Theorie und Politik der Europäischen Integration Prof. Dr. Herbert Brücker Timo Baas Lecture 2 Facts, Institutions and Budget Theory and Politics of European Integration

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 ·Leftovers: ·German unifcation, Maastricht and EMU ·EU Treaties and EU Constitution

Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Today's Lecture - Overview Leftovers from last session Facts, EU Institutions, EU Budget

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 (2006) “The Economics of European Integration”, McGraw-Hill, Ch 2.

Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Pending 1990 unification of Germany opens door to a ‘grand bargain’ (Mitterrand, Kohl). Germany gives up DM for European Monetary Union & East Germany joins the EU without negotiation. Jacques Delors proposes 2 nd radical increase in European economic integration. the formation of a monetary union. Idea championed by French President Francois Mitterrand and German Chancellor Helmut Kohl. Maastricht Treaty, signed 1992 a monetary union by 1999, single currency by Also, sets up EU’s ‘three pillar’ structure to reduce EU’s ‘competency creep;’ ERM exchange rate crises, German unification and Maastricht

Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions EU Enlargement required from the EU to reform institutions Four ties: Amsterdam Treaty 1997 Nice Treaty 2000 Draft Constitutional Treaty, 2003 Constitutional Treaty, June 2004 Lisbon Treaty What comes after failure of Lisbon Treaty in Irish referendum? Was the EU prepared for Enlargement?

Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Failed to reform main institutions Tieded up for the Maastricht Treaty more social policy more rights for the Parliament Flexible integration, more room for national cooperations Amsterdam “Leftovers” Voting rules in the Council of Ministers Number of Commissioners Extension of issue of majority voting Amsterdam Treaty 1997

Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Reform of main institutions, but poorly done Council voting rules highly complex and reduce EU’s ability to act with more members No important extension of majority voting Make shift solution for Commissioners No reform of decision making in ECB Generally viewed as a failure Main changes re-visited in draft Constitutional Treaty, 2003 Nice Treaty

Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Reform of decision making rules More rights for Parliament Slightly more majority voting Inclusion of Charter of Human Rights A lot of other things, which a Constitutional Treaty not necessarily requires Many gestures (social rights etc.) Moves towards more coherent foreign policies, increased competencies of EC Many de facto points turned into de jure Constitutional Treaty

Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Failure of Constitution in referendum (FR, NL) Failure of Lisbon Treaty in Irish referendum Declining approval rates of EU in all member states Increasing disagreement about core EU values in NMS, particularly in Poland, Czech Republic and Hungary Increasing tensions between federalistic and intergovernmental approach Increasing tensions about goals of foreign policies Disagreement on accession of candidate countries, particularly Turkey... Outlook: new EU pessimism?

Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Facts EU Law The “Big 5” Institutions Legislative process Budget Today’s Lecture

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, 2006

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

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

Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Facts: EU15’s Trade Pattern B+W t. 2.2

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 EU’s exports to North America amount to only 10 per cent of its exports ·Asia’s share is only 8 per cent About 80 per cent of EU exports consist of industrial goods ·‘intraindustry’ trade

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 Community’s 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 Community’s interest the transfer of national power to the Community. New Treaty may replace this as the source of EU law. Law – sources of

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. highest French court can be overruled on a matters pertaining to intra-EC imports Primary legislation: treaties. Secondary legislation: collection of decisions made by EU institutions. Law: Key principles

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.

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.

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 EU’s multiyear budget plan ·Treaty changes ·final terms of enlargements, etc.

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 EU’s major moves

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.

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.

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:

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).

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 EU’s 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.

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. 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 ·draft endorsed by European Council at June 2003 meeting.

Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions QMV: Nice/Accession Treaty Reforms (big countries gain)

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

Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Power implications: big nations gain a lot (except Spain and Portugal who lose a lot) intermediate-sized nations lose tiny nations gain slightly. QMV: draft Constitutional Treaty

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.

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.

Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Commissioners, Commission’s 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 (Romano Prodi up to 2005), two Vice-Presidents and 17 other Commissioners.

Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Commissioners, Commission’s Composition Under Nice Treaty each member in EU25 has 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.

Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions Commissioners, Commission’s Composition Each Commissioner in charge of a specific area of EU policy: Directorate-Generals (DGs). Executive powers Commission executive in all of the EU’s 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.

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.

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

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.

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 Court’s supranational power highly unusual in international organisations. (very influential)

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.

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

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

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

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

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 EU’s 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).

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

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

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).

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

Prof. Dr. Herbert Brücker Lehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer Arbeitsmärkte Universität Bamberg | | Theory and Politics of European IntegrationLecture 2 Institutions NEXT LECTURE October 30 EU Decision Making Reading: Baldwin & Wyplosz (2006) “The Economics of European Integration”, McGraw-Hill, Ch 3.