Question 1.
The European Integration has undergone several changes to be what it is now. Several incidents and treaties marked the turning points for the EU in its infancy years to create a more stable and unified European cooperation. The Marshall Plan formed in 1948 consolidated democracy in Europe after the German defeat in the WW2 (Dinan 1122). The United States proposed the plan to speed up economic development in the transatlantic region. The plan saw the creation of the OEEC (Organization for European Economic Cooperation) liberalize trade and the Coal and Steel Community to oversee the extraction of coal in Germany and its sale in the global market (Dinan 1122). In 1958, the EEC (European Economic Community) emerged to enhance trade within the European region by creating a common market for all industrial goods (Dinan 1125). Several countries embraced the EEC while policies such as the SEA (Single European Act) came into force to launch a single market system. After that, The Maastricht Treaty transformed the EEC into the EU in 1992 (Dinan 1132). This treaty established a common monetary policy that provided a significant degree of integration within the EU. A proposed law to adopt a single Constitution for the EU failed to pass in 2004 after countries expressed fears that it would undermine national sovereignty. In 2010, however, the member states adopted the Lisbon Treaty to govern EU operations. In response, the treaty abolished the use of EU symbols such as the motto, flag and anthem.
Question 2.
A referendum occurs when the government of a country presents a legislative decision to members of the public, who either adopt or reject it. Some member countries of the EU hold a referendum the proposed EU policy is a constitutional matter or if the constitution requires that voters approve the decrees in a referendum (Tridimas). Such legal issues include questions of national sovereignty and governance. For instance, Ireland conducted a poll because its Supreme Court made a ruling in 1987 that considered any significant amendment to the EU treaty a change to the Constitution of Ireland (BBC News, "The Lisbon Treaty"). The Irish government perceived the Lisbon Treaty as a threat to its national sovereignty in matters concerning immigration, asylum, and visas. The downside of referendums includes high cost and unpredictable outcome. Besides, the voters may be ignorant of the proposed policies. In contrast, a parliamentary vote is appropriate where a proposed EU law does not cause significant changes in the constitution of member countries. Its advantages include fewer decision costs associated with a small number of legislators involved in negotiations and superior outcomes since the legislators are better informed about the policies (Tridimas). However, a parliamentary vote may be disadvantageous because legislators are susceptible to corruption and can implement policies to that serve their selfish interests and not their citizens. Of the two methods, a referendum is better because it is more consultative and gives citizens an opportunity to participate in decision-making. For this reason, a democratic deficit exists in the EU since the majority of member states prefer to adopt EU legislations through a parliamentary vote that denies the citizens of member countries to express their opinions. Most often, their representatives in the Council vote according to the dictates of the government of the day and not necessarily on behalf of their people.
Question 3a.
The Maastricht convergence criteria were the five preconditions that countries had to meet before joining the EU and adopting the euro. They constituted the Treaty of Maastricht of 1992 (Afxentious 247). One, the inflation must be 1.5 or fewer percentage points higher than the mean rate of three member countries that recorded the lowest inflation in the previous year (Gilmore). Two, the national budget deficit of the country must be 3% or less of the GDP. Three, the national public debt must be 60% or less of the GDP. Four, the long-term interest rate should be 2 or fewer percentage points higher than the mean of three member states with the lowest inflation in the previous year. Five, the national currency of the country must enter the ERM 2 exchange rate regime two years before joining the EU. The first three rules are monetary policies intended to ensure the stability of the fixed exchange rate system while the last two are fiscal policies meant to shield the euro from inflation induced by budget deficits. Among these five rules, only four became part of the Fiscal Compact. They include a deficit of 3% or less, a debt-to-GDP ratio of 60% or less, a structural deficit of 0.5% or less, and a structural deficit of up to 1% if the debt-to-GDP is way below 60% (Gilmore).
Question 3b.
Nineteen members of the EU constitute the Eurozone - they use the euro their currency. They include Cyprus, Greece, Slovenia, Slovakia, Latvia, Malta, Estonia, Germany, Lithuania, Belgium, Spain, Ireland, Italy, France, Netherlands, Luxembourg, Finland, Austria, and Portugal. The non-Eurozone members include Bulgaria, Hungary, Romania, Croatia, Czech Republic, Poland, and Sweden. The first four countries did not meet the economic preconditions for joining the EU but still have a chance to join at a later date if they so wish (European Commission). Czech Republic refused to accede to the EU out of the fear of property claims by German citizens chased away from Czechoslovakia after the end of WW2 (European Commission). Poland wanted to retain control over its national laws concerning morality and family issues whereas Sweden considered the Maastricht criteria too restrictive. Despite their misgivings, these countries have expressed a desire to joining the EU after the Union grants them certain guarantees regarding their areas of concern. However, the impending Eurozone crisis will impact their entry decisions given the intention of some member countries such as Germany and France to break up the EU. If these strong economies leave, the EU will crumble since investors will lose confidence in the euro currency.
Question 4a.
The Lisbon treaty of 2010 aimed at increasing transparency and efficiency in European integration by promoting the participation of EU citizens, establishing a new structure of EU institutions, and creating a more democratic decision-making process (Novak 1). The Treaty replaced the European Community with the European Union – a full legal personality with the power to sign certain international agreements with other countries or join international organizations on behalf of member states (Novak 2) the treaty created changes in the operation of several EU institutions. It established the European Parliament to represent the citizens of the member states as a whole rather than as separate residents of each country. The maximum number of members constituting the parliament is 751, distributed according to the size of the EU countries (Novak 3). The European Council has the mandate of identifying viable economic opportunities to provide the impetus for EU growth. It is also the main decision-making body, which determines the political direction of the Union. The High Representative (HR) office is in charge of defining a joint foreign affairs and security policy for the EU (Novak 3). The Council appoints the HR through a Qualified Majority Voting (QMV) system. The Council of Ministers is responsible for formulating and implementing both the legislative and non-legislative decrees. The approval for these statutes results through a QMV system. The EU Court of Justice has the role of prosecuting violations of the financial interests of the Union. Lastly, the Lisbon Treaty created the EU Commission to manage the daily affairs of the Union.
Question 4b.
The Qualified Majority Voting (QMV) is a voting system that requires the attainment of a double majority as a condition for approving legislations by the Council (Council of the European Union). The conditions for approval include a 55% majority vote of all member states and a minimum of 65% of the total population of the EU represented by member countries (Council of the European Union). The Council uses the QMV during ordinary legislative procedures to ensure that each member country and their citizens take part in decision-making. So far, 80% of existing EU laws are the outcome of the double majority rule. The QMV also determines the operations of the Council with regards to Special cases, abstention, and minority votes. A blocking minority to a proposal must consist of a minimum of 4 members of the Council, representing more than 35% of the population of the EU (Council of the European Union). Special cases are legislative decisions in which not all members of the Council take part in because of opt-outs by their countries in certain policy areas. Thus, a majority vote of such decisions must be 55% of the participating members, which represents a minimum of 65% of the population of the states that are party to such policies (Council of the European Union). Lastly, the QMV considers an abstention from voting as equivalent to a vote against a policy.
Question 5a.
The global financial crisis had far-reaching effects on the economies of many countries. It hit the economies of some nations in the Eurozone hard and pushed them to the brink of a financial collapse. A looming economic meltdown necessitated massive bailouts by the European Union. These interventions aimed at preventing the dire debt crisis in these countries from spreading to other member countries and triggering a Eurozone financial catastrophe. Five countries that received ballots included Spain, Portugal, Ireland, Cyprus, and Greece. While the government debt of Spain before the crisis was not excessive by normal economic standards, its banks, however, suffered massive loan defaults after the housing bubble collapsed. Mortgages, which formed the bulk of the loans, went unrepaid by debtors after the property market crashed and property prices fell. As a result, the banks suffered from an acute credit crunch that threatened to push them into bankruptcy. In response, the EU lent Spain a bailout of 41 billion euros to stabilize its financial system (Kottasova). Ireland and Cyprus also faced a possible economic meltdown due to the collapse of the property market. The two countries received bailouts of 67 and 10 billion euros respectively to restore stability in their banking systems (Kottasova). For Portugal, the economic failure stemmed from excessive budget deficit run by the government that necessitated a 78 billion euro bailout. These four countries have successfully managed to turn their economies around and now experience a steady growth in their GDP. In contrast, Greece remains in deep financial problems that arose from wanton spending by the government. Moreover, the government incurred substantial debts in its bid to host the Athens Olympics in 2004 while ignoring the rampant tax evasions in the country that culminated in budget deficit (BBC News, "Eurozone Crisis Explained"). To date, the country has received two bailouts of 110 billion and 130 billion in 2010 and 2012 respectively (BBC News, "Eurozone Crisis Explained"). Greece is yet to show any improvement in its financial situation, causing doubts as to whether it will continue being a member of the EU.
Question 5b.
While the 2008 financial crisis has passed, the debt crisis persists today as countries such as Greece and Italy struggle to service their debts. If this trend continues, a Eurozone breakup is likely to ensue since those members states with stronger economies fear a downward spiral on the value of the euro. The possible failure of Greece and Italy to repay their debt would set a risky precedent that would cause investors and creditors to doubt the ability of other heavily indebted member states to meet their obligations (BBC News, "Eurozone Crisis Explained"). This negative perception would cause investors to lose confidence in such countries and either stop purchasing their treasury bonds or offload their security holdings of these countries in the market and transfer their capital to member states with stronger economies to safeguard their investments. As a result, the indebted countries will lack the funds to repay creditors, further exacerbating their credit crunch problem. By facing severe liquidity constraints, the banks in such countries would have to write off their loans during a recession thereby undermining the stability of the entire Eurozone banking system and triggering a second credit crunch in the region that will affect even the stronger economies in the Union. Furthermore, more crises are likely to arise soon due to the use of a single currency that stifles the ability of the member states to adjust their national exchange rates and interest rates to correspond to market forces.
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