What is European Union?
EU is an unique economic and political union betwwen 27 European countries. |
The Schuman Plan created on 9 May 1950 made sure than Germany and France would cooperate in steel and coal production - neither of them could get enough resources to start producing weapons. |
France and Germany gathered enough money to improve their standard of living (building new roads, homes and other buildings to replace those that were destroyed during WWII) |
the European Coal and Steel Community (ESCS) was founded in 1951 together with Luxembourg, the Netherlands, Belgium and Italy |
the European Economic Community (EEC) was founded in 1957 and written down in The Treaty of Rome. The treaty contained the agreements upon agriculture, economy and transport. By 1992 twelve countries had joined. |
In 1992 there was signed a treaty in Maastricht that decided that from then on the collaboration would be calle the European Union - many import and export regulations were abolished. |
The Lisbon Treaty signed on 1 December 2009 made the EU more democratic and easier to govern. |
Brexit = the UK decided by voting to leave the EU (51,9% was the majority). They left on 31 January with a deal called the withdrawl agreement. |
The EU institutions
the Council of the European Union (Council of ministers)) |
memebers are not the prime ministers but ministers who vary depending on the subject of meeting |
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each country has its own voice in the CoM |
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role: voice of the EU memeber governments, adopting EU laws and coordinating EU policies |
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members: government ministers from each EU country, according to the topic |
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president: each EU country holds the presidency on a 6-month rotating basis |
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location: Brussels |
the European Council |
it brings together the EU leaders (heads of states) to define the general political directions and priorities of the EU; decides on the EU's overall direction and political priorities |
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it represents the highest level of political cooperation between EU countries |
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role: defines the general political direcition and priorieties of the EU, it nominates and appoints |
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members: heads of the states |
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location: Brussels |
the European Commision |
there are 27 commissioners, one frm each country, the commissioners do not represent their country, but the EU as a whole |
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each commissioner is responsible for a different sibject |
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the EC makes proposals for European laws and monitors their implemantation by all memebr states |
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manages EU policies and allocates EU funding, sets EU spending priorities, together with the Council and Parliamen it draws up annual budget for approval by the Parliament and Council, supervises how the money is spent |
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it represents the EU internationally, speaks on its behalf in international bodies, in particular in areas of trade policy and humanitarian aid |
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role: promotes the general interest of the EU by proposing and enforcing legislation and implementing it as well |
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members: a team or college of commissioners, 1 from each EU country |
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president: Ursula von Leyen |
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location: Brussels |
the European Parliament |
directly elected by EU voters every 5 years (lastly in 2019) |
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the EU's law-making body |
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705 members - they do not sit together in the European Parliament, they foin the MEPs (Members of the European Parliament) from other EU countries with whom they agree the most, and so form the European party |
3 roles: |
legislative - passing EU laws, together with the Council of the EU, based on the European Commission proposals |
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supervisory - democratic scrutiny of all EU institutions, electing the Commission President, examining citizens' petitions and setting up inquiries, discussing monetary policy |
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budgetary - establishing the EU budget, together with the Council, approving the EU's long-term budget - the Multiannual Financial Framework |
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role: directly elected EU body with legislative, supervisory, and budgetary responsibilities |
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members: 705 MEPs |
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president: Roberta Metsola |
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location: Strasbourg, Brussels, Luxembourg |
**the European Court of Justice |
is responsible for ensuring EU lawis being interpreted and applied the same in every EU country |
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monitors whether the countries, citizens and businesses in the EU comply with the EU rules and legislations |
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location:Luxembourg |
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Objectives and values of the EU
goals of the EU |
to promote peace, values of the EU and well-being of the citizens |
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to offer freedom, security and justice without internal borders |
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sustainable development based on economic growth and price stability |
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economy with full employment and highly competitive market and social progress, and environmental protection |
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fight against discrimination |
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promote scientific and technological progress |
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improve economic, social and territorial cohesion and solidarity among the EU states |
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respect culture and language of a country |
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establish economic and monetary union, whose currency is euro |
Objectives of the EU
forming a customs union |
removing all taxes on internal trade in order to discourage EU citizens from buying imports coming from non-EU countries |
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common external tariff - tax on the price of imports, it protects the domestic market |
freedom of movement |
no barriers to the free movement of Gs, Ss, capital and people across the EU borders |
common agricultural policy |
the idea was that the Europe should produce its own food and not rely on foreign supplies |
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it implements a system of agricultural subsidies and other programmes to help out farmers in the EU and improve agricultural productivity |
help to less prosperous regions in the EU |
provides money, jobs, improves schools, hhousing, roads, etc. (Euro funds) |
single European market |
created on 1 January 1993 |
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EU members removed all remaining barriers to movement and free trade such as forntier checks at custom posts, cumersome importing documents, different national product and safety standards, etc. |
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Shengen Agreement - area without any frontier checks at custom posts |
Creating of economic and monetary union |
7 February 1992 Maastricht Treaty - the main focus of that is the creation of a framework for European economic and monetary union |
Economic and Monetary Union (EMU) in Europe
Three stage plan for EMU |
stages 2 and 3 have proved controversial and UK and Denmark have ipter out of them |
1st stage (1 July 1990) |
increased co-operation between central banks (new tasks - holding consultations and promoting the coordination of the monetary policies of the Member States - the aim is to achieve price stability |
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compete freedom of capital transactions |
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improvement of economic convergence |
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Economic convergence - process in which economies of different countried become more similar to each other |
2nd stage (1 January 1994) |
establishment of the EMI (European Monetary Institute) |
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main tasks of the EMI - to strengthen central bank cooperation and monetary policiy coordination, and to make the preparations required for the establishment of the European System of Central Banks (ESCB) |
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ESCB consists of the ECB and the national central banks of all 27 member states of the EU |
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gradual transfer of economic decistion making power from national central banks to the ECB |
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increased coordination of monetary policies |
3rd stage (1 January 1999) |
fixing of conversion rates |
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introduction of euro (online) |
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conduct of the single monetary policy by the ECB |
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entry into force of the Stability and Growth Pact |
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Maastricht condition - a stability and growth pact was agreed at a meeting in Dublin in 1996, budget deficit must not exceed 3% of their GDP and nainal debt must not exceed 60% of the GDP, otherwise the country will be penalised |
Convergence criteria |
they measure progress in countries's preparedness to adopt the euro, and are defined as a set of macroeconomic indicators |
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indicators focus on: price stability, sound public finances, exchange-rate stability, long-term interest rates |
Conditions for the 3rd criteria |
annual average inflation must be within 1.5% of the rate of inflation of the 3 EU members with the lowest inflation rate |
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average long-term interest rate over 1 year must be within 2% of rates of the 3 best performing member states in terms of price stability |
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budget deficit must be lower than 3% of GDP |
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exchange rates participation in European Exhange Rate Mechanism (ERM II) for at least 2 years without severe tensions and without devaluing against the euro |
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The European Exchange Rate Mechanism (ERM)
ERM II provides the framework to manage the exchange rates between EU countries and ensures stability. |
Participation in ERM II is voluntary thought. Country which wants euro must participate in it for at least 2 years. |
ERM II entry id based on an agreement between the ministers and central bank governors of the non-euro area Member State and the euro-area Member States, and the ECB |
It covers the following:
central exchange rate between euro and the country's currensy is agreed - currency is allowed to fluctuate by up to 15% above or below this central rate |
if necessary the currency is supported by intervention (buying or selling) to keep the exchange rate against the euro within +- 15% fluctuation band. |
The euro
Euro |
the name given to the currency that has replaced the national currencies of the EU member countries |
euro area/eurozone |
countries using the euro |
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it is a monetary union of 19 (soon to be 20) member states of the EU that have adopted the euro as their primary currency |
Euro system |
the monetary authority of the eurozone |
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it is formed by the ECB together with all central banks of countries with euro |
ECB
The creation of the ECB was accompanied by the introduction of the euro. The ECB was founded on 1 June 1998. |
The seat of the ECB is in Frankfurt am Main in Germany and the President is Christine Lagarde |
Its main task is to maintain price stability and to keep the infaltion at a desired level of 2%. |
The ECB takes decisions on the single monetary policy and interest rate for the euro area. |
ECB together with all central banks of countries with euro for the Euro system. |
ECB heads the European System of Central Banks. |
Argument for and against euro
Potential benefits |
reduced transaction costs - no commission for changing money |
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increased European competition - all prices are in euro |
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reduced exchange rate uncertainty - international trade may become less risky |
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lower interest rates - the goal of ECB is to keep the inflation as low as possible |
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increased direct inward invesment |
Potential costs |
economic misalignment resulting in higher unemployment and/or lower real income growth in some countries - the value of euro may harm countries at certain times when they would need to alter it |
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national governments will no longer be able to use economic policy to control inflation and unemployment in their own countries - ECB setes interest rates and the rest has to obey by them |
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changeover costs - though they happen only once |
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