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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