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Theorie und Politik der Europäischen Integration Prof. Dr. Herbert Brücker Lecture 2 EU Institutions and Decisionmaking Theory and Politics of European.

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Präsentation zum Thema: "Theorie und Politik der Europäischen Integration Prof. Dr. Herbert Brücker Lecture 2 EU Institutions and Decisionmaking Theory and Politics of European."—  Präsentation transkript:

1 Theorie und Politik der Europäischen Integration Prof. Dr. Herbert Brücker Lecture 2 EU Institutions and Decisionmaking Theory and Politics of European Economic Integration

2 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Last Lecture Course Overview EU History ·Why European Integration: Preventing another war in Europe ·Two competing concepts: federalism vs. intergovernmentalism ·Links between deeper integration and expansion ·Europessimism ·Single Market Programme 1992 ·Collapse of Communism ·Eastern enlargement and finalisation of Europe ·German unifcation, Maastricht and EMU ·EU Treaties and EU Constitution ·Euro crisis

3 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions EU Institutions Key Facts EU Law The Big 5 Institutions Legislative process Budget Decisionmaking Task Allocation and Fiscal Federalism Evolution of Voting Rules Efficiency of Decision-making Fair Power Distribution and Legitimacy Todays Lecture

4 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Today's Reading EU History, Institutions, Decision Making and the Budget ·Baldwin & Wyplosz (2009/2012) The Economics of European Integration, McGraw-Hill, Chs 2 + 3

5 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions A heterogeneous group: per capita GNP and population, 2010

6 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Also in absolute size … B+W Fig. 2.2

7 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Is heterogeneity a problem? How to device institutions that ensure the rights of small countries Why then should big countries surrender some powers EU a consensus driven enterprise Mutual benefits … find win-win situations … may stem from trade

8 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Facts: EU15s Trade Pattern B+W t. 2.2

9 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions EU trade patterns EU-27 members are all comparatively open economies ·openness and size ·figures for Japan and the US are 10 per cent and 8 per cent respectively. EU15 market is very important for all EU-27 ·share of exports going to the EU15 ranges between 50 per cent to 80 per cent. The EU trades mainly with Europe, especially with itself ·about two-thirds of EU exports and imports are to or from other Western European nations ·the EUs exports to North America amount to only 10 per cent of its exports ·Asias share is only 8 per cent About 80 per cent of EU exports consist of industrial goods ·intraindustry trade

10 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions EU organization: three pillars and a roof First pillar ·Integration issues, Common Market, Competition (4 Freedoms) ·Supranational Second pillar ·Common foreign and security policy ·Intergovernmental, some supranational decisionmaking Third pillar ·Justice and Home Affairs ·Intergovermental coordination, no suprantional decisionmaking Roof ·European Union and their institutions

11 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions The EU Court created by the Treaty of Rome: court then established the Communitys legal system EC law was established on the basis of: the EU institutions ensuring that actions by the EC take account of all members interests, i.e. the Communitys interest the transfer of national power to the Community. Constitutional Treaties and Constitution replaces this as the source of EU law. Future Treaties may follow, e.g. on financial sovereigneity Law – sources of

12 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Autonomy: system is independent of members legal orders. Direct Applicability: has the force of law in member states so that Community law can be fully and uniformly applicable throughout the EU. Primacy of Community law: community law has the final say, e.g. Bundesverfassungsgericht can be overruled on a matters pertaining to intra-EC imports Primary legislation: treaties (including constitution/constitutional treaty). Secondary legislation: collection of decisions made by EU institutions. Law: Key principles

13 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Institutions There are dozens of EU institutions – but only five are really important: European Council Council of Ministers Commission Parliament EU Court. Others matter in specific areas or at particular moments.

14 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Institutions: European Council Consists of the leader (prime minister or president) of each EU member plus the President of the European Commission. By far the most influential institution: its members are the leaders of their respective nations. Provides broad guidelines for EU policy.

15 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Institutions: European Council Thrashes out compromises on sensitive issues: ·reforms of the major EU policies ·the EUs multiyear budget plan ·Treaty changes ·final terms of enlargements, etc.

16 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Institutions: European Council Meets at least twice a year (June and December): meets more frequently when the EU faces major political problems highest profile meetings at the end of each six-month term of the EU Presidency these meetings are important political and media events ·determine all of the EUs major moves

17 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Institutions: European Council most important decisions of each Presidency are contained in a document, known as the Conclusions of the Presidency, or just the Conclusions. Strangely enough, the European Council has no formal role in EU law-making: its political decisions must be translated into action via Treaty changes or secondary legislation.

18 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Institutions There are dozens of EU institutions – but only five are really important: European Council Council of Ministers Commission Parliament EU Court. Others matter in specific areas or at particular moments.

19 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Institutions: Council of Ministers Usually called by old name Council of Ministers (formal name is now Council of the EU). Consists representatives at ministerial level from each Member State, empowered to commit his/her Government:

20 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Institutions: Council of Ministers typically minister for relevant area: ·e.g finance ministers on budget issues ·confusingly, Council uses different names according to the issue discussed. – Famous ones include EcoFin (for financial and budget issues), the Agriculture Council (for CAP issues), General Affairs Council (foreign policy issues).

21 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Institutions: Council of Ministers Is EUs main decision-making body (almost every EU legislation must be approved by it). Main task to adopt new EU laws: measures necessary to implement the Treaties also measures concerning the EU budget and international agreements involving the EU is also supposed to coordinate the general economic policies of the Member States in the context of the Economic and Monetary Union (EMU), e.g. famous 3 per cent deficit rule.

22 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Council/Council of ministers: Qualified Majority Voting (QMV) QMV is complex and is changing (see Part II). Three sets of rules: Procedure that applies until mid 2004: ·basic form unchanged since 1958 Treaty of Rome. Procedure post-2004 (from Nice Treaty) unless Constitutional Treaty supersedes them: ·political agreement in Nice Treaty; implemented by Accession Treaty for 2004 enlargement. Procedure from Constitutional Treaty ·Effective now since ratification

23 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Institutions There are dozens of EU institutions – but only five are really important: European Council Council of Ministers Commission Parliament EU Court. Others matter in specific areas or at particular moments.

24 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Institutions: The Commission Has three main roles: propose legislation to the Council and Parliament to administer and implement EU policies to provide surveillance and enforcement of EU law (guardian of the Treaties) it also represents the EU at some international negotiations.

25 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Commissioners, Commissions Composition Before the 2004 enlargement: one Commissioner from each member: ·extra Commissioner from the Big-Five (Germany, UK, France, Italy and Spain in the EU15) ·this includes the President, two Vice-Presidents and 17 other Commissioners.

26 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Commissioners, Commissions Composition Under Nice Treaty each member in EU25 had one Commissioner Current president: Barroso Draft Constitution, only 15 Commissioners: rotating evenly among all members would have non-voting Commissioners from other nations (IGC likely to change this). Commissioners are chosen by their own national governments: ·subject to political agreement by other members ·Commission, the Commission President individually, approved by Parliament after hearing

27 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Commissioners, Commissions Composition Each Commissioner in charge of a specific area of EU policy: Directorate-Generals (DGs). Executive powers Commission executive in all of the EUs endeavours power most obvious in competition policy and trade policy. Manage the EU budget, subject to EU Court of Auditors. Decision making: decides on basis of a simple majority, if vote taken almost all decisions on consensus basis.

28 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Institutions There are dozens of EU institutions – but only five are really important: European Council Council of Ministers Commission Parliament EU Court. Others matter in specific areas or at particular moments.

29 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Institutions: European Parliament Two main tasks: oversees EU institutions, especially Commission has to approve Commission it shares legislative powers, including budgetary power, with the Council and the Commission. traditional problem …: democratic deficit

30 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Institutions There are dozens of EU institutions – but only five are really important: European Council Council of Ministers Commission Parliament EU Court Others matter in specific areas or at particular moments.

31 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Institutions: European Court of Justice EU laws and decisions open to interpretation that lead to disputes that cannot be settled by negotiation: Court settles disputes, especially disputes between Member States, between the EU and Member States, between EU institutions, and between individuals and the EU. EU Courts supranational power highly unusual in international organisations (very influential)

32 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Institutions: European Court of Justice As a result of this power, the Court has had a major impact on European integration. ·1964 judgment established EC law as an independent legal system that takes precedence over national laws in EC matters ·1963 ruling established the principle that EC law was directly applicable in the courts of the members.

33 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions The Budget The EU Budget

34 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions The Budget: Expenditure

35 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Evolution of Spending Priorities

36 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Evolution of Spending, Level

37 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Funding of EU Budget EUs budget must balance every year. Financing sources: four main types: Tariff revenue – common external tariff Agricultural levies (tariffs on agricultural goods) VAT resource (like a 1 per cent value added tax – reality is complex) GNP based (tax paid by members based on their GNP).

38 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Evolution of Funding Sources

39 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Contribution vs. GDP, 1999, 2000

40 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Contribution vs GDP, 1999, 2000 Percentage of GDP per member is approximately 1 per cent regardless of per-capita income. EU contributions are not progressive, e.g. richest nation, (L) pays less of its GDP than the poorest nation (P).

41 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Net Contribution by Member

42 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Part II: Decisionmaking

43 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Which level of government is responsible for which task? Why centralize, why decentralize? What are the trade-offs? Which task at which levels? How efficient and fair are the EUs decision rules? Ability to act Distribution of power What are the questions?

44 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Typical policy areas: foreign policy school curriculum speed limit trade policy Typical levels local regional national EU / supranational Task allocation (compentencies in EU jargon) Task allocation

45 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Before looking at the theory, what is the practice in EU? Task allocation in EU guided by subsidarity principle (Maastricht Treaty) Decisions should be made as close to the people as possible EU should not take action unless doing so is more effective than action taken at national, regional or local level Background: creeping competencies Range of task where EU policy matters was expanding. Some Member States wanted to discipline this spread. The subsidarity principle

46 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking 3 Pillar structure delimits range of: Community competencies (tasks allocated to EU). Shared competencies (areas were task are split between EU and member states). National competencies. 1 st pillar is EU competency. 2 nd and 3 rd are generally national competencies details complex, but basically members pursue cooperation but do not transfer sovereignty to EU. Recall: three pillars and task allocation (lecture 2)

47 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking What is optimal allocation of tasks? Basic theoretical approach is called Fiscal Federalism. Name comes from the study a taxation, especially which taxes should be set at the national vs. sub-national level. Theory: Fiscal federalism

48 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking What is the optimal allocation of tasks? There is no clear answer from theory, just list of trade-offs to be considered. Diversity and local informational advantages Diversity of preference and local conditions argues for setting policy at low level (i.e. close to people). Scale economies Tends to favour centralisation and one-size-fits-all to lower costs. Spillovers Negative and positive spillovers argue for centralisation. –Local governments tend to underappreciated the impact (positive or negative) on other jurisdictions. –Examples: defense (positive), VAT (negative) Fiscal federalism: The basic trade-offs

49 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Democracy as a control mechanism ·Favours decentralisation so voters have finer choices. Jurisdictional competition ·Favours decentralisation to allow voters a choice. Fiscal federalism: The basic trade-offs (cont.)

50 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Closer look at the trade-offs

51 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking One-size-fits-all policies tend to be inefficient since too much for some and too little for others. Central government could set different local policies but local Government likely to have an information advantage. Diversity and local information

52 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking By producing public good at higher scale, or applying to more people may lower average cost. This ends to favour centralisation. Hard to think of examples of this in the EU. Defense? Scale

53 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Example of positive spillovers. If decentralised, each region chooses level of public good that is too low. e.g. Q d2 for region 2. Two-region gain from centralisation is area A. Similar conclusion if negative spillovers. Q too high with decentralised. Spillovers

54 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking If policy is in hands of local officials and these are elected, then citizens votes have more precise control over what politicians do. High level elections are take-it-over-leave-it for many issues since only a handful of choices between promise packages (parties/candidates) and many, many issues. Example of such packages: Foreign policy & Economic policy. Centre-rights package vs Centre-lefts package. At national level, cant choose Centre-rights economics and Centre-lefts foreign policy. Democracy as a control mechanism

55 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Voters influence government they live under via: voice ·Voting, lobbying, etc. exit. ·Change jurisdictions (e.g. move between cities). While exit is not a option for most voters at the national level, it usually is at the sub-national level. And more so for firms. Since people/firms can move, politicians must pay closer attention to the wishes of the people. With centralised policy making, this pressure evaporates. Jurisdictional competition

56 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Using theory to think about EU institutional reforms. e.g., institutional changes in Constitutional Treaty, Nice Treaty, etc. Take enlargement-related EU institutional reform as example. Economical view of decision making

57 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Since 1994 Eastern enlargement was inevitable & EU institutional reform required. 3 Cs: CAP, Cohesion & Control. CAP: budget problem due to large agricultural sectors in NMS Cohoesion: budget problem due to low income levels in NMS Here the focus is on Control, i.e. decision making. Endpoint: EU leaders accepted the Constitutional Treaty June Last country ratified November 2009! Look Nice Treaty and Constitutional Treaty. Constitutional Treaty is after several postponements in force now Focus on Council of Ministers voting rules. See Chapter 2; these are the key part of EU decision making. EU enlargement challenges

58 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Three sets of rules Voting rules in the Constitutional Treaty

59 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking No longer used since 1 November 2004, but important as a basis of comparison. Qualified Majority Voting (QMV): weighted voting in place since 1958, Each member has certain number of votes, Populous members more votes, but far less than population- proportional. ·e.g. Germany 10, Luxembourg 2 Majority threshold about 71% of votes to win. Pre-Nice Treaty Voting Rules

60 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking 3 main changes for Council of Ministers: Maintained weighted voting. Majority threshold raised to 71-72% Votes re-weighted. Big & near-big members gain a lot of weight. Added 2 new majority criteria: Population (62%) and members (50%). ERGO, triple majority system. Hybrid of Double Majority & Standard QMV. Nice Treaty Voting Rules

61 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Consider percentage increase by member: members ranked by population. Who win? Who lose? QMV: Nice/Accession Treaty Reforms

62 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Voting rules Voting rules can be complex, especially as number of voters rises. Number of yes-no coalitions is 2 n. Example: All combinations of yes & no votes with 3 voters Mr A, Mrs B, and Dr C; Example: EU9 when Giscard dEstaing was President of France. 512 possible coalitions. When Giscard considered Constitutional Treaty rules, it was for at least 27 members: 134 million coalitions. YesNo A, B, C A, BC AB, C A CA,B A, B, C A, CB B

63 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking 1. Passage Probability measures Decision making efficiency. Ability to act 2. Less formal: Number of blocking coalitions 3. Normalise Banzhaf Index measure Power distribution among members. Many others are possible 2 Formal Measures

64 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Passage probability is ratio of two numbers: Numerator is total number of winning coalitions. Denominator is total number of coalitions. Passage probability equals probability of win if all coalitions are equally likely. Idea is that for a random proposal, all coalitions equally likely. Nations dont know in advance whether they will yes or no. Caveats: This is a very imperfect measure. Not random proposals, But, still useful as measure of change in decision-making efficiency. Passage probability explained

65 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Step Forward: Re-weighting improves decision-making efficiency. 2 Steps Backwards: 2 new majority criteria worsens efficiency raising vote threshold worsens efficiency. The ways to block in Council massively increased. EU decision-making extremely difficult. Main point is Vote Threshold raised. Pop & member criteria almost never matter. ·About 20 times out of 2.7 million winning coalitions. Even small increases in threshold around 70% lowers passage probability a lot ·The number of blocking coalitions expands rapidly compared to the number of winning coalitions. Nice reforms: 1 step forward, 2 steps backward

66 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Historical Passage Probabilities

67 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Blocking coalitions. Easier to think about & probably what most EU leaders used. Try to project likely coalitions and their power to block. For example, coalition of Newcomers & coalition of Poor. Less formal analysis

68 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Examples: 2 blocking coalitions, Nice rules MembersVotesPopulation Poor coalition votes East coalition votes

69 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Constitutional Treaty rules increase ability to act

70 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Formal power measures: Power = probability of making or breaking a winning coalition. SSI = power to make. NBI = power to break. Focus on the NBI. In words, NBI is a Members share of swing votes. Power measures

71 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Why use fancy, formal power measures? Why not use vote shares? Simple counter example: 3 voters, A, B & C A = 40 votes, B=40 votes, C=20 votes Need 50% of votes to win. All equally powerful! Next, suppose majority threshold rises to 80 votes. C loses all power. ASIDE: Power measures

72 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking For EU15, NBI is very similar to share of Council votes, so the distinction is not so important as in 3 country example. Distribution of power among EU members

73 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Do power measures matter? The budget measure

74 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Do power measures matter? The budget measure

75 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Impact of Constitutional Rules: Change in power in EU-25 compared to Nice rules, %-points

76 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Impact of Constitutional Rules (cont.): Power change Const. Treaty and Nice rules in EU-29, %-points

77 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Enlargement impact on EU power, Nice rules (%-points)

78 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Enlargement impact on EU-25 power, CT rules (%-points)

79 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Legitimacy is slippery concept. Approach: equal power per citizen is legitimate fair. Fairness & square-ness. Subtle maths shows that equal power per EU citizen requires Council votes to be proportional to square root of national populations. Intuition for this: EU is a two-step procedure ·Citizens elect national governments, ·These vote in the Council. Typical Frenchwoman is less likely to be influential in national election than a Dane. So French minister needs more votes in Council to equalise likelihood of any single French voter being influential (power). How much more? Maths of voting says it should be the square root of national population. Legitimacy in EU decision making

80 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking Legitimacy is slippery concept Approach: equal power per citizen is legitimate fair. Fairness & squareness Subtle maths shows that equal power per EU citizen requires Council votes to be proportional to square root of national populations. Legitimacy in EU decision making

81 Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 3 Decisionmaking NEXT LECTURE November 13, 15:00 hours The Microeconomics of Trade and Tariffs and Preferential Trade Liberalisation Baldwin & Wyplosz (2009/2012) The Economics of European Integration, McGraw-Hill, Ch 4-5.


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