Abstract
After a short digression to refresh memories regarding past attempts at European unification, we turn on the process of integration in the post-war period, emphasising the goals that were pursued in each phase and the ways and means that were adopted for this purpose. In particular, we assess the factors that contributed to the take-off of the economic integration of Europe; we review the results that were achieved in its first three stages, namely those of the customs union, the economic union and the monetary union; and finally, we look into the developments in the forefront of the political integration and explain the reasons why we believe that, despite the delays and difficulties, despite the present economic turmoil, eventually the European unification experiment, which started back in 1957, will prove successful in this century.
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- 1.
Of the 12 countries which were added during the latest enlargement, Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia entered in 2004, whereas Bulgaria and Romania entered in 2007.
- 2.
For example, according to Aldcroft (2001, 270), the bureaucracy in the EEC in 1982 produced 80 million forms of documents.
- 3.
Berend (2006, 193–194, 199) points out that the initiative in 1948 of certain European countries, e.g. France, Italy and Netherlands, to discuss the possibility of forming a customs union was also promoted by the Marshall Plan. As the data compiled by Eichengreen and Uzan (1992) show, the economic benefits of the Marshall Plan for Western countries were not only investment and imports, but mainly political and monetary stability, as well as liberalisation from the strong interventionist practices during the war years.
- 4.
Shortly after the end of the war there appeared various spontaneous initiatives for the unification of European countries. Noteworthy among them is the establishment in 1948 of Benelux, i.e. of a customs union comprising Netherlands, Belgium and Luxembourg, whereas intensely was debated also the economic cooperation among the Nordic countries (Berend 2006, 197–198).
- 5.
Haberler (1949) had already emphasised that there could be no economic unification of Europe if it did not rely on the operation of a free market economy with little government intervention.
- 6.
These issues attracted the attention of economists from the time when Viner (1950) showed that a customs union would affect member-states both positively and negatively. In particular, on the positive side, it would increase trade and trade due to tariff elimination, but on the negative side it would increase imports of raw materials and goods from the member-states, which may not be the cheapest available. A few years later, Meade (1955) established that the benefits for member-states of a customs union would increase not only from trade and production but also from the convergence in consumption patterns, which in turn would enhance economies of scale. Adding to these results from an empirical point of view, Lipsey (1970) found that the disadvantages alluded to by Viner (1950), due to imports of raw materials and goods from member-states at higher prices than from non-member-states, are much smaller than the advantages because of the economies of scale achieved in the customs union. Finally, it is worth mentioning that Scitovsky (1956) showed that the benefits of economic integration are much higher than those of a customs union, because the former increases competition among member-states.
- 7.
This goal left almost no other choice, because the General Agreement of Trade and Tariffs (GATT) in Uruguay in 1986 reduced custom duties among the participating countries in many sectors, including agriculture, thereby reducing the competitiveness of countries with relatively high taxes and wages.
- 8.
Certain European countries attempted also to set up monetary unions in the past. For example, in 1834 a group of them created the Zollverein monetary union, which in turn led to the political union of small states making up Germany. Sometime in the period 1861–1920 some other countries founded the so-called Latin Union, which dissolved very quickly; and in the twentieth century the Scandinavian countries established a monetary union, which lasted until 1924.
- 9.
This situation led even socialist governments with a long tradition in the maintenance of large welfare states to renege on their promises. An example in this regard is Sweden where the government that won the elections in 1994 on the promise to extend the welfare benefits was forced to backtrack (Torbiörn 2003, 118).
- 10.
- 11.
Clearly, the complete liberalisation of capital movements raised the issue of the conditions that ought to be met in order to be compatible with the objective of exchange rate stability within the EMS.
- 12.
For example, the negative outcome, albeit by a narrow majority (50.7 %), of the Danish referendum held on June 2, 1992, for the ratification of the treaty, sparked great controversy.
- 13.
In a monetary union the cost of losing the possibility of an independent monetary policy increases if the following differences among member states prevail: (a) there is no full labour mobility and the wages and prices are not sufficiently flexible; (b) the member-states have different levels of prices and unemployment, i.e. they have different Phillips curves, which would imply that a member-state prefers higher prices and less unemployment than another member-state and (c) a member-state has a high inflation rate, so that issuing bonds instead of printing new money forces it to absorb the interest on bonds.
- 14.
For the nature of this state intervention in labour markets and its role in the emergence of the European welfare state, as well as the degree to which it was adopted by the various member states, see Berend (2006, 194–195, 213–222).
- 15.
According to the analysis by Alesina et al. (2010), the loss by member-states of the ability to depreciate their currencies so as to shield their non-competitive industries from international competition, led to the latters’ demise, whereas at the same time it put pressure on all other industries to find ways to increase their competitiveness. Both these trends boosted competitiveness in the EU.
- 16.
Using various measurement techniques, Frankel (2010) found that in the period 2002–2006 trade among Eurozone member-states increased by 15 %, an increase that was less than the one predicted by other researchers. However, it was an important development because it showed that monetary integration was a process with great prospects for economic growth.
- 17.
- 18.
Southern European countries made an effort initially to abide by the Maastricht criteria, but subsequently their fiscal policies got loose and started to pile up public deficits and debts at alarming rates.
- 19.
In 1987 the community spent 19 % of the EU budget for this purpose, while in 1999 the respective figure rose to 35 %.
- 20.
The data cited above come from Eichengreen (2007b, 346, 377). According to the findings of the empirical research by Fingleton and McCombie (1998), market liberalisation, mainly of industrial products, enabled businesses in many regions of the EU during the period 1979–1989 to achieve economies of scale and greater economic convergence.
- 21.
- 22.
The problems that may arise from the introduction of fiscal policies at the EU level are discussed in Alves and Afonso (2008).
- 23.
The treaties and the agreements establishing these principles at the EU level are presented in considerable detail by Manners (2008).
- 24.
A detailed account of the efforts by European authorities in these fronts is presented in the book by Balzacq and Carrera (2006).
- 25.
The various European treaties which establish the rights of European citizens are presented and analysed in Wiener (2007).
- 26.
Gillingham (2006) argues that certain weaknesses of the EU, such as the rejection of the European constitution, emanated largely from the fact that European citizens voted unaware of its importance and even worse because they were not represented in some way in the European institutions that decided in this respect.
- 27.
Recent studies included in the book by Trechsel and Mendez (2005) highlight the great possibilities that exist in the direct electronic voting by all European citizens for their representatives in European Parliament and in other relevant EU bodies.
- 28.
In this regard it is importance to note that, according to the Eurobarometer (2010, 11–12, 16), seven out of ten European citizens believe that the current EU crisis can be overcome only through a common economic policy, whereas eight out of ten believe that the EU must take a leading role in the regulation of international financial markets.
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Bitros, G.C., Karayiannis, A.D. (2013). Democracy, Free Market Economy and European Unification. In: Creative Crisis in Democracy and Economy. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-33421-4_7
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