European Union

1. an association of European nations formed in 1993 for the purpose of achieving political and economic integration. Formerly known as the European Economic Community, the European Union's member states are Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, and the United Kingdom.

2. See European Community.

Abbr.: EU.

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▪ 2009

      When Slovenia assumed the rotating presidency of the European Union on Jan. 1, 2008, the symbolism was unmistakable. With a population of just over two million, Slovenia had become the first postcommunist country (of the eight that joined the EU in 2004) to take on the six-month chairmanship of what had long been an elite “Western” club. Slovenia's big moment underscored how the EU—representing 27 countries and almost 500 million citizens—had begun to embrace those postcommunist Eastern European members.

      Slovenia, which had helped to trigger the collapse of the former Yugoslavia when it declared independence in 1991, took control of the EU presidency at a time when problems in the Balkans were threatening to reassert themselves. Kosovo, a province of Serbia with a population comprising a mix of ethnic Albanians (Kosovars) and Serbians, announced on February 17 that it was breaking away from Serbia. Serbia and its ally Russia were vehemently opposed, describing the split as illegal.

      Amid the rising tension, Slovenian Foreign Minister Dimitrij Rupel saw an opportunity for his country to make a mark on history by using the lure of EU membership for Serbia as a way to resolve the crisis. Despite divisions between EU countries over how to approach the crisis, it was made increasingly clear to Serbia that if it accepted Kosovan independence, Serbia could soon become a candidate for EU membership. The approach worked, and in Serbia's parliamentary elections in May, the “For a European Serbia” alliance outperformed the Serbian nationalists. Then in July the arrest of Bosnian Serb wartime leader Radovan Karadzic—one of a group of men whose capture the EU had been demanding—also helped improve relations. Karadzic's capture was described by British Foreign Minister David Miliband as an “important step” toward Serbia's accession to the EU.

       Ireland, historically one of the most enthusiastic EU member countries, caused the biggest short-term problem in the middle of the year. In June in a referendum, Irish voters rejected the EU's Lisbon Treaty—a set of proposals designed to modernize the bloc's institutions so that they could function with its increased membership of 27 countries. The treaty had started out in 2004 as the EU Constitutional Treaty, which was rejected in referenda in France and The Netherlands in 2005.

      The renamed Lisbon Treaty was much the same in substance, although EU leaders—in the hope of making it more acceptable to citizens who feared the loss of powers from their own national governments to the EU's central power in Brussels—insisted that the new treaty was less far reaching in constitutional terms. According to the existing rules, every country in the EU must ratify a new treaty, either in its respective parliament or in a referendum, for that accord to be implemented anywhere in the community. With the Irish rejection, the Lisbon Treaty was unable to come into force as scheduled on Jan. 1, 2009. EU leaders said that the process of ratification in other countries had to continue, but there was no obvious way forward unless, sometime in the future, the Irish government held another vote and won approval. In the meantime, the EU would have to carry on with structures devised in the 1950s for its original six-country membership.

      In August the EU's attention switched to the crisis in Georgia after Russia sent tanks into that country in a dispute over the breakaway region of South Ossetia, whose population was primarily ethnically Russian. Moscow's actions were seen in part as a warning to Western countries not to back Georgia's efforts to join NATO—an idea that had been discussed by members of the Western alliance.

      The question of how to deal with the situation in Georgia caused intense debate among the EU member countries. An emergency summit of EU leaders in Brussels on September 1 denounced the “disproportionate” Russian action and described as “unacceptable” the Kremlin's recognition of South Ossetia and Abkhazia, another breakaway province in Georgia. There was no agreement on a plan submitted by British Prime Minister Gordon Brown to freeze negotiations with Moscow on a new EU-Russia strategic partnership. France, which had assumed the EU presidency on July 1, urged caution, saying that it did not want “another Cold War.” As the United States led the condemnation of Russia, France was in the vanguard of those who urged caution, highlighting Europe's reliance on energy supplies from Russia.

      By early autumn, as tensions over Georgia lessened, the global financial and banking crisis was posing fundamental questions of a very different sort for the European Union. Instability in the global financial markets was spreading fears of a severe worldwide economic slowdown. Food and commodity prices had been climbing all year, threatening a surge in inflation, and instability in the value of the U.S. dollar affected the euro. At the same time, there were also calls in member countries for cuts in euro-zone interest rates. The debate remained: whether the EU would establish a joint economic policy to combat the crisis or every country would be responsible for itself as the financial crisis hit home—an approach that would severely undermine the EU's central purpose.

      In late September Ireland was criticized by its EU partners for suddenly and unexpectedly announcing plans to guarantee all bank savings, even corporate deposits, in six of its main banks. Other EU countries were furious that the Irish government had not consulted its European partners and that the plan might mean that people across the community would switch their banking to Ireland, which thus would distort the European system.

      French Pres. Nicolas Sarkozy called an emergency summit of the “big four” EU nations—France, Germany, Italy, and the U.K.—to discuss the crisis. At this meeting, held in Paris on October 4, the leaders demanded a global gathering to consider the formation of a new world financial system to replace the 1944 Bretton Woods agreement, which had formed the International Monetary Fund and the World Bank. “We need to literally rebuild the international financial system,” Sarkozy said. “We want to lay the foundations of entrepreneurial capitalism, not speculative capitalism.”

      Within hours of that declaration, however, there was consternation in Paris, London, and Rome: Germany had itself established a plan to guarantee its savers' money in German banks that appeared to exceed the perimeters of accepted EU policy. After initially furious protests, tempers cooled as the German government explained that its plan was a far-more-limited measure than that authorized by Ireland, but the row exposed many of the tensions at the heart of the European project.

      During October and early November, there was a greater sense of common purpose as the EU backed plans, pushed hard by Prime Minister Brown, to prop up and partially nationalize major banks. Several of the largest European countries—notably the U.K. and Germany—developed proposals for tax cuts to give their economies a fiscal stimulus to encourage people to start spending again. Even the U.K.—traditionally resistant to the idea of a coordinated European fiscal policy—admitted that cooperation within the EU was a vital component in reviving the global economy. In mid-November leaders of the larger EU states took part in a Group of 20 (G-20) summit of major advanced and emerging economies held in Washington, D.C., where it was agreed that the economic crisis required coordinated global action on fiscal policy, including, where possible, tax reductions to jump-start the world economy. The G-20 leaders also decided to try to restart the stalled Doha round of trade talks and to work toward reform of the IMF and the World Bank so that those two institutions could work effectively in the new world of global finance.

      On November 5 the EU turned some of its attention to the next phase of EU expansion, declaring that Croatia—another Balkan state—was on course to become the 28th EU member country by the end of 2010 or early in 2011. Serbia was told that it might be able to start membership talks in 2009. Turkey's path toward entry remained strewn with obstacles. In a report on the EU's expansion plans, Olli Rehn, the European commissioner with authority for enlargement, said that there had been “stagnation” in Turkey's efforts to meet the political and economic conditions for entry. At the same time, Sarkozy was subtly applying new pressure on Ireland to hold a second referendum, claiming that there could be no further admissions until all existing member countries had ratified the Lisbon Treaty.

      As the year drew to a close, it was clear that despite diplomatic crises on its doorstep, a continuing constitutional wrangle involving its own rule book, and a global economic crisis that had raised questions about its plans for common economic policies, the EU was still a club that many ambitious countries wanted to join. Membership offered a sense of stability in an unstable world and a say in an international organization that was using the weight of its collective membership to argue for global solutions to many global problems.

Toby Helm

▪ 2008

       Berlin, for so long the symbol of a divided Europe, was chosen as the venue to celebrate the European Union's 50th birthday at the end of March 2007. The German capital staged a series of emotionally charged events that marked the unquestioned ceremonial highlight of the EU's year. Heads of state and government from the 27 member countries came together near the Brandenburg Gate—a short distance from what had been the route of the now dismantled Berlin Wall—for gala dinners, concerts, and fireworks to hail the achievements of the union formed by the 1957 Treaty of Rome. The symbolism passed no one by as German Chancellor Angela Merkel, who grew up in communist East Germany, expressed Europe's pride in the successful union of West and East.

      The high spirits of the Berlin birthday party could not conceal doubts that dogged the European venture throughout 2007. European leaders knew that the EU had reached a crossroads in its development and had yet to decide down which route to turn. Less than two years earlier, the EU project—until then driven forward by the founding fathers' belief in the moral necessity of “ever closer union”—had been thrown into disarray when plans for an EU constitution (with many of the trappings of statehood) were rejected by voters in France and The Netherlands. The “no” votes meant that the constitution had to be scrapped. European leaders had been unsure of what to do about the EU's future, and in 2007 many of the fundamental questions remained unresolved.

      The year opened optimistically enough with the admission of two more former Eastern bloc countries, Romania and Bulgaria, as full members of the EU, which thus stretched the European Union boundaries from the Atlantic Ocean to the Black Sea. In the two capitals, Bucharest and Sophia, respectively, the sanguine atmosphere evoked memories of the fall of the Iron Curtain 17 years earlier. In much of Europe, however, opinion was mixed about expansion. One EU-wide opinion survey found that people in countries that had joined recently overwhelmingly supported more expansion, while only 41% of citizens in preexpansion countries wanted to admit more members in years to come.

       Merkel, whose country held the EU presidency for the first six months of the year, was definite in her vision that Europe should not retreat from its bold ambitions for further expansion and deeper integration. In January she made it clear that she wanted the EU to bring back to life large elements of the rejected constitutional treaty that had caused such division in 2005. In countries with a tradition of reticence about transferring powers from their national governments to the EU—notably the U.K., Denmark, and The Netherlands—Merkel's enthusiasm to revive most of a treaty that had been rejected as democratic votes did not go unnoticed.

      British Prime Minister Tony Blair, preparing to step down after a decade in office, urged the EU to turn its attention away from institutional reform to subjects such as the need to tackle global warming and deliver economic liberalization in the face of mounting competition from countries such as India and China. At the EU summit in Brussels in March, leaders of the 27 member countries agreed to binding targets that would require them to cut greenhouse-gas emissions to 20% below 1990 levels by 2020. There were also commitments to increase the proportion of energy provided by renewable sources, such as wind, wave, and solar power.

      An era of European politics ended in May when 52-year-old Nicolas Sarkozy succeeded Jacques Chirac, age 74, as president of France. Chirac had driven the European Union forward for 12 years, combining a strong pro-integration philosophy with consistent defense of France's national interest. Sarkozy hinted that although he was just as enthusiastic about the EU as his predecessor had been, he might also foster relations between Paris and Washington that were warmer than the frosty atmosphere that had existed under Chirac. On economic policy, however, Sarkozy's arrival created new tensions. Unlike Blair, he warned the EU against focusing too much on economic liberalization. He made it clear that he would continue France's protectionist tradition—known in the EU as “economic nationalism”—and asserted that Europe had a moral purpose beyond merely advancing the interests of free trade. “It [the European Union] must not become the Trojan Horse for globalization's ills,” Sarkozy declared upon taking office.

      In June the debate on what to do about the constitution came back in earnest. Germany applied heavy pressure for a replacement treaty to be agreed upon by the time it handed over the presidency to Portugal at the end of the month. Most member countries acknowledged that much of the substance of the treaty was necessary for the efficient working of the EU. There was a need to reduce the policy areas that were subject to unanimous voting. The European Commission (the EU's executive arm) had to be streamlined, and it was vital that the EU expand its role in areas such as the fight against international terrorism and drug trafficking. Supporters also emphasized that the EU needed to increase its influence in international affairs with the creation of a new permanent president of the Council of Ministers and a new foreign policy chief.

      Behind closed doors EU leaders agreed that their best chance of selling to their people a treaty that was essentially the same as the rejected one would be to drop the word constitution from the title and strip the new documents of proposals for a new EU anthem and EU flag, which looked so much like the trappings of statehood. What emerged from the June summit was a differently worded and slightly slimmed-down reform treaty—devoid of references to flags and anthems but otherwise much the same as the rejected constitution.

      Having secured a deal that did not require a repeat referendum, Sarkozy seemed to have done enough to persuade the French people, and it appeared that the Dutch parliament was more relaxed, arguing that it had been given a new role of keeping the EU in check. The revival of key elements of the constitutional treaty presented a real headache for Gordon Brown (Brown, Gordon ), who had succeeded Blair as British prime minister on June 27. Blair's government had promised a U.K. referendum on the constitution in 2005 but never had to call one because French and Dutch voters had killed the treaty. Now—as he tried to head off calls for a referendum— Brown had the difficult task of arguing that the new treaty was fundamentally different from the old one.

      In September there were signs of a major shift in French policy on European and transatlantic defense issues as Sarkozy signaled that Paris was preparing to rejoin NATO's military command after a 40-year absence. The move was intended to reassure Washington that France's enthusiasm for closer cooperation between EU countries on defense and military issues was not, as the U.S. feared, intended to undermine the transatlantic alliance. French Defense Minister Hervé Morin told a defense conference in September that he was “convinced that European defence will make no progress unless France changes its political behaviour within NATO.” Meanwhile, Sarkozy was developing plans for a new committee of EU “wise men” to examine the EU's role until 2030. It was agreed in December that the group would be chaired by former Spanish prime minister Felipe González. At the same time, Sarkozy was preparing to unveil his ideas on closer defense cooperation between member countries.

      The 27 heads of state and government met again in Lisbon in October to agree on the final wording of the revived reform treaty—which was then renamed the Lisbon Treaty. Only Ireland, which was bound under its constitution to hold referenda on such issues, had committed itself to holding a national vote. Brown was holding out, arguing that the U.K. Parliament should ratify the treaty, but with MPs of all parties demanding that he grant a national vote, he remained under intense pressure. The treaty was signed by all 27 EU leaders on December 13 at a ceremony in Lisbon.

      On November 6 the European Commission published its report on the difficult issue of Turkey's progress toward admission into the EU (which was not expected for at least a decade). The report indicated that Turkey still fell short in several areas. At the request of France, a document adopted on December 10 by the EU foreign ministers referred to “intergovernmental” rather than “accession” conferences with Turkey. This was considered in some circles to be a victory for Sarkozy, who opposed Turkey's accession to the EU. Enthusiasts for Turkey's admission, including the British, claimed, however, that the wording had no hidden significance. It was clear that new tensions were already building over the next phase of the EU's development.

Toby Helm

▪ 2007

      The year 2006 was strangely muted and uneventful for the European Union, given the extraordinary momentum that had seen the EU expand in half a century from a membership of 6 founding countries to a club of 25 with ever-increasing ambitions. The European project had always been driven by the principle of “ever-closer union.” The organization's founding fathers had preached that if true Europeans ever paused in their mission to achieve closer cooperation and the extension of the union's boundaries, the whole edifice might collapse and the continent return to nationalism. In 2006, however, Europe's integrationists—stung in the previous year by the failure to push through a binding constitution that was rejected in referendums in France and The Netherlands—decided to pause, take stock, reflect about what the EU was really for, and examine whether the direction in which they had been hurtling was the right one. Everyone knew that the EU had to win back the trust of its citizens as quickly as possible.

      The year opened with Austrian Chancellor Wolfgang Schüssel, whose country had taken on the rotating six-month EU presidency in January, dismissing 2005 as a “terrible year for Europe.” Pres. José Manuel Barroso of the European Commission, the EU's executive arm, spoke of the need to deliver a “Europe of results” in the aftermath of the constitution debacle. Throughout 2006 Barroso asserted that he wanted a community that did real things for real people, rather than one in which politicians sought to amass more power and centralize it in Brussels by building ever-more-powerful EU institutions. Barroso argued that the community had to bring tangible benefits to people's lives that they could understand and see as relevant to the challenges of the modern world. The EU had to forget institutional “navel gazing” and make economies stronger, the environment cleaner, and citizens' lives more secure.

      By the end of 2006, British Prime Minister Tony Blair also was urging the EU to restore its reputation for acting in the peoples' interests by becoming the lead player in global efforts to save the environment. At a summit in Finland in October, Blair declared that the EU was ideally placed as an international organization of real weight to lead worldwide efforts to reduce carbon emissions and to promote and develop clean energy. “We have a window of only 10–15 years to take the steps we need to avoid crossing catastrophic tipping points,” Blair and Dutch Prime Minister Jan Peter Balkenende wrote in a joint letter to their fellow heads of government.

      For much of the year, the efforts to reconnect with citizens focused on the urgent need to create a common energy policy that would ensure greater security of supply within the EU and reduce the union's dependency on Russia. Concern about gas and oil supplies had heightened after Russia's decision at the start of 2006 to halt gas supplies to neighbouring Ukraine revived memories of the Cold War. With about half of the EU's total energy needs being met by imports and a fifth of its total oil and gas coming from Russia, the European Commission sought to build support for a common approach to energy and the “Russian problem.” In a policy paper, the commission called for massive investment in new technology and the completion of the single energy market within the EU while acknowledging that the cost could reach €1 trillion (about $1.27 trillion) over the next 20 years.

      As with other issues, however, the desire for progress in Brussels clashed with political interests in some member countries as well as with the need for national governments to be seen to be backing their leading domestic companies. Barroso accused some members, including Spain and France, of hindering progress toward a common energy policy and a fully functioning single market by promoting “economic nationalism.” This was, at least in part, a reference to member countries' efforts to defend their own large energy companies from being taken over by foreign firms.

      Despite these problems, there were encouraging signs in 2006 that the EU economy, long held back by its outdated social model and inflexible labour markets, was picking up. In August the EU, powered by encouraging results from Germany and France, recorded its highest level of growth in six years, overtaking the United States. Official figures showed that GDP in the 12 euro-zone countries had risen by 0.9% in the second quarter, which represented a year-on-year expansion of 2.4%.

      In June heads of the 25 member governments met in Brussels to discuss what to do about the defunct constitution that had been placed in political cold storage following its rejection by the citizens of two of the community's founding countries. The constitution would have given the EU many of the trappings of nationhood, including the ability to sign international treaties, a permanent president and foreign minister, and more powerful institutions. Instead of confirming that many people apparently no longer wanted the constitution, however, the leaders agreed to spend another two years—until mid-2008—reflecting on what to do about it. The need to change voting rules and systems so that the EU could function better with its recently expanded membership remained.

      There was some progress in June; Turkey completed the first official step toward membership when an initial symbolic chapter of negotiations on its terms of admission was opened and closed. Deep concerns remained that Turkey's strained relations with Greece over the divided island of Cyprus could derail the talks farther down the line. Under EU rules, any one existing member could veto the entry of a new one, which gave the Greeks huge leverage. Throughout the year there were misgivings over Turkey's refusal to allow Greek Cypriots access to Turkish ports and airports—even though Ankara had formed a customs union with the EU in a sign of progress toward membership. Countries opposed to Turkey's entry, including France, also accused Turkey of slow progress on human rights, particularly those of minorities such as the Kurds. By the end of 2006, there was some apprehension that talks on Turkey's admission could be suspended.

      By contrast, Romania and Bulgaria, which had been in the accession queue for longer than Turkey, finally heard in September that they would be joining on Jan. 1, 2007, as the 26th and 27th member countries. Their joint accession would add 30 million people to the EU's total population, taking it close to half a billion. Although the two countries were told to continue the fight against corruption and to clean up their justice systems, Barroso described their entry as a “historic achievement” that completed the admission of 12 former Eastern bloc communist countries.

      Worries about mass immigration into the EU from outside the community and about active population movements from new member countries to more prosperous existing ones were high on the agenda. In response to the bustling migration into the EU, the commission proposed the creation of a rapid-reaction force of 250–300 experts that could be dispatched within 10 days to any point on the EU's southern border to counter illegal immigration from other continents, particularly Africa.

      The situation in the United Kingdom demonstrated the dilemmas facing EU governments over internal migration, especially following the accession of eight former communist countries to the community in 2004. (Citizens of one member country retained the right to cross borders to another EU member and, unless the government of the destination country had imposed restrictions, work there as they wished.) Figures released by the U.K. Home Office revealed that 600,000 new EU migrants had gone to work in Britain since 2004, compared with the 15,000 that had been predicted. Most of these immigrants had contributed to the British economy, but pressure on housing and overcrowded schools was building to levels that worried some government ministers.

      When it was announced that Bulgaria and Romania would be admitted to the EU at the start of 2007, British Home Secretary John Reid abandoned the U.K.'s open-door policy, stating that the only “unskilled” Romanian and Bulgarian workers who would be permitted to work in the U.K. would be those taking jobs in agriculture and food processing. Highly skilled migrants, the self-employed, students, and others with proven skills would be allowed to work in the U.K., but those who arrived without the necessary qualifications would face fines, and their employers would be required to pay hefty penalties. It was a dramatic shift of policy for the U.K., which had always championed enlargement of the EU and the free movement of workers across national borders. Other EU countries followed suit with similar measures to exclude workers from the next entrants into the community. It was additional proof that the European Union was rethinking how it operated and challenging assumptions that had driven the project since it was founded half a century earlier.

Toby Helm

▪ 2006

 The year 2005 would be remembered as one in which Europe's political elite received a reality check when voters in referenda held in two of the European Union's founding members—France and The Netherlands—rejected the EU's proposed constitution. These negative verdicts created the biggest crisis in the EU's history—one that was to dominate EU affairs throughout the year.

      In the previous six years, those who supported a stronger EU had achieved everything they hoped for. The EU had introduced a single currency, replacing national currencies with the euro in 12 member states, and had expanded its membership from 15 countries to 25 with the addition of 8 countries from the former communist bloc of Eastern Europe, as well as the islands of Cyprus and Malta. In October 2004 the EU members signed a treaty in which they agreed on the text for a proposed Constitution of Europe. (See Sidebar (European Union's Proposed Constitution ).) Under EU law, for any treaty to come into force, all member countries had to ratify it either in referenda or in votes of their national parliaments, so any “no” votes would put a halt to the momentum. The proposed constitution aimed to change the rules of the EU to ensure that it could function with a greatly expanded membership. More decisions would be reached by majority voting, which thus would reduce the power of one nation to veto EU policies. EU institutions would be granted more power and authority so that they could carry more weight in international affairs and better address new challenges, such as immigration, drug trafficking, and terrorism. Under the constitution the EU would acquire a new full-time president and foreign minister, become more involved in justice and home affairs issues, and gain the right to sign international treaties.

      As 2005 began, the momentum toward further integration and expansion seemed irresistible. Two parliaments—in Lithuania and Hungary—had already voted to ratify the treaty, and on February 20 a referendum in Spain drew a 76.7% “yes” vote. Plans to move one step farther by binding member countries together under a written constitution were to prove a step too far for some Europeans, however. In four momentous days the people of France (on May 29) and The Netherlands (on June 1) rejected the constitutional treaty. Although several other member parliaments ratified the treaty during the year, pro-constitution leaders in Europe were forced to slow down, take stock, and ponder how to reconnect with the people who opposed the planned changes.

      France's rejection of the constitution had been widely predicted in opinion polls, but that did nothing to lessen the sense of shock when the result came through. Almost 55% voted “no,” and the unusually high turnout of more than 69% left no doubt that this was a clear verdict that could not be ignored. Pres. Jacques Chirac, who had fought hard for a “yes” vote, appeared uncertain how to react. In a brief statement after the result was announced, he said merely that the outcome would make it “difficult to defend French interests in Europe.” Many observers felt that Chirac's remarks suggested that he was unwilling to accept the result, thought the French people had failed to understand, and saw the prospect of a second referendum to reverse the “no” vote as the only way forward.

      The reasons that the French rejected the constitution were many and complex. Centre-left politicians argued that the document was too Anglo-American in its view of Europe's economic objectives, placing too much emphasis on the free market and too little on the principles of protection for citizens against the ravages of the global marketplace. They argued that the constitution echoed too enthusiastically the EU's long-standing commitment to “free and fair competition” and the goal of “free movement of goods, people, and capital.” Opponents on the right, however, criticized the treaty for transferring power from the national government to Brussels and thus promoting a multicultural Europe with open borders in which decisions on immigration and border controls would be made by the EU. Their fear was that as the EU membership stretched farther eastward, there would be a multinational free-for-all in which Eastern European workers could move to Paris, undercut local wages, and put French workers out of their jobs overnight. France's rejection of the treaty reflected a multifaceted distrust of the country's and the EU's leaders.

      Another disheartening blow for Chirac and other Brussels supporters was the speed with which The Netherlands—which until a few years before had been one of the most pro-EU countries—followed France's lead. Discontent among the Dutch people about rising immigration into their crowded if prosperous country was coupled with a sense that the euro had not proved good for the local economy. Dutch voters rejected the proposed constitution by 61.6–38.4% in a turnout of 63%. A few weeks later Luxembourg, the chief beneficiary of EU funds in per capita terms, approved the constitution by a surprisingly narrow margin (56.5–43.5%), which reinforced the impression that support for the treaty was fading. A period of indecision followed. Should referenda proceed in other countries, while a rescue plan was devised? If they did, would there be a chain reaction of “no” votes that would further damage the EU's reputation and morale?

      Pro-EU British Prime Minister Tony Blair (Blair, Tony ) (see Biographies) had committed his people to a referendum that looked impossible to win. The collapse of the constitution might have come as a relief, although he was at pains not to say so publicly. In a landmark speech on June 23 to the European Parliament in Brussels, Blair took the lead in arguing for a profound rethink about the direction in which Europe should go. The “no” votes, he said, had been a “wake-up call” for the EU. Europe's leaders could no longer kid themselves that it was “business as usual,” and the community would need to redefine its economic priorities and develop a more modern economic philosophy before it thought again about how to expand its powers and enlarge its institutions. Blair insisted, “It is a time to recognize that only by change will Europe recover its strength, its relevance, its idealism, and therefore its support amongst the people.”

      During the second half of the year, after the U.K. took over the EU presidency, Blair led calls for reform of the so-called Europe social model of high social protection (put in place after World War II), which he said had failed to adapt to the challenges of globalization and the threat from such emerging economies as India and China. Europe's labour markets were too inflexible and contributed to unemployment, which had risen to 20 million in Europe—with almost 5 million people out of work in Germany, the former engine of the EU economy. Blair asserted that the community's common agricultural policy desperately needed reform so that more of the EU budget would go to support training and industries of the future rather than to prop up unproductive farmers through overly generous farm support and export subsidies.

      Blair's approach infuriated the French and German governments. Chirac immediately hit back, saying that he would refuse to accept any change to agricultural subsidies, which benefited millions of small French farmers. Blair offered to give up Britain's 21-year-old deal, known as the rebate, under which the U.K. received £3 billion (about $5.5 billion) back from Brussels in recognition of its lower farm-subsidy payments. German Chancellor Gerhard Schröder also fell out spectacularly with the British prime minister, who, Schröder said, wanted to abandon Europe's political project and return the EU to a mere free-trade area. Europe was locked in bitter stalemate as it tried to address its next big challenge—the shape of the EU budget from 2007 to 2013. In September Schröder, a Social Democrat, narrowly lost the German election to his centre-right opponent, Angela Merkel (Merkel, Angela ) (see Biographies), a scientist from the former communist East Germany, who had advanced the cause of economic reform in Europe and by German standards was less of an integrationist than Schröder.

      Arguments were also opening up on other fronts. Turkey, which with 70 million citizens would become the EU's most populous country, was hoping to open negotiations in October on its entry into the community in several years' time. There was strong opposition, particularly from Austria, which feared an influx of Turks and threatened to block the opening of talks. Not only had deeper integration through the constitution been abandoned—at least for the foreseeable future—but the goal of further expansion was also under threat. The deadlock over Turkey was broken, and in a rare success negotiations opened in October.

      At a summit in October at Hampton Court near London, EU leaders agreed to commit themselves to economic reform. Their statements were vague, however, and the meeting merely postponed the real decisions about where Europe should go. In Brussels in December a new budget defined support for the economies of the 10 new members and required the European Commission to undertake a full review of the budget.

Toby Helm

▪ 2005

      In the history books, 2004 would be remembered as the year when Europe finally said goodbye to the legacy of the Cold War. In an atmosphere of sober, thoughtful celebration—and with fireworks lighting the skies of all EU member capitals—the east-west division came to an end on May 1 when the EU, previously a club of 15 Western European nations, opened its doors to 10 new members, eight countries from the former Eastern European communist bloc (the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia) and the Mediterranean islands of Malta and Cyprus (although Turkish Cyprus was officially excluded). The new member countries increased the number of EU citizens from 370 million to 455 million. It was an achievement that no one had thought possible two decades before. The Italian Romano Prodi, president of the European Commission (EC), summed up the sense of fulfilment: “Five decades after our great project of European integration began, the divisions of the Cold War are gone once and for all.… [Our new members] bring to the union the cultures and diversity of 10 countries with distinct historical roots stretching back through the centuries.”

      Those driving the expansion, not content with an EU membership of 25, used the mood of optimism to talk up the prospects of further enlargement within four or five years. Bulgaria, Croatia, and Romania were mentioned as the next in line to join. Even more ambitious, the debate over whether to open accession negotiations with Turkey, the first predominantly Muslim applicant nation, dominated many EU council meetings for much of the rest of the year.

      The upbeat rhetoric, however, hid real tensions about how an expanding community would work and what its aims should be. In the short term, many individual EU governments were worried about practical issues in such a vast border-free zone. Long-standing EU member states were concerned about how to prevent people from the poorer entrant countries, many of whom were used to much lower wages, from moving across borders en masse and throwing their own citizens out of jobs by undercutting them on the wage market. Opinion polls showed that more than 60% of Germans believed that EU expansion would lead to higher unemployment as the Poles on Germany's eastern border and EU citizens from other new member states moved in to look for better-paying work. A similar proportion of Germans feared that crime would rise after the borders came down.

      There were other huge issues to resolve—both institutional and philosophical—before the 25 countries could hope to operate successfully as a unit on the world stage. A community formed in the late 1950s by six founding nations—Belgium, France, Italy, Luxembourg, The Netherlands, and West Germany—could not function in its expanded form unless it rewrote the rule book and changed and strengthened its institutions. These institutions—the European Parliament, the EC (the EU's executive arm), and the Council of Ministers—needed to be modernized so that each country could have its say and wield votes in proportion to its population. The new entrant countries were determined not to be dominated by the older members, particularly France and Germany, while Paris and Berlin did not want their traditional supremacy eroded by the newcomers.

      Expansion raised many questions. How ambitious should the enlarged Europe be as a political and military entity? How much power should move from its nation-states to the EU's central administration? Should the EU try to build itself as a rival to the United States? Should it restrict its ambitions and work as Washington's partner in the fight against global terrorism and in the interests of world trade? These questions predominated as stalled efforts to draw up the EU's first written constitution resumed. In June, after months of tense and often bitter negotiations, agreement was reached on a constitution defining the goals and beliefs of the EU and the way in which power would be shared between the member states and the EU.

      The Parliament, the EC, the Council, and the European Court gained new powers. A permanent new post of EU president was created, and the EU would have its own foreign minister for the first time. The constitution ensured that the EU would have many of the trappings of a state. Its roles in justice, home affairs, and asylum and immigration policies were greatly extended. Talk of the EU's becoming a superstate was overblown, however, as the constitution also safeguarded the powers of national parliaments against further encroachment by the EU and, crucially, gave the organization no power to raise its own money through taxation.

      There were bitter arguments over who should fill the principal positions in the new EC, which reflected the disagreements over the direction the community should take. A particularly unpleasant row blew up over who should succeed Prodi as EC president. Germany and France wanted Belgian Prime Minister Guy Verhofstadt, who shared both countries' desire for faster and deeper European integration. The U.K.—already enduring a period of frosty relations with Paris and Berlin because of a disagreement over the U.S.-led war in Iraq—vetoed Verhofstadt's appointment, saying that Britain did not want a man who believed in so much power's being concentrated in the EU institutions at the expense of the member states. After an extraordinary battle, British Prime Minister Tony Blair faced down the French and Germans and won. “We are operating in a Europe of 25 now, not six or two or one,” said Blair's official spokesman. This statement was perceived as a message to Pres. Jacques Chirac of France and German Chancellor Gerhard Schröder. The heads of government of the 25 EU members eventually settled on Blair's suggestion of Portuguese Prime Minister José Manuel Durão Barroso as EC president.

      If the writing of the constitution was divisive, its ratification might prove even more so. In many EU countries, including some of the new entrants, there was strong resentment at the way power appeared to be flowing from national capitals to the central administration in Brussels. Governments came under pressure to promise referenda on the constitution before their national parliaments agreed to sign it into law. By the end of the year, Belgium, the Czech Republic, France, Ireland, Luxembourg, The Netherlands, Spain, and the U.K. were on a growing list of nations that had promised a voter referendum. Most of these would take place in 2005, and if any one country voted “no,” the constitution could not become law.

      The reelection of U.S. Pres. George W. Bush in November reopened arguments that had raged before the Iraq war began in March 2003. While Blair said that Europe had to work more closely with the U.S. during a second Bush term of office, Chirac emphasized the need for the EU to strengthen itself and become an effective counterweight against U.S. dominance in the world.

      By the end of the year, concerns had resurfaced about the European economy, which many observers believed was held back by overregulation, generous social security systems, and high taxation. An official report by former Dutch prime minister Wim Kok concluded that member states had failed miserably since the mid-1990s in reforming their economies. The EU's stated goal of making Europe the most dynamic economy in the world had not been reached. The 10 new members also faced special challenges if they wanted to join the euro zone by adopting the single currency that had replaced the national currencies for 12 of the 15 older members since 1999. (See Sidebar (Criteria for Joining the Euro Zone ).)

      On October 6 another historic decision was made. The EC agreed that Turkey should receive “qualified” approval to open talks on its eventual admission into the EU. This massive strategic move was urged strongly on the EU by Blair, who believed that if Turkey could be brought into the EU, a bridge would be built between Europe and the Middle East. Other European leaders pointed out that Turkey had far more to do—economically, politically, and in terms of human rights—in order to satisfy the criteria for entry. At a summit in Brussels in December, the EU announced that it would officially begin membership talks with Turkey in October 2005.

      The latter months of the year were marred by a spectacular power struggle between the unelected EC and elected members of the European Parliament. Provoking a minicrisis, MEPs refused to accept Barroso's new team of commissioners because the Italian representative, Rocco Buttiglione, who had been designated to handle the justice portfolio, had called homosexuality a sin and made disparaging remarks about single mothers. The Parliament also used its power to block other suggested members, though no objections were raised to the British representative, Peter Mandelson (see Biographies (Mandelson, Peter )), despite his controversial political history at home. On November 18 the MEPs approved Barroso's revised team by a vote of 449–149, with 82 abstentions.

Toby Helm

▪ 2004

 The year 2003 would be remembered as the last in which the European Union was a uniquely Western club. It was a year of preparation for historic change that would see 10 new member states—8 of them from former communist Eastern Europe—join the community in May 2004. (See Map—>.) On a continent split for so long by the Iron Curtain, hopes were high that expansion would mark the final healing of its post-World War II divisions. Though preparations for enlargement brought EU nations together in a common purpose, profound differences were also exposed about the kind of union that the future membership of 25 countries wanted to create for the 21st century.

      Tensions were bought into focus most sharply by the war in Iraq. As British Prime Minister Tony Blair, backed by Spain's Prime Minister José María Aznar López, supported U.S. Pres. George W. Bush's war with Saddam Hussein in the early months of the year, France and Germany—the most powerful axis in EU politics—led opposition to armed conflict to the last.

      The war begged a series of key questions about the EU and its future direction. Was it sensible for the community to push forward in the creation of a common foreign policy—as it was trying to do—when big international issues such as Iraq merely highlighted profound differences between its member states? Was it a good idea for the bloc to create its own defense force with a measure of independence from NATO, as the French, Germans, Belgians, and Luxembourgers suggested, if this risked further upsetting the Americans and dividing the two continents? Indeed, what should the EU's relationship be with the superpower U.S. in the era of global markets, global diplomacy, and global terrorism? Should it be a rival, preaching its alternative economic philosophy and foreign-policy priorities, or a superpower partner?

      The year opened amid much economic and diplomatic uncertainty. The euro was finally moving upward against the U.S. dollar and British sterling after four years on the slide since the currency's birth. Its climb was less a sign of the euro zone's economic health than of uncertainties in the U.S. Germany, the EU's economic powerhouse, was in the doldrums with barely any economic growth as it struggled with inflexible labour markets and resulting high unemployment. The stronger euro merely added to the pain and made exports from Europe's manufacturing areas more expensive.

      Britain, which remained outside the euro zone, was the notable exception, and it fared far better than most other EU member states. The U.K.'s relative success begged another question. Was the EU's five-year-old monetary union—from which Britain, Denmark, and Sweden had been the only three nations to stand apart—doing mainland Europe more harm than good? Many believed that the one-size-fits-all interest rate for 12 nations was not delivering success. In June the British government, as expected, put off a decision to join the euro yet again, in effect for several years, in a further sign of its flagging confidence in the European economic system.

      Worse was to come for the integrationists, however, when the Swedes rejected the euro by a substantial margin in a referendum in September, despite a strong campaign by government and business for a vote in favour. The campaign was marred by the murder of Anna Lindh, the popular pro-euro foreign minister, just days before the vote. While she was shopping, she was stabbed in what appeared at first to be an attack by an anti-EU fanatic. Investigators later ruled this out as a motive after they arrested a man with Serbian links and strong political views about the Balkan wars.

      On the diplomatic front, it was Paris that was to set the tone for a year of rancorous exchanges between Europe and Washington—and bitter squabbling between the EU member states over the wisdom of the war in Iraq. In February the row between the Europeans became so serious that it threatened to throw enlargement off course. In that month French Pres. Jacques Chirac suggested that nations that were due to join the EU were putting their chances of admission at risk by supporting the Iraq war in defiance of Berlin and Paris. “These countries are very rude and rather reckless of the danger of aligning themselves too quickly with the Americans,” said Chirac. “Their situation is very delicate. If they wanted to diminish their chances of joining the EU, they couldn't have chosen a better way.” The accession nations were furious, as was London, which had always seen itself as the number one supporter of enlargement to the east.

      As the Iraqi conflict neared, Blair made no attempt to hide the rift with Paris and Berlin. His hopes of acting as a diplomatic bridge linking Europe and the U.S. lay in ruins. The French, Germans, Belgians, and Luxembourgers seemed determined to add to Blair's discomfort as they hatched plans for a European defense force that went well beyond ideas envisaged by Blair. The four powers were plotting the creation of what would in effect be a new European army with its own command headquarters, rather than a mere peacekeeping force that could draw its recruits from national armies as before. In London and Washington there were worries that such a scheme would challenge the supremacy of NATO.

      Though the Iraqi crisis was dominating world affairs, EU leaders still had to agree on how a community that was about to expand from 15 to 25 members would work. Poland, Hungary, the Czech Republic, Slovenia, Slovakia, Estonia, Lithuania, and Latvia—all from the former communist bloc—were due to join the following May, along with Malta and the Greek section of Cyprus.

      For the first time, EU leaders decided to formulate a constitution that would lay down the rules about how an enlarged community would function and what its objectives and values would be. They had to decide how powers would be distributed between big and small member states and how to adapt Europe's institutions that had originally been built for just six founding members in the 1950s.

      Among the accession nations, the whole process was causing a mixture of excitement and alarm. In staunchly Roman Catholic Poland, the biggest in area and population of the accession nations, there were fears that its traditions would be swept away on a tide of EU conformity. There was to be no mention of God in the constitution, an omission that offended Poland's Roman Catholic traditionalists. Fears grew that the Poles might reject entry in a referendum that was supposed merely to confirm the people's will to join. In June, however, the Poles voted overwhelmingly in favour of entry, sending a positive, upbeat signal that encouraged many of their Eastern neighbours to do the same in national votes. Pope John Paul II did the “yes” cause enormous good when he publicly exhorted his Polish countrymen to support membership.

      In June former French president Valéry Giscard d'Estaing, who had been placed in charge of drawing up the initial draft of the EU constitution, handed over a copy of the draft to EU heads of government. The document laid out plans to create a new full-time European president, a new European foreign minister, and a European public prosecutor. The powers of the European Parliament would be doubled and those of the European Commission (EC) greatly increased. Also important, the constitution would give the EU “legal personality” for the first time, granting it in effect the sole right to negotiate most treaties.

      By the middle of the year, however, fraud had been uncovered inside the institutions. Romano Prodi, the EC president, had promised to root out financial mismanagement and corruption after a series of scandals under his predecessor, Jacques Santer, but it appeared that little progress had been made when a number of secret bank accounts were found at Eurostat, the community's statistical wing. The suspension of three senior officials followed allegations that millions of dollars had been siphoned into secret bank accounts over several years. Officials were also accused of having wrongly awarded contracts to the same outside companies over which they themselves presided. Slush funds, it was alleged, were used to pay for dinners, travel under false pretenses, and perks for high-ranking officials. In October insider-trading claims surfaced in the EU's agriculture fiefdom.

      The last quarter of the year saw the French and Germans trying to rebuild diplomatic bridges with the U.S., but the niggling arguments about European defense continued to anger the Americans, so much so that in October they called a special meeting of NATO to discuss the threat to the alliance. Blair reassured the Americans that he would agree to nothing that would harm NATO, but Washington's suspicions remained.

      In November the EC published a report on the accession nations that claimed that in many ways they were not yet ready to be members. Corruption, the report said, was rife in public life, and legal systems were inadequate. Though arguments ensued over the constitution and the widespread belief that accession nations were not yet ready to be full members, it was made clear that they would join nonetheless the following May. In December the community failed to reach agreement on a new German-backed draft constitution after Spain and Poland raised objections to planned changes in voting weights allocated between large and small EU members.

Toby Helm

▪ 2003

      As people across the continent greeted the arrival of 2002, a new era was born in the European Union (EU). At a few seconds past midnight, crisp and colourful euro notes appeared from cash machines in 12 EU countries. The ambitions of Europe's integrationists to unite their continent with a single currency had finally been partially realized after more than 30 years of effort. German Chancellor Gerhard Schröder bade a fond farewell to the Deutsche Mark that had symbolized his country's postwar recovery. At the same time, he welcomed its successor as the badge of a confident new epoch. “We are witnessing the dawn of an age that the people of Europe have dreamed of for centuries: borderless travel and payment in a common currency,” he said. Many had predicted that the arrival of euro notes and coins would be chaotic, leaving consumers and shopkeepers confused. Detractors said that the banking system would be unable to cope and that the EU's 300 million citizens would be so unfamiliar with their new money that they would be susceptible to fraud. The introduction and distribution of six billion euro notes and 37 billion coins in 12 countries—and the withdrawal of a dozen national currencies—amounted to the largest peacetime operation ever carried out in Europe. The changeover, however, occurred almost without a hitch. Apart from a few complaints, Europeans seemed to enjoy the novelty of using euros. Counterfeiters were deterred by the sophisticated security features that adorned the new notes, and police reported little trouble. Polls showed that Sweden, Denmark, and the U.K., the three EU states that chose not to adopt the euro, might soon do so. It was a truly optimistic—and unexpectedly smooth—start to 2002.

      European integrationists never pause long for breath, however, and they began concentrating on the next daunting challenge—to adapt the EU's institutions and alter its decision-making processes to ensure that it could function with an expanded membership of 25–30 countries. There were 13 states, including 10 from former communist Central and Eastern Europe, that were knocking on the EU's door asking for entry. The existing 15, members keen to bind those applicants with strong economies and functioning democracies into their Western club, knew that their existing structures, designed for the six founding members, were woefully ill-equipped to serve a membership five times as high.

      At the end of February, a historic Convention on the Future of Europe was launched under the chairmanship of former French president Valéry Giscard d'Estaing. The goal of the meeting, modeled on the U.S. 1787 Constitutional Convention, was to prepare the EU for a first wave of enlargement in 2004 and further expansions in the years to come. In addition, Giscard made it clear that the convention's task was to define once and for all the levels of power sharing between European institutions and national and regional ones. “In order to avoid any disagreement over semantics,” he said “let us agree now to call it a constitutional treaty for Europe.” A final report from the convention would be drawn up in the summer of 2003, demarcating the relative roles of the European Commission, the European Parliament, and the European Court of Justice. Europe's institutions would be recast in line with the ambition to turn Europe into a “superpower” with its own military arm, police functions, and currency.

      In October Giscard floated some initial ideas, many of them radical. He suggested that the European Union could be renamed the United States of Europe. The British government, however—eager not to inflame Euroskeptic opinion at home as it prepared for battle to win public approval for the euro—shot down the idea immediately. Euroskeptics had long claimed that Europe's integrationists had a secret agenda to abolish nation states and create one European superstate on a federal model similar to that of the United States. Giscard seemed to be playing into their hands.

      As this high-minded debate over institutional architecture raged, the European dream was being aggressively challenged on the streets by populist political forces from the far right. The spring of 2002 was dominated by the unexpected successes of two right-wing politicians in The Netherlands and France. Taking into account that parties from the hard right were already in power in Italy, Denmark, and Austria—and the anti-immigrant Vlaams Blok was thriving in parts of Belgium—the alarm bells began ringing loudly. Were right-wing, anti-integration, and anti-immigration politics sweeping the continent? In March it appeared to be true. Pim Fortuyn (see Obituaries (Fortuyn, Wilhelmus Simon Petrus )), a maverick who headed an anti-immigration party in The Netherlands, won 35% of the vote in local elections in Rotterdam and set his sights on national elections the following May. Then, in April, the leader of France's extreme right-wing National Front, Jean-Marie Le Pen—who was fervently anti-EU and called for France to abandon the euro—astonished the French and European political establishments when he beat Socialist Prime Minister Lionel Jospin and finished in second place in the first round of the French presidential elections. The result threw mainstream politicians in France into a state of shock, and Le Pen's success was condemned across Europe.

      The fears about a rightward, anti-EU shift subsided, however, after Le Pen was crushed in the second round by Pres. Jacques Chirac, who won 82% of the vote, compared with Le Pen's 18%. (See France: Sidebar (French Elections ).) The centre-right's hold on power in France was consolidated a few weeks later in the general election when the parties backing Chirac gained 399 of the 577 seats in the National Assembly. In The Netherlands Fortuyn's rise came to a shocking end when he was shot dead nine days before the country's general election. His death was met by a national outpouring of grief, and in the election his party was propelled to power with 26 of the lower house's 150 seats—enough to assure it a role in a new coalition government. It was a short-run victory, however. In October Fortuyn followers fell out among themselves so spectacularly that the entire coalition government fell, and new elections were called for 2003.

      The rise of far-right parties, while alarming centrist parties, also focused leaders' attention on the issue of immigration. In June a summit in Seville, Spain, saw EU heads of government arguing over how to stem the flow of illegal immigrants and asylum seekers. With the EU about to expand eastward, the concerns about illegal immigration into a borderless Europe had become all the greater. By year's end few solutions had been found, however. (See Australia: Special Report (Strangers at the Gates: The Immigration Backlash ).)

      These disturbing events coincided with a gathering economic gloom in many parts of Europe—most of all in Germany, the EU's largest economy. There was also rising concern that the euro had been used by shopkeepers and businesses to hike up their prices. Suddenly the currency that had seemed so popular was losing its appeal as it became associated increasingly with rises in the cost of living. In Germany it had earned the nickname “the teuro” after the German word teuer (“expensive”). The Bundesbank, Germany's central bank, said that there was evidence that the currency had increased prices, although the European Commission and the European Central Bank maintained the impact had been minimal at most.

      In September attention became focused on elections in Germany. With the national economy flagging and unemployment nearing 10%, it appeared that Schröder's centre-left government might lose to the centre-right. In the event, Schröder warded off the challenge from Bavarian Prime Minister Edmund Stoiber (see Biographies (Stoiber, Edmund )), having courted German voters with a promise not to support a U.S.-led war on Iraq. The pledge appealed to the pacifist majority in Germany and, while it did serious damage to U.S.-German relations, ensured that Germany would buck the EU trend toward centre-right governments.

      A month later the European Commission formally announced that 10 applicant states could join the community in 2004. Although many were not fully fit for entry either economically or in terms of the way that they ran their democracies, the historic opportunity of a “big-bang” expansion was seen as too good to miss. Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia were all approved as potential members. Together they would add another 75 million people to the EU population.

      One further cloud hovered on the horizon, however, threatening to scupper the entire enlargement process. The Irish—who 18 months earlier had rejected in a referendum the Nice Treaty, which prepared the community for expansion—were voting again on the same issues. The Irish had feared that the EU's ambition to develop its own defense identity would threaten Irish neutrality. Were the Irish to vote “no” a second time, the entire enlargement process would be thrown into doubt. With Europe on tenterhooks and the Irish receiving reassurances that Ireland could opt out of military operations, 63% voted in favour of the measure. The way was clear for expansion.

      The remaining months saw EU countries squabbling over how to pay the bills for enlargement. At a meeting in Brussels in October, France and Germany settled a long-running dispute over farm spending by agreeing to keep the total outlay from the Common Agricultural Policy at around its current level until 2013, excluding the 1% annual increase provided for inflation. The agreement gave the EU a financial framework within which to negotiate the precise terms of entry for the applicant countries. With just a year to go before the 10 new entrants took their place as permanent members in the councils of Brussels, there was still plenty of haggling to be done.

Emma Tucker

▪ 2002

 As 2001 began, the European Union (EU) looked forward to a solid 12 months of steady progress on the road toward a united continent. Europe's leaders had much to do as they prepared to expand membership into Eastern Europe and introduce euro notes and coins in 12 member states in 2002. (For design specifications on the symbol for the euro, which was inspired by the Greek letter epsilon, see Graphic—>.) Preparations for these historic developments, however, were eclipsed by unexpected events. Unforeseen tensions, pressures, and disasters on a global scale stole the headlines and overshadowed the EU's internal work. Alarmingly for the pro-EU lobby, antiglobalization protests that caused havoc at summits exposed how much the EU still had to do to win broad-based public support. In addition, the diplomatic fallout from the September 11 terrorist attacks in the U.S. exposed how far the EU was from being taken seriously as a key player in foreign policy and global diplomacy.

      In January the focus was on how to restructure the EU's institutions if new member states were admitted from former communist Eastern Europe, as well as Cyprus, Malta, and Turkey. The worry was that an overly large EU would slow down decision making even more and take government too far from the citizen. How could Europe expand, how could the goal of creating a wider market and area of peace be achieved while making its ever-expanding institutions more democratic at the same time?

      Early in the year there was also an undercurrent of concern about the euro's sickly performance. Its price against the dollar did not bode well. Would the public refuse to accept a weak new currency in exchange for strong ones, such as the Deutsche Mark, that had served them so well? During its first two years as a noncash currency, the euro had lost over 30% of its value against the dollar. The hope was that the launch of notes and coins on Jan. 1, 2002—the thrill of handling the new money and the realization of the convenience it would bring—would lift confidence in the euro on the markets and among a skeptical public.

      German Chancellor Gerhard Schröder was the first to offer his vision for a new Europe. In a speech made in the spring, he called for the creation of a European government that would involve the transformation of the European Commission (EC) into a strong executive, a reform of the Council of Ministers to make it a chamber of European states, and the drafting of an EU constitution. Germany, which had been a strong proponent of greater political integration, had already sunk the rock-steady Deutsche Mark into the euro and was looking to its partners—primarily France—to deliver their side of the bargain—political union. Schröder's “federal” vision for the EU won swift support from the leaders of Belgium, Finland, and Luxembourg, and it was in keeping with the ideas of EC Pres. Romano Prodi of Italy. Schröder's recommendations, however, did not chime with the messages coming from London and Paris, where the British and French prime ministers, Tony Blair and Lionel Jospin, respectively, were quick to reject the German vision. Presenting his own ideas for a revitalized Europe, Jospin put the emphasis on strong ties between the national governments under which power remained firmly vested with the member states.

      While European leaders were busy pondering the future architecture of Europe, the message dominating headlines was that the EU was losing touch with its 376 million citizens. The first wake-up call came when on June 8 Ireland voted in a referendum to reject (by 54%) the Treaty of Nice, an agreement that had been made in 2000 by the 15 heads of state to begin a reform of the EU's decision-making procedures to allow it to enlarge. Voters, fearing that enlargement would weaken Ireland's influence in the EU and that participation in peacekeeping forces could threaten the country's military neutrality, rejected the treaty. The shock was all the more stark coming from Ireland, traditionally one of the EU's most loyal and pro-European members.

      A few days later the EU was shaken once again, this time by riots at its summit in Göteborg, Swed., during which one antiglobalization protester was seriously injured by police. Important agreements concerning enlargement and the environment were utterly overshadowed by the violent protests that cast strong doubts over the viability of holding such summits in the future. Ironically, the outcome of the summit was in tune with what many of the peaceful demonstrators in Göteborg were demanding—a commitment to sustainable development, including measures on climate change and energy conservation. Together with the Irish “no” vote, the episode graphically underscored the growing sense of disconnection between the EU's institutions and its citizens and the need for its leaders to explain their objectives better.

      As a result, EU leaders and the Brussels commission initiated a debate on the need to make the EU more relevant to its people. In early September foreign ministers agreed that in 2002 a convention should start preparing a large-scale reform of the EU's responsibilities and institutions to allow it to connect better with its citizens and cope with enlargement.

      Such issues, however, were totally eclipsed by the September terrorist attacks in the U.S. As the horror of the events sank in, EU leaders took the opportunity to emphasize that such global crises demanded a global response. The need for EU member nations to work together on cross-border crime, intelligence sharing, and immigration was given a new urgency. In the 10 days that followed, the outraged member states broke new ground in foreign policy and dropped long-held taboos in the areas of justice and home affairs. Agreements that would normally have taken months, even years, to conclude were swiftly adopted. Though the political will to work together was strong, the EU's clumsy instruments for making policy, particularly on foreign and defense issues, were quickly exposed as inadequate. It soon became clear that in the short term the EU would be unable to make an effective collective contribution to the war against terrorism.

      This fact was underscored by the flow of EU leaders to Washington, D.C. Though Javier Solana had been an energetic “high representative” of the EU's common foreign and security policy, it was Blair, Schröder, and French Pres. Jacques Chirac who set the pace in bilateral discussions with U.S. Pres. George W. Bush.

      In addition, leaders of the 15 member states circumvented the EU institutions in their dealings with one other. Amid the frantic diplomacy, new tensions between the large and small member states arose. Many of the smaller countries felt sidelined by the efforts of the more powerful member states that were committed to making military contributions to the war against terrorism. They were particularly incensed by Blair's decision, four weeks into the war, to abandon the usual EU summit formula in favour of a meeting in London to which only certain member states were invited.

      Among those most angered by developments was Prodi, who was furious at the way Brussels was being ignored. A series of gaffes earlier in the year, however, had put Prodi on weak ground, and many were losing faith in his effectiveness as a leader. He barely figured in the headline-grabbing initiatives that followed September 11. Earlier, following the Irish “no” vote on the Treaty of Nice, Prodi had infuriated the Irish government and forced the EC into a damage-control mode when he stated that EU enlargement could continue in spite of the Irish vote—a remark that left EU leaders even more open to charges of being detached from the electorate. More questions about his political judgment were raised when he refused to appear at a press conference in October with Belgian Prime Minister Guy Verhofstadt, one of the few EU leaders who could still be considered his supporter. Prodi's office issued a statement saying he had stayed away because he could not compete with Verhofstadt's verbose accounts of events in Dutch and French.

      Amid the uncertainty created by the war against terrorism, preparations for the introduction of euro notes and coins continued on schedule. While plans for deploying troops to help distribute the new currency were finalized, retailers protested that the first few days would be chaotic because of the European Central Bank's (ECB) refusal to authorize the distribution of notes, as well as coins, ahead of January 1. A sense of unease about the impending switchover (and a fear that people were not focusing on the task at hand) was exacerbated by the euro's persistent failure to strengthen against the dollar even after the terrorist attacks and as the U.S. economy slipped into recession.

      Optimistic talk earlier in the year that Europe would somehow be able to insulate itself from an economic downturn in the U.S. was also proving to be unfounded. Throughout the year Germany revised growth forecasts downward to the point where, by the autumn, there were fears that the country was entering a recession.The gloomy economic news added to frustration over the behaviour of the ECB, which, unlike the U.S. Federal Reserve, did not move quickly to reduce interest rates.

      By year's end the expected publicity campaign about the introduction of the euro and the excitement generated by its imminent arrival unexpectedly failed to dominate the news. Even though this was to be the biggest peacetime operation of any kind in Europe since 1945, like everyone else the EU was thinking more about its role in the post-September 11 world.

Emma Tucker

▪ 2001

      No year in the life of the European Union (EU) would be complete without a combination of grand visions and short-term crises. The year 2000 had more than its fair share of both.

      Having set the euro—the new European currency—on its way at the start of 1999, Europe's leaders found themselves entering the new millennium casting around for a fresh challenge to maintain the EU's momentum. By the middle of 2000 they were talking confidently of the EU's becoming a “superpower” to rival the U.S.

      The year opened with Germany, France, and Great Britain turning their attention to the task of expanding Europe's boundaries eastward into lands that just a decade earlier were under communist rule. At the same time, France and Germany were eager to establish ways of preventing a wider Europe from diverting attention from their plans for deeper political and economic integration.

      Such grandiose preoccupations were soon put to one side, however, by events in Austria. Following national elections a government coalition was formed between the conservative Austrian People's Party, led by Wolfgang Schüssel, and the far-right Freedom Party, whose leader and pivotal figure was the controversial populist Jörg Haider. Haider's past expressions of sympathy for some Nazi policies of the 1930s and 1940s, coupled with his anti-immigration rhetoric and hostility to EU enlargement, triggered panic in Europe's capitals. In a gesture of disapproval unprecedented in the EU's history, Austria's 14 EU partners froze bilateral contacts with Austria as the world expressed fears that far-right racist views were being rendered respectable by the new government in Vienna.

      Austria threatened to take its revenge by blocking EU measures, including the ongoing intergovernmental conference to reform its institutions before enlargement of the organization. The crisis dragged on until September, when a team of “wise men” appointed by the EU to examine the conduct of the Austrian government and to assess the political character of the Freedom Party found no evidence that the new coalition had strayed from “European common values.”

      Events in Austria were far from the only worries for EU leaders. By early May the euro had slid to record new lows against the dollar. Economists and analysts blamed structurally rigid European economies and the unwillingness of governments to push through unpopular reforms as well as the strength of the U.S. economy.

      Even advisers to Gerhard Schröder, the German chancellor, openly expressed concern about the euro's loss in value with less than two years to go before euro notes and coins were to be introduced. Talk began about the need for the European Central Bank to organize coordinated intervention to prop up the euro and also about the long- term need to rid Europe of some of its structural economic rigidities.

      The euro's slump was to be an enduring theme of the year. It was a factor seized upon by “Euroskeptics” in Denmark, where a referendum on September 28 narrowly rejected adoption of the single currency. As they had done in 1992 when they voted against the Maastricht Treaty, the people of Denmark showed that they were not frightened to go it alone within the EU and to resist the headlong rush toward economic and political union that was being driven particularly vigorously from Germany and France. The referendum's result also demonstrated to the U.K. and Sweden, which remained outside the single currency, that there was nothing inevitable about adoption of the euro.

      The Danish vote added to the growing belief that perhaps the political elites were pushing the integration project too fast for the people. Europe's leaders were yet again faced with their classic dilemma—that of maintaining sufficient pace in building Europe while also bringing the citizens on board.

      These dilemmas had been addressed in May in a controversial speech by Germany's foreign minister, Joschka Fischer, an enthusiastic pro-European integrationist. In it he tackled the question of how to reconcile his equal passions for a wider EU and for the need to deepen political integration and to construct truly democratic structures at Europe's heart. With the problems of Europe's so-called democratic deficit uppermost in his mind, Fischer floated the idea of a fully fledged European government, with an elected EU president, a written constitution, and a second chamber composed of politicians from the national parliaments of the member states. While recognizing the need for nation-states to survive, he intended to ensure that, at least among the EU's most committed members, closer political and economic ties would be built on stronger democratic foundations.

      In September similar worries that the EU was out of touch with the public mood prompted Günther Verheugen, the EU's commissioner for enlargement, to suggest that Germany (his nation) consider holding a referendum on the expansion of the EU. He argued that the euro had been introduced “behind the backs of the population” and that such mistakes should not be made again.

      From midyear onward the EU's ambitions to run its own defense and foreign policy were also creating tensions between those holding the highest offices in these two key policy fields. There were rumours of friction between Javier Solana, the former secretary-general of NATO who became the high representative for EU common foreign and security policy at the start of the year, and Chris Patten, the ex-governor of Hong Kong, in charge of external relations at the European Commission, the EU's civil service. In September Romano Prodi, the Commission president, admitted that dividing foreign policy between two such heavy hitters did not work. “The EU cannot continue to have its foreign policy split in two; one for external aid, and the other for defense,” he said. “With this dualism, Europe cannot go forward.” It was another sign that Europe's overarching ambitions to widen its responsibilities lacked the tried-and-tested backup common to institutions of longer standing.

      Internally, Neil Kinnock battled to introduce the most extensive modernization of the European Commission in its 43-year history. In spite of strong opposition from the Commission's staff unions, he pressed ahead with plans to tighten up staff training and discipline and also proposed a “whistle-blowers” charter to encourage employees to report instances of fraud and corruption. It had been just such a whistle-blower, Paul van Buitenen, who in 1999 had prompted internal auditing probes that eventually led to the mass resignation of the Commission at that time.

      Similarly, as the euro continued to drop in value, serious questions were being asked as to whether the institutions and personnel put in place to run the new currency were capable of doing so. Many European politicians argued that the euro could work only if the individual countries better coordinated their economic policies.

      All the while, however, as the everyday problems of running the EU appeared to mount, plans were advancing to admit 13 new countries into the organization—10 former communist countries plus Malta, Cyprus, and Turkey. In November, with the applicants eager to hear when they would be allowed to join, the European Commission issued a long-awaited road map setting out an informal timetable by means of which the 12 Eastern European and Mediterranean candidate nations, plus Turkey, which was farther behind in line, might hope to gain entry.

      Prodi announced that the detailed negotiations on terms of entry with the more prepared nations, including Hungary, Poland, the Czech Republic, Estonia, Cyprus, and Malta, should be concluded by the end of 2002. Under an optimistic scenario this could mean that those countries would be EU members before the next elections to the European Parliament in 2004. Most observers, however, thought 2005 to be a more likely date.

      At the same time, Prodi made it clear that the timetable would slip if leaders failed to agree on a new sharing of power in an enlarged EU at the approaching summit in Nice, France, in December. Issues addressed included the number of votes each country would wield after enlargement of the European Council (the supreme decision-making body), areas over which countries would maintain their right to a national veto, and the number of commissioners a country would be allowed to send to the Commission in Brussels. Equally thorny was the question of how to allow some groups of member nations to press ahead with integration faster than others.

      As ever, the more cautious member nations, such as the U.K. and Denmark, wanted to retain the right to veto policies with which they disagreed, while the more ambitious integrationists—France, Germany, Italy, Spain, Belgium, The Netherlands, and Luxembourg—insisted that almost all vetoes should be disallowed if the EU were to continue functioning with a membership of more than 25. Though the issues stated for discussion were highly inflammatory subjects, Prodi warned that it was time to bang heads together. “The whole momentum of enlargement will be lost if we don't have momentum in Nice,” he said.

      As it turned out, national interest prevailed over European ones in Nice. Leaders emerged uncertain as to whether they had compromised enough to allow preparations for enlargement to proceed effectively. Many vetoes, for example over taxation policy, were retained. Some damage was also done to Franco-German relations, after France refused to allow an increase in Germany's voting weight to reflect that nation's post-reunification population increase.

      Some progress was made, however. The relative voting strengths of the 12 applicant countries already in negotiations to join the EU were determined. Moreover, it was decided that the first entrants could be admitted in time to take part in elections to the European parliament in 2004.

      Nice was a typical European summit ending a typical European year—long on vision, but short on nitty-gritty agreement on how to reach ambitious objectives. Nonetheless, the determination to increase the EU's membership to 27 countries had been established beyond doubt even if all the finer details on how to run such a large club had yet to be hammered out.

Emma Tucker

▪ 2000

      Sharp ups and downs marked 1999 for the European Union (EU). The year opened with the 15-country bloc enjoying possibly its finest-ever moment with the launch of its own currency, the euro. (See Sidebar. (Euro's First Birthday )) Less than three months later, however, it was swamped by a constitutional crisis that threatened to derail critical goals, such as the enlargement of the EU to take in the former communist countries of Eastern Europe, and to put on ice key pieces of legislation and competition reform.

      Such was the will to make the project of ever-closer union succeed, however, that by the end of the year the EU had rediscovered its purpose and self-confidence. As 2000 approached, the union's leaders were setting their ambitions higher and wider than ever before. Romano Prodi (seeBiographies (Prodi, Romano )), the new president of the EU executive, the European Commission, was talking of building a union of 30 or more member states early in the next century, of leading a far more adventurous EU defense and foreign policy in the aftermath of the Kosovo situation, and of forging common approaches to immigration, asylum, and justice. Europe, said Prodi, had its best chance to unite “since the fall of the Roman Empire.”

      The year began on a high note. On January 1 the bilateral exchange rates of 11 national currencies were locked irrevocably to create one money—the euro. Although for the first three years of its life it was to be a noncash currency (a unit of exchange for banks, financial institutions, and retailers), the euro's arrival was proof that a majority of EU countries were willing to abandon their own exclusive control of monetary policy for the sake of the European ideal and greater economic integration.

      The formation of Europe's own currency to rival the U.S. dollar was not only a huge economic achievement—all participating countries had to prune back government debts and deficits to defined levels in order to join—but also a political leap of faith. Everyone knew that if it were to work, it would require much closer cooperation across a wide range of policy areas, such as employment and taxation. It was not surprising, therefore, that on the very day the exchange rates were fixed against the euro, the EU's leaders vowed to put political union next on Europe's agenda.

      While the euro's launch went smoothly and carried the EU through January in an optimistic mood, serious problems were developing at the Commission in Brussels. The trouble began when a junior internal auditor leaked documents to Green deputies of the European Parliament that showed that the appointment of friends to high office in the Commission and even, in some cases, corruption were being tolerated by members of the EU's official civil service. At first, the reaction from the Commission was a typical one of complacency mixed with savage denunciation of the whistle-blower himself. So arrogantly did it handle the case that members of the democratically elected European Parliament, preparing for elections in June, sensed an opportunity for a high-profile battle in which they could bring the unaccountable Commission to book. In mid-January the Parliament came close to exercising what was known as its “nuclear option,” the power to dismiss the entire 20-person team of commissioners, which was appointed by heads of national governments to lead the administration in Brussels. The Parliament drew back only after the commissioners agreed to establish an independent inquiry into all the allegations by a team of former judges and auditors.

      In March this team published a devastating report confirming much of what the whistle-blower had alleged. It also uncovered a culture in which commissioners were not prepared to accept any sense of responsibility for what was going wrong inside the organization they ran. The report was particularly critical of Edith Cresson, the former French prime minister and one of France's two appointments to the Commission. She was accused of having appointed cronies to well-paid jobs inside the Commission even though they had little or nothing to bring to her area of responsibility—research and education. On the night the report was published, Pres. Jacques Santer and his 19 fellow commissioners were left with no option but to resign, leaving a huge hole at the heart of Europe's institutional structure.

      Reaction was sharply divided. Euroskeptics argued that the collapse of the Commission was proof that the ramming together of 15 different political and cultural systems simply did not work. Others saw the crisis as an opportunity to promote a long overdue shake-up of the EU's organizational structures that would strengthen the system.

      As most of the member states of the EU were determined to see greater integration, it was not long before the disaster in Brussels had been turned to the Union's advantage. Within two weeks of the Commission's resignation, EU leaders, meeting in Berlin, agreed to appoint Prodi, a former Italian prime minister, as Commission president. He was seen by many as an ideal choice. A year earlier Prodi had done what many thought impossible by steering the heavily indebted Italian economy into shape to be among the first wave of countries to accede to the single currency. He was precisely the kind of big-name politician with a reputation for taking on vested interests that was required for sorting things out at the Commission.

      The mood of determination to move Europe back on track also helped leaders to sign an agreement in Berlin on reforming their national financial contributions to the EU budget and, in one of the most painful negotiations in years, on reshaping the EU's much-criticized Common Agricultural Policy.

      Nonetheless, the aftershocks from the Commission crisis would be felt for many months; a prolonged period of nervousness and uncertainty followed. The new Prodi Commission could not be put in place until the autumn, and the discredited old team was left in place, limping on in a caretaker capacity.

      It was against this background that rapid falls in the value of the euro prompted the first crisis for the new currency. EU leaders and the heads of the European Central Bank showed signs of losing their nerve and blamed each other for the drop. At the same time, rows over beef hormones, bananas (see Economic Affairs: Sidebar (Banana War )), airplane hushkits (engine mufflers), and data-protection laws soured relations with the U.S.

      This period of uncertain transition culminated in June with elections to the European Parliament, which attracted a miserable turnout. Participation was as low as 25% in some member states. Either people were disillusioned with “Europe” following the bad publicity of the Commission crisis, or they were still so ignorant about the European Parliament that they did not bother to vote. Whichever was true, the apathy was depressing for the Parliament and EU leaders with high democratic ideals.

      In June, as the affair in Kosovo raged on, the EU took its biggest step ever toward integrating its defense policy. At a summit in Cologne, Ger., it signed a common defense and security agreement. Although the ideas fell well short of the creation of a European army, they were ambitious. The agreement said: “The Union must have the capacity for autonomous action, backed up by credible military forces, the means to decide to use them and a readiness to do so in order to respond to international crises without prejudice to actions by NATO. The EU will thereby increase its ability to contribute to international peace and security within the principles of the UN charter.”

      With the U.S. spearheading efforts in the Balkans, the defense agreement reflected the desire of national leaders, notably Britain's Tony Blair, for Europe to be able to act more boldly to crises on its doorstep. Their determination to give the EU a more active role in international affairs was confirmed again later in the year when heads of government appointed NATO Secretary-General Javier Solana as the EU's first “supreme head” of its common foreign and security policy. (See Biographies (Solana Madariaga, Javier ).) Prodi kept up the pace as soon as he was sworn in by the European Parliament after the summer break. Just one month into his period in office, he called for the rapid expansion of the EU from its current 15 members to 28. Even Turkey, whose economy and human rights record had long excluded it from consideration, was being talked of as a candidate. Under the Prodi plan, six countries lagging behind Poland, Hungary, the Czech Republic, Slovenia, Cyprus, and Estonia in the enlargement queue—Bulgaria, Latvia, Lithuania, Malta, Romania, and Slovakia—were to begin accession negotiations in Brussels in 2000.

      As the year drew to a close, an old problem returned to haunt the community—mad cow disease. Following a Commission decision to lift the export ban on British meat, the French continued to block its entry. France's intransigence, even after the Commission had threatened legal action, called into question the EU executive's authority as guardian of the treaties and EU law. While the dispute damaged confidence in Brussels, however, the affair was essentially a bilateral spat between the U.K. and France. In spite of the bad feeling it generated, it was not enough to throw off course any of the EU's wider ambitions.

Emma Tucker

▪ 1999

      During the closing months of 1998, final preparations were made for the most ambitious step yet toward achieving a more united Europe—the launch in January 1999 of European economic and monetary union (EMU), including eventually a single European currency. These last stages of the operation were, however, overshadowed by the worldwide financial and economic crisis. In spite of international currency and stock market turmoil, particularly during the second half of the year, there was growing confidence that EMU would begin on schedule and lead to the introduction of the new single currency, the euro, into full circulation by the middle of 2002.

      Lingering doubts about the capacity of the 11 European Union (EU) countries to accomplish the single-currency project gradually disappeared during the year. In sharp contrast to much of the rest of the world economy, the EU countries, and the core 11 single-currency economies in particular, continued to experience strong growth. At the end of October, however, the European Commission in Brussels conceded that the global economic downturn would slow the pace of the EU's economic expansion. Some detected in this admission the beginnings of a possible conflict between the strict rules laid down for currency stability in the development of the single currency and those wanting a stronger policy emphasis on growth and employment.

      During the year technical planning for the stage-by-stage introduction of the euro was matched by growing debate on the need for increased integration of the economies of the 11 single-currency countries. The governments of those nations began discussions in the spring in Brussels about closer coordination of national policies on a range of economic issues, including taxation of capital savings and energy, employment, and increased competitiveness. In spite of some objections from the British government, which decided to keep sterling out of the single-currency project for the present, the 11 finance ministries met separately and with increasing frequency to prepare for monetary union.

      The most difficult and politically sensitive of the issues to be resolved before EMU could be finally launched was the selection of the future president of the new European Central Bank (ECB). This was the subject of a lengthy and acrimonious summit meeting of EU heads of government in Brussels on May 2 and 3. Finally, the EU leaders chose the former president of the Dutch central bank, Wim Duisenberg (see BIOGRAPHIES (Duisenberg, Wim )), over a rival French candidate, Jean-Claude Trichet. This was accomplished, however, only after a political deal in which Duisenberg would retire before the end of his eight-year term to make way for Trichet.

      After the appointment of Duisenberg, the focus of attention switched to the prospects for EU economic growth in the aftermath of the launch of EMU. By October it had become clear that the world economic crisis would adversely affect the rate of economic growth in the EU countries during 1999. The European Commission conceded that overall EU economic growth in 1999 would be 2.4%, compared with earlier forecasts of 3.2%. The Commission and the ECB continued to insist that the single-currency countries would not face outright recession, unlike much of Asia, Russia, parts of Latin America, and, possibly, the U.S.

      At the year-end EU summit, held in Vienna, progress in converting economic growth into improved levels of employment was critically scrutinized. At the end of September, the European Commission issued a progress report on the measures taken by all 15 member governments to introduce greater labour market flexibility, improved training and education, and other measures to stimulate employment. The Commission warned EU member nations that, in spite of a reduction in the numbers out of work in 1998, unemployment, at more than 15% of the labour force in the EU as a whole, remained unacceptably high.

      The election of a Social Democratic-Greens coalition government in Germany during October was widely seen as marking a clear shift in the political balance of power between right and left in the EU. The new German government, headed by Gerhard Schröder (see BIOGRAPHIES (Schroder, Gerhard )), soon made it clear that it favoured a more interventionist economic policy than had the outgoing Christian Democratic administration led by Helmut Kohl.

      By the autumn months a new political alliance of left-of-centre governments, led by France and Germany, was emerging within the EU. This was further reinforced by the arrival in October of a new left-of-centre coalition in Italy led by Massimo D'Alema. As a consequence, socialist or social democratic parties led or participated in 13 of the 15 EU member governments by the end of 1998.

      During its six-month presidency of the EU, the United Kingdom had the responsibility for the launch of the other major EU project—its enlargement to include new member states from Central and Eastern Europe as well as from the Mediterranean region. At a heads of government conference in Cardiff, Wales, on June 15-16, the EU agreed that negotiations should begin with an initial group of six applicant member states: the Czech Republic, Poland, Hungary, Slovenia, Cyprus, and Estonia. It was also agreed that a number of other applicants, including Bulgaria, Romania, Latvia, Lithuania, and Slovakia, needed a longer period to achieve economic and political reforms before accession negotiations could begin. Those countries were assured, however, that if they made sufficient progress toward economic and political reform, they might be included in the first "fast-track" group of applicants. As a result of the general election in Malta in September, that nation's government reinstated the country's bid for EU membership, which had been withdrawn four years earlier by the Labour Party government.

      The fact that Turkey was not chosen for formal membership negotiations caused a worsening in relations between that nation and the EU. The Turkish government declined to participate in a wider conference on European cooperation held in London in June, protesting that it was being discriminated against unfairly because it was predominantly Islamic. The EU governments strongly denied this charge and insisted that the main obstacles to Turkey's eventual EU membership were related to its poor human rights record.

      At the Cardiff conference the EU leaders adopted an ambitious program of internal policy reform designed to allow the EU to undertake the heavy additional responsibilities that would accompany enlargement. These were set out in a major strategic document, Agenda 2000, which included measures to reform the EU budget and its major spending policies—most notably the Common Agricultural Policy and measures to help the economies of the less-developed member states.

      At a special heads of government summit held at the end of October under the Austrian presidency, which took over from the U.K. for the second half of the year, a start was made on discussions about further institutional reform of the EU. The meeting, held in Austria near Klagenfurt, concentrated on the issue of "subsidiarity," the doctrine under which the EU should decide only those matters that could not be dealt with effectively at the national or regional level.

      EU leaders made it clear, however, that a range of other constitutional reforms would have to be settled during 1999 before the conclusion of negotiations with the "first-wave" accession countries. Among the issues that were not resolved during 1998 was a further extension of the principle of decisions by majority vote (rather than unanimity) in the EU Council of Ministers. Differences also remained about a proposed "reweighting" of the votes of member states in the Council in order to favour those countries with larger populations. Finally, the 15 EU governments had to agree on steps to streamline the European Commission in advance of expanding its membership to perhaps 30 or more members over the next decade or two.

      Once again, in 1998 the challenges of foreign and security policy proved to be among the most daunting to face the EU. Although the new Treaty of European Union, agreed upon at Amsterdam in December 1997, included provisions to strengthen the so-called EU Common Foreign and Security Policy, these could not come into force until the treaty was ratified in all 15 member nations. By the end of 1998, it was evident that this process would not be concluded before the middle of 1999.

      The outbreak of conflict in the Serbian province of Kosovo highlighted the weakness and disunity of the EU in foreign and security affairs. Open conflict broke out during the summer when the Yugoslav government of Slobodan Milosevic used military force to repress the Albanian-speaking majority population of Kosovo. It became clear that military action by NATO might be necessary because of the inability of the EU countries to take joint military action on their own.

      It had earlier been agreed that NATO's European member states should take more direct responsibility for handling purely European security crises. As 1998 drew to a close, however, there was still no formal agreement between NATO and the Western European Union, the security and defense organization of the EU, for NATO military resources to be made available for purely European peacekeeping or peacemaking missions.

      The emergence of the global financial crisis, begun in Asia in the second half of 1997, led to new questions about the pace and direction of future world trade liberalization moves. In spite of proposals by the European Commission, there was little enthusiasm in either the U.S. or the EU for a transatlantic free-trade area. Some concern was expressed on both sides of the Atlantic in the closing months of 1998 that with slower economic growth expected in 1999, there could be a slide into trade protectionism. The U.S. in particular pressed the EU to open up its markets to increased volumes of cheap Asian exports, partly to take the pressure off American markets.

      During 1998 relations between the EU and Russia deteriorated, notably after the economic crisis during the summer led to a large devaluation of the ruble and to fears that Russia might reverse its policies of economic reform. Similar concerns surfaced at the end of the year about the future direction of reform in Ukraine lest that also affect relations with the EU. On the other hand, during the year closer links were forged between the EU and regional organizations in Latin America, a process that culminated in the decision to call an EU-Latin-American heads of government summit in 1999.

JOHN PALMER

▪ 1998

      Agreement on the final stages of preparation for European economic and monetary union, an accord on a new treaty on closer political union, and the first tentative steps toward a major future expansion in its membership dominated developments within the European Union (EU) in 1997. A year that began amid serious doubts about the likelihood of achieving a successful transition to a single European currency by the target date of January 1999 ended with considerably greater confidence about the inevitability of monetary union.

      In spite of these promising developments, the EU in 1997 was again confronted with a much slower than expected recovery from recession in the major Western European economies. Persistent mass unemployment remained a cause of growing social and political concern, which led to an emergency EU heads of government summit in Luxembourg in November dedicated exclusively to the struggle to reduce the numbers of the jobless.

      In political terms the two most influential events in 1997 were the British and the French general elections. A clear leftward tilt was given to the political balance within the European Union as a result of the landslide victory of Tony Blair's Labour Party in the British general election in May. This was followed a month later by the unexpected decision by Pres. Jacques Chirac to call early elections to the French National Assembly and the even more unexpected subsequent defeat by the left of the centre-right government.

      The triumph of the French Socialists under Lionel Jospin ) (Jospin, Lionel ) meant that for the first time in its history, the European Union's Council of Ministers had a numerical majority of social democratic and/or labour-led governments. Taken together, the two elections seemed to signal a growing discontent among European voters with the economic policies of economic deregulation and government budget austerity that were followed in the 15 EU countries in the late 1980s and early 1990s.

      By the time the EU celebrated the 40th anniversary of the original European Community in March, it was increasingly clear that a majority of member states would probably fulfill the strict economic qualification tests for monetary union that had been laid down in the Maastricht Treaty in 1991. During the first six months of 1997, the Dutch government, which held the rotating post of EU presidency, succeeded in achieving agreement on the final details of the arrangements for the single currency (the Euro) and for a framework of economic disciplines that would be binding on countries taking part in the monetary union. It was agreed that the final decision as to which countries would be invited to join the Euro group would be made at a special EU heads of government summit to be held in May 1998. The deadline for starting the final stage of monetary union was set at January 1999, to be followed by a transition period leading to the complete replacement of national currencies by the Euro ending in the middle of 2002.

      By the end of 1997, it seemed probable that the successful candidate countries in the "first wave" group to join the single currency would be Belgium, The Netherlands, Luxembourg, France, Germany, Austria, Finland, Portugal, and Ireland. There was also a growing view that Italy would succeed in qualifying as well. This followed a period of political upheaval in the early autumn during which the efforts of the centre-left Italian government, led by Romano Prodi, to push through the financial reforms that were necessary for the nation to achieve monetary union appeared doomed to failure.

      Three additional countries—Great Britain, Denmark, and Sweden—were expected to meet the economic qualifications for monetary union but to delay their formal accession to the single currency until some years after the 1999 launch. In November, however, the new British Labour government—in a sharp break with the strongly "Euroskeptical" policy pursued by previous Conservative regimes—announced that it was now committed in principle to joining the single currency.

      As the adoption of the single European currency drew nearer, there was increasing debate about the wider economic implications of the move to the Euro, both for the European economies and for the world financial system. During the year EU finance ministers debated the need for closer coordination of economic policy, including sensitive areas touching on such traditional national sovereignty concerns as employment and taxation.

      EU governments were divided between supporters and critics of the "Anglo-Saxon" model of sharply deregulated labour markets. There was universal concern, however, about the persistence of high unemployment—notably in France and Germany—and the need to accelerate economic reforms designed to create jobs and reduce Europe's numbers of workless to more acceptable levels. This led to the adoption, at a special employment summit in Luxembourg in November, of a series of broad targets to improve labour market flexibility and boost job-creation initiatives in a range of sectors, including small and medium-sized business and the social services.

      During 1997 there was also increased international awareness of the implications of the emergence of the Euro as a major world currency for the future roles of the United States dollar and gold in the global financial system. This was a major subject of debate at the annual meetings of the International Monetary Fund and the World Bank in Hong Kong during October.

      The return to power of the British Labour Party government defused a range of tensions between the United Kingdom and its EU partners that had emerged during the years of Margaret Thatcher's prime ministership. The change of British strategy was emphasized when Prime Minister Blair announced in June that Britain would become a full participant in the social policy chapter of the 1991 European Union Maastricht Treaty. The decision by the government in London to adopt a more constructive role in EU affairs was widely welcomed in other European capitals.

      The clear progress made by the EU during 1997 toward the goal of a single currency was in marked contrast to the difficulties in negotiating a new treaty on closer political union, difficulties that came to a climax at the EU heads of government summit in Amsterdam in June. The original idea had been to reform the EU decision-making institutions and processes agreed upon in the 1991 Maastricht Treaty while at the same time giving the EU a more "human face."

      The importance of the latter was emphasized by continuing evidence of a growing gulf between the EU's political elites and their electorates about the pace and direction of closer European integration. In an effort to meet these concerns, EU governments agreed to write into the new treaty a series of commitments covering areas such as human rights, equality, defense of the environment, and social protection as well as greater powers for the European Parliament and measures to make EU decision making more transparent. The Amsterdam summit also agreed to transfer responsibility for key areas on internal security—including the fight against transnational crime—from member states to the European Union itself.

      In spite of intense diplomatic efforts to achieve an accord, EU governments failed to agree on hoped-for reforms of the way in which the Council of Ministers makes decisions. The new treaty provided for a modest extension of the system of majority voting to a limited number of new policy areas, but it deferred agreement on making majority-vote decisions the norm instead of the exception. This inconclusive outcome of what had been hailed as a major milestone on the road to a politically more united Europe was seen by some EU governments as a threat to the goal of EU enlargement. They argued that without further far-reaching institutional reform, it would be impossible for the EU to integrate all those countries in Central and Eastern Europe that either had already sought or were shortly expected to seek EU membership.

      In July the European Commission published a major study of the political, economic, and other implications of EU enlargement—"Agenda 2000." In its report the commission recommended that 6 of the 12 applicant nations be selected for initial enlargement negotiations. They included Poland, Hungary, the Czech Republic, Slovenia, Estonia, and Cyprus. A second EU heads of government summit in Luxembourg in December confirmed this decision, and formal accession negotiations were scheduled to begin in early 1998. Romania, Bulgaria, Slovakia, Lithuania, and Latvia were to prepare for accession later.

      In selecting the countries with which to begin negotiations, the EU used both political and economic criteria. Only those nations that met a series of democratic and human rights tests would be accepted. The great majority of the applicant countries were seen as meeting these requirements—with the exception of Slovakia, whose drift toward antidemocratic rule had been a cause of concern in the EU for more than two years.

      Aware of the political problems that might be created by a decision to open accession talks with some but not all applicant countries, EU governments discussed arrangements that would encourage closer cooperation with all of them. Late in 1997 EU member states debated the setting up of a standing European Conference. This would comprise the 15 existing EU countries, the 6 "first wave" applicants, and Bulgaria, Romania, Latvia, Slovakia, and Lithuania.

      This conference would include a wide range of issues for cooperation, ranging from transportation and the fight against crime to foreign policy and the environment. While all the Central and Eastern European countries were expected to become full EU members at some future time, however, Turkey was still not considered even a potential future member in view of its poor record on democracy and human rights.

      The accelerating momentum behind EU enlargement was given further impetus by the decision by NATO at its conference in Madrid in July to accept Poland, Hungary, and the Czech Republic as members as of mid-1999. But this development added a further complicating factor to the already complex web of relations linking both Western and Eastern European countries and to the debate about the extent to which the EU itself should take responsibility for European security and defense.

      This debate was given a new focus by the continuing NATO peacekeeping operation in Bosnia and Herzegovina and speculation about whether the U.S. would withdraw its troops from that area in 1998. The year also ended without a clear-cut agreement between NATO and the Western European Union—the security organization run by a majority of the EU states—under which the WEU would be able to use NATO military resources in peacekeeping operations supported by the EU.

JOHN PALMER

▪ 1997

      The drive to achieve economic and monetary union by 1999 and preparations for the enlargement of the European Union during the coming decade dominated the EU's political agenda during 1996. The debate about economic and monetary union (EMU) and the introduction of a single European currency were overshadowed for much of the year by the effects of recession and high unemployment and doubts as to whether EU countries would be in an economic position to meet such major challenges.

      At the start of 1996, there were fears that even those EU member states that were most enthusiastic about monetary union would have great difficulty in meeting the conditions for taking part in the planned move to a single currency in January 1999. The tough qualification criteria—including limits on government budget deficits and government debt levels—as well as the 1999 monetary union timetable had been set out in the Maastricht Treaty on European Union in 1991.

      The attitude of the financial markets in early 1996 was equally skeptical. There were concerns that because of the serious problems facing the French economy, the French franc might be forced to devalue against the Deutsche Mark and thus break a key condition for monetary union.

      The mood began to change after a meeting of the finance ministers of the EU governments in Verona, Italy, in April. There it became clear that all member nations were determined to make the goal of EMU their overriding economic and political priority. They also agreed on the outline of a strategy to underpin EMU with a pact that would commit all of the participants in the single currency to maintain long-term policies that would be oriented toward achieving stable economies. At a meeting in June in Florence, the EU heads of government supported this approach. It thus became clear that the political will existed to achieve a single currency, even at the expense of domestic political difficulties for the governments concerned.

      The extent of those difficulties became clear during the summer and fall, when one EU government after another announced strong austerity measures designed to reduce their budget deficits and meet the EMU criteria. During the summer, mass trade-union demonstrations took place in France against planned reforms to the social security system, and discontentment with the government's economic strategy continued to the end of the year as economic recovery brought little or no reduction in the numbers of the unemployed.

      There were similar protests through the year in other countries, as anger about persistent unemployment led to questions about the wisdom of the EU governments' policies to prepare for monetary union. In Germany the unions organized strikes and demonstrations against planned cuts in welfare benefits, and there were also militant protests in Belgium and Spain. In Italy it was primarily the middle classes who objected to the government's proposals to meet the Maastricht Treaty deficit rules with new taxes and spending cuts.

      In spite of these problems, the EU appeared by the end of the year to be significantly closer to the goal of a single currency. During the fall and winter, the Irish government, which occupied the rotating presidency of the EU, obtained agreements from the members on the details of the ways in which the new EMU system would operate. A formal agreement on a stability pact, on the legal status of the proposed new single currency (the Euro), and on the operation of a reformed European exchange-rate system (to link the Euro with those EU currencies outside monetary union) was finalized at a summit meeting in Dublin in December.

      Reflecting this remarkable political determination to achieve the single currency, the European financial markets gradually became less skeptical about the prospects for accomplishing it. This was reflected in a remarkable narrowing of interest rates between the key EU economies—notably France and Germany.

      In November the European Monetary Institute warned that in spite of the progress that had been made, governments needed to act further to ensure economic convergence, without which monetary union could fail. Simultaneously, however, the European Commission, the executive body of the EU, published forecasts of improved economic growth in 1997, which was to be the base year for judging the economic performance of countries to determine whether they could join the single currency. The Commission predicted that as many as 12 or 13 of the 15 EU member nations might expect to qualify for the EMU. Of these, however, two—Denmark and the United Kingdom—while expected to qualify economically, had already negotiated a political right to opt out of the single-currency project. Most reaction, however, focused on the Commission's belief that even relatively less-prosperous countries such as Portugal and Spain might also join the move to a single currency, and even Italy was close to qualification.

      For all the growing optimism about monetary union, the German government and especially the powerful German central bank, the Bundesbank, expressed concern that the rigour of the EMU conditions might be in danger of being diluted. In the closing months of the year, debate focused on issues such as the scale of penalties a government might face if—after joining EMU—it began breaking the rules governing budget limits, debt, and inflation.

      In spite of evidence that the worst of the European recession had passed in the early months of 1996, with the EU economies expecting a recovery in growth, concern remained about unemployment. In October the Commission warned that the economic upturn risked becoming a jobless recovery. In the closing months of the year, there was a growing debate about whether the answer to unemployment depended on radical restructuring of the European labour markets and the virtual abandonment of the European system of social security. The Commission, the European Parliament, and some EU governments insisted that the European welfare model had to be reformed and adapted but not scrapped.

      The other major institutional issue dominating EU politics in 1996 was the intergovernmental conference (IGC) to review the 1991 Maastricht Treaty. That agreement involved measures to strengthen the supranational decision-making authority of the EU institutions—including the Council of Ministers, the Commission, and the European Parliament. It not only set out the goal of monetary union but also envisioned further steps to full political union, including a common European foreign, security, and (eventually) defense policy.

      In February the Commission president, Jacques Santer, told the European Parliament that unless radical institutional reforms were agreed upon to improve the effectiveness and accountability of the EU, it would be in no position to open its doors to new members. This was no abstract issue, as the number of applicants for EU membership continued to grow through 1995 and 1996. In April Slovenia became the 12th European nation to apply formally for membership. The EU promised to begin negotiations with at least some of the would-be new members six months after the completion of the IGC. As the discussions in the IGC dragged on through the summer and fall, however, with little concrete agreement on the key issues, doubts were raised about the likely date of any new treaty.

      The Irish EU presidency said at the end of November that significant progress had already been made in reducing areas of disagreement between most countries on such sensitive questions as voting in the Council of Ministers, a reduction in the national right of veto on decisions, extensions of the role of the European Parliament, a stronger common foreign and security policy, and a bigger role for the EU in such issues as immigration and political asylum. Ireland was succeeded in the EU presidency by The Netherlands at the end of the year. Earlier, in October, the Dutch prime minister, Wim Kok, said he hoped that the 15 EU governments would be able to agree on a new treaty at the heads-of-government summit to be held in Amsterdam in June 1997.

      The major difficulty facing the IGC negotiations during 1996 was the increasingly obdurate opposition of the British Conservative Party government to any further strengthening of the EU or any new move to what London described as "a federal super state." British Prime Minister John Major reiterated at the Florence summit in June and again at a special heads-of-government meeting in Dublin in September that he would veto any further extension of majority voting or any weakening of the national veto in EU matters.

      Great Britain's isolation among its EU partners over institutional reform was further deepened during the summer as a result of a confrontation between the U.K. and the rest of the EU over bovine spongiform encephalopathy (BSE, or "mad cow" disease), which was thought to be linked with the human condition of Creutzfeldt-Jakob disease. Following the outbreak of BSE in Britain, the EU imposed a ban on exports of British beef and beef products. The Florence summit agreed that this ban could be lifted only when scientific experts had advised that it was safe to do so and when measures promised by the U.K. to eliminate the disease among British cattle were seen to have been enforced.

      Prior to this agreement, the U.K. conducted a campaign of "noncooperation" with its EU partners, refusing to approve even broadly agreed-upon decisions and seeking to block EU business wherever possible. This campaign signally failed to persuade the EU to relax the beef ban in advance of evidence that the British authorities were taking action—including the slaughter of cattle herds at risk—to tackle the crisis. Relations between Great Britain and the other European nations worsened in November when Major demanded that the IGC effectively reverse a decision of the European Court obliging the U.K. to introduce a 48-hour limit for the workweek.

      Bosnia and Herzegovina, the Middle East, and Central Africa were the main issues facing the EU in its attempt to develop a common foreign policy. Although NATO military action was required for at least a temporary peace to finally be produced in Bosnia and Herzegovina, the EU took the lead in the international economic reconstruction of the war-torn region.

      Tensions between the EU and the United States over policy in former Yugoslavia arose periodically during the year. There were also sharp differences of approach to the peace process in the Middle East. In September the EU condemned the actions of the Israeli government, which it blamed as primarily responsible for the flare-up in fighting with the Palestinians. The EU also insisted on appointing its own special representative to the peace process, a move that was warmly welcomed by the Palestinian authorities and by Arab governments but was received with less enthusiasm by the U.S. and Israel. (JOHN PALMER)

▪ 1996

      For the European Union (EU), 1995 was a year marked by introspection and internal debate about both its future constitutional development and its role in international affairs. The year began with the formal accession of three new member states—Austria, Finland, and Sweden—bringing the number of EU member states to 15, but it ended on a note of uncertainty about the pace of further European integration and enlargement.

      The declared objective of full monetary union and a single European currency by 1999 provided the focus for much of the discussion about future European integration. Uncertainty about the single-currency project was underscored with evidence of the economic difficulties facing a majority of EU member states during 1995. These suggested that several EU countries might not be able to fulfill the economic conditions laid down for participation in the single currency by the 1992 Maastricht Treaty on European union. At a special meeting of EU finance ministers in Valencia, Spain, in September, however, there was broad agreement on a detailed technical strategy for introducing a single currency in stages after January 1999. At the EU summit in Madrid in December, the single currency was formally given a name, the Euro, and the timetable for its introduction was extended to 2002. A final decision on which EU countries would be eligible to participate would be taken in January 1998.

      There were disagreements within and between EU countries about the speed with which the EU should open its doors to new member states in Central and Eastern Europe. There was also little agreement about the extent to which any enlargement (to perhaps 30 member states over the next decade or so) should be preceded and balanced by steps toward closer political as well as monetary union.

      Many of these issues were due to be resolved in a special conference of the 15 EU governments in 1996 to review the Maastricht Treaty—which laid down the shape of the EU's decision-making institutions and processes. At the summit meeting in Cannes, France, in June, EU heads of government set up a "reflection group" under the presidency of the senior Spanish diplomat, Carlos Westendorp, to prepare for the 1996 intergovernmental conference and to seek a consensus among the key EU governments.

      By late summer it was clear that major differences still separated governments about any radical changes in the EU decision-making institutions. At one end of the spectrum, the German government pressed for the introduction of qualified majority voting instead of unanimity for almost all areas of policy, as well as a bigger lawmaking role for the EU Council of Ministers and the directly elected European Parliament. Germany and other supporters of closer integration argued that the EU itself should take more responsibility for some policy areas still being decided by national governments alone. These included foreign and security policy as well as some aspects of immigration, justice, and police cooperation.

      At the other end of the spectrum, the British government continued at both summit and ministerial meetings during the year to resist any moves to closer political union. British Prime Minister John Major also repeated his government's refusal to commit itself to taking part in an eventual single European currency even if the U.K. met the economic conditions.

      France and a number of other countries found themselves in the middle of the argument about closer European integration. French Pres. Jacques Chirac appeared closer to the British government in resisting stronger powers for the European Parliament, the European Commission, and the European Court of Justice. He also angered his more integration-minded European partners in June when he announced France's temporary withdrawal from a seven-nation agreement to abolish internal frontier controls.

      Bilateral summit meetings between Chirac and German Chancellor Helmut Kohl in Strasbourg, France, at the end of June and in Bonn, Germany, during October showed significant French and German agreement about the need for more majority-vote decisions in the EU Council of Ministers and progress to a common European defense system. Meanwhile, in Germany itself Kohl faced increasing domestic opposition to monetary union from those who feared it might involve swapping the strong Deutsche Mark for a less-strong single European currency.

      Apart from the 1996 intergovernmental conference, the political agenda of the EU during 1995 was dominated by two more immediate issues: the continuing war in Bosnia and Herzegovina and concern about unemployment and the competitiveness of the European economies. At year's end there was guarded optimism that the war in Bosnia was over as NATO troops began arriving to help carry out peace accords signed in Paris on December 14, but the future role of EU countries in the Balkans was far from clear.

      The perceived failure of the EU member states to respond adequately to the challenge of the war in Bosnia was cited by those governments pressing for a stronger European common foreign and security policy. A discussion paper put forward by the European Commission in Brussels in June suggested that after 1996 the EU end its requirement that all decisions be taken only with the unanimous agreement of all 15 governments and take at least some foreign and security policy decisions by majority vote.

      During the year there were calls from the Commission and a number of EU governments for European defense to be brought within the decision-making framework of the EU. European defense policy was discussed only in the Western European Union (WEU), the European pillar of NATO, to which not all EU countries belonged.

      Disagreements between the United States and its European allies over security issues—most notably over the use of NATO airpower in Bosnia—also influenced the discussion about future European security and defense policy. As the year drew to a close, negotiations were continuing over an agreement under which NATO military resources might be used by the WEU in future European-run security missions.

      During the first half of 1995, there was evidence of a sharp recovery in economic growth rates in most EU countries, but the fall in unemployment proved much slower than had been hoped. At the end of the year, there were signs that economic growth and the rate of decline in unemployment were also beginning to slow.

      In October the European Commission issued a policy strategy that predicted that unemployment in the 15 EU countries could be halved by the end of the decade. The Commission stressed that this could be achieved only if member states maintained progress toward monetary union and introduced new measures to boost job creation and improve labour market flexibility, but with national governments facing serious difficulty in bringing their budget deficits under control, there were growing doubts about the speed of future reductions in the number of unemployed.

      The economic problems of the EU were compounded by the political difficulties faced by many of its member state governments during the year. The fall of the right-wing coalition led by Silvio Berlusconi in Italy and the emergence of a technocratic administration led by Lamberto Dini did not answer all the questions about that country's long-term political future. There were fears that domestic political instability might adversely affect Italy's six-month tenure running the EU presidency during the first half of 1996.

      When France took over the rotating EU presidency from Germany at the start of 1995, there were also concerns that the looming French presidential election would complicate the day-to-day running of EU affairs. Indeed, for the first five months of its six-month tenure, the French presidency was prevented from taking any significant political initiative. The flow of legislative business in Brussels, the site for the main EU institutions, almost ground to a halt.

      In spite of the striking electoral victory of Chirac and his centre-right allies in May, there were continuing questions about the new French government's attitude to closer European integration. In contrast with his strongly pro-European predecessor, Pres. François Mitterrand, Chirac did not disguise his somewhat more skeptical attitude about closer European political union.

      France's decision to launch a series of nuclear tests in the South Pacific led to conflict with other EU governments in the months that followed. These came to a head at informal EU heads of government summits in Cannes during June and in Majorca, Spain, during September in a series of bitter exchanges between Chirac and the prime ministers of Sweden, Denmark, Austria, and The Netherlands, who demanded an immediate end to the tests.

      The French government's annual budget, introduced in July, was badly received on international currency markets, where there were renewed predictions that France would not be able to meet its single currency targets for reducing the public spending deficit. After Prime Minister Alain Juppé reshuffled his government in November, he reaffirmed France's intention of reducing its budget deficit to less than 3% of its gross production by the end of 1997, as called for in the Maastricht Treaty.

      The Spanish Socialist government, led by Prime Minister Felipe González, which succeeded France in the EU presidency at the end of June, was hit by a series of internal financial and political scandals during the second half of the year. Once it became clear that the government would survive until it had to face a general election in March 1996, the Spanish presidency was able to complete its term with few major problems.

      In spite of the internal difficulties facing the EU a growing number of countries announced their desire to join. At the end of October, Latvia followed Cyprus, Malta, Poland, Hungary, Slovakia, Bulgaria, and Romania in delivering its membership application. Slovenia, Estonia, and the Czech Republic were expected to follow suit.

      At Cannes the European Council agreed on a development aid budget of some $6.7 billion to help countries in Central and Eastern Europe prepare for eventual EU membership. As the financial cost to the EU of a potential doubling in membership was assessed during 1995, some argued that enlargement might have to be tackled more slowly and in stages over a 10-15-year period. At the Madrid summit in December, however, EU leaders pledged to treat all applicants equally and said some talks could begin as early as 1997.

      At the Cannes meeting EU leaders also agreed on an aid budget of about $4.7 billion to assist the EU's economically troubled and increasingly unstable neighbours in the Mediterranean region and elsewhere. A joint partnership for development and security cooperation was agreed to at a summit held in Barcelona, Spain, at the end of November, which brought together the 15 EU states and 11 countries from North Africa and the eastern Mediterranean.

      The doubts about the future of the EU inevitably had an impact on the operation of its day-to-day executive—the European Commission. The European Parliament approved former Luxembourg prime minister Jacques Santer as the new Commission president in January, after a narrow vote in his favour. (JOHN PALMER)

▪ 1995

      The flagging course of the European Union (EU) showed signs of renewal in 1994. When he delivered a keynote speech in Brussels in January, U.S. Pres. Bill Clinton clearly spelled out that he thought Europe's future lay in closer unity. It was a theme that was to dominate the year, especially the autumn, when member-state governments began setting out their views for the forthcoming review of the Maastricht Treaty, scheduled for 1996. The promise of the talks was for a renewed advance toward monetary union, closer cooperation on defense and foreign policy, and sweeping reforms of the European institutions aimed at realigning their relationships and introducing greater levels of democratic control.

      On the foreign policy front, the overriding crisis during the year continued to be the war in Bosnia and Herzegovina. As international forces struggled to keep aid convoys flowing, the EU became directly involved for the first time, setting up an administration of Mostar, the divided capital of Herzegovina.

      At their summit on the Greek island of Corfu in June, the heads of state and government of the EU signed cooperation agreements with Russia and Ukraine and gave their backing to NATO's Partnership for Peace agreements with former Soviet bloc countries. It was acknowledged that the agreements were no more than an interim step to full membership of NATO and the Western European Union (WEU), recognized as the defense arm of the EU. With Russia playing a full military role in the former Yugoslavia, European leaders also approved Moscow's admission to the Group of Seven.

      NATO and the WEU also reached an agreement under which NATO forces might in future be earmarked for WEU operations not necessarily involving the U.S. The decisions reflected the debate toward the end of the year on what role defense might play in the EU's process of integration. The prime ministers of Poland, Hungary, the Czech Republic, Slovakia, Bulgaria, and Romania attended the EU summit in Essen, Germany, symbolizing the EU's commitment to enlarging its membership to countries in Eastern Europe.

      The increasing confidence behind the EU's developing foreign and security policy began to be reflected on the economic front during 1994. Recession had been blamed for the weakening of some member governments' resolution to pursue closer integration in the face of public opposition. In fact, 1994 proved to be the year that Europe began to move out of economic recession while inflation continued at low levels. There was also evidence of remarkable currency stability despite the abandoning of the narrow band limits of the European exchange-rate mechanism in 1993.

      Much hope for reinforcing economic recovery in Europe was pinned on the signing of the General Agreement on Tariffs and Trade (GATT) in Marrakech, Morocco, in April. The achievement of an agreement after eight years of difficult negotiations came despite some reservations, particularly in France. The only remaining question was whether the agreement would be ratified by national parliaments on both sides of the Atlantic.

      Politically the year was dominated by the European Parliament elections in June, the first since the institution was given wider powers under the Maastricht Treaty. The members of the new European Parliament (MEPs) were elected in four days of voting across the EU. The results showed a low turnout, with the average voting figure down to 56.5% from 58.5% in 1989. This apparently reflected dissatisfaction among voters—but as much about their own national governments as about the status of the EU. Against a background of recession and political disagreement, opposition to integration appeared to be growing in Italy and France, and it continued unabated among sectors of political opinion in the U.K. In Germany polls showed that increasing numbers of citizens questioned the desirability of abandoning their strong Deutsche Mark in favour of a single European currency.

      Two large groups, the Party of European Socialists and the centre-right Christian Democratic European People's Party, dominated the newly elected Parliament. Together with Liberals and Greens, the parties formed large new transnational political alliances. Huge gains by the Labour Party in the U.K. brought their numbers to almost one-third of the 198-strong Socialist grouping and gave the British their first opportunity to lead the Socialists in the Parliament.

      Right-wing parties also made gains in Italy, France, and Belgium—most significantly the Forza Italia of Silvio Berlusconi. (See BIOGRAPHIES (Berlusconi, Silvio ).) Although the extreme right failed to return any members in Germany, the French right-wing extremist Jean-Marie Le Pen was returned at the head of an 11-member European Parliament group that included three extreme-right MEPs from Belgium. The Italian neo-fascists, the National Alliance (formerly the Italian Social Movement), managed to win 11 seats.

      Reflecting a growing disenchantment with European integration in France, the Other Europe party of Philippe de Villiers, which campaigned against GATT and the single market, joined with four Danish and two Dutch MEPs to form the "Europe of the Nations Group."

      Although the signing of the Maastricht Treaty on political, economic, and monetary union had introduced the principle of subsidiarity, allowing member states greater control over their own affairs, an underlying suspicion of centralized government remained. Concerned that the public appeared not to have understood the increased powers of the European Parliament, the Commission launched a campaign to show that the Parliament would be closer to European citizens by having new instruments at its disposal, such as an ombudsman and the right of petition. Elected members would have to deal with the questions of integrating new member states into the EU beginning Jan. 1, 1995, and with establishing strong economic ties with the new democracies of Eastern and Central Europe.

      The newly elected MEPs signaled at their first meeting in Strasbourg, France, that they should be actively involved in the preparation of the 1996 Intergovernmental Conference to reform the EU institutions and to review the Maastricht Treaty. In making their stand they clashed with the views of most member states that national governments should decide on any institutional changes.

      On the eve of the European Council meeting in Corfu, the outgoing president of the European Commission, Jacques Delors, outlined the priorities facing Europe. He declared that governments would have to step up the fight against unemployment, promote economic growth, and prepare the EU for the next century. The European economy was at a crossroad between survival and decline. Government leaders would be focusing on four main areas: the Commission's White Paper on growth, competitiveness, and employment released earlier in the year; economic guidelines for the second stage of European economic and monetary union; Ukraine's nuclear power plants; and the establishment of the World Trade Organization as the successor to GATT.

      Delors singled out six main elements of the White Paper for Council action: support for small firms, coordination of national research policies, a commitment to developing trans-European networks, a commitment to information technology, employment measures, and sustainable development.

      The EU leaders took the White Paper as their main point under discussion in Corfu and pledged to pursue its recommendations vigorously. The Council stressed that improvements in Europe's economic situation should not be used as an excuse to slacken efforts to promote structural change but rather should serve as an incentive to introduce essential reforms, particularly in employment. Each member state was called upon to appoint a minister responsible for coordination of the Information Society, and the Council agreed on 11 major transport projects and 8 energy projects. In a deregulating mood, the Council gave its full backing to plans for a group of independent experts to look at the impact of both EU and national legislation on employment and competitiveness. This approach was confirmed by the Essen EU summit during December.

      Britain's Prime Minister John Major, with support from German Chancellor Helmut Kohl (see BIOGRAPHIES (Kohl, Helmut )) and others, welcomed references to labour-market deregulation and praised mention of private-sector funds to cofinance the construction of trans-European networks. The midyear summit meeting of the European Council reflected on the efforts of finance ministers to mobilize an additional ECU 8 billion ($9,660,000,000) a year in loans to help set up the trans-European networks, but they stressed that the funding should not run counter to efforts being made by member states to reduce public debt.

      The talks on Europe's economic future were, however, overshadowed by the difficulty in agreeing on Delors's successor as president of the European Commission. Following a meeting in Mulhouse, France, between Kohl and Pres. Francois Mitterrand of France, both announced that they preferred Belgian Prime Minister Jean-Luc Dehaene. Driven by vociferous and rebellious Euro-skeptic elements in his own Conservative Party, Major blamed what he called the arrogance of the Bonn/Paris axis and vetoed Dehaene's appointment. Britain stood alone among the 12 member states, but despite bitter European resentment, Major insisted on getting his way.

      At a special summit in Brussels in July, it took only 20 minutes for the European leaders to agree on a new candidate. They chose the prime minister of Luxembourg, Jacques Santer (see BIOGRAPHIES (Santer, Jacques )), who would take office in 1995. After a long and bitter debate, the MEPs approved his nomination—but by only a 22-vote majority.

      The ensuing battle over the appointments to Santer's team of commissioners demonstrated that the European Parliament was increasingly in the political driving seat of the EU. The democratically elected MEPs said they were determined to press on with essential democratic reforms and to ensure that the EU was representative of the will of the people of Europe.

      The second half of the year saw the rekindling of the controversial debate about "a two-speed Europe." A policy paper published by the parliamentary faction of the German Christian Democratic Party advocated the creation of a possible "hard core" of EU countries committed to comprehensive economic political and defense integration. This provoked charges that the German and French governments were seeking to create a privileged inner core of EU states, leaving others outside. (JOHN PALMER)

* * *

▪ European organization

Introduction

   international organization comprising 27 European countries and governing common economic, social, and security policies. Originally confined to western Europe, the EU has expanded to include several central and eastern European countries. The EU's members are Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, The Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. The EU was created by the Maastricht Treaty, which entered into force on November 1, 1993. The treaty was designed to enhance European political and economic integration by creating a single currency (the euro), a unified foreign and security policy, common citizenship rights, and by advancing cooperation in the areas of immigration, asylum, and judicial affairs.

Origins

 The EU represents one in a series of efforts to integrate Europe since World War II. At the end of the war, several western European countries sought closer economic, social, and political ties to achieve economic growth and military security and to promote a lasting reconciliation between France and Germany. To this end, in 1951 the leaders of six countries—Belgium, France, Italy, Luxembourg, The Netherlands, and West Germany—signed the Treaty of Paris, which founded the European Coal and Steel Community (ECSC). The ECSC created a free trade area for several key economic and military resources: coal, coke, steel, scrap, and iron ore. To manage the ECSC, the treaty established several supranational institutions: a High Authority to administrate, a Council of Ministers to legislate, a Common Assembly to formulate policy, and a Court of Justice to interpret the treaty and to resolve related disputes. A series of further international treaties and treaty revisions based largely on this model led eventually to the creation of the EU.

Creation of the European Economic Community (European Community)

 On March 25, 1957, the six ECSC members signed the two Treaties of Rome (Rome, Treaties of) that established the European Atomic Energy Community (Euratom), which was designed to facilitate cooperation in atomic energy development, research, and utilization, and the European Economic Community (EEC). The EEC created a common market that featured the elimination of most barriers to the movement of goods, services, capital, and labour, the prohibition of most public policies or private agreements that inhibit market competition, a common agricultural policy (CAP), and a common external trade policy.

      The treaty establishing the EEC required members to eliminate or revise important national laws and regulations. In particular, it fundamentally reformed tariff and trade policy by abolishing all internal tariffs by July 1968. It also required that governments eliminate national regulations favouring domestic industries and cooperate in areas in which they traditionally had acted independently, such as international trade (i.e., trade with countries outside the EEC). The treaty called for common rules on anticompetitive and monopolistic behaviour and for common inland transportation and regulatory standards. Recognizing social policy as a fundamental component of economic integration, the treaty also created the European Social Fund, which was designed to enhance job opportunities by facilitating workers' geographic and occupational mobility.

      Significantly, the treaty's common market reforms did not extend to agriculture. The CAP, which was implemented in 1962 and which became the costliest and most controversial element of the EEC and later the EU, relied on state intervention to protect the living standards of farmers, to promote agricultural self-sufficiency, and to ensure a reliable supply of products at reasonable prices.

      Like the ECSC, the EEC established four major governing institutions: a commission, a ministerial council, an assembly, and a court. To advise the Commission and the Council of Ministers on a broad range of social and economic policies, the treaty created an Economic and Social Committee. In 1965 members of the EEC signed the Brussels Treaty, which merged the commissions of the EEC and Euratom (European Atomic Energy Community) and the High Authority of the ECSC into a single commission. It also combined the councils of the three organizations into a common Council of Ministers. The EEC, Euratom, and the ECSC—collectively referred to as the European Communities—later became the principal institutions of the EU.

      The Commission (commonly referred to as the European Commission) consists of a permanent civil service directed by commissioners. It has had three primary functions: to formulate community policies, to monitor compliance with community decisions, and to oversee the execution of community law. Initially, commissioners were appointed by members to renewable four-year terms, which were later extended to five years. The Commission is headed by a president, who is selected by the heads of state or government of the organization's members. In consultation with member governments, the president appoints the heads of the Directorate-Generals, which manage specific areas such as agriculture, competition, the environment, and regional policy. The Commission has shared its agenda-setting role with the European Council, which consists of the leaders of all member countries. Established in 1974, the European Council meets at least twice a year to define the long-term agenda for European political and economic integration.

      The main decision-making institution of the EEC and the European Community (as the EEC was renamed later) and the EU has been the Council of Ministers (now the Council of the European Union), which consists of ministerial representatives. The composition of the Council changes frequently, as governments send different representatives depending on the policy area under discussion. All community legislation requires the approval of the Council. The president of the Council, whose office rotates every six months, manages the legislative agenda.

      The Common Assembly, renamed the European Parliament in 1962, originally consisted of delegates from national parliaments. Beginning in 1979, members were elected directly to five-year terms. The size of members' delegations varies depending on population. For example, at the 2004 elections, Germany had 99 representatives and Malta had 5. The Parliament is organized into transnational party groups based on political ideology—e.g., the Party of European Socialists (European Socialists, Party of), the European People's Party, the European Federation of Green Parties, and the European Liberal, Democrat and Reform Party (European Liberal Democrat and Reform Party). Until 1987 the legislature served only as a consultative body, though in 1970 it was given joint decision-making power (with the Council of Ministers) over community expenditures.

      The European Court of Justice (ECJ) interprets community law, settles conflicts between the organization's institutions, and determines whether members have fulfilled their treaty obligations. Each member selects one judge, who serves a renewable six-year term; to increase efficiency, after the accession of 10 additional countries in 2004 the ECJ was allowed to sit in a “grand chamber” of only 11 judges. Eight impartial advocates-general assist the ECJ by presenting opinions on cases before the court. In 1989 an additional court, the Court of First Instance, was established to assist with the community's increasing caseload. The ECJ has established two important legal doctrines. First, European law has “direct effect,” which means that treaty provisions and legislation are directly binding on individual citizens, regardless of whether their governments have modified national laws accordingly. Second, community law has “supremacy” over national law in cases where the two conflict. Because national courts eventually accepted these legal doctrines, the ECJ has acquired a supranational legal authority.

      Throughout the 1970s and '80s the EEC gradually expanded both its membership and its scope. In 1973 the United Kingdom, Denmark, and Ireland were admitted, followed by Greece in 1981 and Portugal and Spain in 1986. The community's common external trade policy generated pressure for common foreign and development policies, and in the early 1970s the European Political Cooperation (EPC; renamed the Common Foreign and Security Policy by the Maastricht Treaty), consisting of regular meetings of the foreign ministers of each country, was established to coordinate foreign policy. In 1975 the European Regional Development Fund was created to address regional economic disparities and to provide additional resources to Europe's most deprived areas. In the same year, members endorsed the Lomé Convention, a development-assistance package and preferential-trade agreement with numerous African, Caribbean, and Pacific countries. Members also made several attempts to manage their exchange rates collectively, resulting in the establishment of the European Monetary System in 1979.

Single European Act

 The Single European Act (SEA), which entered into force on July 1, 1987, significantly expanded the EEC's scope. It gave the meetings of the EPC a legal basis, and it called for more intensive coordination of foreign policy among members, though foreign policy decisions were made outside community institutions. The agreement brought the European Regional Development Fund formally into the community's treaties as part of a new section on economic and social cohesion that aimed to encourage the development of economically depressed areas. As a result of the act, there was a substantial increase in funding for social and regional programs. The SEA also required the community's economic policies to incorporate provisions for the protection of the environment, and it provided for a common research and technological-development policy, which was aimed primarily at funding transnational research efforts.

      More generally, the SEA set out a timetable for the completion of a common market. A variety of legal, technical, fiscal, and physical barriers continued to limit the free movement of goods, labour, capital, and services. For example, differences in national health and safety standards for consumer goods were a potential impediment to trade. To facilitate the completion of the common market by 1992, the community's legislative process was modified. Originally, the Commission proposed legislation, the Parliament was consulted, and the Council of Ministers made a final decision. The Council's decisions generally needed unanimity, a requirement that gave each member a veto over all legislation. The SEA introduced qualified majority voting for all legislation related to the completion of the common market. Under this system, each member was given multiple votes, the number of which depended on national population, and approval of legislation required roughly two-thirds of the votes of all members. The new procedure also increased the role of the European Parliament. Specifically, legislative proposals that were rejected by the Parliament could be adopted by the Council of Ministers only by a unanimous vote.

The Maastricht Treaty

 The Maastricht Treaty (formally known as the Treaty on European Union), which was signed on February 7, 1992, created the European Union. The treaty met with substantial resistance in some countries. In Denmark, for example, voters who were worried about infringements upon their country's sovereignty defeated a referendum on the original treaty in June 1992, though a revised treaty was approved the following May. Voters in France narrowly approved the treaty in September, and in July 1993 British Prime Minister John Major (Major, John) was forced to call a vote of confidence in order to secure its passage. An amended version of the treaty officially took effect on November 1, 1993.

      The treaty consisted of three main pillars: the European Communities, a common foreign and security policy, and enhanced cooperation in home (domestic) affairs and justice. The treaty changed the name of the European Economic Community to the European Community, which became the primary component of the new European Union. The agreement gave the EC broader authority, including formal control of community policies on development, education, public health, and consumer protection and an increased role in environmental protection, social and economic cohesion, and technological research. It also established EU citizenship, which entailed the right of EU citizens to vote and to run for office in local and European Parliament elections in their country of residence, regardless of national citizenship.

      The Maastricht Treaty specified an agenda for incorporating monetary policy into the EC and formalized planning that had begun in the late 1980s to replace national currencies with a common currency (euro) managed by common monetary institutions. The treaty defined a set of “convergence criteria” that specified the conditions under which a member would qualify for participation in the common currency. Countries were required to have annual budget deficits not exceeding 3 percent of gross domestic product (GDP), public debt under 60 percent of GDP, inflation rates within 1.5 percent of the three lowest inflation rates in the EU, and exchange-rate stability. The members that qualified were to decide whether to proceed to the final stage—the adoption of a single currency. The decision required the establishment of permanent exchange rates and, after a transition period, the replacement of national currencies with the common currency, called the euro. Although several countries failed to meet the convergence criteria (e.g., in Italy and Belgium public debt exceeded 120 percent of GDP), the Commission qualified nearly all members for monetary union, and on January 1, 1999, 11 countries—Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, The Netherlands, Portugal, and Spain—adopted the currency and relinquished control over their exchange rates. Greece failed to qualify, and Denmark, Sweden, and the United Kingdom chose not to apply for membership. Greece was admitted to the euro beginning in 2001. Initially used only by financial markets and businesses, the euro was introduced for use by the general public on January 1, 2002.

      The Maastricht Treaty significantly modified the EEC's institutions and decision-making processes. The Commission was reformed to increase its accountability to the Parliament. Beginning in 1995, the term of office for commissioners, who now had to be approved by the Parliament, was lengthened to five years to correspond to the terms served by members of the Parliament. The ECJ was granted the authority to impose fines on members for noncompliance. Several new institutions were created, including the European Central Bank, the European System of Central Banks, and the European Monetary Institute. The treaty also created a regional committee, which served as an advisory body for commissioners and the Council of Ministers on issues relevant to subnational, regional, or local constituencies.

      One of the most radical changes was the reform of the legislative process. The range of policies subject to qualified majority voting in the Council of Ministers was broadened. The treaty also endowed the Parliament with a limited right of rejection over legislation in most of the areas subject to qualified majority voting, and in a few areas, including citizenship, it was given veto power. The treaty formally incorporated the Court of Auditors, which was created in the 1970s to monitor revenue and expenditures, into the EC.

      As part of the treaty's second pillar, members undertook to define and implement common foreign and security policies. Members agreed that, where possible, they would adopt common defense policies, which would be implemented through the Western European Union, a security organization that includes many EU members. Joint actions—which were not subject to monitoring or enforcement by the Commission or the ECJ—required unanimity.

      The EU's third pillar included several areas of common concern related to the free movement of people within the EU's borders. The elimination of border controls conflicted with some national immigration, asylum, and residency policies and made it difficult to combat crime and to apply national civil codes uniformly, thus creating the need for new Europe-wide policies. For example, national asylum policies that treated third-country nationals differently could not, in practice, endure once people were allowed to move freely across national borders.

Enlargement and post-Maastricht reforms

      On January 1, 1995, Sweden, Austria, and Finland joined the EU, leaving Iceland, Norway, and Switzerland as the only major western European countries outside the organization. Norway's government twice (1972 and 1994) attempted to join, but its voters rejected membership on each occasion. Switzerland tabled its application in the early 1990s. Norway, Iceland, and the members of the EU (along with Liechtenstein) are members of a free trade area called the European Economic Area, which allows freedom of movement for goods, services, capital, and people.

 Two subsequent treaties revised the policies and institutions of the EU. The first, the Treaty of Amsterdam, was signed in 1997 and entered into force on May 1, 1999. Building on the social protocol of the Maastricht Treaty, it identified as EU objectives the promotion of employment, improved living and working conditions, and proper social protection; added sex-discrimination protections and transferred asylum, immigration, and civil judicial policy to the community's jurisdiction; granted the Council of Ministers the power to penalize members for serious violations of fundamental human rights; and gave the Parliament veto power over a broad range of EC policies as well as the power to reject the European Council's nominee for president of the Commission.

 A second treaty, the Treaty of Nice, was signed in 2001 and entered into force on February 1, 2003. Negotiated in preparation for the admission of new members from eastern Europe, it contained major reforms. The maximum number of seats on the Commission was set at 27, the number of commissioners appointed by members was made the same at one each, and the president of the Commission was given greater independence from national governments. Qualified majority voting in the Council of Ministers was extended to several new areas. Approval of legislation by qualified voting required the support of members representing at least 62 percent of the EU population and either the support of a majority of members or a supermajority of votes cast. Although national vetoes remained in areas such as taxation and social policy, countries choosing to pursue further integration in limited areas were not precluded from doing so.

 After the end of Cold War, many of the former communist countries of eastern and central Europe applied for EU membership. However, their relative lack of economic development threatened to hinder their full integration into EU institutions. To address this problem, the EU considered a stratified system under which subsets of countries would participate in some components of economic integration (e.g., a free trade area) but not in others (e.g., the single currency). Turkey, at the periphery of Europe, also applied for membership, though its application was controversial because it was a predominantly Islamic country, because it was widely accused of human rights violations, and because it had historically tense relations with Greece (especially over Cyprus). Despite opposition from those who feared that expansion of the EU would stifle consensus and inhibit the development of Europe-wide foreign and security policies, the EU in 2004 admitted 10 countries (Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia), all but two of which (Cyprus and Malta) were former communist states; Bulgaria and Romania joined in 2007. Negotiations on Turkey's membership application began in 2005 but faced numerous difficulties.

      Building on the limited economic and political goals of the ECSC, the countries of western Europe have achieved an unprecedented level of integration and cooperation. The degree of legal integration, supranational political authority, and economic integration in the EU greatly surpasses that of other international organizations. Indeed, although the EU has not replaced the nation-state, its institutions have increasingly resembled a parliamentary democratic political system at the supranational level.

 In 2002 the Convention on the Future of Europe, chaired by former French president Valéry Giscard d'Estaing (Giscard d'Estaing, Valéry), was established to draft a constitution for the enlarged EU. Among the most difficult problems confronting the framers of the document was how to distribute power within the EU between large and small members and how to adapt the organization's institutions to accommodate a membership that would be more than four times larger than that of the original EEC. The framers also needed to balance the ideal of deeper integration against the goal of protecting members' national traditions. The drafting process evoked considerable controversy, particularly over the question of whether the constitution should mention God and the Christian heritage of much of European society (the final version did not). The proposed constitution was signed in 2004 but required ratification by all EU members to take effect; voters in France and The Netherlands rejected it in 2005, thereby scuttling the constitution at least in the short term. It would have created a full-time president, a European foreign minister, a public prosecutor, and a charter of fundamental rights. Under the constitution the powers of the European Parliament would have been greatly expanded and the EU given a “legal personality” that entailed the sole right to negotiate most treaties on its members' behalf.

      Under the leadership of Germany, work began in early 2007 on a reform treaty intended to replace the failed constitution. The resulting Lisbon Treaty, signed in December 2007, required approval by all 27 EU member countries in order to be ratified as scheduled in 2008. The treaty, which retained portions of the draft constitution, would have established an EU presidency, consolidated foreign policy representation for the EU, and devolved additional powers to the European Commission, the European Court of Justice, and the European Parliament. Unlike the draft constitution, the Lisbon Treaty would have amended rather than replaced existing treaties. The treaty failed, at least in the short term, in June 2008 after it was rejected by voters in a national referendum in Ireland.

Matthew J. Gabel Ed.

Additional Reading

General overviews of the EU are provided in Desmond Dinan, Ever Closer Union: An Introduction to European Integration, 2nd ed. (1999); and Neill Nugent, The Government and Politics of the European Union, 5th ed. (2003). The diplomatic and political history of European integration is discussed in Alan S. Milward, The European Rescue of the Nation-State, 2nd ed. (2000); and Andrew Moravcsik, The Choice for Europe: Social Purpose and State Power from Messina to Maastricht (1998). A detailed discussion of the various EU institutions is Simon Hix, The Political System of the European Union, 2nd ed. (2003). Economic studies include Ali M. El-Agraa, The European Union: Economics and Policies, 7th ed. (2004); and Loukas Tsoukalis, The New European Economy Revisited, 3rd ed. (1997).Matthew J. Gabel

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