Outline of EC301 Lecture on the European Union
Historical precedents - empires, Prussian Zolverein
Aristide Briand in 1920's - "federal links" for European states
U.S. view in FDR's administration:
Interventionist approach to "save capitalism from itself"
Cordell Hull and the link between trade and peace
1944-46 Creation of the Benelux Free Trade Area
1948-52 Marshall Plan required participating European governments to organize and cooperate to ensure funds weren't wasted.
In France, coalition of Gaullists and Federalists (e.g., Jean Monnet) - views towards US
1951 Treaty of Paris - European Coal and Steel Community (ECSC)
German Ruhr coal fields for French industry
Six countries - France, Germany, Italy, and Benelux
American encouragement even though ECSC was against U.S. domination
US unsuccessfully encouraged UK to participate,
But UK had just nationalized coal industry
1957 Treaty of Rome - European Economic Community (EEC) of "inner six"
common market (no internal tariffs on goods)
supranational institutions
Common External Tariff (CET) in 1960s to prevent trading around high tariffs
Common Agricultural Policy (CAP) - high food prices
UK had low tariffs on food and did not want to participate in CAP
Joint Float Agreement - 2.25% bands on internal currency fluctuations - failed
1960 European Free Trade Area (EFTA) for "outer six"
UK, Denmark, Sweden, Norway, Austria and Portugal - gradually added more countries
no CET or CAP
UK changed its mind about the EEC, but the French opposed their entry
1973 UK finally joined EEC, together with Denmark and Ireland
EEC moved one step further in political integration, and became European Community (EC)
1979 European Monetary System (EMS) revived that Joint Float Agreement
made it workable with creation of European Currency Unit (ECU)
and Exchange Rate Mechanism (ERM) - which tied monetary policy to exchange rates
1981-86 EC added Greece, Portugal and Spain, now the "Twelve"
European Internal Trade, adjusted for inflation, was nine times higher in 1986 than in 1958
European External Trade was 4 times higher, and by 1987 Europe traded more externally than either the US or Japan.
1987 Single Europe Act - 282 directives for removing economic barriers

1991 Maastricht Treaty - goal of unified Europe

three "pillars" of cooperation/integration
(1) economic
(2) foreign policy / national security
(3) justice and home affairs
+ fourth pillar of social cooperation not applied to UK
timetable for free flow of labor, capital, monetary union
1992 European Financial Crisis
German interest rates caused UK, Spain, and Portugal to withdraw from the ERM
Problem of independent fiscal and monetary policies - not possible with fixed rates
1993 European Union (EU) created
Political instutions include European Council of top leaders, Commission, Council of Ministers, Parliament, Court of Justice, et cetera.
Fears of a "fortress Europe"
1995 Austria, Finland, Sweden added
may eventually grow to 25-30 countries
1999 European Monetary Union
European Central Bank - dominated by Deutschmark, and thus by the DBB
Convergence criteria to remove outliers relative to best performers:
  • sustained low inflation
  • low budget deficit
  • sustained stability in ERM bands
  • low interest rates
    • 1995 - only Germany, Ireland, and Luxembourg met all four criteria
    1997 launch delayed until 1999
    Possible effects of the "Euro" on the US Dollar
     
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