Theme 3. Essence of the eu common policies

Plan:

3.1. Essence and classification of the EU common policies

3.2. European internal|inlying| market and unification of economic|economical| policy|politics|

3.3. The EU budget as a basis|foundation| of common policies

3.4. The EU policies for citizens

Keywords: common policies of the EU, classification, horizontal policies, policies in different sectors of economy, external policies, common internal market, standardization, monetary policy, budget of the EU, tax policy, policies for citizens.

Literature: 1, 3, 6, 5.

Question and task:

1. Essence of common policies of the EU.

2. Kinds of common policies of the EU.

3. European internal market.

4. Four fridoms of the EU

5. «White-book» and «Green book».

6. Introduction of the common currency.

7. Budget of the EU.

8. Consumer Policy

9. Education and Cultural Policy

10. Employment Policy

11. Common Foreign and Security Policy (cfsp)

Case Studies:

Case 5 – Further euro-zone integration for EU

When Germany and France disagree, everybody complains about paralysis in Europe. When they agree, the protest is about unacceptable diktats. So when Angela Merkel and Nicolas Sarkozy pushed an EU summit in Brussels to approve their “competitiveness pact”, which calls for closer co-ordination of economic policies among countries using the euro, an outcry was only to be expected. Yet its vehemence took them aback.

Over a long and bad-tempered lunch, almost every other EU leader railed against something. Ireland rejected the idea of aligning EU corporate taxes (or at least the tax base) as a danger to its low-tax growth model. Belgium and Luxembourg resisted calls to abolish their system of index-linked wages. The Baltics said they should not raise their pension age as fast as west Europeans because their people tend to die younger. Poland denounced plans for separate summits of euro-zone leaders for being divisive. From Stettin to Trieste, many easterners feel, a curtain is descending again. This time it bears the symbol of the euro.

Mrs Merkel and Mr Sarkozy should in part blame themselves. They chummily bargained for weeks and then leaked the pact’s details before telling their colleagues. The start of the summit on February 4th was delayed while the two conferred separately; lunch was then postponed while they gave a press conference to explain their plans. It was eventually left to Herman Van Rompuy, as president of the European Council, to find agreement in time for a special euro-zone summit in mid-March.

Whatever the details, one thing is clear: the EU is at a turning-point. The debt crisis is forcing the 17 euro-zone countries to pool economic sovereignty to a degree that was unthinkable before. And their relationship with the ten non-euro outsiders, ranging from eurosceptical Britain to east Europeans who are keen to join the single currency, has been thrown into doubt.

Mrs Merkel has invited all to join the competitiveness pact. She says it will complement, not replace, new mechanisms being created in Brussels: closer monitoring of national economic and budgetary policies; tougher sanctions to enforce fiscal rules; peer-review of budgets as part of the “European semester”; EU-wide economic guidelines called the annual growth survey; and the “Europe 2020” plan for structural reforms. “It’s like a Russian doll, a matryoshka doll,” commented Mrs Merkel. But the matryoshka image lends itself to another interpretation: of a union within a union. Mr Sarkozy is hailing the advent of European “economic government”. He has long cherished the notion of a euro-zone club, with its own summits, to regain some of the influence that France has lost in a bigger EU.

That is not quite what he will get. The European Commission (the EU’s civil service), disliked by both France and Germany, will keep a central role at the demand of smaller countries. There will be a euro-zone summit in March, but it will not for the time being be institutionalised, unlike the euro group of 17 finance ministers who meet (and pre-cook most decisions) a day before Ecofin gatherings of 27. Instead there are likely to be occasional summits (perhaps once or twice a year) of a “17-plus” group that includes countries ready to sign up to the competitiveness pact. This could grow to “27-minus”, with only the British and Czechs staying out.

In a different era, all this might have caused great worry in Britain and, as a result, generated even more tension within the EU. But the new British government, deeply hostile to further EU integration, seems content to stand aside even as the euro zone binds itself closer. If that means a two-speed Europe, so be it: Britain thinks its outer lane, presently inhabited by the likes of Poland and Sweden, is faster.

By tradition Germany is strongly pro-European, and by political preference it likes to operate at 27, a format that gives like-minded fiscal hawks and free-traders greater influence. By her own history, as a daughter of East Germany, Mrs Merkel is averse to division within Europe. Last summer, after the first phase of the euro crisis saw the rescue of Greece and the creation of a big temporary bail-out fund, the German chancellor rejected French demands for summit meetings at 17. But the second wave, in which Ireland was rescued and fresh doubts were raised about the size of the fund, has forced Mrs Merkel to shift.

Mrs Merkel will not allow the euro to collapse. But neither can she ask German voters to hand their credit cards to less disciplined countries. Her price for boosting the bail-out fund is thus a grand bargain, with the competitiveness pact at its heart. She wants members of the euro zone to abide by the example of the “best-performing countries” (ie, Germany), for example by adopting a constitutional or other domestic legal “debt brake”. Germany will make itself heard — at a time of crisis, the euro zone needs its biggest creditor. But to be followed, Germany still needs the support of France. Mrs Merkel has yielded to Mr Sarkozy on matters of form, even if the substance is mostly German.

For domestic reasons, both leaders want to show they can lead Europe, and even to dictate terms. Mrs Merkel must demonstrate she can impose rigour on profligate Mediterraneans. Mr Sarkozy hopes that standing with Mrs Merkel at the helm of Europe will allow him to remain in charge of France after the 2012 presidential election. And reforms to push back the danger of France losing its AAA credit rating will be easier if they are part of a great European project.

Some complaints from fellow Europeans may be a necessary part of saving the euro and leading its members towards greater integration. But if Mrs Merkel and Mr Sarkozy overplay their hand, they risk causing both resentment and paralysis. That would prolong the crisis to the detriment of all.

Source: The Union within the union // The Economist. – 2011. – 10^th February. - [Electronic resource]. - Access mode: http://www.economist.com/node/18112137.

Dictionary:

paralysis - паралич outcry - протест vehemence – горячность chummily - дружелюбно hailing - приветствие advent - появление cherish - лелеять tension - напряженность

hostile – враждебный bail-out - спасительный bargain - сделка abide - пребывать rigour - суровость profligate - расточитель resentment - негодование detriment - вред

Questions:

1. What were the reasons of resistance of many EU countries (Ireland, Belgium, Luxemburg and others) to the “competitiveness pact” proposed by Merkel and Sarkozy?

2. Which constituent parts does Merkel’s mechanism include?

3. Analyze the effectiveness of the mechanism. Has it work for all EU countries?

4. What does the term “two-speed Europe” mean? Does it help or limit integration processes?

5. What is role of Germany in the EU during the crises?

Case 6 - Running the euro zone

Europeans have learned to let their attention drift when Brussels starts droning on about “process”. But every so often, a change in the mechanics of the European Union really does matter. Just such a moment looms next month, at the first summit meeting of the euro zone ever to be held, when Germany’s Angela Merkel and France’s Nicolas Sarkozy will press for agreement to a “pact of competitiveness” - part of a grand bargain under which more money will be made available to bail out troubled euro-zone economies, with perhaps more flexibility in its use. The pact sounds technical, but it foreshadows something much bigger: a closer integration of the euro zone that could hold threats for the entire EU.

On the face of it, the pact is about bolstering the economic bit of Europe’s economic and monetary union. Germany’s desire for more intrusive controls over euro members’ fiscal and economic policies is understandable after last year’s bail-outs. And the competitiveness pact includes some sensible ideas, including raising retirement ages to 67 and scrapping indexation systems that link wages to prices - though these will be hard to agree.

But the pact does little to resolve the euro’s current sovereign-debt crisis. First Greece and then Ireland have been bailed out. Portugal may be next. Yet though this may buy time, it fails to recognise that Greece and maybe the other two as well are insolvent. Unless other euro-zone members (for which read Germany) are prepared to make large fiscal transfers, which is unlikely, there is no alternative to debt restructuring - and it would be sensible to start this now.

The pact also includes ideas that are not just unhelpful, but also damaging. One is to impose constitutional amendments to enforce balanced budgets, which are too rigid in a system without a big federal budget. Plans to harmonise tax bases could too easily evolve into minimum tax rates. Harmonising educational qualifications could also turn into just another way of inhibiting competition.

It is not just the countries involved that are threatened by closer integration: it is the EU as a whole. Many euro-zone countries are instinctively interventionist, hostile to unfettered competition (including tax competition) and overly sympathetic to state aid for industry. The European Commission will no doubt continue to defend the EU’s single market, with the support of several euro-zone members (such as Austria, the Netherlands and Slovakia). But the liberals are a smaller minority in the euro zone than in the wider EU. Indeed, this is why the French always wanted a bigger political role for the euro group - and why the Germans long resisted it. The euro crisis has shifted Mrs Merkel into backing closer integration of the euro zone.

This should also worry EU countries outside the euro, including Britain, Poland and Sweden. Mrs Merkel and Mr Sarkozy have invited all EU members to join the competitiveness pact and submit to tougher fiscal scrutiny, but they are unlikely to do so unless and until they adopt the euro - and a more integrated and less liberal euro group might make joining the euro less attractive, for instance by opting for more harmonised taxes and social policies. This could even put at risk the EU’s single market. Already, some euro members hint that Britain, Poland and Sweden had an unfair advantage in 2009-10 because they could regain competitiveness by allowing their currencies to fall. It is easy to imagine such complaints leading to changes in the rules over state aid or to attacks on the four freedoms of movement - of goods, services, capital and labour—that underpin the single market.

There is nothing wrong in principle with the idea of some EU countries going farther and faster towards political integration than others. Not all now join in the euro, the Schengen passport-free zone or European defence. Having a variety of subgroups can accommodate both those (like Belgium) that want closer political union and those (like Britain) that do not. But if the euro group turned into a protected core that agreed economic and social policies without heeding the rest, it could split the union.

The British government seems entirely happy to sit on the periphery. The Swedes and Poles are not. They are openly fretting that a more politically united euro group of 17 could divide the EU of 27.

Source: Pact of uncompetitiveness // The Economist. – 2011. – 10^th February.- [Electronic resource]. - Access mode: http://www.economist.com/node/18114465.

Dictionary:

to drift – сместиться, сдвинуться to drone - трубить to loom – разрастаться bolstering - поддержка intrusive - навязчивый retirement age - пенсионный возраст scrapping - пересмотр

rigid – жесткий inhibiting - запрещение unfettered - освобожденный to underpin - поддерживает without heeding – без учета to split - расколоть fretting – раздраженные, недовольные

Questions:

1. What is the core of the pact of competitiveness?

2. What are the main advantages and disadvantages of the pact?

3. Which steps does the pact suppose in the direction of sovereign-debt crises salvation?

4. Why did Britain, Poland and Sweden have unfair advantage in comparison to euro-zone countries?

5. Which subgroups were formed in the EU. Which countries did enter them?

6. Which countries do move faster to political integration then others? Why?

Case 7 - Spain's budget deficit

Faced with an inherited budget deficit that was way off target, Spain's Mariano Rajoy has rebelled against this year's European Union-agreed objective. Instead of bringing his country's deficit down to 4.4% of GDP, Mr Rajoy's centre-right People's Party (PP) government is aiming for a gentler 5.8%.

It has taken little more than two months in government for Mr Rajoy to complete his transformation from gold-star pupil of Europe's austerity warriors to chief rebel. In that time Spain has begun to dip into a second recession. Unemployment has raced to 23% of the workforce and beyond, the highest figure in the EU. February saw a further 112,000 Spaniards added to the ranks of the jobless.

The EU's deficit target assumed moderate economic growth this year. In fact, Spain's economy is set to shrink by 1.7%—with the consequent reduction in tax receipts and increase in social spending.

The biggest shock of all, however, has been the state of the country's accounts. In the run-up to November's general election, the outgoing Socialist administration of José Luis Rodríguez Zapatero continued to insist that it was on track to meet the EU's 6% target.

But last week CristóbalMontoro, the budget minister, revealed the true figure: 8.5%. This seemed further proof that, when faced with elections, Spanish administrations at all levels find it almost impossible to apply austerity. More importantly, it left Mr Rajoy facing a whopping €45 billion ($59 billion) adjustment if he was to meet the 4.4% mark.

Little surprise, then, that the prime minister let it be known that he would appreciate it if the EU gave him a bit of leeway. How about a new, more realistic, deficit target? But the hawks refused to blink. Spain's government muttered angrily about a handful of Brussels bureaucrats digging their heels in.

So today it decided to go it alone. Despite the considerable loosening, Mr Rajoy insisted he would remain Señor Austerity. His new target will still require an adjustment of close to €30 billion. That is roughly the same as the "Save Italy" programme of Mario Monti, Italy's newish prime minister. And that is to be spread over three years.

In Barcelona this week and in Valencia last week demonstrations against education cuts turned nasty when (admittedly small-scale) violence erupted. The head of steam building up against Mr Rajoy's government will continue to grow. A general strike is expected for March 29th.

Mr Rajoy has already pushed through serious reforms of the labour market, of banks and of budgetary rules for the future. These have been roundly praised outside Spain. But none of this will help the country in the short term. Indeed, the government sees a total of 630,000 jobs disappearing this year. That will push unemployment to 24.3%. Youth unemployment may well top 50%.

Yet the real task of cutting social spending has barely begun. Spain's 17 regional governments, which are responsible for education and health spending, jointly failed to reduce their deficits at all last year. They were the chief culprits, in fact, of Spain's 2011 deficit miss, jointly accounting for an overspend worth 2.9% of GDP against a target of 1.3%.

Even hawkish Catalonia, which within Spain took the path now being trodden by Mr Rajoy within Europe and rebelled against its Madrid-set target in 2011, failed to meet the 2.6% it unilaterally set itself instead. ArturMas's government calculates that it came in a full percentage point above that.

The prospect of that experience being repeated at national level is what worries markets and the rest of the EU. Can Mr Rajoy meet the targets his government has set itself? His rebellion today, announced hours after the signing of the EU's fiscal pact, makes the EU's stability measures look weak—and sees Spain run the risk of facing EU sanctions. If Mr Rajoy fails with his more modest adjustment, it will not just be his own credibility that is blown.

Source: Rajoyloosens his belt // The Economist. – 2012. – 2^nd March.- [Electronic resource]. - Access mode: http://www.economist.com/blogs/newsbook/ 2012/03/spains-budget-deficit.

Dictionary:

austerity – аскетизм recession – спад culprit – виновный

measure – мера adjustment – регулировка

Questions:

1. What is the main goal set by Mariano Rajoy?

2. What caused Rajoy to become an oppositioner so quickly after joining the government?

3. What was the state of the country's accounts before Mr Rajoy join the government?

4. What was the real figure of country’s accounts?

5. What action Mr Rajoy has already taken and what results it has achieved?