growth between 1986 and 1993
150

between 1986 and 1993

Mean annual growth

100

100

50 50 100 150

50 50 100 150

GDP per capita in 1986

GDP per capita en 1986

Greece
Mean annual growth between 1993 and 1998
Mean annual growth between 1993 and 1998
150

UK
150

100

100

50 50 100 150

50 50 100 150

GDP per capita in 1993

GDP per capita in 1993

The efficiency of EU development policies (III)


Many assisted regions have not performed particularly well
Growth in parts of Southern Italy has been sluggish Tendency towards greater polarization in many European countries

Since the implementation of the Reform, mixture of national convergence and regional divergence
Inequalities across States have fallen by 25%, but regional inequalities within states have risen by 10%

GDP growth, 1985-98 EUR15=100


more than 130 115 to 130 100 to 115 85 to 100 70 to 85 less than 70 No data available

The efficiency of EU development policies (IV)


Over time, there has been no change in the Cohesion States The number of regions qualifying for Objective 1 has remained stable
If anything, the number has increased Many regions of core countries (Merseyside, South Yorkshire, Burgenland) have been incorporated.. But few peripheral regions (only Abruzzo, with parts of Ireland and Lisbon among others being phased out)

The analysis of unemployment highlights divergence


Greater polarization in unemployment rates

trends

Conclusion
European development policies have evolved from a minor and rather haphazard policy in the 1980s to the second most important policy of the EU Achieving economic cohesion is, however, proven more elusive than expected
National convergence... But regional divergence

There are voices starting to question this degree of intervention, since it may lead to the formation of sheltered economies

Chapter 3

Ageing

Introduction
Western Europe is ageing As a consequence of:
Higher life expectancy Falling birth and fertility rates

Ageing is likely to become a serious economic, social, and political problem once the baby boomers start retiring
Pressure on the already well-developed European welfare systems Consequences for the economic potential of the EU

Countries are setting policies in motion in order to curb ageing

Demographic change in the EU (I)


The EU is still the most populous among the major world economic powers. 375 million vs 278 in the US and 117 in Japan But the US has been catching up rapidly with the EU (57% of the population in 1960, 74% in 2000) Low rates of population growth during the second half of the 20th century Since 1960 the population of Europe never rose by more than 1% in a single year In contrast, this rate was achieved 18 times in the US and 8 in Japan Population growth in Europe has been declining steadily

Average annual population growth in the EU, Japan and the USA
2.5 2 1.5 1 0.5 0 EU15 Japan USA

1960

1964

1968

1972

1976

1980

1984

1988

1992

1996

Demographic change in the EU (II)


Prospects are bleak:
According to the UN report on Replacement Migration will peak in 2005 By 2050 the EU will have 44 million less than in 2000 (a loss of 12%) It will have 18 million less than the US Twelve out of the fifteen current member states will lose population (exceptions: Ireland, Luxembourg, and France) Population loss in Italy, Spain, and Greece will be in excess of 20%

The decline in birth rates (I)


The second demographic transition:
Fall in birth rates Lower number of marriages and marriages later in life Unstable marriages and growing divorce rates Increase in cohabitation Increase in the number of children born out of wedlock

The decline in birth rates (II)


Three types of demographic patterns: Population growth (France, the Netherlands, Ireland, US):
Early decline in birth rates, but births have stabilized and remain above the number of deaths Still natural growth

Early zero growth (Austria, Denmark, Sweden, UK):


Early decline in birth rates without stabilization Negative growth rates which caused a reaction and a rebound of birth rates

Late zero growth (Italy, Greece, Spain, Portugal, Japan):


Late, but sharp decline in birth rates Zero growth since the early 1990s

10

15

20

25

10

15

20

25

10

15

20

25

1960 1964 1968 1972 1976 1980 1984 1988 1992 1996
1996 1996 1992 1992 1988 1988 1984 1984 1976 1976 1972 1972 1968 1968 1964 1964

1960

1960

FRANCE

NETHERLANDS

AUSTRIA
1980 1980
Birth r. Death r. Birth r. Death r.

Evolution of birth and death rates in selected European countries, the US, and Japan 1960-97

Birth r. Death r.

10

15

20

25

10

15

20

25

10

15

20

25

10

15

20

25

1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 1988 1992 1996 1984 1980 1976 1972 1968 1964

1960

1960 1964 1968 1972 1976 1980

1960 1964 1968 1972 1976 1980

UK

DENMARK

SWEDEN

GREECE

1984 1988 1992 1996

1984 1988 1992 1996

Birth r. Death r. 10 15 20 25

Birth r. Death r. 10 15 20 25
0 5

Birth r. Death r.
10 15 20 25

Birth r. Death r. 10 15 20 25

1960 1964 1968 1972 1976 1980 1984 1988 1992 1996

1960 1964 1968 1972 1976 1980 1984 1988 1992 1996

1960 1964 1968 1972 1976 1980

1960 1964 1968 1972 1976 1980

ITALY

SPAIN

USA

JAPAN

1984 1988 1992 1996

1984 1988 1992 1996

Birth r. Death r.

Birth r. Death r.

Birth r. Death r.

Birth r. Death r.

The decline in birth rates (III)


National demographic patterns hide important intranational differences: Significant internal contrasts in birth rates in:
Italy (North/South division) Germany (East/West division) and, to a lesser extent, in other EU countries

Regional crude birth rate in the EU, 1997


Crude Birth Rate 1997
more than 13 12 to 13 11 to 12 10 to 11 9 to 10 less than 9

The decline in fertility rates


Women (and families) are deciding to have less children than ever before: Total fertility rates in the EU are the lowest in the world, bar some countries in Eastern Europe and Japan Fertility decline started in the mid 1960s
Early declines in the North (Denmark, Finland, Germany, Luxembourg and Sweden): Demographic core/periphery divide Subsequent and more dramatic decline in the Mediterranean countries (Italy and Spain now with some of the lowest TFR in the world) Short-lived rebound of fertility rates in Sweden and other Scandinavian countries in the early 1990s

Evolution of fertility rates


Country Name Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain Sweden United Kingdom Japan United States 1970 2.29 2.20 1.95 1.83 2.48 2.03 2.34 3.93 2.42 1.98 2.57 2.76 2.84 1.94 2.44 2.13 2.48 1980 1.62 1.67 1.55 1.63 1.95 1.44 2.23 3.23 1.64 1.50 1.60 2.19 2.22 1.68 1.89 1.75 1.84 1990 1.45 1.62 1.67 1.78 1.78 1.45 1.40 2.12 1.26 1.62 1.62 1.43 1.33 2.13 1.83 1.54 2.08 1995 1.40 1.57 1.79 1.81 1.66 1.25 1.32 1.87 1.17 1.68 1.53 1.45 1.19 1.74 1.71 1.42 2.06 1997 Fertility in 1997 as a % of 1970 1.37 1.60 1.75 1.85 1.71 1.35 1.30 1.91 1.20 1.71 1.53 1.44 1.15 1.74 1.70 1.39 1.99 59.83 72.73 89.74 101.20 68.84 66.50 55.63 48.60 49.48 86.36 59.49 52.19 40.55 89.74 69.76 65.11 80.24

Source: World Bank World Development Indicators (2000)

Evolution of total fertility rates in selected European countries


4.5 4

Total Fertility Rate

3.5 3 2.5 2 1.5 1

France Germany Spain Sweden Ireland

1960

1966

1972

1978

1984

1990

1996

The ageing of the EUs population (I)


The decline in birth and fertility rates is profoundly altering Europes age structure Younger population cohorts are becoming smaller than older ones
The population cohort of those aged between 30 and 34 is 50% larger than those aged between 0 and 4 There are more 55 to 59 year olds than children between 0 and 4

Life expectancy is increasing


Women in most countries of the EU can now expect to live until the age of 80 Male life expectancy in all countries bar Portugal above 72

Life expectancy at birth, 1970-1997


1970 1980 1990 1997 Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain Sweden United Kingdom United States Japan 70.3 71.2 73.3 70.3 72.0 70.5 71.8 71.1 71.9 70.3 73.5 67.4 72.3 74.5 71.7 70.8 71.9 72.7 73.2 74.3 73.2 74.3 72.6 74.4 72.7 73.9 72.7 75.7 71.4 75.5 75.9 73.8 73.7 76.0 75.7 76.0 74.7 75.1 76.8 75.1 76.9 74.6 77.1 75.2 76.9 73.7 76.7 77.5 75.6 75.2 78.8 77.3 76.8 75.3 76.9 78.1 76.7 77.7 75.9 78.2 76.5 77.5 75.0 77.9 79.1 77.1 76.1 80.0 Change 1970-97 (in %) 10.0 7.9 2.8 9.4 8.4 8.8 8.2 6.8 8.8 8.7 5.4 11.2 7.7 6.2 7.6 7.5 11.2

Source: World Bank World Development Indicators (2000).

The ageing of the EUs population (II)


Europe is ageing There are now 41.5 people million more over 70 than in 1980 (an increase of 40%) The percentage of the elderly has risen considerably everywhere, bar Ireland In Greece, Finland and Portugal the percentage of the population aged 65 and above doubled between 1960 and 1997 Italy and Spain were not far behind Population projections predict that the process of ageing is far from over According to the UN the over 65 will rise to 95.6 million in 2050 (29% of the population)

Population aged 65 and above (% of total)


1960 1970 1980 1997 Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain Sweden United Kingdom United States Japan 12.0 12.0 10.6 7.2 11.6 11.5 8.2 11.2 9.3 10.8 9.0 8.0 8.2 12.0 11.7 9.2 5.7 14.1 13.4 12.3 9.2 12.9 13.7 11.1 11.3 10.9 12.0 10.2 9.2 9.8 13.7 12.9 9.8 7.1 15.4 14.3 14.4 12.0 14.0 15.6 13.2 10.7 13.2 13.5 11.5 10.5 10.7 16.3 15.1 11.2 9.0 14.8 16.0 14.7 14.4 15.4 15.5 16.6 11.3 16.6 13.9 13.4 16.1 15.9 17.3 15.8 12.3 15.5 Change Change 1960-97 1980-97 (in %) (in %) 23.3 -3.5 34.1 12.0 39.2 2.2 99.2 20.0 31.9 10.0 34.5 -0.7 100.9 26.0 1.0 5.2 78.2 26.1 28.6 3.4 49.0 16.5 101.2 53.6 93.9 49.1 44.4 6.1 35.0 4.7 34.1 9.9 169.8 71.1

Source: World Bank World Development Indicators (2000).

Predicted evolution of the total and elderly population in selected European countries, the EU and the US 2000-50
Total population 2000 59.08 82.22 57.30 58.83 375.28 278.35 2050 59.88 73.30 41.20 56.68 331.31 349.32 Pop. Elderly population Change (65+) 2000-05 2000 2050 1.35 9.41 15.26 -10.85 13.44 20.79 -28.10 10.41 14.37 -3.65 9.43 14.11 -11.72 61.60 95.60 25.50 34.83 75.90 % Elderly 2000 15.93 16.35 18.17 16.03 16.41 12.51 2050 25.48 28.36 34.88 24.89 28.86 21.73 Support ratio (1564/65+) 2000 2050 4.10 2.26 4.17 2.05 3.72 1.52 4.06 2.37 4.08 1.96 5.28 2.82

France Germany Italy UK EU USA

Population in millions
Source: Own elaboration with United Nations Population Division data. Medium variant.

Regional share of senior citizens, 1998


Population 65 and over (% of total) 1998
more than 21 % 19 to 21 % 17 to 19 % 15 to 17 % 13 to 15 % less than13 %

The factors behind the ageing process (I)


Causes for higher life expectancy Advancement of medicine and health:
Eradication of many infectious and contagious diseases Advancement in the treatment of degenerative diseases Nutritional and health improvements

Social factors:
Relative wealth of European societies Reduction in the number of hours worked during life

The factors behind the ageing process (II)


Causes behind the decline in fertility Advances and greater availability of contraceptive methods (M. Murphy) (although for some this is not a cause) Economic factors:
Pecuniary and time cost of having children Children cannot longer be regarded as sources for future family support Opportunity costs of having children in societies with a high female participation in the labour market. This has become more evident recently:
Decline in job stability in Europe (relying on one salary is not enough!)

The factors behind the ageing process (III)


Sociological factors:
The gap in educational attainment between men and women in western Europe has disappeared Female employment has increased dramatically Female employment is regarded as the main determinant in the fall of fertility rates
The opportunity cost of having a child increases Especially, and despite some changes in male attitudes, since the burden of child-bearing still greatly falls on women The opportunity cost of having a child increases as womens wages rise

However this argument is found wanting when we notice that the countries with the lowest fertility rates also have the lowest female employment

Evolution of female employment, 1970-1997


Female Female Male emp. Increase in Female as a % emp. 1970 emp. 1997 1997 (%) female emp. of male emp. (%) (%) 1970-97 (1997) Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain Sweden United Kingdom EU 38.4 30.5 36.1 43.7 36.2 38.6 25.7 26.2 28.5 26.7 25.9 25.4 24.4 35.8 35.6 46.2 36.3 55.2 46.6 41.2 43.1 30.8 38.3 28.9 36.8 46.8 45.7 26.4 49.2 50.0 39.9 65.6 56.4 68.8 56.1 56.3 61.5 59.0 61.5 55.8 63.5 68.4 63.2 52.1 57.3 64.9 59.5 20.3 19.0 52.9 6.6 13.8 11.7 19.8 46.2 1.4 37.8 80.7 79.9 8.2 37.4 40.4 70.4 64.4 80.2 83.1 73.2 70.1 52.2 62.3 51.8 58.0 68.4 72.3 50.7 85.9 77.0 67.1

Source: World Bank World Development Indicators (2000).

Family policies (I)


European governments have adopted different policies to tackle declining fertility:
Very high support in Sweden (and Denmark and Finland):
Generous child benefit package Generous public childcare provision Lengthy maternity and paternity leaves

Austria and Germany


Generous policies Greatest support for mothers who stay at home to look after children

Family policies (II)


France (and Belgium and Luxembourg)
Horizontal and vertical redistribution of resources to families with children (especially for families with three children)

UK
Means testing and tackling child policy Low-income mothers benefit the most from support meassures

Lower support in the Netherlands, Ireland, and Mediterranean countries

Family policies (III)


Have family policies contributed redress the decline in fertility? to
Some claim that the impact has been weak (Gauthier; Hoem) Others suggest that family policies have had an impact The actual evidence is inconclusive
Lack of adequate family policies may have contributed to the decline in fertility in southern Europe Some countries with more generous family policies (Sweden, Finland, Denmark, France, the UK) tend to have slightly higher fertility rates But countries with similar family policy regimes differ in their fertility rates

Social policies for old age


The process of ageing is putting European social services under considerable stress:
Social policies for old age have become one of the most important areas of public policy Old age expenditure (as a % of GDP) has risen significantly since the 1980s and remained stable during much of the 1990s Old age expenditure represents two fifths of all social expenditure (highest incidence in Italy, Greece, and Spain)

Old age expenditure in the EU


Old age expenditure as a percentage of GDP EUR15 Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain Sweden United Kingdom 1997 1993 10.9 10.7 10.6 10.5 8.5 8.5 11.6 10.7 8.5 9.5 11.0 10.5 11.5 11.1 9.8 9.0 3.2 4.3 13.4 12.8 7.1 7.1 9.3 10.2 7.0 6.1 8.7 8.4 12.3 13.0 10.1 10.2 1980 9.0 6.8 6.1 8.1 10.8 4.7 8.3 8.0 7.5 6.2 Old age expenditure as a percentage of social expenditure 1997 1993 1980 38.3 36.8 36.8 36.4 34.0 30.1 29.0 38.2 33.5 29.1 27.5 30.9 35.6 33.9 38.4 38.3 40.5 41.4 40.5 18.1 20.8 51.6 49.0 28.6 29.0 30.8 30.3 31.0 29.0 40.8 35.2 35.3 36.6 33.8 36.3 34.5 Source: EUROSTAT data.

Conclusion
Ageing poses a serious challenge for the future of European societies:
Society may become more conservative and riskaverse, less open to innovation and foreign influences, and less dynamic and able to compete Ageing represents a challenge for public finances More and better targeted policies may be needed Even if the perception of an aged society as a less dynamic society may be rather reductionist.

Chapter 4

Migration and xenophobia

Introduction
While Europe ages, neighbouring countries have young and dynamic populations who find few outlets in their local labour markets:
Result: development of large migration flows towards Europe
Many see this trend as a solution for population ageing and to ease social and economic pressure in the country of origin of migrants Many others see migration as a threat, leading to xenophobia and the emergence of racist attitudes and parties

European legislation has been tightened in order to restrict migration into Europe

Migration and its forms (I)


Definition of migration:
The movement or displacement of a person or a number of persons from one place to another.

Forms of migration:
Individual or group migration Regional, inter-regional, international or intercontinental Temporary or permanent Legal and illegal

Migration and its forms (II)


Forms of migration (II):
Economic migration: when people move in search of jobs and/or a better life Types of economic migration:
Migrant or employer-initiated Economic migration is closely linked to long-term economic cycles

Non-economic migration: Causes


Natural disaster (the destruction of the island of Montserrat by a volcanic eruption, floods, earthquakes, droughts) War Political and/or social persecution (political and religious beliefs, race, ethnicity, gender) Division between political refugees and asylum seekers

Mass migration in post-war Europe (I)


In modern times migration out of Europe has predominated:
America, Australia and South Africa as the main destinations At the beginning of the 20th century more than a million Europeans a year were leaving the Continent

The second half of the 20th century has seen a reversal of this trend
Outward migration has been replaced by migration within and into Western Europe
First, 25 million refugees back to their places of origin (mainly flow east-west, including 12 million Germans) Then migration from former Communist regimes to the West (3.8 million East Germans until the erection of

Mass migration in post-war Europe (II)


Since the 1950s emergence of South/North economic migration
Basically in low-skilled and poorly paid sectors (rejected by the local workforce) Several waves and destination:
1950s: Italians moving to Germany, Switzerland, and France Late 1950s and 1960s: Spaniards and Portuguese (same destinations) 1960s: Turks and Yugoslavs (to Germany) and workers from the Maghreb (to France) Irish to Britain and Finns to Sweden

Migration very often employer-initiated and state-managed Large volumes of migration:

Mass migration in post-war Europe (III)


Jobs for migrants varied:
West Germany: Jobs in manufacturing (15% in construction) France: 30% in construction. Smaller proportion as health workers and manufacturing UK: West Indians as civil servants, South Asians in textiles

As did the formal rights of immigrants:


Germany, Austria and Switzerland: Gastarbeiters (high levels of job security but low protection without job contract) UK, France and the Netherlands: Rights of immigrants to stay, generally more developed (possibility to apply for citizenship after a period living in the country)

The crisis of the 1970s brought South/North migration in Europe almost

The renewal of migration in the 1990s


Several factors have led to a renewal of migration in the 1990s:
Economic and social factors: The economic bonanza of the second half of the 1990s The reduction of unemployment rates associated to the introduction a labour market flexibility The higher level of qualification of local workers The demographic boom in neighbouring areas of the world Political factors: The fall of the Berlin Wall The implementation of the principle of free movement of people after the Single Market.

Foreign or foreign-born population


Foreign population % of total population in thousands Austria Belgium Denmark Finland France Germany Ireland Italy Luxembourg Netherlands Portugal Spain Sweden UK EU Australia* Canada* US* *Data for Austalia, Canada, and the US refer to foreign-born population
in 1986 and 1996 Source: SOPEMI, 1999.

1987 326 863 136 18 3714 4241 77 572 103 592 95 335 401 1839 13312 3247 3908 14080

1997 733 903 250 81 3597 7366 114 1341 148 678 175 610 522 2066 18584 3908 4971 24600

1987 4.3 8.7 2.7 0.4 6.8 6.9 2.2 1.0 26.8 4.0 1.0 0.9 4.8 3.2 3.6 20.8 15.4 6.2

1997 9.1 8.9 4.7 1.6 6.3 9.0 3.1 2.2 34.9 4.4 1.8 1.5 6.0 3.6 4.9 21.1 17.4 9.3

Differences between migration in the 1950s and 1990s (I)division has been The traditional North/South
completely slashed: Finland, Greece, Ireland, Italy, Portugal and Spain are no longer sources of emigrants, but have positive migration balances (in the case of Italy since as early as 1972) Intra-EU migration is no longer South/North but occurs in both directions (case of Ireland, Sunbelt phenomena) The Mediterranean sea (and the former Iron Curtain) are becoming the new Rio Grande of Europe

Differences between migration in the 1950s and 1990s (II) almost become Employer initiated migration has
a thing of the past: In contrast to more common practices in the US, Canada, or Australia. European employers and governments are more reluctant to initiate migration.
Some exceptions: Attempt by the German government in 2000 to recruit IT experts in India

Migration has become migrant-initiated

almost

exclusively

Differences between migration in the 1950s and 1990sand illegal immigration (III) Increase of clandestine
As a result of the tightening of national and European immigration legislation More migrants decide to come and stay in Europe illegally:
Flourishing of mafias, racketeers and organised crime syndicates trying to smuggle immigrants into Europe

Diversification of immigrant groups Highly qualified migrants Low-skilled economic migrants and clandestines Refugees and asylum seekers

Migration of the highly qualified (I)


Migration of the highly qualified has flourished during the 1990s: Basically in sectors such as finance, banks, insurance, and business services
But increasingly also in fashion, design and R&D

The main beneficiaries has been the financial centres and large urban areas of the Continent (London, Paris, Frankfurt, Berlin, Madrid, Milan, Amsterdam) Increasing importance of airport hubs Recruitment in many of these sectors is increasingly happening at a European, if not global, level

Migration of the highly qualified (II)


One of the triggers of the increased mobility has been the implementation of the principle of free mobility of labour in the SEM. No longer are work or residence permits needed for EU nationals who live abroad Cultural and linguistic barriers are now less important for these groups
Better prepared and better travelled generations

Mutual recognition of qualifications But also process of globalization

Migration of the highly qualified (III)


Process of globalization: Restructuring of large companies (international M&As) Radical change in the profile of the European migrant
In contrast to the low-skilled worker from Southern Europe We now have highly qualified young professionals

This migration is however tiny in numbers (5.5 million EU nationals living outside their country, in comparison with 12 million in the early 1970s)

Migration of the low-skilled and clandestines (I)


Migration at the lower end of the scale has been taken over by people from outside the EU Immigrants escaping poverty to the East and South of the EU and hoping to find Eldorado Europe In comparison, the migration of the European low skilled has been negligible Main destination is low-value added service jobs Pay in these sectors is often so low that European workers cannot or do not compete for these jobs with immigrants from outside the EU

Migration of the low-skilled and clandestines (II)


Migration is becoming a truly global phenomenon Not only is western Europe receiving more immigrants from outside the EU than in the 1980s But the regions of origin of the migrants are increasingly diversified Several waves: Fall of the Berlin Wall: Eastern Europeans
First wave: Poles, Czechs, and Hungarians into Germany and other European destinations Followed by former-Yugoslavs, Albanians, Romanians, Bulgarians, Ukranians, and Russians

Migration of the low-skilled and clandestines (III)


Several waves (II): South/North flows increasing since 1995:
Northern and Sub-Saharan Africans Latin Americans Central and South East Asians Chinese

Situation similar to that of the US


Although European borders are more difficult to police Most migration is likely to be illegal
Overstaying visas Entering the EU through its Eastern Border Making perilous Mediterranean sea crossings

Illegal immigration increasingly in the hands of gangs and crime syndicates

Migration of the low-skilled and clandestines (IV)


Sectors benefited by migration: Low-value added services: cleaners, waiters, hotel, and chamber maids Construction Labour-intensive agriculture
The frequent use of clandestines make them easy prey for exploitation

Informal sector
From working as street sellers to criminal activities.

Refugees and asylum seekers (I)


Boom of refugees and asylum seekers since the end of the 1980s As a result of increasing conflict and of political persecution elsewhere in the world But also, some claim, as a result of the increasing differences in wealth Countries of destination: Germany at first (more than 100,000 asylum applications per year at the beginning of the 1990s) The UK since (more than 100,000 applications in the year 2000) Belgium, Ireland, and the Netherlands with the highest relative weight

Refugees and asylum seekers (II)


The inclusion of restrictive legislation across Europe have contributed to stem the flow Extension (and co-ordination) of visa requirement to a large number of countries (Schengen) Restriction of asylum rights to national of countries which have not signed the United Nations Conventions on Refugees and on Human Rights Co-ordination of asylum applications across Europe

Asylum applications in selected EU countries


Belgium France Germany Netherlands Sweden UK EU 1985 1988 1992 1996 1999 5,387 4,510 17,675 12,433 35,778 28,925 34,352 28,872 17,405 30,830 73,832 103,076 438,191 117,333 95,113 5,644 7,486 20,346 22,857 39,286 14,500 19,595 84,018 5,774 11,771 6,200 5,740 32,300 29,640 70,410 159,180 210,740 672,380 227,800 352,380
Source : EUROSTAT data.

The European response to migration (I)


Which has been the reaction of the EU to the renewal of migration across Europe? Two positions:
Free mobility of labour for EU nationals Increasingly restrictive and co-ordinated policies for non-EU citizens

Free mobility of labour for EU nationals: Abolition of red-tape Equivalence of qualifications Social security and welfare recognition Removal of physical border controls Right of vote to non-nationals in local and European elections

The European response to migration (II)


Restrictive policies for non-EU citizens Implementation of harsher national legislative frameworks both on immigration and asylum Greater co-ordination of European policies: Several stages:
Ad hoc groups: Trevi, Ad Hoc Group on Immigration, the Police Working Group on Terrorism Schengen Group Treaty of the European Union: Introduction of the Third Pillar on Justice and Home Affairs Treaty of Amsterdam: partial Europeanization of the Third Pillar

The European response to migration (III)


Features of a co-ordinated migration policy Asylum seekers are entitled to have their cases reviewed only by one country Creation of EURODAC Homogenization of the EU external borders:
Tougher controls Common visa policy Creation of databases containing information on immigrants Police co-ordination (Europol)

The emergence of a Fortress Europe

Migration and xenophobia in the EU (I)


Why this tightening of European laws towards migration? Some claim is the result of increasing demands by the population: Increasing xenophobia and racist attitudes:
Negative perception of migration by the population in surveys and opinion polls
Immigrants as criminals Immigrants responsible for unemployment Immigrants as welfare claimants Immigrants as a threat to national culture

Emergence of xenophobic and racist parties (France, Belgium, Austria, Germany, Italy) Increase in the acts of violence against immigrants (attacks on refugee hostels in Germany, razzias virtually everywhere else)

Attitudes towards foreigners in the EU


Number of foreigners living in your country
100% 80% 60% 40% 20%
Gr B I D A F DK UK NL S L P E IR SF EU
Source: Eurobarometer 48.

Don't know Not many A lot Too many

0%

Migration and xenophobia in the EU (II)


Emergence of xenophobic and racist parties:
Front National in France Freedom party in Austria Vlaams Blok in Belgium Neo-nazi groups in Germany To a lesser extent, the Northern League in Italy

Increase in the acts of violence against immigrants or their descendants


Attacks on refugee hostels in Germany (and what has been considered a lenient attitude by the Courts on those crimes until recently Racial riots in Northern England Razzias against immigrants virtually everywhere else (eg.: El Ejido in Spain)

Migration and xenophobia in the EU (III)


But it my be also spurred by the securitization of migration: Negative portrayal of immigrants in European legislation.
Immigration as a security issue Immigration as a cost for European societies Immigration as something to be restricted

Xenophobic discourses by fundamentally rightwing (but not only right-wing) politicians General portrayal of immigration as a burden, rather than as an asset

Conclusion
Renewal of mass migration in and towards the EU since the 1990s:
Qualified migration within EU Unskilled migration from outside the EU towards it.

Effects of the new migration wave Western Europe becoming more diverse and cosmopolitan But also generating rejection:
Negative attitude towards migrants and their descendants in most EU countries Restrictive migration and asylum laws across the EU Migration being driven underground

Chapter 5

Unemployment and social polarization

Introduction
The post-war economic boom brought about nearly full employment across most of Western Europe However the oil crisis, socio-economic restructuring, and globalization have provoked a radical change in the panorama
Greater participation of women in the labour market... But a significant rise in the levels of structural unemployment

In the 1990s measures have been adopted to flexibilize labour markets:


Unemployment has decreased... But social polarization has increased

The process of socioeconomic restructuring


Collapse of the (Fordist) system of mass production
Demise of the three pillars of the post-war consensus: full employment, prosperity, and social citizenship

Rise in unemployment levels


From unemployment rates below 5% (bar Ireland and Italy), before 1975 To 23% in Spain, 20% in Finland, and Ireland By the mid-1990s the main economies in the EU (bar the UK) had unemployment rates in excess of 10%

Unemployment phenomenon:

rates

as

European

Much lower unemployment rates in the US and Japan

10

15

20

10

15

20

10

15

20

25

0
0 5

5
1970
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997

1970 1973 1976 1979 1982 1982 1979 1976 1973

France

1985

1985 1988 1991 1994 1997

Italy

Finland

1988 1991 1994 1997

Male

Total

Male
1970 1973 1976 1979 1982 1985

Male

Female

Total
12 10 8 6 4 2 0
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997

Total

Unemployment

Female

Female

4
1970 1973 1976 1979 1982 1985

35 30 25 20 15 10 5 0

Spain

Japan

USA

1988 1991 1994 1997

1988 1991 1994 1997

Male

Male

Male

Total

Total

Total

Female

Female

Female

Unemployment (II)
Regional unemployment differences are even greater:
Unemployment in excess of 20% in Southern Italy, Southern and Western Spain, and the former East Germany High rates in many old industrial regions of Northern France, Belgium, and West Germany Low unemployment in the peripheries of large urban regions... And in many intermediate regions

Regional unemployment 1999


more than 20 16 to 20 12 to 16 8 to 12 4 to 8 less than 4

The problems of structural unemployment


Having a large percentage of the population willing to work idle represents a waste for any economy
Especially since often the unemployed tend to be younger and better prepared than those employed

Social exclusion
Large sections of the population are excluded from the labour force Increase in long-term unemployment rates

Serious financial problems for the state


Expansion of unemployment benefits Unemployment benefits disguised as other benefits in certain countries (Italy and the Netherlands)

Long-term unemployment
Long-term unemployment is positively linked to total unemployment
Highest long-term unemployment in the poorest regions of Spain, Greece, and the South of Italy... But also in West Germany and Belgium Lowest long-term unemployment in the UK and Scandinavia

And negatively employment levels

linked

to

total

Long term unemployed 1998


more than 55 50 to 55 45 to 50 40 to 45 35 to 40 less than 35

Employment share (in % ) 1998


more than 60 55 to 60 50 to 55 45 to 50 40 to 45 less than 40

Unemployment in social expenditure


Unemployment expenditure as a percentage of total social expenditure 1997 EU 12 Austria Finland France Germany Ireland Italy Netherlands Spain 7.2 5.3 13.0 7.5 8.7 15.0 1.8 10.5 13.8 1993 9.1 5.4 15.6 8.8 10.2 16.2 2.2 8.8 21.1 1980 2.0 4.3 3.7 15.4 Evolution of unemployment expenditure at constant prices. 1990=100 1997 1993 1980 135.8 158.1 149.1 140.2 34.7 274.1 314.1 40.5 115.1 124.6 59.6 224.1 240.2 53.3 157.4 141.9 47.0 127.2 149.2 79.0 140.7 117.3 58.0 96.5 150.4 55.7

The roots of persistently high unemployment


The regulation markets Taxation: of European labour
Overall marginal tax rate higher than 60 percent in most European countries In contrast, 40% in the USA and 23% in Japan It could thus be argued that the higher the level of taxation the higher the level of unemployment However the relationship is far from perfect: Relatively low taxation in Spain high
unemployment High taxation in Scandinavia Lower unemployment than in other parts of Europe

The roots of persistently high unemployment (II)


The power of European trade unions
Higher union membership than in the USA or Japan Different evolution of trade union membership across the EU
Decline in France (more than 50%), the UK, and Spain Moderate increases in Belgium or Scandinavia

Power of trade unions increased by having their participation in centralized collective bargaining by law Trade unions thus represent a much larger share of the workforce than their membership may suggest Trade unions are much less powerful in the US or Japan

The roots of persistently high unemployment (III)


The existence of a minimum wage
It has been argued that the existence of minimum wages puts low skilled workers out of the market
This, however, does not always seem to be the case (i.e.: introduction of the minimum wage in Britain in 1998)

More important is the level of the minimum wage Minimum wages in Europe tend to be much higher than in the US Countries with the highest minimum wages have endured high unemployment The relationships is again far from perfect

The roots of persistently high unemployment (IV)


High social benefits:
High social benefits have been accused of entrapping people in welfare assistance and, thus in unemployment (the poverty trap)

Workers rights
Workers rights still reflect the situation of the post-war social compromise

Mismatch between educational supply and labour demand

Measures to combat high unemployment


Main aim: to make European labour markets more flexible Meaning of flexibility: making employees more disposable:
Easier and cheaper to dismiss Less covered by constraining agreements and regulations over conditions Less health, safety, and security offered to workers

Two interpretations of flexibility:


Outright labour market deregulation: In the UK The reform of labour market laws and of the welfare state: Netherlands, followed by Continental Europe
Combination of restrictive measures with greater worker training

The impact of labour market reform


Reduction of unemployment
Britain and the Netherlands (the early adopters) have enjoyed lower unemployment rates Spectacular effect in Spain. Between the introduction of labour market flexibility in 1996/97 and 2000, Spain has created half of all the new jobs in the EU. Unemployment came down from 22 to 14% Reduction of unemployment in Germany and France Reduction even in the countries more reluctant to introduce flexibility measures: Belgium and Italy

But the timing of the reforms has coincided with a period of economic expansion
And in the past economic growth has been associated with job creation

The impact of labour market reform (II)


The jobs created as a result of flexibilization are not the same as the previously existing employment Emergence of atypical employment everywhere in Europe
Part time work:
Mainly women: the number of women in part-time jobs triples that of men Very high in the Netherlands, low in Scandinavia

Temporary or limited contract work:


Mainly the young and women Prevalent in new jobs being created in Spain and France

The impact of labour market reform (III)


Other forms of atypical employment:
Self-employment:
Basically male, and fundamentally a middle age phenomenon. Also among immigrant groups and minorities No sign of the emergence of a new entrepreneurial class Concentrated in low productive and marginal sectors (agriculture) High in Greece, Spain, Portugal, and Ireland

Informal employment:
Family work The informal or underground economy:
Difficult to calculate, but growing across Europe Most important in Southern Europe and Scandinavia

The informal economy


Average Average Increase 1989/90 1999/00 1990-2000 Austria 6.9 9.8 2.9 Belgium 19.3 22.2 2.9 Denmark 10.8 18.0 7.2 Germany 11.8 16.0 4.2 Greece 22.6 28.7 6.1 Finland 13.4 18.1 4.7 France 9.0 15.2 6.2 Ireland 11.0 15.9 4.9 Italy 22.8 27.1 4.3 Netherlands 11.9 13.1 1.2 Portugal 15.9 22.7 6.8 Spain 16.1 22.7 6.6 Sweden 15.8 19.2 3.4 UK 9.6 12.7 3.1 US 6.7 8.7 2.0 Japan 8.8 11.2 2.4
Source: Schneider (2001)

The impact of labour market reform (IV)


The concentration of atypical employment forms among women, the young, the elderly, ethnic minorities, and immigrants and the less skilled is contributing to the segmentation of society:
The A-team: Highly qualified stable wage-earners The B-team: An underclass of unstable and precarious workers (MacJobs)

According to some (Harvey, 2000) this represents a return to the period prior to the mid-century compromise
Proletarianization of the labour force Employer having increasing control to the detriment of workers rights and stability

Conclusion
Europe seems to be stuck between a rock (unemployment) and a hard place (atypical work) Unemployment has decreased as a result of the flexibilization of labour markets... But, inequalities have increased
Managerial and executive wages have been rising at a greater rate than those of stable employees And the gap between stable employees and those in precarious employment has also been widening

Part III

POLITY

Chapter 6

Enlargement

Introduction
The fall of the Berlin Wall in November 1989 marked the beginning of the end of the postWWII polarized world Countries to the East of former the Iron Curtain looked immediately towards the prosperous and democratic West Membership of the EU became an indicator of future stability and prosperity for central and eastern European countries (CEECs) The EU, despite a warm welcome, was somewhat slow to react:
Because of the economic, social and political situation of countries in CEE Because of the degree of internal restructuring needed in order to accommodate new members

Change in central and eastern Europe


The fall of the Berlin Wall in November 1989 symbolically marked the beginning of a process of radical transformation in CEE This process entailed different types of transition
Political transition: From one-party states to democratic regimes Economic transition: From centrally planned socialist economies to capitalist systems Identity transition: Represented by changes in national allegiances Diplomatic transition: Integration or reintegration into a Western-dominated international system

Different transitions in central and eastern Europe


Political transition: From communist one-party states to democratic regimes
Successful in the Czech Republic, Hungary, Poland, Slovenia, and, increasingly, Slovakia Baltic states close to that stage (question marks about the treatment of minorities) Right track, but early stages: Bulgaria, Romania, and, increasingly, Croatia Still far away: Russia, the Ukraine, Yugoslavia, Albania Plain dictatorships: Belarus

Different transitions in central and eastern Europe (II)


Economic transition: Mammoth economic changes Serious difficulties in the passage from centrallyplanned to free-market systems
Wholesale reform of how the economy is run Change in the attitudes and habits of economic agents End of central planning, of state support and subsidies to basic industries Introduction of market institutions such as competition and profit End of full employment and employment for life Introduction of real trade

Different transitions in central and eastern Europe (III)


Economic transition (II): Two alternative approaches transition:

to

economic

Shock therapy: Rapid demise of socialist economic institutions and their replacement by market institutions (Poland and Hungary, to a lesser extent) Gradual and incremental transition: step by step change of institutions (Czech Republic)

No system has yielded magical results


Loss of economic weight of most CEECs
Severe recession in the early 1990s Steep rise in unemployment

Transition to capitalism has often implied the loss of one generations worth of income (Fischer, Sahay, and Vgh, 1997)

Different transitions in central and eastern Europe (IV)


Economic transition (III): Weak economic situation across CEECs
The republics of the former USSR have been especially hard hit Although candidate countries, Turkey and the European republics of the former USSR together have a population which is similar to that of the EU-15, the size of their economies put together represents less than the joint size of the Dutch and Spanish economies The GDP per capita of candidate countries is lower than that of the poorest member states in EU-15

Economic transition is proving more complicated that political transition


Few CEECs have managed to achieve a full transition to a market economy

Evolution of GDP
First wave countries
15 EU15 5 -5 -15 -25 1991 1992 1993 1994 1995 1996 1997 CZE EST HUN POL SVN
-25 -35 1991 1992 1993 1994 1995 1996 1997 -5 -15

Second wave countries


15 5 EU15 BGR LVA LTU ROM SVK

Ex-Soviet countries
15 5 -5 -15 -25 -35 1991 1992 1993 1994 1995 1996 1997 EU15 BLR MDA RUS UKR

Turkey
10 5 0 -5 -10 1991 1992 1993 1994 1995 1996 1997 EU15 TUR

GDP in CEECs with respect to the EU


1991 EU15 First wave Czech Republic Estonia Hungary Poland Slovenia Second wave Bulgaria Latvia Lithuania Romania Slovakia Turkey Ex-Soviet Moldova Belarus Russian Federation Ukraine 100.00 2.73 0.63 0.08 0.56 1.24 0.22 1.07 0.17 0.14 0.14 0.40 0.22 1.83 9.16 0.08 0.35 6.67 2.06 1994 100.00 2.73 0.58 0.06 0.53 1.35 0.22 0.88 0.15 0.08 0.08 0.37 0.20 1.91 5.87 0.04 0.25 4.40 1.19 1997 100.00 2.96 0.61 0.06 0.54 1.53 0.23 0.88 0.12 0.08 0.09 0.36 0.22 2.21 4.96 0.03 0.24 3.84 0.85

Source: Own elaboration with World Bank World Development Indicators (2000) data.

GDP per capita in CEECs


1980 EU15 First wave Czech Republic Estonia Hungary Poland Slovenia Second wave Bulgaria Latvia Lithuania Romania Slovakia Turkey Former Yugoslavia Croatia Macedonia Ex-Soviet Moldova Belarus Russian Federation Ukraine 100.00 1986 100.00 1992 100.00 1996 100.00 1997 100.00

43.96 38.51 -

64.68 43.55 33.39 -

51.16 25.19 35.50 27.34 53.72

51.94 23.41 34.26 30.58 56.72

50.70 25.28 34.73 31.45 56.92

27.37 34.00 34.00 27.37

29.19 35.73 34.76 28.31

24.96 21.74 26.68 21.50 36.09 30.32

21.41 18.28 19.97 23.01 37.40 29.88

19.34 19.01 20.36 20.79 38.16 30.63

23.70 20.55

23.80 15.94

25.32 15.48

13.16 31.27 33.35 23.29

7.42 21.66 21.71 11.25

7.24 23.40 21.08 10.56

Source: Own elaboration with World Bank World Development Indicators (2000) data.

Different transitions in central and eastern Europe (V)


Identity transition: From being citizens of a state to being citizens of another (in some case with little or no historical tradition):
Former East Germans, becoming citizens of a united Germany Former Czechoslovakians, becoming Czech and Slovak citizens Former Soviets citizens, being divided into 15 independent republics. Collapse of the former Yugoslavia

National identity still not well defined:


Especially in states with little historical tradition (Belarus, Bosnia-Hercegovina, Macedonia, Moldova) In states with large minorities

Different transitions in central and eastern Europe (VI)


Diplomatic transition: Failure of regional co-operation after the collapse of communism:
Lack of success of regional co-operation: the Central European Free Trade Area (CEFTA) never really got off the ground Commonwealth of Independent States (CIS) in the former USSR with little economic and political clout

Integration or reintegration of CEECs into a Western-dominated international system:


From the Warsaw Pact to NATO Integration in international organizations economic content: IMF, OECD, WTO Membership of the EU as the ultimate goal with

Enlargement and European integration


EU engaged during the 1990s in the widening vs. deepening debate: Deepening: Steaming ahead with greater economic and political integration and reform before opening the gates to new members
Consequences: It becomes more difficult for candidate countries to join, as the acquis communautaire expands considerably

Widening: Allow candidate countries in first and then undertake reforms


Consequences: The consensus to proceed with economic and political integration becomes more difficult

Enlargement and European integration (II)


The position each country adopted has depended on their future vision of the EU, as well as on internal political considerations
France, Benelux, Spain, and Portugal on the deepening side Britain on the widening side, because of the deeply-rooted Euroscepticism in the country Germany, Italy, and Greece in two minds: pro-widening, but wanting at the same time to deepen the EU Admission of Austria, Finland, and Sweden in 1995 reinforced the pro-widening camp

Initial decisions favoured the deepening agenda


Process of enlargement has been slow and relatively ad hoc Introduction of criteria in the 1993 Copenhagen summit

Enlargement and European integration (III)


Copenhagen criteria 1993:
stable institutions guaranteeing democracy, the rule of law, the protection of minorities, and human rights; a functioning market economy, capable of coping with an increasingly competitive market pressure an institutional framework capable of assuming the obligations of the acquis communautaire in its entirety.

Enlargement, however, played second fiddle to economic and political integration until the implementation of the single currency It is only since the arrival of the Euro that enlargement has become the EUs greatest priority

Enlargement for candidate countries


For candidate countries the EU is regarded as guaranteeing:
Democratic stability Economic prosperity

But it also implies:


Swallowing the bitter pill of thorough economic, institutional, and political reform Economic reform may have important implications for economies that are, as a general rule, much poorer that previous candidates Greater need for adjustment than in previous enlargements as a result of the growth of the acquis communautaire in recent years

Enlargement for the EU


Enlargement will increase the heterogeneity of the EU and therefore requires a rethinking of European institutions and policies
The Treaty of Rome was originally devised for six member states, enlargement to twenty five or more members implies a thorough revision of the Treaty And a thorough revision of the current institutional framework And of the decision-making rules Enlargement has also important budgetary implications
Thorough revision of main EU policies (agricultural, structural, and cohesion)

Enlargement may revive the large flows of east-west migration of the early 1990s

Conclusion
Enlargement will transform the EU
It will increase political and economic stability across Europe It will increase the budgetary burden on the EU if no thorough reform of current policies is undertaken It may lead to institutional paralysis without thorough reform It will tilt the balance of power in the EU, probably in Germanys favour

A successful enlargement requires a thorough reform of:


The economies, policies, and institutions of applicant countries A thorough institutional and policy reform in the EU itself

Chapter 7

Regionalism and regionalization

Introduction
An important challenge to the European nation-state is emerging from below
Recently most European countries have witnessed a revival of regionalism This revival has triggered processes of regionalization and devolution Centralized states are increasingly becoming the exception to the rule (a Europe of the Regions)

Main questions:
How and why did the process of regionalization come about? Are we really witnessing the emergence of a Europe of the Regions?

Regional devolution in Europe


At the end of the 1960s
The great majority of the states in Europe were centralized states
Powerful central administrations Solid and generally small local authorities Regions as mere administrative divisions

Austria, Germany, and Switzerland (with Yugoslavia on the other side of the Iron Curtain) as the main exceptions to the rule

At the beginning of the 21st century


Strong central governments are on the retreat Centralized governments are increasingly confined to relatively small and homogenous states

Regional devolution in Europe (II)


Challenges to the centralized state have been widespread in larger and less homogenous states
Partition of former plurinational states: Czechoslovakia, Yugoslavia, Soviet Union Devolution as a general process in the EU
Federal states: power of the central state confined to foreign policy, defence and some macro-economic management (A, B, D) Regional states: Substantial autonomy achieved without a profound restructuring of the state (E, I) Regionalized states: less advanced form of decentralization (F, P, UK) Unitary states: little or no decentralization (Dk, SF, Gr, Irl, L, Nl, S)

Regional devolution in Europe (III)


There are also differences in the levels of regional autonomy within states
Homogenous level of devolution only in federal states and France Asymmetrical devolution in Italy, Portugal, Spain, and the UK
Historical regions or regions with greater identity enjoy higher levels of autonomy (Italy and Spain) Parts of the country have devolved powers, while others remain under central rule (Portugal and the UK)

Level of regional autonomy across the EU


High Federal States Austria Belgium Germany Regional States Italy Spain The whole country The whole country The whole country 'Special status' regions The rest of the country 'Ordinary status' regions Level of Autonomy Medium Low Non-existent

Andalusia, Basque Country, Canary Islands, Catalonia, Galicia, Navarre, Valencia

'Regionalized' states France Portugal UK Centralized states Denmark Finland Greece Ireland Luxembourg Netherlands Sweden Scotland

Possibly Corsica Azores, Madeira Northern Ireland, Wales

The whole country Continental Portugal English Regions

London

The whole country The whole country The whole country The whole country The whole country The whole country The whole country

From regionalism to regionalization


Two waves of regionalism regionalization (Keating 1998) and
1960s and 1970s: Deeply rooted in identity issues Late 1980s and 1990s: the new regionalism
More widespread than in the previous wave More often based on economic rather than on identity grounds

Austria and Germany


Federal states since the second WW Federal structure as a way to weaken the power of the central state and to prevent the reemergence of German militarism

From regionalism to regionalization (II)


Belgium
The country that has undergone the deepest transformation: From unitary to regionalized in 1970 and to federal in 1993 Regional division based on the deep linguistic and cultural cleavages that divide the state Regional division of power follows two criteria:
Language: Three communities (Flemish-speaking, French-speaking and German-speaking communities) Identity: Three regions (Flanders, Wallonia, and Brussels) The Flemish Community and Region have merged into one entity

Result: a complex territorial structure with five territorially overlapping subnational entities

From regionalism to regionalization (III)


Spain
A failed secular nation-building process and repression of regional identities by the Francoist regime fuelled resentment in the peripheral nations of Spain With the restoration of democracy came a process of regional autonomy Asymmetrical devolution process across regions:
Highest autonomy in the regions keeping their medieval privileges (fueros): The Basque Country and Navarre High autonomy in regions with strong identity: Catalonia, Galicia, Andalusia, Valencia, Canary Is. Much lower level of autonomy in the remaining regions (although the gap has narrowed in recent years)

From regionalism to regionalization (IV)


Italy
Origins of the regionalization process can be traced back to imperfect nation-building Important cleavages remain
The Questione Meridionale (question of the South), relative underdevelopment of the South of the country Existence of linguistic minorities in peripheral regions

1948 Constitution has asymmetrical devolution

provided

for

5 special status regions, with a high level of autonomy (Sicily, Sardinia, Valle dAosta, Trentino, Friuli) 15 ordinary status regions, with a much lower level of autonomy

Ongoing process of federalization

From regionalism to regionalization (V)


UK
Regionalism has basically affected the peripheral nations of the country The union state, created in 1707, has not succeeded in creating a British national identity The first wave of regionalism of the 1960s and 1970s ended with the rejection of devolution in referenda A second wave has taken place since the arrival of New Labour in 1997
Devolution was approved in referenda for Scotland, Wales, Northern Ireland, and London However, asymmetrical level of devolution, with a huge gap between the powers of the Scottish, at one end, and the London executives, at the other

From regionalism to regionalization (VI)


France
Weak decentralization in France more the result of planning than of the strength of regionalist movements Direct election of Regional Councils from 1986 onwards has granted French regions greater legitimacy But level of autonomy well below that of neighbouring countries New regionalist wave in the late 1990s and beginning of the 21st century
Devolution for Corsica on the political agenda

The bastions of centralism


Seven of the fifteen Member States of the EU are still centralized countries
These tend to be small and relatively homogenous countries Devolution debate active in some of these countries
The Netherlands, where regionalization has always remained in the background Portugal, whose population rejected plans devolve powers to the Portuguese mainland regions in 1998

The transfer of power from the nation state to the regions


Regionalization has brought about important changes in governance and policy making structures across the EU
Increase of transfers of powers from the centre to regional governments Even the regions with the lowest level of autonomy (i.e. regions in France) are responsible for a considerable array of policies The expansion of regional powers has not always been matched by a similar increase in regional resources
With the exception of Spain, the expenditure balance between central and regional and local governments has remained relatively stable

Share of total government expenditure by different tiers of government (1980-97)


1980 1990 1997 Central Regional Local Central Regional Local Central Regional Local Government Governments Governments Government Governments Governments Government Governments Governments Austria Belgium Denmark Finland France Germany Ireland Italy Luxembourg Netherlands Portugal Spain Sweden UK a 1995 b 1996 c 1998 68.7 85.9 47.5 61.6 84.0 56.4 .. .. .. 74.7 .. 89.0 63.2 74.2 13.3 .. .. .. .. 25.5 .. .. .. .. .. 0.3 .. .. 18.0 14.1 52.5 38.4 16.0 18.0 .. .. .. 25.3 .. 10.7 36.8 25.8 69.8 88.9 55.6 60.2 82.5 59.0 76.3 77.2 83.4 76.7 92.2 70.0 63.3 74.9 13.5 .. .. . .. 24.0 .. .. .. .. .. 16.8 .. .. 16.7 11.1 44.4 39.8 17.5 17.0 23.7 22.8 16.6 23.3 7.8 13.2 36.7 25.1 69.4 89.1 56.0a 61.4 82.5 62.5c 74.7b 76.7c 85.5 78.3 89.9 69.0b 64.1c 77.7c 15.4 .. .. .. .. 23.7c .. .. .. .. .. 19.3b .. .. 15.2 10.9 44.0a 38.6 17.5 13.9c 25.3b 23.3c 14.5 21.7 10.1 11.7b 35.9c 22.3c

The transfer of power from the nation state to the regions (II)
Recent steps are, however, going in the direction of granting greater resources to regional governments
The tax varying powers accorded to the Parliament award the Scottish executive a significant capacity to raise revenue During the 1990s Spanish regions have been granted access to 30 per cent of the income tax revenues generated within their territory Fiscal federalism is advancing in Italy with the introduction of new forms of regional taxation

The roots of the regionalization process


What are the factors behind the drive towards devolution in Europe?
The revival of nationalism and regionalism across Europe since the 1960s
The sources behind this regeneration where of historic, linguistic, and cultural nature Regions with a strong identity led the way (Catalonia, Basque Country, Scotland, Flanders, Brittany, Sicily) Demands for autonomy were centred around the need to protect and promote regional culture, languages, and identity

The use of economic arguments in the 1990s


Globalization is undermining the capacity of nation states to control economic development processes within their territories The region is becoming a key actor in a global setting

The roots of the regionalization process (II)


Globalization also poses challenges to regions
The greater mobility of factors of production is forcing regions to adopt more pro-active development strategies Regions and cities are forced to compete with one another for mobile assets Regional success increasingly depends on the capacity of each region to adopt pro-active policies and to form a complex web of public and private institutions Devolution is regarded as a way of guaranteeing economic survival in an increasingly competitive world

Towards a Europe of the regions?


It is claimed that transfers of powers to supranational and subnational bodies is contributing to the hollowing out of the nation state
Taken to its limits, this implies that the nation state in the European context no longer matters (OBrien, 19992; Ohmae, 1995) Emergence of a Europe of the regions

But is a Europe of the regions really emerging?


For some (Milward, 1999) European integration has not only not weakened, but is reinforcing the power of the nation state

Towards a Europe of the regions? (II)


The transformation of the nation state
Capacity to shape matters that go beyond their national boundaries States as power brokers between subnational and supranational levels of government (Hirst and Thompson, 1995) Regional economic performance still very much embedded in national economic performance

We seem to be closer to a Europe with the regions than to a Europe of the regions

Conclusion
The revival of regionalism has triggered a profound transformation of the territorial organization of European states Devolution processes have both advantages and disadvantages
Advantages:
Greater diversity of policies and possibly greater transparency and adjustment to local and regional needs

Disadvantages:
Greater competition among regions Possibly a lower capacity of poorer regions to compete in a globalized world

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