5.3 Regional economic integration in Europe
In both the introduction to this chapter and in the section above we noted that integration usually has a political stimulus. This was certainly the case with the European Union (EU). The devastation wrought by two World Wars and the perceived need to counter the economic strength of both the US and the former USSR were the two major political factors behind its formation.
The history of the EU is well documented in your textbook, so in this section we will present a summary in tabulated form of the significant events in the economic union of the states of Europe . Presentation of events in chronological order will enable you to see that the process of integration is not linear: there is an ebb and flow which is illustrated by the United Kingdom 's membership, first of the European Free Trade Association (EFTA), then EC, then opting out of monetary union and so on. Before discussing the EU it is appropriate to introduce another European trade bloc, EFTA.
EFTA was a loosely constituted free trade area consisting of those Western European countries that did not sign the Treaty of Rome (1957) which formally established the European Economic Community (EEC). The EEC was the forerunner of the EC, now known as the EU. EFTA consisted of six countries - Austria , Finland , Iceland , Norway , Sweden and Switzerland . EFTA joined with the EC on 2 January 1994 to form the European Economic Area (EEA). EFTA is now defunct as Austria , Finland and Sweden became members of the EU.
Read the following table to gain an understanding of how the EU developed.
Table 5.3 European evolution to integration: A chronology (Source: Daniels et al. 2004, p. 209)
To update Table 5.3, the following can be added:
2003 |
Treaty of Nice came into force (1 February). It lays down the rules governing the size, composition and workings of EU institutions. On 14 September Sweden held a referendum on the Euro with the majority rejecting the single European currency. |
2004 |
The Accession Treaty enters into force, resulting in ten countries representing 100 million people joining the EU. Three further countries interested in joining the EU possibly by 2007 are Bulgaria , Romania and Turkey . |
Your textbook will provide you with much more detail on the EU. Of significance was the establishment of the Euro as the single currency in 12 of the now 25 member countries of the EU on 1 January 2002 with the circulation of Euro notes and coins and the removal of previously held currencies. Sweden and Britain have decided to opt out of adopting the Euro whilst Denmark does not meet the necessary criteria. Similar to Denmark , the ten new member countries that acceded to the EU on 1 May 2004 (see Table 5.4) do not automatically adopt the Euro because they must first achieve the Maastricht convergence criteria. These criteria require:
.a high degree of price stability, sustainable government finances (in terms of both public deficit and public debt levels), a stable exchange rate, and convergence in long term interest rates. (Europa 2004)
Table 5.4 Growing Membership of the EU (Source: Czinkota et al. 2005, p. 257)
1957 |
1973 |
1981 |
1986 |
1995 |
2004 |
2007? |
|
West Germany |
Great Britain |
Greece |
Spain |
Austria |
Czech Republic |
Bulgaria |
|
France |
Ireland |
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Portugal |
Finland |
Cyprus |
Romania |
|
Italy |
Denmark |
|
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Sweden |
Estonia |
Turkey |
|
Belgium |
|
|
|
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Hungary |
|
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Netherlands |
|
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|
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Poland |
|
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Luxembourg |
|
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Slovenia |
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|
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Latvia |
|
|
|
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|
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Lithuania |
|
|
|
|
|
|
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Malta |
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|
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|
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Slovakia |
|
|
Maps showing the growth of the EU and providing membership details are available at http://europa.eu.int/abc/keyfigures/eu_work_progress/index_en.htm. Turn now to your reading from Hill (2005)
In your text
Hill 2005, Chapter 8, pp. 274-284.
Activity 5.2
Write a list of the benefits and costs to member countries of the EU adopting the Euro as a single currency
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