UNIVERSITY OF LEFKE
FACULTY OF ADMINISTRATIVE AND ECONOMIC SCIENCES
BUSINESS DEPARTMENT
IMPACT OF EUROPEAN INTEGRATION IN ITS MEMBER STATES
Prepared By:
MAKHSUT ZULUFOV
June 2006
HOME IS WHERE THE HEART IS
BUSINESS IS WHERE THE BRAIN IS
OFFICE IS WHERE THE USER IS
VALUE IS WHERE THE INFORMATION IS
[*]
SYNOPSIS
This project does cover the topic
of European Union by including the starting up of EU with its original three
countries and bringing a concept of Benelux that combined from the initial
letters of Belgium, Netherlands, and Luxembourg.
The map of the world has changed
as European Nations decided to come together and found a common ground while
they were in process. EU bloc has became one of the leading bloc and it says
the role of those nations changed and nations eliminated barriers and
established one concept of Single Market and Euro region which is region of
transnational change on its continent.
Also this project covers main
advantages and disadvantages of such union by giving a chance to European
countries to have access to this entity. The aim is to achieve unanimity in all
terms. However, they have not achieved last and further stage.
CONTENTS
Synopsis…………………………………………………………………… …...4
Introduction…………………………………………………………………………………………
…..6
EU and its impact on its member state……………………………………………………. …..7
Brief information of
history…………………………………………………….9
Rationality on eastward enlargement and candidacy of Turkey………………….. …10
Single Market…………………………………………………………………………….12
Stages of Economic Integration……………………………………………......13
Single European Act
1986…………………………………………………......15
Maastricht Treaty (Treaty on
EU)……………………………………………..15
Relation of Turkey and EU……………………………………………………16
Disadvantages of European
Union…………………………………………….17
Advantages of European
Union……………………………………………….18
Demographic
problem…………………………………………………………21
Conclusion……………………………………………………………………..23
Bibliography…………………………………………………………………...24
INTRODUCTION
After World War II, showed
the need to unify the people of Europe in a way that would minimize, but not
destroy, national patriotism that was felt to be a cause of both World Wars. European
countries realized that establishment of strong relationship is necessary for
avoiding of a conflict and not to repeat it, which was in 1939-45. In this
project I would like to express how European nations integrating on the
continent or in other word a big peninsula of Europe, where 25 countries are
united and became highly interdependent on each other because of Economic Union
(Integration), which is the last and achieved stage (level) of integration, by
excluding Political Union.
To bring out one more
international currency of € (Euro), European countries have put too much of
efforts which was really hard job. European countries have signed main several Treaties
for establishment of Economic Integration.
First Treaty of EEC was Treaty of
Paris, which set up the European Coal and Steel Community (ECSC), this Treaty
was signed by six countries (Belgium, Netherlands, Luxembourg, France, West Germany, and Italy.)
The same six countries
signed the Treaty of Rome, establishing the European Economic Community (EEC),
better known as the Common Market. And later, these countries signed Single
European Act (SEA). And last stage is Economic and Monetary Union (EMU) which
is the Maastricht Treaty. These Treaties have contributed to make such
transnational change on the continent of Europe. As well as, international
entity, which is European Union, has some advantages and disadvantages.
EU and its impact
on its member states
The European Union (EU)
is a unique endeavor involving economic and political integration in the world
today. Europe is conventionally considered one of the seven continents of Earth,
which in this case, is more a cultural and political distinction than a
physiographic one, leading to various perspectives about Europe’s borders.
Physically and geologically, Europe is a subcontinent or large peninsula,
forming the western most part of Eurasia and west of Asia. The
European Union has 25 member states, an area of 3,892,685 km² and
approximately 460 million inhabitants as of December 2004. The European Union's
member states combined represent the world's largest economy by GDP, the seventh
largest territory in the world by area and the third largest by population. The
EU describes itself as an "a family of democratic European countries"
though the extent of "European" has been a matter of debate,
especially in relation to the possibility of the accession of Turkey.
The main focus is
on the Common Market and Monetary Union aspects of the European story. The
Common Market has of course evolved and is evolving both in terms of membership
and scope. The key developments were the Single European Act of 1986, the
Maastricht Treaty on European Union of 1992 and the Treaty of Amsterdam
of 1997. The Single Act set the community the basic task of completing the
creation of Single European Market. The Maastricht Treaty transformed the
relationship in a variety of ways.
First, the European Economic Community is now referred to as the European Community since it covers
social and cultural as well as economic matters. Second, the process of
economic integration has now been pointed towards the ultimate destination of
Economic and Monetary Union. Third, the whole complex of relationships has been
given the title of the European Union. The Union’s task is not only economic,
social and cultural integration; it also takes in the Common Foreign and
Security Policy and what is now called Police and Judicial Cooperation in
Criminal Matters. In short, integration has spilled over from economic to
broadly political affairs.
Economic Integration is a
term used to describe how different aspects between economies are integrated.
The basics of this theory were written by the Hungarian Economist Bela Balassa
in the 1960s. As economic integration increases, the barriers of trade between
markets diminish. The most integrated economy today, between independent
nations, is the European Union and its Euro zone.
European Integration is the
process of political and economic (and in some cases social and cultural)
integration of European (and some peripheral) states into a tighter bloc. The
main and most powerful body of European Integration is European Union,
(European Union is an intergovernmental and supranational union of 25
democratic member states from the European Continent. *
A basic tension exists
within the European Union between intergovernmentalism and supranationalism.
Intergovernmentalism is a method of decision-making in international organizations
where power is possessed by the member states and decisions are made by
unanimity. Independent appointees of the governments or elected representatives
have solely advisory or implementation functions. Intergovernmentalism is used
by most international organizations today. An alternative method of decision-making
in international organizations is supranationalism. In supranationalism power
is held by independent appointed officials or by representatives elected by the
legislatures or people of the member states. Member state governments still
have power, but they must share this power with other actors. Furthermore,
decisions are made by majority votes; hence it is possible for a member-state
to be forced by the other member-states to implement a decision against its
will.
Some forces in
European Union politics favor the intergovernmental approach, while others favor
the supranational path. Supporters of supranationalism argue that it allows
integration to proceed at a faster pace than would otherwise be possible. Where
decisions must be made by governments acting unanimously, decisions can take
years to make, if they are ever made. Supporters of intergovernmentalism argue
that supra-nationalism is a threat to national sovereignty, and to democracy,
claiming that only national governments can possess the necessary democratic
legitimacy. Intergovernmentalism is being favoured by more Eurosceptic nations
such as the United Kingdom, Denmark and Sweden; while more integrationist
nations such as the Benelux countries, France, Germany, and Italy have tended to prefer the supranational approach. The European Union attempts to strike a
balance between the two approaches. This balance however is complex, resulting
in the often labyrinthine complexity of its decision-making procedures. Supranationalism
is closely related to the inter-governmentalist vs. neofunctionalist
debate. This is a debate concerning why the process of integration has taken
place at all. Intergovernmentalists argue that the process of EU integration is
a result of tough bargaining between states. Neofunctionalism, on the other
hand, argues that the supranational institutions themselves have been a driving
force behind integration. **
The
EU was established under that name in 1992 by the Treaty on EU (Maastricht
Treaty)). Through other institutions like Council of Europe also integrate
their members states. The regions of Europe are integrated into larger Euro
regions. (A Euro region is a form of transnational co-operation structure
between two or more territories located in different European countries.)
Euro regions usually do not
correspond to any legislative or governmental institution, do not have
political power and their wok is limited to the competences of the local and
regional authorities which constitute them. They are usually arranged to
promote common interests across the border and cooperate for the common good of
the border and cooperate for the common good of the border populations. Even
though the Council of Europe sponsored term “euro region” means a similar
thing, it should not be confused with the European Union sponsored term
“regions in Europe”.
The European Union created
regions of Europe as the layer of EU government administration directly below
the nation-state level
Regions of Europe are represented by the Committee of the Regions headquarters in Brussels.
Reasons for this
include;
- Reflecting the historic and
cultural claims for autonomy in many regions all over the EU
- Strengthening the political and
economic situation in those regions.
* Benelux
countries. This was accomplished by the Treaty of Paris, signed in April, 1951,
and taking effect in July, 1952. **
On
25March 1957 the governments of France, West Germany, Italy, the Netherlands, Belgium and Luxembourg signed the Rome Treaty and implemented on 1 January 1958.
In so doing they agreed to create what came to be known as the Common Market
or, more accurately, the European Economic Community. That institution has
remained the movement towards closer union and economic integration in Europe. It was course accompanied by the creation of Euratom and had indeed been preceded
by the European Coal and Steel Community of 1951. European Coal and Steel
Community (ECSC) established with the pooling of production and consumption of
coal and steel. And the on the same day the same six countries signed Treaty of
Rome, establishing European Economic Community (EEC )in 1957). EEC better known
as The Common Market, and the EURATOM Treaty (European Atomic Energy
Community), designed to promote and supervise the development for peaceful uses
of nuclear and atomic energy, which was recognised as an essential resource. In
1973 the UK, Denmark and Ireland joined the origial six countries, followed by
Greeced in 1981and then in 1986, by Spain and Portugal. In 1990 the reunion of
East and West Germany was achieved, which effectively added another state to
community. On 1st January 1995, Austria, Finland and Sweden joined to make a
European Community of 15. *
After that EU
was going on the way of enlarging in zone, population, economy and rest of all
aspects, by giving access to other countries to apply for access to become a
member of EU. On 1st January 2001 European Union become more in number after
ten new states joined to EU entity, and in present time EU includes 25 states
with new ten members; (Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia). However, by 1st January 2007 two
new states will be joining to EU like Bulgaria and Romania.
Context —
rationale for enlargement and future prospects
Supporters of
the European Union argue that the growth of the EU is a force for peace and democracy.
They argue that the wars which were a periodic feature of the history of
Western Europe have ceased since the formation of the European Economic
Community (which later became the EU) in the 1950s. They also claim that in
the early 1970s, Greece, Portugal and Spain were all dictatorships, but the
desire of the business communities in these three countries to be in the EU
created a strong impetus for democracy there. Others argue that peace in Europe
since World War II is more due to other causes, such as the need for a unified
response to the threat from the Soviet
Union, a need for reconstruction after World War II, and a collective
temporary tiring of waging war, and that the dictatorships cited came to an end
for totally different reasons. In more recent times, the European Union has
been extending its influence to the east. It has accepted several new members
that were previously behind the Iron Curtain, and has plans to accept several
more in the medium-term. It is hoped that in a similar fashion to the entry of Spain, Portugal and Greece in the 1980s, membership for these states will help cement economic and
political stability. As the EU continues to enlarge eastward, the candidate
countries' accessions tend to grow more controversial. As previously explained,
the EU has finished accession talks with Bulgaria and Romania, and set an entry date for the two countries in 2007. However, the rejection of the EU
Constitution by France and the Netherlands, and the EU's slow economic growth,
have cast some doubt on whether the EU will be ready to accept new members
after 2007, when Romania and Bulgaria are set to join EU (in early 2005 they
signed the Accession Treaty). A further point of contention for EU members is
the accession of Turkey.
Accession
preliminary talks between Turkey and the EU began in early October 2005. Turkey's Government, led by Prime Minister Recep Tayyip Erdoğan, has enacted many
legal reforms to meet the EU's entry requirements. However, some member states,
especially Austria, repudiate Turkey joining the EU, and the possible economic,
immigration and cultural implications that may bring. It is also noted that the
vast majority of Turkey's territory lies outside of what is commonly considered
the continent of Europe.
The
ten new member states of Eastern Europe have enjoyed a much higher average
percentage growth rate than their West European counterparts. With the
exception of Malta not one state has had a GDP growth of less than 4%, putting
these nations up with economies such as the US. Notably the Baltic states have
achieved massive GDP growth, with Latvia topping 8.5%, close to China, the world leader at 9% on average for the past 25 years. Reasons for this massive
growth include government commitments to stable monetary policy,
export-oriented trade policies, low flat-tax rates and the utilization of
relatively cheap labor. The current map of EU growth is one of huge regional
variation, with the larger economies suffering from stagnant growth and the new
nations enjoying sustained, robust economic growth. Although EU25 GDP is on the
increase, the percentage of Gross world product is decreasing due to the
emergence of economic powers such as China, India and Brazil. In the medium to long term, the EU will be looking to increase GDP growth in the
central European economies such as France, Germany and Italy and stabilize growth in the new Eastern European states to ensure sustained economic
prosperity. *
Dating back the
initial steps of union or inegration is clear in above statements how EU entity
is being built up. It started by three countries and has no last point that can
cover enlargement of Euro Zone. European Union tries to get new character of
Federation. However, by analyzing each and single country of EU then we can see
that are not so significant by own, but by unitting into one single entity they
have cooperation, strong solidarity in front of rest of the world. GDP per
capita of new accessed members are not so great but under one entity total
possession of each member makes a great number that let EU to compete almost in
all aspects as a bloc and in such way it is easier to compete and to combat in
world market arena. European Union has a large economy, probably
slightly larger than that of the United States of America with a 2005 GDP of
12,865,602 million vs. 11,734,300 million (USD figures) (using nominal US
Dollar GDP) according to the International Monetary Fund. Using the purchasing
power parity method of computing GDP, the preferred comparative measure of
economic output, the EU and the US economies are virtually the same size. As
the EU has 50% more people than the US, but produces about the same
economically, the average EU citizen enjoys a per capita share of domestic
product of about USD $28,100, while in the US the per person GDP is over USD
$40,000. It is estimated that in the
period 2006-2020 the European Union's economy will grow at an average rate of
2.1% per annum, against the United States growing at an annual rate of almost
3.0%, however if growth is taken per head the figures are 2.5% per annum for
the US and 2.0% for the EU. The EU set itself an objective under the Lisbon
Strategy to make the European Union "the world's most dynamic and competitive
economy" by the year 2010, but it is now generally accepted that this
target will not be met. The significant challenges facing the EU economy
include demographic issues like a low birth rate and aging population; while
important strengths include the expected gains earned through enhanced free
trade and high growth in newer EU members in particular. The European Union's economic growth has been below that of the United
States most years since 1990, while its unemployment rate has generally been
higher. Many point out that there are benefits accruing to EU citizens (the
"social wage") that are not visible in traditional economic data -
like enhanced time off from work, social protection and other benefits. In
recent years, the economic performance of several of its key members, including
Germany and Italy, has been a matter of serious concern to policy makers. Population and GDP per capita of EU member states and candidates. *
If considered a
single unit, the European Union has the largest economy in the world with a 2004
GDP of 11,723,816 million USD using PPP equivalence. The EU economy is expected
to grow further over the next decade as more countries join the union —
especially considering that the new states are usually poorer than the EU average,
and have the capacity to grow at a high rate. The European Council published
estimations on 17 November 2005 that the economy of the European Union will
have grown approximately 1.5% in 2005 (1.3% in the eurozone),and 2.3% 2006
(2.1% in the eurozone) comparing favorably to earlier low growth predictions.
In the year of 2006 the eurozone made 4-5 milion new jobs. The European Council
is hopeful that the European Union will grow further in 2006 and in 2007 (2.1%
2006 2.4% 2007). Germany, the largest economy in the EU, will grow about: 0.8%
2005, 1.2% 2006 and 1.6% 2007. After extremely slow growth, it seems that the
EU will grow again in the next couple of years.
EU member states
have agreed a program called Agenda 2010 which aims at making "the EU the
world's most dynamic and competitive economy" by 2010.
I think that European
integration has a great impact to its members almost in all aspects. Some information
above explains the beginning of EU and its economic integration condition,
which is one of the leading and most successful economies on the planet. Today
25 countries of EU became together to be stronger and to have competitive
advantage in market place and in the world arena. Member states joined to be in
union and to be in unison almost in each and every act. As we analyze past time
we can see that they had conflict and war between each other. However,
situation that we see today is phenomenon and it fascinated whole world as
those countries created Single Market and new currency of EURO appeared in half
of international transactions in the world. Mostly all states have adopted EURO
currency as an official currency of European Union. Such achievement took a
long time and much efforts put with particular stages that used by states to
improve relationship and membership. European Union has achieved four stages
and last and further stage is Political Union which is not achieved yet. This
is last and most advanced stage in process. Stages of Economic Integration are
explained below after explanation of Single Market.
Single
market (Treaty of Rome 1957)
Many of the policies of the EU
relate in one way or another to the development
anmaintenanceof an effective single market. Significant
efforts have been made to create harmonized standards – which are designed to
bring economic benefits through creating larger, more efficient markets.
The power of the
single market reaches beyond the EU borders, because to sell within the EU, it
is beneficial to conform to its standards. Once a non-member country's
factories, farmers and merchants conform to EU standards, much of the cost of
joining the union has already been sunk. At that point, harmonizing domestic
laws in order to become a full member is relatively painless, and may create
more wealth through eliminating the customs costs. The single market has both
internal and external aspects:
The original Rome of Treaty quite
clearly provided for the creation of a common market.
·
Called for the elimination o internal trade barriers
·
Provided for the creation of a common external
tariff
·
Required the member states to abolish obstacles to
the free movement of factors. In order to facilitate this free movement of
goods, services and factors of production
·
Provided for any necessary harmonization of member
state laws
The Treaty of Rome is one of the
treaties that forms the Community of European Member Sates known today as the
EU. The main objective of the original Treaty was to achieve a single
integrated market possessing the following features:
·
Free movement between Member States of goods,
unimpeded by customs duties and quantitative restrictions;
·
Free movement of labor;
·
Free movement of services;
·
Free movement of capital;
·
Trade protection where appropriate against
non-Member countries by way of a common external tariff, ie a customs barrier,
so that the same duty would be levied on goods coming into the Community
regardless of which Member State imported the.
In 1957 the
governments of France, West Germany, Italy, the Netherlands, Belgium and Luxembourg signed the Rome Treaty. In so doing they agreed to create what came to be
known as the Common Market or, more accurately, the European Economic Community.
That institution has remained the movement towards closer union and economic integration
in Europe. It was course accompanied by the creation of Euratom and had indeed
been preceded by the European Coal and Steel Community of 1951. *
STAGES OF ECONOMIC INTEGRATION
·
There are stages which brought impact to the
development of EEC. These stages came to existence after Treaty of Rome.
Economic integration can take
various forms and these can be ranged in a spectrum in which the degree of
involvement of the participating economies, one with another, becomes greater
and greater.
1.
The free trade area is the least onerous in terms
of involvement. It consists of an arrangement between states in which they
agree to remove all customs duties and quotas on trade passing between them. Each
party is free, however, to determine unilaterally the level of customs duties
on imports coming from outside area. It is first step toward improvement of
economy. Several countries agreed to sell freely from one country to another.
For example; NAFTA, OPEC, ASEAN and last is EFTA, which belongs to EU.
2.
The next stage is Customs Union. Here tariffs and
quotas on trade between members are also removed but in addition the members
agree to apply a common level of duty on goods entering the union from without.
The latter is called the common customs, or common external, tariff.
3.
Next come the Common Market which is only one
Common Market in the world belong to EU. Single Market is known as Common
Market too, it has freedom in following;
·
Freedom of Labor
·
Freedom of Capital
·
Freedom of Persons
·
Freedom of Goods
And this technical term implies that to the free movement of goods
within the customs union is added the free movement of the factors of
production-labor, capital and enterprise.
4.
Finally there is the economic union. This is a
common market in which there is also a complete unification of monetary and
fiscal policy. There would be a common currency which would be controlled by a
central authority and in effect the member states would become regions within
union. Euro is the official currency of EU. This stage is the further step in
their stages for time being. EU has aim to include Political Union which is
lies behind all these stages. However, for this time is not achievable. Once
they gain it will carry a character of Federation of EU.
The Single European Act 1986
The Single European Act was a document signed in 1986 by the heads of
state and later ratified by the parliaments of all Member States. It made the
first post-signature amendments to the Treaty of Rome. The complete Act came
into force in July 1987, although some sections took effect earlier. It was
enacted in the UK in the European Communities Act 1986.
The SEA
aimed to provide impetus towards achieving the objectives of the original EC
treaties, which were;
·
To transform the relations between Member States
into a real European Union;
·
To achieve a common foreign policy;
·
To promote democracy;
·
To speak with one voice;
·
To protect the EC’s freedoms and human rights;
·
To facilitate the Commission’s exercise of its
powers;
·
To work towards economic integration via Economic
and Monetary Union (EMU);
·
To work towards the protection of the general and
working environment.
Besides providing for speeding up
the legislative process by introducing qualified majority voting, the SEA set
out the common intention that the EC shall have as its objective to contribute
together to making concrete progress towards European Union. *
Maastricht Treaty (Treaty on European Union)
The Treaty on
European Union (TEU) 1992 was for many the logical progression from the
completed Internal Market. This Treaty (known as Maastricht Agreement) marked
a new stage in the process of creating an ever closer union among the peoples
of Europe, where decisions are taken as closely as possible to citizens. The
TEU concerned institutional reform and political union, together with the
necessary amendments to the Rome Treaty, extending majority voting and
strengthening the European Parliament. It incorporated the principle of
Economic and Monetary Union (EMU), including issue of the single European
currency and provisions relating to security.
Aims of TEU;
·
the promotion of an international identity leading
possibly to a common defense policy
·
the establishment of a single currency in the
context of Economic and Monetary Union (EMU)
·
reinforcement of environmental protection
·
a fund to promote cohesion in the context of
economic and social progress, including improvement in the quality of life
·
the establishment of common citizenship
*(The Treaty of Rome, Single European Act and
Maastricht, Sixth edition
of EC/EU fact book Alex Roney p. 14)
·
the facilitation of free movement of people, not
forgetting their safety and security **
RELATION
OF TURKEY AND EU
Firstly, I want to say that EU has some other official
candidates which is Croatia. It hopes to join in 2009. Also, Republic of Macedonia has been given official candidate status as of December 2005 under the
name "former Yugoslav Republic of Macedonia".
Turkey and EU relations can be
dated back as far as 1959, when Turkey applied for an association with the
European Commission, thus on year after the enforcement of the Treaty of Rome. Turkey is an official candidate to join the European Union. The Ankara Agreement which was
signed in 1963. Additional protocol was also signed in 1970 which underlined
two main documents. The first time was to ensure future Turkey’s Custom Union with EU, whiles the second was to find modalities to ensure Turkey’s full membership with the EU. It must be noted that Turkey’s long term dream of having
Customs Union with the EU became a reality on 1st January.1996. In
spite of the fact that Turkey is the only country to have reached such an
advanced stage with the EU without necessary becoming full member it took then
32 years. This delay was mainly due to;
·
The huge economical gap existing between Turkey and the EU at that time
·
Also because of Turkey’s military intervention with
Greece between 1960 and 1980s.
According to the Article 24 of the GATT, Turkey now can import and export goods
to and from EU without any restriction. However, Turkey should also apply the
union’s common trade policy in dealing with other countries outside the EU. For
the time been, the Customs Union covers only industrial and processed
agricultural products, plans are, however, in advance to add traditional
Agricultural products pending Turkey’s adaptation to the EU’s Common
Agricultural policy.
Turkey-EU association relations that guided Turkey’s foreign economic and commercial relations were culminated with the establishment
of the Customs Union. The completion of the Customs Union is the most important
development effecting Turkish economy since adoption of liberalization measures
by the 1980s. The Customs Union with the EU is the most comprehensive element
that contributes to strengthening Turkey’s expanding role as a business
partner.
An important feature of the Turkey-EU Customs Union is
that Turkey is the first and only country to enter into such an advanced form
of economic integration without being a full member. As it is a unique case for
the EU, there are several issues other than tariff reductions where Turkey and the EU agree to cooperate.
Turkey started preliminary
negotiations on 3 October 2005. However, analysts believe 2015 is the earliest
date the country can join the union due to the plethora of economic and social
reforms it has to complete. Since it has been granted official candidate
status, Turkey has implemented permanent policies on human rights, abolished
the death penalty, granted cultural rights to its large Kurdish minority, and
taken positive steps to solve the Cyprus question. However, due to its
religious and cultural differences, Turkey faces strong opposition from
governments of some member states, including France, Germany, Austria and Cyprus. The Greek government has supported in principle the Turkish candidacy, while in
practice linking its progress with the resolution of the long standing Cyprus dispute. Pope Benedict XVI, the head of the Roman Catholic Church, also opposes Turkey becoming a member state because of its predominantly Muslim population. *
As well
as, there are some cases where there are advantages and disadvantages of joining
to European Union. EU is international entity where many states united and
became as Union. In such cases all countries who are members of EU have
sovereignty, independence, flag, nationality, background, culture, mentality,
tradition and some other criteria which are not mentioned make a sense that
they are different but in order to avoid preceded incidents of history, they
have united to go hand in hand.
Items that I mentioned above and according to
it disadvantages follow as:
Disadvantages
1. The instability of the
system.
Throughout most of the 1980s the UK refused to join the ERM (Exchange rate
mechanism). It argued that it would be impossible to
maintain exchange
rate stability within the ERM, especially in the early
1980s when the
pound was a petro-currency and when the UK inflation rate was consistently
above that of Germany. When the UK joined the ERM in 1990 there had been
three years of relative currency stability in Europe and it looked as
though the system had become relatively robust.
2. Loss of Sovereignty.
On the political side, it
is argued that an independent central bank is
undemocratic. Governments must be able to control the
actions of the
central banks because Governments have been
democratically elected by the
people, whereas an independent central bank would be
controlled by a non
elected body. Moreover, there would be a considerable
loss of sovereignty.
Power would be transferred from London to Brussels. This would be highly
Undesirable because national governments would lose
the ability to control
policy.
4. Deflationary tendencies.
Perhaps the most important economic argument relates
to the deflationary
tendencies within the system. In the 1980s and 90's France succeeded in
reducing her inflation rates to German levels, but at
the cost of higher
unemployment, for the UK, it can be argued, that
membership of the ERM
between 1990 and 1992 prolonged unnecessarily the
recessional period. This
is because the adjustment mechanism acts rather like
that of the gold
standard. Higher inflation in one ERM country means
that it is likely to
generate current account deficits and put downward
pressure on its
currency. To reduce the deficit and reduce inflation,
the country has to
deflate its economy. In the UK, it could be argued
that the battle to
bring down inflation had been won by the time the UK joined the ERM in
1990. However, the UK joined at too high an exchange
rate. It was too high
because the UK was still running a large current
account deficit at an
exchange rate of around 3 Dm to the pound. The UK government then spent
the next two years defending the value of the pound in
the ERM with
interest rates which were too high to allow the
economy to recover. Many
forecasts predicted that, had the UK not left the ERM in Sept 1992,
inflation in the UK in 1993 would have been negative
(ie prices would have
fallen).The economic cost of this would have been
continued unemployment
at 3million and a stagnant economy. When the UK did leave the ERM and it
economic growth and the current account position
improved, but there was
an inflation cost.
EU is not only
economic and political union but traditional and cultural aspects includes as
well. But today situation is changing and EU entity is going to influence it
and gradually Political Union might be achieved by EU, then all values beliefs,
cultures, traditions will be the same because might be presented as a one nation.
According to my outlook these values and beliefs of each nation is important
because, it what does motivates them as a nation (country), however the union
drains them. From economy point of view is good to stabilize the economy but
they ignore subjective matters as I have mention in previous statements but
objectives matters have been achieved but have not finalized the union because Political
Union not achieved, which is the hardest stage and further one.
However, if take into consideration other points,
which are advantages then we can see also some advantages that EU benefits in
fact. As follows:
Advantages
- Transaction costs will be eliminated.
For instance, UK firms currently spend about 1.5
billion sterling a year buying
and selling foreign currencies to do business in the
EU.
With the EMU this is eliminated, so increasing
profitability of EU firms.
Advice to young people: You can go on holiday and not
have to worry about
getting your money changed, therefore avoiding high
conversion charges.
- Price transparency
EU firms and households often
find it difficult to accurately compare the
prices of goods, services and resources across the EU
because of the
distorting effects of exchange rate differences.
- Uncertainty caused by Exchange rate fluctuations
eliminated.
Many firms become wary when investing in other
countries because of the
uncertainty caused by the fluctuating currencies in
the EU. Investment
would rise in the EMU area as the currency is
universal within the area,
therefore the anxiety that was previously apparent is
there no more.
4. Single currency in single
market makes sense.
Trade and everything else should operate more
effectively and efficiently
with the Euro. Single currency in a single market
seems to be the way
forward.
5. Rival to the "Big
Two".
If we look out in the world today we can see strong
currencies such as the
Japanese Yen and The American $. America and Japan both have strong
economies and have millions of inhabitants. A newly
found monetary union
and a new currency in Europe could be a rival to the
"BIG TWO".
EMU can be self-supporting and so they could survive
without trading with
anyone outside the EMU area.
The situation that EMU is in is good as it seems that
it can survive on
its own, with or without the help of Japan and U.S.A.
6. Prevent war.
The EMU is, and will be a political project. It's
founding is a step
towards European integration, to prevent war in the
union. It's a well
known fact that countries who trade effectively
together don't wage war on
each other and if EMU means more happy trade, then
this means, peace
throughout Europe and beyond (we hope).
- Increased Trade and reduced costs to firms.
Proponents of the move argue that it brings
considerable economic trade
through the wiping out of exchange rate fluctuations,
but as well as this
it helps to lower costs to industry because companies
will not have to buy
foreign exchange for use within the EU. For them, EU
represents the
completion of the Single European Market. It is vital
if Europe is to
compete with the other large trading blocs of the Far East and North
America.
- The Political agenda.
There is also a political agenda to European bank (the
European System of
Central Banks -ESCB), the complete removal of national
control over
monetary policy and the partial removal of control
over fiscal policy.
Individual nation states will lose sovereignty (i.e.
the ability to
control their own affairs). It will be a considerable
step down the road
towards political union.
- Inflation
From the mid-1980s onwards, there were a number of
economists and
politicians who argued that, for the UK at least, EMU provided the best
way forward to achieve low inflation rates throughout
the EU. During the
first half of the 1980s high inflation countries, such
as France and Italy
were forced to adopt policies which reduced their
inflation rates to
something approximating the German inflation rates to
something
approximating the German inflation rate. If they had
not done this, the
franc and the lira would have had to be periodically
devalued, negating
the fixed exchange rate advantages of the system.
Effectively, the German
central bank, the Bundesbank, set inflation targets
and therefore monetary
targets for the rest of the EU.
In order
to express whether EU has positive or negative points, we have to take in
consideration both advantages and disadvantages of EU and it also depends upon
point of view you are considering because of good and bad sides of integration.
Behind Economic Integration there is logic to unite politically since EU wants
to achieve Political Union we have to consider two sides of coin. And in this
case I can say that Economic integration has both negative and positive sides. According
to my opinion the union of EU is good because they strengthening economy and
cooperate with each other. At the same time it is not good because each member
states lose not only sovereignty but also some other matters which belong only
to that nation, and can not represent themselves as independent states because
they are tighten to each other. Moreover, EU with its member states
concentrated on economical and political matters but not on values and beliefs
of its citizens, of course they increase living standards of people by
improving the economy but it is related materially but not subjective points,
you can say it is not important, however, in fact those items make them feel
whether he is British or someone else and Economic Integration might drain
them. Europe and Western part have sexual harassment and consumption of alcoholic
drinks increase in great number and much of fun that makes young generation
lazy and keeps out of consciousness. Unless
Europe reverses trend -- low birthrates it faces a bleak future of rising
domestic discontent and falling global power. In case of rejecting of EURO
currency by England, Denmark, and Sweden, these countries do not want to change
their official currency, for instance, British people want to see their queen
on their home currency because it motivates and makes them to have perception
of being British. Also Denmark and Sweden rejected EURO because own currency
shows independence and political solidarity.
DEMOGRAPHIC PROBLEM
(Population is shriveling)
It's hard to be a great power if your
population is shriveling. Europe's birthrates have dropped well below the
replacement rate of 2.1 children for each woman of childbearing age. For Western Europe as a whole, the rate is 1.5. It's 1.4 in Germany and 1.3 in Italy. In a century -- if these rates continue -- there won't be many Germans in Germany or Italians in Italy. Even assuming some increase in birthrates and continued
immigration, Western Europe's population grows dramatically grayer. Now about
one-sixth of the population is 65 and older. By 2030 that would be one-fourth,
and by 2050 almost one-third, the trouble is that so much benevolence requires
a strong economy, while the sources of all this benevolence -- high taxes,
stiff regulations -- weaken the economy. With aging populations, the
contradictions will only thicken. Indeed, some scholarly research suggests that
high old-age benefits partly explain low birthrates. With the state paying for
old age, who needs children as caregivers?
High taxes may also deter young couples from assuming the
added costs of children.
So in sentences which are above clearly explains us that financially situation
is ok but for who Europe is uniting and to whom this economy will belong when
there is neither sound generation with sound mind nor generation itself, too
much sick young people. For who symbolized such transnational change in the
continent of Europe? *
Beside
of aging of population Europe has problem with its generation. Europe is by the heaviest-imbibing region in the world, with alcohol consumption per head
over twice the world average-11 L of pure alcohol per year. During the
mid-1970s, as southern countries have slowly lost the habit of drinking
throughout the day. But younger generation is yanking it up again. Irish
Minister of State Noel Ahern, speaking about his own country, captures the
European trend: “People used to drink for enjoyment, but now many young people
are drinking to get plastered. **
Kids may think binge drinking is cool, but the hangover-in terms of health
problems, crime and accidents causing death or disability-is huge. Spanish
Health Minister Elena Salgado says that the number of hospitalizations from
alcohol abuse has doubled in a decade. Martin Plant, an alcohol researcher at
the University of the West of England, says that “people in their 20s are now
dying of alcohol-related liver disease, and even teenagers are developing it”.
British accidents and 47% of violent crimes, in Germany young people are
drinking almost 30% more alcohol than four years ago.
Average
age Europeans start drinking
ITALY; 12.2
IRELAND; 12.7
E.U;
14.6
U.K;
14.8
GERMANY; 15.1
GREECE; 17.2* **
In Spain, young girls are keeping up with the boys and drinking to get plastered; 82% of 14-to
18-year –olds say they drink regularly, and reckon they are drunk every 10
days.
This
information is the fact about Europe before stating it I have said about the generation
and to make my statement more reliable or authentic I mention about young
people of EU and trend of youth is-wrong, plus administration of EU doest not
take effective action according to it even if they do but is not really
significant. Today EU’s young descendants do not take such progress between
European nations.
So
much consumption of alcohol causing not only death or disability, but it leads
to unplanned sex, it spreads either sexual harassment or leads to many HIV
(human immunodeficiency virus) that reducing population and healthy people.
CONCLUSION
BIBLIOGRAPHY
BOOKS:
EC/EU FACT BOOK, Sixth Edition
Alex Roney (2000)
INTERNET:
#"#_ftnref1" name="_ftn1" title="">[*]
The Information Wave, by Peter Cochrane, taken from Information Superhighways,
Academic Press
*
** ** *
Sixth edition of EC/EU fact book by Alex Roney p.3
*
*
*
The Treaty of Rome, Single European Act and Maastricht, Sixth edition
EC/EU fact book by Alex Roney p. 10
** The
Treaty of Rome, Single European Act and Maastricht, Sixth Edition of EC/EU fact
book of Alex Roney p.17
* #"#_ftnref12" name="_ftn12" title="">*
The End of Europe By
Robert J. Samuelson Wednesday,
June 15, 2005;
Page A25
*
* Source: BBC online; British Crime Survey, published
by Time, December 19, 2005,p.22
** * Source: Euro barometer, health, food and alcohol and
safety, published by TIME, December 19,2005,p.23