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					CHAPTER 10
   THE
EUROPEAN
  UNION
           EU PRISMs
1. Is it a mistake for Europe to
   try to integrate so many
   different ethnic groups &
   religions?
2. Should all EU members play by
   the same rules & standards?
3. Should EU leaders be elected
   by EU citizens?
4. Can nationalism play a
   constructive role in the
   world?
5. To what extent do
   governments owe their
   citizens social welfare
   benefits?
6. Should economically weak
   nations be excluded from
   free trade agreements?
 Is the EU a
  model for
 21 st century

     global
government?
            WHY THE EU?
1. To become a “United States of Europe”
   with one economic/political system on
   par with the United States of America.
2. For European nations to stop being
   their own worst enemies in trade &
   politics.
3. Vision + Infrastructure + Cooperation
   + Regionalism over nationalism +
   Power Centralization = THE WORLD’S
   LARGEST ECONOMY & MARKET (30%
   share of world gross product)
ECONOMIC ADVANTAGES OF THE USA THAT
     THE EU WANTS TO EMULATE
1. One currency
2. One banking system
3. Uniform commercial laws
4. No tariffs between states
5. Federalism over states rights
These are referred to as the 4 EU
   freedoms: freedom of goods,
   services, movement of labor &
   capital.
          EU ECONOMIC POTENCY
1.   7% of the world’s population—28%
     of the global GDP (larger than the
     USA)
2.   454M population & 60% more
     consumers than the USA
3.   The 12 member nations using the
     Euro exclusively account for 67% of
     the population & 74% of the EU
     GDP %
4.   One third of the world’s 100 largest
     corporations are European
        EU vs. U.S.
1.Population of 454M for
  EU, 1.5 times larger
  than U.S.
2.EU gross regional
  product of $12.5T vs.
  $11.7T for U.S.
  THE BENEFITS OF EUROPEAN INTEGRATION
1. Lowered incidence of war due to
   increased economic interdependency
2. The EU’s single market opens up a
   huge new sales opportunities
3. Merged EU corporations are becoming
   the largest in the world
4. Poorer member nations benefit from
   the economic pull of richer members
5. Democracy & capitalism are promoted
   in weaker EU nations
 THE COSTS OF EUROPEAN INTEGRATION
1. Diminished national sovereignty of
   member nations
2. Loss of national identity in in the EU’s
   uniform laws & standards
3. Increased competition for corporations
   less protected from their cross-border
   rivals
4. Increased organized crime enabled by
   removed border controls
5. Head-butting among members over
   agricultural subsidies
In order to admitted for
  membership, EU candidate
  nations must fulfill the
  “Copenhagen” criteria:
1.A secular, democratic
  government
2.Corresponding freedoms &
  institutions
3.Respect for rule by law
 POLITICAL EVOLUTION OF THE EU
1. The economic unification of Europe
   began after WWII (1951) with 6 nations
   (Belgium, France, Germany, Italy,
   Luxembourg, & the Netherlands)
   forming the European Coal & Steel
   Community (the “Common Market”) to
   prevent another war via trade
   cooperation.
2. In 1957, the European Community (EC)
   was established by the Treaty of Rome,
   which pledged cooperation towards
   “four freedoms”: free movement of
   goods, services, capital, & people
3. Britain, Ireland, Norway, & Denmark
 joined the EC in 1972. Greece, Spain,
 & Portugal joined in the 1980s.
4. The European Union emerged in
 1992 with the Maastricht Treaty.
5. The Euro was adopted the sole
 currency of 11 EU members in 1999.
6. New EU members in 2004 included:
 Estonia, Latvia, Lithuania, Poland,
 Czech Republic, Hungary, Slovakia,
 Slovenia, Malta, & Cyrus. Bulgaria &
 Romania joined in 2007.
7.Conspicuous by their absence:
  Norway (has thus far rejected EU
  membership over concerns about
  the Euro & centralization of EU
  power) & Switzerland (historically a
  politically neutral nation).
8.The political problem with Cyprus: A
  civil war has split the island into 2
  zones: Turkish/Cypriot (north) vs.
  Greek/Cypriot (south). Only the
  north Greek-Cypriot partition is
  currently an EU member.
     PER CAPITA GDP RANKINGS
           OF EU NATIONS
Luxembourg (highest per capita GDP
  income), Ireland, Denmark, UK,
  Austria, Netherlands, Belgium,
  Sweden, France, Germany, Italy,
  Finland, Spain, Cyprus, Greece,
  Slovenia, Portugal, Malta, Czech
  Republic, Hungary, Slovakia,
  Estonia, Lithuania, Latvia, Poland
  (lowest per capita GDP income)
    UNEMPLOYMENT RANKINGS
           OF EU NATIONS
Luxembourg (lowest unemployment,
  around 4.5%), Netherlands,
  Austria, Cyprus, Ireland, UK,
  Denmark, Sweden, Hungary,
  Portugal, Slovenia, Czech Republic,
  Belgium, Malta, Italy, Finland,
  Greece, France, Germany, Estonia,
  Latvia, Spain, Lithuania, Slovakia,
  Poland (highest unemployment,
  18%)
    SEATS IN THE EU PARLIAMENT
Germany: 99; UK, Italy & France:
78; Spain & Poland: 58;
Netherlands: 27; Greece, Belgium,
& Portugal, Czech Republic &
Hungary: 24; Sweden: 19; Austria:
18; Slovakia, Denmark, & Finland:
14; Ireland & Lithuania: 13;
Latvia: 9; Slovenia: 7; Estonia,
Cyprus, & Luxembourg: 6; Malta: 5
   4 EU
MEMBERSHIP
  GROUPS
ANGLO-SAXONS: Ireland &
 Britain
CONTINENTALS: France,
 Germany, Belgium, Austria,
 Luxembourg
MEDITERRANEANS: Greece,
 Spain, Italy, Portugal, Cyprus
NORDICS: Demark, Sweden,
 Finland, Netherlands
   EU APPLICANTS FOR FUTURE
         MEMBERSHIP
    Turkey Albania Bosnia
   Macedonia Serbia Ukraine
   Moldova Belarus Georgia


It will take the former USSR nations about
 50 years to catch up economically to the
                rest of the EU.
            EU POPULATIONS
•   Austria: 8M    •   Italy: 58M
•   Belgium: 10M   •   Ireland: 4M
•   Cyprus: 1M     •   Latvia: 2M
•   Denmark: 5M    •   Lithuania: 3M
•   Estonia: 1M    •   Luxembourg: 16M
•   France: 60M    •   Poland: 38M
•   Finland: 5M    •   Portugal: 11M
•   Germany: 83M   •   Spain: 42M
•   Greece: 11M    •   Sweden: 9M
•   Hungary: 10M   •   UK: 60M
   Austria (1995)             Italy (1950)
   Belgium (1950)             Latvia (2004)
   Bulgaria (2007)            Lithuania (2004)
   Czech Republic (2004)      Luxembourg (1950)
   Greek-Cyprus (2004)        Malta (2004)
   Denmark (1973)             Netherlands (1950)
   Estonia (2004)             Poland (2004)
   Finland (1995)             Portugal (1986)
   France (1950)              Romania (2007)
   Germany (1950)             Slovenia (2004)
   Great Britain (1973)       Slovakia (2004)
   Greece (1981)              Spain (1986)
   Hungary (2004)             Sweden (1995)
   Ireland (1973)
1. The 10 newest EU member nations in the
   EU (mainly former Communist Eastern
   European nations) receive tens of billions
   or Euros in economic subsidies (“cohesion
   funds”) annually from the EU budget
   (finance primarily by Germany, France,
   Britain, the Netherlands, & Sweden). For
   example, new member Poland received
   $3.4B in 2005, twice the amount of money
   it contributed to the 2005 EU budget.
2. The overall biggest competitive advantage
   these newer members have is their low
   labor costs compared to Germany, France,
   etc.
    APPLYING FOR EU MEMBERSHIP
Filling out the EU’s Stabization &
  Association Agreement (SAA) is the
  first step toward applying for formal
  membership. Macedonia submitted
  its SAA in 2001 & graduated to
  candidate status in 2005. Serbia has
  yet to file a SAA because it refuses to
  comply with the EU’s war-crimes
  investigations. Bosnia’s SAA is
  currently in limbo until it implements
  police reform.
  STANDARD OF LIVING DISPARITIES
       BETWEEN EU MEMBERS

2003 per capita incomes:
Germany: $27,600
Poland: $5,400
Romania: $4,084
Bulgaria: $3,735
Ukraine: $1,000 (potential
 future member)
           WHY TURKEY?
1. Controversy surrounds the membership
   of Muslim/Islamic Turkey in the EU
   because of historical & current conflict
   between Islam & Christendom.
2. The EU hopes Turkey will be a stable
   future political & economic buffer zone
   between Europe & the Middle East. The
   more dependent Turkey becomes on the
   EU for new jobs and increased trade, the
   greater the chances for peace between
   these two ancient religious spheres.
3. Most EU nations worry about Turkey’s
   possible membership because of its
   large population (& hence voting clout),
   islamic leaning, restricted human rights
   (especially for women), & its illegal
   government in northern Cyprus.
4. Fear of Turkey’s possible membership
   was a major factor that caused the
   French to reject the EU constitution.
5. Europe’s biggest worry about Muslim
   Europeans is that their high population
   growth rate will swamp Europe (which
   is currently experiencing population
   declines as a region) within 3 decades.
6. Turkey’s Prime Minister, Tayyip
 Erdogan, pledged after elections in
 the summer of 2007 to maintain his
 country’s efforts to join the EU. He
 had to reassure many of Turkey's
 secular middle class that his Islamic-
 leaning administration would not
 seek to undo decades of state
 religious–neutrality. However,
 “Turkey’s secular elite feel more
 vulnerable than ever before.”
                 RUSSIA & THE EU
1.   Russia currently has no desire to join the EU because
     it continues to think of itself as an independent global
     power that can go it alone (like India & China).
     Europe worries about Russia’s lack of human rights,
     corrupt business system, & rogue foreign policy.
2.   Russia has attempted to corral former satellites
     Moldova & Belarus into an informal economic
     confederation to counteract Europe’s growing unity.
3.   The former Soviet satellite nations in Eastern Europe
     would oppose Russia’s European entry, fearing future
     re-domination.
4.   France would like Russia to join their EU as a foreign
     policy counterweight to the U.S.; Germany also is pro-
     Russia because of its large oil reserves.
5.   It is possible that Russia might align itself more
     closely with Europe economically in the future, but
     not politically.
             EU OUTLIERS
1. Four Western European have declined to
   join the EU: Iceland, Liechtenstein,
   Norway, Switzerland
2. The 3 official candidates for the next
   round of enlargement: Croatia,
   Macedonia, Turkey
3. Future potential candidates: Albania,
   Bosnia, Herzegovina, Montenegro,
   Serbia
4. The following 4 “micro-states “ lack
   formal membership status but are part
   of the Euro-zone: Andorra, Monaco, San
   Marino, & the Vatican
         THE EU’S FINANCIAL FAULT LINES
1. 5 EU nations have been “red-flagged” as EU
   “PIIGS” (Portugal, Ireland, Italy, Greece,
   Spain) because of their unmanageable
   government debt problems.
2. Greece and Ireland developed serious
   financial problems in 2009-2010, each
   requiring billion dollar bail outs from the
   Eurozone, European Central Bank, and the
   International Monetary Fund.
3. Both nations struggled with imminent
   national loan default: Greece due to large
   government deficits that diluted its
   currency; and Ireland due to bank defaults
   stemming from over-investment in subprime
   mortgages a la the US & other EU nations.
• 16 of 27 EU members that
  have adopted (1999) the
  Euro as their official
  national currency
            “PIIGS”:
• Core EU govt. deficit nations
Portugal, Ireland, Italy,
Greece, Spain
•PIIGS governments are in
financial jeopardy due to high
social welfare (vote-buying)
deficits & the high value of the
Euro. Their rotten economies
endanger the value of the Euro &
the existence of the EU.
•PIIGS economies are too poor to
afford the Euro on their own (like
living in New York or Tokyo on a
Waco income).
• Northern EU nations subsidize their
  use of the Euro & hence PIIGS social
  welfare benefits.
• Germany & the USA have pushed the
  EU to create an emergency bailout
  fund to use should any of the PIIGS
  go bankrupt.
• EU & USA leaders worry that this
  fund will not be adequate & that the
  world doubts the stability of the
  Euro & thus trade with the EU.
• Should PIIGS be forced to drop
  the Euro & reuse their weaker
  former currencies?
• Should the EU cancel PIIGS
  membership to halt subsidies
  & their economic baggage?
• Is use of the Euro as the EU’s
  official currency unrealistic &
  hence the EU itself?
       Brussels, Belgium
  El capital del EU (formally
established by the Maastricht
      November 1, 1993)
Belgium is partitioned into
Flanders (Dutch/Anglo-
Saxon ethnicity) &
Walloonia (French/Latin
ethnicity). Thus Belgium is
the #1 spot for test
marketing of new products in
Europe with its mix of largely
Anglo-Saxon + Latin citizens.
Current EU treaties =
  80,000 pages (!)
   LE TRAITÉ 1993 SUR L'UNITÉ
   EUROPÉENNE (MAASTRICHT)
The Maastricht treaty established
4 economic standards European nations
must meet to qualify for EU membership:
1. Manageable government deficits
2. Stable currency
3. Mainstream interest
rates (close to the EU regional
average)
4. Inflation control
THE 4 ONE’S OF EU
CENTRALIZATION
      1.One military
      2.One foreign
      policy
      3. One banking
      system
      4. One currency
   THE 2000 TREATY OF NICE
1. Designed a complex weighted
   voting system to determine
   how much influence each
   member nation should
   have based primarily on
   population, GDP, % trade
   volume.
2. Initiated a dialogue regarding how
  much influence the incoming 10
  members should have.
         THE EU MILITARY
1. Since WWII, Europe’s main military
capability was the North American Treaty
Organization (NATO), a defense
partnership with the USA.
2. In 2003, the EU developed its own rapid
deployment military force to augment
NATO. Part of the Common Foreign and
Security Policy (CFSP), this rapid
deployment force is designed to put 60,000
troops (gathered from all EU member
nations) into European battle within 60
days.
1. The EU headquarters in Brussels has an
   annual budget of $140B, funded by: (1) A
   dedicated value-added sales tax (VAT) in
   each country + (2) A government support
   fee paid by each nation’s population (which
   provides 68% of total government
   funding)+ (3) Tariffs on goods entering the
   EU. The bigger, richer member nations—
   particularly Germany, France, and Britain—
   provide most of the funds. Inevitably, the
   biggest donors want the biggest say in
   determining how big the budget should be
   and what it should be used for.
2. The European Central Bank (ECU) in
   Frankfort has 18 members who set interest
   rates for the euro area.
14.The EU government currently
  receives an annual budget equal to
  1% of the EU’s GDP. This will be
  raised to 1.14% in 2013. The 6
  biggest contributors (who provide a
  quarter of the entire annual
  government budget) are Germany,
  Britain, France, the Netherlands,
  Sweden, & Austria. Almost 40% of
  the total EU budget goes to
  agricultural subsidies (via the EU’s
  Common Agriculture Policy—CAP).
The EU is the prototype model for 21st
century global government which is
emerging via GGOs such as the WTO,
NAFTA, the International Criminal Court,
Kyoto Climate Protocol, and the
International Standards organization. The
EU is seeking to solve such thorny
governmental problems as developing one
constitution for 27 nations, managing a
single currency, & cobbling together a
multilateral foreign policy. Thus the EU is
blazing the trail for other new
organizations that fit into the global
government jigsaw puzzle.
1. European Council of Ministers: A
   multiple-headed executive branch of
   government (the chiefs of state) that
   recommends policies to the Euro
   Commission (The EU “Civil Service”).
   The Council elects its own president
   to a 2 1/2 year renewable term The
   current President is Jose Barroso of
   Portuga.l
2. Euro Parliament: Amends laws,
   controls EU budget, approves
   president of Euro Commission
3. The executive (“presidential”) branch of
   the European Union—the entity that
   does most of the work, and employs
   most of the fonctionnaires—is the
   European Commission. This is
   essentially the cabinet of the European
   government—the ministers of health,
   finance, agriculture, and so on who
   implement the policies of the prime
   ministers and the European Parliament.
4. The new Constitution dictates that there
   will be only fifteen cabinet jobs, and the
   twenty-five member countries will have
   to use lobbying and leverage to land one
   of the slots.
5. The EU Commission is charged with
   proposing new laws for the EU
   Parliament to consider. Each EU
   member nation is represented by a
   single commissioner with a 5-year
   renewable term who has one vote
   in the Council.
6. The members elect one of its own
   members to serve as president who
   oversees the day-to-day operations
   of the Eurocrats in Brussels.
7. The Council of the EU is charged with
   enacting EU laws & controlling the EU
   budget. The Council is headed by a
   different nation on a rotating basis every 6
   months.
8. During the half year a given nation presides
   over the Council, it is in the driver’s seat to
   chair Council meetings, set the agenda, &
   to broker deals between nations. The
   Council also is charged with enacting new
   laws.
9. Each nations has from 3 (Malta) to 29
   (France, Germany, Italy, & Britain) votes.
     Le Parlement d'EU
 located in Strasbourg, Fr.




Current President: Spain’s
      Josep Borrell
10.The European Parliament is the
   legislative branch of the EU, an
   assembly of members elected
   to five-year terms by the voters
   of each of the member states.
11. Parliament passes laws, passes
   the final EU budget, & supervise
   other EU institutions.
12.The parliament now meets half
   the time in Strasbourg and half
   the time in Brussels.
13.There are 732 seats in the European
  Parliament, roughly one for each
  600,000 people, which creates a
  constituency for each member about
  the same size as a congressional
  district in the United States.
14.This means Germany, France, Britain,
  and Poland have the most seats in the
  Parliament (about eighty seats for
  each of those large countries), and
  the tiny states like Malta and
  Luxembourg get four or five seats
  apiece.
15. Voting in the Parliament, though, tends not to
    follow national lines. Rather, the MEPs (MEP is
    the abbreviation for Member of the European
    Parliament) have formed various party groupings
    along policy lines. The biggest “party” in the
    Parliament is a combination of Christian
    Democrats and Conservatives, a political
    alignment that is known in Europe as “center-
    right,” but is actually far more liberal on most
    issues than left-wing Democrats would be in the
    United States.
16. There’s also a large grouping called the party of
    European Socialists (PES), which is generally
    described as “center-left:” but is not at all centrist
    by U.S. political definitions. The third largest
    party is a self-described “Reform” camp, which
    consists largely of people who are fed up with the
    traditional politics of both the Left and the Right.
           EUROZONE
(EU 16 of 27 member nations who use
  the Euro as their official currency)
   Austria, Belgium, Cyprus,
   Estonia, Finland, France,
   Germany, Greece, Ireland,
 Italy, Luxembourg, Malta, the
     Netherlands, Portugal,
 Slovakia, Slovenia, and Spain
      EU PROGRESS CHECK
      Thus far, the EU has:
 A flag           • A foreign
 An anthem          minister
 A currency       • A president (of
 A central bank     the European
                     Commission)
 A supreme
  court            • A budget
 A parliament     • A military
                   • A (non-ratified)
                     constitution
     ECONOMIC PROGRESS
1. Lisbon agenda: for the EU to be the
world’s strongest economy by 2010
2. EU integration added only 1.3% to the
region’s GDP during the 1990s, but since
1992, EU output increased 2.2%,
creating 2.75M new jobs.
3. EU’s competitiveness has been limited
by (1) Lower work hours vs. the USA; (2)
High welfare state benefits (3) Slow
population growth
4. $500B of trade between EU &
   USA annually
5. U.S. companies employ 6M
   EU workers vs. 4M Americans
   who work for EU companies
6. The per capita income of
   Ireland went from 62% of the
   EU average in 1981 to 121%
   in 2002
          L'EURO (official in 2002)
1. The EU wants the Euro to pass up the
   American dollar as the world’s most used
   currency. The Euro has been stronger than
   the dollar over the past 2 years. 16 member
   nations currently use the Euro as their official
   currency.
2. The U.S. dollar fell 31%
    vs. the Euro between 7/01 to
    12/03 (when 1 Euro was
    worth $1.20)
3. The main cause was tied to America’s record
    current account deficit (exports – imports) in
    2003 of $½ T (5% of GDP)
HOW THE STRONGER EURO IS
      IMPACTING THE EU
1. Increased off-shoring of
   manufacturing
2. Greater reliance on
   exporting within the Euro
   zone
3. Increased importing of
   supplies
4. Seeking more non-European
   mergers
5. Before the euro, prices for McDonald’s
  Big Mac varied by as much as 75 percent
  across the eurozone, from roughly $3.55
  in Finland to about $2.00 in Greece. Two
  years after the euro was introduced,
  there were still national differences in
  McDonald’s menus, but prices had
  converged dramatically. The average
  Big Mac price was 2.71 euros (roughly
  $3.30), and the difference between
  Finland and Spain had dropped from 75
  to 15 percent.
THE BENEFITS OF CURRENCY UNIFORMITY
1. Greater clarity of comparing prices
   across European borders
2. Greater efficiency of conducting
   business & investing across borders
3. Greater willingness of investors to
   invest regionally instead of just
   locally
4. Emergence of the Euro as a world-
   class currency
  EURO DAMAGE CAUSE BY THE GREEK
         FINANCIAL CRISIS
1. The EU’s efforts (in partnership with
   the IMF) in the first quarter of 2010
   to provide a financial bail-out for
   the 150% of GDP federal deficit of
   Greece caused the Euro to drop
   about 20%. Currency traders inside
   & outside the EU recognize that
   “there is no instruction manual for
   rescuing a euro-zone country
   nearing default.”
   LOCAL OR TRULY REGIONAL MARKETING?
Although the EU promises regional
  integration of trade and business deals
  (reflected by EU corporations earning
  almost 2/3 of their revenue regionally),
  so far local consumers continue to do
  most of their shopping, investing, and
  work at home—86% of people’s income
  was generated at home & only 10%
  across borders. 2/3 of equity investments
  are with home companies rather those in
  other parts of the EU.
  THE SCHENGEN NO-PASSPORT AGREEMENT
In 1985 (in the small town of Schengen,
  Luxembourg), 30 nations in Europe
  agreed to create passport-free passage
  across borders. Thus far, 15 of these
  nations have implemented the borderless
  policy, & the others will comply in the
  near future. Security control is
  maintained by requiring people to show a
  passport upon leaving a signatory nation.
  Non-EU citizens can obtain a special visa
  to use instead of a passport.
   SCHENGEN NO-PASSPORT
          ZONES
Austria , Belgium, Denmark,
 Finland, France, Germany,
   Greece, Iceland, Italy,
 Luxembourg, Netherlands,
  Norway, Portugal, Spain,
    Sweden, Switzerland
During 21C, the rest of the
  world will be evolving in
 the same direction as the
  EU: less nationalistic +
  regional cooperation +
power centralization + the
   “2-generation effect”
 THE TWO GENERATION EFFECT
People’s sense of history
 normally extends back only
 2 generations, so over the
 next 20 years Europeans
 are likely to become less
 and less nationalistic as a
 result of emergent EU
 regionalism.
EURO-NOMICS
• 16 of 27 EU members that
  have adopted (1999) the
  Euro as their official
  national currency
            “PIIGS”:
• Core EU govt. deficit nations
Portugal, Ireland, Italy,
Greece, Spain
•PIIGS governments are in
financial jeopardy due to high
social welfare (vote-buying)
deficits & the high value of the
Euro. Their rotten economies
endanger the value of the Euro &
the existence of the EU.
•PIIGS economies are too poor to
afford the Euro on their own (like
living in New York or Tokyo on a
Waco income).
• Northern EU nations subsidize their
  use of the Euro & hence PIIGS social
  welfare benefits.
• Germany & the USA have pushed the
  EU to create an emergency bailout
  fund to use should any of the PIIGS
  go bankrupt.
• EU & USA leaders worry that this
  fund will not be adequate & that the
  world doubts the stability of the
  Euro & thus trade with the EU.
• Should PIIGS be forced to drop
  the Euro & reuse their weaker
  former currencies?
• Should the EU cancel PIIGS
  membership to halt subsidies
  & their economic baggage?
• Is use of the Euro as the EU’s
  official currency unrealistic &
  hence the EU itself?
       THE MODERN EUROPEAN
“MIXED CAPITALISM” ECONOMIC SYSTEM
1. The state runs core economic
   sectors (public capitalism) and
   private companies the other sectors
   (private capitalism).
2. The state owns parts of private
   companies and employs a
   significant number of people
3. The state regulates the private
   sector & shapes the overall
   economic system
4. Thestate delivers an extensive
 welfare system: generous
 welfare support, strong labor
 protections, single-payer health
 care systems, zoning restrictions
 on the encroachment of mega-
 retailers, subsides for child-care,
 pension security, & pregnancy
 leave. Many European nations
 offer nationalized health care.
 Germany, France, &
  Italy are the big 3
 economic powers in
the EU, accounting for
 70% of the region’s
      total GDP.
    THE EU’S “LURCH & MUDDLE”
     FEDERAL POWER STRATEGY
• React to problems as they occur
  (such as approval of a constitution
  & the admission of Turkey to
  membership) rather than have a
  principled master plan
• “Get the agreement and worry
  about the details later.”
• “The nations will eventually cave in
  & consent”
       THE POLITICS OF
“MULTIPLE-SPEEDS” CONCESSION
Under the multiple-speeds EU, members
nations that want to experimentally
implement new policies (“core” Europe)
are free to do so, while other nations can
implement them when they are ready.
“This approach would allow coalitions of
willing nations to work toward greater
cooperation in controversial
areas (such as defense & the
constitution) and move ahead of those
nations who are uncertain.”
  SELECTIVE SUPPORT OF EU POLICIES
1. Only 13 of the EU’s members
   use the Euro as their sole
   currency.
2. Fifteen have implemented the
   Schengen agreement for
   passport-free travel.
3. Sixteen nations have approved
   the proposed EU constitution &
   2 have rejected it.
Germany, France,
& the “BENELUX”
nations (Belgium,
Luxembourg, the
 Netherlands) are
the lead climbers.
THE EU’S UNOFFICIAL POLITICAL COALITIONS
 In the absence of true European unity in a
 number of areas (immigration, addition of new
 members, approval of the constitution, foreign
 policy, etc.), EU members have aligned
 themselves into several birds of a feather”
 factions: those using the Euro vs. those who
 don’t; members of the Schengen passport-free
 zone; nations participating in the Common
 Foreign & Security Policy (the EU’s rapid
 response military force); the 7-nation Prum
 group that seeks cross-border police & border
 control cooperation; those who support the
 membership of Turkey vs. those opposed; the
 institutionalists vs. the incrementalists.
        EU INSTITUTIONALISTS vs.
            INCREMENTALISTS
1. EU institutionalists want to seek integration
   primarily through creating formal institutions
   such as governmental units & agencies
2. Incrementalists would like to see the EU
   evolve slowly over time with maximum “grass
   roots” participation of member nations.
3. Both factions agree that remedies for the
   following temporary structural compromises
   of the EU must be sought: the 6-month
   rotating presidency; the bizarre member
   weighted voting system; a bloated European
   Commission (parliament); muddled foreign
   policy.
    THE EU’s FLIMSY POWER BASE
4. Still in its infancy, the EU government
   lacks strong federalist (centralized)
   power over the member nations
5. Brussels must thus rely on member
   cooperation/goodwill to advance its
   policy initiatives. Unless, members are
   “happy campers,” progressive change is
   tough to come by.
6. An additional power problem for the EU
   is whether or not small, economically
   weak nations should be extended full
   membership privileges.
7.Thus, in 2003, the EU developed an
  experimental “European Neighborhood
  Policy” originally designed to build
  informal, non-membership free trade
  relationships with areas outside, but
  strategically close to Europe: North
  Africa (Morocco, Algeria, Tunisia) + the
  southern Caucasus (former Soviet
  satellites Georgia, Moldova, Belarus,
  Ukraine) + Eastern Europe (Bosnia,
  Montenegro, Macedonia, Albania,
  Serbia, Croatia, Bulgaria, Romania).
8. These “neighborhood” nations would receive
   certain trading privileges with the EU but not
   become full-fledged members (due to their
   political & economic deficiencies). The main
   benefits withheld would include passport-free
   travel, free movement of labor across
   European borders, agricultural subsidies, &
   voting on constitutional issues.
9. The EU government is now considering
   whether this “neighborhood” arrangement
   might be Europe’s future structure—the EU
   would become a loose confederation of “first
   & second class” nations rather than a
   federation of nations all possessing the same
   privileges. This might be the best & only way
   for Europe to continue to grow without
   contending with all of the problems of nations
   that are ill-matched economically & politically.
10.Under this “a la carte” European
   (confederation) model, both full-
   privilege members & partial-privilege
   “neighbors” would be able to pick &
   choose among their benefits,
   responsibilities, & desired level of self-
   governance.
11.The main drawback of a confederation
   EU structure (rather than a federalist
   structure) would be: (1) less progressive
   government; (2) rivalries between first
   class & second class nations; (3)
   diminished capacity of the EU
   government to upgrade the standard of
   living in weaker “neighbor” economies
Scandinavian nations + Great
 Britain tend to be
 confederationists, preferring
 that the EU be mainly an
 economic free-trade
 agreement, but not the
 political union envisioned by
 the federalist-leaning
 Germans, French, Italians,
 Dutch, etc.
   THE EU
CONSTITUTION
1. In 2004, the EU put forth its
   first prototype constitution
   consisting of 200 pages &
   70,000 words in length--10
   times longer than the U.S.
   Constitution.
2. In actuality, this initial
   constitution was a detailed
   rule book & procedures
   manual for EU economic,
   governmental, and political
   policy
      KEY FEATURES OF THE
         CONSTITUTION
1. Charter of fundamental rights
2. Primacy of EU law over national law
3. Gives the EU legal personality to
   sign international agreements
4. Provides nations with veto rights
   over direct EU taxation, foreign &
   defense policy & the EU budget
5. Right for EU members to leave the
   EU
  ABCs of the CONSTITUTION
1. Approved by EU heads of state in 6/04.
2. To be adopted, they had to be ratified by
    all member nations.
3. Under the prototype constitution,
    legislative policies would pass if approved
    by at least 15 member nations, so long as
    they comprise at least 65% of the 455M EU
    population
4. Legislative measures can be blocked if
    vetoed by at least 4 member nations with
    35% of the EU population
5. Consolidates all previous EU
 treaties into a single document &
 adds a bill of rights & member
 expectations
6. The constitution must be
 approved by ALL member nations
 (6 via popular referendum) in
 order to take effect
7. Nations can re-vote as often as
 desired
THE CONSTITUTION’S PROGRESS
1. 16 EU nations have approved the
   constitution so far, but 2 (France & the
   Netherlands) have rejected it. Four
   nations, led by Britain, have put their
   pending constitutional referendums on
   hold until EU leadership can figure out
   how to reverse the 2 no votes & re-
   stabilize Europe’s current fractious
   political environment.
2. A “period of reflection” in 2006-2007
   to gave EU members more time to
   resolve constitutional issues.
           THE TWO NO VOTES
3. The French rejected (by a 55% no vote) the
   EU competition in popular referendums in the
   summer of 2005, raising the specter of
   governmental paralysis as the EU hierarchy
   struggles to centralize enough power to run
   the economy & foreign policy smoothly.
4. 66% of Dutch voters voted the constitution
   down & Denmark, Poland, & the Czech
   Republic have said they will do the same
   thing.
5. Since all EU members must approve the
   constitution, the no votes mean future
   constitutional compromise is mandatory…but
   how long will it take?
  EU CONSTITUTIONAL WRANGLING
1. One size fits all member nations
   & 470M Europeans?
2. Support the Constitution or leave the
   EU?
4. EU parliament levying taxes & passing
   federalist legislation?
5. Popularly elected EU Commission
   President? (Until the constitution is
   approved, nations serve in a rotating
   ceremonial presidency every 6 months)
6. In the current debate over the new EU
  constitution, the 4 most populous
  nations (Germany, France, Britain, Italy)
  want a dominating 29 votes each in the
  EU Council of Ministers (sorta like the
  Executive branch of the USA), while
  Spain & Portugal would get 27 each. The
  other EU members would then be left
  with less than 40% of the overall voting
  power
7. The other nations back a proposal for
  laws to be approved by a simple
  majority vote as long as 60% of the EU’s
  overall population is represented in
  these votes.
8. Uniformity of criminal law (such as
  legal drugs & euthanasia
in the Netherlands)?
9. Uniform immigrations policies,
 taxes & social welfare benefits
 (the Scandinavian welfare
 state)?
10. How can common citizens
 popularly elect EU govt. officials
 from diverse nations & cultures?
 Religious freedom?
   (No mention of
    religion in the
     constitution)
  •Women’s rights?
•Military inscription?
 •Citizens rights to
      bear arms?
    THE CONSTITUTIONAL ANXIETY OF
             EUROPEANS
1. Worry over loss of national economic control at
  a time when many EU members nations are
  struggling economically and fear constitutional
  centralization will further sap their economic
  vitality
2. Worry over possible diminished social welfare
  benefits in richer EU nations as poorer nations
  receive greater benefits under constitutional
  entitlement
3. Worry that Europe’s recent economic
  stagnation & high unemployment rate may be
  harder to reverse with 25 member nations all
  walking “lock-step”
4. Worries about the mythical “Polish
 plumber” (& other workers from low
 wage EU nations) stealing jobs away
 from workers in EU nations with a
 higher standard of living (especially
 Germany, France, Netherlands, Italy)
5. Worry in non-Anglo/Saxon nations
 that A/S profit maximization (“neo-
 liberal”) capitalism might run
 rampant over community &
 consumer rights & social welfare
 benefits
6. Worries about Europe's shrinking
  population & heavy burden of providing
  for the retirements of a record number of
  baby boomers & continued decline of
  Europe’s standard of living.
7. Resentment among the Dutch, Germans,
  French, Swedes, Brits, & Austrians that
  they contribute significantly more to the
  EU budget than they get back.
8. Europeans feel geographically vulnerable
  due to their close proximity to unstable
  Russia & Muslim nations.
9. Several EU nations (especially
   Britain) & growing public
   opinion would prefer that the
   EU grow in an organic, grass-
   roots (non-federalist) manner
   that makes a constitution
   unnecessary.
10.Do you think Americans would
   re-approve the U.S.
   Constitution if voted on today?
       OPTIONS FOR BREAKING THE EU
         CONSTITUTIONAL LOG JAM
1. “Cherry pick” which pieces of the
   constitution EU members do agree on
   and jettison the remainder of the
   document.
2. Let nations who back the constitution
   proceed to operate under its provisions,
   while foot-draggers would carry on
   independently.
3. Empower the 10 or 12 strongest EU
   nations to control the constitutional
   approval process, binding the other
   members.
4. Seek to get approval for a future revised
   constitution via national parliaments
   instead of the more politically volatile
   grassroots referendum approach.
5. To hem in the potential for controversy,
   reduce the number of constitutional
   provisions to a bare minimum.
6. Abandon symbolic constitutional
   provisions (the EU flag design, adopting
   an EU national anthem, & creation of an
   EU foreign minister position).
THE LISBON
 AGENDA: A
BACK DOOR
CONSTITUTION
The Lisbon agenda (an 2000 EU
developmental plan that calls for the EU to
become the world’s largest & most dynamic
economy by 2010) outlines a political
agenda for the EU to phase in between
2014-2017 that achieves much of what the
proposed constitution seeks. The Council of
Ministers (made up of representatives of
national governments) will convert to
majority voting decision-making in which
decisions will be approved if 55% or more
of nations representing at least 65% of the
EU population agree.
Majority voting will also go into effect in 50
policy areas, including immigration,
criminal justice, & the policies of the
European Court of Justice. The European
Council (comprised of the heads of state)
will elect their own president to as many as
2 two-and-a-half year terms. A Charter of
Fundamental Rights will extend EU workers
the right to strike, access to preventive
health care, and governmental intervention
into labor disputes. Also a majority of
national parliaments have the right to
protest any EU governmental policy & write
an alternative proposal.
 IS THE LISBON TREATY ALREADY DEAD?
Ireland rejected the Lisbon Treaty in the
   summer of 2008, raising doubts that
   the Lisbon reversion of the original EU
   constitution is viable. Even though the
   Lisbon treaty sought to improve the
   Brussels bureaucracy and synthesize
   a fairer voting system for EU
   members, “few EU governments or
   institutions are genuine enthusiasts
   for the treaty in its present form.
   Most nations want to simply get it out
   of the way to move on to more
   compelling and viable issues.”
   WHERE THE EU LEADS AMERICA IN
            QUALITY OF LIFE
1. Better income distribution: High
   income Americans average 5.6 times
   more income than low-income
   Americans vs. 3 times more in
   Northern Europe & 3.3 times more in
   Central Europe. Overall, the U.S. has
   the highest income inequality of the
   18 wealthiest nations
2. During the 1980s, the U.S. had the
   least growth (-0.3) in total workforce
   compensation among developed
   nations
3. More Americans (17%; 8% of whites &
   24% of blacks) live in poverty than in
   the top 16 European nations; Finland =
   5.1%; Sweden = 6.6%; Germany =
   7.5%; France = 8%; Netherlands =
   8.1%; Belgium = 8.2%; Spain = 10.1%;
   Ireland = 11.1%; Italy = 14.2%.
4. 37% of Americans work more than 50
   hours per week & 80% of male
   Americans work more than 40 hours.
   70% of Americans say they lack quality
   time with their children & 61% say they
   rarely have excess time. Europeans
   average 4-10 weeks of vacation
   annually.
5. 48M (mostly working) Americans currently
   lack health insurance, even though
   America spends more on per person on
   health care ($4900) than any other nation
   (primarily due to higher administrative
   costs associated with a complex net of
   private insurers).
6. The premiums of corporate-provided
   health care policies are rising by about
   12% annually, and Medicare recipients
   about 15%.
7. “America’s future Medicare costs will be a
   tsunami compared to the a mere tidal
   surge caused by Social Security.”
8. Between 1997-1999, America’s
  homicide rate was 6.26 per 100,000 vs.
  1.7 per 100,00 for Europe. America’s
  rate of childhood diseases, suicides,
  and gun-related deaths are the highest
  of the 25 wealthiest nations in the
  world. The homicide rate for American
  children was 5 times higher than the
  combined total of the 25 nations; U.S.
  suicide rates for children were 2 times
  higher than the combined 28 European
  nations.
9. The U.S. houses one quarter of all the
   prisoners in the world (2M). Europe has 87
   prisoners per 100,00 vs. 685 for the U.S.
10.The U.S. has the highest rate of senior
   citizen poverty in the industrialized world.
11.The EU’s 2003 GDP was $10.5T vs. $10.4T
   in the U.S.
12.Average number of annual vacation days
   for workers: France (39); Germany (27);
   Netherlands )25); Britain (23); Canada
   (20); USA (12)
13. Americas work a longer work day than
   Europeans & take less time for lunch (29
   minutes).
        RECENT AREAS OF
    AMERICAN SOCIAL PROGRESS

1.Successful welfare reform
2.Improved racial attitudes
3.Rising volunteerism &
  charitable contributions
4.Smooth absorption of
  recent immigration
   EU vs. THE USA IN COMPETITIVENESS
1. 61 of the top 140 global corporations are
   European vs. 50 for the U.S. & 29 in Asia.
2. 14 of the 20 largest commercial banks in
   the world are Euro; 3 of the top 5
   engineering/construction firms; 5 of the
   top 10 food & drug retailers; 6 of the top
   11 telecommunications firms; 5 of the top
   10 pharmaceuticals (with the U.S. having
   the other 5)
3. In a recent survey by Global Finance
   magazine, 49 of the 50 companies judged
   best in the world were European.
4. Europe now has a larger share of small-
   to-medium size entrepreneurial firms
   (67% of the total Euro economy) than
   the U.S. economy (46%).
5. The EU lags behind the U.S. in value-
   added to high tech products, number of
   high tech patents, & % of workers with
   a high school degree. The U.S. lags
   behind Europe in number of
   science/engineering college grads;
   government-financed R&D; & in new
   capital raised.
6. The U.S. consumes 1/3 more energy
   than Europe.
     EU vs. THE USA IN PRODUCTIVITY
1. From 1990-1995, 12 EU nations
   experienced higher productivity growth
   than the U.S.; the U.S. moved ahead
   from 1996-1999, with a 1.9%
   productivity increase vs. 1.3% for the
   EU.
2. In 2000, 6 European nations out-
   produced the U.S. in productivity per
   worker. The U.S. per worker output =
   $38.83 vs. $45.55 for Norway & $41.85
   for France.
DECLINING AMERICAN COMPETITIVENESS
The World Economic Forum’s 2006 annual poll of
national showed that America fell from first place in
annual competitiveness in 2005 to 6th place in 2006
due to the high deficits produced by Hurricane
Katrina; federal government corruption associated
with the Abramoff political scandals; restrictions on
immigration; and debt financing the Iraqi war. While
strengths in technological innovation and economic
efficiency explain America’s overall high ranking of
6th, the economy suffers from significant
weaknesses. The World Economic Forum concluded
that America’s overall future competitiveness is
currently at risk, which means that the future of the
overall global economy is also at risk given America’s
dominate position in the global marketplace.
  AMERICA’S FALLING LIFE EXPECTANCY
A 2007 survey disclosed that 41 nations
  (including almost all of Europe) have a
  longer life expectancy than America. The
  average American lifespan of 77.9 years
  ranks 42nd in the world (down from 11th two
  decades ago). Health experts blame the sky
  high American obesity rate and luxury
  lifestyle available to most Americans.
  “Something’s wrong when on of the richest
  countries in the world, and the one that
  spends the most of health care, is unable to
  keep other with other developed countries.”
European markets (especially
 in the “big 3” economies of
 Germany, France, & Italy,
 which produce 1/3 of the EU’s
 entire regional GDP) are over
 regulated & inflexible due to
 unions, high employee
 benefits, & complex
 government regulations.
“Right now, Europeans seem to look to
 the future with more fear than hope.
 The core fact is that the European
 model is foundering under the fact that
 billions of people are willing to work
 harder than the Europeans are. The
 recent Western European standard of
 living is about a third lower than the
 American standard of living, and it’s
 sliding. Europeans clearly love their
 way of life but don’t know how to
 sustain it.”
   “Europe resembles a
teenager who has just gone
   through a tremendous
 physical growth spurt but
without a parallel growth in
   intellectual and moral
  maturity: physically an
adult but philosophically an
        adolescent.”
 EUROPE’S DECLINING POPULATION
1. 18 European nations have a declining population
   rate. France, Britain, the Netherlands, & Norway
   are holding their own with a fertility rate of over
   2.0. Italy & Spain have the most pessimistic
   future population outlook.
2. Number of children per family: France = 1.7;
   Germany = 1.3; Italy = 1.2; Spain = 1.1
3. By 2050, Spain’s population will decline by 31M to
   40M & Germany will lose more people than in all
   of former East Germany.
4. 55% of EU workers will retire over the next 25
   years & its total workforce will shrink by 8%.
5. If these population trends persist, Muslims will
   emerge as the dominant ethnic group in Europe
   by 2050
“Why is Europe committing demographic
 suicide, systematically depopulating itself
 well beyond what the Black Death
 wrought in the 14th century? Europe is
 experiencing a crisis of civilization morale
 today stemming from its violent wars of
 the 20th century, loss of religion, and its
 profound secularization. It has forgotten
 its history. Europeans have convinced
 themselves that in order to be modern
 and free, they must be radically secular.
 That conviction has had crucial, indeed
 lethal, consequences for European public
 life and culture.”
 WHAT EUROPE MUST DO IN THE FUTURE
  TO IGNITE MORE ECONOMIC GROWTH
1. Strengthen the work ethic
2. Strengthen innovative
   entrepreneurship
3. Rein in the “cradle-to-grave” social
   welfare system
4. Increase indigenous population
   growth
5. Keep the EU government’s
   bureaucracy in check
1. America’s population is rising more
than twice as fast as the EU’s. In the
20th century, America’s population
increased by 250% vs. just 60% in
France & Britain.
2. America has freer markets & U.S.
companies capitalize on new
technology at a faster rate.
3. America spends twice as much as
  Europe on higher education.
4. New markets are easier for
   American companies to penetrate in
   comparison with European
   companies.
5. America’s markets for financial
   capital are deeper than European
   capital markets.
6. The hyper-competitive American
   marketplace weeds out weak,
   uncompetitive companies more
   efficiently than Europe’s
   competitive system.
  ECONOMIC
PERFORMANCE
OF THE EU’s 4
 MEMBERSHIP
   GROUPS
ANGLO-SAXONs: High employment rates
 but significant economic inequality
CONTINENTALS: Good at helping people
 avoid poverty (due to generous social
 benefits), but sub-par job creation
MEDITERRANEANS: Sub-par
 performance in both elimination of
 poverty & avoiding unemployment
NORDICS: Successful in both economic
 performance areas of poverty
 reduction + achieving high
 employment
The EU has accomplished most
of the easy stuff & is currently
stuck in a holding pattern:
waiting for a constitution to be
approved; determining where
Turkey & Russia fit in;
stabilizing its many struggling
new members. Future progress
promises to be much tougher
to come by.
        THE ROADBLOCK OF
   LOW CITIZEN AWARENESS
1. 90% of Spaniards weren’t
   aware of the EU constitution
2. 25% of Brits didn’t know GB
   belonged to the EU
3. 31% of Germans had never
   heard of the EU Commission
   (the EU’s giant “Civil Service”)
    PERCENTAGE OF EU MEMBERS WITH A
        POSITIVE IMAGE OF THE EU
•   Italy: 58%
•   Spain: 56%
•   Portugal: 55%
•   Turkey: 53%
•   France: 45%
•   Slovakia: 42%
•   Poland: 38%
•   Germany: 36%
•   Netherlands: 33%
•   Britain: 27%
  % OF EUROPEANS WHO FEEL THE EU
SHOULD BE A SUPER POWER LIKE THE USA
•   France: 82%
•   Netherlands: 77%
•   Spain: 75%
•   Germany: 71%
•   Italy: 71%
•   Poland: 68%
•   Portugal: 66%
•   Britain: 58%
•   Turkey: 40%
              SOCIALISM THE EU’s
             ARTERIOLOSCLEROSIS:
1.   Bloated welfare/pension/health-care
     system
2.   Rigid labor market regulations:
     unionism, short work week, early
     retirements
3.   Sweden/Denmark/Finland spend 33%
     of GDP on social benefits (vs. 25% for
     Germany & France & 14% for USA).
4.   For every 100 working Europeans, 35
     are on pensions; by 2050, there will be
     75 on pensions for every 100 working
  ONE-UPMAN-SHIP vs. THE USA
1.The EU is gunning to
  surpass America as the
  world’s largest economy by
  2010
2.The EU’s political rivalry
  with the U.S. is reflected in
  its post 9/11 anti-American
  foreign policy stances
         THE EU WANTS ONLY EUROPEAN
     COMPANIES TO HAVE THE RIGHT TO USE
     THE FAMOUS NAMES OF THE FOLLOWING
      REGIONAL EUROPEAN FOOD PRODUCTS
•   Champagne          • Roquefort
•   Cognac
                       • Feta
•   Burgandy
                       • Bologna
•   Chianti
•   Madeira            • Nougat
•   Port               • Saffron
•   Mozzarella         • Parmagian
       EU-USA TRADE TENSIONS
1. Unresolved disputes over U.S.
   tariffs, ag. subsidies, U.S. airline
   subsidies, EU beef hormones, &
   genetically modified foods
2. EU trade commission fined
   Microsoft $613 million (500M
   Euros) in 2004 for monopolistic
   practices in Europe & an additional
   $357M in 2006 for failing to comply
   with the 2004 antitrust order.
3.In the summer of 2005, the EU
 broke up Coca-Cola’s dominance
 (50% market share & twice the sales
 of the nearest soft drink competitor)
 of the European market by outlawing
 exclusive contract arrangements
 Coke forced its retailers into. Coke
 can longer require retailers to give
 shelf space preference to Coke
 products or to ban certain products
 of competitors. The EU ruled that
 Coke’s competitive practices were
 unfair and in restraint of trade.

				
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