Impact of European integration in its member






Submitted to; ERHAN ERCIN

You can contact me to:

Name: Makhsut

Surname: Zulufov

Number: 21-4295

Date: 10.06.2006





Prepared By:


June 2006




























This project does cover the topic of European Union by including the starting up of EU with its original three countries and bringing a concept of Benelux that combined from the initial letters of Belgium, Netherlands, and Luxembourg.

The map of the world has changed as European Nations decided to come together and found a common ground while they were in process. EU bloc has became one of the leading bloc and it says the role of those nations changed and nations eliminated barriers and established one concept of Single Market and Euro region which is region of transnational change on its continent.

Also this project covers main advantages and disadvantages of such union by giving a chance to European countries to have access to this entity. The aim is to achieve unanimity in all terms. However, they have not achieved last and further stage.



                 Synopsis…………………………………………………………………… …...4

        Introduction………………………………………………………………………………………… …..6


                    EU and its impact on its member state……………………………………………………. …..7

                    Brief information of history…………………………………………………….9

                    Rationality on eastward enlargement and candidacy of Turkey………………….. …10

                    Single Market…………………………………………………………………………….12


                 Stages of Economic Integration……………………………………………......13

        Single European Act 1986…………………………………………………......15

Maastricht Treaty (Treaty on EU)……………………………………………..15

Relation of Turkey and EU……………………………………………………16

Disadvantages of European Union…………………………………………….17

Advantages of European Union……………………………………………….18

Demographic problem…………………………………………………………21





      After World War II, showed the need to unify the people of Europe in a way that would minimize, but not destroy, national patriotism that was felt to be a cause of both World Wars. European countries realized that establishment of strong relationship is necessary for avoiding of a conflict and not to repeat it, which was in 1939-45. In this project I would like to express how European nations integrating on the continent or in other word a big peninsula of Europe, where 25 countries are united and became highly interdependent on each other because of Economic Union (Integration), which is the last and achieved stage (level) of integration, by excluding Political Union.

    In recent years the European Community has initiated structural changes such as the Single Market, which proceeded by Free Trade Area and Custom Union. However, world has witnessed more rapid and dramatic changes in Euro zone.

To bring out one more international currency of € (Euro), European countries have put too much of efforts which was really hard job. European countries have signed main several Treaties for establishment of Economic Integration.

First Treaty of EEC was Treaty of Paris, which set up the European Coal and Steel Community (ECSC), this Treaty was signed by six countries (Belgium, Netherlands, Luxembourg, France, West Germany, and Italy.)  

       The same six countries signed the Treaty of Rome, establishing the European Economic Community (EEC), better known as the Common Market. And later, these countries signed Single European Act (SEA).  And last stage is Economic and Monetary Union (EMU) which is the Maastricht Treaty. These Treaties have contributed to make such transnational change on the continent of Europe. As well as, international entity, which is European Union, has some advantages and disadvantages.











EU and its impact on its member states


        The European Union (EU) is a unique endeavor involving economic and political integration in the world today. Europe is conventionally considered one of the seven continents of Earth, which in this case, is more a cultural and political distinction than a physiographic one, leading to various perspectives about Europe’s borders. Physically and geologically, Europe is a subcontinent or large peninsula, forming the western most part of Eurasia and west of Asia. The European Union has 25 member states, an area of 3,892,685 km² and approximately 460 million inhabitants as of December 2004. The European Union's member states combined represent the world's largest economy by GDP, the seventh largest territory in the world by area and the third largest by population. The EU describes itself as an "a family of democratic European countries" though the extent of "European" has been a matter of debate, especially in relation to the possibility of the accession of Turkey.    

The main focus is on the Common Market and Monetary Union aspects of the European story. The Common Market has of course evolved and is evolving both in terms of membership and scope. The key developments were the Single European Act of 1986, the Maastricht Treaty on European Union of 1992 and the Treaty of Amsterdam of 1997. The Single Act set the community the basic task of completing the creation of Single European Market. The Maastricht Treaty transformed the relationship in a variety of ways.

        First, the European Economic Community is now referred to as the European Community since it covers social and cultural as well as economic matters. Second, the process of economic integration has now been pointed towards the ultimate destination of Economic and Monetary Union. Third, the whole complex of relationships has been given the title of the European Union. The Union’s task is not only economic, social and cultural integration; it also takes in the Common Foreign and Security Policy and what is now called Police and Judicial Cooperation in Criminal Matters. In short, integration has spilled over from economic to broadly political affairs.

       Economic Integration is a term used to describe how different aspects between economies are integrated. The basics of this theory were written by the Hungarian Economist Bela Balassa in the 1960s. As economic integration increases, the barriers of trade between markets diminish.  The most integrated economy today, between independent nations, is the European Union and its Euro zone.

European Integration is the process of political and economic (and in some cases social and cultural) integration of European (and some peripheral) states into a tighter bloc. The main and most powerful body of European Integration is European Union, (European Union is an intergovernmental and supranational union of 25 democratic member states from the European Continent. *

        A basic tension exists within the European Union between intergovernmentalism and supranationalism. Intergovernmentalism is a method of decision-making in international organizations where power is possessed by the member states and decisions are made by unanimity. Independent appointees of the governments or elected representatives have solely advisory or implementation functions. Intergovernmentalism is used by most international organizations today. An alternative method of decision-making in international organizations is supranationalism. In supranationalism power is held by independent appointed officials or by representatives elected by the legislatures or people of the member states. Member state governments still have power, but they must share this power with other actors. Furthermore, decisions are made by majority votes; hence it is possible for a member-state to be forced by the other member-states to implement a decision against its will.

Some forces in European Union politics favor the intergovernmental approach, while others favor the supranational path. Supporters of supranationalism argue that it allows integration to proceed at a faster pace than would otherwise be possible. Where decisions must be made by governments acting unanimously, decisions can take years to make, if they are ever made. Supporters of intergovernmentalism argue that supra-nationalism is a threat to national sovereignty, and to democracy, claiming that only national governments can possess the necessary democratic legitimacy. Intergovernmentalism is being favoured by more Eurosceptic nations such as the United Kingdom, Denmark and Sweden; while more integrationist nations such as the Benelux countries, France, Germany, and Italy have tended to prefer the supranational approach. The European Union attempts to strike a balance between the two approaches. This balance however is complex, resulting in the often labyrinthine complexity of its decision-making procedures. Supranationalism is closely related to the inter-governmentalist vs. neofunctionalist debate. This is a debate concerning why the process of integration has taken place at all. Intergovernmentalists argue that the process of EU integration is a result of tough bargaining between states. Neofunctionalism, on the other hand, argues that the supranational institutions themselves have been a driving force behind integration. **

           The EU was established under that name in 1992 by the Treaty on EU (Maastricht Treaty)). Through other institutions like Council of Europe also integrate their members states. The regions of Europe are integrated into larger Euro regions. (A Euro region is a form of transnational co-operation structure between two or more territories located in different European countries.)

Euro regions usually do not correspond to any legislative or governmental institution, do not have political power and their wok is limited to the competences of the local and regional authorities which constitute them. They are usually arranged to promote common interests across the border and cooperate for the common good of the border and cooperate for the common good of the border populations. Even though the Council of Europe sponsored term “euro region” means a similar thing, it should not be confused with the European Union sponsored term “regions in Europe”.

The European Union created regions of Europe as the layer of EU government administration directly below the nation-state level

       Regions of Europe are represented by the Committee of the Regions headquarters in Brussels.

             Reasons for this include;

  • Reflecting the historic and cultural claims for autonomy in many regions all over the EU
  • Strengthening the political and economic situation in those regions.

*#"#" title=Benelux>Benelux countries. This was accomplished by the Treaty of Paris, signed in April, 1951, and taking effect in July, 1952. **

        On 25March 1957 the governments of France, West Germany, Italy, the Netherlands, Belgium and Luxembourg signed the Rome Treaty and implemented on 1 January 1958. In so doing they agreed to create what came to be known as the Common Market or, more accurately, the European Economic Community. That institution has remained the movement towards closer union and economic integration in Europe. It was course accompanied by the creation of Euratom and had indeed been preceded by the European Coal and Steel Community of 1951. European Coal and Steel Community (ECSC) established with the pooling of production and consumption of coal and steel. And the on the same day the same six countries signed Treaty of Rome, establishing European Economic Community (EEC )in 1957). EEC better known as The Common Market, and the EURATOM Treaty  (European Atomic Energy Community), designed to promote and supervise the development for peaceful uses of nuclear and atomic energy, which was recognised as an essential resource. In 1973 the UK, Denmark and Ireland joined the origial six countries, followed by Greeced in 1981and then in 1986, by Spain and Portugal. In 1990 the reunion of East and West Germany was achieved, which effectively added another state to community. On 1st January 1995, Austria, Finland and Sweden joined to make a European Community of 15. *

After that EU was going on the way of enlarging in zone, population, economy and rest of all aspects, by giving access to other countries to apply for access to become a member of EU. On 1st January 2001 European Union become more in number after ten new states joined to EU entity, and in present time EU includes 25 states with new ten members; (Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia). However, by 1st January 2007 two new states will be joining to EU like Bulgaria and Romania.   

Context — rationale for enlargement and future prospects

Supporters of the European Union argue that the growth of the EU is a force for peace and democracy. They argue that the wars which were a periodic feature of the history of Western Europe have ceased since the formation of the European Economic Community (which later became the EU) in the 1950s. They also claim that in the early 1970s, Greece, Portugal and Spain were all dictatorships, but the desire of the business communities in these three countries to be in the EU created a strong impetus for democracy there. Others argue that peace in Europe since World War II is more due to other causes, such as the need for a unified response to the threat from the Soviet Union, a need for reconstruction after World War II, and a collective temporary tiring of waging war, and that the dictatorships cited came to an end for totally different reasons. In more recent times, the European Union has been extending its influence to the east. It has accepted several new members that were previously behind the Iron Curtain, and has plans to accept several more in the medium-term. It is hoped that in a similar fashion to the entry of Spain, Portugal and Greece in the 1980s, membership for these states will help cement economic and political stability. As the EU continues to enlarge eastward, the candidate countries' accessions tend to grow more controversial. As previously explained, the EU has finished accession talks with Bulgaria and Romania, and set an entry date for the two countries in 2007. However, the rejection of the EU Constitution by France and the Netherlands, and the EU's slow economic growth, have cast some doubt on whether the EU will be ready to accept new members after 2007, when Romania and Bulgaria are set to join EU (in early 2005 they signed the Accession Treaty). A further point of contention for EU members is the accession of Turkey.

      Accession preliminary talks between Turkey and the EU began in early October 2005. Turkey's Government, led by Prime Minister Recep Tayyip Erdoğan, has enacted many legal reforms to meet the EU's entry requirements. However, some member states, especially Austria, repudiate Turkey joining the EU, and the possible economic, immigration and cultural implications that may bring. It is also noted that the vast majority of Turkey's territory lies outside of what is commonly considered the continent of Europe.

          The ten new member states of Eastern Europe have enjoyed a much higher average percentage growth rate than their West European counterparts. With the exception of Malta not one state has had a GDP growth of less than 4%, putting these nations up with economies such as the US. Notably the Baltic states have achieved massive GDP growth, with Latvia topping 8.5%, close to China, the world leader at 9% on average for the past 25 years. Reasons for this massive growth include government commitments to stable monetary policy, export-oriented trade policies, low flat-tax rates and the utilization of relatively cheap labor. The current map of EU growth is one of huge regional variation, with the larger economies suffering from stagnant growth and the new nations enjoying sustained, robust economic growth. Although EU25 GDP is on the increase, the percentage of Gross world product is decreasing due to the emergence of economic powers such as China, India and Brazil.   In the medium to long term, the EU will be looking to increase GDP growth in the central European economies such as France, Germany and Italy and stabilize growth in the new Eastern European states to ensure sustained economic prosperity. *

Dating back the initial steps of union or inegration is clear in above statements how EU entity is being built up. It started by three countries and has no last point that can cover enlargement of Euro Zone. European Union tries to get new character of Federation. However, by analyzing each and single country of EU then we can see that are not so significant by own, but by unitting into one single entity they have cooperation, strong solidarity in front of rest of the world. GDP per capita of new accessed members are not so great but under one entity total possession of each member makes a great number that let EU to compete almost in all aspects as a bloc and in such way it is easier to compete and to combat in world market arena. European Union has a large economy, probably slightly larger than that of the United States of America with a 2005 GDP of 12,865,602 million vs. 11,734,300 million (USD figures) (using nominal US Dollar GDP) according to the International Monetary Fund.  Using the purchasing power parity method of computing GDP, the preferred comparative measure of economic output, the EU and the US economies are virtually the same size. As the EU has 50% more people than the US, but produces about the same economically, the average EU citizen enjoys a per capita share of domestic product of about USD $28,100, while in the US the per person GDP is over USD $40,000. It is estimated that in the period 2006-2020 the European Union's economy will grow at an average rate of 2.1% per annum, against the United States growing at an annual rate of almost 3.0%, however if growth is taken per head the figures are 2.5% per annum for the US and 2.0% for the EU. The EU set itself an objective under the Lisbon Strategy to make the European Union "the world's most dynamic and competitive economy" by the year 2010, but it is now generally accepted that this target will not be met. The significant challenges facing the EU economy include demographic issues like a low birth rate and aging population; while important strengths include the expected gains earned through enhanced free trade and high growth in newer EU members in particular. The European Union's economic growth has been below that of the United States most years since 1990, while its unemployment rate has generally been higher. Many point out that there are benefits accruing to EU citizens (the "social wage") that are not visible in traditional economic data - like enhanced time off from work, social protection and other benefits. In recent years, the economic performance of several of its key members, including Germany and Italy, has been a matter of serious concern to policy makers. Population and GDP per capita of EU member states and candidates. *

If considered a single unit, the European Union has the largest economy in the world with a 2004 GDP of 11,723,816 million USD using PPP equivalence. The EU economy is expected to grow further over the next decade as more countries join the union — especially considering that the new states are usually poorer than the EU average, and have the capacity to grow at a high rate. The European Council published estimations on 17 November 2005 that the economy of the European Union will have grown approximately 1.5% in 2005 (1.3% in the eurozone),and 2.3% 2006 (2.1% in the eurozone) comparing favorably to earlier low growth predictions. In the year of 2006 the eurozone made 4-5 milion new jobs. The European Council is hopeful that the European Union will grow further in 2006 and in 2007 (2.1% 2006 2.4% 2007). Germany, the largest economy in the EU, will grow about: 0.8% 2005, 1.2% 2006 and 1.6% 2007. After extremely slow growth, it seems that the EU will grow again in the next couple of years.

EU member states have agreed a program called Agenda 2010 which aims at making "the EU the world's most dynamic and competitive economy" by 2010.

       I think that European integration has a great impact to its members almost in all aspects. Some information above explains the beginning of EU and its economic integration condition, which is one of the leading and most successful economies on the planet. Today 25 countries of EU became together to be stronger and to have competitive advantage in market place and in the world arena. Member states joined to be in union and to be in unison almost in each and every act. As we analyze past time we can see that they had conflict and war between each other. However, situation that we see today is phenomenon and it fascinated whole world as those countries created Single Market and new currency of EURO appeared in half of international transactions in the world. Mostly all states have adopted EURO currency as an official currency of European Union. Such achievement took a long time and much efforts put with particular stages that used by states to improve relationship and membership. European Union has achieved four stages and last and further stage is Political Union which is not achieved yet. This is last and most advanced stage in process. Stages of Economic Integration are explained below after explanation of Single Market.


Single market (Treaty of Rome 1957)

Many of the policies of the EU relate in one way or another to the development

anmaintenanceof an effective single market. Significant efforts have been made to create harmonized standards – which are designed to bring economic benefits through creating larger, more efficient markets.

The power of the single market reaches beyond the EU borders, because to sell within the EU, it is beneficial to conform to its standards. Once a non-member country's factories, farmers and merchants conform to EU standards, much of the cost of joining the union has already been sunk. At that point, harmonizing domestic laws in order to become a full member is relatively painless, and may create more wealth through eliminating the customs costs. The single market has both internal and external aspects:

The original Rome of Treaty quite clearly provided for the creation of a common market.

·   Called for the elimination o internal trade barriers

·   Provided for the creation of a common external tariff

·   Required the member states to abolish obstacles to the free movement of factors. In order to facilitate this free movement of goods, services and factors of production

·   Provided for any necessary harmonization of member state laws

The Treaty of Rome is one of the treaties that forms the Community of European Member Sates known today as the EU. The main objective of the original Treaty was to achieve a single integrated market possessing the following features:  

·   Free movement between Member States of goods, unimpeded by customs duties and quantitative restrictions;

·   Free movement of labor;

·   Free movement of services;

·   Free movement of capital;

·   Trade protection where appropriate against non-Member countries by way of a common external tariff, ie a customs barrier, so that the same duty would be levied on goods coming into the Community regardless of which Member State imported the.

In 1957 the governments of France, West Germany, Italy, the Netherlands, Belgium and Luxembourg signed the Rome Treaty. In so doing they agreed to create what came to be known as the Common Market or, more accurately, the European Economic Community. That institution has remained the movement towards closer union and economic integration in Europe. It was course accompanied by the creation of Euratom and had indeed been preceded by the European Coal and Steel Community of 1951. *

                                  STAGES OF ECONOMIC INTEGRATION                         

·   There are stages which brought impact to the development of EEC. These stages came to existence after Treaty of Rome.

 Economic integration can take various forms and these can be ranged in a spectrum in which the degree of involvement of the participating economies, one with another, becomes greater and greater.

1.   The free trade area is the least onerous in terms of involvement. It consists of an arrangement between states in which they agree to remove all customs duties and quotas on trade passing between them. Each party is free, however, to determine unilaterally the level of customs duties on imports coming from outside area. It is first step toward improvement of economy. Several countries agreed to sell freely from one country to another. For example; NAFTA, OPEC, ASEAN and last is EFTA, which belongs to EU.

2.   The next stage is Customs Union. Here tariffs and quotas on trade between members are also removed but in addition the members agree to apply a common level of duty on goods entering the union from without. The latter is called the common customs, or common external, tariff.

3.   Next come the Common Market which is only one Common Market in the world belong to EU. Single Market is known as Common Market too, it has freedom in following;

·   Freedom of Labor

·   Freedom of Capital

·   Freedom of Persons

·   Freedom of Goods

And this technical term implies that to the free movement of goods within the customs union is added the free movement of the factors of production-labor, capital and enterprise.

4.   Finally there is the economic union. This is a common market in which there is also a complete unification of monetary and fiscal policy. There would be a common currency which would be controlled by a central authority and in effect the member states would become regions within union.  Euro is the official currency of EU. This stage is the further step in their stages for time being. EU has aim to include Political Union which is lies behind all these stages. However, for this time is not achievable. Once they gain it will carry a character of Federation of EU.


The Single European Act 1986

The Single European Act was a document signed in 1986 by the heads of state and later ratified by the parliaments of all Member States. It made the first post-signature amendments to the Treaty of Rome. The complete Act came into force in July 1987, although some sections took effect earlier. It was enacted in the UK in the European Communities Act 1986.

      The SEA aimed to provide impetus towards achieving the objectives of the original EC treaties, which were;

·   To transform the relations between Member States into a real European Union;

·   To achieve a common foreign policy;

·   To promote democracy;

·   To speak with one voice;

·   To protect the EC’s freedoms and human rights;

·   To extend common policies;

·   To facilitate the Commission’s exercise of its powers;

·   To work towards economic integration via Economic and Monetary Union (EMU);

·   To work towards the protection of the general and working environment.

Besides providing for speeding up the legislative process by introducing qualified majority voting, the SEA set out the common intention that the EC shall have as its objective to contribute together to making concrete progress towards European Union. *


Maastricht Treaty (Treaty on European Union)

   The Treaty on European Union (TEU) 1992 was for many the logical progression from the completed Internal Market.  This Treaty (known as Maastricht Agreement) marked a new stage in the process of creating an ever closer union among the peoples of Europe, where decisions are taken as closely as possible to citizens. The TEU concerned institutional reform and political union, together with the necessary amendments to the Rome Treaty, extending majority voting and strengthening the European Parliament. It incorporated the principle of Economic and Monetary Union (EMU), including issue of the single European currency and provisions relating to security.

Aims of TEU;

·   the promotion of an international identity leading possibly to a common defense policy

·   the establishment of a single currency in the context of Economic and Monetary Union (EMU)

·   reinforcement of environmental protection

·   a fund to promote cohesion in the context of economic and social progress, including improvement in the quality of life

·   the establishment of common citizenship

*(The Treaty of Rome, Single European Act and Maastricht, Sixth edition of EC/EU fact book Alex Roney p. 14)

·   the facilitation of free movement of people, not forgetting their safety and security **


Firstly, I want to say that EU has some other official candidates which is Croatia. It hopes to join in 2009. Also, Republic of Macedonia has been given official candidate status as of December 2005 under the name "former Yugoslav Republic of Macedonia".

Turkey and EU relations can be dated back as far as 1959, when Turkey applied for an association with the European Commission, thus on year after the enforcement of the Treaty of Rome.  Turkey is an official candidate to join the European Union. The Ankara Agreement which was signed in 1963. Additional protocol was also signed in 1970 which underlined two main documents. The first time was to ensure future Turkey’s Custom Union with EU, whiles the second was to find modalities to ensure Turkey’s full membership with the EU. It must be noted that Turkey’s long term dream of having Customs Union with the EU became a reality on 1st January.1996. In spite of the fact that Turkey is the only country to have reached such an advanced stage with the EU without necessary becoming full member it took then 32 years. This delay was mainly due to;

·   The huge economical gap existing between Turkey and the EU at that time

·   Also because of Turkey’s military intervention with Greece between 1960 and 1980s.

   According to the Article 24 of the GATT, Turkey now can import and export goods to and from EU without any restriction. However, Turkey should also apply the union’s common trade policy in dealing with other countries outside the EU. For the time been, the Customs Union covers only industrial and processed agricultural products, plans are, however, in advance to add traditional Agricultural products pending Turkey’s adaptation to the EU’s  Common Agricultural policy.

Turkey-EU association relations that guided Turkey’s foreign economic and commercial relations were culminated with the establishment of the Customs Union. The completion of the Customs Union is the most important development effecting Turkish economy since adoption of liberalization measures by the 1980s. The Customs Union with the EU is the most comprehensive element that contributes to strengthening Turkey’s expanding role as a business partner.

An important feature of the Turkey-EU Customs Union is that Turkey is the first and only country to enter into such an advanced form of economic integration without being a full member. As it is a unique case for the EU, there are several issues other than tariff reductions where Turkey and the EU agree to cooperate. 

Turkey started preliminary negotiations on 3 October 2005. However, analysts believe 2015 is the earliest date the country can join the union due to the plethora of economic and social reforms it has to complete. Since it has been granted official candidate status, Turkey has implemented permanent policies on human rights, abolished the death penalty, granted cultural rights to its large Kurdish minority, and taken positive steps to solve the Cyprus question. However, due to its religious and cultural differences, Turkey faces strong opposition from governments of some member states, including France, Germany, Austria and Cyprus. The Greek government has supported in principle the Turkish candidacy, while in practice linking its progress with the resolution of the long standing Cyprus dispute. Pope Benedict XVI, the head of the Roman Catholic Church, also opposes Turkey becoming a member state because of its predominantly Muslim population. *

          As well as, there are some cases where there are advantages and disadvantages of joining to European Union. EU is international entity where many states united and became as Union. In such cases all countries who are members of EU have sovereignty, independence, flag, nationality, background, culture, mentality, tradition and some other criteria which are not mentioned make a sense that they are different but in order to avoid preceded incidents of history, they have united to go hand in hand.

Items that I mentioned above and according to it disadvantages follow as:




      1.  The instability of the system.

      Throughout most of the 1980s the UK refused to join the ERM (Exchange rate

      mechanism). It argued that it would be impossible to maintain exchange

      rate stability within the ERM, especially in the early 1980s when the

      pound was a petro-currency and when the UK inflation rate was consistently

      above that of Germany. When the UK joined the ERM in 1990 there had been

      three years of relative currency stability in Europe and it looked as

      though the system had become relatively robust.


2.  Loss of Sovereignty.

      On the political side, it is argued that an independent central bank is

      undemocratic. Governments must be able to control the actions of the

      central banks because Governments have been democratically elected by the

      people, whereas an independent central bank would be controlled by a non

      elected body. Moreover, there would be a considerable loss of sovereignty.

      Power would be transferred from London to Brussels. This would be highly

      Undesirable because national governments would lose the ability to control



4.  Deflationary tendencies.

      Perhaps the most important economic argument relates to the deflationary

      tendencies within the system. In the 1980s and 90's France succeeded in

      reducing her inflation rates to German levels, but at the cost of higher

      unemployment, for the UK, it can be argued, that membership of the ERM

      between 1990 and 1992 prolonged unnecessarily the recessional period. This

      is because the adjustment mechanism acts rather like that of the gold

      standard. Higher inflation in one ERM country means that it is likely to

      generate current account deficits and put downward pressure on its

      currency. To reduce the deficit and reduce inflation, the country has to

      deflate its economy. In the UK, it could be argued that the battle to

      bring down inflation had been won by the time the UK joined the ERM in

      1990. However, the UK joined at too high an exchange rate. It was too high

      because the UK was still running a large current account deficit at an

      exchange rate of around 3 Dm to the pound. The UK government then spent

      the next two years defending the value of the pound in the ERM with

      interest rates which were too high to allow the economy to recover. Many

      forecasts predicted that, had the UK not left the ERM in Sept 1992,

      inflation in the UK in 1993 would have been negative (ie prices would have

      fallen).The economic cost of this would have been continued unemployment


      at 3million and a stagnant economy. When the UK did leave the ERM and it

      rapidly cut interest rates from 10% to five and a half %, there was strong

      economic growth and the current account position improved, but there was

      an inflation cost.

EU is not only economic and political union but traditional and cultural aspects includes as well. But today situation is changing and EU entity is going to influence it and gradually Political Union might be achieved by EU, then all values beliefs, cultures, traditions will be the same because might be presented as a one nation. According to my outlook these values and beliefs of each nation is important because, it what does motivates them as a nation (country), however the union drains them. From economy point of view is good to stabilize the economy but they ignore subjective matters as I have mention in previous statements but objectives matters have been achieved but have not finalized the union because Political Union not achieved, which is the hardest stage and further one.

However, if take into consideration other points, which are advantages then we can see also some advantages that EU benefits in fact. As follows:


  1. Transaction costs will be eliminated.

      For instance, UK firms currently spend about 1.5 billion sterling a year buying

      and selling foreign currencies to do business in the EU.

      With the EMU this is eliminated, so increasing profitability of EU firms.

      Advice to young people: You can go on holiday and not have to worry about

      getting your money changed, therefore avoiding high conversion charges.

  1. Price transparency

EU firms and households often find it difficult to accurately compare the

      prices of goods, services and resources across the EU because of the

      distorting effects of exchange rate differences.


  1. Uncertainty caused by Exchange rate fluctuations eliminated.

      Many firms become wary when investing in other countries because of the

      uncertainty caused by the fluctuating currencies in the EU. Investment

      would rise in the EMU area as the currency is universal within the area,

      therefore the anxiety that was previously apparent is there no more.

4.   Single currency in single market makes sense.

      Trade and everything else should operate more effectively and efficiently

      with the Euro. Single currency in a single market seems to be the way


5.  Rival to the "Big Two".

      If we look out in the world today we can see strong currencies such as the

      Japanese Yen and The American $. America and Japan both have strong

      economies and have millions of inhabitants. A newly found monetary union

      and a new currency in Europe could be a rival to the "BIG TWO".

      EMU can be self-supporting and so they could survive without trading with

      anyone outside the EMU area.

      The situation that EMU is in is good as it seems that it can survive on

      its own, with or without the help of Japan and U.S.A.

6. Prevent war.

      The EMU is, and will be a political project. It's founding is a step

      towards European integration, to prevent war in the union. It's a well

      known fact that countries who trade effectively together don't wage war on

      each other and if EMU means more happy trade, then this means, peace

      throughout Europe and beyond (we hope).

  1.  Increased Trade and reduced costs to firms.

      Proponents of the move argue that it brings considerable economic trade

      through the wiping out of exchange rate fluctuations, but as well as this

      it helps to lower costs to industry because companies will not have to buy

      foreign exchange for use within the EU. For them, EU represents the

      completion of the Single European Market. It is vital if Europe is to

      compete with the other large trading blocs of the Far East and North


  1.  The Political agenda.

      There is also a political agenda to European bank (the European System of

      Central Banks -ESCB), the complete removal of national control over

      monetary policy and the partial removal of control over fiscal policy.

      Individual nation states will lose sovereignty (i.e. the ability to

      control their own affairs). It will be a considerable step down the road

      towards political union.

  1. Inflation

      From the mid-1980s onwards, there were a number of economists and

      politicians who argued that, for the UK at least, EMU provided the best

      way forward to achieve low inflation rates throughout the EU. During the

      first half of the 1980s high inflation countries, such as France and Italy

      were forced to adopt policies which reduced their inflation rates to

      something approximating the German inflation rates to something

      approximating the German inflation rate. If they had not done this, the

      franc and the lira would have had to be periodically devalued, negating

      the fixed exchange rate advantages of the system. Effectively, the German

      central bank, the Bundesbank, set inflation targets and therefore monetary

      targets for the rest of the EU.


          In order to express whether EU has positive or negative points, we have to take in consideration both advantages and disadvantages of EU and it also depends upon point of view you are considering because of good and bad sides of integration. Behind Economic Integration there is logic to unite politically since EU wants to achieve Political Union we have to consider two sides of coin. And in this case I can say that Economic integration has both negative and positive sides. According to my opinion the union of EU is good because they strengthening economy and cooperate with each other. At the same time it is not good because each member states lose not only sovereignty but also some other matters which belong only to that nation, and can not represent themselves as independent states because they are tighten to each other. Moreover, EU with its member states concentrated on economical and political matters but not on values and beliefs of its citizens, of course they increase living standards of people by improving the economy but it is related materially but not subjective points, you can say it is not important, however, in fact those items make them feel whether he is British or someone else and Economic Integration might drain them. Europe and Western part have sexual harassment and consumption of alcoholic drinks increase in great number and much of fun that makes young generation lazy and keeps out of consciousness. Unless Europe reverses trend -- low birthrates it faces a bleak future of rising domestic discontent and falling global power. In case of rejecting of EURO currency by England, Denmark, and Sweden, these countries do not want to change their official currency, for instance, British people want to see their queen on their home currency because it motivates and makes them to have perception  of being British. Also Denmark and Sweden rejected EURO because own currency shows independence and political solidarity.





                                  DEMOGRAPHIC PROBLEM (Population is shriveling)




              It's hard to be a great power if your population is shriveling. Europe's birthrates have dropped well below the replacement rate of 2.1 children for each woman of childbearing age. For Western Europe as a whole, the rate is 1.5. It's 1.4 in Germany and 1.3 in Italy. In a century -- if these rates continue -- there won't be many Germans in Germany or Italians in Italy. Even assuming some increase in birthrates and continued immigration, Western Europe's population grows dramatically grayer. Now about one-sixth of the population is 65 and older. By 2030 that would be one-fourth, and by 2050 almost one-third, the trouble is that so much benevolence requires a strong economy, while the sources of all this benevolence -- high taxes, stiff regulations -- weaken the economy. With aging populations, the contradictions will only thicken. Indeed, some scholarly research suggests that high old-age benefits partly explain low birthrates. With the state paying for old age, who needs children as caregivers?  

High taxes may also deter young couples from assuming the added costs of children.
So in sentences which are above clearly explains us that financially situation is ok but for who Europe is uniting and to whom this economy will belong when there is neither sound generation with sound mind nor generation itself, too much sick young people. For who symbolized such transnational change in the continent of Europe?  *

Beside of aging of population Europe has problem with its generation. Europe is by the heaviest-imbibing region in the world, with alcohol consumption per head over twice the world average-11 L of pure alcohol per year. During the mid-1970s, as southern countries have slowly lost the habit of drinking throughout the day. But younger generation is yanking it up again.  Irish Minister of State Noel Ahern, speaking about his own country, captures the European trend: “People used to drink for enjoyment, but now many young people are drinking to get plastered. **

       Kids may think binge drinking is cool, but the hangover-in terms of health problems, crime and accidents causing death or disability-is huge. Spanish Health Minister Elena Salgado says that the number of hospitalizations from alcohol abuse has doubled in a decade. Martin Plant, an alcohol researcher at the University of the West of England, says that “people in their 20s are now dying of alcohol-related liver disease, and even teenagers are developing it”. British accidents and 47% of violent crimes, in Germany young people are drinking almost 30% more alcohol than four years ago.

Average age Europeans start drinking

ITALY; 12.2


E.U; 14.6

U.K; 14.8


GREECE; 17.2* **

In Spain, young girls are keeping up with the boys and drinking to get plastered; 82% of 14-to 18-year –olds say they drink regularly, and reckon they are drunk every 10 days.


This information is the fact about Europe before stating it I have said about the generation and to make my statement more reliable or authentic I mention about young people of EU and trend of youth is-wrong, plus administration of EU doest not take effective action according to it even if they do but is not really significant. Today EU’s young descendants do not take such progress between European nations.

So much consumption of alcohol causing not only death or disability, but it leads to unplanned sex, it spreads either sexual harassment or leads to many HIV (human immunodeficiency virus) that reducing population and healthy people.







EC/EU FACT BOOK, Sixth Edition                                                             Alex Roney (2000)                                                                                        





#"#">#"#">#"#">#"#_ftnref1" name="_ftn1" title="">[*] The Information Wave, by Peter Cochrane, taken from Information Superhighways, Academic Press

* #"#_ftnref3" name="_ftn3" title="">** #"#_ftnref4" name="_ftn4" title="">** #"#_ftnref5" name="_ftn5" title="">* Sixth edition of EC/EU fact book by Alex Roney p.3

* #"#_ftnref7" name="_ftn7" title="">* #"#_ftnref8" name="_ftn8" title="">* The Treaty of Rome, Single European Act and Maastricht, Sixth edition EC/EU fact book by Alex Roney p. 10

** The Treaty of Rome, Single European Act and Maastricht, Sixth Edition of EC/EU fact book of Alex Roney p.17


* #"#_ftnref12" name="_ftn12" title="">* The End of Europe By Robert J. Samuelson Wednesday, June 15, 2005; Page A25

* * Source: BBC online; British Crime Survey, published by Time, December 19, 2005,p.22


** * Source: Euro barometer, health, food and alcohol and safety, published by TIME, December 19,2005,p.23



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