City of London– March 2008 Introduction

The evolution of the European Union How it started and expanded since the end of the Second World War in 1945 A quick journey that starts in the days immediately after World War 2.

The evolution of the European Union  1948 – Plans begin to build a ‘peaceful’ Europe – Congress of The Hague and Council of Europe. Marshall Aid arrives.  1949 – NATO created=mutual defence and the US is supportive of more integration in Europe.

Evolution  1950 – The Schuman Declaration – France and Germany to pool resources of coal and steel. ’solidarity in production would make war unthinkable and materially impossible’.  1951 – Treaty of Paris establishes ECSC – which includes Benelux countries and Italy.  1952 – ECSC starts and many consider this to be the real start of European Community.

Evolution  1952 – ECSC starts work with Jean Monnet as President.  1954 – European Defence Community emerges – German soldiers encouraged to join but French national assembly rejects this.  1957 – Treaty of Rome signed by 6 original signatories

Evolution  1958 – European Community launched  1960 – EFTA launched with UK a member. No common external tariff.  1961 – Britain, Denmark and Ireland apply to join EC. De Gaulle rejects UK application.  1963 – De Gaulle rejects second UK application.

Evolution  1968 – The European Community customs union is completed.  1973 – UK, Demark and Ireland join EC. Norway rejects membership in national referendum. UK referendum I 1975 supports entry 2:1.  1979 – EMS starts to be discussed and Ecu introduced for internal transactions and travellers cheques and bank deposits.

Evolution  1981 – Greece joins EC  1984 – UK wins budget rebate  1985 – Jacques Delors becomes President of European Community. Aims to remove all barriers to trade by 1992 and so create a ‘single market’. Essential if EU to be competitive with US  1986 – Spain and Portugal join EC

Evolution  1987 – European Single Act signed. It abolishes national vetoes in many areas, so enabling a single market to emerge. The members will now become part of a ‘European Union’.  1988 – Regional Aid doubled. The expansion of structural funds to poorer regions and countries.

Evolution  1990 – UK joins ERM.  1991 – Maastricht Treaty signed – monetary union and European citizenship created. UK ‘opt out’ on euro and social policy.  1992 – UK leaves ERM. ‘Black Wednesday’.  1993 – Maastricht Treaty ratified.

Evolution  1995 – Borders come down as result of Schengen Agreement. UK does not join and Norway rejects membership of EU in second referendum  Amsterdam Treaty signed – gets EU ready for ‘eastward’ move.  1998 – Talks start for major enlargement

Evolution  fraud problems hit EU.  2002 – Euro replaces 10 national currencies.  2003 – Plans for EU Constitution suffer set backs.  2004 – 10 new members join  2005 – Constitution rejected and budget difficulties  2007 – Enlarged to 27 members

Evolution  25 March, 1957  His Majesty The King of the Belgians, the President of the Federal Republic of Germany, the President of the French Republic, the President of the Italian Republic, Her Royal Highness The Grand Duchess of Luxembourg, Her Majesty The Queen of the Netherlands,  resolved by pooling their resources to preserve and strengthen peace and liberty and calling upon the other peoples of Europe who share their ideal to join in their efforts,

From Six to Fifteen 1957

1973 From Six to Fifteen

1981

From Six to Fifteen 1986

1995 From Six to Fifteen

2001 From Six to Fifteen… and Beyond

The EU

Croatia and Montenegro  Croatia Montenegro

Serbia and Bosnia

Macedonia and Albania

Turkey and the Kossovo Issues

Being inside the Single Market Free movement of product, people and capital (soon services) with no artificial barriers to trade BUT protected where necessary from outside competition by Common External tariff Benefits arising from free trade within the Single Market -  Opportunity to exploit their various comparative advantages in many industries as possible and increase exports to “richer nations” as a source of further economic development  - Enlargement will eventually create a Single Market of over 500 million consumers, with relatively similar tastes in consumer durables

Other advantages of enlargement  Most accession countries will be to net recipients of income from EU programmes a. Common Agricultural Policy - though only 25% of current subsidies paid to the older member states.  b. Social Cohesion and Regional Funds – to bring them to 75% of NNI figures of all members c. To the receipts of receipt of EU funds one needs to add various macroeconomic advantages  Potential macroeconomic advantage  a. Reduced exchange rate volatility if accession countries join the ERM – many countries are keen to join the Euro to reduce exchange rate risk and benefit from lower interest rates.  Monetary policy coordination with the European Central Bank - Lower inflation will help bring down long term interest rates (this is good for investment)

Other advantages of enlargement  The main aims of joining the EU for the accession countries are to a. Increase economic integration with Western Europe b. Provide a catalyst to long term economic growth c. Raise relative living standards closer to the EU average-via Regional and Cohesion Funds-look at evolution of EU and the ideas of the founding fathers.

Current numbers  Income per capita in new member states rose from 40% of the old member states' average in 1999 to 52% in 2008  Economic growth averaged 5.5% per year in , compared to 3.5% in  The old member states averaged annual growth of around 2.2% in the last four years.

Current Numbers  In 2007, almost 80% of exports of the new member states went to the rest of the EU. Old member states also saw their sales to the new members increase to around 7.5% of their total exports in 2007, from 4.75% a decade ago.  It is now the world's biggest integrated economic area, with half a billion people producing 30% of global economic output and 17% of world trade.