ECONOMIC INTEGRATION
Founding of the Common Market with the signing of the Treaty of Rome, 1957.
Source: bpk, Berlin / Campidoglio, Rome / Art Resource, NY.
Despite a steady drizzle, the leaders of six West European nations were overjoyed when they concluded the Treaties of Rome on March 25, 1957. In a televised ceremony on Capitoline Hill German chancellor Konrad Adenauer and the foreign ministers of France, Belgium, Holland, Luxembourg, and Italy signed two documents establishing a customs union, the European Economic Community, and a convention for the peaceful use of nuclear energy, titled Euratom. After the failure of ambitious plans for a European Defense Community in 1954, this was a more modest approach, using economic instruments for political ends. By including “a Court of Justice, a rudimentary Parliament and the embryo of a future European Cabinet,” these treaties created structures “designed to serve as central organs of what could in time develop into a government of a European federation.” The mayor of Rome underlined the importance of the signing by claiming that it prepared Europe for “a century of union in peace, freedom and prosperity.” The church bells rang, the holiday crowd cheered. Only the communists grumbled.1
The founding of the Common Market was a concerted attempt to prevent a repetition of the disasters of the first half of the twentieth century. Its central purpose of laying “the foundations of an ever-closer union among the peoples of Europe” intended to achieve multiple aims: By linking the economies of France, Germany, Italy, Belgium, the Netherlands, and Luxembourg, the treaty sought to make future war impossible by eliminating “the barriers which divide Europe.” At the same time the agreement tried to ban the specter of another depression by striving for “the constant improvement of the living and working conditions” of European citizens. Through ensuring “economic and social progress” the customs union attempted to strengthen the transition to democracy in the two postfascist member states. The preamble even expressed the pious wish of confirming “the solidarity which binds Europe and the overseas countries” during decolonization. Conscious of the Cold War, the signatories hoped to “preserve and strengthen peace and liberty” even for those East Europeans who might want to join them in the future.2
Enthusiastic Europhiles have created an optimistic narrative of European integration that celebrates the development from the Common Market to the European Union as a straightforward success story. In optimistic speeches, leading politicians like former German foreign minister Joschka Fischer have been competing with public intellectuals like Timothy Garton Ash in proposing appealing visions of present benefits and future harmony. Many political scientists involved in European studies have been fascinated by an emerging continental polity, eager to offer advice to Brussels bureaucrats on how to take the next step. Even some historians have become involved in hailing the development of a common European society and public sphere, as if it had already taken place. This advocacy of a normative Europeanism risks falling into the Treitschke trap of intellectual partisanship, thereby repeating the failings of nineteenth-century nationalism on a larger geographic scale. The problem of this involvement in promoting integration is the lack of critical distance and exaggeration of its achievements.3
An equally determined minority of Euroskeptics contradicts this positive view by opposing the European Union and rejecting any increase of its power. In Western Europe right-wing populists like the UK Independence Party and the Alliance for Germany (AfD) voice such opposition, calling for a withdrawal from the EU for reasons of nationalism, whereas in East Europe the “postaccession” disappointments have led to vocal opposition. A softer version objects to further advances of integration or to specific aspects like the common agricultural policy, shading thereby into legitimate criticism for improving the EU. In free-trading countries like Britain, many commentators complain about invasive regulations of the Brussels bureaucracy or its presumed protectionism. In the United States prominent neoconservatives tend to dismiss the EU as militarily impotent and politically divided. Critics who express open skepticism about European identity prefer instead to argue for greater Eurorealism. Though often exaggerated, this resentment indicates the need for more detachment that also admits the many setbacks and failures of the process.4
By recognizing both achievements and shortcomings, the perspective of modernization offers a fresh way to deal with the integration of “Europe without illusions.”5 Traumatized by the triple disaster of the world wars, the Great Depression, and the collapse of democracy, the founders of the EEC essentially attempted to recapture the benign aspects of liberal modernity: overcoming the hostility between France and Germany would guarantee continental peace; economic cooperation based on market competition and free trade would ensure future prosperity; and the establishment of supranational self-governing institutions would cement democracy. The benefits of closer cooperation in the West European core would eventually also help the Mediterranean, East European, and Balkan countries to modernize. Finally the approaching loss of empire also demanded that attention should shift toward reforming the metropole. While agreeing on the need to reverse the trajectory of self-destruction, European leaders in subsequent decades struggled over how actually to put these guiding principles into practice.
BEGINNINGS OF COOPERATION
In broad historical terms, the project of European integration was inspired by the evident failure of prior attempts to dominate the entire continent. As a dim memory, the legacy of the Greek culture, the Roman Empire, and the spread of Christianity demonstrated that cooperation was possible and had many benefits. But the subsequent aspirations of Charlemagne, Philip II, and Louis XIV to establish hegemony over the continent precipitated dynastic wars rather than creating unity. The impact of Napoleon was also deeply ambivalent, ushering in a liberal legal code, continentwide trade, and enlightened administration but also imposing French rule and initiating an endless series of military conflicts. Finally, even Hitler’s racist Reich tried to mobilize wider support by claiming to fight for Europe in its campaign to eradicate Jewry and Bolshevism. These negative experiences with military efforts to gain domination over Europe made thinkers from the Abbé de Sieyès to Jürgen Habermas look for a more peaceful and constructive form of unity.6
More directly, the integrationist impulse was an effort to continue the interwar initiatives at cooperation on a broader scale. In spite of all conflicts, transportation, communication, sports, and tourism had been creating a shared sense of Europeanness.7 Impressed by the collapse of the Habsburg Empire, the Austrian philosopher Count Coudenhove-Kalergi in 1923 penned an appeal, called Pan-Europa, that advocated European unification. Some clairvoyant youths also participated in Franco-German exchanges in order to break out of nationalism and foster mutual understanding. Trying to build on the spirit of Locarno, the French premier Aristide Briand and the German foreign minister Gustav Stresemann talked about closer cooperation, but their efforts were cut short by the latter’s death and the Great Depression. Instead, it was Nazi conquest that united the entire continent in a war-driven, resource-extracting, and slave-labor-exploiting Großraumwirtschaft. Realizing that transnational cooperation was needed to throw off this fascist yoke, the resistance movement developed ideas of European federalism that inspired the Italian theoretician Altiero Spinelli to propose a voluntary cooperation of liberated nations.8
Allied victory provided a chance to integrate Europe rather than just to reconstitute national states. Realizing that their countries were too small to compete, representatives of Belgium, the Netherlands, and Luxemburg had already signed a Benelux customs union in 1944. After the war, integration idealists began to meet in order to formulate their program, founding a Union of European Federalists in the fall of 1946. Out of office, Winston Churchill proposed “to recreate the European family, or as much of it as we can, and to provide it with a structure under which it can dwell in peace, in safety and in freedom. We must build a kind of United States of Europe.” Since Britain was tied to the Commonwealth, he suggested “a partnership between France and Germany.” Meeting at The Hague in 1948, advocates of integration created the Council of Europe as an intergovernmental institution, disappointing the federalists. This institution became a debating club without real power, but it sponsored the creation of the Court of Human Rights at Strasbourg, whose decisions have contributed to strengthening civil rights among its forty-seven member states.9
Jean Monnet, the chief of French postwar planning, advocated modernization through a form of integration that went beyond the mere cooperation of national states. As a successful businessman and diplomat with connections to Dean Acheson and John McCloy, he understood that the increasing tensions of the Cold War were shifting American priorities from punishing the Nazis toward rebuilding western Germany. Though he welcomed the foundation of the Organization for European Economic Cooperation (OEEC) in April 1948, he considered this intergovernmental body of eighteen members too big to do more than distribute Marshall Plan aid. Since France was not strong enough alone to contain a resurgent West Germany, Monnet hit upon the fortuitous idea of Europeanizing coal and steel production as the key power source and the crucial material for economic reconstruction. Supranational supervision of this strategic sector of industry would facilitate the continuation of Allied control over the Ruhr Basin and prevent the forging of new weapons of war: “To pool them across frontiers would reduce their malign prestige and turn them instead into a guarantee of peace.”10
With wartime hostilities still running high, the establishment of the European Coal and Steel Community (ECSC) was a political feat of the first magnitude. French foreign minister Robert Schuman was happy to seize upon Monnet’s idea and give it his own name, since the proposal provided security through cooperation rather than confrontation. Happy to be included in the Marshall Plan, West German chancellor Adenauer was eager to take the outstretched hand, because it allowed him to lift the Allies’ exclusive control over the Ruhr and thereby claim equality for the Federal Republic through a conciliatory policy of western integration. Italian prime minister Alcide de Gasperi was delighted just to be included. But, clinging to insularity, the British government refused to join. Intent on fostering continental cooperation, U.S. diplomats like John Foster Dulles, however, welcomed the Franco-German rapprochement. In economic terms, the Schuman Plan was attractive since it formalized a long-standing cooperation between French iron-ore producers and German coalmine owners.11 After overcoming communist and nationalist opposition, the Treaty of Paris was signed on April 18, 1951.
The ECSC was the first practical step toward the supranational integration of Western Europe. While the preamble argued that “Europe can be built only by concrete actions which create a real solidarity,” the text announced that its purpose was “to contribute to economic expansion, the development of employment and the improvement of the standard of living.” Its central instrument was the High Authority under Monnet, which controlled the production and pricing of coal and steel. But its real innovation was the creation of accompanying institutions such as a Council of Ministers that had ultimate authority, a rudimentary parliament with the right to discuss policies, and a court to adjudicate disputes. These were embryonic governmental structures that went far beyond the limited task of supervising a strategic economic sector. As a result of the burgeoning demand for weapons materials during the Korean War, the ECSC was initially successful in raising production. But the progressive shift to oil as energy base and the post-Korean steel glut diminished its importance.12 Ultimately, the ECSC’s significance was therefore political rather than economic.
The plan of a European Defense Community (EDC) was even more ambitious, since it dared to address military power, the core of national sovereignty. Creating fears in Europe of a Soviet invasion, the North Korean attack of the South on June 25, 1950, raised the question of German rearmament to strengthen western defense. Prodded once again by Monnet, in 1952 French defense minister René Pleven proposed the creation of a supranational European army that would draw on German manpower without full German rearmament. Designed to square the circle, the EDC plan proposed basic units that would remain national but command structures that would be integrated, while German soldiers were to be concentrated in infantry without access to advanced weapons systems. As one cartoon had it, the EDC was supposed to be a fierce wolf toward the East to repel the Red Army but a tame lapdog toward the West to reassure its allies. In a heated debate the French parliament defeated the treaty’s ratification in 1954 by a vote of 319 to 264, with both extremes, the nationalist Gaullists and pro-Soviet Communists, against it.13
After a decade of trying to modernize Europe through integration, the result remained rather disappointing, having produced more rhetoric than substance. In the beginning, European leaders concentrated on rebuilding their own immediate surroundings, from cities to states. The rising fear of communist attack and the consistent prodding by Washington sufficed only to establish various forms of cooperation between existing states in the Council of Europe and the OEEC. The pressure of European federalists, the appeals of intellectuals, and the initiatives of visionaries like Monnet merely succeeded in creating a single supranational institution controlling one key sector of the economy, needed both for reconstruction and rearmament. A more ambitious plan, the EDC failed because integrating the military also required creating a European Political Community, a common government to command its forces, which no longer seemed necessary with the end of the Korean War. Since its failure inspired other solutions like German membership in NATO, the project of forging European unity appeared stalled by the midfifties.14
THE COMMON MARKET
Surprisingly enough European integration did not die, but rather acquired a different form. When idealists failed to realize their grand vision, pragmatists took up the issue and pursued a more modest approach, in the hope that the logic of cooperative problem solving would require further integrative steps. Having built up enough momentum, the project shifted from federalism to functionalism, from one great leap to a succession of small steps.15 The incremental course had the advantage of convincing skeptics of the benefits of each limited advance, rather than having to sell them on the ultimate goal. In this way the integration built on the achievement of the ECSC but sought to broaden it from one sector to the entire economy. A customs union could appeal both to free traders who would appreciate the enlargement of the market and to protectionists who insisted on shielding continental production against outside competition. The result of the rethinking after the defeat of the EDC therefore inspired a broadening of the push for modernization by establishing a comprehensive common market.
Undeterred by their setback, advocates of integration sought a way to “relaunch Europe” during the mid-1950s. Even after resigning as head of the ECSC, Jean Monnet was still influential enough to suggest a joint effort to develop nuclear power as an energy source capable of supplanting coal and oil. Already during the debates about the EDC, Dutch foreign minister J. Willem Beyens had proposed going beyond sectoral integration to establish a customs union and common market in order to speed economic development on the continent. Belgian foreign minister Paul-Henri Spaak picked up both ideas during the brainstorming at the Messina Conference in June 1955. After lengthy deliberation his committee produced a report for the foreign minister meeting in Venice in May 1956 recommending the creation of two separate but politically linked communities for a common market and nuclear cooperation. Subsequent negotiations between the six ECSC members France, West Germany, Italy, and the Benelux countries developed two agreements, the Treaty of Rome and the Euratom Treaty, signed a year later.16
Multiple compromises between member countries and economic interest groups were needed to achieve agreement and ratification. While French protectionists hoped to shield their companies through shared external tariffs, German free traders welcomed the removal of the internal barriers to trade. Whereas Paris was excited about the potential of nuclear energy, Bonn was more interested in the advantages of a common market for its competitive industries. Entrepreneurs looked forward to greater business opportunities, but labor leaders insisted on the inclusion of a European Social Fund. To convince his hesitant compatriots, French negotiator Robert Marjolin demanded “the adoption of a common policy in the sphere of agriculture” as help for his farmers. Worried about weakening connections to its colonial empire, Paris also called for association agreements with its overseas territories. In order to overcome the skepticism of German economics minister Ludwig Erhard, Chancellor Adenauer stressed the abolition of restraints on continental trade within the common market.17
The Treaty of Rome was infused with the modernizing language of economic liberalism, stressing competition. Internally, creating a common market required the “free movement” of goods, persons, services, and capital by tearing down all barriers to trade, including indirect obstacles and subsidies. It also necessitated outlawing the “prevention, restriction or distortion of competition” through dumping or taxation. Externally, the establishment of a customs union demanded removal of separate duties and imposition of a common tariff, with receipts shared between the governments. As a compromise between free traders and protectionists, the level of outside duties was set at the arithmetical average of the current tariffs of the members. The concurrent but separate Euratom treaty sought to “create the conditions required for the development of a powerful nuclear industry,” spreading the costs to all member states and giving Germans access to research without letting them develop their own weapons. But with oil rapidly replacing coal as energy, atomic cooperation became less relevant.18
Map 10. European integration: the European Economic Community / European Community, 1956–86. Adapted from German Historical Institute, Washington, DC.
Resembling the ECSC, the institutions of the Common Market (EEC) were basically intergovernmental with some supranational elements. The Commission of the European Economic Community, led by a president, was so to speak the executive, guiding the functioning of the market, recommending measures, and assuring their implementation. But its policies depended on the Council of Ministers, instructed by the member states, which retained ultimate control through deciding by majority vote. At the same time there was also a European Parliament composed of elected representatives, which had merely “advisory and supervisory powers.” Finally, a Court of Justice whose decisions were binding watched over the correct application of the treaty. This mixed system was both the nucleus of a European government and a formalized cooperation between sovereign states, which functioned well when in agreement but stalled when France and Germany were at loggerheads.19 Symbolic of the tensions within the EEC was the dispersal of its institutions, leaving the nascent bureaucracy and commission in Brussels, the court in Luxembourg, and the parliament in Strasbourg.
In economic terms the Common Market turned out to be highly successful, since its introduction coincided with the postwar boom of the trente glorieuses. Under the forceful leadership of the German lawyer Walter Hallstein, the commission rapidly removed internal trade barriers, completing the customs union within nine years, much faster than planned. Although the abolition of other distortions of trade would take decades, the six member countries enjoyed vigorous growth, averaging around 5 percent annually. For producers, the Common Market had the advantage of larger scale, which allowed them to establish factories and retail outlets beyond national limits, leading slowly to the emergence of Europewide corporations and marketing chains. For consumers, the increased competition brought improved products at lower prices, ranging from luxury cars to reliable washing machines. While economists argue about whether these developments would not have taken place without the Common Market, it undeniably had a strong psychological impact, which added to the impetus of economic growth.20
The Common Agricultural Policy (CAP) was both the showcase and Achilles’ heel of European integration, since it represented a triumph of bureaucratic interest-group politics. Under the able advocacy of the Dutch commissioner Sicco Mansholt, the regulation and support of agricultural production consumed 80 percent of the common budget in the first several decades. On the one hand, the CAP was a spectacular success in increasing production, banishing the specter of hunger and agrarian extremism. It mostly aided rural regions in France and Italy as well as market producers in Holland. For shoppers it provided a more variegated offering of fruits and vegetables. On the other hand, its price supports led to overproduction, the infamous “milk lakes” and “butter mountains” that had to be dumped below cost on the world market. By raising consumer prices in Europe, it increased living costs and indirectly hurt industrial exports. While touting the protection of the family farm, the CAP effectively benefited large producers and helped transform agriculture from small-scale operations to mass-market production.21
Two decades after the end of the war, the balance sheet of European integration remained decidedly mixed, showing some real progress but also continuing deficits. The establishment of the Common Market created a successful institution for one crucial policy field that modernized European production and consumption by orienting the economy to a larger continental arena. But by refusing to limit the EEC to a pure free-trade area, the founding members in effect divided Western Europe, since the British founded a rival free-trade organization, called EFTA, which consisted of countries of the European periphery. Without direct taxation the EEC Commission remained “a pensioner of the member states,” incapable of influencing core issues such as defense, diplomacy, or the welfare state. Walter Hallstein’s more encompassing vision of increased budget powers that was supposed lead to the creation of a European federal state was rejected by French president Charles de Gaulle, who forced Hallstein’s resignation in 1967.22 Since supranationalism remained elusive, Europeans turned to pragmatic functionalism as an integrating strategy.
EUROPE OF THE FATHERLANDS
Ironically, the economic success of the Common Market actually helped rescue the nation-state in postwar Europe. Though it may seem counterintuitive, “without the process of integration the West European nation-state might well not have retained the allegiance and support of its citizens the way it has.” Indeed, it was the Common Market that provided the economic foundation for the “security and prosperity” that saved national independence from extinction. Instead of being antithetical, integration and nation-states were actually interdependent, since by partial delegation of sovereignty over trade and agriculture policy the national governments were able to retain the rest. In the postwar division of labor NATO took care of defense, the European Community of the economy, and the nations of the welfare state.23 But the new lease on life, produced by the positive impact of the Common Market, subsequently stood in the way of further progress with integration.
Calling for a “Europe of the fatherlands,” French president Charles de Gaulle demonstrated this national turn by provoking the empty-chair crisis of 1965. When the EEC Commission tried to use negotiations over the CAP to increase its power and the European Economic Community’s budget, de Gaulle withdrew the French representative from the Council of Ministers. The crucial issue was his objection to the introduction of majority voting, which might override French interests. This move was also part of a more general assertion of power by withdrawing from active NATO membership and developing the force de frappe as an independent nuclear deterrent in order to demonstrate France’s grandeur. The crisis was finally resolved by the Luxembourg compromise of 1966, which required “unanimous agreement” on “very important issues,” instituting in effect a national veto. Though merely amending the rules, this agreement halted further progress with integration for well over a decade. In order to defend its interests, Paris eventually resumed working in Brussels, but Gaullism reasserted the power of the member states over the European Community.24
Intent on preserving political dominance, de Gaulle also prevented the expansion of the EEC by twice vetoing the accession of Britain. When it became clear that the Common Market was growing faster than EFTA, Prime Minister Harold Macmillan decided to apply for membership in 1961. But the general said “non!” to the British entry in 1963 and again in 1967 because he feared losing control over a diffident Germany, which was bending over backward not to offend the French, signing the Elysée Treaty of Franco-German cooperation in 1963. Only when de Gaulle left office in 1969 did the pro-European Conservative Party leader Edward Heath renew the British bid for membership, which succeeded in 1973. But this time it was the Labour Party that objected, as it feared a diminution of sovereignty. After Harold Wilson won the next election, he held a referendum in 1975, promising to renegotiate the terms of membership, in which a substantial margin of 67.2 voted for remaining in the European Community, renamed EC in 1967. The Danes and Irish also entered in 1973, though the oil-rich and fishing-focused Norway refused to go along.25
While columnists were complaining about a “Eurosclerosis,” the collapse of the Bretton Woods system inspired a renewal of integration efforts. The disappearance of fixed exchange rates after 1971 and the Oil Shock of 1973 confronted the Council of Ministers with difficult decisions regarding the relationship of monetary and economic policies. To restore a semblance of stability, they created a “snake,” in which the value of member currencies could vary no more than 2.25 percent against one another. But only the Benelux states were able to follow the lead of the strong German mark (DM), acting as reserve currency. To fix this problem, French president Giscard d’Estaing and German chancellor Helmut Schmidt worked out an improved version, the European Monetary System (EMS). It created a European Exchange Rate Mechanism that returned to the snake in a more flexible manner and established a joint accounting currency, the ECU, which became the basis of all transactions. While subject to frequent adjustment, the EMS succeeded in giving the EC members control over their own currencies by creating a common monetary instrument.26
The next crisis was precipitated by another ardent nationalist, the combative prime minister of the United Kingdom Margaret Thatcher. She had already attacked the EC in her maiden speech as Conservative opposition leader of the House in 1975, calling the British contribution unfair. Since the United Kingdom imported more industrial and agricultural products than any other EC member, it also paid higher import duties. However, owing to its small and efficient agricultural sector, London received less support from the CAP than the others. When Thatcher entered 10 Downing Street in 1979 she peremptorily demanded a renegotiation of the European Community’s finances to ease the British burden. Because of her aggressive style, she alienated even those colleagues who admitted that she had a sound case. After five years of strife in which the British budget question inhibited the work of the EC Commission, French president François Mitterrand finally succeeded in brokering a compromise at the Fontainebleau summit. The British contribution was reduced by 66 percent, the CAP finally reigned in, and revenues for the EC generally increased.27
In spite of these heated conflicts, the European Community’s aura of economic and democratic modernity attracted Greece, Spain, and Portugal to apply for membership. As long as they remained under dictatorships, had underdeveloped economies, and exported labor, they had not been invited to become candidates. But when the colonels were overthrown in 1974, Greece asked to join, followed by Spain after the death of General Franco (1975) and Portugal after the demise of Antonio Salazar’s successors (1974). To make membership possible, the candidates had to modernize by becoming functioning democracies and by liberalizing their economies. Moreover, they had to accept European Community law, implementing all those regulations which the existing member states had developed in the meantime. The EC was willing to help by creating a regional fund to assist their development. Ultimately the decision was a political one. Although the per capita GNP of the candidates was only about half of the EC average and their civil societies remained weak, they were allowed to join in 1981 and 1986 so as to facilitate their postdictatorial transition.28
Even though the intergovernmental phase of the midsixties to the early eighties disappointed many federalist hopes, some incremental progress in European integration continued. While ambitious EC Commission proposals were often blocked, the newly created European Council cooperated through regular summit meetings, while the rapport between French president Giscard d’Estaing and German chancellor Helmut Schmidt facilitated the resolution of problems. Though member states reasserted their power, the bureaucracy in Brussels expanded considerably, becoming a regular infrastructure for the implementation of common policies. It sought to establish fair competition by regulating community standards in everything from the size of imported bananas to the pasteurization of French cheeses and the contents of German beer. Slowly the European Parliament acquired more powers over the EC budget through direct election of its deputies, reducing the democracy deficit. Finally the European Court also regularly issued decisions that overrode national legislation in strengthening freedom of trade and competition.29
Far from proceeding in a straight line, modernizing integration therefore moved in fits and starts, even backsliding or lying dormant for a time and then gathering momentum again. In a stylized fashion it can be described as a cycle: Committed Europeans in the EC Commission would draw up visionary plans, but the Council of Ministers would block them, issuing vague communiqués instead. Clashing national interests, dramatized in provocative statements for domestic news-media consumption, would result in confrontations, leading to a veritable crisis. The ensuing negotiations between national representatives and European bureaucrats would sometimes drag on for years, with the Commission making various proposals. Finally a dramatic summit meeting going on into the wee hours would strike a political bargain, sometimes finding a suitable compromise or in other times simply postponing a resolution to a later date.30 The modernizing push of integration was therefore not an automatic spillover effect from prior decisions but rather the result of reconciling conflicts of interests, expressed in rival visions of the European future.
Ending a period of prolonged stagnation, the creation of the European Union (EU) was the result of a second relaunching of integration. It took an unlikely combination of national and European leaders to resume progress after the failure of plans such as the Tindemans Report of 1976, which had already sketched the goal of a closer union. On the European side, the appointment of the French socialist Jacques Delors as president of the European Commission in 1985 put a visionary who was exceptionally committed to reviving the integrationist agenda into a key position. On the national side, Prime Minister Margaret Thatcher’s effort to gain a better deal for Britain and to extend her neoliberal domestic reforms to the European level provided an agenda that demanded further steps toward completing the single market. Moreover, the concurrent chancellorship of the Christian Democrat Helmut Kohl meant that Germany would welcome steps to strengthen integration as long as these agreed with its interests.31 This constellation produced a set of agreements that transformed the Common Market into a nascent union of Europe.
The Single European Act (SEA) of 1986 was a crucial step forward because it linked the completion of the market to the strengthening of the European Community’s powers. It originated in a Commission White Paper that proposed to create an area “in which the free movement of goods, persons, services and capital is ensured.” Approved by the European Council in February 1986, the SEA sought to complete the single market by 1992, develop the EMS further, and coordinate social, scientific, and environmental policy. Superseding national vetoes, it also expanded qualified majority voting and increased the power of the European Parliament through a “cooperation procedure.” Finally, it outlined a constitutional basis for what might become a European Political Community. Approved by referendum in Denmark and Ireland and by parliament elsewhere, the SEA was the first major revision of the Rome Treaties. It revived the integration process so as to establish a single market by removing the remaining barriers and at the same time strengthening the political institutions and decision-making processes of the European Community.32
One demonstration of the benefits of free movement was the Schengen Agreement, which liberalized the movement of persons within the signatory states. Starting in 1985, France, Germany, and the Benelux countries agreed to end their border controls, simplifying land and air travel considerably. But when abandoning frontier policing raised fears that criminal activities like drug trafficking would spread, implementation was postponed until a second convention was negotiated to clarify internal security measures. The most difficult problem was the influx of asylum seekers into the European Community, especially from the global South, which was resolved in Dublin in 1994 by the principle of “first handling,” making the country where an applicant had initially entered the EU responsible for determining an immigrant’s status. Starting with a trial period, the Schengen Agreement was put into practice in 1995 among the original five, joined thereafter by Italy, Spain, Portugal, Greece, and Austria. For vacation and business travelers the lifting of controls in “Schengenland” proved a great boon, illustrating the advantages of integration.33
The next, even more important step was the Treaty of the European Union, signed at the Dutch border town of Maastricht in February 1992. It was propelled by the effort to contain a stronger Germany after its reunification and by a demonstration of European impotence during the first Iraq War. Difficult negotiations between François Mitterrand of France, Helmut Kohl of Germany, and John Major of Britain led to agreement on the consolidation of existing structures into a new body, called the European Union. Expanding the Common Market, it created a political union with a common citizenship, governed by the principle of subsidiarity in making decisions on the lowest level possible. A second pillar was a common foreign and security policy, complemented by a third pillar of cooperation in justice and police affairs. The European Parliament received more budgetary powers and new competences in consumer protection and support of culture were added, though Britain opted out of a shared social policy. Because of the supranational tone of the document, ratification proved difficult in Denmark and France but succeeded in the end.34
The most visible aspect of the Maastricht Treaty was the introduction of a common currency, since it affected the daily lives of European citizens directly. The coordination of the European Monetary System was upgraded into an agreement on fixed exchange rates, which in 1999 transformed the ECU into a new currency, called euro. Put into circulation in 2002, the new bills used symbolic designs derived from famous buildings, while the coins had one common side and another with national images. To supervise the new exchange medium, a European Central Bank (ECB) was created and located in Frankfurt, the financial heart of the leading economic power in the EU. Stringent convergence criteria were supposed to guarantee the stability of the new currency, limiting annual inflation to less than 2 percent, government deficits to below 3 percent of GNP, and public debt to no more than 60 percent of GNP. Though these were fairly rigorous demands in order to reassure the German public, the French and Italians actually switched from a soft to a hard money policy.35 Businessmen and vacation travelers were delighted with the common currency.
After some initial difficulties, the euro performed reasonably well, soon rivaling the U.S. dollar as a reserve currency for international monetary transactions. Starting with the six original EEC members, it was eventually adopted by seventeen nations, with other currencies in Africa pegged to it. By abolishing currency conversion costs, it facilitated internal trade and made external exchanges more predictable. Initially there was some speculation against it, starting out with a rate of 0.82 euro to the dollar, but after 2002 it exceeded the U.S. currency in value, and more recently it has been traded above $1.25 to one euro. By introducing the euro, the member states have turned over control of monetary policy to the European Central Bank, which has favored financial stability over growth. Especially during the recession caused by the dot-com bubble, its decisions have been controversial, since even France and Germany violated the convergence criteria, making it difficult to insist on their observance by the weaker economies.36 In order to function more smoothly, the euro therefore required a harmonization of economic policies.
Another arena of modernization was EU support for innovation and cooperation in higher education and scientific research. Starting in the mid-1970s, the European Science Foundation sought to pool some of the resources of about thirty countries in order to fund transnational research, while the European Space Agency prepared to send satellites into orbit. Beginning in the mid-1980s, the EU financed technological and scientific research directly through a series of increasingly ambitious “framework programs” so as to keep Europe competitive on the world market. From 1987 on the Erasmus Program supported exchanging several million students and hundreds of thousands of teachers among countries to learn other languages and cultures. Constituted by a declaration at Bologna in 1999, the European Higher Education Area also tried to improve the compatibility of national degree programs by introducing the Anglo-American sequence of BA, MA, and PhD in order to make their diplomas more comparable.37 Though creating initial chaos, the homogenization of curricula ultimately facilitated student exchanges.
Propelled by modernizing pressures of globalization, the new impetus for integration in the 1980s and 1990s created a complex structure of multilevel governance that has baffled political analysts. The European Union gained numerous features that were clearly supranational such as the common currency of the euro, suggesting the gradual emergence of a common polity. But the retention of ultimate decision-making power by the Council of Ministers of the member states, and within it by the Franco-German axis, also demonstrated the continued importance of intergovernmentalism. Moreover, the introduction of regional policies by funding those areas that had lagged in economic development added an element of subsidiarity to the mix, in which some powers were actually devolved from the national level to the regions concerned. The result was an exceedingly complicated structure of competing competences, taxing the ingenuity of citizens trying to make sense of the system. Even if the comparison with the arcane Holy Roman Empire seems a bit far-fetched, it does suggest the difficulty of creating “unity out of diversity.”38
The overthrow of communism confronted the emerging European Union with an unforeseen dilemma of whether to welcome new eastern members or to pursue further integration. In part, the peaceful revolutions showed that western-style consumer democracy was more attractive than eastern-style welfare dictatorship. The “socialist economic integration” of the Comecon had remained rather limited, because planning was inflexible and the division of labor privileged bilateral barter.39 Propelled by popular resentment, the Soviet retreat from Central Europe lifted the Iron Curtain that had long divided the continent, thereby posing the question of how to deal with former satellite countries such as Poland, Czechoslovakia, and Hungary. Since their dissident counterelite was intent on a “return to Europe,” it clamored for admission to the emerging EU. But at the same time the original Western European members were attempting to integrate even further, shifting more powers to the European Commission. In practice, these divergent goals of widening and deepening proved difficult to reconcile.
The first round of post–Cold War enlargement was rather unproblematic, since it involved several neutrals who now felt free to formalize their ties to the EU. During German reunification in 1990 the five eastern Länder that had formerly been the German Democratic Republic became EU members by joining the Federal Republic. With the end of the Cold War and the collapse of the Soviet Union, Finland and Austria reinterpreted their neutrality obligations so as to allow them to enter, while Sweden did not want to be excluded from participating in the continental market. In order to deal with these new applicants, the EU in its Copenhagen meeting in 1993 established clear membership criteria, calling for full democracy, a free market, and the acceptance of the existing body of European Community law. Since there was no doubt that all three countries fulfilled these demands, they were welcomed in 1995 as strong economies that would help augment the shared budget.40 Only the idiosyncratic Swiss and the oil-rich Norwegians refused to join, but they negotiated special agreements providing them with market access.
The second widening of the EU concerning the former Soviet Bloc countries (plus Cyprus and Malta) was more difficult, since these were less ready owing to their communist legacy. Not only were they still attempting to catch up economically and transition into a new political system, but the economic disparity was enormous, with some applicants averaging only one-quarter of the members’ per capita GNP. But the argument that inclusion would be “a historic opportunity” to heal the continent’s division and strengthen the drive to democracy proved irresistible. As a result, negotiators agreed on a lengthy transition period with a gradual phase-in of economic support so as not to push the EU budget beyond its agreed limit. One sticky issue was the question of labor, since German and Austrian unions feared a flood of low-wage workers from the East and insisted on postponing full mobility. The first group of countries consisting of the Baltic states, Poland, the Czech Republic, Slovakia, Hungary, and Slovenia was admitted in 2004, and Bulgaria and Romania were added three years later.41 Thereby the EU expanded to twenty-seven countries with about five hundred million citizens.
To streamline decision making in the enlarged union, supporters of further integration pushed for a new constitution that would consolidate and accelerate EU development. In 2001 the Laeken meeting created a constitutional convention, chaired by Giscard, which was charged with drafting a text that would combine the various treaties into one document. To create “a Union that is more cohesive and more understandable to the general public,” the eventual draft proposed “to promote peace, its values and the well-being of its peoples.” Reaffirming the human rights of European citizens, the constitution differentiated between exclusive, shared, and reserved competences, starting with the common market but expanding into new areas such as energy. The text also clarified the institutional structure, strengthened qualified majority voting, and moved explicitly toward a common foreign and security policy while giving the European Parliament powers of codecision. Signed in 2004, the document tried to affirm current practices while moving further in selected areas toward a European superstate.42
The surprising rejection of the draft during the subsequent ratification process exposed flaws in the top-down approach to European integration. Though eighteen states had already endorsed the constitution by parliamentary vote or plebiscite, referenda in France and Denmark on May 29 and June 2, 2005, repudiated the constitution by a vote of 55 to 45 percent and 61 to 39 percent respectively. While the turnout was modest, the media cried doomsday and pronounced the entire integration project dead on arrival. More differentiated analyses pointed out that the constitutional convention had been an elite project that failed to ignite public interest and therefore did not create a groundswell of support. The referenda also gave Euroskeptics a chance to vent their resentment of their own governments as well as the “Brussels bureaucrats” for unpopular policies. Moreover, for most Europeans the current version of the EU with its shared currency, open borders, student exchanges, and wider offerings of fruits and vegetables worked well enough already. A largely symbolic constitution therefore seemed unnecessary.43
Instead of giving up, the proponents of integration succeeded in salvaging the core of the constitution through an intergovernmental agreement called the Lisbon Treaty. The more modest approach of amending prior treaties with a shorter document had the advantage of being ratified more easily, though it took two tries to do so in Ireland. The most important provisions aimed at strengthening the internal functioning of the EU by giving greater powers to the European Parliament and expanding qualified majority voting in the European Commission. At the same time the treaty sought to enhance the external influence of the EU through the creation of a European Council president, serving for two and one-half years, and the addition of a commissioner for foreign affairs and security issues. Moreover, the citizenry gained the right to initiative, if signed by one million voters, and protection for human rights by making them legally binding.44 Coming into force in 2009, the Lisbon Treaty put the EU onto a more solid footing and recovered a sense of momentum for the integration process.
Almost immediately, the sovereign debt crisis in peripheral European countries severely tested the EU’s cohesion and ability to react. When the U.S. rating agencies downgraded Greek, Irish, Portuguese, and eventually also Spanish government bonds because of those countries’ large budget deficits, interest rates went through the roof. Easy credit and transfer of funds from Brussels had led to excessive spending and fed a real-estate boom that now threatened to collapse. Egged on by hysterical commentators, the EU had to find a way to bail out the debtors in order to defend the euro. As the largest economy of the euro zone, Germany was loath to support undisciplined overspenders but eventually understood that its exports depended on saving the common currency and helping its neighbors. Chancellor Angela Merkel reluctantly agreed to a series of rescue packages, provided that the debtors reduced their expenditures and undertook structural reforms. With the help of ECB refinancing, the EU succeeded in calming the markets. But the crisis showed that monetary union required stronger controls and a shared fiscal policy.45
In spite of annoying setbacks, many indicators point to the growth of a common European identity at the beginning of the twenty-first century. In the stores appliances from Germany, fashions from France, wines from Italy, oranges from Spain, whiskey from Ireland are all paid for in the same currency. On the superhighways trucks from Ukraine pass Danish campers heading for vacations in Portugal, while repair vans from Poland drive to work sites in Holland, mixing license plates and destinations as never before. In the airports travelers with European passports pass through special fast-track lanes, while tourists from the United States and the rest of the world have their papers more carefully scrutinized. On university campuses, Erasmus (ESN) students from within-EU countries mingle with local youths and other exchange students from all over the world, discussing the latest rock bands in accented English. While some of their elders still marvel at the disappearance of borders, denizens of the younger generation take such blending of backgrounds and cultures for granted, developing into an emergent European elite, thinking in continental or global terms.46
After the catastrophic first half of the twentieth century, many European intellectuals dreamed of recovering a benign version of modernity that would bestow bountiful benefits instead of wreaking death and destruction. From classical antiquity to Christianity, from the Renaissance to the Enlightenment, leading thinkers had formulated visions of “universal peace” in order to pacify the continent. The terrible suffering produced by the world wars, the Great Depression, and the dictatorships turned the realization of such pious wishes into a necessity of practical politics, if Europeans wanted a better future. During the darkest hours, resistance leaders clung to their faith in the possibility of resuming progress through scientific discovery, market competition, individualistic lifestyles, and rule of law. In the midst of the ruins left by World War II and the Holocaust, survivors searched for new political arrangements that would constrain the dangers of nationalism, militarism, authoritarianism, and international strife.47 The quest for integration was one answer to the question of how to shape a better future.
Though these hopes were only partly realized, the modernizing achievements of the EU have nonetheless been impressive. To begin with, European integration has made war unthinkable among its members, because it has eliminated barriers between them and bound them together in a shared enterprise. No doubt bilateral reconciliation attempts such as the Elysée Treaty between France and Germany and the more recent effort to reduce tensions between Warsaw and Berlin have also made a contribution. While the transatlantic anchoring of the NATO alliance has provided a crucial nuclear umbrella, the Europeans were instrumental in moderating the renewal of Cold War confrontation. The only exception, the wars of Yugoslav secession during the 1990s in the Balkans, took place outside the EU, serving as a drastic reminder of what could go wrong. At the same time a basic change of attitudes toward war extinguished the fires of militarism to such a degree that U.S. neoconservatives attacked Europeans as having become too reluctant to fight.48 Compared to the bellicose past, this pacification has been astounding.
The spread of prosperity has been an equally impressive gain in modernity, even if it has slowed noticeably during the past decades. Remarkable efforts of reconstruction have produced a “new Europe” out of the rubble with an intriguing mixture of restored historical buildings and gleaming modern designs. The return to the market was largely responsible for this economic miracle, since it unfettered individual initiative and competition, weeded out the inefficient structures. But neoliberal commentators tend to forget that the trente glorieuses were also a product of the systematic expansion of the welfare state that made it possible for the underprivileged parts of the population to participate in consumption. After the Oil Shocks of the 1970s this “social market economy” had considerable difficulties adjusting to the pressures of globalization, but its social protections proved more crisis-resistant than during the late 1920s. Though some pockets of poverty remain at the periphery, some European countries have in the meantime achieved a higher standard of living than the United States, which serves as a barrier against radicalism.49
In spite of critiques of a “democracy deficit,” European integration has also contributed considerably to stabilizing a renewed form of democracy on the continent. Already in the first postwar years, the beginnings of cooperation reaffirmed self-government in those West European countries where it had been under pressure before. More importantly, in the postfascist states of Germany and Italy integration speeded westernization by making democracy the expected standard for recovering international respectability. Several decades later the EC took an active role in the Greek, Spanish, and Portuguese transition to parliamentary rule by providing economic aid to facilitate development and assisting with the rebuilding of democratic structures from the ground up. In the postcommunist transition in Eastern Europe the EU served as magnet for the fledgling governments by welcoming them into the European community with material help and political advice. Even if European censure was unable to prevent the rise of populists like Jörg Haider, the principle of “conditionality” as prerequisite to membership reinforced the turn to democracy.50
In spite of much progress, “an ever closer union” remains elusive, since the contest between federalists and skeptics over the meaning of European modernity continues to be undecided. Proponents of further integration like the German philosopher Jürgen Habermas argue that a “deepening of the federative aspect of the European Union” is necessary to prepare the continent for global citizenship. Neoliberal opponents of additional steps like the UK Independence Party see Brussels as the root of all evil, accuse it of overregulation, and demand that Britain leave the EU. Between these extremes commentators take a range of positions, from advocating a moderate strengthening of common institutions to calling for a halt with no further advancement. Through this debate “Europe” has become a signifier for conflicting views of modernization, be it embraced as progress or rejected as danger. Brussels can be applauded as a guarantor of free movement and gender equality, or it can be damned as an incarnation of technocracy and bureaucracy.51 Though populist critics of integration are getting more vociferous, the process of integration is likely to continue.