Theorie und Politik der Europäischen Integration

Theorie und Politik der Europäischen Integration Theory and Politics of European Integration Lecture 2 EU Institutions and Decisionmaking Prof. Dr. Herbert Brücker

Last Lecture Theory and Politics of European Integration Lecture 2 Institutions • Course Overview • EU History • Why European Integration: Preventing another war in Europe • Two competing concepts: federalism vs. intergovernmentalism • Links between deeper integration and expansion • Europessimism • Single Market Programme 1992 • Collapse of Communism • Eastern enlargement and ‘finalisation’ of Europe • German unifcation, Maastricht and EMU • EU Treaties and EU Constitution • Euro crisis

Today’s Lecture Theory and Politics of European Integration Lecture 2 Institutions • EU Institutions • Key Facts • EU Law • The “Big 5” Institutions • Legislative process • Budget • Decisionmaking • Task Allocation and Fiscal Federalism • Evolution of Voting Rules • Efficiency of Decision-making • Fair Power Distribution and Legitimacy

Today's Reading Theory and Politics of European Integration Lecture 2 Institutions • EU History, Institutions, Decision Making and the Budget • Baldwin & Wyplosz (2006) “The Economics of European Integration”, McGraw-Hill, Ch 2 + Ch 3

A heterogeneous group: per capita GNP and population, 2008 Theory and Politics of European Integration Lecture 2 Institutions

Also in absolute size … Theory and Politics of European Integration Lecture 2 Institutions B+W Fig. 2.2

Is heterogeneity a problem? Theory and Politics of European Integration Lecture 2 Institutions • How to device institutions that ensure the rights of small countries • Why then should big countries surrender some powers • EU a consensus driven enterprise • Mutual benefits … find win-win situations … may stem from trade

Facts: EU15’s Trade Pattern Theory and Politics of European Integration Lecture 2 Institutions B+W t. 2.2

EU trade patterns Theory and Politics of European Integration Lecture 2 Institutions • EU-27 members are all comparatively open economies • openness and size • figures for Japan and the US are 10 per cent and 8 per cent respectively. • EU15 market is very important for all EU-27 • share of exports going to the EU15 ranges between 50 per cent to 80 per cent. • The EU trades mainly with Europe, especially with itself • about two-thirds of EU exports and imports are to or from other Western European nations • the EU’s exports to North America amount to only 10 per cent of its exports • Asia’s share is only 8 per cent • About 80 per cent of EU exports consist of industrial goods • ‘intraindustry’ trade

EU organization: three pillars and a roof Theory and Politics of European Integration Lecture 2 Institutions • First pillar • Integration issues, Common Market, Competition (4 Freedoms) • Supranational • Second pillar • Common foreign and security policy • Intergovernmental, some supranational decisionmaking • Third pillar • Justice and Home Affairs • Intergovermental coordination, no suprantional decisionmaking • Roof • European Union and their institutions

The EU Court created by the Treaty of Rome: court then established the Community’s legal system EC law was established on the basis of: the EU institutions ensuring that actions by the EC take account of all members’ interests, i.e. the Community’s interest the transfer of national power to the Community. New Treaty may replace this as the source of EU law. Law – sources of Theory and Politics of European Integration Lecture 2 Institutions

Autonomy: system is independent of members’ legal orders. Direct Applicability: has the force of law in member states so that Community law can be fully and uniformly applicable throughout the EU. Primacy of Community law: community law has the final say, e.g. highest French court can be overruled on a matters pertaining to intra-EC imports Primary legislation: treaties. Secondary legislation: collection of decisions made by EU institutions. Law: Key principles Theory and Politics of European Integration Lecture 2 Institutions

Institutions Theory and Politics of European Integration Lecture 2 Institutions • There are dozens of EU institutions –but only five are really important: • European Council • Council of Ministers • Commission • Parliament • EU Court. • Others matter in specific areas or at particular moments.

Institutions: European Council Theory and Politics of European Integration Lecture 2 Institutions • Consists of the leader (prime minister or president) of each EU member plus the President of the European Commission. • By far the most influential institution: • its members are the leaders of their respective nations. • Provides broad guidelines for EU policy.

Institutions: European Council Theory and Politics of European Integration Lecture 2 Institutions • Thrashes out compromises on sensitive issues: • reforms of the major EU policies • the EU’s multiyear budget plan • Treaty changes • final terms of enlargements, etc.

Institutions: European Council Theory and Politics of European Integration Lecture 2 Institutions • Meets at least twice a year (June and December): • meets more frequently when the EU faces major political problems • highest profile meetings at the end of each six-month term of the EU Presidency • these meetings are important political and media events • determine all of the EU’s major moves

Institutions: European Council Theory and Politics of European Integration Lecture 2 Institutions • most important decisions of each Presidency are contained in a document, known as the ‘Conclusions of the Presidency’, or just the ‘Conclusions. • Strangely enough, the European Council has no formal role in EU law-making: • its political decisions must be translated into action via Treaty changes or secondary legislation.

Institutions: Council of Ministers Theory and Politics of European Integration Lecture 2 Institutions • Usually called by old name Council of Ministers (formal name is now ‘Council of the EU’). • Consists representatives at ministerial level from each Member State, empowered to commit his/her Government:

Institutions: Council of Ministers Theory and Politics of European Integration Lecture 2 Institutions • typically minister for relevant area: • e.g finance ministers on budget issues • confusingly, Council uses different names according to the issue discussed. • Famous ones include EcoFin (for financial and budget issues), the Agriculture Council (for CAP issues), General Affairs Council (foreign policy issues).

Institutions: Council of Ministers Theory and Politics of European Integration Lecture 2 Institutions • Is EU’s main decision-making body (almost every EU legislation must be approved by it). • Main task to adopt new EU laws: • measures necessary to implement the Treaties • also measures concerning the EU budget and international agreements involving the EU • is also supposed to coordinate the general economic policies of the Member States in the context of the Economic and Monetary Union (EMU), e.g. famous 3 per cent deficit rule.

Council/Council of ministers: Qualified Majority Voting (QMV) Theory and Politics of European Integration Lecture 2 Institutions • QMV is complex and is changing (see Part II). • Three sets of rules: • Procedure that applies until mid 2004: • basic form unchanged since 1958 Treaty of Rome. • Procedure post-2004 (from Nice Treaty) unless Constitutional Treaty supersedes them: • political agreement in Nice Treaty; implemented by Accession Treaty for 2004 enlargement. • Procedure from Constitutional Treaty • draft endorsed by European Council at June 2003 meeting.

Institutions: The Commission Theory and Politics of European Integration Lecture 2 Institutions • Has three main roles: • propose legislation to the Council and Parliament • to administer and implement EU policies • to provide surveillance and enforcement of EU law (‘guardian of the Treaties’) • it also represents the EU at some international negotiations.

Commissioners, Commission’s Composition Theory and Politics of European Integration Lecture 2 Institutions • Before the 2004 enlargement: • one Commissioner from each member: • extra Commissioner from the Big-Five (Germany, UK, France, Italy and Spain in the EU15) • this includes the President (Romano Prodi up to 2005), two Vice-Presidents and 17 other Commissioners.

Commissioners, Commission’s Composition Theory and Politics of European Integration Lecture 2 Institutions • Under Nice Treaty each member in EU25 has one Commissioner • Current president: Barroso • Draft Constitution, only 15 Commissioners: • rotating evenly among all members • would have non-voting Commissioners from other nations (IGC likely to change this). • Commissioners are chosen by their own national governments: • subject to political agreement by other members • Commission, the Commission President individually, approved by Parliament.

Commissioners, Commission’s Composition Theory and Politics of European Integration Lecture 2 Institutions • Each Commissioner in charge of a specific area of EU policy: • Directorate-Generals (DGs). • Executive powers • Commission executive in all of the EU’s endeavours • power most obvious in competition policy and trade policy. • Manage the EU budget, subject to EU Court of Auditors. • Decision making: • decides on basis of a simple majority, if vote taken • almost all decisions on consensus basis.

Institutions: European Parliament Theory and Politics of European Integration Lecture 2 Institutions • Two main tasks: • oversees EU institutions, especially Commission • Has to approve Commission • it shares legislative powers, including budgetary power, with the Council and the Commission. • Traditional problem … democratic deficit

Institutions Theory and Politics of European Integration Lecture 2 Institutions • There are dozens of EU institutions –but only five are really important: • European Council • Council of Ministers • Commission • Parliament • EU Court • Others matter in specific areas or at particular moments.

Institutions: European Court of Justice Theory and Politics of European Integration Lecture 2 Institutions • EU laws and decisions open to interpretation that lead to disputes that cannot be settled by negotiation: • Court settles disputes, especially disputes between Member States, between the EU and Member States, between EU institutions, and between individuals and the EU. • EU Court’s supranational power highly unusual in international organisations. (very influential)

Institutions: European Court of Justice Theory and Politics of European Integration Lecture 2 Institutions • As a result of this power, the Court has had a major impact on European integration. • 1964 judgment established EC law as an independent legal system that takes precedence over national laws in EC matters • 1963 ruling established the principle that EC law was directly applicable in the courts of the members.

The Budget Theory and Politics of European Integration Lecture 2 Institutions • The EU Budget

The Budget: Expenditure Theory and Politics of European Integration Lecture 2 Institutions

Evolution of Spending Priorities Theory and Politics of European Integration Lecture 2 Institutions

Evolution of Spending, Level Theory and Politics of European Integration Lecture 2 Institutions

Funding of EU Budget Theory and Politics of European Integration Lecture 2 Institutions • EU’s budget must balance every year. • Financing sources: four main types: • Tariff revenue – common external tariff • ‘Agricultural levies’ (tariffs on agricultural goods) • ‘VAT resource’ (like a 1 per cent value added tax – reality is complex) • GNP based (tax paid by members based on their GNP).

Evolution of Funding Sources Theory and Politics of European Integration Lecture 2 Institutions

Contribution vs. GDP, 1999, 2000 Theory and Politics of European Integration Lecture 2 Institutions

Contribution vs GDP, 1999, 2000 Theory and Politics of European Integration Lecture 2 Institutions • Percentage of GDP per member is approximately 1 per cent regardless of per-capita income. • EU contributions are not ‘progressive’, e.g. richest nation, (L) pays less of its GDP than the poorest nation (P).

Net Contribution by Member Theory and Politics of European Integration Lecture 2 Institutions

Part II: Decisionmaking Theory and Politics of European Integration Lecture 3 Decisionmaking

What are the questions? Theory and Politics of European Integration Lecture 3 Decisionmaking • Which level of government is responsible for which task? • Why centralize, why decentralize? What are the trade-offs? • Which task at which levels? • How efficient and fair are the EU’s decision rules? • Ability to act • Distribution of power

Task allocation Theory and Politics of European Integration Lecture 3 Decisionmaking • Typical policy areas: • foreign policy • school curriculum • speed limit • trade policy • Typical levels • local • regional • national • EU / supranational • Task allocation (“compentencies” in EU jargon)

The subsidarity principle Theory and Politics of European Integration Lecture 3 Decisionmaking • Before looking at the theory, what is the practice in EU? • Task allocation in EU guided by “subsidarity” principle (Maastricht Treaty) • Decisions should be made as close to the people as possible • EU should not take action unless doing so is more effective than action taken at national, regional or local level • Background: “creeping competencies” • Range of task where EU policy matters was expanding. • Some Member States wanted to discipline this spread.

Recall: three pillars and task allocation (lecture 2) Theory and Politics of European Integration Lecture 3 Decisionmaking • 3 Pillar structure delimits range of: • Community competencies (tasks allocated to EU). • Shared competencies (areas were task are split between EU and member states). • National competencies. • 1st pillar is EU competency. • 2nd and 3rd are generally national competencies • details complex, but basically members pursue cooperation but do not transfer sovereignty to EU.

Theory: Fiscal federalism Theory and Politics of European Integration Lecture 3 Decisionmaking • What is optimal allocation of tasks? • Basic theoretical approach is called “Fiscal Federalism”. • Name comes from the study a taxation, especially which taxes should be set at the national vs. sub-national level.

Fiscal federalism: The basic trade-offs Theory and Politics of European Integration Lecture 3 Decisionmaking • What is the optimal allocation of tasks? • There is no clear answer from theory, just list of trade-offs to be considered. • Diversity and local informational advantages • Diversity of preference and local conditions argues for setting policy at low level (i.e. close to people). • Scale economies • Tends to favour centralisation and one-size-fits-all to lower costs. • Spillovers • Negative and positive spillovers argue for centralisation. • Local governments tend to underappreciated the impact (positive or negative) on other jurisdictions. • Examples: defense (positive), VAT (negative)

Fiscal federalism: The basic trade-offs (cont.) Theory and Politics of European Integration Lecture 3 Decisionmaking • Democracy as a control mechanism • Favours decentralisation so voters have finer choices. • Jurisdictional competition • Favours decentralisation to allow voters a choice.

Closer look at the trade-offs Theory and Politics of European Integration Lecture 3 Decisionmaking

Theorie und Politik der Europäischen Integration