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The Euro: How a Common Currency Helped Europe Achieve Peace

The Euro: How a Common Currency Helped Europe Achieve Peace


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It could have been a disaster: runs on banks, uncashed checks, confusion at the counter. But by all accounts, the European Union’s switchover from a rainbow of different currencies to a single currency, the euro, was so orderly it was downright dull.

“The boring thing about the euro is that everything is working so well,” a German retailer told the New York Times in late January 2002, a few weeks after 8.1 billion euro notes flooded the market.

The transition may have been quick and quiet. But the road to a common European currency was a bumpy ride from economic confusion to eventual unity. Here’s a brief history of the money that has come to define the hopes of the European Union.

A vision of peace led to the first economic union in Europe

It all began with the Treaty of Paris, a 1951 treaty negotiated in the aftermath of World War II. Officials at the time worried that hyperinflation and economic instability similar to that experienced by Germany after World War I might ensue. So European nations decided to band together not just to stabilize their economies, but minimize the chance of another devastating war.

In 1951, the treaty established the European Coal and Steel Community, which united steel and coal production in France, West Germany, Belgium, Luxembourg, and the Netherlands. Since France and Germany had long been enemies, it was thought that pooling the production of two materials essential to waging war would essentially make fighting one another impossible. It also created a common market for those commodities, kicking off the slow movement toward a common currency that would follow over the next half-century.

In 1957, the Treaty of Rome created the European Economic Community, a common market which gradually eliminated customs and other trade barriers between the six nations. In 1967, both groups merged with the European Atomic Energy Committee to form the Commission of the European Communities, which was joined by other European nations throughout the years.

Economic volatility made currency reform more important than ever

Europe was peaceful, and the currency of its various nations stable, for now. Common market countries grew more prosperous over the 1950s and early 1960. But the late 1960s threatened that newfound prosperity when international currency began to experience large swings in value.

The EEC created a working group to try to figure out if it was viable to unite economically and monetarily, and in 1970 the Werner Report, named after the group’s chair, Luxembourg’s prime minister Pierre Werner, recommended that Europe adopt a single currency within a decade. It was a plan designed to help the region achieve economic equilibrium, but as the world economic crisis deepened, it was largely abandoned as each country grappled for monetary stability.

It took decades for a plan to emerge

Europe wanted a single currency, but it took until 1989 for a serious plan to emerge again. The European Communities commissioned its president, Jacques Delors, to head a group that would figure out a plan for monetary unification. Its report proposed a clear road to a single currency, and in 1992, the Maastricht Treaty clearly defined what European unity would mean, and gave the European Union a new name.

Under the treaty, progress toward the currency meant three stages: introducing free movement of capital between member states, increasing cooperation between states and their central banks, and gradually introducing a single currency and monetary policy. The treaty also laid out how new member states could join the union and set criteria for using the currency, like having stable levels of public debt and inflation.

How the currency got its name

The legal framework for a common currency had been built. But the specifics of the currency itself still needed to be hashed out—including what to call it. “The name of the single currency must be the same in all the official languages of the European Union, taking into account the existence of different alphabets; it must be simple and symbolize Europe,” the European Council wrote in 1995.

Enter Germain Pirlot, a Belgian professor and esperantist who thought that the currency should reflect the people who would use it. He wrote to the commission’s president in 1995 suggesting the name “euro.” In 1995, it became the official name of the currency, and the European Council chose the symbol €. The symbol "was inspired by the Greek letter epsilon (Є), a reference to the cradle of European civilization,” the commission writes. “It also stands for the first letter of the word ‘Europe’ in the Latin alphabet, while the two parallel lines running through the symbol signify stability.”

With a name in place, the Euro countries set a date for its introduction in electronic form (for banking and electronic transmission): midnight on January 1, 1999. Starting then, each participating country began to phase out its currency, working against set deadlines.

A high-minded design—and an orderly rollout

On January 2, 2002, euro banknotes and coins began to circulate. Luc Luycx, a Belgian designer, won an international competition to design the common side of each coin. They feature maps of Europe, and each euro country contributes national sides that feature various figures and facets of their countries. The banknotes were designed by Robert Kalina of Austria and feature architectural features from different phases of European history. The gates, windows, bridges and archways on the notes don’t show actual buildings, but symbolize openness and cooperation. Starting in 2013, a refreshed series of banknotes has been sent into circulation. It features an updated map of Europe and better safety features.

The rollout was relatively smooth, despite the refusal of some countries, like the United Nations and Denmark, to use the currency and strikes by disgruntled bankers in both France and Italy. Meanwhile, reported CBS News, people exchanged hoards of money they had been hiding for years and bestowed piles of old money on churches as offerings to offload their old coins. The public had to be taught not just to recognize the new currency, but to determine whether the coins and banknotes were counterfeit and figure out what it was worth compared to their old currency.

“As soon as I switched to the single currency, I converted all my money into euros and tried to think only in that currency,” said Germain Pirlot, the professor who suggested the currency’s name, in 2007. He called the conversion “a simple gymnastics of the mind” and encouraged his fellow Belgians to think in euros, not francs, abandoning the complicated math that went into understanding how much the currency might be worth.

Will the euro survive?

The euro was supposed to usher in a new age of economic stability, but it has had its share of ups and downs. Beginning in 2009, the world began to realize that Greece, a eurozone member, might default on its debt. The prospect of one or multiple countries leaving the economic alliance unsettled the international markets, and the European Union was criticized for standardizing only its currency, not its financial systems. The EU bailed out multiple countries, but the future of the economic alliance is still an open question.

“Although they described the project in grand terms, Europeans set about creating an “incomplete monetary union,” one that had a common monetary policy but lacked the fiscal safeguards to dampen booms and recessions,” writes economist Ashoka Mody for Quartz. “Within this incomplete structure, conflicts involving the conduct of monetary and fiscal policy were bound to arise.”

With Brexit on the horizon, the future of the eurozone is still unclear. But the ubiquity of the euro is not. Today, nearly 1.2 trillion euro are in circulation, and the currency has been more valuable than the dollar for nearly two decades. Europe’s risky gamble on a common currency may still pay off. Until then, it pays for the practicalities and pleasures of 19 members of the EU—one ambitious coin, banknote, or wire transfer at a time.


Economic and Monetary Union of the European Union

The Economic and Monetary Union (EMU) [1] is an umbrella term for the group of policies aimed at converging the economies of member states of the European Union at three stages. The policies cover the 19 eurozone states, as well as non-euro European Union states.

Each stage of the EMU consists of progressively closer economic integration. Only once a state participates in the third stage it is permitted to adopt the euro as its official currency. As such, the third stage is largely synonymous with the eurozone. The euro convergence criteria are the set of requirements that needs to be fulfilled in order for a country to join the eurozone. An important element of this is participation for a minimum of two years in the European Exchange Rate Mechanism ("ERM II"), in which candidate currencies demonstrate economic convergence by maintaining limited deviation from their target rate against the euro.

Nineteen EU member states, including most recently Lithuania, have entered the third stage and have adopted the euro as their currency. All new EU member states must commit to participate in the third stage in their treaties of accession. Only Denmark, whose EU membership predates the introduction of the euro, has a legal opt-out from the EU Treaties granting an exemption from this obligation. The remaining seven non-euro member states are obliged to enter the third stage once they comply with all convergence criteria.


Three bodies run the EU. The EU Council represents national governments. The Parliament is elected by the people. The European Commission is the EU staff. They make sure all members act consistently in regional, agricultural, and social policies. Contributions of 120 billion euros a year from member states fund the EU.

Here's how the three bodies uphold the laws governing the EU. These are spelled out in a series of treaties and supporting regulations:  

  1. The European Commission proposes new legislation. The commissioners serve a five-year term.  
  2. The European Parliament gets the first read of all laws the Commission proposes. Its members are elected every five years.  
  3. The European Council gets the second read on all laws and can accept the Parliament’s position, thus adopting the law. The council is made up of the Union’s 27 heads of state, plus a president.  

The Role of the EU in Peace and Security

Spring 2012 brought to a close the 3-year project on Changing Multilateralism: The EU as a Global-Regional Actor in Security and Peace (or EU-GRASP). Under the coordination of UNU-CRIS, this project brought together a consortium of nine partners from across the globe to examine the changing notions and practice of multilateralism and security.

The objective was to assess the current security activities of the European Union (EU) at different levels of cooperation — ranging from bilateralism to inter-regionalism and multilateralism — and their inter-linkages.

The policy brief “Multilateralism Today: What Role for the European Union in the Field of Peace and Security” outlines the key findings of the project. The brief develops an analysis of the role of the EU as a global-regional actor in peace and security.

Multilateralism today

Multilateralism is far from being a novel concept. Originally, multilateralism was instituted as a form of cooperation among sovereign states, which are the building blocks of any multilateral arrangement or enterprise. However, today’s increasing diversification of multilateral actors and of multilateral playing fields means that this conception of international relations no longer accurately depicts reality.

The United Nations (UN), as the paramount organization at the international level, represents the primary platform for multilateral cooperation. This, however, does not preclude other organizations from playing a role. Regional organizations have the potential to ease the burden on the UN and play a role of international reach, for example in peace and security operations. The position of the EU is analysed within this framework.

The role of the EU in peace and security

Since the creation of Europe, security and defence concerns have been both of primary importance and highly controversial. Early attempts to set up a defence union were largely unsuccessful. New security threats arising at the end of the cold war provoked a renewed interest in security and defence-related issues.

Three determinants shape the role and influence of the EU as a global-regional actor in peace and security:

  • Capacity (institutional, material, human and operational, and financial) to undertake missions
  • Willingness to devote resources to security and defence purposes, mainly driven by member states’ priorities and
  • Acceptance (internal and external) of the EU as a leading actor in peace and security.

Capability

The EU’s capacity to undertake missions is influenced not only by its resources but also by the level of sophistication of its command structures.

First, the institutional security and defence framework of the EU has undergone many reforms in the past two decades. The Treaty of Maastricht (1992) established the Common Foreign and Security Policy (CFSP) with the ambitious goal of coordinating EU member states′ foreign policies. The European Security and Defence Policy (ESDP) has been developed as part of the CFSP.

While the merits of the policy must be acknowledged, the effectiveness of the ESDP was hampered by numerous inconsistencies.The Treaty of Lisbon (2007) was a relevant answer to a number of them. It renamed the ESDP as the Common Security and Defence Policy (CSDP). These developments promise a strengthened EU institutional framework, endowing it with strengthened capabilities in terms of political control and strategic command.

However, the EU still sorely lacks military planning capability, The establishment of the Permanent Structured Cooperation has stalled. Moreover, the absence of a common operational structure for coordination on the ground remains a pressing issue.

Also, CSPD’s narrow reactive focus on crisis management negatively impacts on the efficiency of its military interventions. CSDP operations would benefit from a comprehensive contingency planning capability invested with three crucial tasks besides intervention, namely knowledge and anticipation, prevention, and deterrence.

Thirdly, the EU’s defence budget is important, and its financial contributions to UN peace missions are considerable. However, the ongoing budget cuts might generate problems in the future if they are uncoordinated.

Willingness

The second dimension that conditions action is the willingness to act. Willingness relates to the power that member states entrust upon the EU. Common security and defence policies fall under the EU’s intergovernmental pillar, which implies that member states are the main responsible actors for decision-making and policy output.

Thus, one has to keep in mind that member states, while committed to the purposes of the Union, remain driven by their national agenda. The diverging interests of EU member states make it difficult to reach a common strategic position at the European level.

While the very preferences of the EU member states are unlikely to be easily altered, strong and coordinated European institutions have the potential to shape the member states’ behaviour and influence their willingness to involve financial and military assets. Indeed, the link between levels of willingness and the eventual deployed capacity is arguably strong.

Germany provided an outstanding illustration thereof in the intervention in Libya, being conspicuous for its absence from the operations. This continued reluctance to resort to military force is rooted in Germany’s past and history of military debacles, and is now part of its foreign policy strategy.

Acceptance

The third factor, relates to the importance of the acceptance of the EU’s actions and its potential to play a relevant role in maintaining global peace and security. The support of European citizens is of utmost importance, as it provides the EU with leverage in terms of authority at the global level, as well as positively influencing member states’ willingness to engage their resources in EU entreprises.

A relevant example thereof is again provided by Germany. The context of probable low levels of citizen support for a forceful intervention in Libya conditioned the country’s willingness to take part in the military operation. The ineffectiveness of the Union can therefore not be entirely attributed to the institutional configuration of the EU, and the responsibility of every member states shall not to be overlooked

However, looking exclusively inwards is insufficient. For the EU to establish itself as a globally recognised leader, its acceptance by external actors and international organizations is essential. Effectiveness and consistency are highly relevant in this context, as bad performance will cast doubts about the EU’s capacity and willingness and will negatively impact on both external and internal acceptance.

Given the complexity of the EU context and framework for external action, institutional reforms and advancements must be promoted, as much remains to be done to make the EU a coherent capable, willing and accepted global player.

The EU and the “‘triple F’ strategy

The “triple F” strategy recommends the EU to be “flexible” in its strategic approaches towards the increasing number of relevant actors, “focused” with regards to its battles in order to be efficient in the tasks it has committed to, and “fast” in taking important decisions despite its internal diversity.

Flexible

The EU has been criticized for its tendency to adopt a one-size-fits-all strategy, often taking insufficient account often taken of the internal dynamics and particular contexts of the partners it engages with. Therefore, the EU should adopt a flexible approach in its relations with the outside world. This will also contribute to enhancing confidence and trust among its partners.

The EU, as a regional organization, has had a tendency to emphasize inter-regional dialogue. This has led to successful achievements and should be continued. However, the EU should adopt (tailored) strategic approaches that would allow it to interact with the wide variety of actors that make up the international environment.

Focused

The EU clearly aspires to become an ubiquitous player in the field of peace and security. This is commendable. However, as demonstrated above, the EU has not yet fully developed its capacity to deploy and coordinate peace missions worldwide. Therefore, the EU should be more Focused in its choices in order to maximize its strengths.

A rational direction for the EU would be to focus on its direct neighbourhood, including the Balkans, the Caucasus and North Africa. This is for reasons of geographical proximity, since instability in the EU’s immediate neighbourhood has inevitably negative side-effects on the EU’s order, and, because the EU is likely to be efficient in swift deployments, as it has resources and personnel situated near the regions prone to disorder. Relevant operational experience and knowledge gained in the EU’s immediate neighbourhood give hope to further successful developments. These factors can account for increased credibility and legitimacy.

Finally, the enlargement of the EU to its present strength of 27 members bodes well for the organization. However, experience has demonstrated the difficulty for such a large group to reach common decisions given differing interests, especially when it comes to sensitive security issues.

In this regard, it is tempting to suggest that core decision-making in the EU should be left to a group of states taking the lead, as France and UK did in favour of an intervention in Libya. While this may reveal the lack of internal cohesion, it may in the short-term help prevent stalemate and impasses.

This option may enhance EU’s decision-making processes and will mean that decisions are reached much faster. It would, however, be naïve to assume that Fast is an easy option. To start with, choosing the group of states deemed competent to take decisions on behalf of the whole EU is likely to be a highly controversial issue.

Nonetheless, it is possible that with increased promotion of common values by EU institutions and dialogue and coordination among member states, the EU decision-making process can become more expedient. Thus, for now, the EU should focus on developing mechanisms that can help it achieve a faster turn-around time in decision-making.

Conclusion

A successful application of the advocated “triple F” strategy may have positive implications on the three determinants that shape the role and influence of the EU as a global-regional actor in peace and security. The EU would potentially strengthen its role in the maintenance of international peace and security and enhance its credibility and legitimacy. This, in turn would increase internal and external acceptance of EU’s external engagement and international role.

Internal support would ideally translate into a strong willingness on the part of member states to contribute to the peace and security goals of the EU. This would then contribute to strengthening the capability of the EU to deploy important peace and security missions. To complete this virtuous circle, a Union that performs successfully as a global and regional peace and security actor will inevitably gain legitimacy and credibility.

For more information on the EU-GRASP project and to access key publications.

EU-GRASP partners were: UNU-CRIS, University of Warwick (UK), University of Gothenburg (Sweden), Florence Forum on the Problems of Peace and War (Italy), KULeuven (Belgium), Centre for International Governance Innovation (Canada), Peking University (China, Institute for Security Studies (South Africa) and Ben-Gurion University of the Negev (Israel).


The European Coal and Steel Community

The establishment of international organizations provided a measure of American protection. But what about the future of Western European states? Both the First World War and the Second World War occurred in large part because of Franco-German conflicts. Creating a stable Europe required reconciliation between France and Germany.

One of the major obstacles to Franco-German reconciliation after the war was the question of coal and steel production. Coal and steel were the two most vital materials for developed nations the backbone of a successful economy. Coal was the primary energy source in Europe, accounting for almost 70% of fuel consumption. Steel was a fundamental material for industry and to manufacture it required large amounts of coal. Both materials were also needed to create weapons.

The largest concentration of coalmines and steel production was found in two areas in Western Germany: the Ruhr Valley, and the Saarland. The Allies detached the Saarland from West Germany and made it a semi-autonomous region. In the Ruhr Valley, the Allies placed restrictions on the production, ownership and sale of coal and steel in an attempt to restrict German economic growth. The Ruhr Valley coal and steel production was also restricted as a guarantee to Germany’s neighbours, France, Luxembourg, Belgium and the Netherlands, that these crucial resources would not be used to re-create a Germany army.

France wanted to control and access the coal and steel in the Ruhr Valley and wanted the Saarland permanently separated from West Germany. The French government was especially worried that West Germany could use its massive coal and steal resources to attack France once again. West Germans, under the leadership of Chancellor Konrad Adenauer, who was elected in 1949, wanted the Saarland returned to Germany and objected to the strict controls placed on Germany heavy industry. The Franco-German conflict persisted over coal and steel. A reconciliation of the two former enemies seemed unlikely.

French Foreign Minister Robert Schuman

The solution to the coal and steel problem and the core of the reconciliation between France and Germany was the Schuman Plan, named after the French Foreign Minister Robert Schuman. The Schuman Plan was presented on 9 May 1950. It argued that coal and steel production should be placed under a supranational High Authority. Following shortly after Schuman’s declaration, the negotiations that established the European Coal and Steel Community began. The European Coal and Steel Community (ECSC) pooled the coal and steel resources of six European countries: France, Germany, Italy, Belgium, the Netherlands, and Luxembourg (BENELUX). These countries would be collectively known as “the Six”. Pooling coal and steel resources greatly reduced the threat of war between France and West Germany. The ECSC became a reality in 1952.

The author of the Schuman Plan was another Frenchman, Jean Monnet a bureaucrat in the French government. Monnet had worked at the League of Nations between the World Wars and was committed to the goal of a United States of Europe. Monnet was also the first President of the ECSC. For Monnet, and for Schuman, the ECSC was to be the first step in creating an federal Europe.

Click here to proceed to the European Economic Community the next step in integration.


Chapter 9 - Cozy Global Business

A. Agreements designed to promote freer trade within regions have failed to produce gains from trade for all member countries.

B. World Trade Organization members are not required to notify the organization of any regional trade agreements in which they participate.

C. Regional economic integration is good for consumers because it lowers prices.

D. Regional economic integration benefits producers because they do not have to adapt to a more competitive environment.

D. Foreign exchange market

A. Factors of production are allowed to move freely between member nations.

B. Each member country is allowed to determine its own trade policies with regard to nonmembers.

C. Member nations are required to have a common currency.

D. Member nations are required to have a common monetary and fiscal policy.

A. The emphasis of EFTA has been on free trade in agricultural goods.

B. Industrial goods were left out of the trade arrangement, each member being allowed to determine its own level of support.

C. Members cannot determine the level of protection applied to goods coming from outside EFTA.

D. It was founded by those western European countries that initially decided not to be part of the European Community.

A. Absence of a common external trade policy with regard to nonmembers

B. Free movement of factors of production between member nations

C. Establishment of barriers to the free flow of goods between member nations

D. Lack of administrative machinery to oversee trade relations with nonmembers

A. There are restrictions on immigration, emigration, or cross-border flow of capital among member countries.

B. It entails less economic integration and cooperation than a common market.

C. It involves the free flow of products and factors of production among member countries.

D. It is defined as a central political apparatus that coordinates the economic, social, and foreign policy of the member-states.

C. An exclusive economic zone

A. International institutions such as the World Trade Organization have been moving the world away from a free trade regime.

B. The greater the number of countries involved in a free trade agreement, the fewer the perspectives that must be reconciled.

C. Coordination and policy harmonization problems are largely a function of the number of countries that seek agreement.

D. It is difficult to establish a free trade and investment regime among a limited number of adjacent countries as compared to the world community.

A. Linking neighboring economies increases the potential for violent conflict.

B. Free trade stimulates economic growth, which creates dynamic gains from trade.

C. Making neighboring economies increasingly dependent on each other fails to create incentives for political cooperation.

D. Countries can enhance their political weight in the world by grouping their economies.

A. The pressing need to have a common currency that would make trade between European and non-European countries easier

B. The need for a united Europe to deal with the United States and the politically alien Soviet Union

C. The economic lessons from the Great Depression that hit the United States in the 1920s

D. The success of the European Free Trade Association formed by Western European countries in 1960


1 The European Union in brief

The European Union (EU) is a unique economic and political union between 27 European countries.

The predecessor of the EU was created in the aftermath of the Second World War. The first steps were to foster economic cooperation: the idea being that countries that trade with one another become economically interdependent and so more likely to avoid conflict. The result was the European Economic Community, created in 1958 with the initial aim of increasing economic cooperation between six countries: Belgium, Germany, France, Italy, Luxembourg and the Netherlands.

Since then, 22 more countries joined (and the United Kingdom left the EU in 2020) and a huge single market (also known as the ‘internal’ market) has been created and continues to develop towards its full potential.

What began as a purely economic union has evolved into an organisation spanning many different policy areas, from climate, environment and health to external relations and security, justice and migration. A name change from the European Economic Community to the European Union in 1993 reflected this.

The EU has delivered more than half a century of peace, stability and prosperity, helped raise living standards and launched a single European currency: the euro. More than 340 million EU citizens in 19 countries now use it as their currency and enjoy its benefits.

Thanks to the abolition of border controls between EU countries, people can travel freely throughout most of the continent. And it has become much easier to live and work in another country in Europe. All EU citizens have the right and freedom to choose in which EU country they want to study, work or retire. Every EU country must treat EU citizens in exactly the same way as its own citizens when it comes to matters of employment, social security and tax.

The EU’s main economic engine is the single market. It enables most goods, services, money and people to move freely. The EU aims to develop this huge resource to other areas like energy, knowledge and capital markets to ensure that Europeans can draw the maximum benefit from it.

The EU remains focused on making its governing institutions more transparent and democratic. Decisions are taken as openly as possible and as closely as possible to the citizen. More powers have been given to the directly elected European Parliament, while national parliaments play a greater role, working alongside the European institutions.

The EU is governed by the principle of representative democracy, with citizens directly represented at EU level in the European Parliament and Member States represented in the European Council and the Council of the EU.

European citizens are encouraged to contribute to the democratic life of the EU by giving their views on EU policies during their development or by suggesting improvements to existing laws and policies. The European Citizens’ Initiative empowers citizens to have a greater say on EU policies that affect their lives. Citizens can also submit complaints and enquiries concerning the application of EU law.

As enshrined in the Treaty on European Union, ‘the Union is founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities. These values are common to the Member States in a society which pluralism, non-discrimination, tolerance, justice, solidarity and equality between women and men prevail’. These values are an integral part of the European way of life.

Human dignity must be respected, protected and constitutes the real basis of fundamental rights.

Being a European citizen also means enjoying political rights. Every adult EU citizen has the right to stand as a candidate and to vote in elections to the European Parliament, whether in their country of residence or country of origin.

Equality is about equal rights for all citizens before the law. The principle of equality between women and men underpins all European policies and is the basis for European integration. It applies in all areas.

The EU is based on the rule of law. Everything the EU does is founded on treaties, which are voluntarily and democratically agreed by its member countries. Law and justice are upheld by an independent judiciary. The EU countries have given final jurisdiction in matters of EU law to the European Court of Justice, whose judgments have to be respected by all.

Human rights are protected by the EU Charter of Fundamental Rights. These cover the right to be free from discrimination on the basis of sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation, the right to the protection of your personal data, and the right to get access to justice.

In 2012, the EU was awarded the Nobel Peace Prize for advancing the causes of peace, reconciliation, democracy and human rights in Europe.

EU Member States and institutions

At the core of the EU are the 27 Member States that belong to the EU, and their citizens. The unique feature of the EU is that, although the Member States all remain sovereign and independent states, they have decided to pool some of their ‘sovereignty’ in areas where it makes sense to work together.

In practice, this means that the Member States delegate some of their decision-making powers to the shared institutions they have created, so that decisions on specific matters of common interest can be made democratically at EU level.

Member States of the European Union in 2020

Several institutions are involved in making decisions at EU level, in particular:

  • the European Parliament, which represents the EU’s citizens and is directly elected by them
  • the European Council, which consists of the Heads of State or Government of the EU Member States
  • The Council, (also called the Council of the European Union) which represents the governments of the EU Member States and
  • the European Commission, which represents the interests of the EU as a whole.

The national parliaments of the Member States also play a role in taking decisions and making laws, as do two advisory bodies. These are the European Committee of the Regions, which consists of representatives of regional and local government, and the European Economic and Social Committee, comprising representatives of employees’ and employers’ organisations and stakeholders’ groups.

Generally it is the European Commission that proposes new laws and the European Parliament and the Council that adopt them.

The advisory bodies (the European Economic and Social Committee and the European Committee of the Regions) as well as the national parliaments are involved in the process by providing their opinions on the proposals, mainly from the perspective of the principles of subsidiarity and proportionality. Subsidiarity means that, except in the areas where it has exclusive powers, the EU only acts where action will be more effective at EU level than at national level. Under the principle of proportionality, the EU’s action must be limited to what is necessary to achieve the objectives of the EU treaties.

The Member States and the EU institution or institutions concerned then implement adopted EU laws. The third section of this publication contains more information on how the EU makes decisions, and how it implements them.

The EU treaties

Every action taken by the EU is founded on treaties that have been approved voluntarily and democratically by all EU countries. The treaties lay down the objectives of the European Union, and set out the rules for how the EU institutions operate, on how decisions are made and on the relationship between the EU and its Member States.

In certain specific cases, not all Member States participate in all areas of EU policy. For example, while the euro is the single currency of the EU as a whole, the euro area currently comprises only 19 Member States, while Denmark has an opt-out and the remaining countries do not yet meet the criteria for joining. 22 Member States are members of the Schengen area, which enables passport-free movement, with five maintaining their own border controls.

Looking ahead

To keep the European project on course, the 2016 State of the Union address by Jean-Claude Juncker, then President of the European Commission, presented a positive agenda for a Europe that protects, empowers and defends. This message was welcomed by the European Parliament as well as by the 27 EU leaders at the Bratislava Summit on 16 September 2016.

The work on the positive agenda continued with the Commission’s White Paper on the Future of Europe in March 2017, offering five scenarios for what the EU could look like by 2025. Following the White Paper, the Commission contributed to the debate with a series of thematic reflection papers offering different options for the EU in certain policy areas: the social dimension of Europe harnessing globalisation the deepening of economic and monetary union the future of European defence and the future of EU finances.

The years ahead offer both opportunities and challenges for the European Union. The European Parliament elections in 2019 and the extraordinary summit to discuss the future of Europe in Sibiu, Romania on 9 May 2019, provided the EU with the chance to renew its commitment to delivering on the issues that really matter to people.

Commission President Ursula von der Leyen has announced a Conference on the Future of Europe to give Europeans their say on how their Union is run, and what it delivers on. It will start in 2020 and run for two years, bringing together citizens of all ages from across the EU, as well as civil society and European institutions.


What does EU law cover?

Member states gave the EU different levels of authority over different areas, known as competencies:

  • Exclusive competencies are areas in which only the EU, not national governments, can pass laws. These include many of the core activities of the EU, including the customs union, business competition rules, trade agreements, and, for eurozone countries, monetary policy.
  • Shared competencies are those in which national governments can legislate, but only if the EU doesn’t already have related laws. This applies to the single market, which provides for the free movement of goods, services, people, and capital. It also applies to agriculture, regional development spending, transportation, energy, environmental and consumer protections, public health, and research and technology.
  • Supporting competencies are areas in which the EU can only bolster activities that have already been undertaken by member states. They include culture, education, sport, and many social policies.

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How a Country Joins the EU

For countries interested in joining the EU, there are several requirements that they must meet in order to proceed to accession and become a member state.

The first requirement has to do with the political aspect. All countries in the EU are required to have a government that guarantees democracy, human rights, and the rule of law, as well as protects the rights of minorities.

In addition to these political areas, each country must have a market economy that is strong enough to stand on its own within the competitive EU marketplace.

Finally, the candidate country must be willing to follow the objectives of the EU that deal with politics, the economy, and monetary issues. This also requires that they be prepared to be a part of the administrative and judicial structures of the EU.

After it is believed that the candidate nation has met each of these requirements, the country is screened, and if approved the Council of the European Union and the country draft a Treaty of Accession which then goes to the European Commission and European Parliament ratification and approval. If successful after this process, the nation is able to become a member state.


Tejvan Pettinger studied PPE at LMH, Oxford University. Find out more

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