Transcript Business Environment - International University College, Sofia

Lecture 15&16 (L2&3/S2)
The EUropean Environment
Milena Malinowska
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Definitions
 The EU is a unique union of sovereign states, which
cooperate in multi-tier structure
 It is the world’s most largest economy (2011) with a
GDP of € 12.2 ($ 17.7) trillion and market of 500 million
consumers
 The EU ‘institutional triangle’ is the most powerful
structure on the supranational level
 The EU is a unique blend of culture, where democratic
values are granted highest appreciation
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Development of the EU
Year
Treaty
Result
1952
Treaty of Paris
European Coal and Steel Community
1958
Treaty of Rome
European Economic Community and European
Atomic Energy Community (EURATOM)
1986
Single European Act
Creation of the Single Market
1993
(Maastricht) Treaty on the European Union established (7 EU institutions
European Union
defined, EMU, common foreign and security policy
+ cooperation in justice and home affairs)
1999
Treaty Of Amsterdam
Institutional changes, voting facilitated
2003
Treaty of Nice
More institutional changes
2004
(Rome) Constitutional
Treaty
EU Constitution – was never ratified
2009
(Lisbon) Reform Treaty
EU President, further political integration
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Enlargement
Year
Member States
1951
Belgium, France, Germany, Luxemburg, Italy, Netherlands
1973
Denmark, Ireland, UK
1981
Greece
1986
Portugal, Spain (Southern Enlargement)
1995
Austria, Finland, Sweden
2004
Cyprus, Malta, Estonia, Latvia, Lithuania, Hungary, Poland, Czech
Republic, Slovakia, Slovenia (Eastern Enlargement 10+2)
2007
Bulgaria, Romania
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Current Candidates:
 Croatia
 Macedonia
 Montenegro
 Turkey
 Iceland
Potential Candidates:
 Albania
 Bosnia-Herzegovina
 Serbia
 Kosovo
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EU Conditionality
 ‘Conditionality’ is the EU approach of imposing criteria
(conditions) that a candidate state should meet in order
obtain pre-accession aid and ultimately to become a
member state (MS)
 Copenhagen criteria:
 Political: to establish institutions that promote and secure
democracy, the rule of law, protect human rights and minorities
 Economic: to establish a market economy (that is competitive on
the single market (SM)
 Aquis Communautaire: to adopt EU legislation
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EU & the Balkans
 EU had a fragmented ‘ad-hoc’ approach until the late 1990s
 After the Kosovo war first comprehensive framework was
established – Stability Pact for SEE
 Stabilization and Association Agreements (SAAs):
 Potential Candidate status
 ‘pre-accession’ assistance
 FTA
 EU legislation approximation
 Accession of BG and RO in 2007 – stabilizing the region
 Shift towards ‘regional ownership’ for the WB - Regional
Cooperation Council 2008
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Council of the EU
 Primary decision-making body
 Comprised by (27) ministers of MS, which change due
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to the topic discussed
Rotating presidency every 6 months
Adopts EU legislation (together with EP)
Adopts the EU budget (together with EP)
Defines the EU Foreign and Defense policies
Mainly ‘qualified majority voting’
Unanimity voting in the areas of tax, defense, foreign
policy, social security and enlargement
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Council of the EU (2)
MS hold votes, according to the size of their population
Member states (27)
Votes
(345)
Germany, France, UK, Italy (each)
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Spain, Poland (each)
27
Romania
14
Netherlands
13
Greece, Belgium, Portugal, Czech Republic, Hungary (each)
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Austria, Bulgaria (each)
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Denmark, Slovakia, Finland, Ireland, Lithuania (each)
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Latvia, Slovenia, Estonia, Cyprus, Luxemburg (each)
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Malta
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Council of the EU (3)
The Council has 10 main subdivisions (configurations),
which deal with the following policy areas:
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General Affairs
Foreign Affairs
Economic and Financial Affairs
Cooperation in Justice Home Affairs
Agriculture
Competitiveness
Transport, Telecommunication and Energy
Environment
Education and Culture
Employment, Social policy, Health and Consumer Affairs
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The European Parliament (EP)
 EP has 751 members (MEP), which are directly elected
every 5 years
 Each MS has seats proportionate to its population
 It is the democratic body of the EU, hence:
 It co-decides on the most important matters:
 Approves the choice of Commissioners and Commission
President
 Amends and adopts the budget
 Amends and approves legislation
 Oversees malpractices
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The European Commission (EC)
 ‘Guardian of the Treaties’ and ‘engine’ of integration
 Comprised by 26 Commissioners (each one appointed
by his/her MS) and a President for a 5-year term
 Drafts legislation
 Monitors law obedience
 Implements decisions of the Council and Parliament
 Proposes the budget, oversees and reports its
allocation
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The European Council
 Defines the general political agenda and environment
of the EU
 Consists of EU Heads of State / Parliament
 Chaired by a Council President (elected every 2 and a
half years)
 A general meeting with the EU leaders, the Council
President and the Commission president is held every
3 months
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The European Central Bank
 The ECB deals with the monetary policy of the EU and
especially the Eurozone (17 MS)
 Owned by MS central banks
 ECB’s main functions are:
 Keeping the fixed target for inflation – 2%
 Controlling the money supply (authorizing MS central
banks to print €)
 Setting the interest rates – 0.25% in (Dec 2011)
 Keeping the foreign currency reserves
 Supervising MS financial markets & institutions
 Most independent body in the EU
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The Court of Justice of EU
 Comprises the European Court of Justice, the General court
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and the Civil Service Tribunal
The ECJ has 27 judges appointed by MS for a 6-year term
Interprets EU law (ECJ)
Infringements of EU law are monitored by the EC and
brought to the Court
Deals with matters on the EU level, but also with national,
regional, commercial and individual cases within the EU
context
Current President – Vassilios Skouris
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EU Court of Auditors
 Comprised by 27 judges (one per MS)
 Carries out annual audit of the EU finance:
 Examines and reports to the Council and EP the
Commission’s allocation of the EU budget
 Runs audit on MS, EU institutions or any organization
dealing with EU funds
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Interaction of EU institutions
European
Council
CA of
the EU
ECB
CJ of
the EU
Reports
Decides
Audits
Council of the EU
Influences
& decides
Cases
EU Commission
Interprets
the law
Co-decision
Proposes law
& budget
Controls
& decides
EU Parliament
Elect MEP
27 MS
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EU integration and policies
 The basic idea of the EC/EU was to create gains for its
members through economic integration:
 negative integration – removing barriers
 positive integration – adopting common rules
 The EU integration stared with a FTA, and evolved into a
customs union in the late 1960s
 More rapid economic integration set out in the mid 1980s,
leading to the emergence of the SM and EMU
 The EU countries pursued political integration as a result
and also established a framework of common policies/laws
in various other fields (close 40! today)
 The EU has regulatory and budgetary policies
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The Single Market
 The Delors Commission’s impact
 White Paper 1985:
 Free movement of goods, services, people and capital should be fully
enabled until 1993
 The Single European Act 1986 established legally the
Single Market
 Physical barrier to the movement of goods are abolished –
the principle of ‘mutual recognition’
 Shengen – free movement of people ?
 Liberalization of services ?
 More capital mobility ?
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Competition policy
 Implemented and monitored by EU Commission
 Based on the liberal (free-market) idea of the SM, it
promotes competitive environment
 Main policy areas are:
 Antitrust – bans agreements resulting in monopoly or oligopoly
(<40% market share)
 Mergers – bans single companies to become monopolists
 State aid – should be limited
 Liberalization – of public sectors including energy, water,
postal services, telecommunication, transportation
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The Economic and Monetary Union
 Within a single market, a single currency makes economic
sense
 Three stages of the EMU:
 1st ‘convergence’ stage (1990-4) – completing the SM,
adopting common competition policy and harmonizing
economic policies of MS
 2nd ‘institutional’ stage (1994-98) – established the
European Monetary Institute (EMI), independence of MS central
banks, set up ECB
 3rd ‘euro’ stage (1999-2002) – dual currency usage, followed
by complete adoption of the euro
 Currently, the Eurozone has 17 members
 To become part of it, new MS should meet several
requirements of convergence
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Eurozone criteria
 Convergence (Maastricht) criteria:
 Price stability – inflation ≤ 1.5% of the average of the 3 MS
(with the lowest inflation rate in the EU)
 Inflation – interest rate ≤ 2% of the of the average of the 3 MS
(with the lowest inflation rate in the EU)
 Exchange rate – should be within the limit (ERM2) for the past
2 years
 Budget deficit – should be less than 3% of GDP
 Public debt – should be less than 60% of GDP
 Stability and Growth Pact – in case the last 2 fiscal criteria are
broken, the MS should pay fine of 1,5% of GDP
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Euro zone:
(1999) Belgium, Germany,
Ireland, Spain, France, Italy,
Luxembourg, Netherlands,
Austria, Portugal, Finland,
(2001) Greece
(2007) Slovenia
(2008) Cyprus, Malta
(2009) Slovakia
(2011) Estonia
ERM2: Denmark, Latvia,
Lithuania
Unilaterally adopted:
Andorra, Kosovo, Montenegro
Special adoption:
Vatican City, San Marino
Monaco
Other: Bulgaria, Romania,
Hungary, Czech Rep, Poland,
Sweden, UK
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The EU Budget 2011: € 141.9 billion
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Regional (cohesion) policy
 The biggest proportion of the budget goes to EU regional
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policy
It aims at reducing disparities between more and less
developed MS and increasing living standards in the latter
(solidarity principle)
Currently 15 MS are beneficiaries of RP funds
Each MS acquiring aid draws a list of main priorities
(National Strategic Reference Framework)
Regional priorities are incorporated into Operational
Programs (OP)
Pre-accession assistance is part of RP – BG acquired €1.3bn
in 2004-2006
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Structural & Cohesion Funds
Fund name
Convergence
Regional
Competitiveness
& Employment
European
Territorial
Cooperation
European Regional Development
Fund
infrastructure, competitiveness,
sustainable development, good
governance, civil society etc.
European Social Fund
employment creation and job
assistance
Cohesion Fund
assistance to 15 MS, where the GNI is
less than 90% of the EU average
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Common Agricultural Policy
 Logic behind the CAP:
 Ensure reasonable amount of (high-quality) food for EU citizens
 Provide farmers with normal standard of living
 Assure environment and animal protection
 CAP measures include:
 Import duties and quotas
 Direct subsidies to farmers
 Intervention price on the internal market
 Market distortions – ‘lakes of wine’ and ‘mountains of
butter’
 The Iron Triangle – why is reform so hard?
 The CAP today
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Strategies for development
 Lisbon Strategy (2000-2010):
“The EU should become the most competitive and dynamic
knowledge economy by 2010” – χ
 Europe 2020:
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75% employment among 20-64 years-old population
3% of EU GDP to be invested in innovation
Climate change – Directive 20x20x20
Reducing the rate of school drop-out by 10%; increasing the rate of
30-35 years-old population with university degree to 40%
 Decreasing the number of population below poverty line with 20
million
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