1. Europe in Crisis,

2. Eurosclerosis and Europessimism
The accomplishments of the early 1970s: the accession of 3 member states, the adoption of a plan for EMU, the launch of a procedure for foreign policy coordination.
However, in the mid-1970s, the terms Eurosclerosis and Europessimism dominated the European integration process.

3. Increasing problems
the shock of the first oil crisis: increasing oil prices, and the imposition of an oil embargo after the 1973 Arab-Israeli war. (oil imported from the Middle East covered 63% of the EC’s energy needs).
growing German assertiveness
uneven economic performance within the EEC.
increasing inflation, exchange rate fluctuations.

4. Franco-German axis
In Germany Helmut Schmidt replaced Willy Brandt, and Valery Giscard d’Estaing replaced Pompidou in France. Schmidt and d’Estaing developed strong personal relations which was important in the consolidation of the Franco-German axis.
The partnership of Schmidt and Giscard: got together often for dinner, spoke at least weakly on the phone. The aim was to resolve disputes, and minimize the differences and divergent interests.
Schmidt stated that Europe can only be brought forward by the will of a few statesmen not by thousands of regulations or ministerial conclusions. However, Franco-German partnership alienated other member states and also irritated the EU institutions.

5. British problem Labor Party was divided on the issue of membership.
British government insisted for the renegotiation of the accession agreement.
Britain demanded that:
its budgetary contribution to the EEC budget should be changed
CAP reform
Protection of Commonwealth interests, particularly for New Zealand dairy products.

6. Satisfying British demands
Renegotiations lasted 11 months in two summits.
German Chancellor, Schmidt as a socialist visited Britain in November 1974 and convinced majority of the Labor Party to stay within the EU.
To satisfy British demands, the size of the British share in regional development fund was made 28%. Britain was not satisfied with this share. Italy, Ireland, France became the other main beneficiaries.

7. British referendum
British Prime Minister Wilson announced that the government would hold a referendum to decide whether Britain would stay in the EC.
The members states agreed on accepting New Zealand dairy imports. After this decision, Wilson supported a yes vote on referendum. 67 % of the electorate voted for staying in the EC, 33% against.
Although Britain opted for staying within the EC, member states were irritated by British attitude.

8. Institutional Immobility
German and French leaders disliked the supranational European Commission and were reluctant to send important people to Brussels as Commission representatives. The European Commission was ineffective.
European Council was also immobile due to the Luxembourg Compromise. By the early 1970s, nearly 1000 commission proposals were said to be stuck in the Council. Because a member states would prevent a vote from being taken due to the Luxembourg Compromise.

9. Slow down in European Integration
Large members states failed to provide leadership.
France was not doing good economically and Giscard d’Estaing was under threat from left and right. Poor leadership and growing divergence among members states not only undermined political solidarity but also risked the development of economic integration.
Faced with high inflation and unemployment, members states applied non-tariff barriers and other protectionist measures that impeded the emergence of a single market.
Disputes over budgetary contributions and monetary compensation to farmers to cover the impact of fluctuating exchange rates on the CAP.

10. Establihment of the European Council Summits in 1975
Regular meetings of national leaders at a time of increasing economic complexity and bureacratic paralysis.
Giscard and Schmidt saw the European Council as an ideal forum to dominate the EC.

11. “Two-speed” Europe
Belgian Prime Minister Leo Tindemans published a report in 1976 and suggested for a “two-speed” Europe: different rates of integration depending on the will and ability of member states.
The EU leaders failed to act upon this proposal.

12. European Monetary System
The Werner Plan launched economic and monetary union (EMU) in 1972 and aimed at achieving EMU in But this target failed to be materialized: The German Mark was strong, while French, Italian, and British currencies were weak due to high inflation.
European Monetary System (EMS) was started in 1979 with an aim of achieving monetary stability. EMS helped member states to fight inflation and achieve economic development.
Schmidt supported EMS because of the decreasing value of the dollar. This was cutting German industrial competitiveness. Giscard also gave support to the initiative. There was a clear convergence of interests between France and Germany. Britain excluded itself from the initiative.
In exchange for support for the EMS, Ireland and Italy demanded an increase in regional development funding and subsidized loans for infrastructural improvements.

13. Thatcher and British Budgetary Question
When Thatcher came to power in 1979, she also insisted on the budgetary question.
For Thatcher, Britain paid too much but received too little in return. Britain’s net payments to Brussels averaged 60 million pound from 1973 to 1976, it was 368 million pounds in 1977, 822 million in 1978, and 947 million pounds in 1979.
Thatcher argued that without budgetary reform, the British public would turn against the EC, and might even insist on withdrawal.

14. Fontainebleau Summit
The British problem of budgetary contribution was resolved during the Fontainebleau summit held in It was agreed that Britain would get back 850 million pound and pay 66% of what it previously paid. In this way, Britain saved more than 10 billion pounds over the 1980s.
Satisfied with the result, Thatcher announced in a press conference that she now looked forward to go ahead with the development of the European Community. Thatcher announced that Britain would support the abolition of non-tariff barriers and cooperation in the field of foreign policy and security.

15. Creating a single market: ideological dimension
The Fontainbleau summit opened the way for deeper political and economic integration: single market.
Ideological shift in Western Europe. After 5 years of Labor Party rule, British people reacted against excessive government intervention in economic and social affairs. Thus, they brought Thatcher to power. Thatcher focused on privatization and encouraged private enterprises.
On the contrary, in France Mitterand opted for state intervention. As a result of socialist policies of Mitterand, inflation increased, investments and the value of the franc fell. Thus, Mitterand shifted to neoliberal policies. Spain and Portugal also adopted similar policies.

16. The aims of the single market
The Commission responsible for industrial affairs from supported the development of a single European wide market.
The aim was to prevent customs delay at borders, conflicting national standards in data processing. The influential European industrialists supported such an initiative.

17. The Role of the European Commission
European Commission was influential in the completion of the single market.
Based on the Court of Justice’s decision on Cassis de Dijon case, Commission argued for the necessity of a single market: Germany prohibited imports of alcoholic beverages from France by arguing that French producers did not meet minimum alcohol content requirements.
The Court of Justice found Germany guilty for such an act and declared that any product imported from another member state must in principle be admitted if it is legally produced, that it conforms to rules and manufacturing process traditionally accepted by the exporting country.
Thus, the Commission developed the principle of mutual recognition that would avoid the otherwise impossible process of harmonizing the member states’ diverse legal norms.

18. Transatlantic Tensions
After a decade of relatively good relations, East-West tension increased in the late 1970s. EC member states failed to develop a sufficient European political cooperation particularly in response to crises such as the Soviet invasion of Afghanistan in December 1979.
The Raegan administration in the US was strongly against the Soviet Union and put pressure on Europeans to stop economic and trade activities with the Soviet bloc. For the US, Europeans were weak and coward.

19. Rise of Anti-Americanism in Europe
In 1982, the US announced sanctions against US license holders in Western Europe involved in the Soviet gas pipeline, a massive infrastructural project to facilitate the export of Soviet gas to Western Europe. This promoted anti-Americanism in Europe. High technology industries accelerated colloboration in the EC to be independent from the US. ESPRIT and other EC sponsored high technology research and development programs emerged.
There were also severe transatlantic disputes over subsidized steel and agricultural exports from the EC.

20. Rise of Anti-Americanism in Europe
Moreover, there was euromissile crisis. The US and Europeans were in dispute over NATO’s deployment of medium range nuclear missiles in Western Europe in response to a similar Soviet deployment in Eastern Europe. Europeans were accusing the US that the US was only interested in deploying missiles in Europe, and the US was accusing Europeans for surrendering to the Soviet pressure.
n the 1970s, the Soviets started deploying SS-20 theater ballistic missiles inEastern Europe. The missiles threatened European cities and threatened NATO's critical British air bases with short-notice attack.

21. Rise of Anti-Americanism in Europe
NATO announced that it would deploy U.S. cruise missiles to Britain and Italy and Pershing 2 ballistic missiles to West Germany to counter the Soviet SS-20s.
Western peace organizations, Western pacifists and Communist sympathizers demonstrated throughout Western Europe and the U.S.. The West German parliament had scheduled a vote on missile deployment.
On November 22, West Germany's parliament approved the missile deployment. The next day, U.S. missiles arrived in Europe. NATO counter-deployed and nuclear war didn't erupt. 

22. The Reasons of British Support for European Integration
Britain was afraid that if Britain would stay out of further integration, European, American and Japanese capital would not come to Britain but shift to continental member states.