Elementaries!: IS EUROPEAN UNION GONNA COLLAPSE????

European Union

A group of European countries that participates in the world economy as one economic unit and operates under one official currency, the euro. The EU's goal is to create a barrier-free trade zone and to enhance economic wealth by creating more efficiency within its marketplace.

History

After World War II, European integration was eyed as an escape from the extreme nationalism that had devastated the continent. The 1948 Hague Congress was a pivotal moment in European federal history, as it led to the creation of the European Movement International and of the College of Europe, where Europe's future leaders would live and study together.1952 saw the creation of the European Coal and Steel Community, which was declared to be "a first step in the federation of Europe.". The supporters of the Community included Alcide De Gasperi, Jean Monnet, Robert Schuman, and Paul-Henri Spaak.

In 1957, Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany signed the Treaty of Rome, which created the European Economic Community (EEC) and established a customs union. They also signed another pact creating the European Atomic Energy Community (EURATOM) for co-operation in developing nuclear energy. Both treaties came into force in 1958. The EEC and EURATOM were created separately from ECSC, although they shared the same courts and the Common Assembly. The EEC was headed by Walter Hallstein (Hallstein Commission) and EURATOM was headed by Louis Armand (Armand Commission) and then Étienne Hirsch. EURATOM was to integrate sectors in nuclear energy while the EEC would develop a customs union among members.

Through the 1960s, tensions began to show, with France seeking to limit supranational power. Nevertheless, in 1965 an agreement was reached and on 1 July 1967 the Merger Treaty created a single set of institutions for the three communities, which were collectively referred to as the European Communities. Jean Rey presided over the first merged Commission (Rey Commission).

In 1973, the Communities enlarged to include Denmark (including Greenland, which later left the Community in 1985, following a dispute over fishing rights), Ireland, and the United Kingdom.Norway had negotiated to join at the same time, but Norwegian voters rejected membership in a referendum. In 1979, the first direct, democratic elections to the European Parliament were held.

Greece joined in 1981; Portugal and Spain in 1986. In 1985, the Schengen Agreement led the way toward the creation of open borders without passport controls between most member states and some non-member states. In 1986, the European flag began to be used by the Community and the Single European Act was signed.

In 1990, after the fall of the Eastern Bloc, the former East Germany became part of the Community as part of a reunited Germany. With further enlargement planned for former communist states, Cyprus, and Malta, the Copenhagen criteria for candidate members to join the EU were agreed upon in June 1993.

Against the blue sky of the Western world, the stars symbolize the peoples of Europe in a form of a circle, a sign of union. Their number is invariably twelve, the figure twelve being the symbol of perfection and entirety.

Members of EU

The European Union (EU) is a union of twenty-eight independent states based on the European Communities and founded to enhance political, economic and social co-operation. Formerly known as European Community (EC) or European Economic Community (EEC).

Member states (EUR: Euro currency):

Austria (since 1995-01-01) (EUR)

Belgium (EUR)

Bulgaria (since 2007-01-01)

Croatia (since 2013-07-01)

Cyprus (Greek part) (since 2004-05-01) (EUR: 2008-01-01)

Czech Republic (since 2004-05-01)

Denmark

Estonia (since 2004-05-01) (EUR: 2011-01-01)

Finland (since 1995-01-01) (EUR)

France (EUR)

Germany (EUR)

Greece (EUR)

Hungary (since 2004-05-01)

Ireland (EUR)

Italy (EUR)

Latvia (since 2004-05-01) (EUR: 2014-01-01)

Lithuania (since 2004-05-01) (EUR: 2015-01-01)

Luxembourg (EUR)

Malta (since 2004-05-01) (EUR: 2008-01-01)

Netherlands (EUR)

Poland (since 2004-05-01)

Portugal (EUR)

Romania (since 2007-01-01)

Slovakia (since 2004-05-01) (EUR: 2009-01-01)

Slovenia (since 2004-05-01) (EUR)

Spain (EUR)

Sweden (since 1995-01-01)

United Kingdom of Great Britain and Northern Ireland

Goals

These are the five big things the EU has set out to do.

1. Promote economic and social progress. Help people earn enough money and get treated fairly.

2. Speak for the European Union on the international scene. By working as a group the EU hopes that Europe will be listened to more by other countries.

3. Introduce European citizenship. Anyone from a member state is a citizen of the EU and gets four special rights.

Anyone from a member state is a citizen of the EU and gets these special rights.

Freedom to move between countries of the EU and to live in any nation in the Union.

The right to vote and stand in local government and European Parliament elections in the country you lives in.

If you are travelling outside the EU, and your own country does not have an embassy, you can go to the embassy of any other EU country.

The right to put your side of the story to the European Ombudsman if you think the EU has not acted fairly.

4. Develop Europe as an area of freedom, security and justice. Help Europeans to live in safety, without the threat of war.

5. Maintain and build on established EU law. Make laws that protect people rights in the member countries.

The Euro

One of the goals of the EU is economic integration and a common European currency. EU leaders expect great benefits from the adoption of a single currency. International trade within the single currency area will be greatly facilitated by the establishment of what amounts to a single market, complete with uniform pricing and regulation, in place of separate national markets. The creation of a single market is also expected to spur increased competition and the development of more niche products, and ease the acquisition of corporate financing, particularly in what would formerly have been international trade among members of the single currency area. Finally, in the long term, the establishment of the single currency area should simplify European corporate structures, since in time nearly all regulatory statutes within the single currency area should become uniform. The Maastricht Treaty established conditions that EU member nations would be expected to meet before they would be allowed to participate in the introduction of the single European currency. These conditions were designed to create a “convergence” among the various national economies of Europe to ease the transition to a single currency and ensure that no single country would benefit or be harmed unduly by its introduction. Such a convergence would also create greater uniformity among the various national economies of the EU, making administration of economic activity within the single-currency area more feasible. The conditions set for participation in the introduction of the Euro and inclusion in the single-currency area included the following:

Maintaining international currency exchange rates within a specified range (called the Exchange Rate Mechanism or ERM) for at least two years prior to the introduction of the Euro. Maintaining long-term interest rates within 2 percent of the national inflation rate and within 1.5 percent of the three best-performing EU member states in terms of price stability. Maintaining public debt at no more than 3 percent of the gross domestic product. Maintaining total government debt at no more than 60 percent of gross domestic product. Despite difficulties faced by some members in meeting these conditions, implementation of the Euro went ahead on schedule through the three phases set forth at Maastricht. Phase one began in 1998 with an EU summit in Brussels, Belgium, that determined which of the fifteen member states had achieved sufficient convergence to participate in the introduction of the Euro. The selected participants were Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain (exceptions were Demark, Greece, Sweden and the UK). Phase two, which commenced on 1 January 1999, introduced the Euro as legal tender within the eleven selected countries, referred to as the single-currency area, although the new currency would only exist as a “currency of account,” that is, it would exist only on paper or for electronic transactions, as no Euro notes or coins were yet in circulation. Instead, the existing currencies of the participating countries functioned as fixed denominations of the Euro. Phase two also included the subordination of the eleven national banks in the single-currency area to the European Central Bank.

Phase three, which began on 1 January 2002, set the Euro banknotes and coins into circulation and by July 2002, it became the legal tender of the countries, replacing their national currencies. At the time of introduction there were twelve countries in the area using the Euro, known as the Eurozone: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, and Greece. Denmark, Sweden and the UK chose not to use the Euro. By the beginning of 2008, the Eurozone had expanded to include fifteen member nations, with Cyprus, Malta, and Slovenia having joined the original members. Nine of the new EU member states were still operating with a currency other than the Euro. The Accession Treaties signed by all of these countries requires them to join the Euro; some have already joined the ERM and others have set themselves the goal of joining the Euro as follows:

Slovakia: January 1, 2009

Lithuania: January 1, 2010

Estonia: January 1, 2011

Bulgaria, Czech Republic, Hungary, Latvia, Poland, and Romania: January 1, 2012 or later.

The initial introduction of the Euro as a currency of account began with a resounding success, as the new currency rose immediately to an exchange rate of 1.17 U.S. dollars to the Euro. Uncertainties about the further progress of European Union raised by conflicts in the Balkans in 1999 soon dampened investor interest in the Euro, however, and its value fell to 1.04 U.S. dollars per Euro by the summer of that year. The Euro continued to slip, and by late 2000, it had fallen to a record low of $0.83. Since 2003, however, the Euro has steadily risen against the dollar, gaining strength in 2007 as the U.S. economy began slipping towards recession; by mid 2008, the Euro was holding steady in the mid $1.50s.

STRUCTURE

The EU maintains four administrative bodies dealing with specific areas of economic and political activity.

Council of Ministers. The Council of Ministers comprises representatives, usually the foreign ministers, of member states. The presidency of the council rotates between the members on a semiannual basis. When issues of particular concern arise, members may send their heads of state to sit on the council. At such times the council is known as the European Council, and has final authority on all issues not specifically covered in the various treaties creating the EU and its predecessor organizations. The Council of Ministers also maintains the Committee of Permanent Representatives (COREPER), with permanent headquarters in Brussels, Belgium, to sit during the intervals between the council's meetings; and operates an extensive secretariat monitoring economic and political activities within the EU. The Council of Ministers and European Council decide matters involving relations between member states in areas including administration, agriculture and fisheries, internal market and industrial policy, research, energy, transportation, environmental protection, and economic and social affairs. Members of the Council of Ministers or European Council are expected to represent the particular interests of their home country before the EU as a whole.

European Commission. The European Commission serves as the executive organization of the EU. Currently each country has one commissioner except for the five largest countries that have two. The Commission enlarges as more countries join. The European Commission seeks to serve the interests of Europe as a whole in matters including external relations, economic affairs, finance, industrial affairs, and agricultural policies. The European Commission maintains twenty-three directorates general to oversee specific areas of administration and commerce within the EU. It also retains a large staff to translate all EU documents into each of the EU's twenty official languages. Representatives sitting on the European Commission are expected to remain impartial and view the interests of the EU as a whole rather than the particular interests of their home countries.

European Parliament. The European Parliament comprises representatives of the EU member nations who are selected by direct election in their home countries. Although it serves as a forum for the discussion of issues of interest to the individual member states and the EU as a whole, the European Parliament has no power to create or implement legislation. It does, however, have some control over the EU budget, and can pose questions for the consideration of either the Council of Ministers or the European Commission.

Court of Justice. The Court of Justice comprises thirteen judges and six advocates general appointed by EU member governments. Its function is to interpret EU laws and regulations, and its decisions are binding on the EU, its member governments, and firms and individuals in EU member states.

Obstacles facing EU

Although the EU has accomplished a great deal in its first two decades, many hurdles must still be crossed before true European unity can be achieved. Many EU nations experienced great difficulty in meeting the provisions required by the EU for joining the EMS, although eleven countries met them by the 1 January 1999 deadline. Meeting these provisions forced several EU members, including Italy and Spain, to adopt politically unpopular domestic economic policies. Others, such as the United Kingdom, chose not to take politically unpopular action and thus failed to qualify for participation. Even though the Euro was introduced according to schedule, economic unity has far outstripped political cooperation among EU members to date and real and potential political disagreements within the EU remain a threat to its further development. Although the Eurozone represents a formidable force in international trade, the EU faces several grave challenges as it strives to form an ever closer linkage of its national constituents.

Despite the fact that the Treaty on European Union created a central bank to super cede the national banks of its members, responsibility for the creation of fiscal policies remains in the hands of each national government. As such, there is great potential for the central authority and national economic policy making agencies to adopt conflicting programs. Furthermore, national political institutions within the EU are likely to be more responsive to the desires of their national constituencies than to the well-being of the Eurozone as a whole, especially in times of economic instability. It is difficult to see how voters in the nations of the EU will be able to put the good of Europe ahead of their own particular interests. This difficulty is particularly troublesome as political integration has progressed much more slowly than economic integration, and further political integration has recently suffered several potentially insurmountable setbacks. In 2004, the Treaty establishing a European Constitution (TCE) was signed by the representatives of all twenty-seven member nations, but the treaty failed to be ratified by all of the members. Most members did in fact ratify the TCE by parliamentary measure or popular referendum, but France and the Netherlands both rejected it in referendums. These failures led other members to postpone or call off their ratification procedures. As a result, the European Council called for a “period of reflection,” which subsequently led to negotiations over a new constitutional treaty, known as the Lisbon Treaty. The Treaty of Lisbon, signed on 13 December 2007, was in the process of being ratified by member nations when the Irish electorate rejected the treaty in June 2008, creating uncertainty as to the future ratification of this version of a European constitution.

Another problem also arises out of the composition of the Eurozone. According to the optimal currency theory first posed by American Robert Mundell in 1961, in order for a single currency to succeed in a multinational area several conditions must be met. There should be no barriers to the movement of labor forces across national, cultural, or linguistic borders within the single-currency area; there should be wage stability throughout the single currency area; and an area-wide system should exist to stabilize imbalanced transfers of labor, goods, or capital within the single-currency area. These conditions do not exist in present-day Europe, where labor mobility is small, largely because of language barriers, and wages vary widely among EU member countries, particularly between those in the West and in the East. Furthermore, the present administrative structure of the EU is not powerful enough to redress imbalanced transfers, which are bound to occur periodically. Such imbalances would engage the sort of political response discussed previously, to the detriment of the EU as a whole. Optimal currency theory also holds that for a single currency area to be viable it must not be prone to asymmetric shocks, that is, economic events that lead to imbalanced transfers. Ideally, a single-currency area should comprise similar economies that are likely to be on similar cycles, thus minimizing imbalances. Similarly, the need for a freely transferable labor force within the single-currency area is also necessary to minimize imbalances, since each national member of the area must be able to respond flexibly to changes in wage and price structures.

The impact of Brexit on the European Union (EU) result in social and economic changes to the Union, but also longer term political and institutional shifts. The extent of these effects remains somewhat speculative until the precise terms of the United Kingdom's post-Brexit relationship with the EU becomes clear. With the EU's policies on freedom of movement and the economic benefits and drawbacks which the UK and the EU provide each other with, there will be a clear impact with consequences for both institutions.

The EU’s biggest problem is that its economic model has aged alongside its population. Europe has plenty of world-class companies but, unlike the US, none of them were set up in the past 25 years. In Europe’s golden age, Volkswagen was a rival to Ford, and Siemens could go toe to toe with General Electric. But there is no European Google, Facebook or Amazon and in the emerging technologies of the fourth Industrial Revolution, such as artificial intelligence, Europe is nowhere.

China is making faster progress than Europe in the development of machine learning and has companies that pose a threat to the giants of Silicon Valley. That’s why China rather than Europe is the main target for Donald Trump’s tariff war.

When plans for the euro were being drawn up 30 years ago, the assumption was that the single currency would make the single market work more efficiently and so generate faster growth. It hasn’t happened. The performance of the Eurozone countries has got worse not better, but so much political capital has been invested in the monetary union project that there is an unwillingness to accept as much.

Analyzation:

The EU has made remarkable progress during its first two decades. Although there are significant obstacles in the way of further strengthening of the EU, especially in political matters, the continued enhancement of economic ties binding members is likely to increase the political unity of EU members over time. That this is feasible is evidenced by the efforts of EU nations to conform to the stipulations of the Maastricht Agreement. Maintaining stable currency exchange rates, reducing public and overall government debt, and controlling long-term interest rates are all areas in which national governments and fiscal agencies had exercised complete autonomy in the past. Before the implementation of the Euro's second phase, many doubted that the EU member states could put aside their own internal interests to meet the Maastricht provisions; however, eleven of the fifteen managed to do so, and currently over half of the EU members belong to the Eurozone. Significantly, many had to experience economic slowdowns and increased unemployment in order to do so. Such resolve bodes well for continued strengthening of European unification in both political and economic areas. In fact, the history of the EU to date has been one of overcoming obstacles similar to those faced during the first two phases of the introduction of the Euro, and a unified Europe is and will remain a fact of international economic life for the foreseeable future.