TO THE EURO CRISIS AND BEYOND

Arrival of the Euro Preparations were under way for the single currency, named the euro in 1995. Convergence criteria were agreed as preconditions for participation in the euro, including controls on budget deficits, inflation, and interest rates. The euro became available as an electronic currency in 1999 and as a physical currency – replacing those of 12 EU member states – in early 2002. Only Britain, Denmark and Sweden did not take part.

Transatlantic Tensions The 9/11 attacks of 2001 generated strong transatlantic solidarity, but this quickly changed once the Bush administration began preparations for a pre-emptive military invasion of Iraq in 2003. Several EU leaders were openly critical of US policy, and public opposition in Europe was deep and near uniform. With the end of the Cold War having removed much of the glue that had held the US and Europe together, the controversy over Iraq revealed a new willingness by the EU to assert itself against the USA.

Transatlantic Tensions

Enlargement, 1994-2013 Enlargement now looked east, focusing on bringing in Eastern European states and former Soviet republics. Eight Eastern European states, along with Cyprus and Malta, joined in 2004, Bulgaria and Romania joined in 2007, and Croatia in 2013. These new rounds took membership of the EU to 28, and were politically significant for marking the final end to the Cold War division of Europe, and the transformation of much of the former Soviet bloc states from communism to liberal democracy. As of mid-2015, candidates for future membership were Albania, Iceland, Macedonia, Montenegro, Serbia, and Turkey.

Enlargement, 1994-2013

More Treaties In 2001 a European Convention was held to draft a constitutional treaty for the EU, ending the process of periodically amending the treaties. It was published in 2003, but rejected by national referendums in France and the Netherlands in 2005. Signed in 2007, and coming into force in 2009, the Treaty of Lisbon was almost exactly the same in content as its failed predecessor. It brought the rules of the EU up to date, the most significant institutional changes being the creation of a president for the EU Council, and a newly powerful High Representative for foreign affairs and security policy.

Crisis in the Euro Zone In 2007 the EU began to suffer the effects of the global economic crisis, sparked in the United States by banks offering mortgages to low-income home buyers. It spread when European banks bought some of these ‘toxic assets’, and then the housing bubble burst. A home-grown crisis emerged in the euro zone in 2009 when it became clear that Greece had amassed a large budget deficit. Greece was offered bailouts and loans on condition that it imposed austerity measures designed to cut public spending and boost tax revenue. Several countries – the PIIGS, or Portugal, Ireland, Italy, Greece, and Spain – felt the worst effects of the economic crisis, and there was talk of a Grexit: Greece leaving the euro zone.