The European Union and the Member States: Cooperation, Coordination, and Compromise 9781685850173

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T H E EUROPEAN U N I O N AND THE MEMBER STATES

THE EUROPEAN UNION AND THE MEMBER STATES Cooperation, Coordination, and Compromise edited by

Eleanor E. Zeff Ellen B. Pirro

LYN

NE

R I E N N E R PUBLISHERS

B O U L D E R L O N D O N

Published in the United States of America in 2001 by Lynne Rienner Publishers, Inc. 1800 30th Street, Boulder, Colorado 80301 www.rienner.com and in the United Kingdom by Lynne Rienner Publishers, Inc. 3 Henrietta Street, Covent Garden, London W C 2 E 8LU © 2001 by Lynne Rienner Publishers, Inc. All rights reserved Library of Congress Cataloging-in-Publication Data Zeff, Eleanor E., 1943The European Union and the member states : cooperation, coordination, and compromise / Eleanor E. Zeff, Ellen B. Pirro. Includes bibliographical references and index. ISBN 1-55587-941-1 (alk. paper) ISBN 1-55587-918-7 (pbk. : alk. paper) 1. Political planning—European Union countries. 2. European Union. I. Pirro, Ellen B. II. Title. JN32.Z44 2001 341.2427—dc21 00-062562 British C a t a l o g u i n g in Publication Data A Cataloguing in Publication record for this book is available f r o m the British Library.

Printed and bound in the United States of America

@

The paper used in this publication meets the requirements of the A m e r i c a n National Standard for P e r m a n e n c e of Paper for Printed Library Materials Z 3 9 . 4 8 - 1 9 8 4 . 5 4 3 2 1

This book is dedicated Edwin S. Elwell Ellen J. Elwell Charles A. Pino Jr. Eleanor B. Pirro Robert H. Zeff

to

Contents

1

Introduction Eleanor E. Zeff and Ellen B. Pirro

2

Policy Performance in the European Union John McCormick

Part I 3

4

Early Union Members

France: Europeanism, Nationalism, and the Planned Economy John S. Ambler and M. Shawn Reichert

29

Belgium, the Netherlands, and Luxembourg: Diversity Among the Benelux Countries Jan Beyers, Bart Kerremans, and Peter Bursens

59

5

Germany: A Major Player Carl Lankowski

89

6

Italy: Both Leader and Laggard Marco Giuliani and Simona Piattoni

115

Part 2 T h e Second W a v e Britain: Aloof and Skeptical Jorgen Rasmussen

145

Ireland: Brussels and the Celtic Tiger Richard B. Finnegan

175

vii

viii 9

Contents

Denmark: Small State with a Big Voice Leslie Eliason

Part 3 10

11

191

T h e 1980s

Greece: A European Paradox Christos Markou, George Nakos, Nikolaos Zahariadis

217 and

Spain and Portugal: Betting on Europe Joaquin Roy and Aimee Kanner

Part 4

235

The Newest Members

12

Austria: Confronting Controversy Reinhard Heinisch

267

13

Sweden: Retreat from Exceptionalism Karen Anderson

285

14

Finland: An Integrationist Member State Alexander C-G. Stubb, Heidi Kaila, and Timo

305

Bibliography List of Acronyms The Contributors Index About the Book

and Abbreviations

Ranta

317 341 343 347 355

I Introduction Eleanor E. Zeff & Ellen 8. Pirro

To many people, " E u r o p e " represents the most exciting and remarkable political development of the current era. And at first glance, it does appear that the nations of Western E u r o p e are m o v i n g slowly but inexorably toward integration. Under closer scrutiny, however, it becomes apparent that this idea of " E u r o p e " has yet to be entirely realized. The 15 m e m b e r states still vary considerably in their positions on many policies, as well as in the ways that their governments translate European Union (EU) laws at the national and subnational levels. " C o m mon policies" often are very general and d o d g e the tougher issues. There is also the lack of what Karl Deutsch has labeled a " w e - f e e l ing" 1 —instead of thinking of themselves as " E u r o p e a n , " individuals continue to identify themselves with their nation, calling themselves Germans, Italians, Danes, and so on. The policy perspective adopted in this v o l u m e provides a unique insight into how the individual m e m b e r states cooperate with the institutions of the European Union, as well as how they c o m p r o m i s e and coordinate their own national policies to fit with those of the European Union. (Further insights into this policy perspective can be found in John Peterson and Elizabeth B o m b e r ' s work on the E u r o p e a n Union 2 and in Aaron Wildavsky's Seeking the Truths) The processes of cooperation, coordination, and compromise consist of a series of decisions that the m e m b e r states are willing to make because they expect to receive some perceived benefits. Each of these steps contributes to the actual building of a series of European "we-feelings," such as the monetary " w e " and the environmental " w e . " But the particular set of attitudes, culture, and needs in each of the 15 m e m b e r states still makes this " w e - f e e l i n g " difficult to achieve.

1

Introduction

The chapters that follow describe h o w and at what level of government (the supranational, national, or subnational) EU policies are developed and implemented. The focus of the book is on how each individual m e m b e r state implements EU policies at national and subnational levels and how EU policies affect its m e m b e r s — w h a t benefits, for example, are gained—as the policies are absorbed into existing national policies, culture, and tradition. This first chapter establishes the format and design of the book, and Chapter 2 provides an overview of the European Union and its institutions with regard to policymaking and implementation. Then, chapters on the 15 member countries are grouped according to the time that the country joined the Union (see Table 1.1). The first grouping consists of the six countries that signed the Treaty of R o m e in 1957: France, Belgium, the Netherlands, Germany, Italy, and Luxembourg. (Germany was not reunited at that time, but still fits most appropriately with this group.) The second section contains chapters on the three countries that joined the Union in 1973: the United Kingdom, Ireland, and Denmark. The third section covers the countries that entered in the 1980s: Greece (1981), Spain (1986), and Portugal (1986). And the final section includes the most recent (1995) entrants: Austria, Sweden, and Finland. There are many opinions about how to group, or in which order to discuss, the European U n i o n ' s m e m b e r countries; suggestions that we received include alphabetical order, "reluctant states" vs. "enthusiastic states," and geographical location, yet no approach seemed to satisfy everyone. We decided, finally, that the chronological order in which the states joined the Union provides a valuable historical v i e w — a n d , more to the point, that the order in which these countries are discussed is not as important as the fact that all 15 of the current m e m b e r states are brought together in one volume, enabling the reader to look at the full scope of today's European Union.

T a b l e I. I

E C / E U M e m b e r States, 1957-2001

Original M e m b e r States ( 1 9 5 7 ) Belgium France German Italy Luxembourg Netherlands

1st E n l a r g e ment (1973) Britain Denmark Ireland

2d E n l a r g e ment (1981)

3d E n l a r g e ment (1986)

4th Enlargement (1995)

Greece

Portugal Spain

Austria Finland Sweden

Introduction

3

The European Union represents a new type of political institution, one that breaks down the previously accepted notions of international organizations. Each new stage of its growth and development not only alters the E u r o p e a n landscape, but also changes the balance of the whole international system. The process of policy development and implementation provides the student and analyst a unique opportunity to examine an evolving situation. Thus, it seems critically important to focus on what is actually occurring: that is, a series of policy moves, in a n u m b e r of issue areas, which each of the 15 member states then implement separately. Within this reality, there is tremendous diversity to examine and to stimulate analysis.

T h e F r a m e w o r k of the C h a p t e r s Each of the chapters in Parts 1 through 4 focuses on how the m e m b e r states implement and modify policies handed down to them by the EU. The chapters also describe the difficulties encountered by the m e m b e r states during the process of i m p l e m e n t a t i o n . Specifically, for each m e m b e r state the authors consider how and in what areas the m e m b e r state has influenced EU policy, what institutional mechanisms the state uses to implement EU policy, how and in what areas the EU has influenced the policies of the member state, and the m e m b e r state's implem e n t a t i o n record. S o m e authors chose to e m p h a s i z e all four of these tasks; others felt they needed to discuss one area more thoroughly in order to better explain a particular country's implementation record. The policies discussed in the member-state chapters are organized according to the system of three pillars f o u n d in the Treaty on European Union (TEU, popularly k n o w n as the Maastricht Treaty). Pillar O n e is the European C o m m u n i t y (EC), embracing the European Econ o m i c Community, the European Coal and Steel Community, and the E u r o p e a n Atomic Energy Community. T h e issues covered include the full range of areas of e c o n o m i c concern, such as the single market, C o m m o n Agricultural Policy (CAP), financial policy, competition, consumer protection, taxation, and environmental policy. First-pillar issues are supranational, falling mainly under the governance of the E U C o m m i s s i o n . M a n y decisions are m a d e by Qualified Majority Voting ( Q M V ) , although consensus is highly valued. EU policy on first pillar issues should subsequently be enacted into law within the m e m b e r states.

4

Introduction

Pillar Two is the Common Foreign and Security Policy (CFSP), encompassing such issues as enlargement of the European Union, the relationship of the EU to NATO, and involvement in the Balkan conflicts. Authority in this area is intergovernmental, shared by the member states and the Union. Pillar Three is Cooperation on Justice and Home Affairs (JHA), dealing with internal security, drugs, crime, the European Police Office (EUROPOL), international terrorism, and related issues. Authority in this area also is intergovernmental, though it includes some policy issues that are the prerogative of the member states. In addition to these substantive issues, there are some significant theoretical issues that crosscut the three pillars and have an impact on each area covered. Discussions of these theoretical issues—which include sovereignty, subsidiarity, transparency, legitimacy, and the "democratic deficit"—are incorporated into the analyses of substantive issue areas and policy implementation where appropriate. For example, the chapter on Britain emphasizes that country's continued concern over its sovereignty and demonstrates how Britain has sought to slow EU integration by stressing a need for subsidiarity (see Chapter 7).

Policymaking and Implementation in the European Union The nature of the European Union creates its own complexities. As John McCormick describes in Chapter 2, the distribution of power among the institutions of the European Union, especially the Commission, the Council of Ministers, the European Council, the European Parliament, and the European Court of Justice (ECJ), changes frequently, and the relationship between these EU institutions and the member states is ambiguous. Furthermore, the EU has no real constitution clearly stating which institutions should be responsible for policymaking and implementation, and it has only limited powers of enforcement and a very small budget. 4 This focuses most of the policy implementation at the national level, minimizing EU involvement. The EU institutions have divided competencies for policymaking, which prevents any one of them from becoming too powerful and that allows the member states to guard their sovereignty and play a role in policymaking. The European Commission, for example, is restricted in its attempts to oversee policy implementation of First Pillar issues. It can bring member states before the ECJ if a directive from the EU is

Introduction

5

not being properly transposed into national law, but it cannot physically enter the state to gather evidence of noncompliance. The Maastricht Treaty's emphasis on subsidiarity has confused the issue about whether the EU institutions or the m e m b e r states should be responsible for achieving and implementing policy goals. 5 Despite these limitations, the authority of the European Union over its m e m ber states has both deepened and broadened over the years, and the number of EU laws is growing. The European Union passes about 60 to 80 directives every year and 160 to 190 decisions. 6 Although the Council of Ministers has the final say in passing policy after it has been created by the other EU institutions, the Commission and the m e m b e r states have the responsibility for implementing these policies. Policymaking is no more than goal setting unless policies are implemented and enforced. 7 With a small budget and limited enforcement powers, the Commission must rely heavily on the m e m b e r states to implement policies passed by the EU institutions. Because of the restricted budget and the E U ' s evolving institutional f r a m e w o r k , implementation of regulations, directives, and decisions—all forms of EU legislation—is a difficult process with varying results. The European Court of Justice helps the implementation process by making sure that EU laws are uniformly applied and that disputes are resolved. The ECJ has also been active in implementing and even in enforcing EU laws especially in the area of social policy. The European Union has a harder time implementing policies than it does making them, and the ECJ has often taken the lead in policy implementation when the other institutions have been ineffective. As the EU enlarges, it b e c o m e s more challenging to bring together all the disparate interests and traditions and to f o r m coherent and unified policies. Consequently, there are a lot of general policies that avoid awkward choices. As John M c C o r m i c k states, " T h e absence of central control has created a policy process that is driven largely by compromise, opportunism and unpredictable political pressures." 8 Each of the 15 nations has faced formidable obstacles in adapting E U policies to its o w n national traditions. M a k i n g policy that is acceptable to all its m e m b e r s is a difficult task for the European Union as well, and often has led to c o m p r o m i s e s and to regulations that meet only the lowest c o m m o n denominator among the m e m b e r states. This inevitably leads to new problems: for example, if the standards in one m e m b e r state are lower than they are in others, products will be manuf a c t u r e d in the country where laws are less stringent and the products cost less to produce, thus giving that country an unfair trade advantage.

6

Introduction

Although the European Union passes a lot of legislation each year, it has trouble implementing it because of these types of considerations. Underlying all of the discussion that follows is the question: "What is E u r o p e ? " Each and every area of concern develops f r o m this unresolved issue. Right now, there is no c o n s e n s u s (in a system in which consensus is the goal) on such basic questions as what nations "belong" in Europe, where the expansion of the EU should end, what its m a j o r objectives should be, and where it is heading. As the European Union considers admitting more m e m b e r s , the potential for even greater disparity in views grows. A unique balance, discussed in the chapters of this book, has evolved between national and European identity. The fate of this balance is the story of " E u r o p e ' s " future.

Notes The authors w i s h to thank D a l e A . Z i e s k e for s i g n i f i c a n t l y contributing to the production of this v o l u m e and Clayton J. C l e v e l a n d for assisting with this introductory chapter. 1. Karl W. D e u t s c h et al., Political Community and the North AtlanticArea: International Organization in the Light of Historical Experience. 2. John P e t e r s o n and E l i z a b e t h B o m b e r g , Decision-Making in the European Union. 3. Aaron Wildavsky, Speaking the Truth to Power. 4. John M c C o r m i c k , The European Union, p. 2 0 4 . 5. Ibid., p. 2 0 3 . 6. D o m i n i k Lasak and John W i l l i a m Bridge, Laws and Institutions of the European Communities. 7. M c C o r m i c k , The European Union, p. 2 1 0 . 8. Ibid., p. 2 1 2 .

2

Policy Performance in the European Union John McCormick

Public policy is a complex issue. Even in democracies—where systems of government are institutionalized and generally predictable—it is not always clear how agendas are developed, who makes policy, why some options are adopted and others ignored, and whether the policies pursued have worked or not. With the European Union, the public policy process adopts a new level of complexity. Not only are the policymaking structure and principles of the E U very different from those found in conventional state systems, but the E U is still evolving, the balance of power among E U institutions and member states is constantly changing, and the forces at work in the E U policy process are not yet fully understood. Studies of E U policymaking are replete with such adjectives as complex, unique, inefficient, unpredictable, unstable, distinctive, arcane, and fragmented. Helen Wallace talks about the "intellectual m a z e " that f a c e s the student of E U p o l i c y m a k i n g , 1 and J e r e m y Richardson concludes that the complexity of the E U policy process demands the use of multiple concepts from multiple models. 2 Understanding the E U policy process would be easier if the E U had a formal constitution: a single, permanent, codified document that could function as a blueprint for the powers and responsibilities of the " g o v e r n m e n t " of the E U . But it does not, and European integration is guided instead by an increasingly convoluted set of treaties whose details are regularly amended and whose meaning is constantly finetuned as a result of debates among the governments of the member states, struggles f o r influence among the major E U institutions, new laws adopted by the E U , and decisions reached by the European Court of Justice. T h e treaties provide a list of the policy areas in which the

7

8

Policy Performance in the EU

EU is active (these include agriculture, transport, social affairs and the environment) but they say little about how responsibility is—or should be—divided in these areas between the EU and its member states. They provide a series of policy principles, outlining the general goals that the EU should aspire to achieve, but these goals are often a m b i g u o u s and subject to differing interpretations. There is little question that the authority of European institutions has deepened and broadened since the creation in 1952 of the European Coal and Steel Community. The member states have since transferred so many powers to Brussels that the EU now deals to varying degrees with most aspects of economic, social, agricultural, regional, and environmental policy. Yet despite this "Europeanization" of the policy process, and despite the growing workload of European institutions, the EU still has no direct powers of enforcement and implementation, and it has a very small budget—about $110 billion in 1998, smaller than the budgets of many of the larger state governments in the United States. Questions also remain about whether the EU is a supranational arrangement with a life of its own, or whether it is still driven essentially by intergovernmental bargains among the governments of the m e m b e r states. Against that background, this chapter will set the scene for the country case studies that follow by assessing the policy relationship between the EU and the m e m b e r states. It begins with a review of the EU policy cycle, outlines the forces at work on that cycle, discusses the critical issue of implementation, and then assesses the division of policy responsibilities between the EU and the m e m b e r states. It concludes that there are no clear answers to the question of how much p o w e r the EU and the m e m b e r states have relative to each other, and still no consensus regarding the most effective division of policy tasks.

The European Union Policy Cycle Writing about the policy process in the United States, Guy Peters argues that "American government has a number of structures but no real organization, f o r the f u n d a m e n t a l characteristic of these structures is the absence of e f f e c t i v e coordination and c o n t r o l . " He notes that the absence of central control was intentional given the concern of the framers of the Constitution about the potential for tyranny of a powerful central executive, and about the control of the central government over the states. 3 Similar arguments can be m a d e about the EU. There are institutions, structures and processes, but overall organization is loose,

Policy Performance in the EU

9

changeable and occasionally lacking, in large part because of the ubiquitous concerns among the governments of the member states with loss of sovereignty. A brief summary of the policy cycle in the EU would read as follows: • The European Council sets the broad agenda. • The European Commission fills in many of the details of that agenda and develops proposals for new laws and policies. • The European Parliament and the Council of Ministers discuss and amend Commission proposals, the Council making the final decisions on which laws to adopt and which policies to pursue. • The Commission oversees implementation through the member states. • The Court of Justice interprets and adjudicates. As with all systems of administration, however, the simple outline overlooks the many nuances, details, political realities, and informalities that often color the manner in which government functions. There are many different ways of approaching the study of public policy, but the most common is to describe it in terms of a cycle. Reduced to its key elements, the EU policy cycle, and the key players in that cycle, can be expressed as follows. Problem Recognition and Agenda Setting All governments are faced with problems that demand resolution. Before a policy choice can be made, there must be political agreement on the definition of a "problem," and a decision must be made to add that problem to the list of policy concerns that are considered part of the remit of government. In a democracy, the development of the policy agenda is normally driven by a combination of the individual preferences and priorities of elected officials and their advisers, the struggles for power among political institutions, and the combined pressures of public opinion and media attention. For its part, the EU agenda is driven largely by the European Council, which outlines broad policy goals and often sparks new policy initiatives, and the European Commission, which develops proposals for new laws and policies. However, the pressures and influences that lead to such initiatives come f r o m many different sources: public opinion, treaty obligations, recommendations from consultative committees, personal initiatives of individual leaders, tension among member states, the need to harmonize laws, international treaty requirements, discussion

Policy Performance in the EU

10

papers, specialist reports, and c h a n g e s in the outside world. P a r l i a m e n t m a y put p r e s s u r e on the C o m m i s s i o n to d e v e l o p policies in new areas, interest g r o u p s or c o r p o r a t i o n s m a y try to i n f l u e n c e the C o m m i s s i o n stance on a particular p r o b l e m , and a j u d g m e n t by the Court of Justice m a y have e f f e c t s on the d e v e l o p m e n t of policy. T h e r e are at least three i m p o r t a n t d i f f e r e n c e s b e t w e e n a g e n d a setting at the national and at the E u r o p e a n level: •

•

•

Elected leaders at the national level often add issues to the policy a g e n d a in r e s p o n s e to public and m e d i a opinion. At the EU level, h o w e v e r , there really is no E u r o p e a n " p u b l i c " in the sense that t h e r e is a large b o d y of c i t i z e n s d e m a n d i n g c h a n g e at the E u r o p e a n level. T h u s policy is heavily driven by p r e s s u r e s internal to the p r o c e s s of E u r o p e a n i n t e g r a t i o n , and by leaders rather than by citizens. T h e E U p o l i c y p r o c e s s is p u l l e d in d i f f e r e n t d i r e c t i o n s by the o f t e n c o m p e t i n g m o t i v e s and a g e n d a s of the m a j o r institutions. W h i l e the C o m m i s s i o n and the Court of Justice take a s u p r a n a tional a p p r o a c h to a g e n d a setting, for e x a m p l e , P a r l i a m e n t ' s c h o i c e s are o f t e n driven by its desire to exert itself and d e v e l o p an identity. M e a n w h i l e , the E u r o p e a n C o u n c i l and the C o u n c i l of M i n i s t e r s r e p r e s e n t the interests of the g o v e r n m e n t s of the m e m b e r states. T h e c o m p l e x i t y and variety of the n e e d s and priorities of the m e m b e r states m a k e it m o r e d i f f i c u l t to i d e n t i f y p a n - E u r o p e a n p r o b l e m s and to tease out the c o m m o n causes of such p r o b l e m s , to build political support f o r a response, or to anticipate the potential e f f e c t s of policy alternatives. T h i s is particularly true in regard to policy issues on which there is less of a E u r o p e a n c o n s e n s u s , s u c h as f o r e i g n policy, w h e r e the m e m b e r states o f t e n bring d i f f e r e n t values and priorities to bear.

Policy Formulation O n c e a p r o b l e m or a need has b e e n r e c o g n i z e d , a r e s p o n s e m u s t be f o r m u l a t e d . In the case of the E U , this usually involves p u b l i s h i n g disc u s s i o n p a p e r s , d r a f t i n g w o r k p r o g r a m s or action p r o g r a m s , m a k i n g public a n n o u n c e m e n t s , or d e v e l o p i n g proposals f o r new laws and new b u d g e t a r y allocations. W h i c h e v e r r e s p o n s e is c h o s e n , it m i g h t b e reas o n a b l e to e x p e c t that s o m e k i n d of m e t h o d i c a l a n d r a t i o n a l p o l i c y analysis w o u l d be c o n d u c t e d in w h i c h the c a u s e s and d i m e n s i o n s of a

Policy Performance in the EU

II

p r o b l e m w e r e studied and all the o p t i o n s a n d their r e l a t i v e costs and b e n e f i t s w e r e c o n s i d e r e d b e f o r e t a k i n g action. H o w e v e r , this rarely h a p p e n s in practice, b e c a u s e the n u m b e r of d e p e n d e n t and independent variables i n v o l v e d c a u s e s m o s t E U policy to be d e s i g n e d and applied incrementally, opportunistically, intuitively, or in response to e m e r g e n cies or c h a n g e s in public opinion. In national systems of g o v e r n m e n t , policy is usually f o r m u l a t e d by the e x e c u t i v e , the legislature, or g o v e r n m e n t d e p a r t m e n t s . In the case of the E U , the m a j o r f o c u s of policy f o r m u l a t i o n is the C o m m i s s i o n , which has a pivotal position as a broker of interests and a f o r u m for the e x c h a n g e of policy ideas. 4 H o w e v e r , its p r o p o s a l s are routinely a m e n d e d as a result of lobbying by interest groups or national governm e n t s , as a r e s p o n s e to internal and e x t e r n a l e m e r g e n c i e s and crises, and as they are d i s c u s s e d by c o n s u l t a t i v e c o m m i t t e e s , the C o u n c i l of Ministers and the E u r o p e a n Parliament.

Legitimation Policies c a n n o t work in a d e m o c r a c y unless there is a belief by the citizens a f f e c t e d by these policies that they h a v e been d e v e l o p e d by officials and institutions with a legitimate c l a i m to being able to m a k e aut h o r i t a t i v e d e c i s i o n s f o r society. In political s y s t e m s f o u n d e d on the rule of law, there are usually f e w questions about the authority of gove r n m e n t to m a k e and implement policies. H o w e v e r , the reach of the authority of E U i n s t i t u t i o n s has long been a s u b j e c t of d e b a t e . Eurobarometer polls find that while public support for the idea of E u r o p e a n integration is g r o w i n g , it is far f r o m enthusiastic. Barely half the population of the 15 m e m b e r states believes that m e m b e r s h i p of the E U is a " g o o d t h i n g , " while only 3 2 - 4 8 percent of the p o p u l a t i o n c o n c u r s in t h r e e of the b i g g e s t m e m b e r states: B r i t a i n , F r a n c e , and G e r m a n y . 5 T h e r e is m a j o r i t y s u p p o r t ( 6 5 - 8 0 percent in f a v o r ) for E U action on issues such as u n e m p l o y m e n t and poverty, e n v i r o n m e n t a l m a n a g e m e n t , c o n s u m e r p r o t e c t i o n , and c o m m o n f o r e i g n and d e f e n s e p o l i c i e s , but there are m i x e d v i e w s on questions such as the single currency. Since the m e m b e r states h a v e signed treaties of m e m b e r s h i p , and h a v e c o m m i t t e d t h e m s e l v e s to m e e t i n g the t e r m s and r e q u i r e m e n t s of b e i n g part of the E u r o p e a n U n i o n , its s t a n d i n g in i n t e r n a t i o n a l law is rarely q u e s t i o n e d . H o w e v e r , g i v e n the l i n g e r i n g d o u b t s a b o u t the legitimate reach of E U law and policy, question m a r k s continue to hang o v e r the b o u n d a r i e s of the responsibilities of E U institutions relative to t h o s e of the m e m b e r states.

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Policy Performance in the EU

Adoption Once a new law or policy has been proposed by the European C o m mission, it must formally be adopted before it goes into effect. Strictly speaking, the Council of Ministers (representing the interests of the member states) has the final say over adoption, but decisions are in fact m a d e as the result of a complex interplay involving Parliament, the C o m m i t t e e of P e r m a n e n t Representatives ( C O R E P E R ) , the Council, the Commission, and the member states, with the Court of Justice providing interpretation when necessary. Changes introduced by the Single European Act and by the Maastricht and Amsterdam Treaties have provided new powers to Parliament, which, in most areas, has now become a "co-legislature" with the Council of Ministers. C O R E P E R is often left out of discussions about the policymaking process of the EU, yet it is arguably the most important link in the chain. Consisting of groups of specialists f r o m the permanent representations in Brussels of the m e m b e r states, it vets all proposals from the C o m m i s s i o n , and tends to make most of the changes and reach most of the agreements that are finally adopted in the name of the Council of Ministers. Except on the most controversial or complex issues, it is usually left to the ministers to confirm the agreements already made by C O R E P E R .

Implementation Policies remain only words until they are put into effect and begin to result in changes, a process normally that is undertaken by bureaucracies. However, the bureaucracy of the EU, the C o m m i s s i o n , is small and has no powers directly to enforce European law. It must work instead to ensure implementation through the bureaucracies of the member states. Limits on Commission resources and staff mean it must rely to some extent on reports from m e m b e r states, individuals, and interest groups in helping to ensure implementation. The relationship between the EU and the m e m b e r states on this crucial step in the policy cycle is discussed in more depth later in this chapter.

Evaluation The final stage in the policy cycle is to determine whether or not a law or policy has worked. This is difficult unless specific goals were set and unless national bureaucrats can be trusted to report accurately to

Policy Performance in the EU

13

the Commission on the results of policies. In many cases it is almost impossible to know which actions resulted in which consequences or whether the results are being accurately reported. This is particularly true in the case of the EU, where it is difficult always to distinguish the effects of national and local government actions from those of EU law. Nonetheless, evaluation in the EU is conducted by a combination of the Commission, the Council of Ministers, the European Council, the European Parliament, and reports from member states, interest groups, and individuals.

T h e Nature of EU Policymaking The fragmentation of the European institutions—coupled with the caution with which the member states have approached the process of integration—has created a policy process that is driven largely by compromise, opportunism, and unpredictable political pressures. The balance of power among EU institutions and member states changes constantly as the goals and reach of European integration change, and the most telling pressures on the policy process are those that are informal and unstructured rather than those that are formal and structured. Compromise and Bargaining In democracies, all politics is a matter of compromise. The need for compromise is magnified in the EU, where the balance of power is still not clearly defined, and where the "government" is effectively a coalition of the representatives of 15 member states. The compromises are driven by the competing needs not just of national governments, but of local governments within the member states, of local, national and trans-European interest groups, and of regional disparities that make the needs of poorer states such as Ireland, Portugal, and Greece different from those of wealthier states such as Germany, Denmark, and the Netherlands. Games and Competition Politics everywhere is driven by struggles for power and influence, but, once again, such struggles are magnified in the EU by the extent to which member states and EU institutions compete with each other. Peters describes three sets of interconnected "games" being played out in

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Policy Performance in the EU

the EU: a national game among m e m b e r states, which are trying to extract as much as possible from the EU while giving up as little as possible; a game played out a m o n g EU institutions, which are trying to win more p o w e r relative to each other; and a bureaucratic g a m e in which the directorates-general in the Commission are developing their o w n organizational cultures and competing for policy space. 6 The institutions and the m e m b e r states have different definitions of the Eur o p e a n interest, and they often sacrifice that interest on the altar of their own more narrow political and economic goals.

Subsidiarity While this concept is at the core of the character of the EU, its precise meaning and implications are open to debate. An attempt was made in the Maastricht Treaty to define the powers of the EU by focusing on subsidiarity and insisting that the EU should act only if "the objectives of the proposed action cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale or effects of proposed action, be better achieved by the Community" (Article 5). However, there is no agreement about what kinds of actions are better undertaken at one level or the other, and no formal agreement about how responsibilities should be shared among the member states and the EU institutions. Table 2.1 is an attempt to list the balance of policy responsibilities, but the balance is constantly changing, both within and among policy areas.

Intergovernmentalism Versus Supranationalism The EU is characterized by a split personality in that some of its institutions (notably the Council of Ministers) are intergovernmental in the sense that they are the meeting place for the interests of the m e m b e r states, while others (notably the Commission) are driven more by the supranational concerns of the EU as a whole. This tension pulls the EU in two different directions, u n d e r m i n i n g attempts to provide it with consistency, and to provide its policies with the same underlying objectives and principles.

Informal Politics Studies of politics and policy usually concentrate on the formal aspects of administration, yet every system of government consists of a combination of formal rules and informal procedures, both of which are important to understanding the nature of government. Hence a real understanding of

Policy Performance

Table 2.1

in the EU

15

Balance of Policy Interests Between t h e E U and the M e m b e r States

European Union Trade policy Agriculture Fisheries Competition Environment Immigration Consumer policy Cross-border crime European culture Cross-border banking Working conditions EU transport networks Customs issues

Shared Transportation Development cooperation Monetary policy Employment Culture Regional policy Energy Rural development Vocational training Small & medium enterprises Information networks Export promotion

Member States Foreign policy Defense policy Education Policing Criminal justice Tax policy Citizenship Health care Postal services

policymaking in the United States cannot be achieved without looking at the role of legislative assistants, presidential advisers, interest groups, and the media. Similarly, it is important to appreciate that—in the EU case—the Commission will often liaise with interest groups, experts, representatives of industry, and representatives of national government ministries and local government. Each directorate-general has become used to working with the people and organizations that can provide it with the information most relevant to its work, and that are most likely to be involved in the implementation of EU law. There is nothing in the treaties to say that the process should be so; these informal processes have evolved out of need and circumstances.

The Democratic Deficit

Most liberal democracies have high levels of public accountability, and public opinion plays a vital role in policymaking. The same is not true of the EU, however, where secrecy surrounds much of the work of the Commission and the Council of Ministers, and where few policymakers are directly or even indirectly accountable to voters. While it is true that most legislative and policy proposals are subject to lengthy debates involving many interested parties, the average citizen has little input into the process of adoption, and key meetings both within the Commission and the Council of Ministers are closed to the public. While public opinion has played an increasingly important role in EU policymaking with the growth of lobbying, direct elections to Parliament, the creation

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Policy Performance in the EU

of the European ombudsman, and the Commission's efforts to promote transparency, the links between policymakers and citizens are still poorly developed. The result is that policymaking in the EU remains largely an elitist, top-down phenomenon. Incrementalism Because of concerns over the loss of national sovereignty, the absence of a consensus about the priorities of European integration, and the need for constant compromise, EU policymaking tends to be slow, cautious, and incremental. The process sometimes slows to the point where the critics of integration complain about " E u r o s c l e r o s i s , " but this is probably unfair. While the C o m m u n i t y had many p r o b l e m s in the 1970s, and there have been many teething troubles in the process of integration, breakthroughs have often been made in that process, such as progress on the euro, convergence on foreign policy, and agreement on the need for enlargement. All these initiatives emerged incrementally from a combination of opportunity and need. Spillover This concept is usually identified with neofunctionalist theories of regional integration, and suggests that as organizations such as the EU b e c o m e involved in one area of policy, they will find that political, economic, and/or social forces will compel them to become involved in additional areas of policy. This has been particularly true of the single market p r o g r a m , where e f f o r t s to bring down barriers to trade have found EU institutions making policy in areas that were not anticipated by the authors of the Treaty of Rome, such as consumer protection and the environment. Critics of the EU (like critics of the U.S. federal government) charge that it has tried to become involved in too many policy areas; however, it has often had little choice—the creation of new programs has revealed or created new problems, which in turn have led to demands for additional supporting programs.

Policy Implementation: T h e E U and the Member States Arguably the most important step in the European policy cycle is implementation, the point at which the goals and objectives of the EU

Policy Performance in the E U

17

result, or fail to result, in real change for Europeans. As noted above, policies remain nothing but words until put into effect. Unfortunately, implementation has so far proved a relatively weak part of the EU policy process, and several structural problems have made it difficult always to be sure about the extent to which EU law and policy really make a difference in the lives of Europeans. If measured by the production of new laws, policies, white papers, green papers, and action plans, there is no question that the EU institutions have been fertile parents; the flow of paper from Brussels often seems almost endless. However, productivity means little unless policy intent is translated into practical action, and unless EU law is transposed into—or implemented at the level o f — n a t i o n a l regulatory systems. Here the record has been much less impressive. Responsibility for implementation rests with the member states, whose performance is monitored, under Article 211 (formerly 155), by the Commission. The varied levels of transposal and e n f o r c e m e n t of EU law have been a matter of growing concern for EU institutions, within which there has been an expanding debate on how to improve application. Implementation is a three-step process. 7 First, European law must be transposed or incorporated into national law. Transposal is not simply a question of ensuring that every element of a law is carried out, but also involves making sure that the national legislative and administrative f r a m e w o r k is suitable for the attainment of the goals of the law. Regulations offer fewer problems than directives, because they are directly applicable and so do not need to be transposed, although they may occasionally need supplementary national law. Since directives are not quickly applicable in the member states, additional implementing measures need to be agreed by each of the national governments, within a time f r a m e that is usually built into the directive. It is not e n o u g h for a national government to send out a circular announcing that it has adopted a directive, or to change the administrative structure of its responsible government agencies—a national law or regulation must be passed, it must be published in an official government document so that everyone subject to the law is familiar with its content and goals, and the Commission must be notified of the action each m e m b e r state plans to take. Once a directive is adopted, the Commission sends a formal letter to each m e m b e r state reminding them of the deadline for transposal into national law. Three months before the deadline, a second letter is sent out to the m e m b e r states that have not notified the Commission of their plans for transposal. M a n y problems and outstanding questions

18

Policy Performance

in the EU

are resolved at this stage, mainly through informal discussions between the Commission and officials of the member states, but if the deadline expires and a m e m b e r state has still not provided the Commission with this information, the C o m m i s s i o n can bring infringement proceedings against the m e m b e r state under Article 226 (formerly 169). The C o m m i s s i o n begins by sending the m e m b e r state a "letter of formal notice," outlining the grounds of the suspected i n f r i n g e m e n t , and giving the m e m b e r state two months to respond (although the deadline is usually longer in practice). If the m e m b e r state does not respond, or the Commission is dissatisfied, then the C o m m i s s i o n — u s u ally after a substantial e x c h a n g e of c o r r e s p o n d e n c e — d e l i v e r s a reasoned opinion in which it outlines its position on the legal issue involved. Reasoned opinions are delivered for failure to notify the measures taken to incorporate directives into national law, for nonconformity of the measures taken, for infringement of the treaties or regulations, or for the incorrect application of directives. The sources of problems with transposal are many and varied. The Commission itself blames nonconformity between national and EU law on the existence of two or more legal systems in several m e m b e r states (notably those with a federal structure), and the difficulties that arise in amending national laws because of the effect they have on provisions in a variety of other areas, such as agriculture, transport, and industry. 8 In their study of environmental policy, Collins and Earnshaw note a related set of p r o b l e m s . 9 First, the range and complexity of existing national laws can make it difficult to adapt them to the requirements of EU law. Second, concepts contained in many directives may be defined differently in different m e m b e r states. Third, national and subnational administrative systems vary by m e m b e r state. For example, Germany is a federation where the national and Länder governments must cooperate on transposal and i m p l e m e n t a t i o n , while regional g o v e r n m e n t s have more a u t o n o m y in Italy, B e l g i u m , and Spain than they do in Britain or France. Fourth, differences in "legislative culture" will mean some m e m b e r states take longer than others to agree to new national laws. Finally, m e m b e r states m a y occasionally decide that it is politically expedient for some reason to drag their feet on transposal. Despite such difficulties, most outstanding problems are resolved f o l l o w i n g the issuance of reasoned opinions, but if the m e m b e r state still does not comply within the period set by the Commission, the matter can be referred to the Court of Justice. Since 1997, the Commission has been using its powers under amendments to Article 228 (formerly 171), through which it can refer a case to the Court of Justice with a request that a financial penalty be imposed.

Policy Performance in the EU

19

The second step in the process of implementation involves putting a law into practice and achieving measurable results. In order for national and local authorities to comply with the content of EU law, relevant authorities may have to be strengthened, plans developed, and investments made. EU laws contain requirements that m e m b e r states report back to the Commission regularly on the measures taken, but the record on this varies from one state to another, and the reports rarely say anything about how well or how badly the state is doing in terms of meeting the goals of the law. T h e final step involves monitoring the application and effect of each law. It is the member states that, under Article 10 (previously 5), must take "all appropriate measures, whether general or particular, to ensure fulfillment of the obligations arising out of this Treaty or resulting from action taken by the institutions of the Community." However, it is the C o m m i s s i o n that must encourage and sometimes cajole them. Unfortunately, Article 226 powers can be directed only at national governments, not at any of the other bodies and organizations involved in the application of EU law. The result is that the Commission must rely heavily on the complaints system introduced in the 1960s to measure progress on completion of the c o m m o n market. This allows a n y o n e — a government, an elected official, an interest group, or an individual—to lodge a complaint with the Commission, or to petition the European Parliament if they suspect that a member state is not meeting its obligations under European law. The C o m m i s s i o n has also had to become an " e n f o r c e m e n t entrepreneur," and to engage the help of national and local governments, interest groups, the European Parliament, and even European citizens in supervising the process by which member states implement that law. The most important relationship in this regard is that between the Commission and the national government agencies responsible for executing EU laws. The Commission occasionally convenes meetings of national representatives and experts to monitor progress, and also carries out its own investigations using its contacts in national government agencies. Most of the time, however, the C o m m i s s i o n must rely on other sources, including the following: • The governments of m e m b e r states themselves will occasionally report on other governments that are not being as aggressive as themselves in implementing law. • Interest groups, the media and private citizens are an important source of information. Unfortunately, the C o m m i s s i o n notes that many complaints f r o m these sectors suffer f r o m a lack of

Policy Performance in the EU

20

information or from misunderstandings about mainly procedural matters, and that such complaints can often be dealt with more efficiently within the m e m b e r states. 1 0 • Parliament has had a long history of being interested in implementation, dating back to a 1983 resolution requesting that the C o m m i s s i o n submit annual reports on the failure of m e m b e r states fully to implement Community legislation. This led to the submission of the first Annual Report on Monitoring Application of Community Law in 1984, a document which has since become the standard source on the matter. Individual MEPs also raise complaints through oral or written questions. •

A new avenue for complaint was created with the establishment in 1995 under the terms of Maastricht of the office of the European o m b u d s m a n , who has the power to conduct inquiries into charges of bad administration against Community institutions (except the Court of Justice and Court of First Instance).

U s e f u l though they may be as a means of drawing attention to problems that the Commission might otherwise have missed, c o m plaints are not an entirely reliable measure, and the system suffers at least four drawbacks. First, it is ad hoc and unstructured. Second, many of the problems drawn to the attention of the Commission are found not to be infringements because there is no relevant legal base. 11 Third, the number of complaints is influenced by the political culture of different m e m b e r states, and by their varied relationships with the EU. The fact that a large number of complaints is registered in a particular m e m b e r state may reflect less a problem with implementation than a high level of interest in the effects of EU law. Finally, complaints are difficult to prioritize—they may not necessarily be made about the most serious or the most urgent cases.

T h e Balance of E U Policy Responsibilities The priorities of European integration to date have been mainly economic. What is now the European Union was born in the early 1950s with a limited experiment in cooperation on coal and steel, broadened in the 1960s to become a customs union, was driven during the 1970s by attempts to build exchange-rate stability, was given more focus in the late 1980s with the single market program, and is now involved with the conversion to the euro. The EU made progress in other policy

Policy Performance in the EU

21

areas along the way (such as agriculture, the environment, and development aid to poorer countries), but it has only been in the last 10 to 15 years that the EU policy agenda has begun to m o v e substantially outside the e c o n o m i c sphere. M u c h of the c h a n g e in thinking can be ascribed to a sense in the 1980s that something needed to be done to reverse the C o m m u n i t y ' s relative e c o n o m i c decline, and to exploit more fully the potential of its own market, which had almost as many consumers as the United States and Japan combined. This view produced three landmark initiatives that transformed the character of European integration. Concerned about the slowness with which the barriers to the free m o v e m e n t of people, goods, money, and services were being removed, several countries signed the Schengen A g r e e m e n t in 1985, which made arrangements for a " f a s t - t r a c k " removal of internal border controls, and came into force in 1995. At the same time, the signature of the Single European Act in 1987 established the goal of achieving a unified single market by December 1992. Finally, it was recognized that a true single market could not exist without a single currency, hence a plan on e c o n o m i c and monetary union was developed in 1989, was confirmed in 1993 when the Maastricht Treaty came into force, and led to 11 m e m b e r states adopting the euro in January 1999. Where does this leave the EU now in terms of its policy responsibilities? In unitary systems of government such as those in Japan and most Western E u r o p e a n states, the question of the balance of policy powers rarely arises—the national g o v e r n m e n t clearly dominates, while local government tends to play a supporting role in implementing policies on issues such as education and health care. In federal systems of government, however, powers and responsibilities are divided among national and local units of administration. In the United States, for example, the federal government has primary responsibility for defense and foreign policy, monetary policy, interstate c o m m e r c e , international trade, and social security. State and local g o v e r n m e n t s for their part have the majority of responsibility for education, highways, and law e n f o r c e m e n t , while the three levels of g o v e r n m e n t share responsibility on issues such as w e l f a r e , health, and transportation. No level has exclusive powers in most areas; instead, there are overlapping circles of responsibility, with cooperation being greater in some areas than in others. While the division of p o w e r s in the United States has reached a strong state of equilibrium, the division of p o w e r s in the EU changes constantly as the process of integration sees responsibilities shifting

22

Policy Performance in the EU

away f r o m the m e m b e r states and toward the EU institutions. This makes it difficult to be sure about the balance of policy responsibilities, so when Jeremy Richardson concludes that "it is beyond dispute" that as much as 60 percent of "what used to be regarded as purely domestic policy-making" takes place at the EU level, that is no more than an educated guess, and a contentious one at that. 12 EU policy has been the focus of remarkably few studies to date, and where it has been studied, little attention has so far been paid to trying to understand exactly what the EU does and does not do (or what it does best and what it does worst). Hence anyone seeking to determine the relative responsibilities of the EU and the m e m b e r states must—for the time being— look in four main places. First, constitutions will o f t e n spell out the specific p o w e r s of the different levels of government. T h e U.S. Constitution is clear in Section 8 when it lists the powers of Congress, which include the power to regulate c o m m e r c e with other countries, to coin money, and to raise and support armies, and in Section 10 when it lists several p o w e r s denied to the states, including making treaties. However, it leaves many questions unanswered about responsibilities in policy areas that developed after the Constitution was written, and which have not always been clarified by the Tenth Amendment, which reserves to the states all powers not delegated to the federal government by the Constitution, or prohibited by the states. As noted earlier, the EU lacks a "constitution" as such, but revisions to the treaties have given it a large measure of responsibility over economic policy, agriculture, the movement of workers, transport, commercial policy, culture, public health, consumer protection, research, the environment, and development cooperation. However, it is unclear from the treaties just how those responsibilities are shared with the governments of the member states. On environmental policy, for example, the relevant sections of the treaties provide more of an outline of the underlying goals and principles of EU policy than an exposition of the division of tasks. As it happens, the EU has been most active in dealing with such issues as air and water quality, waste management, and the control of chemicals, but none of these are specifically mentioned in the treaties. A second clue comes f r o m administrative budgets, but here again the story is incomplete. A c o m p a r i s o n of federal and state b u d g e t s in the United States reflects the d o m i n a t i n g role of the federal g o v e r n ment in matters relating to Social Security and Medicare (32 percent of spending in 1997), defense (15 percent), welfare (13 percent), and health (8 percent), and the p o w e r of state and local g o v e r n m e n t over

Policy Performance in the EU

23

education (34 percent of state and local spending), welfare (12 percent), and health (8 percent). However, these general spending priorities say little about the many more specific policy areas in which the different levels of government may be involved, such as agriculture, the alleviation of poverty, gun control, or civil rights issues. Furthermore, there is no direct link between spending and the amount of time and effort expended. Environmental management may be a m a j o r priority of a government, but most of the costs of, for example, reducing emissions from vehicles and factories will be borne by manufacturers, industry, and the taxpayer. An analysis of the EU budget shows clearly that agriculture has been a major priority of the process of integration. In 1998, nearly 45 percent of the EU budget went to the C o m m o n Agricultural Policy, although this represented a significant reduction f r o m previous years. Nearly 37 percent of EU spending went on the different structural funds, emphasizing the extent to which the EU has placed a priority on reducing economic disparities. Barely 6 percent went to remaining internal policies, and about the same amount to external policies. When it c o m e s to spending, at least, the vast majority of the E U ' s attention appears to be focused on just two issues. However, a broader analysis of EU policy activities shows that this is not true. The third indicator of policy priorities comes from a subject analysis of the laws passed by a government. These provide more detailed information on the specific issues and problems to which the different levels of administration apply themselves. To a large extent, the content of laws passed by the U.S. C o n g r e s s and by state legislatures in the United States reflects the balance of interests suggested by the U.S. Constitution and by federal, state, and local budgets: the federal government is mainly interested in matters relating to d e f e n s e , international trade, social security, welfare, and health, while state and local governments focus mainly on education, law enforcement, and welfare. A superficial study of E U R - L e x , the listing of EU laws in force, provides few surprises—the EU seems to have been most active in the kinds of areas listed in the treaties as being priorities of European integration; these include laws relating to the customs union, agriculture, fisheries, transport, energy, economic and monetary policy, and regional matters. However, a more thorough study reveals that the EU has only been involved in very specific elements of each of these policy areas, and has rarely developed broad-ranging policies. Generally, most laws have so far been prompted by the harmonization of member-state laws arising out of the need to develop the single market. In that sense, they

24

Policy Performance

in the

EU

have been aimed mainly at removing the physical, fiscal, and technical barriers to free trade in support of the broad goals of integration. The fourth indicator of policy priorities can be found in the portfolios of cabinets, and in the size and reach of government departments. In the case of the United States, an analysis of the federal cabinet will reveal which government departments are considered sufficiently important to have been given cabinet status, and, within the cabinet, which positions are regarded as senior and junior. The four senior positions are those held by the secretaries of state, defense, and the treasury, and by the attorney general, while the more junior (and newer) positions include the secretaries of transportation, energy, education, and veterans affairs. It is in the f o r m e r areas that the federal government is most active, and in the latter that it is least active. For the EU, the functional equivalent of a cabinet is the College of Commissioners, and the equivalent of government departments can be found in the directorates-general (DGs) of the Commission. A survey of the portfolios of commissioners and D G s — a n d of the budgets and staff numbers of D G s — s a y s much about the policy interests of the EU, and further analysis provides more detail on the relative levels of importance accorded the different policy areas. Reflecting Commission priorities, the senior portfolios are those relating to trade policy, industrial affairs, external relations, competition, and agriculture, while the junior portfolios include those dealing with the African, Caribbean and Pacific States (ACP), science and education, consumer policy, and energy. The power of the portfolios—and the reach of the EU over p o l i c y — i s reflected in the DGs, where some (notably those dealing with external relations, e c o n o m i c and financial affairs, competition, and agriculture) are well-established and powerful enough to override the wishes and objections of other DGs during the development of proposals. 1 3 The ongoing tensions between supranationalism and intergovernmentalism have ensured that no policy areas have yet become the exclusive domain of the EU. Similarly, the contradictory attitudes of different m e m b e r states to the process of integration has meant that different states have retained different levels of authority over different policy areas. Thus all we can say with any certainty is that the process of integration has brought the EU to a point today where responsibilities are shared, but the focus of responsibility for some policy issues lies with the EU, while the focus for others rests mainly with the m e m ber states, but to differing degrees (see Table 2.1).

Policy Performance

in the EU

25

G e n e r a l l y s p e a k i n g , the f o c u s of p o l i c y r e s p o n s i b i l i t y lies with the EU on e c o n o m i c issues, and it is n o w f a i r to say thai e c o n o m i c policy in the E U is d r i v e n or i n f l u e n c e d m o r e by the w o r k of the E U institutions t h a n by the i n i t i a t i v e s of the g o v e r n m e n t s of the m e m b e r states. " E c o n o m i c p o l i c y " m e a n s m o r e than the single m a r k e t , and c o n s i s t s of a variety of i s s u e s that are c e n t r a l to t h e single m a r k e t , r e l a t e d to t h e need to e n s u r e f r e e trade a m o n g the m e m b e r states, and r e l a t e d to the need f o r the m e m b e r states to w o r k in t a n d e m in their d e a l i n g s with external t r a d i n g p a r t n e r s . T h e c o m b i n a t i o n of the c u s t o m s union and the single m a r k e t has led to i n c r e a s e d E U r e s p o n s i b i l i t y f o r issues such as e n v i r o n m e n t a l p r o t e c t i o n , c o n s u m e r s a f e t y , the d e v e l o p m e n t of E u r o p e a n t r a n s p o r t and e n e r g y n e t w o r k s , l a b o r issues, c o m p e t i t i o n , f i n a n cial s e r v i c e s and b a n k i n g , and t e l e c o m m u n i c a t i o n s .

Conclusions This chapter has been an attempt to pin d o w n the nature of the policy relationship b e t w e e n the institutions and the m e m b e r states of the European Union. It has argued that the relative input of the t w o sides into the policy process is c o m p l e x , changeable, and o f t e n a m b i g u o u s . It has also argued that the key point of contact b e t w e e n the t w o s i d e s — p o l i c y implem e n t a t i o n — i s w e a k e n e d by several structural p r o b l e m s that m a k e it difficult a l w a y s to be sure about the e f f e c t s of EU law and policy. Finally, it has c o n c l u d e d that the division of policy responsibilities b e t w e e n the EU and the m e m b e r states r e m a i n s unclear. W h i l e the balance of p o w e r seems to lie with the E U in some policy areas and with the m e m b e r states in others, there are significant d i f f e r e n c e s in the balance of responsibilities on d i f f e r e n t issues within these areas. F u r t h e r m o r e , there are few, if any, f o r m a l rules regarding how these responsibilities should be divided. It h a s b e e n a r g u e d e l s e w h e r e that t h e r e are only t h r e e p o s s i b l e o u t c o m e s to the p r o c e s s of E u r o p e a n i n t e g r a t i o n : 1 4 a f e d e r a l E u r o p e , a E u r o p e of S t a t e s in w h i c h t h e m e m b e r s t a t e s p l a y t h e m a i n role, a n d a m u l t i s p e e d E u r o p e in w h i c h l e v e l s of i n t e g r a t i o n v a r y f r o m o n e i s s u e to a n o t h e r , and f r o m o n e m e m b e r state to another. T h e r e is little a g r e e m e n t to b e f o u n d a n y w h e r e ( a m o n g p o l i t i c i a n s , t h e p u b l i c , o r a c a d e m i c s ) a b o u t w h i c h of t h e s e three a p p l i e s to the E U today. H o w e v e r , the c h a p t e r s that f o l l o w will e x a m i n e t h e r e l a t i o n s h i p b e t w e e n the E U a n d e a c h of t h e m e m b e r states, a n d cast m o r e light on the n a t u r e of that rel a t i o n s h i p , and on the b a l a n c e of p o w e r b e t w e e n the t w o sides.

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in the EU

Notes 1. HelenWallace, '"Politics and Policy in the EU: The Challenge of G o v e r n a n c e , " p. 11. 2. J e r e m y R i c h a r d s o n , " P o l i c y - M a k i n g in the EU: Interests, Ideas and G a r b a g e Cans of Primeval S o u p , " p. 20. 3. B. Guy Peters, American Public Policy: Promise and Performance, p. 21. 4. Sonia Mazey and Jeremy Richardson, "The Commission and the Lobby." 5. Eurobarometer 48 (Autumn 1997). 6. Guy Peters, "Bureaucratic Politics and the Institutions of the European C o m m u n i t y , " pp. 106-107. 7. Ken Collins and David Earnshaw, "The Implementation and E n f o r c e ment of European C o m m u n i t y Environmental Legislation," pp. 2 1 5 - 2 1 6 . 8. E u r o p e a n C o m m i s s i o n , " F i f t e e n t h Annual Report on M o n i t o r i n g the Application of C o m m u n i t y L a w — 1 9 9 7 , " pp. 5 1 - 5 2 . 9. Collins and Earnshaw, " T h e Implementation and Enforcement," p. 217. 10. European Commission, Implementing Community Environmental Law, p. 10. 11. European C o m m i s s i o n , "Fifteenth Annual Report," p. 49. 12. Jeremy Richardson, European Union: Power and Policy-Making, p. 3. 13. David Spence, "Structure, Functions and Procedures in the C o m m i s sion," p. 97. 14. Svein Andersen and Kjell Eliassen, " T h e EC as a New Political Syst e m , " p. 7.

Part I

EARLY U N I O N MEMBERS

3

France: Europeanism, Nationalism, and the Planned Economy John S. Ambler & M. Shawn Reichert

F r a n c e and the Uniting of Europe France, more than any other country, has played a critical role in the uniting of Europe. The Benelux countries, while often more committed to unification than France, have, combined, less than half of her population. The Federal Republic of Germany became an essential partner in the crucial Paris-Bonn axis of European unification; yet, after two world wars in which Germany attempted to unify Europe on her own terms by military aggression, she was ill-equipped to take the lead in building a new Europe. Italy, the last of the original six, was handicapped by unstable governments and by an economy that lagged well behind the industrialized powers of Europe until the economic boom of the 1960s and 1970s. If the French have been critical to European integration, they also have been ambivalent about its proper goals, ever since its beginnings in the early postwar period. A few idealists—such as Jean Monnet, head of the French planning agency, inventor of the European Coal and Steel Community, and founder of the Association for a United States of Europe—envisioned the ultimate goal as a true federal union. Others, such as Charles de Gaulle, preferred a "Europe of the States," in which members would enjoy the advantages of a customs union without serious loss of national sovereignty. The history of France's European policy reflects the tension between these visions. It was the French government that proposed the ambitious European Defense Community (EDC) in 1953. The goal of the EDC was the defense of Western Europe against the powerful and menacing army of the Soviet Union. Proponents of the EDC argued that only by incorporating German forces 29

30

Early Union

Members

into a c o m m o n European army, along with those of other nations, could E u r o p e safely enlist Germany in its c o m m o n defense; yet the creation of a p o w e r f u l German army, less than a decade after World War II, was viewed by E D C opponents as too dangerous. Two years later, in fall 1955, the French National Assembly allowed the European Defense Community proposal to die. Even before de Gaulle returned to power in 1958, the French were reluctant to loosen control over such an important symbol of national sovereignty as the army. The lesson of the failure of the European Defense Community was well learned by French supporters of European integration. While the European Defense Community project was dramatic and laden with national symbols, the effective model for future European integration— the European Coal and Steel Community ( E C S C ) — w a s limited in scope, technical in nature, and elitist in design and execution. The ECSC, initiated in 1950, was conceived by Jean Monnet, but formally proposed by the French minister of foreign affairs, Robert Schuman. Its immediate, explicit goal was to promote the growth of the coal and steel industries by creating a c o m m o n market for these c o m m o d i t i e s a m o n g the six m e m b e r countries. From the beginning, as shown by François Duchêne, once a personal assistant to Monnet and later his biographer, an important underlying goal was to contain or convert Germany. 1 Monnet's long-term goal was nothing less than the creation of a federal union of Europe: "One change begets another. The chain reaction has only begun. We are starting a process of continuous r e f o r m that can shape t o m o r r o w ' s world more lastingly than the principles of revolution so widespread outside the West. . .[Europe] will not be conjured up at a stroke, nor by an overall design, it will be attained by concrete achievements generating an active c o m m u n i t y of interest." 2 Monnet here describes what came to be known, in scholarly terms, as the "neofunctionalist" or "spillover" theory of European integration. 3 In order to create a genuinely open European market in coal and steel, m e m b e r countries subsequently would be required to open markets in related sectors, beginning with transportation and energy, and to harmonize policies with respect to labor, social benefits, tax structure, and so on until full economic integration was achieved. In the process, powerful interest groups would emerge to lobby for ever greater integration. M o n n e t ' s strategy worked well in the 1950s and early 1960s. T h e Coal and Steel C o m m u n i t y was j u d g e d to be e n o u g h of a success to provide the model for the European Economic C o m m u n i t y ( E E C ) in the 1957 Treaty of Rome. Shortly after the E E C came into being at the beginning of 1958, the French Fourth Republic collapsed over the issue

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31

of French control of Algeria. Charles de Gaulle agreed to save France from civil war by reestablishing civilian control over the army, but on condition that a new constitution be d r a f t e d , one providing for a strengthened presidency. Once elected president in the fall of 1958, de Gaulle proceeded to put his stamp on the creation of Europe. De Gaulle was a strong French nationalist, devoted to the defense of what he termed "une certaine idée de la France"; yet he agreed with earlier French political leaders on two of the principal advantages to the EEC. First, the e c o n o m i c growth that it was expected to produce would strengthen the French nation. Second, the inclusion of Germany would help to neutralize any f u t u r e threat f r o m a country that three times in seventy years had attacked France. For de Gaulle, there was a third critical advantage: in world politics a united Europe (preferably under French leadership) could serve as a counterweight both to the United States and to the Soviet Union. In pursuit of these goals, he f o r m e d a partnership with Chancellor Konrad Adenauer of Germany. Under de Gaulle's leadership, France negotiated the C o m m o n Agricultural Policy, which extended the C o m m o n Market to include agriculture. He twice vetoed the admission of Britain to the EEC, fearing that her close relationship with the United States would undermine European independence in world affairs. In 1965, de Gaulle provoked perhaps the greatest crisis in the history of the European Union. The immediate issue was the nature of financing for the Common Agricultural Policy. The Commission of what now was called the European Community (EC), under the vigorous presidency of Walter Hallstein, proposed to link the financing of agriculture to expansion of the powers of supranational institutions. The proposal provided that m e m b e r countries would automatically transfer to the Commission all money (less a collection charge) collected from customs duties on imports from non-EC members. In order to balance the Commission's control over the Community's "own resources," the European Parliament would be given increased power over the EC budget. De Gaulle objected vigorously to this attempt by the Commission to create an EC budget partly insulated from the direct control of national governments. In spring 1965, France insisted that the proposal be sent back to the Commission with instructions to disassociate the financing of agriculture from other proposed reforms. When the other five members refused to accept French demands by a June 30, 1965, deadline, de Gaulle ordered his country's representatives to boycott all EC meetings. Underlying de Gaulle's indignation toward the C o m m i s s i o n ' s proposal was a broader objection to some of the supranational features of

32

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Members

the Treaty of R o m e itself. In accordance with that treaty, the EC was to enter a third phase in 1966. De Gaulle explained his objections in a press conference on September 9, 1965: T h u s , in the t e r m s of the t e x t , t h e d e c i s i o n s of llie C o u n c i l of M i n i s ters of the Six w o u l d , b e g i n n i n g o n J a n u a r y 1, 1966, be t a k e n by m a j o r i t y v o t e ; in o t h e r w o r d s , F r a n c e w o u l d be p r e p a r e d to see h e r h a n d f o r c e d in a n y e c o n o m i c m a t t e r — t h e r e f o r e social a n d o f t e n e v e n p o l i t i c a l — a n d , in p a r t i c u l a r , w h a t w o u l d h a v e s e e m e d g a i n e d in t h e a g r i c u l t u r a l a r e a c o u l d be, d e s p i t e her, p l a c e d at s t a k e a g a i n at a n y m o m e n t . . . . W e see w h e r e w e c o u l d be led by s u c h a d i s p o s a l of o u r s e l v e s a n d of o u r c o n s t i t u t i o n , w h i c h s t i p u l a t e s t h a t " F r e n c h s o v e r e i g n t y b e l o n g s to the F r e n c h p e o p l e , w h i c h shall e x e r c i s e it t h r o u g h its r e p r e s e n t a t i v e s a n d by m e a n s of r e f e r e n d u m . " a n d m a k e s n o p r o vision f o r a n y kind of e x c e p t i o n . 4

De Gaulle seized on the C o m m i s s i o n ' s proposal to make a fundamental point: France would neither relinquish its veto over European Community policy nor allow a supranational government to develop in Brussels. De Gaulle's vigorous defense of French sovereignty applied not only to the EC, but to NATO as well. In early 1966, he withdrew the French army from the NATO c o m m a n d structure and asked the United States to withdraw its troops from French soil. The "empty chair" policy lasted until January 1966, when the six EC m e m b e r s agreed to what came to be known as the L u x e m b o u r g Compromise: They would proceed with implementation of the Treaty of Rome, while acknowledging that France "considers that when very important issues are at stake discussion must be continued until unanimous agreement is reached." 5 In effect, each national government was to be judge of which issues were "very important." De Gaulle had succeeded in suspending, indefinitely, the right of the EC to impose a decision on an unwilling member. European integration, it was now clear, was hardly a mechanical or inevitable process; its continuance depended in good measure upon the support of national leaders. De Gaulle's successors as president of the Republic have provided more positive leadership for E u r o p e a n integration. With f e w exceptions, however, they have f o l l o w e d in the Gaullist tradition in their spirited defense of the interests and prestige of France. Georges Pompidou allowed the United Kingdom to enter the EC in 1973, along with Ireland and D e n m a r k . In the 1980s and early 1990s, the e f f o r t s of François Mitterrand, in association with Chancellor Helmut Kohl of Germany, were critical to the adoption of the Single E u r o p e Act of 1986 and the Maastricht Treaty of 1992. Mitterrand lent strong and

France

33

consistent support to his former minister of economy, Jacques Delors, who, as president of the C o m m i s s i o n f r o m 1985 to 1995, helped to craft both of those pivotal reforms. Indeed, these two luminaries in the French Socialist Party—Mitterrand and Delors—will be known to history much more for their contributions to the building of Europe than for their failed socialist experiment at home. Like de Gaulle, they believed in France but, unlike the general, in a France that could best defend its interests and values by loosening its claims to national sovereignty. President Mitterrand discovered in the 1992 r e f e r e n d u m on the Maastricht Treaty that many of his compatriots did not share his enthusiasm for European integration. A f t e r a heated c a m p a i g n in which some leading Gaullist party figures c a m p a i g n e d for a " n o " vote, the Treaty was accepted by a narrow 51 percent to 4 9 percent margin. From the beginning, the uniting of Europe had been strongly opposed by some sectors of French society. The largest party in France during most of the Fourth Republic, the French Communist Party, viewed the EC as a capitalist and anti-Soviet creation. Despite some moderation of its stance in the Fifth Republic, it remains basically skeptical of the European enterprise. At the opposite end of the political spectrum, JeanMarie Le P e n ' s anti-immigrant party, the National Front, emerged in the 1980s and 1990s as another important enemy of European integration. In between the extremes of left and right, the conservative parties remain badly divided over Europe. The Maastricht debate brought to the fore a widespread anxiety about the future of France. How could French national identity survive, the anti-Maastricht camp warned, at a time when the whole world was subject to the cultural attack of " M c D o n a l d i z a t i o n " ; when television channels and movie theaters were increasingly s w a m p e d with Hollywood productions; when traditional French cafes were being closed by the thousands every year to m a k e way for fast-food restaurants; and when France was ever more deeply embedded in a Europe unable or unwilling to stand up to cultural and economic threats f r o m the outside? Maastricht c a m e to symbolize all of those forces that seemed to be eroding the traditional French way of life. The appeal of these warnings shocked many in the pro-Europe camp. Apart from true believers of the left and right, French citizens still tend to accept integration, at least in good e c o n o m i c times (the Maastricht r e f e r e n d u m took place during a recession), but without enthusiasm. The Maastrich debate demonstrated the shallowness of commitment to Europe among French citizens, who remain Frenchmen first and Europeans only a distant second. 6

34

Early Union

Members

A p a r t f r o m t h e u n c e r t a i n t y of F r e n c h p u b l i c c o m m i t m e n t to E u r o p e , w h a t c a n be said a b o u t t h e i m p a c t of E u r o p e a n i n t e g r a t i o n o n F r a n c e ? T h e first of the initial g o a l s of the early F r e n c h b u i l d e r s of E u r o p e — t o t a m e a n d w i n o v e r G e r m a n y to d e m o c r a c y — c l e a r l y has b e e n achieved. France no longer need fear German military aggression. A s e c o n d m a j o r g o a l — i n c r e a s e d p r o s p e r i t y — a l s o has b e e n a c h i e v e d . T h e last h a l f - c e n t u r y of E u r o p e a n i n t e g r a t i o n has c o i n c i d e d with a m a s s i v e t r a n s f o r m a t i o n of F r e n c h society. At m i d - c e n t u r y , f a r m e r s m a d e u p alm o s t a t h i r d of the w o r k f o r c e . By t h e e n d of the c e n t u r y , they w e r e less than 5 p e r c e n t . At the e n d of World War II, F r a n c e w a s only a partially i n d u s t r i a l i z e d c o u n t r y , w e l l b e h i n d Britain in w e a l t h a n d e c o n o m i c d e v e l o p m e n t . F o l l o w i n g the " T h i r t y G l o r i o u s y e a r s " of e c o n o m i c b o o m that f o l l o w e d t h e war, F r a n c e e m e r g e d w i t h a m o d e r n e c o n o m y , a p o p u l a t i o n that w a s rapidly deserting rural v i l l a g e s f o r the cities, a n d a per c a p i t a w e a l t h that s u r p a s s e d that of B r i t a i n . 7 T h e f a c t s of the F r e n c h e c o n o m i c m i r a c l e are clear. A l t h o u g h the m o d e r n i z a t i o n of the F r e n c h e c o n o m y c o i n c i d e d with E u r o p e a n integ r a t i o n , here, as is so o f t e n the case with c o m p l e x social c h a n g e s , the c a u s a l c o n n e c t i o n is not e a s y to p r o v e . M o s t i n d u s t r i a l i z e d c o u n t r i e s , inside as well as o u t s i d e the E u r o p e a n C o m m u n i t y , s h a r e d in t h e postw a r b o o m . T h e e c o n o m y of Britain, w h i c h w a s not a p a r t i c i p a n t in E u r o p e a n i n t e g r a t i o n until 1974, g r e w m o r e s l o w l y t h a n that of F r a n c e , but several o t h e r n o n m e m b e r s — n o t a b l y Norway, S w e d e n , and S w i t z e r l a n d — m a t c h e d or s u r p a s s e d t h e F r e n c h in g r o w t h of p e r c a p i t a w e a l t h in a p e r i o d of w o r l d w i d e e c o n o m i c e x p a n s i o n . O n e w a y of i n s p e c t i n g t h e l i n k a g e b e t w e e n F r e n c h e c o n o m i c g r o w t h a n d E u r o p e a n i n t e g r a t i o n is t h r o u g h the e y e s of political leaders w h o h a v e w e l c o m e d m o r e o p e n c o m p e t i t i o n as a m e a n s of f o r c i n g i n e f f i c i e n t f a r m e r s a n d m a n u f a c t u r e r s at h o m e to b e c o m e m o r e p r o d u c t i v e . For such leaders ( i n c l u d i n g b o t h M o n n e t a n d de G a u l l e ) , m o r e o p e n t r a d e with E u r o p e h e l p e d t h e m to strengthen the coalition in f a v o r of m o d e r n i z a t i o n at h o m e . 8 A s S t a n l e y H o f f m a n n h a s put it, " D e G a u l l e , g e n e r a l l y v i e w e d as a f o e of the E E C , e n t h u s i a s t i c a l l y u s e d the c o m m u n i t y ' s f r e e - t r a d e p r o v i s i o n s to m o d e r n i z e F r e n c h i n d u s t r y a n d its agricultural p o l i c y as a lever on West G e r m a n y . M i t t e r r a n d a l s o sees t h e E E C as an e s s e n t i a l tool f o r F r a n c e ' s m o d e r n i z a t i o n but in t h o r o u g h l y d i f f e r e n t c i r c u m s t a n c e s . " 9 T h i s is o n e of the t h e m e s that w e will e x p l o r e with r e s p e c t to b u s i n e s s a n d a g r i c u l t u r e . E u r o p e a n i n t e g r a t i o n h a s r e q u i r e d c h a n g e s not o n l y in p o l i c y but also in t h e s t r u c t u r e of the F r e n c h state. 1 0 C o o r d i n a t i o n of r e l a t i o n s b e t w e e n the F r e n c h g o v e r n m e n t a n d t h e E U is the p r i m a r y r e s p o n s i b i l i t y

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35

of the General Secretariat of the Interministerial Committee. That body organizes hundreds of meetings a year to seek agreement among governmental agencies on the position that France will take in negotiations with Brussels. It also facilitates implementation by advising the various ministries of proposed EU directives affecting them, by providing expert staff to the ministries, and by screening French implementation directives. The Constitutional Council advises the g o v e r n m e n t when treaty requirements require amendments to the French constitution, as it did in 1992 with respect to the Maastricht Treaty. The Council of State (the highest administrative court), after long reluctance to rule that EC laws and directives superseded French law, has taken a more Europeanist stance in the 1990s. In European affairs (as in most others), the French parliament has played a very secondary role. The majority of EU directives have been ruled by the Council of State to be outside the powers of the legislature, as established by the Constitution of the Fifth Republic. G o v e r n m e n t ministries, where most directives are translated into decrees, all have specialists on European affairs and most have specialized units devoted to the harmonization of French law in their sectors with EU laws and directives. After a long period in which France lagged behind most other m e m b e r countries in implementing EC laws and directives (in 1984 it was j u d g e d by the C o m mission to have the worst record in the EC), in the late 1980s and the 1990s French compliance improved dramatically. The three general case studies that follow—Renault, Air France, and the C o m m o n Agricultural Policy—will offer examples of three interrelated patterns in French-EU relations. First, they will show how France has sought to manipulate the EU to further the interests of various sectors of its economy. Second, they will demonstrate that the process of Europeanization has forced France to loosen many of the controls and defenses that traditionally have linked private business to the state. Lastly, there will be examples—and particularly in agriculture—of the strategic use of European integration by the French government for the purpose of forcing modernization on inefficient economic sectors.

The Impact of Europe on French Policy Industry and Trade The C o m m o n Market requirements of free trade and open competition among m e m b e r countries have challenged a very old French tradition

36

Early Union Members

of state intervention in the e c o n o m y (known as dirigisme in French) that dates back to the 17th century, when Louis X I V ' s energetic finance minister, Jean-Baptiste Colbert, developed a policy of encouraging and protecting domestic manufacturing and agriculture through high tariffs, strict government regulation, and subsidies to favored sectors and f i r m s . Like Colbert, most ministers in recent centuries have had less faith in the invisible hand of the market than in their own e c o n o m i c j u d g m e n t and foresight. With the French e c o n o m y growing more slowly than that of Britain, French policy m o v e d tentatively toward freer markets under the Second Empire ( 1 8 5 1 - 1 8 7 0 ) and the early Third Republic, before the reassertion of state controls during the great depression of the 1930s (when munitions factories and the railroads were nationalized) and the immediate postwar period (when the state assumed ownership of the coal mines, Air France, the Renault automobile company, electricity, gas, the Bank of France, the four largest commercial banks, and thirty-four insurance compancies). 1 1 Beginning in 1946, a national economic plan was inaugurated for the purpose of coordinating and stimulating industrial development. A newly created Planning Commission, under the leadership of Jean Monnet, consulted broadly with representatives of m a n a g e m e n t and labor, set general goals for investment and production, then called upon the government to use tax incentives, government loans, and a variety of carrot-and-stick devices to encourage entrepreneurs to follow "the Plan." The Plan was widely credited with contributing to the postwar b o o m , yet in fact government policies often seemed unrelated to planned targets and priorities. As a recipient of public financing, industry has come in fourth after housing, infrastructure, and agriculture. The largest expenditure of the Ministry of Industry for most of the postwar period was for subsidies f o r the declining coal industry. 1 2 In the mid 1970s, with energy prices soaring far above projected levels and the whole economy in recession, the process of global planning seemed to come apart. What was left was a policy of nurturing a few firms in key industries to serve as French "national c h a m p i o n s " in world markets: Elf-Acquitaine in the oil industry, France Télécom in communications, Aérospatiale in aircraft and rocket development, Electricité de France in nuclear power generation, and T h o m s o n in electronics, among others. Whether the firm was publicly owned or private, the government was able to use its control over loans, public procurement, and market regulation to assist in the growth of designated champions. Many of them flourished, while a few (notably Bull, the g o v e r n m e n t ' s choice as national champion in the computer field) failed miserably. 1 3

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37

The whole national-champions policy finds no support in the Treaty of Rome and subsequent documents of the European Community and Union. Article 92 of the original treaty prohibits all forms of state aid to industry that distort competition, while Article 93 requires Commission approval of any exceptions to this general rule. The Commission was relatively generous with exceptions for many years, but began tightening up in the 1990s. The Single Europe Act, which codified the goal of achieving a "single market" by 1992, calls for open financial markets, prohibits government favoritism toward domestic firms with respect to public procurement, and requires fair treatment of all European partners in mergers and acquisitions. The French government has protected French producers with great vigor and imagination. A striking example was an attempt in the early 1980s to slow down the importation of Japanese VCRs by allowing their entry exclusively through a small customs office in Poitiers, where only a few each day were allowed to make it past the inspectors. France abandoned this practice under EC pressure in 1982, but the following year Japan's Ministry of International Trade and Industry was persuaded to establish minimum export prices, again under EC pressure. 1 4 With each decade, government protection and assistance have bec o m e less pervasive, leaving the market more open and competitive than ever before in modern French history. Two examples demonstrate some of the ways in which the French government has sought to protect and subsidize national champions, despite the apparent prohibition of such measures by European treaties and regulations.

Renault At the end of World War II, the Renault automobile c o m p a n y was an obvious target for nationalization by a government dominated by parties of the left. Not only was it a key firm in an important industrial sector, but its owner was accused of collaborating with the German occupation. Renault b e c a m e a public corporation, led by a governmentappointed director, exempt f r o m most taxes, guaranteed against bankruptcy, and eligible for generous government funding. It pioneered in l a b o r - m a n a g e m e n t relations; it located its plants in accordance with government priorities, often in areas in need of industrial development; it usually made a profit, at least until 1980. In short, Renault often was cited as a model of a government-owned firm and as an example of the superiority of a mixed economy. Like the private French auto companies that came under the control of Peugeot by the end of the 1970s (with g o v e r n m e n t aid and

38

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Members

e n c o u r a g e m e n t ) , R e n a u l t b e n e f i t e d f r o m the g o v e r n m e n t ' s d e t e r m i n a tion to m a i n t a i n d o m e s t i c control o v e r the auto industry. A m e r i c a n and J a p a n e s e a u t o m a n u f a c t u r i n g w a s kept out of F r a n c e . H i g h p r o t e c t i v e t a r i f f s g a v e w a y to the u n i f o r m t a r i f f s of the E u r o p e a n C o m m u n i t y in the 1960s, but Voluntary Export R e s t r a i n t s ( V E R ) served the s a m e purp o s e of l i m i t i n g i m p o r t s f r o m o u t s i d e t h e C o m m u n i t y . In 1977, w h e n J a p a n e s e i m p o r t s b e g a n to pose a threat, F r a n c e e s t a b l i s h e d a quota of 3 p e r c e n t of t h e m a r k e t f o r J a p a n e s e a u t o s , a f i g u r e j u d g e d to be too low to j u s t i f y the c r e a t i o n of a strong d i s t r i b u t i o n n e t w o r k . E v e n Nissans m a d e in Britain, b e g i n n i n g in 1988, initially were i n c l u d e d in the J a p a n e s e q u o t a on the g r o u n d s that their local c o n t e n t w a s less than 80 p e r c e n t . By t a k i n g the most protectionist s t a n c e a l l o w e d u n d e r (or a r o u n d ) E C law, F r a n c e p o s e d an i n c r e a s i n g l y s e r i o u s p r o b l e m for the C o m m u nity in its i n t e r n a t i o n a l n e g o t i a t i o n s f o r the r e d u c t i o n of t r a d e res t r a i n t s . In 1988, in r e s p o n s e to p r o p o s a l s f o r a l o o s e n i n g of restrict i o n s on J a p a n e s e i m p o r t s , R a y m o n d L e v y , c h a i r m a n of R e n a u l t , w a r n e d that " w e n e e d t i m e and w e n e e d s h e l t e r " to get r e a d y f o r an " e c o n o m i c w a r " with J a p a n . " W e are c o m p e t i n g with p e o p l e w h o are not of our w a y of l i f e . " 1 5 L e v y u n d e r s t o o d that at a time w h e n F r a n c e w a s t a k i n g the lead t o w a r d t i g h t e r E u r o p e a n i n t e g r a t i o n , f i r s t in t h e S i n g l e E u r o p e A c t , t h e n in the M a a s t r i c h t Treaty, the a u t o m o b i l e ind u s t r y w a s d e s t i n e d to f a c e m o r e o p e n c o m p e t i t i o n . In April 1989, t h e F r e n c h m i n i s t e r of i n d u s t r y a n n o u n c e d that B r i t i s h - m a d e N i s s a n s w o u l d no l o n g e r be c o u n t e d t o w a r d the J a p a n e s e quota. In 1991, u n d e r p r e s s u r e f r o m G e r m a n y , F r a n c e r e l u c t a n t l y a c c e p t e d an a g r e e m e n t bet w e e n t h e C o m m u n i t y a n d J a p a n that i n c r e a s e d the V E R q u o t a on J a p a n e s e cars e n t e r i n g the E C f r o m 11 p e r c e n t of the m a r k e t in 1991 to 16 p e r c e n t in 2 0 0 0 . H e n c e f o r t h , J a p a n e s e cars built w i t h i n t h e E C c o u l d not be i n c l u d e d in these q u o t a s . 1 6 F r e n c h q u o t a s on J a p a n e s e a u t o m o b i l e i m p o r t s were within t h e law of t h e E C , if not w i t h i n t h e spirit. G o v e r n m e n t s u b s i d i e s to R e n a u l t , w h i c h g a v e it d e c i d e d a d v a n t a g e s o v e r its E u r o p e a n c o m p e t i t o r s , w e r e a m o r e d i r e c t v i o l a t i o n of treaty r e q u i r e m e n t s f o r f a i r a n d o p e n m a r kets. A f t e r a long p e r i o d of relative s u c c e s s , R e n a u l t fell on hard t i m e s in t h e 1980s. Its s h a r e of the E u r o p e a n a u t o m o b i l e m a r k e t d r o p p e d f r o m 14.6 p e r c e n t and first place in 1982 to sixth place, with 10.7 percent, in 1987. 1 7 It lost 33 billion f r a n c s ( U S $ 6 billion) in the f o u r y e a r s f r o m 1981 to 1985. W h e n J a c q u e s C h i r a c b e c a m e p r i m e m i n i s t e r a f t e r the c o n s e r v a t i v e victory in the legislative elections of 1986, the g o v e r n m e n t sought to i m p r o v e the financial status of Renault, in preparation f o r

France

39

eventual privatization, by writing off 12 billion f r a n c s of the company's outstanding debt of 54 billion. Renault's financial problems coincided with the issuance of a 1986 directive f r o m the European C o m m i s s i o n outlining acceptable practices of state f u n d i n g for research and d e v e l o p m e n t and requiring greater transparency of public-sector financing. T h e French government, joining with the British g o v e r n m e n t , appealed this directive to the European Court of Justice, but without success. 1 8 The EC approved the Renault subsidy on condition that the state revoke its guarantee against bankruptcy and that Renault reduce its production capacity for cars by 15 percent and for trucks by 30 percent. 1 9 In 1989, the E C ' s competition commissioner, Sir Leon Brittan, noted that not one of these goals had been met and demanded that Renault repay the French Government 8.4 billion francs of the written-off loans. Brittan rejected Renault's claim that it was on target toward meeting the reductions in capacity by 1990 and threatened to take the case to the European Court of Justice. When the socialists returned to power in 1988, Prime Minister Michel Roccard bypassed Brittan and took F r a n c e ' s case to the more conciliatory industrial commissioner, Martin B a n g e m a n n , who accepted a c o m p r o m i s e settlement. Renault would repay 3.5 billion francs immediately, and place another 2.5 billion back on its books as long-term debt. Commission president Jacques Delors helped his former French socialist colleagues by lining up sufficient support to guarantee EC acceptance of the deal in May 1990. 2 0 The French government succeeded in softening the punishment through skillful lobbying, yet the message was clear: massive government subsidies to domestic firms would no longer be tolerated. The new, tougher C o m m i s s i o n stance came at a time when the French government already was rethinking the wisdom of coddling and protecting national champions. France was losing foreign investments, and the j o b s they create, to countries such as Britain and Belgium, where Japanese automakers found a more cordial welcome. Subsidies were increasingly costly and hard to justify in an era of sluggish economic growth and high taxes. Publicly owned firms tended to be overstaffed, with powerful unions that inhibited the restructuring that was taking place in the private sector. Protection in the 1980s had contributed to a loss of market share to auto manufacturers in other European countries where Japanese competition forced constant innovation. (French automobiles still were being built with manual c h o k e s well a f t e r many foreign cars had been automated.) Rising u n e m p l o y m e n t emerged in the 1980s and 1990s as a critical problem, yet government

40

Early Union Members

o w n e r s h i p h e r e , as in c o a l , s t e e l , s h i p b u i l d i n g , and a n u m b e r o f o t h e r i n d u s t r i e s , p r o v e d i n s u f f i c i e n t to p r o t e c t p r e c i o u s j o b s . T h e r e s t r u c t u r ing f o r c e d upon R e n a u l t by its l o s s e s o f the e a r l y 1 9 8 0 s led to a r e d u c tion o f the w o r k f o r c e f r o m 2 1 5 , 0 0 0 in 1 9 8 4 to 1 4 7 , 0 0 0 in 1 9 9 1 . 2 1 S h o r t l y a f t e r the B a n g e m a n n c o m p r o m i s e , the F r e n c h g o v e r n m e n t e n d e d its g u a r a n t e e a g a i n s t b a n k r u p t c y , m a k i n g R e n a u l t a j o i n t s t o c k c o m p a n y . T h e g o v e r n m e n t e n c o u r a g e d the p a r t n e r s h i p , t h e n t e n t a t i v e m e r g e r , o f R e n a u l t and V o l v o in the e a r l y 1 9 9 0 s , until V o l v o s t o c k h o l d ers r e j e c t e d the deal in 1 9 9 3 . 2 2 U n d e r the c o n s e r v a t i v e g o v e r n m e n t s o f 1 9 9 3 - 1 9 9 7 , R e n a u l t w a s p r i v a t i z e d , but w i t h the state r e t a i n i n g a 4 4 p e r c e n t i n t e r e s t . In 1 9 9 8 , T o y o t a s e l e c t e d V a l e n c i e n n e s , in n o r t h e r n F r a n c e , for the site o f a n e w 3 . 5 b i l l i o n f r a n c ( U S $ 6 0 0 m i l l i o n ) factory. T h e f o l l o w i n g year, a r e v i t a l i z e d R e n a u l t paid U S $ 5 . 4 b i l l i o n f o r a 3 6 . 8 p e r c e n t share o f the d e b t - r i d d e n N i s s a n M o t o r C o m p a n y . P a r i s and B r u s s e l s n o w w e r e e s s e n t i a l l y on the s a m e p a g e , in support o f a m o r e o p e n , c o m p e t i t i v e m a r k e t f o r a u t o m o b i l e s t h r o u g h o u t the

European

U n i o n . P r e s s u r e from B r u s s e l s n o doubt was o n e o f the f a c t o r s that e n c o u r a g e d the F r e n c h g o v e r n m e n t to l o o s e n state c o n t r o l s o v e r this national c h a m p i o n , but the high d i r e c t and indirect c o s t s o f s u b s i d i e s and the realities o f the international m a r k e t a l s o c o n t r i b u t e d .

Air France N a t i o n a l f l a g c a r r i e r s , u s u a l l y s t a t e - o w n e d , t i g h t l y r e g u l a t e d , and prot e c t e d by their g o v e r n m e n t s , h a v e d o m i n a t e d E u r o p e a n air transport alm o s t f r o m the b e g i n n i n g . L u f t h a n s a in G e r m a n y , S a b e n a in B e l g i u m , A l i t a l i a in Italy, and O l y m p i c in G r e e c e , a m o n g o t h e r s , h a v e b e e n a b l e to rely upon g o v e r n m e n t s u b s i d i e s and p r o t e c t i o n to g u a r a n t e e the surv i v a l o f t h e s e n a t i o n a l c h a m p i o n s . O n l y in t h e late 1 9 8 0 s a n d

1990s

h a s t h e E U C o m m i s s i o n b e g u n to a p p l y the r u l e s o f o p e n c o m p e t i o n written into the T r e a t y o f R o m e to an industry in w h i c h n a t i o n a l p r e s tige has been extremely important. A i r F r a n c e o f t e n h a s b e e n run as an e x t e n s i o n o f the F r e n c h g o v e r n m e n t . A s o n e o b s e r v e r put it, " N a t i o n a l p r i d e , the duty to s h o w the F r e n c h f l a g a r o u n d the g l o b e , and an o b l i g a t i o n to o p e r a t e r o u t e s that are p o l i t i c a l l y s e n s i t i v e l o n g h a m p e r e d the c a r r i e r ' s a t t e m p t s to i m p l e m e n t a b u s i n e s s - o r i e n t e d s t r a t e g y . In the s a m e v e i n , the g o v e r n m e n t c o u l d not resist the t e m p t a t i o n to d e e m A i r F r a n c e ' s o v e r s e a s o f f i c e s as a secondary network o f e m b a s s i e s . " 2 3 T h e supersonic Concorde, develo p e d j o i n t l y by B r i t a i n and F r a n c e and h a i l e d as a t r i u m p h o f F r e n c h e n g i n e e r i n g , w a s k e p t in s e r v i c e on s e v e r a l l o n g - d i s t a n c e r o u t e s w e l l

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41

after industry experts c o n c l u d e d that they never could be profitable. ( T h e o n l y r e m a i n i n g s c h e d u l e d f l i g h t f o r A i r F r a n c e ' s six C o n c o r d e a i r c r a f t is t h e P a r i s - N e w Y o r k r o u t e , w h e r e it c a r r i e s a m a x i m u m o f 100 p a s s e n g e r s at 1 , 3 5 0 m i l e s p e r h o u r f o r a s t a n d a r d r o u n d - t r i p f a r e of o v e r U S $ 8 , 0 0 0 . ) W h a t e v e r t h e p r i o r i t y of g o v e r n m e n t p o l i c y , w h e t h e r s h o w i n g t h e f l a g or p r o m o t i n g t h e d o m e s t i c a e r o n a u t i c a l i n d u s t r y w i t h its p u r c h a s e s , A i r F r a n c e ' s g o v e r n m e n t - a p p o i n t e d d i r e c t o r s w e r e r e a d y to c o m p l y , k n o w i n g t h a t t h e i r c o m p a n y w o u l d b e p r o t e c t e d f r o m f o r eign competition and, when necessary, subsidized by the g o v e r n m e n t to cover high operating costs. T h i s c o m f o r t a b l e a r r a n g e m e n t w a s disturbed by three " p a c k a g e s " of l e g i s l a t i v e m e a s u r e s a d o p t e d b y t h e E C ( o n D e c e m b e r 14, 1 9 8 7 , J u l y 2 7 , 1 9 9 0 , a n d J u l y 2 3 , 1 9 9 2 ) . 2 4 F o l l o w i n g a s e r i e s of r u l i n g s b y t h e E u r o p e a n C o u r t of J u s t i c e in t h e 1 9 8 0 s h o l d i n g th2t a i r t r a n s p o r t w a s s u b j e c t to t h e c o m p e t i t i o n r u l e s of t h e T r e a t y of R o m e , t h e s e m e a sures called for greater access to international and domestic routes and g r e a t e r f l e x i b i l i t y in t i c k e t p r i c i n g . H e n c e f o r t h , g o v e r n m e n t - a i r l i n e r e l a t i o n s w o u l d b e s u b j e c t to t h e g e n e r a l t r e a t y s t a n d a r d s w i t h r e s p e c t t o restrictive practices, a b u s e of d o m i n a n t position, state aid, and m e r g e r s . In 1994, a " c o m m i t t e e of w i s e m e n , " a p p o i n t e d to e x a m i n e E u r o p e a n c i v i l a v i a t i o n , r e p o r t e d that p r o d u c t i v i t y in the i n d u s t r y w a s p o o r a n d c o u l d b e i m p r o v e d b y m o r e o p e n c o m p e t i t i o n . 2 5 B e g i n n i n g in 1 9 9 7 , all E U a i r l i n e s w e r e to b e a s s u r e d f u l l " c a b o t a g e " r i g h t s to c a r r y passengers between cities within other m e m b e r counties. A safeguard c l a u s e allowed g o v e r n m e n t s to limit access on " p u b l i c s e r v i c e " routes, a n d to c o n g e s t e d o r e n v i r o n m e n t a l l y t h r e a t e n e d a i r p o r t d e s t i n a t i o n s . 2 6 T h e n e w r e g u l a t i o n s e m e r g e d j u s t as t h e E u r o p e a n civil a v i a t i o n ind u s t r y w a s e n t e r i n g o n e of the w o r s t c r i s e s in its h i s t o r y . A i r F r a n c e s u f f e r e d s e r i o u s l o s s e s e v e r y y e a r f r o m 1 9 9 0 to 1 9 9 5 a n d m i g h t h a v e c o l l a p s e d e n t i r e l y w i t h o u t m a s s i v e state a i d . T h e F r e n c h g o v e r n m e n t c a m e t o t h e r e s c u e w i t h a s e r i e s of i n j e c t i o n s of c a p i t a l t o t a l i n g 2 0 b i l l i o n F r e n c h f r a n c s ( U S $ 3 . 7 b i l l i o n ) . In 1 9 9 4 , the E u r o p e a n C o m m i s s i o n r e luctantly accepted these subsidies, but on condition that Air France res t r i c t its s e a t i n g c a p a c i t y . T h e B r i t i s h g o v e r n m e n t , j o i n e d b y s e v e n E u r o p e a n airlines, including British Airways, K L M , and Scandinavian Air L i n e s , c h a l l e n g e d t h e C o m m i s s i o n d e c i s i o n b y b r i n g i n g l e g a l a c t i o n in t h e E u r o p e a n C o u r t o f J u s t i c e . T h e S A S d i r e c t o r of E u r o p e a n a f f a i r s , H a n s O l l o n g r e n , e x p l a i n e d t h a t " o u r c o m p l a i n t w a s n o t d i r e c t e d at A i r F r a n c e as a c o m p a n y , b u t r a t h e r a g a i n s t a n a p p r o v a l s y s t e m w h i c h all o w s f o r u n c o n t r o l l e d s t a t e a i d , h e a v i l y i n f l u e n c e d by p o l i t i c a l p r e s s u r e and considerations which ultimately distort competition."27 T h e Court

42

Early Union

Members

initially approved French state aid, but reversed its position in a subsequent appeal in 1998, when it ruled against the C o m m i s s i o n and France on the grounds that Air France had purchased 17 new aircraft, in violation of the C o m m i s s i o n ' s conditions for approval. Although it is unlikely that Air France ever will be required to repay state subsidies, pressure f r o m Brussels gradually is mounting against French protectionism in air transport. In 1991, the French government piloted a merger agreement joining Air France with two large domestic carriers, UTA and Air Inter. The merged company would control two-thirds of all flights at Paris airports. The Commission accepted the merger, but on condition that the French government agree to liberalize its commercial aviation policy. 2 8 Under pressure f r o m Brussels, the French government granted licenses to several private airlines to operate scheduled flights from France to a number of European destinations. The result was a loss of market share for Air Inter. In air transport as in the automobile industry, French government protection of national champions has been challenged not only by pressure from Brussels to open up markets, but also by the high cost of state subsidies and by fierce global competition. Publicly owned firms that fail to keep up with foreign competitors eventually weaken the state through their constant need for funds. In the 1990s, under government pressure to become profitable, Air France shook off its traditional suspicion of partnerships. It sought to protect its access to European and international markets by concluding marketing or code-sharing a g r e e m e n t s with 29 airlines. The crisis of the early 1990s forced a restructuring that reduced some of the airline's redundancy in personnel. Despite a series of bitter strikes, management succeeded in controlling wage increases. Pilots went on strike, grounding Air France flights on the eve of the World Cup soccer tournament in Paris in June of 1998, before finally agreeing to a 2 percent pay cut in return for the right to aquire up to 12 percent of Air France shares over a seven-year period. T h e Socialist government that returned to power in 1997 rejected plans made by its conservative predecessors to convert Air France into a p r e d o m i n a n t l y private company, but proceeded with partial privatization that eventually will reduce the state's share to 53 percent. The initial shares offered to the public in early 1999 were quickly sold. Air France again became a successful, profitable enterprise. Without state subsidies during the early 1990s, however, it might well have gone the way of now defunct airlines such as Eastern, Braniff, and Pan American. Even more than most EU members, France has been fiercely protective of its flag carrier. It usually has been successful in persuading

France

43

the Commission to accept state intervention, whether in the form of subsidies to Air France or mergers designed to control the domestic market. It has negotiated a bilateral air transport agreement with the United States, even though the Commission preferred that the EU negotiate as a bloc. It has seized upon escape clauses to limit competition, as in the refusal to open up the Toulouse-Brussels route to nonFrench companies on grounds of congestion and environmental impact. It refuses to abandon state control of Air France at a time when most flag carriers are being privatized. Yet, if it is unthinkable that Air France ever would be allowed to disappear, it also is clear that the French government no longer has the power to make policy in the field of air transport without considering the reaction of Brussels. Other French national champions typically have followed a similar pattern: engagement in international markets, search for foreign partners, and, eventually, full or partial privatization. The government led by Socialist Lionel Jospin sold more state assets in its first two years in office (180 billion French francs worth) than had all governments over the previous decade. 29 Aérospatiale, the French aircraft manufacturer, joined with British, German, and Spanish partners to create the Airbus Consortium, now the major competitor to Boeing. Assisted by the French government and by the construction of the tunnel under the English Channel, the French national railroad company, the Société Nationale des Chemins de Fer, cooperated with other European countries in spreading high-speed rail transportation beyond the borders of France. As in the case of Renault and Air France, government subsidies often put Paris at odds with Brussels. The sharpest battle with the European Commission in recent years came over the prospective privatization of Crédit Lyonnais, a large French bank nationalized in 1946. The management of Crédit Lyonnais drove the bank to near bankruptcy in the 1980s and early 1990s with aggressive and injudicious loans and acquisitions. 30 The French government saved the bank with a series of rescue plans totaling some 100 billion francs (US$16 billion) of taxpayer money. Karel Van Miert, the aggressive competition commissioner in Brussels, argued that penalties should be imposed on Crédit Lyonnais equal to the government subsidies received. He proposed that the bank be required to sell all of its European operations outside France. This would have so weakened the bank that it likely would have been left with no option other than being taken over by another bank. 31 In a series of tense negotiations in spring 1998, during which Van Miert warned that the Commission might reject state aid and force Crédit Lyonnais into bankruptcy, the French government managed to

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retain control over the sale of the bank and allow it to keep some European operations, but on condition that it sell FF675 billion in assets, that it accept limits in growth, and that the state reduce its stake to 10 percent or less by October 1999. At least for the moment, Paris avoided the worst—total loss of state control and the disappearance of Crédit Lyonnais—but Brussels again had made its point. State subsidies to national champions no longer would go unchallenged. Another of France's national champions, Electricité de France, is distinctive in Europe in that 80 percent of French electrical energy is produced by nuclear plants. France became a world leader in nuclear energy, and achieved a good safety record, at a time when much of the rest of the developed world was turning away from that solution. This issue is likely to create tension in the future if Sweden and Germany hold to their present goal of phasing out nuclear energy entirely and if environmental movements continue to grow across Europe. The French government continues be a vigorous protector of French firms, even when that means protracted battles with Brussels. The state retains a partial interest in many privatized firms, often retaining a "golden share" carrying veto rights. In summer 1999, shortly after the French government announced its opposition to the purchase of French oil companies by "Anglo-Saxon" firms, the single-market commissioner, Mario Monti, took France, along with several other EU countries, to the European Court of Justice over the use of "golden shares" to prevent foreign investors from gaining control of key industries. 32 Even when privatization is complete, the sale of shares frequently has been managed to insure that control is held by a "hard core" of institutional investors closely linked to the state. Despite EU requirements for open competition, in 1996 French firms won more than 90 percent of public procurement contracts. 33 The government still attempts to exert its influence to prevent major French firms, whether in banking, oil, or aircraft construction, from falling under foreign control. The trend, however, is clear: with each decade since the 1970s, the government's grip on French firms has loosened. European integration has been a major contributor to the weakening of French dirigisme. Agriculture

Early European integration often was described as a bargain between French farmers and German industrialists. Apart from the crucial security considerations for France, one of the most important goals of French governments in the early years of the EEC was assuring open

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European markets for agricultural products. France is the second-largest food exporter in the world, after the United States, and the leading agricultural nation of the European Union, with nearly 23 percent of all E U farm production in 1994. 3 4 President Giscard d'Estaing once remarked that if France lacked petroleum for export, it had instead "green oil" in the form of massive agricultural exports. Since the beginning of European integration in the 1950s, France has had a strong interest in using the European Community to protect and promote agriculture. With the creation o f the Common Agricultural Policy ( C A P ) in 1962, France extended to Europe the traditional French policies of subsidizing farmers and protecting them from foreign competition by means of quotas and high external tariffs. The effect of these policies, in Europe as in the United States and Japan, has been a massive redistribution of income from consumers (who pay higher prices) and taxpayers (who pay for subsidies) to farmers. Within Europe, high tariffs and price supports have produced another important redistribution of income from countries with relatively small farm sectors (such as Britain) to those in which agriculture historically has been most important (such as France). The ability of farmers to impose such income redistribution, at a time when they represent a rapidly dwindling proportion of the work force (in France from approximately a quarter in 1958 to less than 5 percent in the mid-1990s), is one of the more interesting puzzles of modern democratic politics. The political clout of French farmers is no longer based primarily on their numbers or on their contribution to GDP, which by 1994 had dropped to 2 percent. 3 5 It is supported more by the unity of their primary farmers' association, the National Federation of Farmers' Unions ( F N S E A ) ; by the intensity of their political demonstrations; and by the broad support that they still enjoy with the general public. The F N S E A , which has no significant competition as the representative of French farmers, at times has enjoyed such a privileged position in the making of agricultural policy—particularly with conservative governments— that one expert observer cites it as a prime example of corporatism in French society. 3 6 When attempts to persuade the Ministry of Agriculture fail, or when one particular group is alarmed (small winegrowers are a frequent example), farmers are quick to bring public attention to their plight by dumping over tanker cars bringing cheap wine into France, blocking turnpikes with loads of potatoes or manure, throwing eggs and tomatoes at unpopular ministers, or (in one imaginative ploy) planting a wheatfield on the Champs-Elysees. Such tactics might be ineffective were it not for the broad popular support that farmers enjoy.

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Although the great majority of the French now live in cities, the tradition of rural France, la France profonde, remains strong. The steady postwar exodus from the countryside—despite high subsidies to agriculture—raises fears of a "decertification" of France, along with the loss to society of the presumably superior values of rural life. All governments, whether of the left or the right, portray themselves as defenders of the interests of farmers. In 1958, the common understanding among the original six members was that the principal goal in agriculture was to increase production. 37 The French argued, successfully, that this meant establishing high tariffs and high internal prices in order to encourage farmers to improve their productivity and increase their output. A system of price supports was established whereby the CAP bought up excess production in order to maintain prices at the established support level. With guaranteed prices and no penalty for overproduction, the CAP created strong incentives for governments and farmers to expand agriculture as rapidly as possible. As a major exporter of farm products, France had everything to gain and little to lose from increased production. Between 1958 and 1995, agricultural production in Europe doubled; in France, with strong government support, it tripled. 38 In agriculture, as in industry, the French pioneers of European integration viewed the expansion of the tariff-free market as a means of improving the efficiency of an agricultural sector still dominated in the 1950s by small, inefficient farms. Michel Debré, de Gaulle's prime minister from 1958 to 1962, welcomed the threat of competition from other CAP members as one stimulus to farmers to modernize. 39 The government actively supported modernization by funding agricultural research, encouraging mechanization and the use of chemical fertilizers; offering social security to younger farmers to encourage them to stay on the farm, and pensions to older farmers to encourage them to retire; providing loans to farmers for equipment and supplies at half the bank rate; and, through the SAFER program, facilitating the consolidation of scattered farm plots and the merger of small farms into larger, more efficient ones. From 1950 to 1990, consumption of fertilizer increased fivefold, while the average yield of grain per acre quadrupled. 40 By promoting the modernization of French agriculture, the French government helped French farmers maximize the potential yield from the CAP, while consumers and taxpayers in other countries paid much of the bill. One French economist, Jean-François Eck, notes the relatively modern condition of French agriculture in the mid-1970s, compared to its backwardness in the mid-1960s, when the CAP was just

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beginning, and concludes: " T h e explanation for this discrepancy is clear: it was the construction of Europe, even more than state policy, that constituted a constant force for c h a n g e and progress, offering it both guaranteed markets and protection f r o m the rest of the w o r l d . " 4 1 In 1960 the f i v e other m e m b e r s of the original E E C received 25 percent of all French agricultural exports; by 1992, in an expanded community, the eleven other members received 79 percent. 4 2 With its large, efficient farms, the Paris Basin became the breadbasket of Western Europe. By the mid-1990s, France produced more than a third of EU production in wheat, barley, maize, oilseeds, fresh fruit, and wine, and had a substantial share in dairy products and meat. 4 3 Contrary to the expectations of the Group of Six in 1958, the key problem for European agriculture has been surpluses rather than shortages. In the three decades following the creation of the CAP, farm production grew at an annual rate of approximately 3 percent, while consumption increased by less than 1 percent per year. The result, as C A P critics c o m m o n l y noted, was the accumulation in storage of "lakes of wine and mountains of butter." The cost of the C A P rose from 12.4 billion ECU (the predecessor to the euro) in 1982 to 27.5 billion in 1987 and 38.5 billion in 1996. At its peak, in 1985, the C A P accounted for 75 percent of the total EC budget, before decreasing to approximately 50 percent in the 1990s, as expenditure on nonagricultural programs increased. 4 4 France b e c a m e a strong d e f e n d e r of European agricultural policies from which its farmers greatly benefited. The high cost of buying up surplus produce at prices far above world levels placed France (a big producer) squarely at odds with the United K i n g d o m (a large food importer). In the early 1980s, Prime Minister Margaret Thatcher called repeatedly and vociferously for a reform of the CAP. By 1984, it had b e c o m e clear that production could not be allowed to expand without limits. Following the June 1984 meeting of the European Council at Fontainbleau, in which Britain received a partial refund on her net contributions to the EC, quotas were imposed on dairy products. In 1988, as costs continued to m o u n t , " b u d g e t stabilizers" were imposed on m a n y f a r m products, providing a reduced intervention price when the quantity of production exceeded an established threshold. France reluctantly accepted these reforms as conditions for saving the essential elements of the CAP. A f t e r these and subsequent reductions in support prices, French f a r m e r s periodically took to the streets and highways in violent demonstrations to protest their government's sellout, while in Brussels that same government was viewed as the m a j o r obstacle to the reform of a very costly program.

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T h e F r e n c h position as a principal d e f e n d e r of the C A P w a s f u r t h e r w e a k e n e d in the 1980s and 1990s w h e n a g r i c u l t u r e b e c a m e a p r i m e i s s u e in i n t e r n a t i o n a l t r a d e n e g o t i a t i o n s . T h e U n i t e d S t a t e s a n d o t h e r a g r i c u l t u r a l e x p o r t e r s i n s i s t e d in G e n e r a l A g r e e m e n t on T a r i f f s a n d T r a d e ( G A T T ) n e g o t i a t i o n s that, in r e t u r n f o r o p e n i n g t h e i r m a r k e t s m o r e c o m p l e t e l y to E u r o p e a n i n d u s t r i a l g o o d s , the E C s h o u l d r e d u c e its tariffs and q u o t a s on f a r m p r o d u c t s and c e a s e solving its agricultural s u r p l u s p r o b l e m by f l o o d i n g i n t e r n a t i o n a l m a r k e t s with h i g h l y s u b s i d i z e d e x p o r t s . T h e d e b a t e c a m e to a h e a d in 1990, w h e n t h e U r u g u a y r o u n d of G A T T n e g o t i a t i o n s , b e g u n in 1986, e n d e d in initial f a i l u r e , largely b e c a u s e of d i s a g r e e m e n t b e t w e e n the U n i t e d States a n d the E C over agriculture. In the w a k e of this f a i l u r e , the C o m m i s s i o n issued a " r e f l e c t i o n s " p a p e r on the f u t u r e of t h e CAP, b e i n g c a r e f u l to d i s a s s o c i a t e its p r o p o s a l s f r o m issues of international trade. T h e p a p e r c o n c l u d e d " t h a t the m e c h a n i s m s of the C A P as currently applied are no l o n g e r in a p o s i t i o n to attain certain o b j e c t i v e s p r e s c r i b e d f o r the agricultural p o l i c y u n d e r A r t i c l e 39 of the T r e a t y of R o m e . " 4 5 O n the b a s i s of this p a p e r , the a g r i c u l t u r e c o m m i s s i o n e r , R a y M a c S h a r r y , p r o p o s e d a p a c k a g e of ref o r m s , i n c l u d i n g r e d u c t i o n s in support p r i c e s f o r g r a i n s a n d a c o m p u l sory " s e t - a s i d e " p r o g r a m to take land out of c u l t i v a t i o n , w i t h a c c o m p a n y i n g r e i m b u r s e m e n t . W i t h s o m e m o d i f i c a t i o n s (the p l a n n e d cut in g r a i n p r i c e s w a s r e d u c e d f r o m 35 to 29 p e r c e n t ) , the p a c k a g e w a s acc e p t e d by the C o u n c i l of M i n i s t e r s in M a y 1992. T h e F r e n c h a c c e p t e d these r e f o r m s , a l o n g with s u b s e q u e n t o t h e r s , i n c l u d i n g a r e d u c t i o n of 36 p e r c e n t in e x p o r t s u b s i d i e s a n d of 21 p e r cent in the v o l u m e of s u b s i d i z e d e x p o r t s . F r e n c h a g r e e m e n t to t h e s e ref o r m s w a s d u e , at least in part, to p r i v a t e w a r n i n g s f r o m t h e G e r m a n g o v e r n m e n t that success in the G A T T n e g o t i a t i o n s w a s vital to G e r m a n n a t i o n a l interests. 4 6 G u y o m a r c h , M a c h i n , and R i t c h i e p o i n t out t h e sign i f i c a n c e of the G A T T c o n c e s s i o n s : The result was a carefully staged spectacle, in Paris, Brussels, and Washington. When a French veto was threatened, the National Assembly was allowed to debate, and even vote on this foreign policy issue, and Jacques Delors and Leon Brittan were asked to play their roles. This son-et-lumiere not only impressed many farm leaders that there was little point in organizing protests or boycotts, but also contributed to winning some concessions from the US negotiators (which slowed down the reduction of subsidies to exports). Talk in Paris of resuscitating the national interest veto of the Luxembourg Compromise was intended to be taken seriously by EU partners, US negotiators, and, above all, French farmers. In short, if the approach to

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agricultural p o l i c y - m a k i n g r e m a i n e d e s s e n t i a l l y nationalist, the G A T T deal c o n c e s s i o n s s h o w e d that agriculture w a s no l o n g e r the top priority. 4 7

C o m m i t t e d as it w a s to the d e f e n s e of agriculture, the French government was a w a r e that other, now m o r e important sectors of the economy, w o u l d b e n e f i t f r o m e n h a n c e d i n t e r n a t i o n a l t r a d e . It also was a w a r e of the costs to F r e n c h l e a d e r s h i p in the EU of t a k i n g what was widely perceived to be a highly nationalistic position on agriculture. In the late 1990s, the French c o n t i n u e d to press their EU partners to stand up to U.S. d e m a n d s for open access to the E u r o p e a n f o o d market. With strong e n c o u r a g e m e n t f r o m F r a n c e , the EU set off a " b a n a n a w a r " with the U n i t e d States by m a i n t a i n i n g p r i v i l e g e d a c c e s s for bananas p r o d u c e d in f o r m e r E u r o p e a n colonies, e x c l u d e d beef f r o m U.S. cattle treated with growth h o r m o n e s , and threatened strict regulation of all f o o d p r o d u c t s f r o m g e n e t i c a l l y m o d i f i e d plants. W h e n the U n i t e d States, with the support of the new World T r a d e O r g a n i z a t i o n ( W T O ) , c h a r g e d the EU with illegally p r o t e c t i n g their beef industry, the E U , with strong e n c o u r a g e m e n t f r o m the J o s p i n g o v e r n m e n t (and particularly the e n v i r o n m e n t a l i s t party within it), r e f u s e d to c h a n g e its policy, on g r o u n d s that the l o n g - t e r m e f f e c t s of h o r m o n e s on h u m a n c o n sumers were still u n k n o w n . T h e C A P clearly has increased overall profits in F r e n c h agriculture and i m p r o v e d the n a t i o n ' s t r a d e b a l a n c e . In 1996 F r a n c e r e c e i v e d 24 p e r c e n t of all f u n d s d i s t r i b u t e d by the C A P ' s E u r o p e a n A g r i c u l t u r a l G u i d a n c e and G u a r a n t e e F u n d . 4 8 By the 1990s, h o w e v e r , the costs of the E U ' s agricultural policy w e r e b e c o m i n g m o r e a p p a r e n t , e v e n in France. Artificially high profits had driven up land prices and diverted i n v e s t m e n t capital f r o m other sectors. F r a u d u l e n t practices by f a r m e r s seeking to m a x i m i z e subsidies had b e c o m e an i m p o r t a n t p r o b l e m . T h e great b e n e f i c i a r i e s of p r i c e s u p p o r t s a n d s u b s i d i e s had b e e n large a g r i b u s i n e s s e s rather t h a n small f a r m e r s . T h e C o m m i s s i o n ' s " r e f l e c t i o n s " paper of 1991 c o n c l u d e d that 80 percent of assistance went to 20 p e r c e n t of f a r m e r s . 4 9 D e s p i t e s u b s i d i e s , the n u m b e r of f a r m e r s and w o r k i n g f a r m f a m i l y m e m b e r s d e c r e a s e d f r o m 4 , 8 9 1 , 9 0 0 in 1963 to f e w e r t h a n a million f u l l - t i m e f a r m e r s in 1996. 5 0 T h e f l i g h t f r o m the c o u n t r y s i d e c o n t i n u e d in the 1990s, w i t h 4 0 , 0 0 0 f a r m s g o i n g out of b u s i n e s s e a c h year. A s in all d e v e l o p e d e c o n o m i e s , the n u m b e r of f a r m e r s n e e d e d to e x p l o i t arable land has d r o p p e d p r e c i p i t o u s l y with t e c h n o l o g i c a l a d v a n c e s . A f f l u e n t f a r m e r s s p e a k the l a n g u a g e of the f a m i l y f a r m , as in the U n i t e d States, but in fact profit f r o m its d e m i s e .

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It is not surprising that small farmers, who struggle, often vainly, to hold on, blame both their government and the EU for deserting them, finding solace only in proposals to expand set-aside payments and to convert surviving peasants into paid guardians of the rural environment. W h a t e v e r conclusions one reaches on the net benefits of C A P to France, it is clear that political leaders believe that they must defend it. In spring 1999, when the European Council met in Berlin under the presidency of German Chancellor Gerhard Schroder, the German gove r n m e n t had decided to fight for important reductions in farm subsidies, partly in order to reduce G e r m a n y ' s large net contribution to the C A P (as Margaret T h a t c h e r had succeeded in doing f o r Britain a decade and a half earlier), and partly in order to prepare for the admission to the EU of Eastern European countries with large farm sectors. France, alone among the fifteen, was represented by two governmental leaders, the Gaullist president Jacques Chirac and the Socialist prime minister Lionel Jospin, who vied with each other for the title of d e f e n d e r of French agriculture. In the interest of E u r o p e a n unity, Schroder gave way, allowing the C A P to emerge only barely reduced. This Berlin European Council meeting suggests that the French conception of the C A P is more than ever under attack. Although some of the most agricultural EU countries still support generous subsidies, northern Europe is ready for reform. The German-French compromise around which the C A P was created is now in doubt. As farmers dwindle in the work force (and in the electorate), it seems likely that the French government will be forced to accept m a j o r changes in a program that it largely designed and f r o m which it has benefited. If and when it does, it no doubt will put up a valiant fight, then blame the restructuring of the C A P (that some government leaders no doubt would w e l c o m e ) upon foreigners w h o could not be made to understand the French position.

A u t o n o m y , Identity, and E u r o p e There is no more drastic e x a m p l e of the constraints that Europe (as well as the global economy) has imposed on French policy than the reversal of the French socialist experiment in the early 1980s. 51 In his introduction to the c o m m o n program adopted in 1972 by the Communist and Socialist Parties, François Mitterand promised a broad-scale attack on "big capital" and "the economic and political system . . . on which is built an unjust and decadent society." 5 2 When the socialists won the

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presidential election in May 1981 and the National Assembly elections that f o l l o w e d the next month, the new g o v e r n m e n t of the left proceeded rapidly to establish a dominant state role in the chemical, steel, and electronics industries, among others, by nationalizing five giant industrial groups, along with all large banks remaining in private hands. The minimum wage was raised by 25 percent, the old-age pension minimum payment by 38 percent, and rent allocations by 50 percent. A f t e r a year in office, faced with an inflation rate of 13.9 percent, a serious trade deficit, and the loss of over half of the foreign reserves of the Bank of France in a losing battle to defend the French franc, the government changed course to reduce government expenditures and reassure private businesses. With investors and financiers fleeing France at a rapid rate, and domestic consumers using most of their enhanced purchasing power for imports, the Socialists had no alternative to austerity, save to insulate the economy with severe protectionist measures. Such m e a s u r e s would have invited trade retaliation and jeopardized F r a n c e ' s continued m e m b e r s h i p in the European C o m m u n i t y . With 21.4 percent of the French e c o n o m y dependent on exports, compared to 14.5 percent in 1960, the likely result of protectionism would have been a severe e c o n o m i c crisis. S 3 Already in the early 1980s, French policymakers found that they could not act effectively without taking into account the reaction of the European C o m m u n i t y and the global market. With the advent in 1999 of the euro and the European Monetary Union, national governments lost the last vestiges of control over monetary policy, along with much of their flexibility in fiscal policy. The shrinking autonomy of the French government in economic affairs is worrisome to many political leaders, and not only on the left. If the European Union plays by the rules of the global marketplace, they ponder, how will the French protect themselves from the social insecurities and inequities of what in France c o m m o n l y is termed "jungle capitalism"? How will the highly prized French welfare state survive? Will it be driven down to the skeletal level of the A m e r i c a n welfare state by the preference of multinational corporations for investment in "business friendly environments"? Jacques Attali, a former special advisor to President Mitterrand, warns that opening all services and intellectual property to unfettered global competition, as the United States proposes in the W T O negotiations, ultimately would lead to loss of all national control over telecommunications, banking, publishing, television, culture, health care, and even education. " H e r e , as elsew h e r e , " he adds, "France, once again, will be one of the rare countries in a situation to oppose [these demands], for she remains perhaps the

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only one that does not wish to adopt the A m e r i c a n model as soon as possible." 5 4 Although certainly not all French observers would agree with Attali that unlimited international competition in the provision of services "can signal the end of nations, of democracy, of politics," many share his fear that France would no longer be France if the market were king. Prime Minister Lionel Jospin's frequent response to this question is: "yes to the market economy, no to the market society," by which he means that, within a competitive economy, workers and citizens must be protected by a high m i n i m u m wage (raised to over $7 per hour in 1997), tight regulation of employee-management relations (dismissing workers is difficult and expensive), and generous benefits for unemployment, health, and retirement, all supported by social security taxes on employers ranging up to 46.8 percent of salary. Critics of French social policies, within the EU as well as outside, suggest that F r a n c e ' s high minimum wage, tightly regulated labor market, and high employer taxes are largely responsible for a structural u n e m p l o y m e n t rate that has hovered at or above 10 percent in recent years (and often twice that a m o n g young people under 25), even during periods of e c o n o m i c growth. D e f e n d e r s of strict regulation reply that foreign investors already have confidence in the French economy. An average of 35 percent of the stock of the top 40 companies is held by British and American investors. Productivity of workers per hour is higher in France than in Britain and the United States, partly, no doubt, because high labor costs create strong incentives for c o m p a n i e s to invest in laborsaving devices. 5 5 T h e principal solutions to the u n e m p l o y m e n t problem o f f e r e d by the Jospin government after 1997 were a reduction of the work week from 39 to 35 hours (with the hope of spreading around the work), the creation of 350,000 j o b s in the public sector (with the optimistic expectation that the private sector would create an equal number), and a proposal to the EU that the creation of jobs become one of its priority goals. W h e n the French, a m o n g others, propose that generous social policies, such as their own, be adopted and mandated by the European Union, the British typically have responded as did Margaret Thatcher in a statement in Bruges, Belgium, in September 1988: "We have not successfully rolled back the frontiers of the state in Britain only to see them reimposed at the European level, with a new European superstate exercising a new dominance from Brussels." 5 6 Although the Maastricht Treaty added social policy to the agenda of the European Union, with strong encouragement from France, there is no consensus regarding the

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specific policies that should be standardized. " E u r o s c e p t i c s " fear that Europe will be unequal to the task of protecting the French hybrid of capitalism and social solidarity against the assault of the " A n g l o Saxon" model. Here again, as in the mounting dominance of the English language and of American popular culture, the identity of France as a society appears to some to be in jeopardy. The lingering image of de Gaulle continues to cast a shadow on relations between France and the United States, and, indirectly, on efforts to build c o m m o n European foreign and security policies. Since the uniting of Germany in 1990 and the subsequent collapse of the Soviet Union, France has struggled to reassert its leadership against the perceived threat of A m e r i c a n hegemony. In the Gulf War against Iraq, French forces, still outside the integrated military command of NATO, found themselves relegated to a marginal role. Jacques Chirac, once elected president in 1995, announced his intention to undo de Gaulle's action of 1966 by reintegrating the French army into NATO, but on condition that a French officer be named to replace the traditional American commander of forces in southern Europe, headquartered in Naples. The Clinton administration refused, on grounds that the m a j o r forces in the sector were nuclear armed American ships. When other European NATO members followed the American lead, the French decided to maintain the i n d e p e n d e n c e of their forces. The French failed again in their effort to bring Slovenia and Romania into NATO, along with the successful candidates of Poland, Hungary, and the Czech Republic. In Yugoslavia, the European nations found that they lacked both the will and the unity to intervene militarily, until a settlement was reached, under American leadership, at Dayton, Ohio. The renewal of "ethnic cleansing" in Kosovo once again demonstrated that Europe was stalemated without A m e r i c a n leadership. In the air war on Serbia in spring 1999, European warplanes were involved, but lacked the sophisticated war machinery (especially air control capabilities and "smart" bombs) to carry the bulk of the action. Despite European d e p e n d e n c e on A m e r i c a n leadership in Yugoslavia, significant progress was m a d e in 1999 toward the o f t e n stated French goal of creating a European security force independent of NATO. In late 1998, British prime minister Tony Blair and French president Jacques Chirac met in St. Malo, France, and called for the development of a " E u r o p e a n Security and D e f e n s e Identity." At their summit meeting in Cologne in June 1999, EU leaders agreed to move toward this goal. NATO secretary-general Javier Solana was persuaded

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to become the first director of EU C o m m o n Foreign and Security Policy. Many problems remain, including the necessary upgrading of weapons at a time when all European countries are struggling to balance their budgets without gutting the welfare state. Beneath the apparent agreement at the summit, one suspects that other European countries remain suspicious that the French call for a purely European security policy is a revival of the old Gaullist plea to rally around the (French) flag. D e p e n d i n g upon the c i r c u m s t a n c e s and the issue at hand, France can play the role of the loyal European, or that of the selfish nationalist. Indeed, she sometimes plays both simultaneously on different issues. France is the homeland of heroes of European unification like Jean Monnet, Robert S c h u m a n , Jacques Delors, and François Mitterrand. French support was critical both to the creation of the European Coal and Steel C o m m u n i t y and to its evolution into the European Union. But France also is the home of farmers who storm Brussels and battle with police in defense of their privileges; of hunters who curse the Commission for challenging their right to shoot at will all migratory birds that fly over French soil; and of a government that jealously protects French firms and conducts nuclear tests in the South Pacific (in 1995) against the vigorous protest of its European partners. Such ambiguity and contradiction are not uniquely French, but they are distinctively French. They are rooted in strong national pride, dismay at the decline of French influence both in the world and in Europe, and fear that many aspects of traditional culture are in jeopardy, countered by a recognition that life outside the EU likely w o u l d be worse than within. This chapter has shown that France has had a significant influence on the institutions and policies of the EU. It also has shown the reverse; the EU has had substantial influence on the institutions and policies of France. From the f o u n d i n g of the European Coal and Steel C o m m u n i t y and the formation of the C o m m o n Agricultural Policy through the empty chair crisis of 1965 to the Agenda 2000 debates of 1999, France consistently has played a leading role in the design of the European integration project. Although France cannot by itself dictate what the EU institutions will look like or what the EU will do, significant changes in the design of the E U ' s institutions and policies cannot occur without French approval. French governments also have shown that they will use the European project to achieve goals in the domestic arena. French insistence on a C o m m o n Agricultural Policy not only ensured that France would enjoy a favorable trade position in agriculture

Fronce

55

with other E U m e m b e r s ; it also c o n t r i b u t e d to F r e n c h e f f o r t s to m o d ernize its agricultural sector. T h e E u r o p e a n project, h o w e v e r , requires that the m e m b e r states r e l i n q u i s h m u c h of their c o n t r o l o v e r policy areas w h e r e they previously e n j o y e d sole authority. French support of national c h a m p i o n s , for instance, has been s u b d u e d in recent years as the E U ' s c o m p e t i t i o n authorities have sought to achieve a single European market. Both the Renault and Air France cases s h o w that France can no longer p r o m o t e its own f i r m s without taking into consideration the i m p a c t its p o l i c i e s will have on other EU m e m b e r s and w i t h o u t c o n s i d e r i n g the r e a c t i o n f r o m B r u s s e l s . In short, the r e l a t i o n s h i p bet w e e n F r a n c e and the E U is not a s i m p l e one of F r a n c e i m p o s i n g its policies on the other m e m b e r s , nor one in which it f o r f e i t s all political authority to Brussels. Rather, it is one of reciprocal i n f l u e n c e s , policy a d j u s t m e n t s , and institutional evolution. Brussels is one i m p o r t a n t arena in which political p r e f e r e n c e s and interests contend. C o n t e n d i n g parties that lose out at one level m o v e to another. G o v e r n m e n t s o f t e n have used E u r o p e a n integration as a m e a n s of i m p o s i n g m o d e r n i z a t i o n on e c o n o m i c sectors that resist r e f o r m . T h e EU then f r e q u e n t l y is b l a m e d , with the result that threatened d o m e s t i c p r o d u c e r s , chastising both their o w n g o v e r n m e n t and Brussels, look to a n t i - E u r o p e a n p a r t i e s — n o t a b l y to J e a n - M a r i e Le Pen and the Front N a t i o n a l — f o r s a l v a t i o n . So long as the e c o n o m y is g r o w i n g rapidly, winners f r o m E u r o p e a n integration presumably o u t n u m b e r losers, buoying public support f o r f u r t h e r integration. In times of e c o n o m i c stagnation or decline, h o w e v e r , E u r o p e f r e q u e n t l y is p e r c e i v e d to be a m a j o r part of the p r o b l e m . T h e c y c l e of E u r o - o p t i m i s t and E u r o - p e s s i m i s m is closely related to the b u s i n e s s cycle. In France, as in other E U c o u n tries, this opinion c y c l e is likely to recur. E u r o p e a n integration is still p r i m a r i l y a b o u t e c o n o m i c s , e v e n if the p r o c e s s has spilled o v e r into other areas. W i t h o u t prosperity, public support f o r integration stalls. 5 7 T h e Maastricht r e f e r e n d u m debates p r o v i d e d clear e v i d e n c e that, even if the c u s t o m s union s e e m s secure, there is nothing inevitable about the m a r c h toward a federal union of E u r o p e . M a s s public support for Europ e a n institutions r e m a i n s shallow, limiting their legitimacy. 5 8 Here lies the greatest w e a k n e s s of the E U in time of crisis.

Notes 1. François Duchêne, "French Motives for European Integration," pp. 28-32.

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2. J e a n M o n n e t , in G e o r g e W. Ball, " J e a n M o n n e t and t h e P e r e s t r o i k a of W e s t e r n E u r o p e , " p. 4. 3. Ernst H a a s , The Uniting of Europe. 4. A s q u o t e d in J o h n N e w h o u s e , Collision in Brussels, p. 23. 5. Ibid., p. 157. 6. In a 1994 s u r v e y , in w h i c h F r e n c h r e s p o n d e n t s w e r e a s k e d to p l a c e t h e m s e l v e s on a t e n - p o i n t scale b e t w e e n " n o t at all E u r o p e a n " and " v e r y m u c h E u r o p e a n , " s l i g h t l y o v e r half s e l e c t e d p o s i t i o n s 1 - 5 , on the " n o t v e r y E u r o p e a n " side of the scale. See Eurobarometer 4 1 . 1 , q u e s t i o n n u m b e r 31. 7. J e a n F o u r a s t i é , Les Trente Glorieuses ou la révolution invisible de 1946-1975. 8. For a m o r e f o r m a i d e s c r i p t i o n of such strategies, see R o b e r t P u t n a m , " D i p l o m a c y and D o m e s t i c Politics: T h e L o g i c of T w o - L e v e l G a m e s . " 9. Stanley H o f f m a n n , " M i t t e r r a n d ' s F o r e i g n Policy, or G a u l l i s m by A n y O t h e r N a m e , " p. 301. 10. For a g o o d o v e r v i e w of t h e s e a d j u s t m e n t s , see A l l a i n G u y o m a r c h , H o w a r d M a c h i n , and Ella Ritchie, France in the European Union, c h a p t e r 2. 11. F o r an a c c o u n t of F r e n c h e c o n o m i c p o l i c y f r o m 1 9 0 0 to 1980, s e e R i c h a r d F. K u i s e l , Capitalism and the State in Modern France: Renovation and Economic Management in the Twentieth Century. 12. Elie C o h e n , " F r a n c e : N a t i o n a l C h a m p i o n s in S e a r c h of a M i s s i o n , " p. 25. 13. F o r an i n t e r p r e t a t i o n of w h y Bull f a i l e d , w h i l e J a p a n e s e " n a t i o n a l c h a m p i o n s " s u c c e e d e d , see Alan S i a r o f f and C l e m e n t Lee, " T h e State and Industrial F o l l o w e r s : J a p a n e s e Versus F r e n c h C o m p u t e r Strategy, 1 9 6 0 s - 1 9 8 0 s . " 14. Bulletin of the European Communities, 1983 (16:3), point 2 . 2 2 . 2 . 15. The Economist, M a r c h 26, 1988. 16. J e a n - F r a n ç o i s E c k , La France dans la nouvelle économie mondiale, pp. 1 9 4 - 1 9 5 . 17. Victoria M a r k l e w , Cash, Crisis and Corporate Governance, p. 121. 18. G u y o m a r c h , M a c h i n , a n d R i t c h i e , France in the European Union, p. 174. 19. M a r k l e w , Cash, Crisis and Corporate Governance, p. 122. 20. The Economist, M a y 26, 1990, pp. 7 3 - 7 4 . 21. M a r k l e w , Cash, Crisis and Corporate Governance, p. 121. 22. Ibid., pp. 1 2 2 - 1 2 3 . 23. Pierre S p a r a c o , " A i r F r a n c e B o u n c e s Back, Seeks R a p i d G r o w t h , " p. 47. 24. H u s s e i n K a s s i m , " A i r T r a n s p o r t C h a m p i o n s : Still C a r r y i n g t h e F l a g , " p. 197. 25. C o m i t é d e s S a g e s , Expanding Horizons. 26. K a s s i m , " A i r T r a n s p o r t C h a m p i o n s , " p. 198. 27. A n o n . , " A i r F r a n c e A i d A t t a c k e d . " 28. Pierre S p a r a c o , " C o n f r o n t i n g the F r e n c h A e r o f l o t . " 29. A n o n . , " A S u r v e y of F r a n c e : T h e G r a n d I l l u s i o n , " p. 6. 30. For a w e l l - r e s e a r c h e d e x p o s é that c l a i m s that public f u n d s w e r e wildly m i s u s e d and p r i v a t e f o r t u n e s m a d e in this a f f a i r , see F a b r i z i o C a l v i a n d J e a n M i c h e l M e u r i c e , Série noire au Crédit Lyonnais. 31. A n d r e w J a c k , " L y o n n a i s G o e s to M a r k e t , " pp. 2 8 - 2 9 .

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57

32. The Economist, July 31, 1999, pp. 5 7 - 5 8 . 33. Guyomarch, Machin and Ritchie, France in the European Union, p. 175. 34. Wyn Grant, The Common Agricultural Policy, p. 48. 35. Ibid., p. 12. 36. John Keeler, The Politics of Neo-Corporatism in France. 37. Guyomarch, Machin and Ritchie, France in the European Union, p. 134. 38. Ibid., p. 152. 39. Ibid., p. 147. 40. Eck, La France dans la nouvelle économie, p. 203. 41. Ibid., p. 202. A u t h o r s ' translation. 42. Ibid., p. 204. 43. Grant, The Common Agricultural Policy, p. 48. 44. Ibid., p. 76; R o s e m a r y Fennell. The Common Agricultural Policy, pp. 78. 186. 45. European C o m m i s s i o n , " C o m m u n i c a t i o n of the C o m m i s s i o n to the C o u n c i l . The Future and D e v e l o p m e n t of the C A P : Relections Paper of the C o m m i s s i o n , " p. 3. 46. Grant, The Common Agricultural Policy, p. 81. 47 Guyomarch, Machin, and Ritchie, France in the European Union, p. 145. 48. European Union Court of Auditors, Annual Financial Report, 1997. 49. Grant, The Common Agricultural Policy, p. 77. The Economist, Dec e m b e r 19, 1998, p. 65, cites the same figures for France. 50. Guyomarch. Machin, and Ritchie, France in the European Union, p. 153. 51. See John S. Ambler, ed., The French Socialist Experiment, chapters 1 and 2. 52. Parti Socialiste, Changer la vie: Programme de Gouvernement du Parti Socialiste, p. 8. 53. William James A d a m s , " F r a n c e and Global C o m p e t i t i o n , " p. 89. 54. Jacques Attali, " P o u r en finir avec l ' O M C . " 55. Anon., "A Survey of France," pp. 5 - 9 , citing O E C D data. 56. New York Times, S e p t e m b e r 22, 1988, p. A5. 57. Richard C. Eichenberg and Russell Dalton, " E u r o p e a n s and the European C o m m u n i t y : The D y n a m i c s of Public Support f o r European Integration." 58. Jean Blondel, Richard Sinnot, and Palle Svensson, People and Parliament in the European Union: Participation, Democracy, and Legitimacy, p. 118.

4

Belgium, the Netherlands, and Luxembourg: Diversity Among the Benelux Countries Jan Beyers, Bart Kerremans

& Peter Bursens

An o v e r v i e w of the E u r o p e a n policy of Belgium, the Netherlands, and L u x e m b o u r g has to start with the similarities b e t w e e n the three c o u n tries. Of course, the three are the constitutive m e m b e r s of the B e n e l u x and have m a n y historical and cultural links b e t w e e n them. E v e n if we only consider European integration issues, the similarities are striking. All t h r e e c o u n t r i e s are f o u n d e r s of the E u r o p e a n U n i o n , and for 4 0 years they have been e n t h u s i a s t i c s u p p o r t e r s of E u r o p e a n integration. A l t h o u g h this e n t h u s i a s m s e e m s to be d i m i n i s h i n g (both in the political elite and in public opinion), the Benelux countries are still considered part of the core of the E u r o p e a n U n i o n ( E U ) . H o w e v e r , d e s p i t e their similarities, the three countries have d i f f e r e n t traditions with respect to how they prepare their European policy and how they transpose and implement European treaties and law. What follows is a comparison of these p o l i c y m a k i n g features. First c o m e s an o v e r v i e w of the policy preparation, f o l l o w e d by the i m p l e m e n t a t i o n stages in the three c o u n tries respectively. Finally, we conclude with some c o m p a r a t i v e remarks.

Preparation of European Policy T h e i n v o l v e m e n t of m e m b e r states in E u r o p e a n policy is quite diverse: it ranges f r o m high-level negotiations b e t w e e n heads of state during int e r g o v e r n m e n t a l c o n f e r e n c e s to the participation of national experts in various ad hoc advisory c o m m i t t e e s that assist the E u r o p e a n C o m m i s sion in the preparation of its legislative proposals. Besides these f o r m a l r e p r e s e n t a t i o n s , m e m b e r states are also i n f o r m a l l y i n v o l v e d in E u r o pean-level politics through their m e m b e r s in the E u r o p e a n P a r l i a m e n t , 59

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t h e i r r e p r e s e n t a t i v e s in the E c o n o m i c and Social C o m m i t t e e and the C o m m i t t e e of the Regions, their c o m m i s s i o n e r s , and even through European f u n c t i o n a r i e s of their nationality. H o w e v e r , the m o s t important locus f o r m e m b e r states to s h a p e d a y - t o - d a y E u r o p e a n p o l i c i e s is the C o u n c i l of M i n i s t e r s . T h i s section t h e r e f o r e f o c u s e s on the involvement of the Benelux countries at three levels of the C o u n c i l of Ministers: the w o r k i n g - g r o u p level, the C o m m i t t e e of P e r m a n e n t Representatives ( C O R E P E R ) level, and the ministerial level. D i s c u s s i n g this involvement implies looking at several aspects: How does the c o m m u nication b e t w e e n the E u r o p e a n and the national level w o r k ? W h o exactly represents the m e m b e r states in the different layers of the Council? And what domestic coordination m e c h a n i s m s have been developed?

T h e Netherlands T h e D u t c h - E u r o p e a n policy c o o r d i n a t i o n is above all characterized by an early warning system. From the m o m e n t that a c o m m i s s i o n proposal is m a d e public, the Dutch P e r m a n e n t R e p r e s e n t a t i o n ( P R ) p a s s e s the text on to the Unit for European Integration in the Ministry of Foreign A f f a i r s , and in particular to the c r o s s - d e p a r t m e n t w o r k i n g g r o u p N e w C o m m i s s i o n P r o p o s a l s ( N C P ) , w h i c h m e e t s twice a m o n t h and is chaired by Foreign Affairs. For each proposal, this N C P w o r k i n g g r o u p a p p o i n t s a d e p a r t m e n t , or ministry, w h i c h has to f o l l o w up the prop o s a l , not only until it is f o r m a l l y a d o p t e d by the E U C o u n c i l but a l s o — i n case of a d i r e c t i v e — u n t i l it is c o m p l e t e l y transposed into the Dutch legal system. The N P C w o r k i n g g r o u p also f o r m u l a t e s a first position that serves as a starting point for d r a f t i n g the official Dutch position that will be d e f e n d e d at all levels of the Council of Ministers. Let us start with the l o w e s t C o u n c i l level, that of the w o r k i n g g r o u p s . T h e p o s i t i o n of the D u t c h r e p r e s e n t a t i v e s in the w o r k i n g groups is d e t e r m i n e d either within the responsible d e p a r t m e n t or, w h e n m o r e d e p a r t m e n t s are involved, through deliberation b e t w e e n these departments. The exact features of the f o r m u l a t i o n process d e p e n d on the policy sectors involved. S o m e sectors, such as the e n v i r o n m e n t and the s i n g l e - m a r k e t , are characterized by relatively formal coordination proc e d u r e s , while o t h e r sectors w o r k with a m o r e ad hoc strategy. In all sectors, however, the Dutch position is d e t e r m i n e d by officials w h o are specialists about the matter c o n c e r n e d . T h e N C P w o r k i n g group, and, in c a s e of c o n f l i c t , the C o o r d i n a t i o n C o m m i t t e e s u p e r v i s e s this c o o r dination. T h e o u t c o m e of this deliberation process is c o m m u n i c a t e d to o n e of the d e t a c h e d o f f i c i a l s in the D u t c h P e r m a n e n t R e p r e s e n t a t i o n .

Belgium, the Netherlands, and

F i g u r e 4.1

Luxembourg

61

The Dutch Coordination Mechanism

NETHERLANDS

EUROPEAN UNION European Commission

Permanent Representation

Foreign Affairs Ministry

COREPER

Permanent Representation

PR Instruction Committee

Coordination Committee for European Integration and Association

High Level Coordination Committee

Council

Ministries

The Netherlands is represented in the working groups by either one of these detached officials (liaison officers) or by one of the officials from a department in The Hague. The process of determining the Dutch position in C O R E P E R is slightly different. Here the central player is the Instruction Committee (IC), a cross-department committee that is chaired by Foreign Affairs

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Members

and composed of officials at the level of "heads of unit" or the equivalent. It meets every week. Remarkably, no formal links exist between the N P C working group and IC coordination. However, this lack is more than compensated for by informal coordination between the liaison officers of the departments and the functionaries and diplomats who are in charge of C O R E P E R coordination. The output of the deliberation process in the IC is communicated to the Dutch PR in Brussels, where it is screened to determine whether it is a practicable position. The IC only coordinates the proposals that are treated by C O R E P E R I and II. Issues that are not dealt with by C O R E P E R , but by committees that act on an equal footing, are coordinated within the functional departments themselves. 1 The Dutch negotiation position at the ministerial level is prepared by the Coordination Committee for European Integration and Association Issues, which meets at the deputy directors-general level or equivalent. This committee discusses all issues appearing on the agenda of the Council of the EU. Strategic policy notes (e.g., on Agenda 2000 and the IGC on institutional reform) are discussed in the High Level Coordination Committee, which is composed of the directors-general themselves. The secretary of state for foreign affairs chairs both committees, which means that the Foreign Affairs ministry has the responsibility for coordination at this level. The most controversial issues can be put on the agenda of the Council for European and International Affairs, which is chaired by the prime minister himself and consists of the ministers who handle European issues. Positions from these three committees are eventually discussed in the Dutch Council of Ministers (Kabinet), which formally decides on all positions that Dutch ministers will defend. In practice, this means that the Kabinet will rubber-stamp most of these positions and will only discuss those that are politically sensitive (i.e., when a national interest is considered to be at stake) or controversial and on which the nonpolitical interministerial level could not reach any agreement. 2 This domestic multistage process acts as an appeal system, where one can try to incorporate an opinion on a higher level if one has failed to do so at a lower level. These formal coordination systems are important for assuring the successful integration of European policy into national law. However, they must be complemented by an adequate informal communication network between all actors involved in European dossiers (compilations of EU regulations in a substantive area). The presence of European expertise in all Dutch administrations and the fact that all government departments have representatives in the PR ensures the existence of such

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and Luxembourg

63

an informal EU network. 3 Furthermore, the Dutch Foreign Affairs Ministry aims at extending these networks beyond its PR to the EU. It strives for m a x i m u m involvement of Dutch diplomats in the other EU member states and of Dutch officials in the EU institutions. Finally, the Dutch coordination mechanism is subject to permanent evaluation and is continuously adapting to the changing European context. The skeleton of formal organisms remains quite stable, but the composition of the working groups and c o m m i t t e e s and the informal communication between "Europeanists" changes. A split between the political level (parliament) and the administrative level also characterizes the Dutch case. In general, the national legislative branch is not really involved in the legislative process at the EU level. In the EU-level process, civil servants play a prominent role, while members of parliament become involved only at the moment that European legislation has to be put into practice. 4 This lack of integration between the national legislative process and the legislative processes at the EU level has stimulated the Dutch parliament's Lower House Advisory C o m m i t t e e on European A f f a i r s to propose amendments to some of the existing procedures. 5 It pleads for better and more timely information to the parliament on EU proposals and on the agenda of the Council. Our interviews with Dutch officials, however, have indicated that there is a shortage of interest and expertise within the national parliament and that the legislature largely depends on the expertise delivered by the civil service. 6 The Foreign Ministry itself is anticipating the growing complexity of issues and work loads. It is developing a new electronic communication system between the Permanent Representation in Brussels and the Ministry in The Hague that will allow all EU documents to be sent directly to the relevant departments.

Belgium

Formulation and implementation of E u r o p e a n policy in Belgium is a very intricate process because of the extremely complex state structure. Belgium is a federal state composed of separate but intermingled subnational units. 7 It consists of three r e g i o n s — t h e Flemish Region, the Walloon Region, and the Brussels Capital R e g i o n — w h i c h are responsible for many economic issues, including agriculture and environment. In addition, Belgium is also divided into three linguistic c o m m u n i ties—the Flemish C o m m u n i t y , the F r e n c h - S p e a k i n g Community, and the German-Speaking Community. These communities are responsible

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for cultural and person-related sectors such as education, family policy, and public health. 8 The federal level is responsible for inter alia home affairs, justice, and foreign and defense policy. Even if the federal level is responsible for Belgium's foreign policy, it has to share part of this responsibility with the regions and communities. 9 The reason is that, unlike many other federal states, the Belgian federation does not have a hierarchy of government levels. No federal law can overrule a subnational decree. 10 Neither can a federal executive decision overrule a subnational government decision or decree. All foreign aspects of issues that are the responsibilities of Belgium's subnational governing bodies have to be decided on by the entities themselves. This decisionmaking process is especially the case for EU issues, since most, if not all, of them fall within the jurisdiction of the subnational authorities. 11 Indeed, the regions and communities are entitled to define their own external relations with respect to all the competencies they have. For the EU treaties that touch upon the competencies of all government levels, six parliaments have to ratify them: the Federal Parliament, the Walloon Regional Parliament, the French Community Council, The Brussels Capital Council, the Council of the German-Speaking Community, and the Flemish Parliament. 12 Although the Belgian subnational governmental units have the authority to develop EU policies, these governments, because they are local and regional, are not recognized by the EU itself. Flanders and Wallonia are not member states in their own right, they are just parts of member states. In the EU, it is only the member state that has the right to act. The solution to this problem is that the regions and the communities can only act in the EU if they act jointly, i.e., if their actions in the EU commit Belgium in its entirety. 13 This condition has been clearly formulated in Article 203 TEC (formerly Article 146) and has been amended in the Maastricht Treaty acceding to requests from Germany and Belgium. The amendment allows member states to be represented in the Council of Ministers by members of a subnational unit other than the (federal) government, but only if the representatives have the power to commit the entire state, a condition that the French insisted on including in the EU Treaty. 14 Acting jointly means that a Belgian position, whenever it concerns issues that partly or completely belong to the competencies of the subnational governing bodies, has to be approved by each and every one of these units. To make matters even more complex, most of the issues dealt with in the EU, where the involvement of the subnational governments is required, refer to competencies shared by both the federal

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and the subnational levels. In these situations, Belgium can only take a position in the Council if both the federal government and each subnational level have approved that position. 15 This extensive involvement of subnational governing bodies requires strong coordinating mechanisms inside the Belgian federal state. In order to create such a system, a Cooperation Agreement has been concluded among the different governments concerned. 1 6 This agreement created a coordination system that built on the already-existing coordination system inside the federal foreign ministry, the so-called PI 1 system. 17 This system provided for coordination among the different federal ministries. Formally, such coordination had to take place for every proposal issued by the Commission. Since the entry into force of the Cooperation Agreement in March 1994, the regions and the communities are entitled to participate in these (weekly) meetings. 18 As a result, the Belgian position in the Council working groups is determined through specialized coordination systems. Some of these systems are highly formalized through special cooperation agreements; others work on an informal basis. It is important to note that the 1994 Cooperation Agreement only deals with coordination and representation in the Council of Ministers and COREPER. As a result, the Belgian position in the Council working groups is determined through specialized coordination systems. Some of these systems are highly formalized through special cooperation agreements; others work on an informal basis. But how does the coordination system for the Council work? Drafts of Commission proposals for legislation are communicated by the Belgian Permanent Representation to the Directorate of European Affairs (P11). P l l organizes weekly meetings among the representatives of different ministers, both from the federal level and from the subnational level. Each coordination meeting is structured according to the issues. For questions on environmental issues, representatives from the different environmental ministries attend. In addition, environmental coordination does not take place in P l l meetings alone. All technical aspects and some political aspects are discussed in the so-called Coordination Committee for International Environmental Policy. 19 But regardless of the issues on the P l l table, some representatives are entitled to attend all meetings, as has been stipulated in the Cooperation Agreement. These include representatives of the federal prime minister and his deputies, representatives of the subnational ministers/presidents, 20 and representatives of Belgium's PR to the EU. The main purpose of these meetings is to prepare Belgium's position for the Council of Ministers and COREPER.

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Figure 4.2 The Belgian Coordination Mechanism

EUROPEAN UNION European Commission

BELGIUM Permanent Representation

Foreign Affairs Ministry/Pi 1

Concertation Committee

Because many issues fall within both the federal and subnational jurisdictions and because many other issues also fall beyond the scope of more than one ministry (on whichever level), the formal meetings of PI 1 are overloaded with issues and by participants from all of these ministries. The solution has been to develop additional sectoral coordination

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67

systems for the first stage of the Council decisionmaking process, i.e., where deliberations occur in the working groups. There are several of these systems, but there is little consistency among them. No attempt has been made at any governmental level to initiate or coordinate procedures jointly or to bring some order into this chaotic situation. Wherever specialized coordination devices have emerged, different factors have determined their shape. 2 1 These devices range from very formalized (for environmental affairs) to extremely informal and infrequent (for social affairs). This divergence can be attributed to a few variables. First, the greater the n u m b e r of international negotiations and agreements on the issues, the more formalized the specialized coordination system. Creating and maintaining a formalized coordination system requires a cost in terms of time, money, organization, and commitment. As long as no serious external reason exists to incur these costs, they are not made and coordination continues to be informal. 2 2 Second, there are the benefits that can come from coordinating in a formal way. Formal coordination increases the capacity of consensus building, channeling information, interpreting information, and channeling subnational and federal concerns. It allows Belgium to intervene quickly at all stages of EU decisionmaking. 2 3 The balance between the costs and the benefits is largely the o u t c o m e of the extent to which there really is an EU agenda on the issues concerned. 2 4 If there is hardly anything to discuss, there is little incentive to bear the political costs of creating and maintaining a formal coordination system. If, however, EU decisionmaking on the issues concerned is important and frequent, the incentive to coordinate and to formalize specialized coordination on more issues is strong. This possibility does not mean that formal coordination automatically occurs because there is a large EU agenda. The assessment of costs and benefits of coordination is a political one. It depends on the perception of each of the g o v e r n m e n t s that it has a direct interest in formalizing coordination. In addition, a certain consensus on this need has to exist between the g o v e r n m e n t s concerned. If there is a lack of such a consensus (which is the case for social affairs), the need for more coordination tends to be fulfilled by informal devices. In other cases, such as the environment and agriculture, formal structures operate. If the specialized coordination reaches a consensus, i.e., if it reaches an agreement on the position the Belgian representative, w h o m e v e r it may be, has to d e f e n d , P l l rubber-stamps this agreement. It is then communicated to the representative concerned, who may be an official f r o m the involved specialized department, or a detached official or

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even a diplomat at the P e r m a n e n t Representation. If there is no consensus, the issue goes on the agenda of a PI 1 meeting, which will try to resolve the problem. The coordination for the C O R E P E R level is more or less similar to the one at the Council level. It is equally the PI 1 coordination that determines the instructions for the Belgian ambassador to the EU (or his deputy). Again, a distinction has to be made whether or not agreement can be reached at the PI 1 level. If a consensus is reached, the instruction is communicated to the PR. However, if there is no consensus, the matter goes on the agenda of the Inter-Ministerial Conference on Foreign Policy. This body consists of the different ministers themselves. If they also fail to reach agreement, the matter can be submitted to a Concertation Committee, composed of the prime minister and the ministers/ presidents of the subnational governments. 2 5 If they fail to compromise, there is no instruction. In that case, the Belgian representative will be unable to take a position during deliberations and will abstain during a vote in the Council. 2 6 This situation has only happened twice since the system began—on the "Television Without Borders" directive and on the directive on voting rights in municipal elections. Both of the above cases were controversial in Belgium and especially in Flanders. The directive on "Television Without Borders" implied the liberalization of the media sector and, consequently, it challenged the rather strict language regulations and the protective policy attitude in Flanders over issues combining economics and culture. In a similar way, the directive on voting rights in municipal elections caused fear in Flanders because of the expected negative impact on the position of the D u t c h - s p e a k i n g minority in the Brussels periphery. 2 7 Both issues triggered an abstention of Belgium in Council negotiations and caused major political problems during the implementation stage. Another important aspect of the Belgian case concerns the preponderance of ministerial advisors in the informal networks of highly politicized cases. Interviews with experts and various case-studies show that the eventual m a n a g e m e n t of sensitive conflicts takes place outside the f o r m a l intergovernmental institutional f r a m e w o r k . These cases demonstrate the central role of the minister's personal advisors (the so-called cabinets) and describe the informal networks these cabinets develop among each other. The voting directive is a typical example of such a politically sensitive case. The number of formal meetings was limited and the i n f o r m a l , but behind-the-scenes networking was very dense and active. Key actors in this case were the Permanent Representation, the advisors of the prime minister, the deputy prime ministers, and the ministers/presidents of the communities and regions. 2 8

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Crucial to the whole system is the fact that it grants both the federal and the subnational entities a right of veto in the determination of Belgium's policy in the Council. Theoretically, they have this veto in all cases, even on exclusive federal or subnational matters, since the representatives of the ministers/presidents are ex officio m e m b e r s of the coordination meetings. Practice shows, however, that these representatives keep a low profile whenever issues are discussed that do not fall within their jurisdiction. On all other matters (and there are a lot since many competencies are shared between the federal and the subnational authorities), they are anxious to protect their privileges. As has been mentioned, Article 203 T E C makes it possible for Belgium to be represented in the Council by a m e m b e r of one of its subnational governments. Therefore, the Cooperation Agreement created a representation system. This system is based on two principles: mixed delegations and rotation. 2 9 The C o o p e r a t i o n A g r e e m e n t provides for four different types of representation (I, II, III, and IV). These four types are based on a division of the EU Council of Ministers into four categories according to the Council agenda. Looking at the issues treated within the Council and comparing these issues with the competencies of the different Belgian authorities determines which governmental level (region, c o m m u nity or federal) is responsible for cases dealt with in each Council. In the representation, the distinction between the leader of the delegation and the assessor is crucial. The leader of the delegation negotiates and votes whenever necessary. The assessor assists the leader and consults the governments and federal ministerial departments that are not present in the Council negotiations (e.g., when additional concessions are required). 3 0 T h e Council of category I and category IV deal mostly with matters that fall within the exclusive c o m p e t e n c i e s of the federal state (e.g., e c o n o m i c and financial issues in the Council of E c o n o m i c and Financial Ministers, E C O F I N ) or within the exclusive competencies of the subnational entities (e.g., culture and education). T h e r e f o r e , Belgium is represented by members of the federal government only in the Council of category I and by m e m b e r s of the subnational governments only in the Council of category II. Representation in the Council of categories II and III is more complicated. The Council of category II deals mostly with matters that belong to the competencies of the federal state but also where the subnational authorities have some supplementary powers (e.g., internal market, transport and energy). 3 1 In that case, the Belgian delegation will be headed by a m e m b e r of the federal government and assisted by a member of one of the subnational governments.

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T h e C o u n c i l of c a t e g o r y III deals m o s t l y with matters that fall within the j u r i s d i c t i o n of the s u b n a t i o n a l g o v e r n m e n t s , but the f e d e r a l state has also kept s o m e s u p p l e m e n t a r y p o w e r s (e.g., research and industry). In that case, there is a s u b n a t i o n a l leader of the delegation w h o is assisted by a m e m b e r of the federal g o v e r n m e n t . T h e q u e s t i o n of w h i c h of the subnational g o v e r n m e n t s will represent B e l g i u m in the Council of categories II, III, and IV is regulated by a rotation system. For every C o u n c i l , it is indicated w h i c h g o v e r n m e n t will be in charge for a specific period of time. At the end of every sixm o n t h rotation period (like the C o u n c i l presidencies) there is a change in the subnational representation (e.g., a Walloon colleague will replace the F l e m i s h r e p r e s e n t a t i v e ) . T h i s list a l l o w s B e l g i a n ' s E U p a r t n e r s to k n o w w h o will represent Belgium in that particular Council during that particular semester. 3 2

Luxembourg Preparation of EU policy within L u x e m b o u r g is relatively simple. Due to the small size of the a d m i n i s t r a t i o n , c o m p l e x c o o r d i n a t i o n m e c h a n i s m s such as exist in the other two B e n e l u x countries are not necessary. T h e system only c o v e r s the m o s t essential steps. It r e s e m b l e s in m a n y w a y s the core of the systems of Belgium and the Netherlands. Indeed, even L u x e m b o u r g has to p r e p a r e positions for all three levels of C o u n c i l m e e t i n g s (ministerial, C O R E P E R , and working g r o u p s ) . D r a f t s of the C o m m i s s i o n ' s l e g i s l a t i v e p r o p o s a l s are first disp a t c h e d to the M i n i s t r y of F o r e i g n A f f a i r s , w h o d i s t r i b u t e s the d o c u m e n t s to o n e or m o r e of the vertical or s p e c i a l i z e d d e p a r t m e n t s that will b e c o m e responsible f o r the preparation and the i m p l e m e n t a t i o n of the EU legislation c o n c e r n e d . It is r e m a r k a b l e that these vertical ministries d e t e r m i n e the v i e w p o i n t s that will be d e f e n d e d in the w o r k i n g g r o u p s of the Council. T h e F o r e i g n A f f a i r s Ministry is not necessarily b r i e f e d on t h e s e m a t t e r s . M o r e o v e r , if L u x e m b o u r g is r e p r e s e n t e d in the w o r k i n g g r o u p s by officials f r o m the vertical d e p a r t m e n t s , not even the PR in Brussels has to be b r i e f e d . A b r i e f i n g only o c c u r s automatically if L u x e m b o u r g is r e p r e s e n t e d by a PR diplomat or by an official d e t a c h e d f r o m a vertical d e p a r t m e n t . 3 3 S i n c e this s i t u a t i o n is e x c e p tional, there is, at least at the w o r k i n g - g r o u p stage, v e r y little f o r m a l c o m m u n i c a t i o n b e t w e e n the vertical d e p a r t m e n t s and the h o r i z o n t a l services of F o r e i g n A f f a i r s , either the ministry or the P R . 3 4 T h e PR in B r u s s e l s only b e c o m e s really involved w h e n the positions f o r the C O R E P E R - l e v e l m e e t i n g s h a v e to be p r e p a r e d . At t h i s

Belgium, the Netherlands, and Luxembourg

Figure 4.3

71

The Luxembourg Coordination Mechanism

[EUROPEAN UNION European Commission

LUXEMBOURG Permanent Representation

Working Groups

COREPER

Foreign Affairs Ministry

Departments

Permanent Representation

Departments

Committee on the EU

Departments

Council

Ministries

level, Luxembourg has to be represented by the Permanent Representation, and needs information from the vertical departments. The PR uses a written procedure that asks for input from the experts in the departments. It is often only at this point that the PR becomes acquainted with the position defended at the working-group level. Frequently, no answer comes from Luxembourg because there is no expert, or because Luxembourg considers the matter relatively unimportant. In the latter case, dossiers are often not prepared for the EU level because services are understaffed and cannot cope with European input. The officials simply have to concentrate on the issues that are crucial for Luxembourg, and the Foreign Affairs Ministry does not play a central role.

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Information, if any, flows directly from the vertical department to the PR in Brussels. Only important issues or issues that have to be coordinated between more than one Ministry, are put on the weekly agenda of the EU C o m m i t t e e in L u x e m b o u r g . This c o m m i t t e e , chaired by the minister of foreign affairs, consists of the ministers of the involved departments and the ambassador of the PR. 3 5 The prime minister is always represented on the EU Committee. Input for the meetings of the Council of Ministers happens both directly and informally between the vertical departments and the minister. Again, Foreign Affairs does not play a coordination role. Frequently, however, the minister concerned meets informally with the PR diplomats in order to briefly discuss the strategy for the Council meeting. In case of highly controversial issues or of issues that have tremendous political importance for L u x e m b o u r g (e.g., harmonization of turnover taxes, banking disclosure rules), the government itself will discuss the issue. This situation normally occurs when the minister concerned asks the prime minister to put the issue on the government's agenda. 1 6 Overall, the Luxembourg coordination mechanism is characterized by an extreme degree of informality and pragmatism. Formal structures are limited to a strict m i n i m u m and are not always activated. If the issue allows, the preparatory stage is developed informally. Only with respect to crucial issues or issues that have to be coordinated between different departments, 3 7 does the formal mechanism come into action. This scenario can be very well illustrated by the role of the PR, which often acts informally, and mediates when necessary on an ad hoc basis, and which rarely follows institutionalized procedures. The benefit of such a way of voting allows the PR to follow issues very closely and above all to interfere directly whenever necessary.

I m p l e m e n t a t i o n of European Policy The three Benelux countries differ sharply from each other with respect to their implementation records. Based on the figures for the amount of EU legislation reported to the European Commission in 1998 as having been legally transposed, the Netherlands belonged near the top, Luxembourg and Belgium, somewhat surprisingly, were at the bottom. These figures differ strongly when different policy sectors are compared. Some sectors have no implementation problems; others are very problematic. Of course, these f i g u r e s must be treated very carefully. Notification does not tell the full story since it does not take into account the

Belgium, the Netherlands, and Luxembourg

T a b l e 4.1

T h e N o t i f i c a t i o n R e c o r d s o f t h e 15 M e m b e r

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States

Percentage Notification Rate

Percentage Notification Rate

31/12/98

31/12/97

98.2

97.0

97.3 97.1

95.1 96.3

97.0 96.7 96.7 96.4

97.3 93.6 96.4 94.7 94.1

Member-State Denmark Spain Finland Sweden Germany Netherlands United K i n g d o m Ireland Austria Portugal Belgium France Luxembourg Greece Italy Community Average

95.5 95.0 94.8 94.7 94.4 94.2 93.8 93.6 95.7

94.3 93.5 91.8 93.6 94.2 92.8 92.5 94.0

Source: European C o m m i s s i o n , "16th Annual Report on Monitoring the Application of Community Law—1998."

C o m m i s s i o n ' s examination of the notification but only the subjective national perception that a particular directive has been transposed legally in a correct manner. This d i f f e r e n c e in interpretation opens a n u m b e r of possibilities. Some states are tougher on themselves than others and open themselves to more infringement procedures because they report more. Others are less aware of implementation problems, or lax about reporting them. So the figures must be interpreted in light of national procedures. For example, Belgium and Luxembourg tend to be strict reporters making their total record seem even worse than it actually is. Let us therefore examine some other statistics as well. Table 4.2 shows a different picture. When it comes to infringement procedures, the Netherlands seems to be one of the best pupils of the E u r o p e a n class, L u x e m b o u r g is situated s o m e w h e r e halfway, while Belgium is almost at the bottom. We now turn to the formal and informal features of the implementation mechanisms. Afterwards, we relate these features to the implementation records of each country by pointing to some tentative explanations. The transposition of European law into the domestic order is rather similar in the three Benelux countries. T h e r e is, at least, less variation than with respect to policy formulation, which is partly due to the

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Table 4.2 T h e Infringement Records of the I 5 Member States Reasoned Opinions

R e f e r r a l s to t h e Court

Total number

Letters of formal notice

Denmark

51

40

10

1

Netherlands

54

28

23

3

69 70 102

52 54

16

1

Sweden United Kingdom

66

15 35

1 1

Luxembourg

112

62

39

11

Austria Spain

118

76 78

38

4

36 46 46 57

6 10 5

Member-State

Finland

Ireland Germany Portugal Greece

120 129 139 142 162

63 88 80 95

51

5 16

Belgium

186

88

78

20

Italy France

217 238

110 121

91 94

16 23

Source: European C o m m m i s s i o n , "16th Annual Report on Monitoring the Application of Community Law—1998."

institutional constraints that a c c o m p a n y legal transposition. Not m u c h variation is p o s s i b l e w h e n all m e m b e r states are o b l i g e d to t r a n s p o s e E u r o p e a n Treaty p r o v i s i o n s , d i r e c t i v e s , and r e g u l a t i o n s into their national legal systems. D e s p i t e the similarities, some d i f f e r e n c e s can be observed with respect to f o r m a l and i n f o r m a l p r o c e d u r e s and with respect to their e f f e c t on i m p l e m e n t a t i o n records.

The Netherlands T h e transposition of E u r o p e a n regulations and directives is not the responsibility of o n e single D u t c h authority. C o n t r a r y to the central p o sition of the Foreign A f f a i r s Ministry in the policy f o r m u l a t i o n process, transposition is a shared responsibility of the respective supervising dep a r t m e n t s . T h e F o r e i g n A f f a i r s M i n i s t r y only has an i n f o r m i n g , c o o r dinating, and facilitating role. 3 8 T h e Ministry of Justice bears the overall r e s p o n s i b i l i t y for the quality of D u t c h law, i n c l u d i n g the E U l a w s that have to be i m p l e m e n t e d in the N e t h e r l a n d s . Within the N e t h e r l a n d s , the i m p l e m e n t a t i o n p r o c e s s starts d u r i n g the first stages of a p r o p o s a l , i.e., d u r i n g the d r a f t i n g stage w i t h i n the E u r o p e a n C o m m i s s i o n . F r o m the m o m e n t that a n e w p r o p o s a l is revealed, it is put on the a g e n d a of the N C P w o r k i n g g r o u p that allocates

Belgium, the Netherlands, and Luxembourg

F i g u r e 4.4

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The Dutch Implementation Mechanism

EUROPEAN UNION Proposal European Commission Common Position Council of Ministers

NETHERLANDS

X

/

Working Group New Proposals Ministry Responsible

Permanent Representation

Foreign Affairs Ministry

Adoption Council of Ministers

Consultations Interdepartmentj Committee i European Law j

Ministry Responsible Council of State

Ministry of Justice Ministry OR Parliament

Notification European Commission

Permanent Representation

Ministers or Executive

Publication

Interdepartment! Working Group i Notification

the proposal to the department that will be responsible f o r both the preparation of the Dutch position and its transposition into the Dutch legal order. H a l f w a y through the European legislative process, there is a check to see whether the administration is still following the journey of the proposal: at the moment of the adoption of a " c o m m o n position" in the Council, the responsible national department drafts an implementation plan that indicates the national legislation that has to be written or altered. 3 9 Finally, from the moment that a directive is published in the o f f i c i a l journal, the Ministry of Foreign A f f a i r s reminds

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the department responsible for the duty of transposing the European law, and it urges the department to propose measures. 4 0 Once a directive is fully incorporated into the Dutch legal order and published, the PR is notified, and it in turn notifies the Commission of the transposition. 4 1 The Dutch implementation process is characterized by several checkpoints that monitor the progress of the implementation. First of all, the N C P working group is obliged to write a report on the status questionis of the European implementation. This report is discussed in the Dutch Council of Ministers. Second, an Inter-Department Committee on European Law, with a subcommittee for implementation, was set up to coordinate the transposition of EU law in which more than one department is involved. 4 2 It is also responsible for the execution of the j u d g m e n t s of the European Court of Justice. This subcommittee is chaired by the Ministry of Justice and welcomes representatives from all departments. Finally, an Inter-Department Working Group Notification was created, which is again chaired by the Ministry of Justice and monitors all notification duties of the Dutch government. T h e transposition of the Directive on Public Procurement of Imm o v a b l e Property (89/440) is a good illustration of the Dutch case. 4 3 This directive has been i m p l e m e n t e d by two different legal instruments: one ministerial order and one amendment to an earlier act. The f o r m e r transposition was the responsibility of the Ministry for H o m e A f f a i r s and the Ministry of Finance. However, since the Ministry for Economic Affairs negotiated the directive, the transposition took place within the f r a m e w o r k of interdepartmental consultation between the three mentioned ministries, and also included the Ministry for Transport, Public Works, and Water Management and the Ministry for Housing, Planning, and Environment. The latter transposition was the sole responsibility of the Ministry for H o m e Affairs. However, wide consultations were organized, including several other ministries and interested p a r t i e s — f o r e x a m p l e , the Association of Dutch Provinces, the Union of Water Control Boards, the Union of Dutch Municipalities, and the Council of Municipal Finance. As has already been mentioned, the Netherlands has a fairly good implementation record. Sometimes, however, the Court of Justice has to deal with cases in which the Netherlands is involved. During the preliminary administrative stage of such a case, Foreign Affairs monitors the timing in order to answer to the Commission. An overview of these cases is discussed within the N C P working group. Once a case is brought before the Court, Foreign Affairs takes the lead in the defense, which means that it coordinates the position that has to be d e f e n d e d .

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This c o o r d i n a t i o n takes place within the s u b c o m m i t t e e for preparation of the I n t e r - D e p a r t m e n t C o m m i t t e e on E u r o p e a n Law. T h i s s u b c o m mittee also m o n i t o r s the j u d g m e n t s of the C o u r t in general and d r a w s attention to the o n e s that could have r e p e r c u s s i o n s on the N e t h e r l a n d s . The s u b c o m m i t t e e reports to the D u t c h Council of Ministers. F o r m a l structures alone c a n n o t explain the excellent D u t c h implementation record. The Foreign A f f a i r s Ministry claims to play an active role in m a n y dossiers and to have a positive e f f e c t on the N e t h e r l a n d s ' i m p l e m e n t a t i o n r e c o r d . T h e D u t c h see t h e m s e l v e s as initiators of a drive t o w a r d vertical d e p a r t m e n t s . T h e y try, for i n s t a n c e , to steer the a p p o i n t m e n t of officials who will be responsible to f o l l o w up a dossier. T h e y strive f o r e f f e c t i v e c o m m u n i c a t i o n b e t w e e n t h o s e w h o are res p o n s i b l e f o r the preparation of the D u t c h position and those w h o are r e s p o n s i b l e for its transposition. T h e y even strive for the a p p o i n t m e n t of the same official for both tasks. T h e b e n e f i t of this a p p r o a c h is that it a l l o w s the D u t c h n e g o t i a t o r s to a n t i c i p a t e p r o b l e m s in the implem e n t a t i o n of d i r e c t i v e s that are being d i s c u s s e d in the EU on the o n e hand, and also to assess the broader legal m e a n i n g of the provisions in directives they have to transpose into Dutch law. T h e a b o v e m a k e s it clear that both f o r m a l p r o c e d u r e s and i n f o r m a l c o m m u n i c a t i o n play i m p o r t a n t roles in the D u t c h i m p l e m e n t a t i o n of EU law. But o f f i c i a l s involved in this p r o c e s s have also pointed to the important role of cultural factors. It would be u n b e a r a b l e f o r Dutch o f f i c i a l s not to t r a n s p o s e E u r o p e a n law into D u t c h law. T h e D u t c h are p r o u d of this g o o d r e c o r d and w o u l d be very e m b a r r a s s e d if they failed, and the record b e c a m e public. Of course, the N e t h e r l a n d s d o e s not a l w a y s a c h i e v e a correct or e v e n an " o n t i m e " i m p l e m e n t a t i o n . But b a c k l o g s are a l w a y s quickly r e m e d i e d . "We may sin f r o m time to time, but w e always p u r i f y ourselves very quickly," as one interviewee put it.

Belgium T h e B e l g i a n i m p l e m e n t a t i o n process e q u a l s the c o m p l e x i t y of its f o r m u l a t i o n p r o c e s s . O v e r a l l , B e l g i u m has a f a i r l y b a d r e c o r d w h e n it c o m e s to i m p l e m e n t i n g E u r o p e a n directives. Its record is a r e m a r k a b l e contrast to the p r o i n t e g r a t i o n p o s i t i o n s that are o f t e n taken during the p r e p a r a t o r y legislative stages. B e l g i u m s e e m s to think in a e x t r e m e l y E u r o p e a n way, but it c a n n o t a l w a y s i m p l e m e n t what has been agreed at that E u r o p e a n level. W h y is B e l g i u m ' s i m p l e m e n t a t i o n record so p o o r ? P e r h a p s the a n s w e r c o u l d c o m e f r o m l o o k i n g at B e l g i u m ' s t r a n s p o s i tion m e c h a n i s m s . 4 4

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Despite its bad record on implementation, Belgium starts quite early with its f o l l o w - u p for new proposals. The so-called sans numéros, or first drafts f r o m the C o m m i s s i o n , are c o m m u n i c a t e d by the PR to the P l l Directorate and the Directorate for Legal A f f a i r s (J 12), both within Foreign Affairs. These documents are also distributed directly by the PR to the responsible vertical departments. Within these departments, the dossiers are given to a unit that is responsible for implementation. A f t e r publication in the official journal, the real implementation process starts. The representatives of the vertical departments distribute the relevant information to all of the departments that they assume will be involved in the implementation process of a particular dossier. Next, this information goes to the European coordinators 4 5 and to J12. These coordinators, in their turn, communicate the EU directive or legal provision to the unit within their department that is responsible for the transposition. The internal c o m m u n i c a t i o n and follow-up are completely dependent on the personal engagement of the coordinators and the administrative culture of the d e p a r t m e n t s involved. In addition, J12 sends a form to the unit responsible for the implementation. This form has to be completed within one month. It contains questions about the official who is in charge of the transposition, the other units or departments that are involved, and the way in which the directive will be implemented (law, royal decision, or ministerial decision). It also includes a provisional time schedule for the transposition process. Here, the unit concerned has to predict when consultations will be held, when the opinion of the State Council 4 6 is expected, when it will be discussed in parliament (if necessary) and when it will be approved and published. 4 7 Practice shows however, that the success of this system depends to a large extent on the goodwill of the units concerned, since no sanction can be applied if the form is not c o m pleted or if it is badly completed. The transposition of a directive in Belgian law mainly takes place within one horizontal department, although several other bodies may be involved. Typically, the unit responsible prepares the first texts, which are sent to one or several consultation bodies, such as the National Labor Council, for an opinion. 4 8 Then a second draft is made, which is screened by the personal advisors (the "cabinet") of the minister. T h e next step consists of obtaining the opinion of the State Council, which is nearly always obligatory. A f t e r w a r d s , a third draft is written that, after political screening by the ministerial cabinet, will be sent to either the parliament or the government, depending on the legal instrument to be used. After adoption, the Belgian official journal publishes the text.

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Figure 4.5

and Luxembourg

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T h e Belgian I m p l e m e n t a t i o n Mechanism

EUROPEAN UNION

BELGIUM

Proposal European Commission

Foreign Affairs Ministry/PI 1 Ministerial European Co-ordinators

Permanent Representation Adoption Council of Ministers

X

Foreign Affairs Ministry/J12 Ministerial Services Responsible Consultations

Ministry & Cabinet

Council of the State

Ministry & Cabinet OR Federal or Regional Parliament Notification European Commission

Permanent Representation

\

Federal or Regional Executive

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When the final text is published, the PR notifies the Commission of the directive's transposition. In the case of unsuccessful implementation, J12 becomes the center of the defense toward, in the first stage, the Commission, and, in a second stage, the Court of Justice. If the C o m m i s s i o n issues a "reasoned o p i n i o n , " J12 contacts the coordinator concerned to find out what went wrong and what stage the transposition has reached. Next, the unit responsible has to write an answer to the Commission and has

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to t r a n s m i t this a n s w e r to J 1 2 and the P R . If the C o m m i s s i o n is not satisfied with the a n s w e r , it can b r i n g the c a s e b e f o r e the C o u r t . T h e n , the d o s s i e r l e a v e s J 1 2 and is t r e a t e d by a n o t h e r unit w i t h i n t h e legal serv i c e s of the M i n i s t r y f o r F o r e i g n A f f a i r s , w h i c h f o l l o w s the case until the E u r o p e a n C o u r t m a k e s a j u d g m e n t . Finally, J 1 2 h a s to r e p o r t the status questionis of the B e l g i a n i m p l e m e n t a t i o n to the B e l g i a n C o u n cil of M i n i s t e r s . M u c h of the i m p l e m e n t a t i o n f a l l s u n d e r the a u t h o r i t y of t h e s u b national g o v e r n m e n t s . As is the case with policy f o r m u l a t i o n , t h e s e authorities c a n n o t deal with the E U directly, nor can the E U deal directly with t h e m . T h u s , the E U c a n n o t i m p o s e s a n c t i o n s on the regional level, but only on the m e m b e r state, B e l g i u m . F u r t h e r m o r e , the a b s e n c e of a h i e r a r c h y within B e l g i u m p r e v e n t s the f e d e r a l g o v e r n m e n t f r o m reprim a n d i n g s u b n a t i o n a l a u t h o r i t i e s for their f a i l u r e s . T h e B e l g i a n c o n s t i t u t i o n o n l y p r o v i d e s a right of s u b s t i t u t i o n in case of a c o n v i c t i o n by the E u r o p e a n C o u r t of J u s t i c e . In this c a s e , the f e d e r a l g o v e r n m e n t c a n t a k e the p l a c e of a s u b n a t i o n a l a u t h o r i t y and h a n d l e the i m p l e m e n t a tion. S u b s t i t u t i o n has n e v e r b e e n used so far, and it s e e m s h i g h l y unlikely that it will e v e r be u s e d , b e c a u s e of the f e a r of d i s t u r b i n g the d e l i c a t e b a l a n c e of p o w e r s within B e l g i u m . M o r e o v e r , there w o u l d be legal p r o b l e m s b e c a u s e it is u n c e r t a i n w h e t h e r t h e a b s e n c e of a h i e r a r c h y a l l o w s a f e d e r a l law to r e p l a c e a s u b n a t i o n a l d e c r e e . T h e r e are also p o s s i b l e f i n a n c i a l c o n s e q u e n c e s of a c o n v i c t i o n . I n d e e d , a f t e r t w o c o n v i c t i o n s there w o u l d be a f i n e . F u r t h e r m o r e , if B e l g i u m ' s c o n v i c tions w e r e c a u s e d by the u n w i l l i n g n e s s of a r e g i o n or a c o m m u n i t y to i m p l e m e n t E U p o l i c i e s , it is u n c l e a r w h o w o u l d pay the f i n e . T h e r e is as yet no d e c i s i o n on h o w to h a n d l e this p r o b l e m . T h e c o m p l e x t r a n s p o s i t i o n s y s t e m is u n d o u b t e d l y o n e of the m o s t i m p o r t a n t f a c t o r s e x p l a i n i n g the B e l g i a n b a c k l o g . S e v e r a l structural asp e c t s m u s t be c o n s i d e r e d , of w h i c h the f e d e r a l - s t a t e s t r u c t u r e is o n l y o n e . O t h e r institutional f a c t o r s include the i n c o m p a t i b i l i t y b e t w e e n E u r o p e a n r e g u l a t i o n and the n a t i o n a l c o n t e x t , and the p o o r f u n c t i o n i n g of t h e B e l g i a n s e r v i c e s i n v o l v e d ( u n d e r s t a f f i n g , lack of e x p e r t i s e ) . B e s i d e s t h e s e structural v a r i a b l e s , soft v a r i a b l e s also play a role, such as the l o w priority g i v e n to i m p l e m e n t a t i o n of E u r o p e a n r e g u l a t i o n s , the lack of interest in i m p l e m e n t a t i o n of E u r o p e a n r e g u l a t i o n s a m o n g national a c t o r s , and the political o p p o s i t i o n f r o m political parties a n d int e r e s t g r o u p s . Finally, t h e l a c k of c o m m u n i c a t i o n a n d c o n t i n u i t y b e t w e e n t h e i n v o l v e d a c t o r s m a y a l s o h a v e an i m p a c t on the s u c c e s s rate of the t r a n s p o s i t i o n m e c h a n i s m s .

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Luxembourg The implementation of European policies in Luxembourg is very similar to its policy preparation stage, to the extent that it also happens to be informal. After the adoption and publication of a European directive, the PR communicates the relevant texts to the Ministry of Foreign Affairs, who distributes them to the ministerial services responsible for implementation. These are nearly always the same officials who have already been supervising the preparatory stage. The implementation process is monitored by a network of European correspondents, one of whom is posted in every vertical department. These correspondents meet only three times a year and come into action only when problems arise. If implementation goes smoothly, a process similar to the Belgian and the Dutch system is followed. This process implies that the ministerial departments responsible for implementation prepare a draft of the document that will implement the European rule. This draft can be a law or an executive decision by the government. These drafts are consecutively scrutinized by one or more consultation bodies. A second (potentially amended) version is sent to the Council of State for an opinion, after which a third draft is written. The latter is the basic text that is discussed and adopted by the parliament or by the government, depending on the form that was chosen. After adoption and publication, the PR is notified and the PR in turn notifies the European Commission about the transposition. The Luxembourg implementation process is also a rather extensive and time-consuming system. Nevertheless, the implementation record of Luxembourg is better than the Belgian record and according to our interviewees, transposition is handled in a rather adequate manner. 4 9

Conclusion The three Benelux countries have a lot in common as far as the European Union is concerned. They are all relatively small countries. They are all founding m e m b e r states of the EU and they all share the conviction that further European integration, even political integration, is necessary. But this commonality in size, European integration history, and objectives do not mean that the three countries organize themselves in the same way when they either defend their interests in the EU or implement its decisions. Their governmental organizations depend much

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Figure 4.6

The Luxembourg Implementation Mechanism

EUROPEAN UNION

LUXEMBOURG

Foreign A f f a i r s Ministry

Permanent Representation Adoption Council of Ministers Ministerial Services Responsible

Consultations

Ministry j Network of j j European j j Correspondents j

Council of State

Ministry OR Parliament

Notification European Commission

Permanent Representation

Executive

\

/

Publication

more on their internal characteristics, on their political culture, on the amount of r e s o u r c e s they c a n set a s i d e f o r their E U i n v o l v e m e n t , on the size of their administrations, and on other internal political characteristics (such as B e l g i u m ' s f e d e r a l state structure). T h e c o n s e q u e n c e s are that, despite s o m e s i m i l a r i t i e s in o b j e c t i v e s , these countries each deal with the E U in their o w n separate w a y s . A s f a r as p o l i c y formulation is concerned, a clear picture seems to e m e r g e in w h i c h there is a c o n t i n u u m to measure h o w the m e m b e r

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states will implement EU policies. The Netherlands and Luxembourg are on the two extremes and Belgium is in the middle. Indeed, the Netherlands provides by far the most formalized coordination system, and Luxembourg works through extremely informal mechanisms. In the Luxembourg case, the fact that only a limited number of people can be involved requires a kind of coordination that is both feasible and less costly. There are important differences between the three Benelux countries, but these differences should not be overstressed and should be considered as a matter of degree. It is surprising that, although the political and institutional contexts are different, similar problems are mentioned by officials of the three countries. Many EU regulations and directives crosscut traditional spheres of competencies and various ministries and levels of governance are involved in the implementation and decisionmaking process. 50 The domestic political structures of the Benelux countries are typical examples of consociational democracies, where the political process aims to build consensus within societies in which myriad political and societal actors are involved. A political infrastructure that is functionally designed to achieve consensus within a national domestic and cleavage system is not necessarily suitable for taking an active part in EU decisionmaking and/or implementation. Given these similarities, the distinction between the Netherlands and Belgium seems to be derived from the very different state structures of both countries. 51 In comparison with the Netherlands, Belgium is characterized by extreme cleavages, and so needs its highly complex state structure, with both formal and informal devices. Whereas the formal structures provide guarantees, the informal ones allow extensive coordination at a relatively low cost. Indeed, formal devices provide the guarantee to each of the participants that whenever rights are hurt, tools are available to correct the situation. The informal devices are important because convening every participant each time a decision has to be made makes the process time consuming and, therefore, costly. Given the fast pace of decisionmaking in the EU, and the heavy load on the EU agenda, such a way of working is neither effective, nor feasible. For Belgium, to coordinate through a multitude of both formal and informal mechanisms is a way to reconcile its complex internal structures and sensitivities with its obligations as a member of the EU. For a more centralized state such as the Netherlands, which is inclined toward clearly stated rules and many formalities, informal devices of coordination seem to be both less necessary and less accepted. That means that political culture (formal behavior) combined with

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institutional structures (a relatively centralized state) explains why formal w a y s of working prevail. F o r L u x e m b o u r g , to invest in f o r m a l i z ing its internal coordination is j u s t too costly, given its small resources. At the s a m e time, however, it has a number o f tools that can be mobilized whenever a national interest is at stake in the E U . L u x e m b o u r g works formally if urgently necessary, but informally in most c a s e s . C o n c e r n i n g i m p l e m e n t a t i o n , there are f e w e r d i f f e r e n c e s between the three countries in the p r o c e s s they use to t r a n s p o s e E U rules into national laws. All three try to start this p r o c e s s as early as p o s s i b l e , which s e e m s to work more smoothly in the c a s e of the Netherlands and L u x e m b o u r g . B e l g i u m s t r u g g l e s with the c o m p l e x i t y of its own internal structures and is still in the p r o c e s s of adaptation. R e s p e c t for the autonomy of its own subnational entities has to be reconciled with its need to fulfil its obligations as a m e m b e r of the E U . That task is often daunting indeed, which is s h o w n by the i m p l e m e n t a t i o n r e c o r d s of these three countries. B e l g i u m has by far the worst p e r f o r m a n c e of the three. T h e Netherlands and L u x e m b o u r g perform much better. C o m p a r e d with policy f o r m u l a t i o n , the p r o c e s s e s the three countries use to i m p l e m e n t p o l i c i e s are m o r e alike. T h e s e similarities are normal b e c a u s e E u r o p e a n institutional constraints are stronger in the c a s e of implementation than in the c a s e of formulation. In formulating policy, the national p r o c e s s largely precedes the E u r o p e a n one. In implementing policy, the national p r o c e s s f o l l o w s the E u r o p e a n one and is largely affected by it. T h e s e c o n c l u s i o n s are interesting from the point of view o f European integration. They point to the fact that all E u r o p e a n countries are a f f e c t e d by the p r o c e s s of E u r o p e a n integration. T h e y all invest considerably in integration in order to equip themselves to protect their interests at the E u r o p e a n level. The way in which the m e m b e r states implement and f o r m u l a t e E u r o p e a n policy is still largely determined by national rather than E u r o p e a n parameters. E u r o p e a n integration, therefore, impinges on the d o m e s t i c structures of the E U m e m b e r states, but d o e s not yet e r a d i c a t e their national p e c u l i a r i t i e s and mutual d i f f e r e n c e s , not even a m o n g countries as similar as those of the B e n e l u x .

Notes 1. The positions for the Article 133 coordination (formerly the Article 113 Committee) are determined in the Interdepartmental Council for Trade Policy, chaired by the Economic Affairs Ministry; those for the Special Committee on

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Agriculture are coordinated by the Ministry of Agriculture; the Article 32 (formerly K4) Committee preparations are presided over by the Ministry of Justice. B. Bot, "Coordinate van buitenlands beleid, diplomaten en diplomatieke dienst," pp. 57-58. 2. In addition, the Dutch system allows for special ad hoc steering groups to be convened when matters of high national interest are at stake. Such groups are chaired by the prime minister. The most recent ad hoc group dealt with the preparations of the AGENDA 2000 negotiations. For a more detailed description of each of the three stages, see J.M.M. Van den Bos, Dutch EC Policy-Making. 3. On the formal and informal networks see Van den Bos, Dutch EC PolicyMaking. 4. Ibid.; J.H. Van Kreveld, "Uitvoering van EG-Regelingen in Nederland," pp. 165-174. 5. The overall assessment of the Dutch parliamentary committee responsible for European affairs is that it has a moderate impact on EU affairs. In contrast, the impact of the Belgian and Luxembourg committees is considered as rather weak. T. Raunio and M. Wiberg, Does Consensus Lead to Ignorance? National Parliaments and the Legitimacy of EU Governance. 6. V.J.J.M. Bekkers et al., "The Case of the Netherlands," p. 410. 7. L. Hooghe, "Belgian Federalism and the European Community," pp. 135-165. 8. This landscape is made even more complex because the Flemish Region and the Flemish Community have merged and because some competencies of the French-Speaking Community have been transferred to the Walloon Region. 9. F. Ingelaere, "De Europeesrechterlijke draagvlakken van de nieuwe wetgeving inzake de internationale betrekkingen van de Belgische Gemeenschappen en Gewesten," pp. 67-82. 10. A decree is a subnational law. 11. Most of these issues, however, are not the sole responsibility of one of the governmental levels, but are so-called shared responsibilities. 12. This complex procedure makes it understandable that Belgium was almost the last member state to ratify the Treaty of Amsterdam and is always among the last to ratify mixed agreements concluded by the EU. 13. B. Kerremans and J. Beyers, "The Belgian Sub-National Entities in the European Union: 'Second' or 'Third Level' Players?" pp. 41-55. 14. B. Kerremans and J. Beyers, "De plaats van de federale overheid, de gewesten en gemeenschappen in de Europese Unie: consequenties van de staatshervorming en de wijziging van artikel 146 EU," pp. 647-657. 15. B. Kerremans and J. Beyers, "Belgium: The Dilemma Between Cohesion and Autonomy," pp. 14-35. 16. The agreement was concluded in 1994, which is relatively recent given the fact that the most dramatic state reforms in Belgium took place in 1988 and 1993. As far as the external competencies of the regions are concerned, the 1993 reform signified a major breakthrough. See R. Moerenhout, 1996, "De samenwerking tussen de federale staat, de gemeenschappen en de gewesten—recente ontwikkelingen," pp. 271-282; Kerremans and Beyers, "Belgium: The Dilemma."

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17. PI 1 refers to the Directorate PI 1 (European Affairs) inside the federal foreign ministry. 18. In case of busy agendas, more than one P l l meeting can take place within a week. See F. Delpérée, "Belgique," p. 84. 19. For a detailed description of the environmental coordination, see Leclercq, "La participation des autorités exécutives 'l'élaboration de la politique européenne de l'environnement," pp. 171-185. 20. These are the heads of the subnational governments. 21. B. Kerremans, "Intergovernmentalism and Coordination of Belgium's EU Policies." 22. B. Kerremans, "Determining a European Policy in a Multi-Level Setting." 23. Kerremans, 2000, o.c. 24. As a matter of fact, it not only concerns an EU agenda but an international agenda, which is the case for environment and social affairs. 25. Kerremans and Beyers, "Belgium: The Dilemma." 26. As mentioned in the memorandum attached to the Cooperation Agreement, a Belgian abstention cannot block EU decisionmaking when unanimity is required. It has, however, an effect if qualified majority is required. In that case, the five Belgian votes cannot be taken into account to reach the required 62 votes. In extreme cases, therefore, the ability of the Belgians to reach a compromise among themselves can lead to an impasse at the EU level. 27. On the voting directive and the Belgian position within the Council, see the excellent case study by Jeffrey Lewis, "Is the 'Hard Bargaining' Image of the Council Misleading? The Committee of Permanent Representatives and the Local Elections Directive," pp. 479-504. The voting directive was salient for Luxembourg as well because the number of non-Luxembourgers in Luxembourg is about 30 percent of the population; S. Beissel Merten, "Luxembourg." 28. For more inside information on this case see, Kerremans and Beyers, "Belgium: The Dilemma." Also, Jans and Tombeur show in a recent paper the crucial role of cabinets in case of highly politicized events—Maarten Theo Jans and Herbert Tombeur, "Living Apart Together: The Belgian Intergovernmental Cooperation in the Domains of Environment and Economy," Vrije Universiteit Brussel, unpublished paper. 29. Kerremans and Beyers, "The Belgian Sub-National Entities." 30. If the assessor is unable to contact his counterparts (e.g., during a meeting late at night or because of time pressure), the head of the Belgian delegation will align himself to the position that mostly reflects "the general interest." The Belgian position will become definite, however, only after it has been confirmed by a coordination meeting. See Kerremans and Beyers, "De plaats van de federale overheid." 31. Also environment and agriculture belong, surprisingly, to category II. Environmental matters fall almost completely under the authority of the regions and should therefore be moved to category III. With respect to agriculture, a recent political agreement (April 2000) has (from 2001 on) abolished the Federal Ministry of Agriculture. Agriculture will become a regional competency. However, in order to guarantee that Belgium defends a common position in the EU, Belgium will be represented by a federal secretary of state for foreign affairs, who will be assisted by the regional ministers for agriculture.

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Whether this will imply the transfer of agriculture from category II to category III is still unclear. 32. Kerremans and Beyers, "Belgium: The Dilemma." 33. The Luxembourg PR is a very small one consisting of no more than eight diplomats, including the ambassador and the adjunct-ambassador, supplemented by only a few functionaries from the Foreign Affairs Ministry, the Justice Ministry, and the Economics Ministry. Only one vertical department (Social Affairs) has got a detached functionary in Brussels. The latter is, however, somewhat compensated by the fact that the functionaries from Luxembourg are very experienced Europeans, who work several days a week in Brussels and have therefore extensive informal contacts with the PR and with their counterparts from the other member states. 34. The Foreign Affairs Ministry itself is also extremely small. A respondent reported that only 1.5 full-time equivalent is charged with European Affairs. See Beissel Merten, "Luxembourg," p. 355. 35. The ambassador travels for the occasion from Brussels to Luxembourg. 36. M. Bichler, "The Case of Luxembourg," p. 366. 37. Because Luxembourg is so small, many departments cover several sectors, which minimizes the coordination problem. 38. Ministerie Van Buitenlandse Zaken, De Staat van de Europese Unie: De Europese Agenda 1999 vanuit Nederlands perspectief. 39. On the different forms the transposition of European law can taken in the Netherlands, see V. J. J. M. Bekkers, Brussel en Nederland: Tegenliggers, spookrijders of reisgenoten?; Bekkers et al., "The Case of the Netherlands," pp. 397-440. 40. Bekkers et al., "The Case of the Netherlands," p. 409; J.G.A. Van Mierlo, "Adviesorganen en uitvoering van EG-milieubeleid," p. 221. 41. Examples of the implementation process of European directives in the Netherlands can be found in V. J. J. M. Bekkers et al., "Succes—en faalfactoren bij de uitvoering van EG-beleid," pp. 192-200. Bekkers, Brussel en Nederland; Bekkers et al., "The Case of the Netherlands." 42. This committee also provides reports on European law in general and opinions on the transposition of European law. It furthermore coordinates the Dutch position before the European Court of Justice and notifies European judgments with consequences for the Dutch legal order. The latter are tasks of the subcommittee for preparation. 43. Bekkers et al., "The Case of the Netherlands." 44. The bad implementation record has also drawn the attention of the federal government. In order to catch up with other member states, it has appointed a special commissioner charged with making up the backlog and working out more efficient and effective transposition mechanisms. 45. These European coordinators were appointed in all federal departments and in the administrations of regions and communities by the federal government. The main purpose was to establish positions to which Foreign Affairs could refer itself in case a directive had not been implemented. In this way someone was at least held responsible for non- or poorly administered implementation. Moreover, these coordinators had a role during the formulation of European policy in order to ensure a smoother implementation

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afterwards. The regional and community departments equally have such coordinators. 46. The State Council is a semijudicial body, the legal advice of which is a formal requirement in the Belgian legislative process. 47. This form was originally an obligation from the European Commission with respect to common market directives. This is still the case and the forms concerned still have to be sent to the Commission itself. 48. The National Labor Council is a body in which the representatives of the employers and of the employees meet each other to discuss labor legislation and can be considered as one of the most powerful consultative bodies in Belgium. On many occasions, no further steps may be made in the transposition until the opinion of consultative bodies as the National Labor Council arrives at the department. 49. Official and reliable sources on the performance of the transposition process in Luxembourg were unfortunately not at our disposal. It is, however, significant that almost all Belgian officials we spoke with complained about the Belgian performance, while the Luxembourg respondents were far more positive about their own administrative system (on the Belgian attitude see also J. Beyers, "How Supranational Is Supranationalism? National and European Socialisation of Negotiators in the Council of Ministers." 50. The fact that complexity is not necessarily only a function of being federalized or not can be illustrated by the implementation of a directive on higher education in the Netherlands. The directive had consequences for 20 different national laws and involved 10 different ministries. As a result implementation took one year more that the EU directive stipulated. Bekkers et al., "The Case of the Netherlands." 51. Related to this is a difference in political culture; informal ways of dealing with political and administrative problems are much more central to decisionmaking in Belgium than they are in the Netherlands.

5 Germany: A Major Player Carl Lankowski

in G e r m a n y as in m a n y of the o t h e r E u r o p e a n U n i o n ( E U ) m e m b e r states, E u r o p e a n integration is m o r e p o p u l a r with its political elite than it is with the p u b l i c . I n d e e d , in the 1990s the elite c o n s e n s u s s u p p o r t ing E u r o p e a n i n t e g r a t i o n w a s b r o a d e r than in a n y of t h e larger E U m e m b e r states with the p o s s i b l e e x c e p t i o n of Italy. T h e r e a s o n s for this support s t e m f r o m the c o u n t r y ' s past, its e c o n o m i c s t r u c t u r e and its location. In p r o v i d i n g an o p p o r t u n i t y to c o o p e r a t e with its n e i g h b o r s , E u r o p e a n i n t e g r a t i o n w a s o n e of G e r m a n y ' s c e n t r a l a v e n u e s of n a t i o n a l r e d e m p t i o n a f t e r the t r a u m a of the T h i r d R e i c h , the H o l o c a u s t , military d e f e a t , a n d o c c u p a t i o n . In t e r m s of both G r o s s N a t i o n a l P r o d u c t a n d o c c u p a t i o n s t r u c t u r e , G e r m a n y started the p o s t w a r p e r i o d as m o r e industrialized than any o t h e r c o u n t r y in E u r o p e . D i v i s i o n of E u r o p e and G e r m a n y d e p r i v e d industry of key m a r k e t s , but t h e s e w e r e r e p l a c e d by a c o m m o n m a r k e t r e a l i z e d by i m p l e m e n t i n g the o r i g i n a l m a n d a t e s of the R o m e T r e a t y e s t a b l i s h i n g t h e E u r o p e a n E c o n o m i c C o m m u n i t y ( E E C ) . G e r m a n y ' s l o c a t i o n m a k e s it E u r o p e ' s p r e m i e r transit c o u n t r y and s u b j e c t s it to d e v e l o p m e n t s in n e i g h b o r i n g c o u n t r i e s . It is m o r e exp o s e d than o t h e r E U m e m b e r s to e n v i r o n m e n t a l t h r e a t s a n d m i g r a t i o n f l o w s since the e n d of the Cold War. Most specific policy sectors operate on the basis of general support f o r integration. Yet G e r m a n y has a rather m i x e d r e c o r d of assent a n d c o m p l i a n c e in the p r o c e s s e s of p o l i c y m a k i n g a n d i m p l e m e n t a t i o n in the EU. T h e c o m p l e x i t i e s of m e s h i n g (at the time of this writing) 15 national systems of law and constitutional organization, public administration, interest intermediation, in short, the results of d e c a d e s , e v e n centuries, of s e p a r a t e d e v e l o p m e n t — p r e s e n t s f o r m i d a b l e b a r r i e r s to i n t e g r a t i v e outc o m e s at the E U level in the best of c i r c u m s t a n c e s . T h e r e f o r e , it s h o u l d

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not c o m e as a surprise that despite greater than average support for int e g r a t i o n a m o n g G e r m a n y ' s p o l i c y m a k i n g elites, G e r m a n y had the highest n u m b e r of suspected i n f r i n g e m e n t s of European U n i o n law in 1997 with 179 r e c o r d e d instances, c o n t i n u i n g a trend in w h i c h G e r m a n y led the EU in 1996 and was second in 1995. G e r m a n y ' s greatest deficiencies have been in a wide n u m b e r of areas: industry, agriculture, e n v i r o n m e n t , internal m a r k e t , and financial services, as well as c o m pany law. 1 For this reason alone, it m a k e s s e n s e to d i s a g g r e g a t e G e r m a n y ' s c o n n e c t i o n s to the EU by policy area. In this chapter, we exa m i n e aspects of e c o n o m i c policy, social policy, e n v i r o n m e n t a l policy, and security and f o r e i g n affairs issues insofar as they have an E C / E U dimension.

E c o n o m i c Policy Macroeconomic Policy and E M U Institution b u i l d i n g is a d e f i n i n g c h a r a c t e r i s t i c of " p o s i t i v e integration." In the case of E c o n o m i c and Monetary Union ( E M U ) , G e r m a n y played the leading role in s p e c i f y i n g the aims, structure, and p o w e r s of E M U ' s chief institution, the European Central Bank ( E C B ) , a task that was a c c o m p l i s h e d during the negotiations in one of the two intergove r n m e n t a l c o n f e r e n c e s l e a d i n g to the M a a s t r i c h t Treaty on E u r o p e a n Union. G e r m a n y was able to d o m i n a t e the a g e n d a for three reasons: It has a l w a y s b e e n the biggest e c o n o m y in E u r o p e ; the G e r m a n central bank e n j o y e d very high p r e s t i g e in E u r o p e and b e y o n d d u e to G e r m a n y ' s traditional ( s o m e w o u l d say l e g e n d a r y ) price stability; and what the other m e m b e r states wanted, only G e r m a n y was in a position to deliver: shared control o v e r G e r m a n y ' s m o n e t a r y policy. T h e most o b v i o u s p l a c e to b e g i n is with the f u n d a m e n t a l c h a r a c t e r i s t i c s of the E C B . That institution was set up to resemble as closely as possible the G e r m a n f e d e r a l bank ( B u n d e s b a n k ) . At G e r m a n insistence, the E C B w o u l d be a u t o n o m o u s in p o l i c y m a k i n g , f e d e r a l in structure, and m a n dated to achieve price stability as its overriding priority. But that was not all. G e r m a n y was able to e x e r c i s e its p o w e r t h r o u g h o u t m o s t of the p r o c e s s leading to the a d o p t i o n of the e u r o c u r r e n c y (by 11 of the 15 EU m e m b e r states at the t i m e of this writing). T h i s p r o c e s s is most easily seen in the a d o p t i o n of f o u r sets of " c o n v e r g e n c e c r i t e r i a " h a v i n g treaty status, the o b s e r v a n c e of w h i c h d e t e r m i n e d w h e n the euro w o u l d be launched (1997 or 1999) and when

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each m e m b e r state was permitted to join. In essence, G e r m a n y successfully insisted that in return for giving up the German deutschemark (DM) currency, E M U aspirants would have to adopt G e r m a n y ' s "stability culture." They bound themselves to macroeconomic performance criteria that included low inflation, low interest rates, low government budget deficits, and movement toward a cap on public debt of 60 percent of the c o u n t r y ' s Gross D o m e s t i c Product (GDP). The resulting quantitative targets proved to be remarkably effective in orienting actual government behavior in the period of just over five years between the coming into force of the Maastricht Treaty and the launch of the common currency. G e r m a n y ' s constitutive power was also evident in defining policy guidelines for the period to follow the transition to EMU stage III, i.e., after the ECB was up and running. Political leverage from the right wing of the G e r m a n g o v e r n m e n t fortified it in pushing for macroeconomic rules of the road that were, if anything, even more stringent than the c o n v e r g e n c e criteria. 2 A "stability pact" was adopted at the 1996 European Council in Dublin, obliging E M U " i n s " not only to maintain adherence to the convergence criteria, but to avoid running government deficits greater than 1 percent of their GDP. Noncompliance would trigger a surveillance mechanism involving the other member states and possibly lead to sanctions against the offender. Germany insisted on a series of characteristics during the negotiations, which meant that German preferences were not necessarily followed after the euro was launched on January 1, 1999. In particular, the kind of monetary target chosen by the bank's policymaking council to orient the operations of the new institution was a hybrid of German and n o n - G e r m a n practice (changes in the stock of money versus changes in the price level). It is ironic that once established as an independent arena standing " a b o v e " Germany, as it were, monetary policy became an arena that pitted German politicians against the ECB because of a change in government in Bonn. E M U was a project closely shepherded for over a decade by the government of Chancellor Helmut Kohl of the conservative Christian Democratic Union (CDU) party. A f t e r an unprecedented 16 years at the helm, Kohl was vanquished by the Social Democrats (SPD) in the federal elections of September 1998. The SPD then formed a governing coalition with the Green Party. 3 This "red/green" government came to power with a different conception of macroeconomic policy than its predecessor. An unusual political alignment of power in the governments of EU member states (13 of the 15 members' national governments had Social Democratic participation)

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g a v e rise to the h o p e that G e r m a n y c o u l d lead a d e m a n d - s i d e p o l i c y of c o o r d i n a t e d r e f l a t i o n that it w a s h o p e d w o u l d f a c i l i t a t e j o b c r e a t i o n , t h e g o v e r n m e n t ' s h i g h e s t priority. T h i s s t r a t e g y w a s to h a v e b e e n o r c h e s t r a t e d by G e r m a n y ' s n e w s u p e r m i n i s t e r f o r f i n a n c e a n d E u r o p e a n p o l i c y c o o r d i n a t i o n , O s k a r L a f o n t a i n e , w h o d o u b l e d as the h e a d of the S P D . His E u r o p e a n policy initiative w a s linked to a l o n g - s t a n d i n g c o n t r o v e r s y in the e c o n o m i c p o l i c y c o m m u n i t y within G e r m a n y in w h i c h he r e p r e s e n t e d the m i n o r i t y view. W h i l e a d m i t t i n g that G e r m a n y ' s une m p l o y m e n t had an important structural d i m e n s i o n , a vocal m i n o r i t y of e c o n o m i c p o l i c y a n a l y s t s a r g u e d that E M U c o n v e r g e n c e o v e r d i d s p e n d i n g cuts and e x a c e r b a t e d the p r o b l e m . T h e s o l u t i o n to the p r o b lem w a s a m o r e f o r g i v i n g i n t e r e s t - r a t e p o l i c y that w o u l d s u p p o r t d o m e s t i c d e m a n d and d o m e s t i c industry. In the context of the E M U , G e r m a n y could not c o n d u c t a d e m a n d - s i d e policy without m o b i l i z i n g o t h e r E U g o v e r n m e n t s a n d the E C B b e h i n d the p l a n . A n y i s o l a t e d G e r m a n e f f o r t to s p e n d itself out of its j o b s d i l e m m a w o u l d m a k e it an a l m o s t i m m e d i a t e c a n d i d a t e f o r s a n c t i o n s u n d e r the Stability and G r o w t h Pact. It is u n c l e a r h o w m u c h the " E u r o p e a n - n e s s " of L a f o n t a i n e ' s app r o a c h w a s an artifact of a position that w a s essentially s e l f - r e f e r e n t i a l w i t h r e s p e c t to G e r m a n y a n d b a s e d less on an u n d e r s t a n d i n g of the limits of p o s s i b l e action in the E U . But the w h o l e c o n v e r g e n c e p r o c e s s e m p h a s i z e d fiscal austerity and c o m p e t i t i v e n e s s a n d w a s in that s e n s e not easy to r e c o n c i l e with d e m a n d - s i d e strategies. Nevertheless, superficially the prospects for E u r o p e a n - l e v e l political steerage of the e c o n o m y looked a u s p i c i o u s in 1999. T h e n e w G e r m a n fin a n c e minister f a s h i o n e d a superministry at the heart of the G e r m a n g o v e r n m e n t for the task, a b s o r b i n g the E U c o o r d i n a t i n g and e c o n o m i c f o r e c a s t i n g d i v i s i o n s f r o m the E c o n o m i c s Ministry. Politically, L a f o n t a i n e w a s a force to be r e c k o n e d with. He is thought to have c o n t r i b u t e d substantially to the S P D ' s electoral success and he held the party c h a i r m a n ship. M o r e o v e r , G e r m a n y w a s about to a s s u m e the rotating EU C o u n c i l p r e s i d e n c y f o r the period J a n u a r y - J u n e 1999. Finally, L a f o n t a i n e had p o w e r f u l allies. H a v i n g p r o v e n its s i n c e r i t y in a c h i e v i n g E M U by und e r t a k i n g r e f o r m s of its constitution and strictly a d h e r i n g to the c o n v e r g e n c e criteria, F r a n c e ' s Socialist g o v e r n m e n t also a d v o c a t e d a g o v e r n m e n t a l c o u n t e r b a l a n c e to the E C B and w a s able to a m e n d the Stability Pact with l a n g u a g e c o r r e s p o n d i n g to this aim. L a f o n t a i n e " b a n k e d " on the p r e s u m p t i o n that the traditional F r a n c o - G e r m a n m o t o r of E u r o p e a n integration w o u l d deliver o n c e again. It w a s not to be. D e s p i t e persistent a n d insistent j a w b o n i n g by the G e r m a n f i n a n c e m i n i s t e r f r o m O c t o b e r 1998 to F e b r u a r y 1999, the

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ECB refused to budge on the question of lowering the interest rate. Getting nowhere in the EU, attacked by business and sniped at by dissenting members of his own government team, Lafontaine resigned his government, party, and parliamentary posts in a fit of pique on March 11, 1999. With palpable Schadenfreude (malicious enjoyment), the ECB announced a significant interest rate reduction several weeks later. Let's take stock of the lessons of G e r m a n y ' s experience with EMU to date. While German negotiators were successful in putting an indelible stamp on the character of Europe's macroeconomic policymaking machinery, subsequent German politicians were not able to dominate policymaking, despite an unusually strong starting point. Two points are in order. Lafontaine's defeat signals German success in the institutional field. It also signals the ascendancy of an outlook regarding the role of markets in the evolving institutional framework of Europe's emerging political economy. In a sense, there is less here than meets the eye, for Germany advocated a solution that simply ran with the tide of economic globalization. In light of the other details of the EU fiscal constitution, this amounts to a repudiation of a Keynesian approach for Europe, but it does not yet offer a coherent alternative that can be marketed to European citizens. Internal Market Issues

Lafontaine was also frustrated by his EU colleagues in a related policy issue: tax harmonization. 4 The original rationale for EMU was that it completed the single European market. While tremendous progress toward this end had been achieved, some important distortions of competition remained. G e r m a n y ' s budget suffered f r o m uncollected revenues due to the existence of tax havens, especially for financial institutions and holding companies. EU m e m b e r Luxembourg is a primary e x a m p l e of what the G e r m a n finance ministry considers a haven for G e r m a n tax evasion m a d e legal by the incompleteness of the Single Market. However, the E U ' s current fiscal regulations favor the model of "competitive federalism"—where member states are allowed maximum fiscal freedom in order to exercise the responsibility placed upon them to adapt to the E M U regime, with its "no bailout" clause written into the treaty. This prevailing presumption that tax codes are for the member states to work out is further strengthened by EU d e c i s i o n m a k i n g rules for taxation issues. All such decisions require unanimity in Council; a single recalcitrant state can frustrate tax harmonization. For these

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reasons, legislation advanced at EU level in the area of taxation is of the " f r a m e w o r k " sort, and even here it is quite difficult to reach consensus. In this set of circumstances it is easy to understand how L u x e m bourg was able to resist Germany on the issue of the withholding tax for financial transactions and Spain was similarly able to resist Germ a n y ' s efforts to put an energy tax back on the European agenda. The latter also reflected a red/green initiative to tax energy and reduce costs to employers when hiring labor. While this initiative might be launched in Germany, its effectiveness depends on other EU member states signing on to the project. Germany duly adopted the first phase of its ecology tax in March 1999, but made the introduction of future steps contingent upon the introduction of a European system of taxation.

State Aid Acceptance of the rigors of a competitive environment and the legitimacy of the single market depends on good e n f o r c e m e n t of EU competition law. In recent years under the leadership of C o m m i s s i o n e r Karel Van Miert, the C o m m i s s i o n has been increasingly attentive to cases in which public support for enterprises runs afoul of the letter and the spirit of the single market. Recent Commission action involving Germany reveals some important organizational features of Germ a n y ' s banking system and economic development policy for the eastern German Länder ("states"). In the former category, guarantees made by Lander to their public sector banks in real estate financing allow these institutions, in effect, to lower their costs of lending. This practice brought an investigation of EU competition authorities, who reco m m e n d e d fining West LB (Landes bank). D M 1 . 6 billion ( U S $ 8 6 0 million) for abrogating Article 90 of the E E C Treaty. 5 With respect to regional development policy in the east, absorption of the territory of the former German Democratic Republic (GDR) into the Federal Republic grafted a "transitional" e c o n o m y onto an EU m e m b e r state with some of the highest labor, safety, and environmental standards. G e r m a n y and the EU worked out derogations f r o m the acquis communautaire, usually limited to a three-to-five-year period. Beginning in 1996 the C o m m i s s i o n challenged state aid in several cases. In one highly publicized case, the contestants included the Volkswagen car manufacturer and the government of Saxony, mandated by the German system of federalism to formulate and conduct regional development policy. The Commission intervened to compel repayment of

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D M 9 0 million in illegal aid p a y m e n t s , d i s t i n g u i s h i n g s h a r p l y b e t w e e n aid f o r r e s t r u c t u r i n g m o r i b u n d i n d u s t r i a l c o m b i n e s f r o m the f o r m e r G e r m a n D e m o c r a t i c R e p u b l i c and o b s e r v a n c e of n o r m a l rules f o r regional aid in the c o m m o n m a r k e t . 6 Tax issues are part of a m o r e general p r o b l e m of a c h i e v i n g b a l a n c e b e t w e e n m a r k e t p r i n c i p l e s a n d a host of o t h e r p o l i c i e s . S u p p o r t e d by treaty and case law, EU c o m p e t i t i o n a u t h o r i t i e s are in a position to disa l l o w all sorts of p o l i c y i n i t i a t i v e s . In 1 9 9 9 , the c o m p e t i t i o n d i r e c t o r a t e - g e n e r a l i n v e s t i g a t e d the c o m p a t i b i l i t y of a f l o o r price to be paid by G e r m a n y ' s p o w e r grid to i n d e p e n d e n t w i n d - e n e r g y p r o d u c e r s . In g e n e r a l , the p h i l o s o p h y of c o m p e t i t i v e f e d e r a l i s m and at least i m p l i c i t r e s p e c t f o r s t r u c t u r a l h e t e r o g e n e i t y that u n d e r l i e t h e E U ' s e c o n o m i c c o n s t i t u t i o n m a k e any m o v e m e n t d i f f i c u l t in the area of t a x a t i o n .

Social Policy Social policy is a n o t o r i o u s l y slippery c o n c e p t o r i g i n a t i n g in E u r o p e ' s industrialization e x p e r i e n c e . Nominally, it is the e n s e m b l e of e f f o r t s und e r t a k e n by the authorities to c o m p e n s a t e i n d i v i d u a l s f o r a n t i c i p a t e d or actual m a r k e t o u t c o m e s that fall short of ideals p r o j e c t e d by i m p o r t a n t political entities. A fair reading of the theory of social c i t i z e n s h i p is that the public authorities should p r o v i d e these p r e r e q u i s i t e s in the f o r m of p u b l i c g o o d s (e.g., health care, e d u c a t i o n ) a n d social i n s u r a n c e against u n e m p l o y m e n t , disability, i n a d e q u a t e i n c o m e , a n d old a g e . It is a l s o a b o u t f o r t i f y i n g the position of labor in its e n c o u n t e r s with capital via legislation c o n v e y i n g rights of r e p r e s e n t a t i o n and e v e n m a n a g e m e n t of b u s i n e s s e n t e r p r i s e s . T h o u g h the n o t i o n of social c i t i z e n s h i p is part of t h e c o m m o n E u r o p e a n p o s t w a r political f a b r i c , several d i f f e r e n t g e n r e of s o c i a l - w e l f a r e states d e v e l o p e d . G 0 s t a E s p i n g - A n d e r s e n has disting u i s h e d three: liberal (Britain), c o n s e r v a t i v e ( G e r m a n y and m o s t of the rest of continental E u r o p e ) , and social d e m o c r a t i c ( S c a n d i n a v i a ) . 7 G e r m a n y b e l o n g s to the c o n s e r v a t i v e t r a d i t i o n of w e l f a r e c a p i t a l i s m , a d e s i g n a t i o n that r e f e r s to a r e l a t i v e lack of a m b i t i o n in c h a l l e n g i n g the f u n c t i o n i n g of m a r k e t s . T h e literature on p o s t w a r G e r m a n y m a k e s m u c h of the l e n g t h s to w h i c h t h e c o u n t r y has g o n e to r e d i s t r i b u t e i n c o m e and i n s t i t u t i o n a l i z e the v o i c e of l a b o r in t h e e c o n o m i c syst e m . F o r a large c o u n t r y , G e r m a n y e x h i b i t s a h i g h d e g r e e of l a b o r org a n i z a t i o n a n d labor is solidly e n t r e n c h e d institutionally. It is n o e x a g g e r a t i o n to c l a i m t h a t a c e n t r a l c o n u n d r u m of E u r o p e a n i n t e g r a t i o n in t h e 1990s is h o w m u c h the idea of " s o l i d a r i t y " at

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the base of social c i t i z e n s h i p is to be e x e r c i s e d a c r o s s national b o r d e r s w i t h i n the E U . As a large, rich c o u n t r y with c o n s i d e r a b l e v a r i a t i o n in i n c o m e and w e a l t h , most p a r t i c u l a r l y since the a b s o r p t i o n of five L ä n d e r f r o m the f o r m e r n e o - S t a l i n i s t G e r m a n D e m o c r a t i c R e p u b l i c in 1990, G e r m a n y h a s b e e n c e n t r a l to a n s w e r i n g t h e s o l i d a r i t y c o n u n d r u m . That " i n t r a - G e r m a n " act of integration and solidarity is p r e s e n t l y c o s t i n g G e r m a n t a x p a y e r s in the o r d e r of U S $ 1 0 0 billion per year, with no e n d in sight, 8 an a m o u n t that is r o u g h l y the s a m e as the total EU a n nual b u d g e t . A m a j o r reason f o r this level of e f f o r t is to be f o u n d in the German constitution, which mandates fiscal sharing among Lander, with s i g n i f i c a n t f i n a n c i a l f l o w s g o i n g f r o m the richer to the p o o r e r s o that the d e l i v e r a b l e s of G e r m a n y ' s c o n s e r v a t i v e w e l f a r e state are roughly equal no matter where you live. Despite this o b v i o u s i m b a l a n c e b e t w e e n w i t h i n - c o u n t r y and b e t w e e n - c o u n t r y s o l i d a r i t y , the r h e t o r i c d o m i n a t i n g the 1999 G e r m a n EU Council p r e s i d e n c y w a s of the reduction of G e r m a n y ' s net p a y m e n t , a goal that was, in fact, a c h i e v e d in the m a r a t h o n session in Berlin that led to a p a c k a g e deal on A g e n d a 2 0 0 0 . T h e r e is m o r e than a little irony in the fact that G e r m a n y underspent its a l l o t m e n t of s t r u c t u r a l f u n d s in the m i d - 1 9 9 0 s . 1 ' at p r e c i s e l y the s a m e time that d e m a n d s for reduction of the net c o n t r i b u t i o n were being p u b licly articulated f o r the first time. It s e e m s likely that this situation dev e l o p e d b e c a u s e of the g o v e r n m e n t ' s e f f o r t s to m e e t its o b l i g a t i o n s u n d e r the M a a s t r i c h t Treaty c o n v e r g e n c e criteria, e s p e c i a l l y f o r p u b l i c sector b u d g e t d e f i c i t s and public debt. T h e r e w a s a t r a d e - o f f in a s s i g n ing top priority to E M U : inability to use available m o n e y f r o m Brussels, as any structural f u n d s d r a w n w o u l d h a v e to be m a t c h e d by G e r m a n y . F r o m the point of v i e w of " B r u s s e l s , " i.e., the a l l - E U p e r s p e c t i v e , it is i m p o r t a n t to d i s t i n g u i s h b e t w e e n high l e v e l s of social p r o t e c t i o n a n d e c o n o m i c p r o t e c t i o n i s m d i s g u i s e d as the f o r m e r . F r o m the point of v i e w of w e a l t h y m e m b e r states with high social s t a n d a r d s such as G e r m a n y , the issue is u s u a l l y d e f e n d i n g the level a n d i n t e g r i t y of t h e i r s y s t e m s of social p r o t e c t i o n and c o l l e c t i v e b a r g a i n i n g . G e r m a n y ' s E U social p o l i c y s t r a t e g y in t h e 1990s h a s b e e n i n s c r i b e d in a strict c o o r d i n a t e s y s t e m a c c o r d i n g to the m o d e l of c o m p e t i t i v e f e d e r a l i s m . 1 0 Ind e e d , this m o d e l is also b e g i n n i n g to t r a n s f o r m t h e d e b a t e w i t h i n G e r m a n y b e t w e e n the L ä n d e r , o f f i c i a l s f r o m at l e a s t t w o of w h i c h h a v e called f o r less i n t r a - G e r m a n s h a r i n g and a l o w e r net p a y m e n t into the G e r m a n s y s t e m of fiscal f e d e r a l i s m . R e c o g n i z i n g the s h o r t - t e r m inability to c h a n g e the E U ' s e c o n o m i cally h e t e r o g e n e o u s r e g i o n s , the G e r m a n g o v e r n m e n t h a s a d v o c a t e d a strategy of E U - w i d e m i n i m u m s t a n d a r d s that m e m b e r states c o u l d a n d

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should strive to exceed, wherever possible. Under prevailing productivity differentials, harmonization in the strict sense would quickly lead to regions making themselves unattractive for investors f r o m other parts of the EU or abroad, which is what occurred in the East German Länder during unification in 1990. The correlate was that institutional differences had to be tolerated, but it has required significant levels of solidarity to wish enterprises well when they moved to take advantage of cheaper labor. Hence, the counterpart to m i n i m u m standards has been a mixed approach to economic and social development throughout the Union. These policy predispositions go all the way back to the negotiations over the Treaty of Rome. Hanns Jürgen Küsters documents how Germany successfully resisted the efforts of Italy to establish a large social fund. 11 Instead, at G e r m a n y ' s insistence the main instrument for development was the European Investment Bank (EIB), whose volume of annual lending has evolved to be as least as great as the grants-inaid financed f r o m the EU structural f u n d s budget. Regional development aid could be expensive and as the largest, and for most of the history of the EEC, the best-performing economy, G e r m a n y ' s contribution to the EU budget was by far the largest. But to the extent that EIB activity and grants were effective, the possibility of convergence of social standards could be entertained, at least in the m e d i u m run. In Germ a n y ' s European integration calculus, the effectiveness of EIB was the precondition for the convergence of social standards. Regulating the decision rules in this area is probably the best guarantee of exercising control over overzealous transnational solidarity via an ambitious program of standards harmonization. G e r m a n y fought hard for consensus decisionmaking in the two treaty reforms. Reflecting expectations of increased transboundary transactions that would acc o m p a n y the internal market r e f o r m , the m e m b e r states amended the decision rule for social protection standards at the workplace, 1 2 permitting new legislation to be adopted by qualified majority voting (instead of unanimity) in the Council. However, they deliberately maintained unanimity in all other areas (social security, labor market policy, individual and collective rights of workers). The Single European Act (SEA of 1986) also opened the door to increased social policy initiative by institutionalizing the so-called social dialogue between e m p l o y e r and employee umbrella organizations at EC level through the adoption of a new Article 118b of the R o m e Treaty. Anticipating the social organization of the EC economic space, this typically German approach established a third leg (in addition to harmonization and e c o n o m i c

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d e v e l o p m e n t ) to social policy by permitting capital and labor collectively to agree to regulations at the EC level that could then be ratified in the Council. The German government concentrated on keeping what it considered unwise employment policy initiatives off the EU agenda. By the time G e r m a n y ' s turn as Council president came around again in the second half of 1994, unemployment in the EU was reaching levels unprecedented since the 1930s. Germany built on the neoliberal tenor of the C o m m i s s i o n ' s White Paper on Growth, Competitiveness, Employment (1993), which focused on training and better use of labor exchanges. Strictly speaking, Germany's presidency in 1994 did not lead to EU action. Instead, five c o m m o n policy priorities for employment were adopted: more training; increasing the employment-intensity of growth; reducing nonwage labor costs; active labor-market orientation; and addressing special problem groups. These priorities were to be embedded in multiyear programs undertaken by the member states. An employment chapter did emerge from the treaty negotiations, thanks in part to support from the new members: Austria, Finland, and especially Sweden. G e r m a n y ' s new g o v e r n m e n t coalition of Social Democrats and Greens made employment the central measure of its performance in the EU presidency during the first half of 1999. All it could produce at the EU level was an agreement to talk about employment in the Commission's Council of Economic and Financial Ministers (ECOFIN) Council meetings, as a " m a c r o e c o n o m i c dialogue." 1 3 It remains to be seen how much additional attention e m p l o y m e n t issues at the microeconomic level, such as generating new jobs and protecting existing ones, will gain from the European Employment Pact. This problem notwithstanding, G e r m a n y ' s EU course is marked by remarkable continuity with respect to pushing a m i n i m u m - s t a n d a r d s agenda, while at the same time arguing for a lower German net payment to the Union.

Industrial Relations Germany's EU policy in the social domain has aimed at leveling up standards, while at the same time recognizing that this leveling is a longterm process. In Germany, the system of industrial relations is often cited as one of the key factors in the economic success of the postwar period. Central to that system are the concept and practice of tarifautonomie ("autonomy in tarifs") works councils, and the practice of codetermination. All but the very smallest German firms have works councils, whose task it is to provide a forum for discussions of significance for the work

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force. Codetermination refers to participation of workers in the supervision and active management of the firm through designated seats on both its m a n a g e m e n t team and board of directors. T a r i f a u t o n o m i e refers to the principle of noninterference by the state in collective bargaining by management and labor. Postwar German collective bargaining has been dominated by relatively few large unions organized by industry and the corresponding sector trade associations created by German businesses. Collective bargaining agreements have been widely encompassing affairs involving all firms and workers in broadly defined industrial sectors. In some but not all areas, G e r m a n patterns of industrial relations were replicated at the EU level. Reinforced by its own federal constitutional structure, trends emerged following German reunification that accelerated the development of the German industrial-relations system in a pattern similar to that emerging in the EU. German reunification was immediately disruptive to industrial relations, and many firms located in the eastern Länder opted out of the national wage-bargaining system. Some firms in the western Lander followed suit. Parallel with this trend toward individualization of bargaining at the firm level was the negotiation of the European Works Council Directive. Acceptance of this directive in September 1994 was a highlight of G e r m a n y ' s EU Council presidency in that year. According to the directive's provisions, a system of worker information and participation was mandated for a certain class of firms. This EU legislation gave the works councils little actual power, especially when measured against the German model. However, the German trade unions and government fought hard to transport this feature of the German system to the European level and were elated that after decades of policy paralysis, agreement was at last reached. Resistance of American multinationals proved less of a hurdle than that of the British Tory government, which would not agree to any draft. The impasse led to adoption of the directive under the Maastricht Social Protocol, which allowed the eleven other m e m b e r states to use EU machinery to unite on this policy, and the British G o v e r n m e n t to "opt o u t " of this social phase of EU membership at this time. Even though a c o n s e n s u s could be f o u n d f o r E u r o p e a n works councils on the basis of the advantages of improved intrafirm c o m m u nication, rights of a farther-reaching kind, such as worker participation in enterprise decisionmaking, proved too hot to handle. It does not seem likely that codetermination in the German sense is transportable to Europe. Nor does the German territorial wage settlement model appear to have a European application.

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On the policy implementation side of the ledger, the swift evolution of the European single market has proved disruptive in certain sectors. The " f o u r f r e e d o m s " laid d o w n in Article 8a of the Treaty of R o m e as a m e n d e d by the S E A include services, capital, goods, and labor. A G e r m a n construction b o o m was ignited by unification, a process that acted as a magnet for labor f r o m the rest of the EU. For e x a m p l e , Portugese c o m p a n i e s were well represented in Berlin, the epicenter of the unification boom. They sent teams at Portugese prices, claiming to provide a short-term service under Article 8a. But the German unions were incensed at the Portuguese undercutting German wage rates, which were nearly three times as high as the Portugese, and insisted on "one site, one w a g e " policy. Portugal refused to sign onto the draft "EU posted workers directive" that sought to regulate matters along the lines favored by G e r m a n unions. Ultimately, a compromise resolution was achieved, based on lower wages for limited periods of time, but that outcome had to be ratified by the unions that represented Berlin's construction workers.

Environment In general, Germany has attempted to move with the E U ' s evolving objectives and philosophy toward i m p l e m e n t i n g environmental policy. Overall, the country 's position is similar to its social-policy role in that it already has stringent standards, because of its role as the EU's largest and most industrialized country. An important difference is the relative newness of environmental policy as a discrete policy sector. Many environmental issues involve interjurisdictional cooperation across the m e m b e r states. In this sense, no EU m e m b e r state had more to offer than any other with respect to policy design. Finally, EU environmental policy demonstrates an important trend in the character of the state in Europe in the 1990s, namely the growing relative importance of regulatory versus redistributive functions. 1 4 Altogether, these three factors help us to appreciate the growing strength of European integration, involving increasing interdependence and the growing power of Brussels vis-à-vis the m e m b e r states. Environmental concerns have played something of a unique role in EU constitutional d e v e l o p m e n t . T h e y m a d e their appearance laterally f r o m the 1972 Paris Summit of the heads of state and government, which was responding to the Stockholm UN Special Environmental Summit, and resulted in the first of five multiyear Environmental Action

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Plans in 1973. But environmental policy had no independent treaty status until Articles 130 r, s, and t were added by the SEA. The Maastricht Treaty adopted "sustainability" language in the preamble and introductory chapters defining the E U ' s basic tasks. The Amsterdam Treaty upgraded the environmental ambitions of the Maastricht Treaty still further, both with respect to framing language and decisionmaking procedures. Germany fully and enthusiastically supported all of these steps, a fact that is mainly explicable in terms of electoral politics. 1 5 Central to this development was the transformation of G e r m a n y ' s political ethos in the 1960s from a deferential to a participatory polity. 1 6 As important was the e m e r g e n c e of a postindustrial milieu that fed a variety of " n e w " social m o v e m e n t s focusing on quality-of-life (as opposed to bread-and-butter) and life-style issues, in particular, the environmental movement. Old nongovernmental organizations (NGOs) were revived and new ones were created. At this time, local and regional green parties had already f o r m e d in Germany and in 1979, the Greens formed a national electoral list to contest the first elections to the European Parliament. They formed Die Grünen in 1980 and entered the Bundestag in 1983 (and the European Parliament in 1984) on the antinuclear, environmental concerns of the earlier movements. Electoral success immediately raised the stakes for the older parties, w h o all tried to appeal to the green electorate, creating a broad policy consensus that has served as the springboard for significant environmental policy innovation nationally and transnationally ever since. G e r m a n y "constitutionalized" the e n v i r o n m e n t in tandem with the EU with the batch of a m e n d m e n t s to the Basic Law, adopted in 1994, to adjust the country's constitutional f r a m e w o r k to the new realities of unification. The new Article 20a calls upon the state "to protect the natural bases of life." The conservative Christian Democratic Union ( C D U ) — F r e e Democratic Party (FDP) government ( 1 9 8 2 - 1 9 9 8 ) became adept at playing the g a m e of E C / E U multilevel politics in all fields, but it excelled in environmental policy. Air pollution and global warming were two environmental policy segments where the G e r m a n government successfully seized the initiative in the 1980s. In the EU, G e r m a n y exploited its position as a leader in industrial-process technologies to make the standards that conformed to its technology also the standards at the EU level. Even before the SEA, the European Investment Bank under a G e r m a n president adopted an environmental charter that provided an avenue for industrial innovation designed to level up to German standards according to the Best Available Technology (BAT). Germany led

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the EC in the campaign to define emissions standards for industrial installations and vehicles. The market/technology nexus of the conservative g o v e r n m e n t ' s policy reflected the political requirement of balancing quality-of-life issues with G e r m a n y ' s economic success, based on export performance. Getting others to adopt G e r m a n y ' s high standards was the best way of stabilizing this domestic political formula. Another type of standard setting concerned waste. Germany adopted its "Green Dot" recycling system in 1992, based on a state regulation requiring manufacturers to reclaim packaging waste. In effect, this move set the agenda for the EU, which followed with a weaker scheme of its own. In the area of greenhouse gas reductions, Germany again tried to play a leading role, in this instance with mixed success. T h e lack of demonstrable short-term costs of putative global warming weakened environmentalists' claims, relative to those of industry, and set political limits to EC strategy. Germany supported the C o m m i s s i o n ' s proposal for an EU-level carbon-energy tax, but the less industrialized m e m b e r states resented any limitation on their d e v e l o p m e n t — t h e French were uninterested because of the country's huge stake in nuclear power, and the British Tory government was unalterably opposed to the adoption of any tax whatsoever at the EU level. G e r m a n y was forced to bury the project during its Council presidency in 1994, but several months later hosted a conference in Berlin that set the stage for agreement on the Kyoto Protocol of 1997, which established ways and means for achieving agreed emission-reduction targets. The intractability of the issue is underlined by the rifts that continue to divide the EU from the United States over the interpretation of the Kyoto Protocol. The advent of G e r m a n y ' s "red/green" government enabled Germany to reaffirm and advance its leadership position in this area, with initiatives in the field of taxation (see below) and energy policy. In 1999 and 2000, the G e r m a n chancellor reiterated the g o v e r n m e n t ' s support for national reduction targets more stringent than those set by other EU m e m b e r states. The Bundestag passed an ambitious law on renewable energy use (the Renewable Energy Sources Act [RESA]) in April 2000. Learning f r o m the experience with G e r m a n y ' s power-grid law to be replaced by R E S A , this nuanced electricity-market legislation made adjustments over previous law in conformity with EU internal market imperatives and the EU state aid rules in three ways: it reduced the floor price for the supply of current f r o m r e n e w a b l e resources (wind, sun, etc.) to the electricity grid, it reduces support over time, and the program is limited to 20 years. In so doing, R E S A helped set the stage for EU action on renewable resources.

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Meanwhile, the December 1993 white paper defining the EU's general economic strategy included as its penultimate chapter the notion of an "eco-tax" that conjoined two priorities—environmental policy integration now mandated by the Maastricht Treaty and employment incentives. The eco-tax aims at decreasing pollution by establishing economic disincentives through manipulating prices. Not wishing to add to the considerable tax burden in Europe, this tax was to have been compensated by a reduction in other levies to achieve revenue neutrality. Since social insurance charges borne by business are comparably very high in Europe and are thought to be a major factor in the intractability of high rates of unemployment, most variants of the eco-tax have singled out these insurance charges as areas for reduction in an eco-tax regime. It required the German federal election of September 1998 to bring a coalition to power that for the first time drafted legislation that would introduce an energy tax without waiting for other EU member states to agree. The measure was adopted and came into force in May 1999, and promises that further steps will be taken at the EU level, together with other member states. Many environmentalists put great hope in the advent of G e r m a n y ' s red/green government, but in September 1999, Nabu, the German federation for the protection of nature, referred to "a year of dashed hopes." 1 7 D i s a p p o i n t m e n t boiled over into outrage when Chancellor S c h r ö d e r intervened on behalf of Volkswagen when, under the 1999 German Council presidency, the EU Council of Environmental Ministers tried to adopt an automobile recycling directive. Schroeder had also tried to stop action restricting airport duty-free sales to passengers flying to or from non-EU destinations. A m a j o r row developed between the German government and the EU over the environmental minister's e f f o r t s to m a k e good on a coalition agreement to begin withdrawing f r o m nuclear power, a policy that had European reverberations. To some extent, this pattern is explicable in terms of G e r m a n y ' s federal constitution. Although G e r m a n y ' s Basic Law assigns most segments of environmental policy to the federation, the Länder also play a role in many areas. 1 8 Perhaps more to the point, the Länder enforce all environmental law, federal or regional. This means both that transposition of EU legislation has been slower in G e r m a n y than in other m e m b e r states, and that there is a greater chance for differences in implementation across G e r m a n y ' s federal states. It has also been suggested that as environmental policy shifted from c o m m a n d - a n d - c o n t r o l - t y p e measures to e c o n o m i c incentives and voluntary agreements or approaches involving broader forms of participation, German administrative tradition created barriers to policy innovation and implementation. 1 9

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By the same token, there is no question but that EU environmental legislation has created a new arena for politics in Germany. For example, German environmental N G O s have been successful in supporting individual citizens in challenging construction projects, usually roads, in court cases brought under EU Directive 85/337 on environmental impact assessments. Environmental legislation has also intruded in odd ways, as is demonstrated by the case of the collapse of the governing coalition in Bremen in 1994. Mandated by the EU "birds directive" to designate protected areas, Bremen's environmental minister (a member of the Green Party, one of the three coalition parties) affirmed a plan originating in his department. A l a r m e d at the implications for economic activity in the territory, the Free Democratic (liberal) coalition partner rejected the plan, withdrawing from the coalition and forcing new elections. Or, take the e x a m p l e of the Munich Greens in 1995, who, motivated by environmental concerns, attempted to kill local airport expansion plans by pointing out that public subsidies for the project ran counter to EU competition law. What all these cases d e m o n strate is a broadening of options available to individual citizens, organizations, and political parties in using EU regulations to advance their environmental agenda. That said, the existence of this new political area demands greater awareness than has been achieved, even among core political actors with an environmental agenda. Environment Minister Jürgen Trittin's efforts in 1999 to achieve rapid withdrawal from nuclear power in Germany is a good case in point. Nuclear power has been a touchstone of Green identity in G e r m a n y since the formation of the party in 1979. Unfortunately, Minister Trittin neglected to mobilize support throughout Europe for his efforts to push his policy through. Nuclear p o w e r did not figure in the agenda of the Euro-level environmental umbrella group, the European Environmental Bureau (in Brussels), and Trittin's proposals upset French and British nuclear-fuel reprocessers, who had long-term contracts with German power stations. Entrenched interests have also played an important role in slowing some sectors' compliance with environmental legislation. In the field of groundwater protection, Germany was threatened with one of the first fines authorized under the Maastricht Treaty for policy noncompliance. At issue was use of agrichemicals that produced polluting runoff. Though Germany was taken to the Court of Justice twice and found to be willfully out of compliance with EU law, steps were not undertaken to bring Germany into compliance until the fine of ECU264,000 per day was threatened in 1997. Simultaneously, two other cases, one involving surface water, the

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other bird protection, resulted in threatened fines of E C U 2 6 , 4 0 0 and E C U 158,400 per day, respectively, amounting to a total daily threatened fine of E C U 4 6 2 , 8 0 0 (ca. U S $ 5 0 0 , 0 0 0 at prevailing e x c h a n g e rates). Lack of settlement would have placed a significant constraint on G e r m a n y ' s ability to meet its E M U obligations. Environmental policy also provides an example of another important feature of integration: the paradox of simultaneous policy uniformity and differentiation across m e m b e r states. In 1995, as part of the EU effort to e m b r a c e policy instruments beyond the c o m m a n d - a n d control type and also advance the policy integration agenda, the Council adopted a directive on environmental management and auditing systems (EMAS). Firms were offered the opportunity to earn a seal they could display to their increasingly environmentally conscious consumers, if they met the eco-audit requirements specified by the directive. It followed a legislative design that has b e c o m e c o m m o n at EU level in the regulatory field, mandating general requirements while permitting each m e m b e r state to fashion its own response. Germany followed its traditional practice of setting up para-public boards to supervise the independent E M A S certification bodies. These boards have representatives f r o m the m a j o r organized groups in German society, in this case most notably environmental NGOs.

Security and Foreign Affairs Germany started the postwar period as a defeated and occupied country. The project of regional integration was seized eagerly as a means of national rehabilitation by Chancellor Adenauer less than a year after the Federal Republic of G e r m a n y was launched in August 1949. Indeed, the S c h u m a n Plan creating the E u r o p e a n Coal and Steel C o m munity was a response to the announced intention of the A m e r i c a n government to enlist German support in the West's Cold War military effort. That year also saw the creation of the Communist-ruled German Democratic Republic, a symbol of E u r o p e a n division and the Cold War, and NATO, whose role it was "to keep the Russians out, the Americans in, and the Germans d o w n . " As if to draw lessons f r o m the interwar period, the latter task was to be achieved not via permanent occupation or singularizing the country by way of special r e g i m e s (e.g., deindustrialization, neutralization, demilitarization), but rather through incorporating the G e r m a n state as an equal party in regional structures. The vision that ultimately prevailed bound the West German

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state firmly in the West as a partner in the strategy of containment. In this way, the solution to divided E u r o p e was also the solution to divided Germany. The modality of G e r m a n r e a r m a m e n t is worthy of note here. At first, a purely European approach was tried, the European Defense Community. That body would have created multilateral forces with no national contingent larger than a division, but the plan died in the French National A s s e m b l y in August 1954. Immediately thereafter, perplexed senior officials found an alternative route that married a European element to a transatlantic one. The moribund Brussels Treaty Organization of 1948, created in the days before NATO as a combination against possible G e r m a n revanchism, was transformed into the Western European Union ( W E U ) , to which Germany was invited to join. According to the terms of its accession, Germany's armed forces were limited to 5 0 0 , 0 0 0 troops and it agreed to forgo acquisition of weapons of mass destruction. G e r m a n y ' s membership in the W E U set the stage for its membership in NATO, accomplished in 1955, when almost all remaining legal vestiges of occupation were lifted. Berlin remained a divided city governed by East and West Germany, respectively, under Four Power supervision. Having accomplished the function assigned to it, the W E U was then allowed to lapse into a deep sleep without the benefit of anything but a nominal staff, in favor of the NATO transatlantic security link that delivered A m e r i c a ' s indispensable nuclear deterrence guarantee. L a u n c h e d in 1969, G e r m a n Chancellor Brandt's détente-oriented Ostpolitik abandoned the principles underlying the strategy of "maintained tensions" and sought to define a peace strategy based on cooperation with the U S S R and the other Central and Eastern European states, including the G D R . B r a n d t ' s policy was the leading edge of a multilateral phase of détente that provisionally culminated in the Conference on Security and Cooperation in Europe and the 1975 Helsinki Accords. In the heightened tensions of the 1980s, Germany supported a policy that demonstrated a European profile within the Atlantic Alliance and in 1984, the W E U was revived with that in mind. 2 0 Under Foreign Minister Genscher the détente policy was continued in the second half of the 1980s to encourage the new Soviet leadership to see an all-European settlement. T h e sudden and breathtaking collapse of the Soviet bloc in 1989 set the stage for absorption of the territory of the East German state by the Federal Republic of G e r m a n y under Article 23 of its Basic Law, and this occurred on O c t o b e r 3, 1990. Germany appeared to have

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achieved its two primary foreign policy and security objectives—national unity and security—at one stroke. In making Germany safe for Europe, European regional integration and the NATO link facilitated unification. Also, by this time the EU provided a reliable avenue for this most successful policy. In a farsighted move designed to assure its neighbors, Chancellor Kohl and French President Mitterrand agreed on and jointly proposed a plan to deepen integration still further through the negotiation of the Maastricht Treaty on European Union. It is no exaggeration to say that these steps represented the central strand of Germany's foreign and security policy par excellence. In the new geopolitical circumstances that prevailed after German reunification and the collapse of the Soviet Union (September 1991), Germany was freer than it had ever been to define and defend its own interests. By the same token, serious new regional and global challenges crowded the agenda. The shared border with Poland and the Czech Republic and the short drive across Austria from the Balkans, highlight Germany's new central position in Europe and the immediacy of the challenge to stabilization, politically and economically. For that reason, and to overcome the division of Europe, Germany's fundamental strategy has consisted of the "Europeanization" of the periphery, by which is meant welcoming CEE states into Western institutions, when they are ready. Germany's principal commitment, particularly to Poland, with regard to NATO and its EU membership was articulated early. Thus Germany has been a champion of eastern EU enlargement under both the conservative (CDU-FDP) and the successor red/green (SPD-Greens) governments. Perhaps the most important achievement of the 1999 German Council presidency was the agreement reached on Agenda 2000, which carried forward the MacSharry reforms of the Common Agricultural Policy (CAP), reformed the structural funds, and defined a financial framework that guarantees resources for new member states from the east. To achieve this mixed outcome, Germany's negotiators had to scale back demands for reduction of Germany's net payment to the EU and abandon their position to renationalize the CAP's unified EU financing plan. 21 Through the EU, Germany had to deal with regional and global issues beyond the framework of enlargement. Maastricht created a threepillar structure that added mechanisms of intergovernmental cooperation in immigration and asylum issues and the Common Foreign and Security Policy (CFSP) to the acquis communautaire built up under the structures created by the Rome Treaty, as amended by the SEA. No

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sooner had the ink dried on the Maastricht Treaty than the deteriorating situation in the Balkans demanded a response. Slovenia and Croatia were threatening to secede from Yugoslavia. Germany's response to the Balkans crisis constituted its first foray into foreign policy, and it defined its position sharply and at odds with most of its EU partners. 2 2 Referring to the liberation of East G e r m a n y as a precedent and responding to the rising salience of the issue in German public opinion due to the horrors of the conflict and the hundreds of thousands of refugees beginning to show up in Germany, it advocated extending immediate diplomatic recognition to the breakaway Yugoslav republics. While, as a practical matter, clear borders made this step relatively uncontroversial in the case of Slovenia, the ethnically mixed character of Croatia raised questions about the stability of the region. Nevertheless, Germany persisted and most of the EU finally, reluctantly, followed suit, as much to preserve the pretense of unity proclaimed by Maastricht's CFSP pillar as because of its commitment to the policy in question. 2 3 The Balkans crisis intensified a discussion, still very much in progress at the time of this writing, about the relationship between NATO and any "European Security and Defense Identity" (ESDI). NATO itself was forced onto a course of redefinition and dynamic development after the end of the Cold War, with respect to mission, force structure, and strategy. In contrast to France and Britain, the E U ' s two other m a j o r powers, Germany, E u r o p e ' s "reflexive i n s t i t u t i o n a l i s e 2 4 was predisposed because of its 20th-century history toward an exclusively soft power role in international affairs. It is, therefore, not surprising that G e r m a n y approached the EU as a means for achieving greater integration, a "transitory solution, a vehicle for transporting security and defense into the Union over time," 2 5 which simultaneously complemented rather than competed with NATO. The EU became involved in " s o f t p o w e r " roles, such as the administration of contested cities (e.g., Mostar, whose EU mission was led for a time by a German). Despite the continual e n c o u r a g e m e n t of its EU and transatlantic partners, no G e r m a n g o v e r n m e n t could contemplate sending troops abroad until the issue was forced by a July 1994 Constitutional Court case won by the government. Still, every engagement was controversial and therefore politically sensitive. There was no question of unilateral interventions, nor even of coalitions of the willing. Only an alliance action under a UN mandate or UN peacekeeping operations was considered politically feasible. But the EU debacle in Bosnia and the U.S.-brokered Dayton Accords of D e c e m b e r 1995 during the second phase of the decade-long

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Balkans crisis began to change the political landscape in Germany in a most unanticipated direction. Led by their parliamentary spokesman and future foreign minister, Joschka Fischer, the debate within the Green Party over the use of force in international affairs intensified in the summer of 1995. B y then, his vision of a Germany bound to the West not only via the EU but also via NATO distinguished itself from the mainstream mostly by greater idealism and an analysis that emphasized the relationship between Germany's foreign policy and socialpolitical order. 26 Fischer's open letter to his party colleagues pointed to the circumstances that produced a conflict between the competing Green principles of pacifism and human rights. In his view, there was no way around the choice in the circumstances prevailing in Bosnia: protecting human rights meant armed intervention. 2 7 It is likely that this debate broadened the consensus allowing Germany to assume greater international responsibility with its partners, and also with the Dayton Accords. Fischer became foreign minister of the red/green government at the end of October 1998, when the Balkans crisis had already entered its third phase over the Serbian position in the Yugoslav autonomous area of Kosovo. As Germany was due to take up the mantle of EU Council president in January 1999, he was already intensively preoccupied with the issue. The underlying problem was Serbia's arbitrary revocation of meaningful Albanian participation in governing a region whose population was 9 0 percent ethnic Albanian in composition. In order to maintain its position in Kosovo, the Serbian government resorted to state terrorism and suppression that fed a local liberation movement. When the Serbian government refused to accept the terms that the Rambouillet Conference had set, NATO struck. In a remarkable display of domestic and international leadership in the E U framework, Fischer managed, despite serious fractiousness, to unite the governing coalition in Germany, the E U , and NATO behind a strategy that dislodged the Serbian military and paramilitary units from Kosovo, associated the UN with the process, and associated Russia with the process. The German government's contribution of fighter-bombers to the air campaign was a significant turning point in Germany's foreign policy. Germany's most enduring contribution lay in the diplomacy o f defining and organizing a long-term approach to the Balkans that extended far beyond the armistice plan that ended the bombing campaign in June 1999. In February 1 9 9 9 , over a month prior to NATO's military operations against Serbia, Fischer deftly used the EU Council presidency to

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project a plan (already in discussion since 1995 when the French first floated the idea) to "Europeanize" the Balkans through the creation of a f r a m e w o r k for cooperation within which states could resolve differences peacefully. Security, economic, and civil society (democratization) p r o g r a m s were to be organized in partnership with the EU in a "Stability Pact for South East E u r o p e . " Inaugural c o n f e r e n c e s of the parties—some 43 states and international organizations—were held in May and June 1999. 28 G e r m a n y ' s diplomacy articulated its fundamental interests in stabilizing the E U ' s European periphery and developing good relations with Russia. It also displayed its vision of a strategic division of labor between the EU and NATO as well as that between itself and other EU m e m b e r states. Still, some important questions were left outstanding, particularly concerning the character of ESDI and G e r m a n y ' s role in it. Without U.S. air power, logistics, intelligence, and ordnance, it is highly unlikely that any military effort would have been m o u n t e d in the Former Republic of Yugoslavia. And without that e f f o r t , the chances of concentrating active and supportive attention on long-term development in the Balkans seems unlikely as well. Indeed, what is remarkable is that the EU was as successful as it was in defining a European profile in light of America's dominance in NATO. In that context, Germany and the EU still need to decide how ESDI is to develop. Germany has favored incorporation of the W E U into the EU, implying that the Amsterdam-mandated "Mr. C F S P " (currently the former NATO secretary-general, Javier Solana) should also be the W E U secretarygeneral. More pointedly, it also raises questions about military capabilities and force structure. Germany and its EU partners wish to pursue greater military independence. A set of principles allowing the W E U to "borrow" military assets from NATO without compromising the political and operational integrity of the latter was agreed at the June 1996 NATO summit in Berlin and confirmed at the April 1999 Washington summit. The Kosovo crisis probably played a major role in consolidating Europe's resolve. As late as the summer of 1997, when Albanian leaders appealed directly to the W E U for assistance in restoring order in that country, both the UK and G e r m a n y demurred, in f a v o r of an ad hoc force led by Italy. 2 9 In a departure f r o m Britain's traditional skepticism about EU defense integration, Prime Minister Tony Blair in his D e c e m b e r 1998 meeting in St. Malo with French president Jacques Chirac indicated a desire for greater European independence with respect to certain kinds of tasks. The experience of the Kosovo war appears to have confirmed

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this stance, as after the cessation of hostilities, Blair and his Italian colleague D ' A l e m a , called for decisive steps forward in European defense industrial organization and rationalization of force structure, with a view toward European requirements. As Council president, G e r m a n y had been mandated, following St. Malo, to present a report on developing the EU defense profile. In Cologne at the European Council in June 1999, G e r m a n y ' s report was adopted advocating the mobilization and organization of operational military capabilities to support aut o n o m o u s action in support of the "Petersburg tasks." 3 0 Notably, the text refers to both NATO assets and "EU-led operations without recourse to NATO assets and capabilities." 3 1 At this stage, G e r m a n y ' s position appears to be typically ambiguous in trying to find formulas that reconcile fundamental priorities. For Germany, these are: avoiding American withdrawal from Europe, reassuring Russia, and achieving a unified European response to contingencies so as to provide a collective framework for its own contribution. One of the most enduring motifs of postwar G e r m a n foreign relations is avoidance of situations in which Germany would be compelled to choose between " E u r o p e " and America. G e r m a n y ' s security has been well served by this connection, also because of the littleobserved assurance provided by the American presence in Europe for ambitious f o r m s of integration. On the other hand, G e r m a n y and the Europeans must live with Russia. Tellingly, the other major document released by the C o l o g n e European Council was the E U ' s " C o m m o n Strategy of the European Union on Russia," and G e r m a n y ' s diplomacy during the K o s o v o crisis demonstrated the centrality of this factor. Withal, Germany recognizes that the "Bonn republic's" foreign policy "culture of reticence" 3 2 has been a great reservoir of European stability. It has been rewarded in the pursuit of its soft-power role and is not particularly motivated to diminish the prestige that came with it, even as it increases its direct participation in military operations promoted by its EU partners. Just as important as any of these reasons is the very strong desire, s u f f u s e d throughout the foreign affairs and defense establishment, indeed throughout the political class and much of the population, to maintain a close relationship with the United States. Germ a n y ' s relationship to its EU partners, particularly the small countries, could be upset by too forward a position in this domain. Furthermore, the ambiguity of its position is amplified by the serious financial constraints Germany now faces, in part due to the heavy costs of unification. Tight budgets will impede any effort to further professionalize German forces and turn around the erosion in force levels.

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Conclusions Germany powerfully shaped the constitutional dynamism of European integration in the 1980s and 1990s, and in turn the growing EU has had a major impact on Germany. This is particularly true in establishing the architecture of E M U and setting the overall scheduling priority of EU deepening via EMU over eastern enlargement, despite insisting on the indispensability of both projects. C o m m i t m e n t to regional integration has been circumscribed by a fundamentally political strategy of avoiding o v e r b u r d e n i n g the EU capacity for legitimization. G e r m a n y has supported increases in the powers of the European Parliament and extension of qualified majority voting in the Council of Ministers, but it has also drawn the line on the EU fiscal constitution, insisting on strict budgetary ceilings with nearly exclusive responsibility for fiscal matters lodged firmly in the m e m b e r states. They are free to tax and spend pretty much as they choose, providing they do not infringe the Common Market. The hope is that the resulting regime of competitive federalism will compel m e m b e r states to more clearly define policies leading to economic convergence. National governments will have to find domestic support for whatever strategies they adopt. Thus, they will bear the burden of maintaining enough legitimacy to continue integration. An interesting question, a detailed analysis of which goes beyond the scope of this chapter, concerns the general pattern of G e r m a n y ' s response to European integration. We have seen that this response varies across policy areas, a finding is consistent with the analytic insight provided by Caporaso et al. 3 3 Of the ten case studies in the Caporaso volume, Germany figures as a point of comparison in nine. Corresponding to the findings in this chapter, G e r m a n y ' s EU "goodness of fit" is high in three areas (environment [in some environment policy sectors], legal structure, and nation-state identity) and low in seven (norms of citizenship, environment [in some policy sectors], behavior of industrial associations, railways, road haulage, t e l e c o m m u n i c a t i o n s , and territorial structure [constitutional role of the Lander]). The additional areas surveyed in this c h a p t e r — m a c r o e c o n o m i c (especially monetary) policy, aspects of social policy, and security and d e f e n s e p o l i c y — b r o a d l y c o n f i r m the utility of this f r a m e w o r k . Given these empirical results, the notion of competitive federalism looks like a reasonable approach to m a n a g i n g the challenges of integration in the d e v e l o p m e n t of a E u r o p e a n sociopolitical order. W h e r e a significant degree of European policy centralization has been achieved, competitive federalism is not an option.

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Coordinated, if not harmonized strategies must be d e v e l o p e d . This is particularly the c a s e in monetary policy, and increasingly in security and defense. The antipodes of Germany's E U p o l i c y are v i s i b l e in its management of the K o s o v o crisis w h i l e e x e r c i s i n g the role of Council president in 1999. D e s p i t e great d e p e n d e n c e on Washington, Berlin was able to forge a European profile in the process through adroit diplomacy. The C o l o g n e European Council at the end of Germany's presidency in June 1999 signaled ramping up of EU security policy, but the relationship to N A T O was left undefined, subject to interpretation by each member state. Foreign Minister Fischer's s u c c e s s lay in his ability to avoid transgressing the ambiguities of German policy. Indeed, apparent reconciliation of disparate policy strands did much to elevate him, at least for a time, to the status of Germany's most popular politician, at least according to the regular poll carried out for the w e e k l y Der Spiegel.

Notes 1. European Commission, "Fifteenth Annual Report on Monitoring the Application of Community Law—1997." 2. This tactic amounted to an adroit exploitation of the Bonn-Brussels twolevel game. See Peter Evans, Harald K. Jacobson, and Robert Putnam (eds.), Double-Edged Diplomacy: International Bargaining and Domestic Politics. 3. Bündnis 90-Die Grunen. 4. Stefan Bach, "Steuerpolitik in Europa zwischen Wettbewerb und Harmonisierung: Perspektiven nationaler und europäischer Steuerpolitik in der Europäischen Wirtschafts- und Währungsunion." 5. Wolfgang Munchau, "Wall of Resistance"; Uta Harnishfeger, "EU Scrutiny of German Public Bank System Arouses Passionate Defense." 6. European Commission, "Fifteenth Annual Report," pp. 72, 84. 7. G0sta Esping-Andersen, The Three Worlds of Welfare Capitalism. 8. Ullrich Heilemann and Hermann Rappen, The Seven Year Itch? German Unity from a Fiscal Viewpoint. 9. Lionel Barber, "EU States Fail to Spend $24bn in Aid for Regions: Nations Withhold Fund in Effort to Meet Monetary Union Targets." 10. This orientation receives explicit documentation in a 1994 advisory committee to the Ministry of Economics. See BMWI (Federal Miinistry for Economics). "Ordnungspolitische Orientierung für die Europäische Union. Gutachten des wissenschaftlichen Beirats beim Bundesministerium für Wirtschaft." Nr. 356. Oktober, 1994 and Carl Lankowski, "Social Policy: Managing the Transition to EU Ordnungspolitik." 11. Hanns Jürgen Küsters, Die Gründung der Europäischen Wirtschaftsgemeinschaft.

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12. E C Article 118a. 13. Alan Burnett and Reiner H o f f m a n n , " T h e European E m p l o y m e n t Pact." 14. Lankowski, "Social Policy." 15. Carl L a n k o w s k i , " P o e t r y on Palimpsest: G e r m a n y , the G r e e n s , and European Integration." 16. Kendall Baker, Russell D a l t o n , and Kai H i l d e n b r a n d t , Germany Transformed. Political Culture and the New Politics. 17. N a b u , " H i n t e r g r u n d : Blick nach V o r n — N A B U präsentiert u m w e l t politischen F o r d e r u n g e n . " Report to the Heinrich Boell Foundation August 1999. 18. Gerd Winter, German Environmental Law. Basic Texts and Introduction. 19. Susan R o s e - A c k e r m a n , Controlling Environmental Policy: The Limits of Public Law in Germany and the United States. 20. Matthias Jopp, " G e r m a n y and the Western European U n i o n . " 21. Barbara Lippert, " G e r m a n y and Agenda 2 0 0 0 . " 22. Carnegie C o m m i s s i o n , Unfinished Peace: Report of the International Commission on the Balkans. 23. Recognition undermined the advice of the E C ' s own Arbitration C o m mission and the e f f o r t s of the E C - s p o n s o r e d Yugoslav peace c o n f e r e n c e s to gain a general settlement, according to the Carnegie C o m m i s s i o n report (note 22). 24. J e f f r e y J. A n d e r s o n and John B. G o o d m a n , " M a r s or M i n e r v a ? A United G e r m a n y in a P o s t - C o l d War E u r o p e . " 25. Jopp, " G e r m a n y , " p. 39. 26. Joschka Fisher, Risiko Deutschland. Krise und Zukunft der deutschen Politik. 27. By this time, the Greens had also moved at least rhetorically f r o m opposing the project of European integration embodied in the Brussels institutions that had developed over 45 years in favor of an unformulated all-European substitute, to the position of critical support adopted at the national party c o n f e r ence at Aachen in October 1993 (Lankowski, "Poetry on Palimpsest"). 28. C h a n c e l l o r S c h r ö d e r d i s p a t c h e d the minister in charge of the C h a n cellery, B o d o H o m b a c h , to a d m i n i s t e r the pact, assisted by the chargé d ' a f f a i r e s at A m e r i c a ' s mission to the E u r o p e a n Union, c a r e e r d i p l o m a t D o n a l d Kursch. 29. T h e W E U was eventually e n g a g e d to provide technical assistance to the Albanian police force. 30. T h e s e are humanitarian and rescue tasks, peacekeeping tasks and tasks of c o m b a t f o r c e s in crisis m a n a g e m e n t , including p e a c e m a k i n g . T h e y w e r e specified at a NATO ministerial meeting held in 1992 outside of Bonn on the Petersberg, and were incorporated into the A m s t e r d a m Treaty ( a m e n d i n g the Treaty on European Union), which c a m e into force in May 1999. 31 Presidency C o n c l u s i o n s — C o l o g n e European C o u n c i l — 3 & 4, p. 19. 32. Andrei Markovits and S i m o n Reich, The German Predicament. Memory and Power in the New Europe. 33. M a r i a Green C o w l e s , J a m e s A. C a p o r a s o , and T h o m a s Risse (eds.), Transforming Europe: Europeanization and Domestic Change.

6

Italy: Both Leader and Laggard Marco

Giuliani & Simona

Piattoni1

Italy has the reputation of being a "Euro-enthusiast" and yet fails to implement European policies in a timely and satisfactory fashion. Italians' unquestioned support of the European Union (EU) contrasts with their factual lack of knowledge of European institutions and policies. Even for many Italian political leaders, Europe has long remained a "geographical expression" that commanded solely dim and sporadic attention. Though constantly revered in public debates, the Union has only recently begun to command some genuine and autonomous interest. In spite of this, the harsh political campaign on the occasion of the last election of the European Parliament (1999) still revolved more around domestic than truly European issues. Among the founding members of the European Union, Italy is often a "leader" in words and a "laggard" in facts. This unflattering picture of Italian membership in the EU has some empirical foundation. Transposition rates—the rates at which European directives are translated into national l a w s — h a v e traditionally been low, and the Commission has often brought Italy before the European Court of Justice (ECJ) in an astonishing number of infringement procedures. Both these features indicate faulty or, at least unsatisfactory, implementation of European policies. Many wonder how these two apparently contradictory behaviors— verbal adherence to and factual distance f r o m the E U — m i g h t be reconciled. Political, administrative, social, and cognitive factors have been called into question. 2 M e a n w h i l e , the e c o n o m i c constraints imposed by the Monetary Union have partially modified this overall picture, hopefully initiating a virtuous cycle in the relationships between Italy and the EU. Unfortunately, the spillover f r o m the core monetary choices to the implementation of the other policies influenced by the

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Union is still tenuous, and the progress achieved in the "Europeanization" of Italy yet uncertain. In this chapter a picture of Italian membership in the EU is presented with the help of both " h a r d " data and anecdotal evidence. In the first part we will sketch the institutional f r a m e w o r k used by Italy to cope with EU obligations. In the second we will focus on a specific sector within the first "pillar" of the EU (see Chapter 1)—namely, regional d e v e l o p m e n t p o l i c y — t o illustrate both the difficulties objectively encountered by Italy in implementing EU policies and the progress that has been made on this front.

T h e Institutional Framework All m e m b e r states have roughly similar arrangements for dealing with EU a f f a i r s — m e m b e r s h i p in the Union has contributed to the development of (some sort of) specialized institutions. Each country has a permanent representation in Brussels, some kind of internal division of labor at the governmental level for dealing with the different phases of EU policymaking, and a varied involvement of the national and local levels of government in the whole process. 3 Actually, these similarities prevail only at the formal level. Permanent representations in Brussels are differently composed, staffed, and connected with the respective central and local governments. There may be a dedicated minister or department for EU affairs in each country, but his/her rank and role in the governmental structure varies significantly. Instruments and procedures for incorporating and implementing EU policies are extremely different from country to country, and the factual inclusion of central and regional assemblies in these processes is even more disparate. Finally, the national political environment in which the participation in EU affairs takes place significantly alters the functioning of apparently similar institutions. In this section of the chapter we will outline the specific institutional f r a m e w o r k devised through the years by the Italian government in order to respect the EU agreements, and review the main reasons for its poor p e r f o r m a n c e in adopting and implementing European regulations and directives.

Formal and Informal Arrangements A puzzling government. Executives are the m a j o r national actors in EU policymaking. Their responsibility is straightforward in the decisions

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made in the Council of Ministers, but it is evident even when these decisions are incorporated into the national body of norms and implemented. A stable division of labor at the executive level and consistent coordination mechanisms between Brussels and the national capitals are necessary but not sufficient conditions for an optimal performance at the implementation stage. Italy suffers from many deficiencies already in these regards. Its short-lived governments cause a continuous turnover in political leadership. The existence of a specialized department for EU affairs was not formalized until 1990. This ad hoc minister failed to gain reputation and autonomy both for want of economic and political support from the prime minister and because of the opposition of some of its colleagues, particularly in the Foreign Office. 4 Its coordinating role was significantly confined to the descending phases of the policy process, with the unpleasant consequence that it had to try to reconcile the divergent positions individually taken in Brussels by each minister. Explicit efforts at coordinating Italian participation in EU processes have been frequently bypassed by informal talks among ministers or suddenly upset by meetings of the leaders of the parties composing the governmental coalition. The Italian permanent representation in Brussels was repeatedly puzzled and disoriented by the absence of a clear, shared position in Rome. Unsurprisingly, the outcome of its bargaining activity proved hard to implement back at home. In sum, the fragmentation of competencies, the absence of one undisputed coordinating institution, and the personal and partisan competition (if not confrontation) among those who should have favored a smooth connection with Brussels, compounded by endemic governmental instability, reduced the credibility of the Italian government at the EU level and diminished its complying capacity at the national level. 5 If the United States laments the plurality of interlocutors in the EU institutions, mutatis mutandis, the European Commission and the other member states were certainly not at ease with the multiple and tricky distribution of responsibilities of their Italian partner. Secluded Parliament and unsatisfactory procedures.

Lacking direct m e a n s

of exercising its sovereignty, the EU depends upon collaboration among national political systems. Once the Council has adopted a directive, implementation and enforcement lie in the hands of domestic institutions. As far as Italy is concerned, the lack of any automatic statutory instrument at the executive level—or the equivalent to the French reserve de pouvoir réglementaire^-directly assigns the responsibility of transposing EU directives to the parliament, which each year

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d i s c u s s e s t h o u s a n d s of bills a n d h a s a c o n s t a n t l y j a m m e d l e g i s l a t i v e a g e n d a . Yet, in p r i n c i p l e , e v e r y t h i n g h a s to be d e c i d e d by law, i n c l u d ing the d e c i s i o n to d e l e g a t e such p o w e r s to the e x e c u t i v e . 7 It has b e e n a r g u e d that the B y z a n t i n i s m of such a p r o c e d u r e — p a r ticularly in a b i c a m e r a l s y s t e m , w h i c h d o e s not e n v i s i o n any r e c o n c i l iatory m e c h a n i s m in c a s e of d i v e r g e n c e b e t w e e n the t w o c h a m b e r s — is a n o t h e r r e a s o n f o r the stalled i m p l e m e n t a t i o n of E U policies. In 1989, a special m e c h a n i s m w a s c r e a t e d — t h e Legge comunitaria ( A n n u a l C o m m u n i t y L a w ) — t h a t a l l o w s the p a r l i a m e n t to acc u m u l a t e in one bill all the E U d i r e c t i v e s a b o u t to e x p i r e and to r e s o l v e in o n e b l o w the p r o b l e m of u n i m p l e m e n t e d E u r o p e a n n o r m s . 8 Its ration a l e s e e m e d s t r a i g h t f o r w a r d : to c o m p e l the m i n i s t e r f o r EU a f f a i r s to s u b m i t , at a f i x e d time of the year, a g o v e r n m e n t a l bill c a p a b l e of f u l f i l l i n g in o n e shot all national o b l i g a t i o n s t o w a r d the U n i o n . U n f o r t u nately, this i n s t r u m e n t soon m a n i f e s t e d s h o r t c o m i n g s of its o w n .

annuale

T h e instability of the political s y s t e m h i n d e r e d the t i m e l y p r e s e n t a t i o n of t h e bill and d e l a y e d its p a r l i a m e n t a r y approval. 1 ' T h e a p e x of i n e f f i c i e n c y w a s r e a c h e d with the 1995 A n n u a l C o m m u n i t y L a w : first a d d e d to the 1996 bill, it w a s then a t t a c h e d to the 1997 bill only to be f i n a l l y a p p r o v e d in A p r i l 1998. O t h e r t e c h n i c a l a n d p o l i t i c a l f a c t o r s h a m p e r e d t h e e f f e c t i v e o p e r a t i o n of this l e g i s l a t i v e a r t i f i c e , a m o n g w h i c h t h e a b s e n c e of a t i m e l i m i t f o r p a s s i n g the bill, a n d t h e d e l a y that t h e c o n t r o v e r s i a l i s s u e s i m p o s e on the s m o o t h e r ones. T h e d i s a p p o i n t i n g e f f e c t of this o t h e r w i s e i n g e n i o u s s t r a t a g e m can be g l e a n e d f r o m t h e d a t a b e l o w . T h e m o s t E U - s e n s i t i v e m i n i s t e r s of p a r l i a m e n t ( M P s ) h a v e r e p e a t e d l y c a l l e d f o r its r e f o r m , in p a r t i c u l a r t h e i n t r o d u c t i o n of a s p e c i a l p a r l i a m e n t a r y s e s s i o n d e d i c a t e d to EU a f f a i r s a n d policies. F o r t u n a t e l y , the stringent c o n s t r a i n t s i m p o s e d on Italy by the M o n e t a r y U n i o n 1 0 h a d the p o s i t i v e e f f e c t of f o r c i n g a global r e o r i e n t a t i o n of n a t i o n a l p r e f e r e n c e s r e g a r d i n g E U issues, w h i c h , in turn, p e r m i t t e d in the last c o u p l e of y e a r s a s m o o t h e r and m o r e r e g u l a r a d o p t i o n of the A n n u a l C o m m u n i t y Law. 1 1 B u t t h e r e is a s e c o n d a s p e c t that s h o u l d be e m p h a s i z e d w h e n talking a b o u t the i n f l u e n c e of t h e p a r l i a m e n t in a d o p t i n g E U p o l i c i e s , n a m e l y its a c t u a l s e c l u s i o n f r o m the c r u c i a l m o m e n t s of the p o l i c y p r o c e s s . T r a d i t i o n a l l y , m o s t M P s h a v e not m a n i f e s t e d great a t t e n t i o n t o w a r d E U m a t t e r s b e c a u s e t h e c o n c r e t e role a s s i g n e d to t h e m w a s o n l y m a r g i n a l . D e s p i t e the e x i s t e n c e of p e r m a n e n t E U c o m m i t t e e s in both c h a m b e r s , t h e Italian p a r l i a m e n t is v i r t u a l l y cut out f r o m t h e f o r m u l a t i o n of the Italian p o s i t i o n on E u r o p e a n a f f a i r s . T h e m e a g e r report

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that the executive initially presented every six months has been recently spaced at yearly intervals. The parliament, de facto excluded f r o m any relevant flow of information, has never exercised any real control on the (already ill-defined) stands of the Italian g o v e r n m e n t . With regard to the transposition of EU directives, the parliament has been gradually bypassed by the government, to which ample legislative powers have been delegated, 1 2 and frustrated by the tangible hostility toward the amendments that it proposed in the last hurried stages of a heretofore slow and belated process. Regional

powers:

duties

without

representation?

The European

Union

began in Maastricht to involve local governments in policymaking. This was the natural outcome of the subsidiarity principle. It is neither one of the tasks nor one of the privileges of the Union to identify at which domestic level of government EU policies should be implemented. Nevertheless, on some occasions, the EU established direct links with subnational entities, as with the Integrated Mediterranean Programs, while in others it favored the national level against competencies constitutionally assigned to regions. 1 3 It is not the juridical profile that is in question in the Italian case. Italian regions have unquestioned responsibilities in implementing EU legislation: they enforce regulations and apply acts with immediate efficacy, EU directives and international treaties included. Still, they are allowed to legislate exclusively, where constitutionally competent and traditionally independent, after a "coordinating act" adopted at the national level. Paradoxically, then, the Italian regions have seen their responsibilities increased by EU membership—including the possibility of being taken before the European Court of Justice—while experiencing a reduction in their actual margins of action. Have they correspondingly increased their capacity to represent their specific interests and problems at the international level? Italian j u r i s p r u d e n c e has long argued against the regions entertaining autonomous international relations. Since 1989, the regions' influence on the positions taken by the government in Rome and Brussels has been confined to a consultative role to be exercised in (irregularly convened) conferences among regional and national officials. Only in the last few years has there been an opening on this front. The Italian regions are still unable to play the same international role as the German Länder or the French districts, but they are now authorized to contact EU institutions for the purpose of gathering information (preferably through the few regional officials within the Italian permanent representation). 1 4

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Administration and adjudication. A f t e r their i n c o r p o r a t i o n into the national b o d y of legislation, E U p o l i c i e s are i m p l e m e n t e d at the street level and their substantive operation is evaluated, case by case, by the E u r o p e a n court system. It has b e e n argued that the Italian a d m i n i s t r a tion and court system have put up a fierce resistance against their loss of authority, thus c o n t r i b u t i n g to the s l u g g i s h n e s s of the i m p l e m e n t a tion process. T h e bureaucratic and particularistic attitude of the Italian p u b l i c a d m i n i s t r a t i o n , c o u p l e d with its low level of p r o f e s s i o n a l i s m and its crisis-driven a p p r o a c h , have run against the technical and " i m partial" p r o b l e m - s o l v i n g approach of the EU. T h e implementation style of the Italian b u r e a u c r a c y is radically d i f f e r e n t f r o m that r e q u i r e d by participation in the EU 1 5 : attention to f o r m a l c o n f o r m a n c e rather than striving for satisfactory p e r f o r m a n c e ; literal and rigid interpretation of the n o r m rather than flexible and intelligent i m p l e m e n t a t i o n of the policy; c o n f l i c t - a v o i d i n g attitude rather than p r o b l e m - s o l v i n g capacity. In its turn, the court s y s t e m — p a r t i c u l a r l y the j u d g e s of the Italian S u p r e m e C o u r t — h a v e held an o b s t r u c t i v e stance t o w a r d EU p o l i c i e s and only gradually have they switched to a more constructive attitude. T h e principle that E u r o p e a n legislation prevails over the national legislation was not u n q u e s t i o n i n g l y accepted by the Italian constitutional court, w h i c h tried to c o u n t e r p o s e the idea that national and c o m m u n i t y n o r m s have equal force. O n c e the principle of EU legal superiority was a c c e p t e d , the r e l a t i o n s h i p b e c a m e smoother. 1 6 J u d g i n g f r o m the n u m ber of preliminary r e f e r e n c e s to the ECJ (ex. Art 177), the Italian pattern r e s e m b l e s that of the other m a j o r m e m b e r states: requests of prel i m i n a r y rulings h a v e increased t h r o u g h the years, particularly on the part of low and intermediate court levels and on matters of agriculture, c o m p e t i t i o n , and taxation. 1 7

Comparative Performances It is time to evaluate the e f f e c t of the previously described f o r m a l and i n f o r m a l institutional a r r a n g e m e n t s with the help of some "hard d a t a . " O u r indicators are built u p o n standard figures that can be f o u n d either in o f f i c i a l p u b l i c a t i o n s of the E u r o p e a n U n i o n , or on their w e b s i t e s . Thus, our elaboration and analysis can be easily replicated and updated. We will concentrate on the 1990s, although we will s o m e t i m e s refer to earlier (and even m o r e problematic) periods. We will evaluate the actual implementation of EU m e a s u r e s both in general—that is, with refe r e n c e to all the directives a d o p t e d in B r u s s e l s — a n d with r e f e r e n c e to a limited, but strategic data s e t — n a m e l y , that regarding the abolishment of physical, technological, and financial barriers and the construction of

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the "Single M a r k e t . " We will m a k e explicit c o m p a r i s o n s with the other 14 m e m b e r states m a i n l y using t w o d i f f e r e n t and mirroring indicators: the a m o u n t of d i r e c t i v e s t r a n s p o s e d into the n a t i o n a l legislation, and the i n f r i n g e m e n t p r o c e d u r e s o p e n e d by the E u r o p e a n C o m m i s s i o n . F i g u r e 6.1 can be i n t e r p r e t e d both p e s s i m i s t i c a l l y and o p t i m i s t i cally. On the one side, w h i l e the a v e r a g e i m p l e m e n t a t i o n rate of the o t h e r m e m b e r states d u r i n g the 1990s has n e v e r f a l l e n b e l o w 9 0 percent ( s u r p a s s i n g the 95 p e r c e n t threshold at the end of the c o n s i d e r e d p e r i o d ) , Italy c o n s i s t e n t l y lingered b e l o w this b e n c h m a r k until 1997, u n a b l e to catch up with its partners. On the other side, there has been s o m e progress: in 1998, the transposition rate is m o r e than 15 percent h i g h e r than at the b e g i n n i n g of the d e c a d e ( a l t h o u g h e v e n the n e w l y e n t e r e d m e m b e r states m a n a g e d to achieve a better record). The data presented in Figure 6.2 give a more accurate picture of the real p r o b l e m s c o n f r o n t i n g Italy. B e y o n d the delayed transposition of directives, the p o o r quality of their i m p l e m e n t a t i o n is r e f l e c t e d in the a m o u n t of i n f r i n g e m e n t p r o c e d u r e s o p e n e d by the E u r o p e a n C o m m i s sion against each m e m b e r s t a t e — a n d the higher the stage reached in the

Figure 6.1 N a t i o n a l T r a n s p o s i t i o n o f E U D i r e c t i v e s ( 1 9 9 1 - 1 9 9 8 ) 100%

_ _ -

95% 90%

-Q

—

85% 80%

75%.70% I I

—

1991

II '

—

1992 I

—

—

—

I I I II I I II I I ' 1993 1994 1995 1996 l Italy- - o -

— I I I 1997

—

—

I I I 1998

Rest of EU

Source: EU Commission, "Annual Report on National Implementation of EU Directives. (EU average refers to EU-11 until 1994, and to EU-14 since 1995.)

I I

122

Early Union

Figure 6.2

Members

Italian Infringements "Surplus" Against the EU Average (1991-1998)

• Formal notice

• Reasoned opinion

• Referral to ECJ

Source: EU C o m m i s s i o n , " A n n u a l Report on National Implementation of EU Directives." (EU means average EU-11 until 1994, E U - 1 4 since 1995.)

procedure, the worse the problem. For each of the three stages—formal notice, reasoned opinion and referral to the ECJ—Figure 6.2 indicates the "surplus" of infringement procedures called against Italy compared to the EU average. 1 8 These figures do not need particular c o m m e n t s — Italy scores always higher and often much (even three or four times) higher than the average m e m b e r state—and attenuate the confident comments advanced on the basis of the preceding indicator. But what is most striking is the fact that the situation worsens at each following stage (the last column of each year is normally higher than the previous ones). This suggests that the Italian governments have been unable or unwilling to solve the implementation problems that have arisen, even when pressed by the Commission and/or the Court of Justice. 1 9 The single market. T h e Single Market initiative was launched by the Single European Act, and included around two hundred directives judged to be essential for establishing a space for the free circulation of goods, persons, technologies, capitals, etc. Given its stagnation after its original 1993 deadline, the Internal Market Directorate General of the

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European Commission tried to relaunch the Single Market in 1997 with a specific Action Plan, which was endorsed by the European Council in Amsterdam. The Action Plan includes constant public monitoring of the implementation progress, giving us an updated account of the situation and the possibility of registering any improvements achieved in the last couple of years. Table 6.1 provides comparative data of the nonimplemented Single Market directives from November 1997 to November 1999 and, in the last column, it measures the absolute and relative improvements. 20 Italy used to be among the two or three worst implementers. Things have not changed dramatically in the last few months covered here but, as displayed by the last two columns of the table, there was a substantial improvement during 1999. 21 Italy has still not completely recovered from its laggard position, but data begin to show a clear departure from its traditional immobility. These statistics are confirmed again even by the positive judgments expressed on the actual fulfillment of the Internal Market project by the business community. In the regular surveys realized by the EU Commission, Italian businessmen show a "satisfaction rate" of 63.4 (seventh

Table 6.1 Internal M a r k e t I m p l e m e n t a t i o n ( r a t e of directives n o t notified t o t h e C o m m i s s i o n a n d i m p r o v e m e n t N o v e m b e r 1 9 9 7 - N o v e m b e r 1999) Improvement Nov. 9 7 - N o v . 99 Nov. 1997 B DK D E EL F IRL I L NL A P FIN S UK

8.5% 3.2% 8.5% 4.7% 7.5% 7.4% 5.4% 7.6% 6.5% 4.6% 10.1% 5.9% 4.3% 6.2% 3.5%

Nov. 1998 5.2% 1.5% 2.7% 2.7% 5.2% 5.5% 5.8% 5.7% 6.2% 3.8% 4.2% 5.6% 0.9% 1.5% 2.1%

Nov. 1999 3.5% 1.3% 2.9% 2.2% 6.2% 5.6% 4.4% 3.9% 5.7% 2.8% 3.7% 4.9% 1.7% 2.1% 2.8%

Source: EU Commission DG XV Single Market Scoreboard

A

%A

5.0% 1.9% 5.6% 2.5% 1.3% 1.8% 1.0% 3.7% 0.8% 1.8% 6.4% 1.0% 2.6% 4.1% 0.7%

58.8% 59.4% 65.9% 53.2% 17.3% 24.3% 18.5% 48.7% 12.3% 39.1% 63.4% 16.9% 60.5% 66.1% 20.0%

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Early Union Members

a m o n g the f i f t e e n m e m b e r states), with a progress c o m p a r e d to 1998 of a l m o s t 10 p e r c e n t . A c c o r d i n g to the d a t a of the Single M a r k e t scoreb o a r d r e p o r t e d on the w e b by the D G XV, at the end of 1999 the sectors with the m o s t p r o b l e m a t i c i m p l e m e n t a t i o n record are social policy and t e l e c o m m u n i c a t i o n s . U n f o r t u n a t e l y , a p p r o a c h i n g the s a m e p r o b l e m f r o m the i n f r i n g e ment side depicts a partially d i f f e r e n t situation. In the t w o - y e a r period c o n s i d e r e d , Italy holds (together with France) the worst record, which, as we already saw in F i g u r e 6.2, t e n d s to deteriorate as the i n f r i n g e m e n t p r o c e d u r e progresses. That Italy is today, unlike the past, in the c o m p a n y of other countries m a y be c o n s i d e r e d as a sign of p r o g r e s s . U n f o r t u n a t e l y , m o s t of these " c o m p a n i o n s " tend to vary f r o m statistics to statistics and f r o m period to period, whereas, in spite of the gradual i m p r o v e m e n t , the data c o n f i r m Italy as one of the f e w constant laggards of the U n i o n .

Some General Hypotheses T h e r e are t w o m a j o r c o n t r a d i c t i o n s that e m e r g e f r o m the portrait outlined here. T h e first, which recurs in every debate on Italy's participation

T a b l e 6.2 I n t e r n a l M a r k e t I n f r i n g e m e n t P r o c e d u r e s , N o v e m b e r N o v e m b e r 1999 Letters of formal notice B DK D E EL F IRL I L NL A P FIN S UK EU

64 15 78 66 64 110 40 91 21 33 55 45 26 30 35 773

8.3% 1.9% 10.1% 8.5% 8.3% 14.2% 5.2% 11.8% 2.7% 4.3% 7.1% 5.8% 3.4% 3.9% 4.5%

Reasoned opinions 52 5 41 38 38 88 15 64 14 17 16 32 6 8 23 457

11.4% 1.1% 9.0% 8.3% 8.3% 19.3% 3.3% 14.0% 3.1% 3.7% 3.5% 7.0% 1.3% 1.8% 5.0%

Cases referred to the ECJ 16 2 7 7 10 29 4 14 2 5 2 8 1 1 3 111

Source: EU Commission DG XV Single Market Scoreboard.

14.4% 1.8% 6.3% 6.3% 9.0% 26.1% 3.6% 12.6% 1.8% 4.5% 1.8% 7.2% 0.9% 0.9% 2.7%

1997-

Judgments of the ECJ 13 0 9 9 5 9 1 11 2 1 0 7 0 0 1 68

19.1% 0.0% 13.2% 13.2% 7.4% 13.2% 1.5% 16.2% 2.9% 1.5% 0.0% 10.3% 0.0% 0.0% 1.5%

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in EU affairs, and has been recapitulated in the introduction, has to do with the inconsistency between the symbolic enthusiasm for European integration and the scant contribution to its construction. The second, which is much more directly related to the theme of this book, relates to the persistency of a situation of deficient implementation of EU policies. This situation may be considered a contradiction even at the domestic level as it produces continuous and manifest costs for a wide range of actors: governments whose promises are u n f u l f i l l e d , politicians whose genuine efforts are voided, bureaucrats whose competencies are expropriated, local g o v e r n m e n t s whose prerogatives are ignored, private entrepreneurs whose opportunities are lost, associations whose participation is neutralized, citizens whose rights are unrecognized, etc. It is not the lack of c o n f o r m a n c e to EU policies per se that is striking. Rather, the apparent persistence of such a situation, through the years and across sectors, represents a puzzle and, hence, an interesting research question. How is it that during most of Italy's EU membership the interests of so many actors have remained largely unheeded? Using Albert H i r s c h m a n ' s f a m o u s categories, why d i d n ' t the classic " e x i t " and " v o i c e " mechanisms activate themselves in order to mend a patently inadequate situation? 2 2 In this section we will quickly review some of the major general hypotheses in this regard; the following section will take a closer look at this problem, guiding us into the specific implementation dynamics of a particular policy sector. The first argument is that some of the intrinsic features of the Italian political system have systematically hindered the formulation and implementation of substantive policies, 2 3 including those stemming f r o m the EU. A highly fragmented and polarized party system, coupled with a type of party government that secured its survival only thanks to hidden microdistributive policies and manifest ideological confrontation, has long represented the precondition for incoherent and ineffective policymaking. Despite the political earthquake that shattered Italy in the early 1990s, only deep constitutional reforms will alter the policymaking performance of the political system, thus improving its credible participation in EU affairs. A second argument revolves around the specific structures and procedures that govern the relationship between Rome and Brussels. Their contribution to the unsatisfactory Italian record is hard to deny. The exclusion of certain actors, the paralysis of others, and the professional and cognitive ineptitude of still others have neutralized most of the mending drift of "voice and exit." Scholars disagree on which structures

126

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Members

and procedures are crucial to s u c c e s s f u l implementation and, hence, would need to be amended. Some of them, mainly jurists, suggest that it is the manner in which EU norms are incorporated into the national body of laws that needs to be corrected, while others, mostly political scientists, insist that the only way to reduce the implementation burden is to improve Italy's participation in the formulation of EU policies. Finally, a third argument is that the whole idea of direct "costs" of nonparticipation and "voice and exit" strategies has be to turned upside d o w n , or at least cautiously considered. Unquestionably, there are groups of actors who would gain from closer commitment to EU decisionmaking, which would plausibly engender a more effective implementation of EU policies. Italy's inertial involvement in the Union has probably benefited the opposite advocacy coalition—one made of ministers fearing to lose some of their privileges, politicians risking to lose the consensus of their clienteles, bureaucrats exploiting their discretionary powers, entrepreneurs unwilling to submit their public financing to EU scrutiny, businessmen preferring a protected environment to open competition, and so on. The overall equilibrium may be costly for the whole country, and even suboptimal for reluctant Europeanists, but this does not imply that the critical voices are automatically capable of overcoming the most conservative ones. 2 4 The threat of " e x i t " on the part of the reformers may be too costly and lack credibility, while their outsiders' " v o i c e " remains ineffective. Path-dependent behaviors and selective distribution of suboptimal incentives may represent sufficient reasons for the stubborn persistency of inadequate implementation of EU policies. These three different groups of explanations should not necessarily be considered as mutually exclusive. They might have several points of contact, and illuminate distinct aspects of a complex situation. The following case study helps clarify how these factors combine to produce a peculiar implementation pattern in one policy area.

Issue A r e a : European Regional D e v e l o p m e n t Policy Italy's lack of initiative in E u r o p e a n matters is epitomized by this country's traditional lame attitude toward European Regional Development Policy (ERDP). A European regional development policy worthy of this name was only inaugurated in 1975 under British pressure. T h e UK, which had joined the EC in 1973, was unwilling to be a net contributor to the European coffers and requested that funds be distributed

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to (its own) lagging regions. Even though in the first round of development aid ( 1 9 7 5 - 1 9 7 7 ) Italy received the largest share of f u n d s (40 percent), 2 5 Italy's lack of initiative in requesting aid for its own lagging regions is a telling indicator of this country's general stance toward Europe: that of a "policy-taker" rather than a "policy-maker." Brief Sketch of ERDP Limited in size and scope for many years ( 1 9 7 5 - 1 9 8 8 ) , the original structural f u n d s (SFs)—the European Social Fund, the European Regional Development Fund, and the European Agricultural Guidance and Guarantee Fund-Guidance Section, plus the loans from the European Investment B a n k — w e r e drastically reorganized and substantially increased in 1989, as a consequence of the Single European Act of 1983. The main innovations of the 1989 reform were: (1) a pooling of the f u n d s , so that the m e m b e r s would concur in financing different pro grams; (2) a reorganization of E R D P goals into six objectives: Objective 1 (in favor of particularly disadvantaged regions) and Objective 2 (in favor of industrially declining regions) are the most relevant for our analysis; (3) the drawing of a "European m a p " identifying the different types of regions according to criteria established uniquely by the Commission; (4) the setting up of a complex procedure starting from the definition of country-level, multiyear C o m m u n i t y Support F r a m e w o r k s (CSFs) and arriving at detailed, yearly regional Operative Programs; (5) the introduction of Community Programs entirely managed by the Commission that target special problems regardless of where they are most acutely felt; (6) a new emphasis on ex-post analysis of the impact of the programs; and (7) the possibility for the C o m m i s s i o n to recall unused funds and allocate them to more efficient regions. These innovations were important and they substantially shifted the balance of power in regional development matters away f r o m m e m b e r states and toward the Commission. Other changes in 1993 further expanded the structural budget, created an additional fund (the Cohesion Fund, targeted at improving communication and environmental infrastructure in the poorest countries of the Union [Ireland, Spain, Portugal, and Greece]), and slightly redesigned the "European m a p " mostly because of the annexation of the eastern Länder to (West) Germany. 2 6 The Integrated Mediterranean Programs (IMPs), 1 9 8 7 - 1 9 9 3 , were a p p r o v e d to help the Mediterranean regions in the m e m b e r states of France, Italy, and Greece prepare f o r the entry of Spain and Portugal, which were direct competitors in many Mediterranean products. They

128

Early Union

Members

served as test cases for the r e f o r m and r e i n f o r c e d or introduced principles and p r o c e d u r e s later i n c o r p o r a t e d in the r e f o r m e d SFs. 2 7 T h e principles of subsidiarity, stating that the d e c i s i o n m a k i n g p r o c e s s should involve as m u c h and as early as possible the " l o w e s t most appropriate l e v e l , " that is the r e g i o n s , and of additionality, s a y i n g that the E u r o p e a n structural f u n d s should be m a t c h e d by national f u n d s in order to e n s u r e the additional nature of the aid lent to the regions, had been at the c o r e of the E R D P all a l o n g . T h e p r i n c i p l e of integration, prop o u n d i n g that the v a r i o u s s t r u c t u r a l f u n d s o u g h t to be c o m b i n e d to support c o m p r e h e n s i v e d e v e l o p m e n t p r o g r a m s , n e e d e d r e i n f o r c e m e n t . T h e principles of cohesion, p r e s c r i b i n g that social and e c o n o m i c disc r e p a n c i e s w i t h i n the c o m m u n i t y o u g h t to be e l i m i n a t e d as m u c h as possible in order to give all regions the possibility to profit f r o m closer i n t e g r a t i o n , and partnership, i m p l y i n g that U n i o n , national and local i n s t i t u t i o n s are c o r e s p o n s i b l e f o r the c r e a t i o n and i m p l e m e n t a t i o n of the d e v e l o p m e n t p r o g r a m s , were introduced with the I M P s and upheld by the r e f o r m e d SFs.

Administrative Efficiency In practice the r e f o r m m e a n t that the regional authorities were to be involved as m u c h and as early as possible in the d e c i s i o n m a k i n g process on the use of d e v e l o p m e n t f u n d s , that E u r o p e a n structural f u n d s could not be r e l e a s e d until the m e m b e r state had p r o v i d e d m a t c h i n g f u n d s , and that the C o m m i s s i o n w o u l d not sign C S F s that lacked internal coherence. All of this m e a n t that the regional and the national authorities c a p a b l e of (1) c o l l e c t i n g and distributing i n f o r m a t i o n on the availability of the f u n d s and the on c o m p l i c a t e d p r o c e d u r e s for s u b m i t t i n g proj e c t p r o p o s a l s , (2) d r a f t i n g c r e d i b l e r e g i o n a l d e v e l o p m e n t p r o g r a m s and i m p l e m e n t i n g the c o r r e s p o n d i n g o p e r a t i v e p r o g r a m s , and (3) rel e a s i n g the f u n d s and m a n a g i n g the f i n a n c i a l f l o w s in a t i m e l y and transparent f a s h i o n would be r e w a r d e d by the C o m m i s s i o n , while those authorities that did not d e m o n s t r a t e such capacity would be penalized. R e w a r d and p u n i s h m e n t , f r o m the I M P s o n w a r d , were not purely moral rebukes, but c o n c r e t e m e a s u r e s . T h e I M P s introduced the principle that the f u n d s left u n u s e d by one region could be redistributed to m o r e e f ficient regions. A d m i n i s t r a t i v e i n e f f i c i e n c y w o u l d , thus, be p u n i s h e d . The conventional wisdom. C o n v e n t i o n a l w i s d o m has it that the r e g i o n s of the n o r t h are m o r e e f f i c i e n t in d r a f t i n g c r e d i b l e d e v e l o p m e n t p r o g r a m s , appropriating and spending the m o n e y , and, supposedly, m a k i n g g o o d use of the f u n d s to sustain local d e v e l o p m e n t than the r e g i o n s of

Italy

129

the south. This stereotypical picture is explicitly given in many accounts 2 8 and implied by many others. 2 9 Conventional explanations come in two slightly different versions. The first is that the ills that affect the performance of the country as a w h o l e — B y z a n t i n e administration, f r a g m e n t e d political systems, and lack of organized e x p e r t i s e — a r e relatively more intense in the south than in the north, which would explain both the poor p e r f o r m a n c e of the entire country and the variation among regions. 3 0 A second, complementary explanation, which has recently gained greater currency, is that cross-regional discrepancies in administrative performance and, hence, also in appropriation and use of the SFs are due to the unequal accumulation of "social capital." 3 1 Social capital is seen as potentially compensating for the administrative and political obstacles that also affect Italy's overall performance. According to this view, the southern regions, which are poor in social capital, perform comparatively worse than the northern regions, which are rich in social capital. 32 These explanations, which reproduce arguments one and two presented above to explain Italy's overall performance, are clearly unsatisfactory as they cannot explain the above-average performance of some southern regions. In line with the third general argument offered above, we would like to draw attention to the capacity of regional political leaders to overcome the passive resistance to the implementation of the E R D P opposed by those interests that would be upset by effective European integration. While administrative Byzantinism and political fragmentation may affect to some degree all regions, and while social capital may further hamper the capacity of some to act, in some regions political leadership manages to overcome the resistance of the interests opposed to integration. The interregional picture that we will offer will thus be less dichotomous and will not fall neatly along the north-south divide. The data. To start with, the picture is not so black-and-white as the conventional explanations would m a k e us believe: interregional discrepancies in appropriation and expenditure rates exist, but they do not distribute neatly along a north-south axis. The rate at which regions manage to spend the f u n d s gives a summary indicator of their financial efficiency. L o o k i n g at Objectives 1 and 2 data for southern and northern regions respectively within the second Community Support F r a m e w o r k at the end of 1998 (Tables 6.3 and 6.4), we find a m o n g the best performers (> 55 percent) three southern regions (Abruzzo, Sardegna, and Basilicata) and only one northern region (Friuli-Venezia Giulia). Two northern regions ( U m b r i a and Lazio) p e r f o r m worse than the worst

130

Early Union Members

Table 6.3

C o m m u n i t y S u p p o r t F r a m e w o r k , 1994-1999: Objective I — Financial I m p l e m e n t a t i o n on D e c e m b e r 31, 1998 Total Cost

Abruzzo 555.6 O P Abruzzo (1995) 365.6 E A G G F (1995) 190 Basilicata 1224.2 OP Basilicata (1994) 1224.2 EAGGF Calabria 2042.7 OP Calabria (1994) 1288.8 E A G G F (1995) 485.7 GG crisis area Crotone (1996) 90.9 GG crisis area Gioia Tauro (1995) 57.3 GG Port of Gioia Tauro (1995) 120 Campania 3018.8 O P Campania (1995) 2904.5 EAGGF GG Campania stock-raising (1998) 66.5 GG Bank province of Naples GG Historic Centre of Naples (1998) 47.8 Molise 537.2 O P Molise (1994) 537.2 EAGGF Puglia 2683.1 O P Puglia (1995) 2499.6 EAGGF GG crisis area Manfredonia (1996) 60.6 GG crisis area Brindisi (1997) 73.2 GG crisis area Taranto (1998) 49.7

SF Assistance

%

Commitments

%

259.4

258

99.5

210.8

81.3

165.5 93.9 663.2

165.5 92.5 572.6

100.0 98.5 86.3

136.4 74.4 368.2

82.4 79.2 55.5

663.2 0 916.3

572.6 0 688.9

86.3 0 75.2

368.2 0 466.1

55.5

580.3 241

428.5 165.4

73.8 68.6

340.5 75.1

58.7 31.2

35

35

100.0

10.5

30.0

20

20

100.0

8

40.0

40 1386.4

40 915.2

100.0 66.0

32 381.2

80.0 27.5

1327.1 0

855.9 0

64.5 0

370.9 0

27.9

34.3

34.3

100.0

10.3

30.0

0

0

0

0

25 292 292 0 1223.4 1148.4 0

25 239.6 239.6 0 891.8 816.8 0

100.0 82.1 82.1 0 72.9 71.1 0

0 143.4 143.4 0 579.5 552 0

0.0 49.1 49.1

25

25

100.0

12.5

50.0

25

25

100.0

7.5

30.0

25

25

100.0

7.5

30.0

Payments

50.9

47.4 48.1

(continues)

Italy

Table 6.3

Cont. Total Cost

Sardegna O P Sardegna (1994) EAGGF Sicilia O P Sicilia (1995) EAGGF GG BIC Sicilia (1998) GG crisis area Siracusa (1998) O P Pianura (1997) South Source:

13 I

SF Assistance

Commitments

%

1811.7

967.1

681.4

70.5

546.7

56.5

1811.7

967.1 0 1525.1 1487.2 0

681.4 0 753.2 715.3 0

70.5 0 49.4 48.1 0

546.7 0 514.3 501.6 0

56.5

22.3

12.9

12.9

100.0

5.2

40.3

50

25

25

100.0

7.5

30.0

25 7232.9

25 5000.7

100.0 69.1

12.5 3210.2

50.0 44.4

3101.8 3029.5

55.3 14975.1

Commission of the European Community, Wth Anni4al Report

Payments

on the

%

33.7 33.7

Structural

Funds (1998).

southern p e r f o r m e r (Campania). The data relative to a program in which all regions partake ( L E A D E R ) shows A b r u z z o still on top followed by four northern regions (Lombardia, the province of Bolzano, Liguria, and Valle d ' A o s t a ) (Table 6.5). The situation at the end of 1998 was the result of a conscious effort on the part of southern regions to improve their record, a result that is neatly registered by the comparison with the situation at the end of the previous year (Table 6.6). The real progress made by the southern regions is reflected also in the international comparison: while still below the European average, southern regions are financially more efficient than northern regions (Tables 6.7 and 6.8). An alternative explanation. According to the third argument above, the poor national p e r f o r m a n c e is explained in terms of the relative costs and benefits that European policies impose on different sets of actors. E R D P is no exception and elicits opposition f r o m various quarters. On the one hand, it distributes considerable funds to needy areas and provides the regions with the opportunity to think systematically about development problems and to acquire technical knowledge and an international profile. On the other hand, E R D P imposes considerable costs, mostly associated with the requirements of "integrated" planning and

I 32

Early Union Members

Table 6.4

C o m m u n i t y S u p p o r t F r a m e w o r k , 1994-1999: Objective 2 — F i n a n c i a l I m p l e m e n t a t i o n on D e c e m b e r 31, 1998

Valle d'Aosta SPD 1994-96 SPD 1997-99 Piemonte SPD 1994-96 SPD 1997-99 Lombardia SPD 1994-96 SPD 1997-99 Liguria SPD 1994-96 SPD 1997-99 Bolzano 3 Trento" Friuli V.-G. SPD 1994-96 SPD 1997-99 Veneto SPD 1994-96 SPD 1997-99 Emilia-Romagna SPD 1994-96 SPD 1997-99 Toscana SPD 1994-96 SPD 1997-99 Umbria SPD 1994-96 SPD 1997-99 Marche SPD 1994-96 SPD 1997-99 Lazio SPD 1994-96 SPD 1997-99 North and Center SPD 1994-96 SPD 1997-99 Source:

Total Cost

SF Assistance

Commitments

32.1 1.6 30.5 1372.4 449.1 923.3 161.4 73.2 88.2 544.9 219.2 325.7

14.1 0.6 13.5 440.1 143.4 296.7 55.1 21.1 34 205.7 81.6 124.1

16.8 3.3 13.5 242.4 143.4 99 55.1 21.1 34 129.9 81.6 48.3

119.1 550.0 100.0 55.1 100.0 33.4 100.0 100.0 100.0 63.2 100.0 38.9

Payments

%

7.2 0.4 6.8 152.3 102.8 49.5 28.6 11.6 17 86.3 65.6 20.7

51.1 66.7 50.4 34.6 71.7 16.7 51.9 55.0 50.0 42.0 80.4 16.7

—

—

—

—

—

—

—

—

—

—

169.1 59 110.1 440.3 152.7 287.6 80.3 39.3 41 893.1 403.1 490 157.7 37.3 120.4 117.8 32 85.8 334.9 158.4 176.5 4304 1624.9 2679.1

53.3 14.1 39.2 152.3 48.9 103.4 26.2 12 14.2 266 113.6 152.4 68.3 17.4 50.9 43.3 12.3 31 132.8 59 73.8 1457.2 524 933.2

57.7 18.5 39.2 98.4 48.9 49.5 26.2 12 14.2 164.5 113.6 50.9 41.8 24.8 17 47.6 16.6 31 83.4 59 24.4 963.8 542.8 421

C o m m i s s i o n o f the European Community, 10th Annual

Funds (1998). Note:

%

a. Not applicable.

108.3 131.2 100.0 64.6 100.0 47.9 100.0 100.0 100.0 61.8 100.0 33.4 61.2 142.5 33.4 109.9 135.0 100.0 62.8 100.0 33.1 66.1 103.6 45.1 Report

29.9 10.3 19.6 60.3 35.5 24.8 13.8 6.7 7.1 111.2 85.8 25.4 18.6 10.1 8.5 21.6 6.1 15.5 35.9 26.3 9.6 565.7 361.2 204.5 on the

— —

56.1 73.0 50.0 39.6 72.6 24.0 52.7 55.8 50.0 41.8 75.5 16.7 27.2 58.0 16.7 49.9 49.6 50.0 27.0 44.6 13.0 38.8 68.9 21.9 Structural

Italy

133

Table 6.5 C o m m u n i t y Support Framework, 1994-1999: L E A D E R P r o g r a m — F i n a n c i a l Implementation on D e c e m b e r 31, 1998 Total

SF

Cost

Assistance

Valle d ' A o s t a Piemonte

2.2 48.8

Lombardia Liguria Bolzano

17.3 18.3 23.4

Trento Friuli-V. G.

10.5 17.7

5.9 2.7 6.0

Veneto Emilia-Romagna Toscana Umbria Marche

70.5 25.1 65.1

19.9 7.7 18.1

38.0 44.6 73.9 31.9 20.9 59.8 39.1 51.3 53.4 72.5

10.3 10.3 19.9 16.0 11.0 29.9 19.6 25.8 26.0 36.2 36.4

Lazio Abruzzo Molise Puglia Basilicata Campania Calabria Sicilia Sardegna Total

78.0 862.3

0.6 11.3 5.5 4.8

323.9

%

Commitments

Payments

0.5 2.6

83.3 23.0

0.2 1.3

5.5 3.9

100.0

1.9 1.6

4.8 2.2 1.5 6.0 1.7 1.5 2.4 1.9 4.2 15.4

81.3 81.4 81.5 25.0 30.2 22.1 8.3 23.3 18.4 21.1

2.3 6.6 2.4 3.5 7.0

96.3 20.9 22.1 12.2 13.6 26.9

20.5 5.1 101.5

56.6 14.0 31.3

Source: Commission of the European Community: 10th Annual Funds (1998).

Report

2.0 0.8 0.7 3.0 0.9 0.7 1.0 0.9 2.1 7.7 0.1 3.3 1.2 1.8 3.5 10.2 2.5 47.4 on the

% 33.3 11.5 34.5 33.3 33.9 29.6 11.7 15.1 11.7 3.9 9.7 8.7 10.6 48.1 0.9 11.0 6.1 7.0 13.5 28.2 6.9 14.6

Structural

heightened financial scrutiny. Both economic and institutional actors must weigh the benefits against the costs. E c o n o m i c actors must weigh the advantages that derive f r o m receipt of development f u n d s against the costs that stem from having to draft credible d e v e l o p m e n t projects and submit them to the regional authorities f o r integration with other concurrent and c o m p e t i n g projects. The costs associated with increasing European i n t e g r a t i o n — heavy costs for the least efficient economic units—are fixed and independent of involvement in ERDP. T h e least d y n a m i c and organized businesses will then perceive E R D P as imposing, on the whole, more costs than it distributes benefits, and will not contribute to fashioning a credible development program. This, in turn, will forestall the acquisition of f u n d s for all businesses.

134

Early Union

Table 6.6

Members

C o m m u n i t y S u p p o r t F r a m e w o r k , 1994-1999: Objective I — Financial I m p l e m e n t a t i o n o n D e c e m b e r 31, 1997 Total Cost

Abruzzo 553.2 OP Abruzzo 365.7 (1995) OP Abruzzo E A G G F (1995) 187.6 Molise 523.5 OP Molise (1994) 523.5 2,470.2 Puglia O P Puglia (1995) 2,409.6 GG Manfredonia (1996) 60.6 1,125.0 Basilicata OP Basilicata (1994) 1,125.0 Campania 2,964.9 OP Campania (1995) 2,964.9 Calabria 2,026.7 O P Calabria (1994) 1,313.9 O P Calabria E A G G F (1995) 502.0 GG Crotone (1996) 90.9 M P Port of Gioia Tauro (1995) 120.0 Siclia 2,560.1 O P Sicilia (1995) 2,560.1 Sardegna 1,808.6 OP Sardegna (1994) 1,808.6 O P Pianura (1997) 55.3 Total 14,087.6

SF Assistance

Commitments

%

Payments

%

259.4

258.0

99.4

192.0

74.0

165.5

165.5

100.0

117.6

71.0

93.9 292.0

92.5 153.6

98.5 52.6

74.4 96.9

79.3 33.2

292.0 1,173.4

153.6 577.1

52.6 49.2

96.9 299.4

33.2 25.5

1.148.4

552.1

48.1

286.9

25.0

25.0 583.2

25.0 352.1

100.0 60.4

12.5 236.3

50.0 40.5

583.2 1,376.7

352.1 455.6

60.4 33.1

236.3 149.3

40.5 10.8

1,376.7 896.3

455.6 473.1

33.1 52.8

149.3 220.8

10.8 24.6

580.3

290.8

50.1

103.2

17.8

241.0

107.3

44.5

75.1

31.2

35.0

35.0

100.0

10.5

30.0

40.0 1,337.2

40.0 715.3

100.0 53.5

32.0 450.3

80.0 33.7

1,337.2 967.1

715.3 461.7

53.5 47.7

450.3 286.0

33.7 29.6

967.1

461.7

47.7

286.0

29.6

25.0 6,910.3

25.0 3,471.5

100.0 50.2

0.0 1,931.1

0.0 27.9

Source: Commission of the European Community, 9th Annual Report on the Structural Funds (1997).

Regional authorities, too, must weigh the advantages deriving from greater economic prosperity and more satisfied citizens against the costs stemming from involvement in the complicated process of drafting,

Italy

Table 6.7

135

Community Support Framework, 1994-1999: Financial Implementation 1994-1998 by Objective on December 31, 1998 (in millions of euros) ERDF

B

Co mmitmen ts 1998 Co mmitmen ts 1994-98 Payments 1998 Payments 1994-98 (2) %(2)/(l) D C o m m i t m e n t s 1998 C o m m i t m e n t s 1994-98 Payments 1998 Payments 1994-98 (2) % (2)/(l) EL Co mmitmen ts 1998 Co mmitmen ts 1994-98 Payments 1998 Payments 1994-98 (2) % (2)/( 1) E C o m m i t m e n t s 1998 C o m m i t m e n t s 1994-98 Payments 1998 Payments 1994-98 (2) % (2)/( 1) F C o m m i t m e n t s 1998 C o m m i t m e n t s 1994-98 Payments 1998 Payments 1994-98 (2) %(2)/(l) IRL C o m m i t m e n t s 1998 C o m m i t m e n t s 1994-98 Payments 1998 Payments 1994-98 (2) % (2)/(l) I C o m m i t m e n t s 1998 C o m m i t m e n t s 1994-98 Payments 1998 Payments 1994-98 (2) % (2)/(l) N L C o m m i t m e n t s 1998 C o m m i t m e n t s 1994-98 Payments 1998 P a y m e n t s 1994-98 (2) %(2)/(l) A C o m m i t m e n t s 1998 C o m m i t m e n t s 1994-98 P a y m e n t s 1998 P a y m e n t s 1994-98 (2) % (2)/(l)

(1)

(1)

(1)

(1)

(1)

(1)

(1)

(1)

(1)

199.65 423.52 84.59 252.35 60% 1,999.45 6,158.84 1,601.22 4,808.81 78% 2,174.92 8,190.55 1,833.07 6,015.10 73% 1,932.86 12,760.67 2,136.05 10,187.92 80% 297.78 764.47 63.59 442.53 58% 753.87 2,204.92 480.75 1,782.05 81% 1,809.56 7,442.20 2,009.50 5,565.14 75% 47.80 82.50 40.30 70.84 86% 29.76 89.14 24.10 58.94 66%

ESF 20.67 124.12 14.87 104.92 85% 764.74 3,179.37 662.33 2,770.40 87% 540.44 1,633.84 463.63 1,256.99 77% 1,073.51 4,937.90 947.10 4,189.47 85% 59.06 358.66 74.93 337.38 94% 652.79 1,920.04 356.82 1,541.29 80% 304.58 2,079.76 603.37 1,340.73 64% 4.46 13.13 4.46 13.13 100% 12.28 22.55 10.97 19.82 88%

EAGGF

22.00 6.64 16.22 74% 559.15 2,384.86 538.41 1,937.92 81% 352.15 1,706.31 267.23 1,366.04 80% 598.35 2,894.91 509.31 2,242.94 77% 86.18 278.16 59.52 227.21 82% 104.46 969.50 229.53 909.43 94% 367.46 1,468.51 149.37 872.28 59% 2.43 13.86 2.99 12.50 90% —

14.11 —

12.05 85%

FIFG 0.77 1.14 —

0.19 16% 19.67 67.26 4.32 43.79 65% 33.00 99.82 18.76 74.39 75% 158.83 804.67 729.65 91% 9.82 19.47 4.81 9.96 51% 10.44 39.70 7.03 33.74 85% 68.05 166.00 24.59 81.56 49% 2.36 5.24 2.11 4.54 87% — — — — —

Total 221.10 570.78 106.11 373.67 65% 3,343.01 11,790.33 2,806.28 9,560.92 81% 3,100.50 11.630.52 2,582.69 8,712.52 75% 3,763.55 21,398.15 3,592.45 17,349.97 81% 452.84 1,420.76 202.85 1,017.08 72% 1,521.57 5,134.16 1,074.13 4,266.50 83% 2,549.65 11,156.46 2,786.83 7,859.71 70% 57.04 114.72 49.86 101.01 88% 42.04 125.80 35.07 90.81 72% (continues)

136

Early Union

Table 6.7

Cont.

Members

ERDF

ESF

EAGGF

P

Commitments 1998 2,215.36 1,166.48 410.66 Commitments 1994-98 (1) 8,596.22 3,107.93 1,846.94 Payments 1998 1,325.45 702.23 334.96 Payments 1994-98 (2) 6,602.99 2,241.84 1,383.26 77% 72% 75% % (2)/(l) 21.97 UK Commitments 1998 71.17 251.09 Commitments 1994-98 (1) 1,105.64 531.44 173.12 Payments 1998 211.06 109.65 21.76 Payments 1994-98 (2) 461.24 147.56 833.01 87% 75% 85% % (2)/( 1) TOTAL Commitments 1998 11,712.11 4,670.18 2,502.81 Commitments 1994-98 (1) 47,818.66 17,908.73 11,772.28 Payments 1998 9,809.68 3,950.37 2,119.70 Payments 1994-98 (2) 36,619.67 14,277.20 9,127.40 77% 80% 78% % (2)/( 1) Source:

C o m m i s s i o n of the E u r o p e a n C o m m u n i t y , /Oth Annual

Report

FIFG

Total

41.14 153.14 26.56 113.55 74% 10.15 35.00 7.75 25.62 73%

3,833.65 13,704.22 2,389.19 10,341.63 75% 354.39 1,845.20 350.21 1,467.43 80%

354.22 1,391.43 95.92 1,116.99 80%

19,239.32 78,891.10 15,975.67 61,141.25 78%

on the Structural

Funds

(1998).

Table 6.8 C o m m u n i t y S u p p o r t F r a m e w o r k , 1994-1999: Objective 2 — Financial I m p l e m e n t a t i o n 1994-1998 on D e c e m b e r 31, 1998 (in millions of euros)

B

DK

D

E

Commitments 1998 Commitments 1994-98 Payments 1998 Payments 1994-98 (2) % (2)/(l) Commitments 1998 Commitments 1994-98 Payments 1998 Payments 1994-98 (2) % (2)/(l) Commitments 1998 Commitments 1994-98 Payments 1998 Payments 1994-98 (2) %(2)/(l) Commitments 1998 Commitments 1994-98 Payments 1998 Payments 1994-98 (2) %(2)/(l)

(1)

ERDF

ESF

9.01 193.64 4.03 126.62 65%

41.40 0.99 30.78 74%

—

(1)

(1)

(1)

67.77 6.97 57.65 85% 73.89 807.43 75.28 581.29 72% 463.19 1,507.76 553.38 1,227.59 81%

_

—

18.38 —

12.73 69% 5.54 328.86 29.67 243.83 74% 199.77 418.70 178.10 345.85 83%

EAGGF

FIFG

Total 9.01 235.03 5.03 157.40 67%

_

_

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

86.15 6.97 70.38 82% 79.43 1,136.29 104.95 825.12 73% 662.96 1,926.47 731.48 1,573.44 82% (continues)

Italy

137

Table 6.8 Cont. ERDF F

Commitments 1998 Commitments 1994-98 Payments 1998 Payments 1994-98 (2) % (2)/(l) I Commitments 1998 Commitments 1994-98 Payments 1998 Payments 1994-98 (2) %(2)/(l) L Commitments 1998 Commitments 1994-98 Payments 1998 Payments 1994-98 (2) % (2)/( 1) NL Commitments 1998 Commitments 1994-98 Payments 1998 Payments 1994-98 (2) %(2)/(l) A Commitments 1998 Commitments 1994-98 Payments 1998 Payments 1994-98 (2) %(2)/(l) FIN Commitments 1998 Commitments 1994-98 Payments 1998 Payments 1994-98 (2) %(2)/(l) S Commitments 1998 Commitments 1994-98 Payments 1998 Payments 1994-98 (2) %(2)/(l) UK Commitments 1998 Commitments 1994-98 Payments 1998 Payments 1994-98 (2) % (2)/(l) TOTAL Commitments 1998 Commitments 1994-98 Payments 1998 Payments 1994-98 (2) % (2)/(l)

(1)

(1)

396.34 2,357.15 145.78 1,565.73 66% 11.97 760.80 32.48 469.12 62% —

(1)

(1)

12.57 0.63 7.65 61% 17.29 255.29 18.03 176.36 69% —

(1)

54.30 7.73 46.45 86% —

(1)

(1)

(1)

(1)

ESF 102.84 462.34 102.12 367.46 79% 15.67 203.10 24.74 112.85 56%

EAGGF

FIFG

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

3.09

—

—

—

—

—

2.18 70% 4.11 127.74 16.30 95.96 75% 3.48 26.33 4.26 22.73 86% —

86.89 12.67 71.90 83% 16.06 99.28 29.31 81.59 82% 619.03 2,635.28 111.50 1,583.49 60%

22.39

11.28 48% 167.87 856.05 148.78 688.49 80%

1,606.76 8,838.16 997.80 5,995.42 68%

500.36 2,532.02 504.97 1,948.18 77%

—

14.02 63% 1.07 23.63 —

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

Source: Commission of the European Community, 10th Annual Report on the Funds (1998).

Total 499.18 2,819.49 247.90 1,933.19 69% 27.64 963.90 57.22 581.97 60% —

15.66 0.63 9.83 63% 21.40 383.03 34.33 272.32 71% 3.48 80.63 11.99 69.18 86% —

109.28 12.67 85.92 79% 17.13 122.91 29.31 92.87 76% 786.90 3,491.33 260.28 2,271.98 65% 2,107.12 11,370.18 1,502.77 7,943.60 70% Structural

138

Early Union Members

implementing, and assessing regional development programs together with European and national authorities. In order to overcome the incapacity or unwillingness of some businesses to propose fundable development projects, regional authorities need to make extra efforts for which they, too, often do not see the point. The first two arguments reported above give us two general reasons—the relative intensity of the problems that bedevil the entire country and the differential endowment with social capital—for believing that the pro-ERDP "coalition" 33 should be stronger in the north of Italy while the anti-ERDP "coalition" should be stronger in the south. Unfortunately, as we have seen, the data do not support such neat distinctions. Simply put, interest in and commitment to ERDP does not co-vary with levels of e c o n o m i c d e v e l o p m e n t or social capital. Rich but declining industrial regions may, generally speaking, be better equipped with the formal and informal institutions through which development problems can be discussed and development plans can be drafted. In a mirror image, poor but developing regions may be relatively less endowed with such institutions and hence have a harder time identifying the problems and devising the solutions. However, it is equally possible that heightened competition within declining businesses creates bitter divisions that hinder communication and action, just as shared success within growing industries creates a positive climate that can facilitate communication and action. Key in overcoming institutional deficiencies as well as in recomposing conflicts is the c o m m i t m e n t of the regional leadership. 3 4 Despite the attempts to infer a d y n a m i c and capable regional leadership from the level of development or social capital, these aspects are independent of one another. It can thus happen that institutionally rich but declining regions have a disheartened and uninterested regional leadership, while institutionally poor but developing regions have an optimistic and committed leadership. T h e ERDP, in other words, represents an opportunity that can be taken or avoided, exploited or wasted, according to the calculations and the visions of the e c o n o m i c actors and, particularly, the political leaders. While the rigidities of the Italian administrative system and the limitations deriving f r o m the weak status of the regions in international affairs are c o m m o n problems, d y n a m i c regional leaders can strive to overcome both. Whether they succeed or not is almost entirely dependent on their vision and capacity. Forging

consensus

and implementing

policies.

The lawmaking powers

of

the regional councils are strictly defined in the constitution and in the

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laws and decrees that complete it. 35 In expressing a u t o n o m o u s policy options, the regions have been hindered not only by their limited legal powers, but also by their limited fiscal autonomy and their derivative financial situation. 3 6 In simple words, the regions often cannot pass the laws, impose the taxes, and raise the money that they would need in order to formulate and implement credible regional development programs. Even to be informed about the national policies that directly affect them or to be heard on matters of regional interest, they have to rely on the goodwill of the central authorities. 3 7 As we h a v e seen, the IMPs and the r e f o r m e d SFs have revived and introduced the principles of subsidiarity and partnership, respectively. The Italian regions have, in other words, been pulled into regional development policymaking by the C o m m i s s i o n without having the f o r m a l c a p a c i t i e s that w o u l d allow them to make a s i g n i f i c a n t contribution. The regions that could compensate for these institutional weaknesses by other means—for example, by collecting intelligence on the needs of the productive sector and by releasing information on the structural f u n d s — c o u l d serve as a link between the Union and the ultimate receivers of the SFs. They could thus contribute important factual knowledge to the decisionmaking process and help oversee the implementation of the development programs. The regions that could not fulfill these important functions only stood in the way. The functions that translate into practice the principle of subsidiarity are facilitated not only by the existence of "social capital," but also and more importantly by the presence of regional leaders willing to use political networks to supply k n o w l e d g e , distribute information, and provide the enforcement necessary for the success of the regional development programs. 3 8 However, for E R D P to also be effective, its implementation eventually needs to be based on institutional capacities. The Italian legal-administrative tradition has so far made it extremely difficult for the national and the regional authorities to act with sufficient "institutional flexibility." Driven and dynamic leaders often need to bypass formal institutions and act through informal networks. To give an example, entering "pacts" or "contracts" with the Commission and with private subjects in view of the implementation of regional development programs, as dictated by the principle of partnership, is extremely c u m b e r s o m e for Italian authorities. The nature of these "contracts" and the obligations that they impose on the contracting parties are foreign to Italian public law tradition. 3 9 While Italian law is beginning to incorporate "contracts" and "pacts" among its legal instruments, there are also signs that some of the most inefficient regions

140

Early Union

Members

are t a k i n g steps t o w a r d the c r e a t i o n of institutional c a p a c i t i e s in o r d e r to play a m o r e s i g n i f i c a n t role in E R D P . 4 0 T h i s p o s i t i v e t r e n d is c l e a r l y s i g n a l e d by the r e c e n t g e n e r a l i m p r o v e m e n t in f i n a n c i a l i m p l e m e n t a t i o n , particularly in the s o u t h .

Conclusion In this c h a p t e r , w e h a v e p r e s e n t e d both the dark and the bright sides of Italian m e m b e r s h i p in the E U . O n the n e g a t i v e side are the c o n t i n u i n g d i f f i c u l t i e s in t r a n s p o s i n g E U p o l i c y d i r e c t i v e s , w h i c h we h a v e m o s t l y a t t r i b u t e d to I t a l y ' s still i n s u f f i c i e n t e n g a g e m e n t in the early p h a s e of p o l i c y m a k i n g . At this s t a g e , w h e n p o l i c i e s a n d p r o c e d u r e s are disc u s s e d a n d w e i g h e d , it is still p o s s i b l e to steer t h e p o l i c y m a k i n g p r o c e s s so as to m a k e f u t u r e t r a n s p o s i t i o n and i m p l e m e n t a t i o n easier. O n t h e p o s i t i v e side, w e h a v e p o i n t e d to the real e f f o r t s that both t h e national and r e g i o n a l a u t h o r i t i e s are p r o d u c i n g in o r d e r to e q u i p t h e m s e l v e s with the i n s t i t u t i o n a l a n d p r o c e d u r a l c a p a c i t i e s to i n c o r p o r a t e E U law m o r e e a s i l y a n d to t a k e f u l l a d v a n t a g e of E U p o l i c i e s . To illustrate this a r g u m e n t , w e h a v e c h o s e n to f o c u s on E u r o p e a n r e g i o n a l d e v e l o p m e n t policy, a p o l i c y area in w h i c h both n e g a t i v e a n d p o s i t i v e a s p e c t s are m o s t a p p a r e n t .

Notes 1. Introduction and Conclusion (Marco Giuliani and Simona Piattoni); The Administrative Framework (Marco Giuliani); Issue Area: European Regional Development Policy (Simona Piattoni). 2. See the main interpretations below. 3. Deitrich Rometsch and Wolfgang Wessels' volume The European Union and Member States is significantly subtitled Towards Institutional Fusion? as it tried to verify if almost half a century of common belonging to the same supranational organization had produced an active convergence in the domestic structures connected with the Union. 4. Even the formal status of the minister for EU affairs changed from government to government. In 1996, Prime Minister Romano Prodi assigned the EU portfolio to a junior minister within the Foreign Office. A senior minister was instead appointed in the successive governments and was asked to better "co-ordinate the other members of the executive . . . because they often give precedence to matters that are different from the problems of EU norms and regulations" (Meeting n. 472, 27.1.1999 Camera dei Deputati). Finally, under Amato (April 2000), the prime minister had to take the ad interim responsibility of the EU department.

Italy

141

5. Actually, the present executive is trying to strengthen the coordination of its EU policies, but it is still not possible to assess the outcomes of this effort. See Dipartimento politiche comunitarie, l'Italia in Europa: Relazione annuale al Parlamento Sulla Parteccipazione dell'Italia ali Unione Europea. 6. Sabino Cassese, "Hypotheses on the Italian Administrative System," p. 318. 7. Francesco Francioni (ed.), Italy and EC Membership Evaluated, chapter 9; Marco Giuliani, "Italy." Parlamento. 8. M a s s i m o Morisi, La legge comunitaria in 9. M a r c o Giuliani, "Italy and Europe: Policy D o m a i n s and D y n a m i c s . " 10. Kenneth D y s o n and Kevin Featherstone, The Road to Maastricht. 11. M a r c o Giuliani, "Europeanization and Italy: A B o t t o m - u p P r o c e s s ? " 12. Essentially, the Legge C o m u n i t a r i a does not legislate directly but provides the e x e c u t i v e with a u t o n o m o u s legislative p o w e r s (delega), which the g o v e r n m e n t o f t e n neglects to use. See R i c c a r d o Chiesi, " L ' l t a l i a n style nella ricezione e n e l l ' i m p l e m e n t a z i o n e delle direttive c o m u n i t a r i e . " 13. Marta Cartabia, " L ' o r d i n a m e n t o italiano e la C o m u n i t à e u r o p e a . " 14. Associations of local governments, such as A N C I (the Italian association of municipalities), UPI (the Italian union of provinces) or A I C C R E (the Italian branch of C E M R (the Council of European Municipalities and Regions) partially fill this gap of representation, but it is still insufficient. 15. For s o m e general c o m m e n t s regarding the p r o b l e m s of "institutional fit" between Italy (and other m e m b e r states) and the EU, including the issue of b u r e a u c r a t i c i n c o n g r u e n c e , see Vivien S c h m i d t , " E u r o p e a n Integration and D e m o c r a c y : T h e D i f f e r e n c e s A m o n g M e m b e r States." 16. In spite of this, there are still p r o b l e m s regarding the adjudication of conflicts, which simultaneously hint at regional, national, and C o m m u n i t y legislation; Cartabia, " L ' o r d i n a m e n t o italiano." 17. Alex S t o n e S w e e t and T h o m a s Brunell, European Integration: The European Court and the National Courts. 18. Zero (0) percent indicates that Italy has the same n u m b e r of infringements as the " m e a n " m e m b e r state; 100 percent that Italy's i n f r i n g e m e n t s are d o u b l e the E U average; 200 percent m e a n s that the Italian value is three times higher, etc. 19. Here we have not reported data regarding the j u d g e m e n t s of the ECJ, but it is well k n o w n that Italy has the worst record also in this respect. 20. Absolute values are measured as simple d i f f e r e n c e a m o n g percentages (e.g., - 2 percent m e a n s , f o r example, that the country had 5 percent of unimp l e m e n t e d directives at the end of 1997, and only 3 percent at the m i d d l e of 1999), w h e r e a s relative values refer to the ratio of p r o g r e s s (in the s a m e exa m p l e the i m p r o v e m e n t is 4 0 percent). 21. See Dipartimento politiche comunitarie, Relazione annuale al Parlamento. 22. Albert O. H i r s c h m a n , Exit, Voice and Loyalty. 23. M a u r i z i o C o t t a and P i e r a n g e l o Isernia (eds.), Il gigante dai piedi di argilla. 24. A f t e r all, t h e U - t u m in public s p e n d i n g that p e r m i t t e d entry to the " E u r o - z o n e " has long been opposed by a shortsighted coalition that gained political and e c o n o m i c b e n e f i t s f r o m the worsening of public accounts. 25. H a r v e y A r m s t r o n g , " T h e R o l e and E v o l u t i o n of E u r o p e a n R e g i o n a l D e v e l o p m e n t Policy."

142

Early Union

Members

26. Detailed accounts of the evolution of ERDP are contained in Armstrong, "The Role and Evolution," and Fiona Wishlade, "EU Cohesion Policy: Facts, Figures and Issues." 27. It is in keeping with the overall picture of Italy as "policy-taker," rather than "policy-maker," that the IMPs were approved under the pressure of Greece, which had threatened to veto the admission of Spain and Portugal to the European Community, and that the reform of the SFs was the result of these countries' pressure for increased "cohesion." 28. E.g., Carlo Desideri, "Italian Regions in the European Community," and Robert Leonardi, "The Regional Reform in Italy: From Centralized to Regionalized State." 29. E.g., Claudio Radaelli, "How Does Europeanization Produce Domestic Policy Change? Corporate Tax Policy in Italy and the United Kingdom." 30. Ibid. 31. Robert Putnam, Robert Leonardi, and Raffaella Nanetti, La pianta e le radici, and Robert Putnam, Making Democracy Work. 32. A balanced review of more and less conventional explanations is contained in Jiirgen Grote, "Cohesion in Italy: A View on Non-Economic Disparities." 33. Here, as elsewhere in this chapter, the term "coalition" is used loosely to indicate a set of actors with plausibly common interests with respect to a given course. 34. Simona Piattoni, "Local Political Classes and Economic Development. The Cases of Abruzzo and Puglia in the 1970s and 1980s." 35. Accurate accounts of the process through which the Italian regions came into being and the limitations imposed by the central state on their powers are contained in Putnam, Leonardi, and Nanetti, La pianta e le radici, and in Leonardi, "The Regional Reform in Italy." 36. Bruno Dente, Governare la frammentazione. 37. Maria Valeria Agostini, "The Role of the Italian Regions in Formulating Community Policy." 38. Simona Piattoni and Marc Smyrl, "Regional Governance in Italy: Beyond the North-South Divide." 39. It is sufficient to read, for example, the jurisprudence discussing the various accordi (agreements), contratti (contracts), and patti (deals) recently introduced by the Italian authorities in compliance with EU regulations to understand how foreign they are to Italian legal-administrative theory and practice. See, for example, Carlo Modica, "L'accordo di programma: istituzionalizzazione dell'inefficienza?"; Chiara Lacava, "Nuovi moduli convenzionali pubblico-privato nell'attuazione dell'intervento straordinario per il Mezzogiorno: il contratto di programma"; Massimo Annesi, "I 'patti territoriali'"; and Roberto Gallia, "Dalla contrattazione programmata alla programmazione negoziata: L'evoluzione normativa degli aiuti di Stato dall'intervento straordinario nel Mezzogiorno all'intervento ordinario nelle aree depresse." 40. Most regions now have offices and personnel dedicated to European legislation and have set up formal or informal units, which get activated in order to draft and implement programming documents that cut across several areas of competency. For a skeptical view of such efforts, see Enrico Ercole, '"Yes, in Theory and Perhaps in the Future': European Integration and Local Government in Italy."

Part 2 THE SECOND WAVE

7 Britain: Aloof and Skeptical Jorgen

Rasmussen

Noel Coward, the most sophisticated composer of popular songs in England in the 1920s and 1930s, satirized the British Empire in a famous composition. His lyrics noted that in the Asian and African lands under England's control, the indigenous peoples possessed the good sense to stay indoors during the heat of the day. But "mad dogs and Englishmen go out in the mid-day, out in the mid-day, out in the mid-day sun." 1 More than half a century later, England no longer had an empire and cows, not dogs—whether in blazing sun or misty drizzle—were what troubled English sensibilities. Nonetheless, the English continued to exhibit the same arrogant self-confidence that Coward had skewered. English behavior had no kind of fault or flaw; Brussels' bureaucrats could teach the English nothing.

National Context: Britain's Past Relations with Europe Only 20 miles of water, the English Channel, separates Britain from the continent; it has made all the difference. Britain has not been invaded for more than a millennium. But for the channel, the Nazis would have occupied Britain in World War II. The channel keeps Britain from being entirely European and has encouraged it to avoid entanglement in continental affairs. Europe presents too great a potential threat to British security, however, to be ignored. To prevent any country or coalition from dominating the continent, Britain usually has preferred to aid the weaker side in any conflict. Spurning enduring alliances, Britain has shifted partners in a balance-of-power strategy.

145

146

The Second Wave

Following World War II, two aspects of world politics reinforced this tradition of interested aloofness. Britain perceived itself as one of the victors, in contrast to the continent's losers. Furthermore, most of them were unstable with little talent for self-government. Both Germany and Italy were burdened by a political heritage more dictatorial than democratic. French political heritage, while predominantly democratic, also had a strong authoritarian strain. The clash between these two cultures had produced persistent constitutional instability. In contrast, Britain had evolved parliamentary government for seven centuries. By the middle of the nineteenth century, Britain was recognized universally as the model for parliamentary democracy. The origins and outcome of World War II enhanced this reputation. Why would an Englishman want to be involved with that lot on the continent? The second factor that reinforced Britain's traditional European policy was relations with the United States. The two countries had grown closer together during World War I, and World War II generated even w a r m e r relations, especially in the f o r m of friendship between President Franklin Roosevelt and Prime Minister Winston Churchill. Churchill spoke of a "special relationship." 2 The British believed that they alone had an " i n " with the greatest democratic power in the world. The special relationship would be jeopardized if the United States saw Britain as merely one of several European countries. The British were determined to remain distinct—separate from Europe. Semantics buttressed Britain's policy. Unlike the United States, Britain is a unitary system. U n f a m i l i a r with federal systems, British politicians tend to think they are designed to dominate their constituent units. 3 Germans, having considerable experience with federalism, understand that it permits diverse policies among the units. As for continental countries not federal, they lack British negative connotations of the word. Britain saw federalism as a threat to its sovereignty. Following World War II, Britain did participate in joint European ventures, but only on its own terms. It would cooperate with others; it would not integrate. Decisions must be made only by unanimity. Each country must be left to implement any decision as it wished or even ignore it. No supranational organ would enforce it. While some Europeans, the Scandinavians, for example, shared the British outlook, others felt that mere cooperation wasn't enough. 4 France, Germany, and Italy drew up new constitutions shortly after World War II, and all provided for relinquishing of sovereignty to international organizations. These Europeans opposed allowing any country a veto; they wanted decisions that bound even those countries that had

Britain

147

voted against a policy decision. Supranational institutions would implement and enforce c o m m o n policy. Thus when in the mid-1950s the Treaty of Rome was signed to create a European Common Market, only six countries joined; Britain was not among them. The C o m m o n Market's external tariff jeopardized Britain's sales to the six members by making many British goods cost more than those made by firms inside o f — e x e m p t f r o m — t h e tariff. Britain must export manufactured goods to pay for the food and resources it must import. To maintain a European market, Britain mobilized the countries favoring cooperative arrangements into a seven-member European Free Trade Association, but this proved to be an inadequate substitute. Economic necessity compelled Britain to join the Common Market. Unlike the founding six, Britain entered grudgingly. Membership ran counter to Britain's history, past policy, and self-perception. Relations are further complicated because European integration has evolved. The C o m m o n Market b e c a m e the European Economic C o m m u n i t y (EEC), which in turn became European Union (EU). The original primary focus on e c o n o m i c affairs has broadened to include such matters as foreign policy and policing. Many in Britain feel that the EU isn't what their country signed on for. H o w pervasive, how far beyond e c o n o m i c matters, has the E U ' s influence on British policymaking become? On what range of subjects is Britain now compelled to take account of EU policy? Is Britain more a m e n a b l e to EU influence in matters of limited importance, resisting only in policy sectors it deems fundamental? Alternatively, do concerns cutting across policy areas cause British resistance regardless of subject matter? Is EU influence confined to policy content or does it extend as well to d o m e s t i c policy processes? Has EU m e m b e r s h i p led Britain to alter its governmental structures? How broad and how deep is the impact? As a reluctant latecomer to European integration, Britain could be expected to resist the influence of European policy as much as possible. If, in these c i r c u m s t a n c e s , E u r o p e a n policy had notably affected British domestic policymaking, it would be evidence of the dynamic process of European integration.

T h e B r e a d t h of Europe's I m p a c t o n British Policymaking The process of European integration unquestionably has affected British politics. A biographer of Margaret Thatcher, British prime minister of

148

The Second Wave

the 1980s, asserts that "the deepest question in post-war British politics, [has been] the relationship between the offshore islands and the European Community." 5 The issue split the Labour Party, helping to keep it out of power for nearly two decades. By the late 1990s, it was producing similar tensions within the Conservative Party. Not only did the European issue contribute to the Conservatives' defeat in the 1997 election, but it continues to impede the party's electoral recovery. Both of the prime ministers preceding the current incumbent were driven from office over relations with Europe. 6 Politics aside, what British policy areas have been influenced by Europe? Economic Policy A healthy economy is essential to any country's well-being. Economics also greatly affects the political health of a country's politicians. Unsurprisingly, Britain accords this policy sector the highest priority. Britain joined the EEC to obtain economic benefits. It wants those benefits, however, without losing control over its own economy. Because economic policy is so crucial, provided the original impetus for European integration, and compelled Britain to participate, this sector will be examined later in the chapter to illustrative the depth of EU influence. Here evidence of EU impact on British economic policy can be illustrated by the exit from the Exchange Rate Mechanism (ERM). The EEC, as part of the progress toward a single market and as a forerunner of a common currency, created the ERM to link the member countries' currencies, thereby moderating fluctuations in the various exchange rates. 7 Keeping prices of goods produced in one member state stable in terms of the currency of another would facilitate trade across national boundaries. German firms, for example, would be more willing to purchase from other members if they were certain what the goods would cost on delivery. Thatcher was determined to keep Britain out of this system. Two of her key cabinet colleagues wanted in, however, because they saw E R M membership as a means of reducing British inflation and of lowering domestic interest rates. They badgered her sufficiently to obtain a grudging concession in principle to join ERM, although she delayed British entry until October 1990. Her successor, John Major, made ERM the linchpin of British economic policy. The economic discipline it required demonstrated how seriously the British government was committed to controlling inflation and spending. International currency speculators, however, thought the

Britain

149

British pound would decline in value. They began selling pounds faster than Britain could afford to buy them. On S e p t e m b e r 16, 1992, subsequently k n o w n as Black Wednesday, Britain was forced out of the E R M to avoid exhausting its gold and currency reserves in a vain attempt to maintain the p o u n d ' s official exchange rate. The British government's domestic economic policy was a shambles. The apparent inc o m p e t e n c e of M a j o r and his cabinet colleagues contributed to the Conservative Party's defeat at the next general election. Relations with Europe have a m a j o r impact upon British domestic policy.

Social P o l i c y

Social policy has been second only to economic affairs in importance to Britain. Because the Single Market project, fulfilled under the Single European Act (SEA), had been criticized for giving too much power to employers at the expense of labor, Jacques Delors, the president of the European Commission, wanted to create a "European Social S p a c e . " 8 Thatcher, a disciple of A d a m Smith liberalism, opposed injecting social concerns, which she thought would impede free-market capitalism by reversing the SEA's deregulation of enterprise. She labeled the Social Charter, drafted by the EU C o m m i s s i o n in 1989, "quite simply a socialist charter—devised by socialists in the Commission and favoured predominantly by socialist m e m b e r states." 9 By the time the European Council agreed to the Maastricht Treaty in December 1991, Major had replaced Thatcher. He shared her hostility to social regulations imposed by Europe. 1 0 Both believed that their Conservative Party's policy of freeing the economy f r o m detailed regulation permitted British enterprise to produce more cheaply than did their European counterparts. As a result, they argued, Britain enjoyed lower u n e m p l o y m e n t and a higher rate of e c o n o m i c growth than did the continent. To maintain this competitive advantage, M a j o r vetoed the plan to include the Social Chapter in the Maastricht Treaty. T h e other m e m b e r s could enact a c o m m o n policy of social benefits only through a separate protocol. The opt-out f r o m the Social Chapter notwithstanding, Britain remains subject to some European social policy provisions of the Treaty of R o m e that created the C o m m o n Market. Prior to the Social Chapter, a decision of the EU Court of Justice (ECJ) forced Britain to enact a law prohibiting sex discrimination by small businesses, and another court decision compelled it to make retirement age the same f o r men and w o m e n . " Despite the opt-out, the European Council in 1992 expanded

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women w o r k e r s ' maternity benefits over British opposition. Which policies fall under the Social Chapter (and can be ignored by Britain) and which are under other EU obligations (and must be f o l l o w e d by Britain) is unclear. The working-hours directive case, examined later in this chapter, illustrates how this uncertainty produces conflict. Both social and economic policy were involved in another crucial case. 1 2 The ECJ held that the British Merchant Shipping Act of 1988 might violate EU law by preventing Spanish vessels f r o m fishing in British waters. Pending its hearing of the case, the Court instructed British courts to suspend the act. The House of Lords, the highest court in Britain, so ordered British courts. Although temporary in effect, this order was extraordinary. British courts lack the power of American ones to declare legislation unconstitutional. Nonetheless, Britain's highest court, acting on the instructions of Europe's Court, had nullified an act of Parliament, the c o u n t r y ' s supreme legal authority. Although the formal structure of g o v e r n m e n t has not been altered, the balance of power b e t w e e n the legislative and judicial b r a n c h e s has shifted. The EU had effectively altered the British constitution. Greater impact than that on a country's governmental machinery is impossible to imagine short of a military invasion.

Environmental Policy Despite the actions of several sizable "green" groups, the British government has given low priority to environmental policy. Although the EU also has shown relatively little interest in such matters, it " n o w [is] arguably the single most important and effective influence on British environmental policy and politics." 1 3 Britain had done little to deal with the problem of acid pollution f r o m large c o m b u s t i o n plants. Scandinavia, where m u c h of this corroding air descended, complained bitterly. The EU forced Britain to alleviate this problem; in short, no EU, no British action. Air pollution standards now are set primarily by the EU rather than by British law. Both the EU Commission and the Court have acted against British failure to i m p l e m e n t various e n v i r o n m e n t a l regulations. 1 4 The EU has forced Britain to improve the purity of drinking water and to clean up polluted beaches. Britain also has clashed with the EU over major construction projects that lack environmental impact assessments. The motive f o r EU action in such matters was the SEA's goal of harmonization. Curtailing industrial pollution is expensive, driving up the cost of production. Businesses in countries with stringent pollution

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laws would be at a c o m p e t i t i v e d i s a d v a n t a g e and the e f f o r t to create a single m a r k e t t h r o u g h o u t the E U w o u l d be t h w a r t e d . In the last f e w years, h o w e v e r , the E U has p u s h e d less strongly f o r h a r m o n i z a t i o n . 1 5 Britain, a l o n g with o t h e r m e m b e r s , has a r g u e d v i g o r o u s l y f o r subsidiarity—the i d e a that the EU c a n n o t and s h o u l d not try to r e g u l a t e everything. O n l y w h e n a c o m m o n policy is essential should the E U act. Most m a t t e r s s h o u l d be left to the d o m e s t i c p o l i c y of the m e m b e r countries. A s the r a n g e of E U policies has e x p a n d e d , subsidiarity has seemed m o r e desirable, c o o l i n g the E U ' s regulatory fervor. T h e d a y s of the E U ' s m a j o r impact on British e n v i r o n m e n t a l policy, t h e r e f o r e , m a y be past. N o n e t h e l e s s , the E U has i n f l u e n c e d the c o n t e n t of B r i t i s h policy in this area, as it has on social matters. T h e different priorities Britain accords these two policy sectors appear not to matter. Britain has been no m o r e a m e n a b l e to external regulation in one sector than another.

Foreign and Security Policy Since Britain a c c o r d s h i g h priority to f o r e i g n and security policy, the potential for conflict with the EU would seem great. T h u s far, however, EU action in s u c h m a t t e r s has b e e n so m i n i s c u l e that d i s p u t e s h a v e been f e w and i m p a c t on British policy slight. In part, the E U has done little b e c a u s e s o m e m e m b e r s are neutral; a c c e p t i n g c o m m o n f o r e i g n policies is d i f f i c u l t . F u r t h e r m o r e , most EU m e m b e r s b e l o n g to N A T O , a m e c h a n i s m f o r security c o n c e r n s . S i n c e A m e r i c a n and E u r o p e a n interests may differ, h o w e v e r , a distinct " E u r o p e a n " policy has s o m e appeal. T h e r e f o r e , the M a a s t r i c h t T r e a t y c r e a t e s a f o r e i g n and security policy "pillar." G i v e n w h a t this c h a p t e r has said earlier a b o u t B r i t a i n ' s prizing of its "special r e l a t i o n s h i p " with the United States, the d i l e m m a this pillar p r e s e n t s is o b v i o u s . If Britain o p p o s e s j o i n t policy, it a p p e a r s yet again to be a m a v e r i c k . I m m e r s e d in c o m m u n i t y a c t i o n , h o w e v e r , it loses the u n i q u e n e s s j u s t i f y i n g a special relationship. In 1997 the L a b o u r Party r e t u r n e d to p o w e r in Britain a f t e r being out of o f f i c e f o r n e a r l y t w o d e c a d e s . T h e n e w p r i m e minister, T o n y Blair, h a i l e d this v i c t o r y as a b r e a k with the past. A s e v i d e n c e , he stressed his desire to put Britain "at the heart of E u r o p e " in contrast to the o p p o s i t i o n C o n s e r v a t i v e s ' s k e p t i c i s m , e v e n h o s t i l i t y to E u r o p e . Signing on to the Social C h a p t e r was a step in this direction. A British initiative on the f o r e i g n and s e c u r i t y pillar w a s a n o t h e r crucial step, having the a d d e d a d v a n t a g e of h e l p i n g Britain to structure the debate.

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The details of the British 1998 proposal need not be examined. The key point is that the plan embodied the cooperative approach, the view that produced British reluctance to join the C o m m o n Market initially. Britain did not propose a process enabling Europe to formulate a common foreign or security policy binding all members. Decisions would be advisory, assisting cooperation among those desiring it. Regardless of its limited impact on Britain, the effect of the common foreign and security policy can't be discounted entirely. 1 6 During the early stages of the conflict in the Balkans, Germany wanted to use the E U ' s foreign-policy structure to recognize Croatia. The German foreign secretary, Hans-Dietrich Genscher, pointed out to the British that Germany had not opposed their "opt-outs" on the Social Chapter and the monetary union f r o m the Maastricht Treaty; therefore, they owed him one. Douglas Hurd, at the time British foreign secretary, later admitted that Britain felt compelled to concede what G e r m a n y wanted. Thus, in January 1992 Britain and other EU m e m b e r s recognized Croatia, but without the guarantees for ethnic minorities in the agreed area that had been a British condition for such recognition. EU decisionmaking pressures produced a result that Britain, negotiating on its own, would not have sought. Finally, the foreign and security pillar encompasses enlargement of the EU. The traditional British reluctance to become entangled with European alliances makes somewhat surprising its leadership in advocating enlargement of the EU. British motives, however, are more ulterior than charitable; they relate to the debate over broadening as opposed to deepening. S o m e m e m b e r s f a v o r admitting new m e m b e r s (broadening) b e f o r e further integration of the EU makes entry more difficult by adding to existing regulations. Others favor eliminating obstacles to a single market and a single currency (deepening) before admitting new members. Harmonization of policy already is difficult enough; admitting the drastically different e c o n o m i e s of Eastern Europe would greatly impede the process. Broadening, therefore, is a means of ensuring that closer integration of Europe would be highly unlikely. The British have had only limited success in arguing for broadening. Although Hungary, the Czech Republic, and Poland are in the process of joining, progress is slow. The European c o m m o n currency, which begins general circulation in 2001, may well circulate before they attain full membership. E u r o p e a n foreign and security policy has advanced only a short ways, hardly surprising since it only became the third pillar when the Maastricht Treaty came into effect in 1994. So far such policy's effect

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upon Britain has been slight. N o n e t h e l e s s , b e c a u s e it d e a l s with such m o m e n t o u s m a t t e r s , British p o l i c y m a k e r s are quite c o n c e r n e d a b o u t future development.

Justice and H o m e Affairs T h e A m s t e r d a m Treaty, the most recent revision of the E U ' s rules, s h i f t s m a t t e r s of i m m i g r a t i o n and visas to the first, or e c o n o m i c , pillar. Free m o v e m e n t of people searching for j o b s is an essential e l e m e n t to a single m a r k e t . I m m i g r a t i o n c o n t r o l , h o w e v e r , g o e s well b e y o n d e c o n o m i c policy. Most EU m e m b e r s have signed the S c h e n g e n A g r e e ment, which is supposed to allow u n i m p e d e d m o v e m e n t a m o n g c o u n tries. T h e s i g n a t o r i e s , h o w e v e r , have been reluctant to i m p l e m e n t S c h e n g e n fully. If they are less than fully c o m m i t t e d , no w o n d e r that B r i t a i n — t h e reluctant m e m b e r — i s e v e n less willing to give up border c o n t r o l s . Britain feels it is m o r e t h o r o u g h than other E U m e m b e r s in k e e p i n g out d r u g dealers and terrorists. H a v i n g to allow f r e e entry of p e o p l e f r o m other EU m e m b e r s would, it is felt, u n d e r m i n e its d o m e s tic security. In what has b e c o m e typical f a s h i o n , Britain sought an opt-out. T h e EU r e c o g n i z e d that Britain, as an island, has distinct b o r d e r s (except f o r the one with Ireland). T h e r e f o r e , it is not subject to all EU regulations on f r e e m o v e m e n t of p e o p l e . H o l d e r s of EU p a s s p o r t s arriving in Britain d o n ' t have to go t h r o u g h the r e s t - o f - t h e - w o r l d c o n t r o l s (as do A m e r i c a n s ) , but they d o n ' t h a v e uncontrolled access to Britain either. Britain is willing to work with the other EU m e m b e r s if this helps it to c o m b a t crime. But w h e n a c o m m o n policy has the potential to und e r c u t British policy, then Britain p r e f e r s to act a l o n e . A g a i n the pattern is c o o p e r a t i o n , not integration.

Crosscutting Issues Sovereignty. T h u s far this c h a p t e r has f o c u s e d on fairly distinct policy sectors. S o m e of the c o n c e r n s E u r o p e a n integration raises in Britain, h o w e v e r , cut across policy s e c t o r s — f o r e x a m p l e , sovereignty. T h i s is such an abstract concept that it is difficult to believe it has practical impact in world now highly interdependent. To Thatcher, however, sovere i g n t y m a t t e r e d greatly. She d e n o u n c e d "that un-British c o m b i n a t i o n of h i g h - f l o w n rhetoric and p o r k - b a r r e l politics which passed f o r E u r o p e a n s t a t e s m a n s h i p . " She felt that the a t m o s p h e r e in the EU " b e c a m e

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i n c r e a s i n g l y alien a n d f r e q u e n t l y p o i s o n o u s . " Finally, she w a s d r i v e n " t o raise the f l a g of national s o v e r e i g n t y . " 1 7 P r i o r to the J u n e 1985 E u r o p e a n s u m m i t in M i l a n , she a n d her f o r e i g n s e c r e t a r y p r e p a r e d a p o l i c y p a p e r p r o p o s i n g c l o s e r E U a c t i o n on f o r e i g n policy. T h i s initiative was s u p p o s e d to d e m o n s t r a t e that Britain truly w a s c o m m i t t e d to E u r o p e a n i n t e g r a t i o n . " T h e a i m w a s c l o s e r c o o p e r a t i o n . . . w h i c h w o u l d n e v e r t h e l e s s r e s e r v e t h e rights of states to go their o w n w a y . " S u c h c o o p e r a t i o n " w o u l d h e l p s t r e n g t h e n the West, as long as g o o d relations with the U n i t e d States r e m a i n e d p a r a m o u n t . " 1 8 F r e e d o m of a c t i o n — s o v e r e i g n t y — a n d the s p e c i a l r e l a t i o n s h i p : t h e s e were w h a t m a t t e r e d . E u r o p e a n integration w a s a c c e p t a b l e only if these t w o f a c t o r s w e r e n ' t t h r e a t e n e d . Little c a m e of this initiative. O n c e the S i n g l e M a r k e t had b e e n c o m p l e t e d , E u r o p e ' s n e x t s t e p for tighter integration was Economic and Monetary Union ( E M U ) — a c o m m o n c u r r e n c y a n d all that it i m p l i e d , s u c h as a E u r o p e a n c e n t r a l b a n k a n d E U c o n t r o l o v e r m o n e t a r y policy. S u c h steps r a i s e d , f o r T h a t c h e r , " t h e i s s u e of s o v e r e i g n t y . " To a g r e e w o u l d be " a b d i c a t i n g c o n t r o l o v e r o u r o w n m o n e t a r y p o l i c y in o r d e r to h a v e it d e t e r m i n e d by the G e r m a n B u n d e s b a n k . " P a r t i c i p a t i n g in E M U " m e a n s t h e e n d of a c o u n t r y ' s e c o n o m i c i n d e p e n d e n c e a n d t h u s the i n c r e a s i n g i r r e l e v a n c e of its p a r l i a m e n t a r y d e m o c r a c y . " 1 9 T h r o u g h o u t T h a t c h e r ' s t i m e in p o w e r in t h e 1980s, in v i r t u a l l y e v e r y i n s t a n c e of E U p o l i c y m a k i n g , t h e B r i t i s h c o n c e r n w a s s o v e r eignty. A l t h o u g h her t w o s u c c e s s o r s d e f e n d e d s o v e r e i g n t y less v i s c e r ally, they d i d n ' t a b a n d o n it. W h a t e v e r the p o l i c y , Britain s e e k s a s s u r a n c e that s o v e r e i g n t y has not b e e n c o m p r o m i s e d . Subsidiarity. A s d i s c u s s e d a b o v e , t h e B r i t i s h h a v e s o u g h t to r e t a r d t i g h t e r E U i n t e g r a t i o n by a r g u i n g f o r s u b s i d i a r i t y , a v o i d i n g E U - d e t e r m i n e d c o m m o n p o l i c i e s w h e n e v e r p o s s i b l e . T h e i r o n y is that B r i t i s h c e n t r a l g o v e r n m e n t f a i l s to p r a c t i c e s u b s i d i a r i t y in its r e l a t i o n s w i t h B r i t i s h local g o v e r n m e n t . D u r i n g t h e 1980s T h a t c h e r p e r s i s t e n t l y u n d e r m i n e d British local g o v e r n m e n t , f e a r i n g that a r e a s c o n t r o l l e d by t h e o p p o s i t i o n L a b o u r P a r t y m i g h t t h w a r t h e r c r u s a d e s against big g o v e r n m e n t a n d the d e p e n d e n c y culture. D e s p i t e her s u c c e s s in r e s t r a i n i n g n a tional g o v e r n m e n t e x p e n d i t u r e , s h e w o u l d fail to t r a n s f o r m B r i t a i n u n less local g o v e r n m e n t s p e n d i n g c o n f o r m e d to h e r v i s i o n as w e l l . M o s t d r a m a t i c a l l y , s h e a b o l i s h e d t h e G r e a t e r L o n d o n C o u n c i l , d e e m i n g it f i s c a l l y i r r e s p o n s i b l e a n d t o o l e f t - w i n g . S h e a l s o r e s i s t e d c r e a t i n g reg i o n a l g o v e r n m e n t f o r B r i t a i n — m o r e taxes, g o v e r n m e n t s p e n d i n g , a n d b u r e a u c r a t s . A l t h o u g h not i n t e n d e d , h e r s t a n c e h i n d e r e d B r i t a i n ' s r e s p o n s e to E U r e g i o n a l policy.

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Prior to 1988, European C o m m u n i t y (EC) m e m b e r s ' central governments d o m i n a t e d regional policy. 2 0 Local g o v e r n m e n t s in Britain, for example, could develop projects, but the central government coordinated all local government f u n d i n g applications to the EC. Furthermore, when the EC made a grant, the central government managed the f u n d s . C h a n g e d procedures in 1988 were intended to make the subnational units of government equal partners in regional policy. Funds from the E u r o p e a n Regional D e v e l o p m e n t Fund ( E R D F ) were supposed to be additional, that is, national governments weren't to reduce their own regional spending because they had received EC funds. The 1988 reforms sought to tighten this requirement. Britain, however, "treated E R D F receipts as part of Britain's return on its budgetary contributions [to the EC] and used them to offset domestic regional expenditure rather than to supplement it." 21 Britain has resisted providing the requisite evidence of additionality, the EU principle saying that European structural f u n d s should be matched by national f u n d s in order to ensure the additional nature of the aid lent. In one case EC special f u n d s were available to alleviate hardship in areas where coal mines were closing; Britain qualified for about half of these f u n d s . The EC refused to release any money, however, because Britain refused to give evidence that the EC f u n d s would increase the amount its government already was planning to spend. The British cabinet split on whether to comply with the EC requirements. Only with a domestic election approaching did it finally make arrangements in February 1992 that satisfied the EC. Nonetheless, local governments do not appear to have received any additional funds. The central government's gatekeeping function remained intact. Thus far, EU influence has not altered Britain's highly centralized governmental machinery. But the EU is creating opportunities for policy initiatives many local government officials find attractive. To a modest extent, the EU has the potential to decentralize British policymaking. Constitutional changes being implemented by Britain's Labour government (for reasons unrelated to European affairs) makes such a shift even more likely. Scotland received a parliament and Wales an assembly in 1999. Similar bodies at the regional level in England may be created. Although the London government Thatcher abolished isn't being restored, an elected mayor and an advisory body are being established. Potential EU impact became dramatically concrete early in 2000. The first secretary of the devolved government in Wales was forced out of o f f i c e by his inability to retain majority support in the assembly. He was attacked for failing to persuade the British treasury to provide the matching f u n d s required to enable Wales to receive US$1.8 billion in

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EU aid. Not only was the resultant political turmoil in Wales embarrassing to British prime minister Tony Blair (because the first secretary was perceived as his protégé), but the issue resonated in other regions of Britain, which also questioned whether the government in London was taking full advantage of EU regional grants. Since the areas in Britain most likely to eligible for f u n d s are depressed ones that typically support the Labour Party, domestic political tensions caused by EU regional policy could cost Labour support among its core clientele. The democratic deficit. A third crosscutting issue concerns what may be the E U ' s greatest f l a w — i t s underdeveloped democracy. Although its influence is growing, the EU Parliament—its only elected body—plays only a subsidiary role in policymaking. Those in Britain w h o oppose European integration for any reason can cloak their views in the compelling argument that the EU has a "democratic deficit." Why should policymaking shift from Britain's democratic institutions to the whims of Brussels bureaucrats? For the 1999 Euro-elections, Britain shifted from the single-member, simple-plurality system, used in domestic elections in Britain and the United States, to proportional representation (PR), widely used on the continent. Some argue that proportional representation is more democratic because it allocates seats more closely to the electorate's partisan preferences. On the other hand, when "closed lists" are used, as Britain did in 1999, party leaders determine the order of the candidates on the list. Since only those candidates near the top of a party's list can hope to be elected, the winners are beholden to the party leaders. Minority views within a party are denied representation. The democratic legitimacy of the British delegation to the EU Parliament was little greater after the 1999 elections than it was before. While turnout for British domestic elections is high, for EU elections it is low. The link between representatives and constituents is less democratic than it would be if participation were higher. As the turnout suggests, the EU usually has not been an issue of m a j o r importance to the British public. 2 2 Before the 1997 domestic election campaign, h o w ever, international financier James Goldsmith waged a vendetta against M a j o r ' s government f o r not ruling out British m e m b e r s h i p in the European c o m m o n currency. So vigorously did he pursue the issue that the Labour Party felt compelled to promise that, if elected, it w o u l d hold a referendum before taking Britain into the currency. Having won the 1997 election, Labour is stuck with its c o m m i t ment. It had planned to wait until the cycle of the British economy was

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in phase with e c o n o m i e s of the m a j o r continental m e m b e r s , then call a r e f e r e n d u m . T h e g o v e r n m e n t w o u l d m o u n t a m a j o r c a m p a i g n for B r i t a i n ' s e n t r y into the e u r o to e n s u r e a f a v o r a b l e vote. T h i s s c e n a r i o has b e e n d e r a i l e d . In the latter part of the 1990s, c o n c e r n s in Britain about political corruption led to establishing a special official to m o n itor d i s r e p u t a b l e political activity. O n e of his reports on political ethics argued that the g o v e r n m e n t should not be a l l o w e d to s p e n d m o n e y to persuade p e o p l e how to vote in a r e f e r e n d u m . With the g o v e r n m e n t so curtailed, a vote f a v o r i n g British entry into the euro is no more than a 5 0 - 5 0 proposition at best. As a result, the date for the r e f e r e n d u m continues to drift into the f u t u r e . E x p e c t i n g it to occur by e v e n 2 0 0 5 m a y be optimistic. Obviously, British entry is even farther o f f . Only o n c e b e f o r e in British history has a national r e f e r e n d u m been held. That was about a q u a r t e r c e n t u r y ago and it also was about Eur o p e — B r i t i s h m e m b e r s h i p in the E C . Britain a l w a y s has been more of a representative than a populist d e m o c r a c y . Only the issue of relations with Europe, not other matters such as capital p u n i s h m e n t that have agitated the British public f r o m time to time, has p u s h e d Britain to depart f r o m the representative tradition. Changes in Domestic Policymaking Structures T h e d i s c u s s i o n thus far has e x a m i n e d the impact of E u r o p e a n integration u p o n the substance of British policy. W h a t of the i n f l u e n c e u p o n the process of British p o l i c y m a k i n g , upon the structure of g o v e r n m e n tal m a c h i n e r y ? To appreciate this e f f e c t fully, recall that Britain lacks a written constitution, a s i n g l e - f r a m e w o r k d o c u m e n t setting forth the relations b e t w e e n g o v e r n m e n t a l organs and s p e c i f y i n g the b o u n d a r i e s of g o v e r n m e n t a l action. A f e w relevant laws have been p a s s e d , but for the most part the British " c o n s t i t u t i o n " consists of p r a c t i c e s that over the years have c o m e to be d e e m e d n o r m a t i v e . Such a " c o n s t i t u t i o n " is not altered by f o r m a l a m e n d m e n t s , but is the product of largely f o r t u i t o u s and p i e c e m e a l g r o w t h . T h e p r o c e s s of u n i f y i n g E u r o p e w o u l d have to be e x c e p t i o n a l l y d y n a m i c to m o d i f y such a system. We a l r e a d y h a v e n o t e d in this c h a p t e r the E U ' s i m p a c t on d e c e n tralization in Britain and the b a l a n c e of p o w e r b e t w e e n the legislative and the judicial branches. T h e c h a n g e in p r o c e d u r e s f o r elections to the E u r o p e a n P a r l i a m e n t and the a c c e p t a n c e of r e f e r e n d a as m e a n s of c o n f e r r i n g p o p u l a r l e g i t i m a c y u p o n g o v e r n m e n t a l d e c i s i o n s also are sign i f i c a n t s h i f t s in the m a c h i n e r y of g o v e r n m e n t . T h e E U ' s i n f l u e n c e e x tends b e y o n d e v e n these c h a n g e s .

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Perhaps the most significant change in British government in the last quarter of a century has been creating departmental select committees in the House of Commons. Unlike the United States Congress, the British legislature did not have permanent subject-matter committees. W h e n bills required detailed consideration, they were referred to ad hoc committees that ceased to exist when they reported back to the full house. As a result, the information-gathering function, to which congressional committees devote a great deal of time, went largely unperformed in Britain. Starved for information, the House of Commons was greatly hampered in its ability to call the executive to account. Domestic reformers—not the pressures of European integration— produced this change in British government. European concerns did contribute, however, to the need for reform. Given the democratic deficit, member states had to do all they could to increase the accountability of the E U ' s powers. Both the House of Commons and the House of Lords established committees to deal with European matters. Proposals of the EU Commission are referred by the relevant British department, along with its own explanatory memo, to the House of Comm o n s ' Select Committee on European Legislation, which sifts through them to decide whether full debate is desirable. If so (which is the decision in about a tenth of the 6 0 0 to 900 proposals a year), then the scrutiny process is not completed until that occurs. The British executive has pledged not to agree to any action in the EU Council of Ministers until domestic scrutiny is complete. Significantly, late in 1998 the British executive declared that this scrutiny process would be extended to the second and third pillars of the Maastricht Treaty. Thus the pledge would apply not only to e c o n o m i c matters, but to foreign and security policy and justice and h o m e affairs as well. In January 1991 two additional committees began work to try to strengthen the scrutiny process in the C o m m o n s . Prior to then, when the Select Committee recommended an EU proposal for debate, it occurred late at night and lasted for a relatively short time, making the C o m m o n s ' examination largely perfunctory. Now, when the Select Committee thinks that detailed scrutiny is needed, it refers the proposal to one of the additional committees. These committees are empowered to call m e m b e r s of the British executive to testify, to aid in their examination of the EU document. If, after its debate, a committee feels that the matter deserves the attention of the full house, it can, if the person in charge of arranging the business of the house agrees, send the proposal to the C o m m o n s for consideration. Unfortunately, scholars expert in the British legislature agree that the work of all these committees receives little attention. W h e n the

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additional committees were established, the plan had been for five to be created. Only two were set up, however, because too few members of the Commons were willing to serve. While members not belonging to the committees can attend their meetings and speak, few do so. The machinery of government has changed, but this appears to have had limited practical impact. Interestingly, the House of Lords is thought to do a much better job in scrutinizing European policy. Its Select Committee on the European Communities was established in 1974. The committee issues about 20 reports each year, most of which are debated in the House of Lords itself, typically for about four hours. A copy of each report is sent to the House of Commons, the EU Commission, and the British representative in Brussels. These reports are highly respected among the British and the EU civil service for their quality. British interest groups, which have given only limited attention to the House of Commons' EU scrutiny activities, tend to follow the Lords' European procedures closely. Despite the quality of the Lords' scrutiny work, the facilities were curtailed. Most of the investigative work was done by six subcommittees. At the end of 1992 one of the subcommittees was abolished. The justification was that support resources for the Lords were limited and certain matters of domestic policy were not receiving adequate attention. Nonetheless, had the British government attached high priority to scrutiny of EU proposals, surely the necessary resources could have been provided. Furthermore, at this time no one knows what the future status of the House of Lords is. The Labour government currently is reforming the House of Lords by eliminating the hereditary members. How members of the Lords are to be chosen and whether the chamber's powers are to be altered, however, is unclear. Whether the reformed Lords will exercise significant surveillance over the EU remains to be seen. Turning from the legislature to the executive, its structure has been modified also in order to handle EU business. One of the six secretariats in the British Cabinet Office (the support staff for the British executive) now deals with European matters. It services the cabinet's Ministerial Subcommittee on European Questions. This secretariat works closely with the British permanent representative to the EU in Brussels and the Foreign Office. While the other secretariats in the Cabinet Office deal mainly with business coming up from departments, the European secretariat must speculate about the possible impact on Britain of issues currently being considered by the EU, set forth options for the British response, and advise on action. The deputy secretary of the European secretariat, alone of the six such officials, has direct access to the British prime minister or the foreign secretary.

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T h e E u r o p e a n s e c r e t a r i a t also is s u p p o s e d to c o o r d i n a t e t h e E u r o p e a n activities of all d e p a r t m e n t s of the British e x e c u t i v e , since Britain h a s not c r e a t e d a E u r o p e a n d e p a r t m e n t as such. In practice, c o o r d i n a tion h a s p r o v e d d i f f i c u l t . As the r a n g e of E U activities b r o a d e n e d , m o s t British d e p a r t m e n t s set up their o w n E u r o p e a n section and w o r k e d less with the C a b i n e t O f f i c e . An e x a m p l e of failure of c o o r d i n a t i o n b e t w e e n British d e p a r t m e n t s a n d with the E U w a s the British health s e c r e t a r y ' s a n n o u n c e m e n t in April 1996 of the risk to h u m a n s of m a d - c o w d i s e a s e , w i t h o u t first w a r n i n g the EU C o m m i s s i o n or its c o m m i s s i o n e r f o r agric u l t u r e . ( T h e m a d - c o w a f f a i r is e x a m i n e d in detail below.) B r i t a i n ' s s u s p i c i o n of E u r o p e g e n e r a l l y and of B r u s s e l s ' civil servants in particular has c a u s e d it to rely too m u c h on the d o m e s t i c structures it has c r e a t e d , to the e x c l u s i o n of EU ones. Each m e m b e r state in turn h o l d s the p r e s i d e n c y of the EU f o r a s i x - m o n t h t e r m , o r g a n i z i n g and p r e s i d i n g o v e r the m e e t i n g s of the E u r o p e a n C o u n c i l , that is, s u m m i t s of the h e a d s of g o v e r n m e n t . B r i t a i n ' s p r e s i d e n c y in the first half of 1992 w a s of limited s u c c e s s b e c a u s e it m a d e little use of the secretariat of the E U ' s C o u n c i l of M i n i s t e r s , p r e f e r r i n g instead t h e British C a b i n e t O f f i c e secretariat. As a result, m u c h of the g r o u n d w o r k n e c e s sary f o r s u c c e s s at the short m e e t i n g s of the heads of g o v e r n m e n t s i m ply w a s n ' t a c c o m p l i s h e d . A l t h o u g h the British civil s e r v a n t s a s s i g n e d to the C a b i n e t O f f i c e E u r o p e a n secretariat d o u b t l e s s are highly capable, their b a c k g r o u n d exp e r i e n c e s e e m s rather c u r i o u s . F r o m 1979 t h r o u g h 1994 only t h e thirdh i g h e s t civil servant in the E u r o p e a n secretariat c a m e f r o m the F o r e i g n O f f i c e . T h e o t h e r f i v e to seven o f f i c i a l s , including both of the t o p t w o , c a m e f r o m o t h e r d e p a r t m e n t s . T h e i r e x p e r t i s e w o u l d s e e m , at best, to be o n l y partially r e l e v a n t to E u r o p e a n a f f a i r s . This s t a f f i n g of the Eur o p e a n secretariat p r o b a b l y w a s i n f l u e n c e d by T h a t c h e r ' s s u s p i c i o n of the B r i t i s h F o r e i g n O f f i c e . S h e b e l i e v e d that the F o r e i g n O f f i c e w a s t o o f a v o r a b l e to E u r o p e a n i n t e g r a t i o n and u n a b l e to d e f e n d British int e r e s t s as v i g o r o u s l y as s h e w o u l d . To her irritation, " B r i t a i n ' s m e m b e r s h i p of the E u r o p e a n C o m m u n i t y g a v e the Foreign O f f i c e a v o i c e in e v e r y a s p e c t of policy that c a m e u n d e r the C o m m u n i t y . A n d t h e m o r e the C o m m u n i t y m o v e d in a c e n t r a l i z e d d i r e c t i o n the m o r e i n f l u e n t i a l t h e F o r e i g n O f f i c e b e c a m e in W h i t e h a l l . " 2 3 E u r o p e a n a f f a i r s c l e a r l y w a s t h e m a i n r e a s o n that T h a t c h e r r e g a r d e d the F o r e i g n O f f i c e as t h e e n e m y w i t h i n . H e r r e l i a n c e on a p e r s o n a l f o r e i g n - p o l i c y a d v i s o r rather t h a n t h e F o r e i g n O f f i c e w a s a n o t h e r e x a m p l e of E u r o p e ' s i n f l u e n c e u p o n t h e p r o c e s s of British p o l i c y m a k i n g . This chapter has discussed above the domestic political tensions c a u s e d by t h e E U ' s r e g i o n a l policy. T h e m a c h i n e r y of g o v e r n m e n t also

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has been affected. The absence of regional g o v e r n m e n t s in Britain— whether states as in G e r m a n y or regional bodies as in France and Italy—has put Britain at a disadvantage in seeking EU regional funds. To rectify this, the British government created a structure linking the regional offices of various departments. O p e n n e s s in government, although not a matter of machinery as such, does relate to how the machine operates. Albeit indirectly, European affairs have forced the traditionally secretive British government to become a bit more transparent. Following Britain's exit from the Exchange Rate M e c h a n i s m in 1992 (discussed above), the government announced new procedures for reporting e c o n o m i c information. The British Treasury had wanted most of these reforms for years. Only after the trauma of Britain's exit f r o m the f o r e r u n n e r of the c o m m o n currency could the Treasury win acceptance of doing more to inform and reassure British businesses and international investors. Thus the process of European integration has altered the shape of the British machinery of g o v e r n m e n t ; the policy process now differs from what it had been a quarter of a century ago. In a country where centuries of tradition make doing anything for the first time difficult, where reform is gradual, the changes in structures and procedures during the relatively short period of Britain's participation in European integration are remarkable.

T h e Depth of Europe's Impact on British Policy To appreciate the profundity of change, however, requires detailed examination of a particular policy area. The remainder of this chapter discusses three cases to illustrate how multinational and national decisionmaking interrelate, giving considerable depth to the E U ' s influence on Britain. The cases all fall primarily in the economic sector. Since policies rarely fit neatly into a single category, however, the second and third cases include aspects of social policy and consumer protection as well. Thatcher's Rebate During the first several years she was prime minister, Thatcher was obsessed with getting Britain's m o n e y back f r o m the EC. 2 4 She recalls that " f r o m the first my policy was to seek to limit the damage and distortions caused by the C A P " 2 5 (the C o m m o n Agricultural Policy). To protect high-cost producers in European agriculture, the C A P imposed a c o m m o n external tariff with the revenues going to the EC. T h e tariff

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meant that Britain—a major importer of f o o d — w a s forced to pay more than world prices. Britain's leaders thought the burden the tariff imposed on the British consumer was too complex to provide a convincing argument. So they f o c u s e d on Britain's contributions to the EC, which could be quantified. The British Treasury prepared a cost-benefit analysis of EC membership, which revealed that although Britain contributed o n e - f i f t h of the EC's tax revenues, it received only a tenth of the E C ' s agricultural e x p e n d i t u r e s — n o small matter since they accounted for nearly twothirds of the total EC budget. Due to CAP, Britain, although only seventh among EC members in G D P per capita, was the highest net contributor to the EC. The Treasury estimated that in 1980 Britain would contribute £1 billion. Thatcher went ballistic. She considered withholding all British contributions. Although she quickly realized that doing so would be illegal, she was pleased that "even the possibility caused satisfactory anxiety in the [EC] Commission." 2 6 At the Dublin Summit in November 1979 (only six months after she became prime minister and only her second summit) she made getting back her billion the m a j o r issue. The other leaders insisted the m o n e y was the E C ' s " o w n r e s o u r c e s " and accused her of threatening a crisis. Since she adamantly insisted it was Britain's money, the summit discussed ways to reduce the net payment. Increasing the E C ' s spending in Britain would help, but was difficult to do under C A P because Britain had relatively few farmers. An alternative was for the E C ' s regional fund to support more projects in Britain. 2 7 The options explored offered her only about a third of what she demanded. Not only was that unacceptable to her, she also "had the strong feeling that they had decided to test whether I was able and willing to stand up to them. It was quite shameless: they were determined to keep as much of our money as they could." 2 8 When she pressed her case further at the next summit, they offered her more money. She rejected that deal also. Seeking some c o m p r o mise, the foreign ministers of the EC m e m b e r s met prior to the next summit. Their proposal—the best offer yet—didn't satisfy her, but she accepted. She explained that the r e f u n d was about two-thirds of what she sought, covered three years, and included a promise of a m a j o r review of the E C ' s budget. Her biographer reports, however, that the British cabinet overrode her desire to fight on. This rare instance of the cabinet's preventing her f r o m getting what she wanted "irked her deeply." 2 9

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For 1980, 1981, and 1982, Thatcher obtained rebates totaling £2 billion. Still not satisfied, she pressed for a permanent change in EC finances to e n s u r e that Britain's contributions would be proportional. She rejected even the five-year settlement offered her in the spring of 1984 because it w a s n ' t permanent. Again she considered withholding Britain's contributions. She complained that had she done so, those in her party w h o were p r o - E u r o p e a n would have denied her a united front, undermining her position. 3 0 President François Mitterrand of France presided over the June 1984 summit. A f t e r the heads of g o v e r n m e n t had discussed how the issue of British contributions might be resolved permanently, he referred the matter to a meeting of the various foreign ministers. They agreed to a deal, but, predictably, Thatcher didn't like it. Instead of an arrangement linking Britain's contributions to its prosperity, as she had been insisting, Britain would be offered a percentage rebate. She estimated that a 70 percent rate would be needed to get as big a rebate as she wanted; the foreign ministers had discussed something in the 50 to 60 percent range. She threatened to disrupt the summit if nothing better were offered. She, the British foreign secretary, and their supporting civil servants worked out a counterproposal. Then during the night the civil servants worked with officials f r o m the other countries, seeking support for it. W h e n the summit r e s u m e d , Thatcher said she would consider a percentage rebate. Mitterrand adjourned the session for informal discussions to agree on details. Thatcher talked with him, then with Helmut Kohl, the G e r m a n chancellor, and discovered that while Mitterrand would go no farther than 60 percent Kohl would agree to 65 percent. She decided that she could wrangle 66 percent. When the full session reconvened, she proposed this, arguing that it would be ridiculous to continue the conflict when only a single percentage point separated her from Kohl. Mitterrand, she says, "smiled and said: 'Of course, M a d a m e Prime Minister, you must have it.'" 3 1 Having battled for five years, Thatcher had won. To consider first what the rebate row reveals about British policymaking, although her cabinet colleagues and, perhaps, her party constrained her somewhat, Thatcher determined British policy. She prevailed even though her foreign secretary and the Foreign O f f i c e opposed her aims. The British policy process, in this instance of relations with the EC, corresponds to the pattern of domestic policymaking then. Thatcher was a domineering, not a consensus-seeking, prime minister. She handled EC matters as she did other issues. Relations with

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Europe didn't alter her policy procedures; if anything EC matters confirmed her in her ways. Turning to EC policy processes, interaction of heads of government at summits (to be called the European Council f o l l o w i n g the SEA) can produce significant decisions—summits/councils aren't just social occasions concluding with rhetorical press releases. Thatcher triumphed because she, unlike most of the other leaders, refused to give any thought to the esprit communautaire. The other leaders felt she was violating the E C ' s norms, but eventually gave her much of what she wanted to avoid a crisis and to allow the EC to move on. Unfortunately for Britain, her success encouraged her to draw the wrong conclusion about the nature of the European policy p r o c e s s — that aggressive, abrasive behavior won admiration. 3 2 Even her concession of accepting a percentage rebate, which transformed the issue from one of immutable principle that defied compromise to a negotiation of p e r c e n t a g e s — m e r e marginal a d j u s t m e n t s — w o n her no praise for reasonableness because she insisted on extorting a higher rate than the other leaders preferred. T h a t c h e r continued to employ her rebate tactics throughout the 1980s, although they proved much less successful in other EU matters and cost Britain influence. The rebate conflict probably is the biggest single reason the other m e m b e r s regard Britain as an obstreperous member. 3 3 T h a t c h e r ' s tactics not only harmed Britain, but also herself. Her unremitting hostility toward Europe caused her former foreign secretary to resign from the cabinet and triggered the events that drove her from office. Such extended discussion of the rebate row is essential not only because of its significant impact on Britain's image and British tactics in European policymaking, but because the issue remains contentious. Financing the EU has cost Germany even more than it has Britain. At the Berlin Summit in March 1999, the formula for calculating members' contributions to EU funds was altered, which will help to reduce Germany's contribution. During the 20-hour negotiation over the budget, some countries wanted Britain to give up its rebate. As a member of the British delegation told a journalist, however, "If the Germans [the host nation] believe we are going to rescue their summit by giving way on the rebate, they can think again." 3 4 The new method of calculating payments would have given Britain a quarter of a million dollars. Prime Minister Blair agreed to forego this gain in exchange for no discussion of the rebate. Although a Labour prime minister has replaced the Conservative Thatcher, the legacy of her rebate row still shapes British and EU policymaking.

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The Working-Hours Directive As explained above in the section on social policy, Britain sought to escape EU regulation in such matters by securing an opt-out from the Social Chapter. The difficulty of fitting policy into watertight categories, however, has given Britain less autonomy than it thought, as the following discussion reveals. The way in which domestic politics influence Britain's EU role can be seen even more clearly than in the rebate row. The E U ' s Commission issues two types of rules: directives and regulations. Directives prescribe goals, but permit each member to decide how to achieve them. Regulations specify both goals and means; members are told how to implement the policy. Since directives allow greater national autonomy, one might assume they would cause fewer problems in Britain. The working-hours case, however, shows that even directives can raise British hackles. Britain's response in this case was shaped by domestic politics. Early in the 1980s the Labour Party split. One of the main reasons that a moderate segment broke away was Labour leaders' hostility to European integration. The Conservatives, who had taken Britain into the EEC, were perceived as more pro-European. Thatcher's rebate crusade reversed this image, while a new group of Labour leaders altered that of their party. The contrasting trajectories crossed; Labour became regarded as more pro-Europe. Labour could not, however, wholeheartedly embrace Europe. During the twentieth century many Labour activists have been pacifists, antimilitarists, or opponents of nuclear weapons. The Conservatives have attacked Labour for being unpatriotic. They have charged that Labour is so weak on defense that Britain is secure only when Conservatives control the government. Thatcher and her successors would ensure that British interests were not sacrificed for some abstract ideal of European unity; Labour—the unpatriotic party—couldn't be trusted to fight the good fight. Labour couldn't afford to appear to be a lapdog. 3 5 In the mid-1990s, the EU Commission considered various proposals about work time, among them what should be the average maximum working week. Recall the comment made above on environmental policy: if regulations vary from country to country, production costs will vary, thwarting the E U ' s objective of a single market. Britain managed to get the proposed rules watered down, but nonetheless abstained on the final vote in the Council of Ministers. When the directive, which specified that the average maximum number of hours worked in a week could be no greater than 48, was to be implemented, Britain sued in the

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C o u r t of J u s t i c e to a n n u l it. B r i t a i n a r g u e d that w o r k i n g h o u r s w e r e m a t t e r s of social policy; u n d e r its Social C h a p t e r opt-out, such r e g u l a t i o n s c o u l d be i m p o s e d on it o n l y if the C o u n c i l of M i n i s t e r s p a s s e d t h e m u n a n i m o u s l y . T h e C o u r t held, h o w e v e r , that such m e a s u r e s dealt with w o r k e r s ' h e a l t h a n d s a f e t y . S u c h r e g u l a t i o n s c o u l d be p a s s e d by q u a l i f i e d m a j o r i t y v o t e and d i d n ' t n e e d u n a n i m i t y . 3 6 O u t r a g e is t o o m i l d a w o r d f o r the C o n s e r v a t i v e s ' r e a c t i o n . S u c h a d e f i n i t i o n of h e a l t h a n d s a f e t y w a s so b r o a d that the E U C o m m i s s i o n c o u l d p r o p o s e e x t e n s i v e social l e g i s l a t i o n that Britain c o u l d not veto. In p r a c t i c e the d e c i s i o n v i r t u a l l y n u l l i f i e d the Social C h a p t e r o p t - o u t . T h e C o n f e d e r a t i o n of British I n d u s t r y ( C B I ) , B r i t a i n ' s m a i n m a n u f a c t u r e r s ' interest g r o u p and m a j o r s u p p o r t e r of the C o n s e r v a t i v e s , w a r n e d that the d i r e c t i v e w o u l d i n c r e a s e p r o d u c t i o n costs a n d u n d e r m i n e British c o m p e t i t i v e n e s s . P r i m e M i n i s t e r M a j o r t h r e a t e n e d to block the u p c o m i n g c o n f e r e n c e s to r e v i s e the M a a s t r i c h t T r e a t y u n l e s s Britain were e x e m p t e d f r o m the directive. A c o n f r o n t a t i o n — p o s s i b l y a c r i s i s — w a s in the m a k i n g . Within six m o n t h s of the C o u r t ' s d e c i s i o n , h o w e v e r , the C o n s e r v a t i v e s had lost p o w e r in an e l e c t i o n . O n e m i g h t h a v e e x p e c t e d B r i t a i n ' s n e w L a b o u r g o v e r n m e n t to imp l e m e n t the d i r e c t i v e , s i n c e it w a s i n t e n d e d to p r o t e c t w o r k e r s , Labour's core electoral clientele, from exploitive employers. Instead L a b o u r fell back on a c o n c e s s i o n the C o n s e r v a t i v e s had w o n b e f o r e the d i r e c t i v e w a s p a s s e d . L a b o u r p a s s e d l e g i s l a t i o n to i m p l e m e n t the dir e c t i v e ' s p r o v i s i o n that 4 8 h o u r s wasn't the m a x i m u m , ( / w o r k e r s volu n t a r i l y a g r e e d w i t h t h e i r e m p l o y e r s to w o r k l o n g e r h o u r s . B a r r i n g s u c h a g r e e m e n t s , t h e h o u r c a p a n d all t h e rest of the w o r k i n g - t i m e rules w o u l d a p p l y in Britain. O n the o n e h a n d , B r i t i s h u n i o n s w e r e u n h a p p y b e c a u s e L a b o u r d i d n ' t i m p l e m e n t t h e e n t i r e set of r u l e s . On the other, the C B I estim a t e d that c o m p l y i n g w o u l d cost m o r e than £2 billion a n d w o u l d drive some small firms into bankruptcy. Perhaps most disruptive was the s l i p s h o d w a y in w h i c h the rules w e r e i m p l e m e n t e d . T h e d o m e s t i c legi s l a t i o n g i v i n g e f f e c t to t h e E U r u l e s b e c a m e law only at t h e e n d of July 1998, with the d e t a i l e d p r o v i s i o n s u n a v a i l a b l e to the p u b l i c until m i d - A u g u s t . F i r m s h a d to b e g i n i m p l e m e n t i n g these c o m p l e x rules on O c t o b e r 1, only a m o n t h and a half later. H a r d l y h a d B r i t a i n s t a r t e d to i m p l e m e n t the rules b e f o r e t h e E U w a s c o n s i d e r i n g e x p a n d i n g t h e m . C e r t a i n c a t e g o r i e s of e m p l o y e e s h a d not b e e n c o v e r e d by t h e m a x i m u m - h o u r s d i r e c t i v e . In m i d - N o v e m b e r 1998 the E U C o m m i s s i o n d i s c u s s e d e x t e n d i n g the limit to t r a n s p o r t a tion w o r k e r s ( l o n g - d i s t a n c e truck d r i v e r s ) and j u n i o r d o c t o r s . Clearly,

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such new rules would be treated as health and safety l e g i s l a t i o n — n o t subject to British veto. Tired trucker drivers pose o b v i o u s safety risks, as do w o r n - o u t j u n i o r d o c t o r s , 15 p e r c e n t of w h o m c u r r e n t l y w o r k m o r e than 56 h o u r s a week in Britain. 3 7 O n e of the E U c o m m i s s i o n e r s noted that o n c e truckers and doctors were c o v e r e d , air c r e w s and barge c r e w s would be next. By M a r c h 1999 the E U C o m m i s s i o n was talking of e x t e n d i n g the regulation to c o v e r taxi d r i v e r s . A British c o u n t e r a t t a c k , h o w e v e r , s l o w e d the m o m e n t u m in the s p r i n g of 1999. Britain m a n a g e d to get other EU m e m b e r states to agree that for j u n i o r doctors the 4 8 - h o u r limit would not have to be i m p l e m e n t e d for 13 years. Yes, it was a f a m o u s victory but the cost f o r Britain was i n f u r i a t i n g the Eur o p e a n C o m m i s s i o n , which had f a v o r e d a p e r i o d of 7 years, and the British medical profession. Doctors were not unique in their anger. T h e L a b o u r g o v e r n m e n t has been d e n o u n c e d as well by the T r a d e s U n i o n C o n g r e s s ( T U C ) , the m a i n u n i o n u m b r e l l a o r g a n i z a t i o n in Britain. S i n c e , as the p a r t y ' s n a m e i n d i c a t e s , L a b o u r is s u p p o s e d to r e p r e s e n t the w o r k i n g class, an attack by the T U C is e m b a r r a s s i n g . T h u s despite Britain's Social C h a p t e r opt-out, w o r k i n g c o n d i t i o n s in Britain are s u b j e c t to detailed E U r e g u l a t i o n . T h e L a b o u r g o v e r n ment finds itself caught between the desires of the unions and those of the e m p l o y e r s . F u r t h e r m o r e , the o p p o s i t i o n C o n s e r v a t i v e Party c o m p l a i n s that L a b o u r ' s s u b s e r v i e n c e to the E U is m a k i n g Britain less competitive.

Mad Cows: Should You Eat Brussels Sprouts, N o t a Hamburger? A l t h o u g h it m a y sound like a spoof, m a d - c o w disease is real. W h a t e v e r its d a n g e r to h u m a n health, it p o s e d an e v e n greater threat to the health of British r e l a t i o n s with the E U . P r i m e M i n i s t e r M a j o r ' s b i o g r a p h e r c o n c l u d e s that the crisis it c a u s e d " w a s to distract him . . . f o r a vital t h r e e - m o n t h period, and b e f o r e it w a s o v e r to inflict lasting d a m a g e to the g o v e r n m e n t ' s credibility at h o m e and a b r o a d . " 3 8 In M a r c h 1996, the British agriculture and health ministers wrote a m e m o to the cabinet that a government advisory committee was about to issue a report on new evidence linking m a d - c o w disease to C r e u t z f e l d t J a k o b brain d i s e a s e ( C J D ) in h u m a n s . M a d - c o w d i s e a s e h a d b e e n p r e v a l e n t in Britain f o r s o m e time, t r a n s m i t t e d b e c a u s e b o v i n e o f f a l (the guts) w a s used in p r e p a r i n g c a t t l e f e e d . In 1989, this p r o c e d u r e had been b a n n e d in Britain and the new e v i d e n c e about a link to h u m a n i n f e c t i o n dealt with people w h o had e a t e n i n f e c t e d beef prior to then.

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Beef currently in the stores should be safe, said the government. Although politicians were p h o t o g r a p h e d eating hamburgers and announced that they were serving British beef to their children, few believed these official reassurances. 3 9 Credibility took a further hit when an EU committee banned British beef within the EU and worldwide. The m a d - c o w issue surfaced just at the time that the EU was to hold its summit conference on revision of the Maastricht Treaty. At the conference M a j o r was promised EU funds to help deal with the cost of eradicating the disease. The hope was that once Britain had responded properly to EU concerns, the ban quickly would be removed. Seeking alternatives should that not happen, Britain considered how to retaliate against the EU. The way deemed most likely to be effective was to obstruct EU decisionmaking on all matters requiring unanimity. A few weeks after the summit, several EU leaders were in Moscow for a meeting on nuclear safety. Major discussed mad-cow disease with them, but failed to obtain any commitments. As time passed and nothing happened, he became impatient. When the EU veterinary committee voted against lifting the ban, he felt betrayed, especially by German Chancellor Kohl. The next day Major announced a policy of noncooperation with the EU. But no thought had been given to what matters Britain would impede. Would it block everything that it could veto— even actions it favored? Nor had anyone specified what the EU had to do about the mad-cow affair for Britain to cooperate once again. "Britain's relations with EU partners plummeted to the worst point since it joined . . . M a j o r ' s personal authority in Europe never fully recovered." 4 0 Various committees, including one chaired by Major himself, were set up to deal with the crisis. Eventually, Britain formulated a plan of action to submit to the EU. Then, it contacted the Italian prime minister, who would host the forthcoming EU summit, and persuaded him to help get the ban lifted, if Britain would slaughter the diseased cows. Although the plan to which the summit agreed didn't include a specific timetable for lifting the ban, Major was satisfied. A few months later he obtained support for culling herds f r o m Britain's National Farmers' Union. The crisis was over—except for implementation and recrimination. Late in 1997 the new Labour government set up an inquiry to determine what had gone wrong under their Conservative predecessors. The Conservatives' agriculture minister had proposed such an inquiry early in 1996, only to have it rejected by his party. The g o v e r n m e n t ' s chief medical o f f i c e r f r o m 1991 to 1998 admitted at the inquiry that when in the fall of 1995 he assured the public that British beef was safe to eat, he meant that the risk was negligible, not "zero." Similarly the holder of the office f r o m 1983 to 1991 conceded that he should not

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have said, "There is no risk associated with the eating of British beef," when he knew there was a remote, not " n o , " risk. Such semantic distinctions failed to impress the mother of the 19-year-old young man who had died of C J D in May 1995. To make matters worse the 1 9 9 1 1998 medical o f f i c e r revealed that he knew in October 1995 that inspectors had discovered cases of the brain and spinal cord still being attached to carcasses leaving slaughterhouses, although that was illegal under the 1989 ban. 4 1 The medical officer reported that he had wanted to publicize the danger but had been prevented by officials in the Ministry of Agriculture. The medical o f f i c e r ' s testimony was only one of the embarrassing revelations the inquiry uncovered. Those who had headed the main body for monitoring infectious diseases indicated that they had favored investigating in the late 1980s the link between mad-cow disease and CJD. The Conservative g o v e r n m e n t discouraged such research and made clear to the agency that it was not to be seen to work on the link or to comment on it. Another inquiry witness asserted that the Conservative food minister from 1992 to 1994 had denounced as unpatriotic anyone who criticized the Ministry of Agriculture's claim that British beef was safe to eat. Rather than rely on rhetoric, the new Labour government prohibited the sale in Britain of beef-on-the-bone (no T-bone steaks). It won EU agreement to permit removal of this ban in the spring of 1999, when none of the cattle entering the food chain would have been exposed to mad-cow disease. Late in November 1998 the EU agriculture ministers voted to allow the export of deboned British beef in the spring of 1999. Nonetheless, in February 1999 the British agriculture minister announced that the ban on selling beef on the bone would remain in effect for another six months. Worse was yet to come. In the closing months of 1999 first France and then G e r m a n y announced that they would not lift their bans on British beef. This behavior clearly violated EU rules. T h e European Commission was reluctant, however, to haul the two countries before the European Court of Justice not only because of the crisis this would create (especially should they refuse to implement any decision), but also because of the long delay involved in adjudication. The C o m m i s sion hoped that Britain could negotiate some solution with the other two. This rosy view assumed that the British were willing to negotiate—hardly realistic, given Britain's trauma. During the time the ban had been in effect Britain had lost £ 5 0 0 million a year in exports. About 3 million cows had had to be exterminated. Eradicating m a d - c o w disease had cost Britain more than £4.5

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billion. The problem had been a key factor in producing the worst financial crisis in British agriculture since the 1930s. Finally, any assessment of costs must include the 4 0 people (all but one in Britain) who died of CJD during this time. The French and the G e r m a n s could argue that these deaths justified their efforts to protect their citizens. The British view was that they had done everything required of them to eliminate the health risk and still they were being victimized. The continentals always were criticizing Britain for failure to be good Europeans, but the continentals refused to play by the rules whenever it didn't suit them. By mid-February 2000 the C o m m i s s i o n had filed suit against France in the Court of Justice and had warned G e r m a n y that unless it complied within the next four weeks, it would be sued as well. However this affair finally turns out, it hardly has made the British public more inclined to vote for British entry into the euro currency market and probably has f u e l e d the hostilities of those who want Britain to get out of the EU entirely. The domestic political implications go even farther. The Conservatives always have painted Labour as the party that loves to control people's lives. "Cut the red tape, free business and the people from regulation" has been the Conservative cry. Perhaps that is why the Conservative government responded so slowly to the mad-cow problem. Then, given pressure f r o m the EU and public outcry, it was forced to devise a program of extensive regulation. Labour wants to rid itself of its regulator image. Prime Minister Blair has called for a review of consumer protection to ascertain whether d e p a r t m e n t s too quickly issue orders to protect people from very remote risks. Is the lesson to be learned (always the British focus at the conclusion of any controversy) from the mad-cow saga the initial inadequate regulation or the subsequent excessive regulation? Does the affair show the need for the EU to protect citizens because their governments are too lax to do so or is it yet another example of excessive meddling by Brussels bureaucrats in a matter that should have been left to subsidiarity? Mad or sane, the cows have yet to come home.

Conclusion: Britain, Still the EU's O d d Man Out? Three factors have kept the British o f f s h o r e islanders more separate from Europe than 20 miles of water might lead one to expect. Britain's b a l a n c e - o f - p o w e r foreign policy has caused it to avoid E u r o p e a n entanglements and remain aloof. Britain's desire to maintain the special

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relationship with the United States has prevented submersion in a new Europe to avoid losing its distinctiveness. Britain's long history as the model for self-government has produced a proud c o m m i t m e n t to sovereign independence, a belief that Britain knows how to govern itself. Despite these compelling factors, Britain was forced by economic necessity to join the process of European integration. So dynamic has the process been that it has affected the substance of British policy both broadly and deeply. Furthermore, its effect has extended even to the machinery of British government, m a n a g i n g to alter institutions that typically changed only gradually over the centuries. The three f u n d a m e n t a l British cultural factors remain. Their continuing i n f l u e n c e makes Britain a somewhat detached m e m b e r of the EU. Britain tends to join in late and, even when it gets on board, raises objections. It declined to join in the c o m m o n currency at the start. Then, the question appeared to be when Britain would e m b r a c e the euro. Increasingly, the question looks more like whether it will do so. In the meantime, Britain worries that the economics ministers of those members belonging to the euro may, at meetings from which Britain is excluded, make decisions significantly affecting the British economy. The process of European integration has had considerable impact on Britain. Britain's national traditions and institutions remain resilient, however, and continue to offer countervailing influences. At times Britain has tried simply to tack European policy onto its domestic policy output; often, however, it has been forced to embrace Europe's influence in what otherwise would be domestic policymaking. The entity developing in Europe is unique: more than the cooperative bodies that Britain favored, but less than the supranational entity envisioned by the pioneers of European integration. Although Britain is only one member, so long as it is a member, Europe will remain in the ambiguous category for which we have no label—neither intergovernmental nor integrated.

Notes 1. "Noel Coward, The Master." Hallmark CD 300692, track 11. Lyrics copied from this sound recording. 2. Jorgen Rasmussen and James McCormick, "British Mass Perceptions of the Anglo-American Special Relationship," found that the British prime minister incurs a cost of reduced popularity with the British public for trying to maintain close relations with the United States. 3. Thatcher denounced those whose view of European relations differed from hers as adherents of "a contrasting tendency in the Community—interventionist,

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protectionist, and ultimately f e d e r a l . " Margaret Thatcher, The Downing Street Years, p. 61. 4. Franklin argues that Britain has usually been at odds with Europe bec a u s e of the special r e l a t i o n s h i p , c o n c e r n s o v e r sovereignty, and the lack of understanding of division of powers (that is, federalism). Michael Franklin and Marc Wilke, Britain's Future in Europe, pp. 8(10. 5. H u g o Young, One of Us, p. 544. 6. Nigel L a w s o n , chancellor of the e x c h e q u e r under Thatcher, lists five f a c t o r s that d r o v e her f r o m power. T h e first two, the row over the E R M and the issue of E M U , concerned relations with Europe. M a j o r ' s biographer asserts that his refusal to abandon the Maastricht Treaty "ultimately lost him his premiership." Anthony Seldon and Lewis Baston, Major: A Political Life, p. 296. 7. I n f o r m a t i o n relevant to the E R M crisis is scattered throughout Thatcher, Downing Street, Seldon and Baston , Major, and Nigel Lawson, The View from No. 11. Especially important are Seldon and Baston, pp. 3 0 9 - 3 2 0 , and Sarah H o g g and Jonathan Hill, Too Close to Call: Power and Politics— John Major in No. 10, pp. 1 8 7 - 1 8 8 . 8. This discussion draws on Allan Williams, The European Community: The Contradictions of Integration, pp. 184-191. 9. Thatcher, Downing Street, p. 750. 10. Hogg and Hill, Too Close, p. 143. 11. Andrew Adonis, Parliament Today, p. 15. 12. Stephen George, " T h e Legislative D i m e n s i o n , " p. 100. 13. John M c C o r m i c k , " E n v i r o n m e n t a l Politics," p. 273. 14. Ibid., p. 274; Neill Nugent, " T h e European D i m e n s i o n , " pp. 6 4 - 6 6 . 15. M c C o r m i c k , " E n v i r o n m e n t a l Politics," p. 275. 16. This paragraph draws on Seldon and Baston, Major, pp. 3 0 4 - 3 0 5 . 17. Thatcher, Downing Street, pp. 7 2 - 7 8 . 18. Ibid., p. 548. 19. Ibid., pp. 690, 691. 20. This discussion draws on R.A.W. Rhodes, Understanding Governance: Policy Networks, Governance Reflexivity and Accountability, pp. 142-158. 21. Ibid., p. 153. As w e ' l l see below in d i s c u s s i n g B r i t a i n ' s rebate, the g o v e r n m e n t had s o m e reason for behaving this way. 22. For e x a m i n a t i o n of the f l u c t u a t i o n in British views of relations with Europe see Jorgen R a s m u s s e n , " ' W h a t Kind of Vision Is T h a t ? ' British Public Attitudes Towards the European C o m m u n i t y During the Thatcher E r a . " 23. Thatcher, Downing Street, pp. 5 5 0 - 5 5 1 . 24. T h i s d i s c u s s i o n d r a w s on T h a t c h e r , Downing Street Years, pp. 63, 7 9 - 8 6 , 5 3 7 - 5 4 5 ; L a w s o n , The View, pp. 1 0 8 - 1 1 1 ; Young, One of Us, pp. 1 8 9 - 1 9 1 ; and G r a n a d a Television, Mrs. Thatcher's Billion. G r a n a d a produced a q u a s i - d o c u m e n t a r y using i n f o r m a t i o n f r o m j o u r n a l i s t s f r o m various E C countries. T h e j o u r n a l i s t s played the parts of E C leaders in recreating the Dublin Summit. 25. Thatcher, Downing Street, p. 63. 26. Thatcher, p. 79. 27. This c h a p t e r ' s section on subsidiarity discussed the conflict over add i t i o n a l l y — B r i t a i n ' s m e r g i n g of E u r o p e a n regional f u n d i n g into the general

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b u d g e t , action contrary to the E C ' s intentions. G i v e n the suggestion at the D u b l i n S u m m i t that increased regional s p e n d i n g in Britain could alleviate Britain's disproportionate contribution, it hardly is surprising that Britain used regional f u n d s to offset its contributions. 28. Thatcher, Downing Street, p. 81. 29. Young, One of Us, p. 190, argues that Thatcher wanted to continue the fight to retain "the populist appeal of the a n t i - E E C c a r d . " A public row with f o r e i g n e r s " m a d e m u c h of her image of patriotic valor." R a s m u s s e n , ' " W h a t Kind of V i s i o n ? " p. 115, f i n d s , h o w e v e r , that her success in getting a rebate had little affect on her popularity. 30. Her chancellor of the exchequer says that the domestic legislation necessary for withholding f u n d s was drawn up and a point m a d e of letting the EC know that this was being done. This was sufficient to galvanize the EC into action without the bill even being published. Lawson, The View, p. 110. 3 1. Thatcher, Downing Street, p. 544. 32. L a w s o n , The View, p. 111. 33. British behavior d i f f e r s sharply f r o m its image; it is one of the E U ' s most c o m p l i a n t m e m b e r s . From 1973 to 1996 Britain was sued f o r n o n c o m pliance only 39 times. Of those countries that were m e m b e r s for that entire period, only D e n m a r k was a d e f e n d a n t f e w e r times. 34. Financial Times, March 27, 1999. 35. O n e of the C o n s e r v a t i v e s ' ads in the 1997 general election s h o w e d L a b o u r leader Tony Blair sitting like a v e n t r i l o q u i s t ' s d u m m y on the lap of Helmut Kohl, the G e r m a n chancellor. 36. A detailed s u m m a r y of the C o u r t ' s j u d g m e n t in United Kingdom v Council of the European Union appeared in The Times, N o v e m b e r 21, 1996. 37. In May 1999, the EU health ministers agreed, at British urging, to permit the 48-hour m a x i m u m for junior doctors to be phased in over 13 years. The EU Commission, which had favored a transition period of 7 years, was furious that Britain had gotten a majority of other m e m b e r s to accept the longer period. 38. Seldon and Baston, Major, p. 641. The opening paragraphs of this section also rely on Seldon and Baston, pp. 6 3 9 - 6 5 3 . 39. People had reason to be skeptical. In 1988 a junior minister had warned about a danger of salmonella in British eggs. Her g o v e r n m e n t colleagues and f a r m e r s were so furious that her career was destroyed. H o w great must have been her pleasure to testify during the 1998 investigation into mad-cow disease. She termed the handling of the mad-cow affair "crass, incompetent, hostile, dangerous and c o m p o u n d e d problems instead of eradicating t h e m . " Officials were "blockheadedly ignorant." The Times, N o v e m b e r 19, 1998. 40. Seldon and Baston, Major, p. 650. 41. T h e g o v e r n m e n t had been i n f o r m e d in D e c e m b e r 1990 that the ban on offal was being ignored but it failed to do anything.

8 Ireland: Brussels and the Celtic Tiger Richard B. Finnegan

To state that the place of Ireland in world politics is modest is not to engage in irresponsible hyperbole. Nor is Ireland's place in the European Union one that should be exaggerated. The Republic of Ireland's 3.5 million people are on an island the size of the state of Maine set apart geographically from the center of Europe. We can begin with the recognition that the importance of the European Union to Ireland is considerably greater than the importance of Ireland to the Union. For Ireland the primary impact of membership in the EU has been in the economic realm, especially the C o m m o n Agricultural Policy and the Structural Funds. T h e relationship to Great Britain also plays an important part in both Ireland's entry into the Union and subsequent developments on Northern Ireland. Abortion in the area of social policy, and Irish neutrality in the security domain have also been distinctive policy issues for Ireland. On January 1, 1973, Ireland entered the European Union. The step not only fastened the Irish economy to those of the states of the European Union, but also forged a relationship that symbolically diminished the primacy of the link to Britain. That psychological break should not be underestimated given the long economic and cultural colonial relationship between the two countries. The relationship with Britain made entry into the European Community (EC) difficult for Dublin. By 1960 London had decided that the European Free Trade Area was not going to operate as a counterweight to the economic advantages of being in the EC and thus decided to apply for entry. The Irish linkage to B r i t a i n ' s economy, however, was so extensive that Irish g o v e r n m e n t could not risk being outside the EC external tariff barrier were Britain within it. Ireland's application to the European C o m m u n i t y was thus

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paired with L o n d o n ' s in 1961. The Community opened up discussions with Britain that year and some m e m b e r states had reservations about British entry, but some also had reservations about the entry of Ireland due to its policy of neutrality. The matter was made moot at the time by the rejection of British entry by Charles de Gaulle as a payback for London's shift in policy against France during the Suez Crisis of 1956. Ireland's application thus was put on hold for a decade. Ireland's wish to enter the Community was not based upon the interests that had motivated the original members, i.e., a concern to integrate the economic activities of the Western European nations so as to make war between them unlikely or impossible. In addition, the security of a united Europe in the context of the Cold War, which shaped both the connection to the United States, as part of NATO, and the nascent development of a common EU foreign policy, were not a concern for neutral Ireland. In the United Nations during the 1950s, Ireland had tried to carve out a neutralist path. Moreover, in 1961 even the embryonic idea of a European identity had little claim on self-encapsulated Ireland. The country had very specific reasons for entry. The dependence of Irish agriculture on the British market had the effect of depressing income for Irish farmers as the British had pursued a cheap food policy since the middle of the 19th century. Irish farmers thus sought new markets. The Irish had in 1959 jettisoned their protectionist industrial policy adopted in the 1930s and were ready to seek foreign investment, develop new industries, and pursue new markets. Finally, the Irish were not unaware that Regional and Social EC f u n d s would f l o w to them as they had the lowest G D P per capita of any member state at the time. 1 The two m a j o r parties, Fianna Fail and Fine Gael, were both pragmatic, economic modernizing parties and thus supported m e m b e r ship. They calculated that the costs, exclusion from the British market, versus the benefits, f u n d s for agriculture and development, meant membership was obviously to Ireland's advantage. 2 The initial Irish application in 1961 did evoke discussion in the Irish Parliament on the nature of Irish neutrality. The then prime minister, Sean Lemass, had little concern with the ultimate consequences to Irish neutrality as long as Ireland was in the EC, but others were unwilling to abandon the policy (as discussed more fully below). Yet opposition to membership was not based solely on the policy of neutrality. The Labor Party, Sinn Fein, and other nationalist and labor groups opposed entry on the basis that they were unwilling to now cede hardearned and long-delayed Irish sovereignty to Brussels and feared that the e c o n o m y would be given over to the control of multinationals.

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France ultimately became receptive to British entry, but only after the departure of de Gaulle, and thus opened the door to Irish entry. A f t e r formal acceptance by Brussels, a r e f e r e n d u m was held in Ireland in 1972, and m e m b e r s h i p was endorsed by 83 percent of the Irish voters.

First Pillar Issues The most significant impact of the EU on Ireland has been in the economic realm. Ireland underwent in three stages a transition from a relatively closed and b a c k w a r d e c o n o m y to an open internationalized economy. T h e first stage was the adoption of incentive planning after 1959 that rejected protectionism, began shifting the basis of the economy from agriculture to industry, and shifted industrial d e v e l o p m e n t from reliance on a paucity of domestic capital to attracting foreign capital. The second stage was entry into the European C o m m u n i t y in 1973, which led to the e f f e c t s of the C o m m o n Agricultural Policy (CAP) on the farmers of Ireland, the effects of the European Monetary System, and of the structural f u n d s on the development of the country. The third stage since 1987 has witnessed strong economic growth f u eled by growth in high-tech industries. The Irish negotiated a five-year transition period into the European C o m m u n i t y , and received dispensations f r o m the EU tax policies to continue to foster industrial development through tax incentives. The expected b e n e f i t s f r o m m e m b e r s h i p did materialize. T h e agricultural subsidies and price supports f r o m the C A P f l o w e d to farmers; the grants from the Social and the Regional Funds came to the west of Ireland and Ireland's companies had access to the large European market. The d i s a d v a n t a g e s w e r e the loss of some autonomy in the sphere of e c o n o m i c policy and the vulnerability of Irish industry to a wave of m a n u f a c t u r e d products f r o m Europe, which swept aside noncompetitive domestic producers. Though the Irish government tried to prepare domestic industries though Competitive Councils directed at specific sectors, domestic producers were too small, too inefficient, and poorly prepared in m a n a g e m e n t and marketing. Thus, sectors such as toys, h o u s e w a r e s , and f u r n i t u r e were decimated by competition in the following decade. 3 The balance of trade was shifted f r o m the almost exclusive focus on the United K i n g d o m to a more balanced distribution. In 1960, 75 percent of Irish exported goods went to Britain; of goods imported, 50 percent c a m e f r o m Britain. By 1980 only 4 3 percent of Irish exports

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and 51 percent of imports passed each other on the Irish Sea. By 1995, 25 percent of Irish exports and 35 percent of imports were passing between the two countries. The volume of Irish exports to the European Union, however, had increased sharply from 7 percent to 47 percent in the same period, while imports to Ireland from the EU had increased one-third by 1995. Ireland in 1979 opted to join the European Monetary System. Britain, reflecting Margaret Thatcher's arm's-length policy with respect to Europe, chose not to enter. The punt was severed from the pound for the first time since 1826. Ireland ran the risk of substantially altering its balance of payments as so much of Ireland's trade was with the United Kingdom, and the choice was much debated within the government. When the British devalued the pound, the Irish devalued the punt and, in addition, Ireland gained grants of £250 million (US$375 million) and loans of £1,250 million (US$1,875 million) to cushion the shock of exposure to the currencies of the EU. The effects, in the event, were relatively difficult for small noncompetitive firms as the decrease in inflation that resulted from entry caused an increase in demand for foreign goods by the Irish and cut the profits of already marginal firms. Irish farmers, f r o m 1973 to 1979, were m a j o r beneficiaries f r o m the price support system of the C o m m o n Agricultural Policy and income from Brussels to Dublin reached £365 million (US$547 million) in 1978. These supports were reduced sharply in 1978 and by 1980 f a r m e r s ' incomes had plummeted by a third. By 1988 farm income was no higher than it was in 1978 although modernization had reduced the number employed in farming by one-third. Evaluation of Ireland's economic performance after entry into the EU is confounded by the fact that it was accompanied by the massive j u m p s in oil prices and the worldwide economic recession. When the price of oil q u a d r u p l e d in 1 9 7 4 - 1 9 7 5 , the negative balance of payments surged and the rate of inflation ascended to a staggering 25 percent. In 1979 the second oil crisis again displayed the vulnerability of Ireland's economy as the rate of inflation in 1980 hit 18.2 percent, and in 1982, government borrowing reached 15.6 percent of GNP. Although oil prices were an obvious element in the inflationary spurt, they were c o n t e m p o r a n e o u s with the adoption of national pay agreements between the government, the employers, and the unions beginning in 1970. T h e first a g r e e m e n t was only designed to last 18 months but had greater implications in that it signaled the adoption of an explicit neocorporatist model of economic management, which has prevailed to the present day. 4

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The third stage of growth in the Irish economy, which began about 1987, involved the development of indigenous industry, increased productivity, decreased emigration, and spectacular growth rates after 1995, which exceeded all other European states. The adoption of a series of national plans that set targets in the realm of taxation, inflation, interest rates, and e m p l o y m e n t b e c a m e the hallmark from the mid1980s to the present. The government adhered to the discipline of controlling inflation, reducing national debt and government spending in order to meet the criteria for entry into the euro-based market. The result has been a growth rate of 51 percent f r o m 1993 to 1998, about three times as strong as the rest of the industrialized world. Political scientist Brigid Laffan sees the entire three stages of development as "a process of learning how to manage internationalization and the emergence of international governance" through the use of the social partnership. 5 The Irish national planning documents had the major sectors of society—employers, labor, agriculture, and g o v e r n m e n t — agreeing to constraints on wage increases, on tax policy, and on social services. All sectors recognized that a small economy must maximize domestic policy consensus in order to be internationally competitive. 6 Attempting to create a balance sheet measuring the benefits of Irish m e m b e r s h i p in the European Union faces the difficulty of counterfactually speculating on what would have happened had Ireland not b e c o m e a member. 7 The weight of the evidence, however, indicates that membership has benefited Ireland in numerous tangible and intangible ways. In supporting the goal of Irish industrialization, foreign investment f u n d s have been brought to Ireland seeking access to the EU market while expanding the market for Irish goods beyond Britain. The C A P facilitated Irish agricultural productivity, provided new markets, and significantly influenced Irish agricultural policy. 8 Ireland has received more of the EU Structural Funds per capita than any other state since its entry, getting, for example, about 1,800 punts per capita between 1994 and 1999. The funds have been, and are, important for Ireland to achieve infrastructure development such as improving freight handling at Dublin Airport, building roads, dredging of W a t e r f o r d Port, treatment of wastewater, and coastal protection schemes. Upon entering the EU, the entire country of Ireland qualified for the cohesion funds. In fact, Ireland still qualifies for some cohesion f u n d s for the years 2 0 0 0 to 2004, as eligibility is set at 90 percent of the average EU G N P per capita and Ireland is at 88 percent. The position of EU members now is that the Irish economy is doing very well because the EU Structural Funds fostered development, but

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it is now time to stop giving these f u n d s to Ireland. The Germans, given their own high costs for reunification, are reluctant to pour more money into the Structural Funds, and have suggested criteria such as participation in the euro, or high annual rates of growth, as disqualifications for getting funds. Dublin clearly does not favor these criteria as they would exclude Ireland from getting the 600 to 700 million punts that they expect through 2004. Ireland points out that Structural Funds have actually accounted for less than 1 percent of the Irish growth, which has really been spurred by foreign investment in high technology. The EU use of the G N P figure inflates the picture of Irish income. G D P in Ireland is significantly lower due to the repatriation of profits of multinational firms and reflects more accurately the difference in income between Ireland and other EU countries. Ireland, for example, has the second highest rate of poverty among the 17 industrialized nations. Ireland has submitted the border and western region counties as qualifying for European Regional Development Funds (ERDF) as that area earns only 72 percent of the EU average GNP and the standard for the E R D F is 75 percent. The government is anxious to retain the E R D F as they allow the Irish Industrial Development Authority to offer generous grant packages based on European funds. T h e EU Regional Commissioner views the Irish request as "subsidy shopping" and wants evidence that the region is a coherent locale with decentralized authority and not merely a collection of counties assembled to get the grant. The rate of growth of the Irish economy is such that whatever level of funding Ireland achieves in this round, the Structural Funds will undoubtedly go to poorer regions in the future. Dublin is fortunate to be able to adjust to that loss of f u n d s over time and f r o m a position of prosperity. As a traditional society, women had been excluded f r o m the corridors of p o w e r and the halls of c o m m e r c e , yet at the same time they held an especially venerated place in the society as the center of the family and as the conservators of religious and social values. The EU directives in the 1970s on—equality of pay, equality of opportunity, social benefits, employment, and retirement—all had the effect of changing the rights of women. These directives led to substantial changes in legislation in the 1970s and the creation of the E m p l o y m e n t Equality Agency to monitor and foster equality of opportunity for women. The issue of abortion was particularly difficult for Ireland and came to involve the European Union Court of Justice (ECJ) in determining Irish law. Abortion was illegal in Ireland under an 1861 law, but conservative groups feared that there would a judicial decision or legislation

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that would allow abortion. These groups sought to have the abortion prohibition placed in the constitution so as to shift the exclusion from a statutory to a constitutional prohibition. The Eighth A m e n d m e n t was passed in 1983, after a rather bitter campaign, in which the government of the day warned that the wording could be potentially troublesome. Abortion counseling clinics providing nondirective information were sued by the Society for the Protection of the Unborn Child in 1988 as being in violation of the amendment. The Irish courts took the position that the a m e n d m e n t forbade the providing of information about abortion. The Irish Supreme Court found that the provision of information about travel for an abortion was also illegal. The case was appealed to the ECJ, which decided in 1991 that abortion services available in one C o m m u n i t y m e m b e r could be advertised in another, and in 1992 the European Court of Human Rights decided that people in EU countries were free to travel to another m e m b e r country, whatever their purpose, under Article 10 of the European Convention on Human Rights. 9 The rape of a 14-year-old girl then triggered an even more bitter debate on the issue. The child sought an abortion in England and was ordered to return to Ireland by the attorney general. The parents complied but appealed to the courts on the basis that the young girl's threatened suicide was a threat to the life of the mother under the wording of the Eighth A m e n d m e n t . The Irish courts differed on the meaning of the wording of the amendment and the Irish Supreme Court ultimately determined that the young women could have an abortion as her life was in danger. The European Court decisions and the " X " case led to referenda on three additional amendments to the Irish constitution in 1992, two of which passed, one guaranteeing travel throughout the EU and the other recognizing the dissemination of information on abortion. T h e issue was drawn into the vote on the Maastricht Treaty. T h e Irish government had negotiated a protocol to the treaty that exempted Ireland from any liberalization of access to abortion through an EU decision that would apply to the EU states. The vote on the treaty would thus "protect" so to speak the antiabortion amendment specified in the protocol. Conservative groups, after the X case, saw this vote as a protection of the liberalization of the availability of abortion. Opponents of the Eighth A m e n d m e n t also opposed the treaty as it put restrictions on information about abortion. The Irish public voted for the M a a s tricht Treaty by a margin of 70 percent to 30 percent, indicating, as they had with the issue of neutrality, that they separated the abortion issue from their pro-EU sentiment.

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An example of increasing penetration of the EU into local government is the EU policy of distributing local d e v e l o p m e n t f u n d s in accord with plans drawn up in partnership by the C o m m i s s i o n , Dublin, and regional and local governments. For Ireland, the plans and f u n d s historically stopped at Dublin with its tradition of strong central government. The necessity to respond to the EU requests for plans emerging from the grass-roots level prompted the inclusion of local government and c o m m u n i t y groups into the planning process. The vitalized institutions and groups at the local level were a direct result of EU policy processes. 111

S e c o n d Pillar Issues The 1996 white paper on Irish foreign policy Challenges and Opportunities Abroad notes "the extent to which Ireland . . . has c o m e to express its foreign policy through the medium of the European Union." 1 1 Membership in the EU has definitely enhanced the diplomatic status of Ireland. A small state on the perimeter of Europe, Ireland has direct and regular access to the policy elites of all the m a j o r countries of Europe. The rotating presidency of the EU Council of Ministers gives Ireland high-profile visibility as Dublin focuses on the issues that it has selected to emphasize during its term. Participation in the EU brings Ireland into development and trade policy issues in the global arena that would be beyond the country's scope as an individual state. 1 2 The permanent delegation to the EU in Brussels is the largest of all Irish diplomatic missions. 1 3 The Irish policy of neutrality had emerged as a pragmatic response to political conditions in the 1930s, as Ireland could not and would not ally with Germany but would not ally with Britain as long as the island was partitioned. Neutrality became enshrined after World War II, somewhere between a practical policy choice and an enduring principle of Irish foreign policy. Anti-British in origin, the Irish sanctified the policy of neutrality. T h e policy acquired additional r e s o n a n c e in later years through opposition to nuclear deterrence, Cold War c o n f r o n t a tion, and colonialism. Joining the European Union raised the question of neutrality insofar as the long-term objective of the European Union was political and would eventually involve security policy. When entry was put before the Irish people in a referendum, the economic pragmatists, such as Sean Lemass, argued that there was no threat to Irish neutrality in joining the Community. He demoted neutrality to a

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policy that was temporal and conditional. He believed that political integration would c o m e at the end of a long process of e c o n o m i c integration and that in the meantime Irish neutrality would be maintained. The opponents of EU membership, on the other hand, elevated neutrality to an eternal principle guiding the Irish state. Neutrality was at least problematic for membership because Article 224 of the Treaty of Rome specifies that the European Community could take common action during war, which would clearly imply actions that could ultimately be inconsistent with Irish neutrality. The Irish public, to the degree that neutrality entered their consideration at all, overwhelmingly opted for economic pragmatism and Ireland entered the Community in 1973. In practice since 1970, European Political Cooperation (EPC) had evolved pragmatically into c o m m o n declarations and support for members' actions. Based on a process of consultation, consensus between foreign ministers was to be sought on matters of general interest to the member states, but the result was hardly a common EU foreign policy. The 1986 Single European Act (SEA) and the Maastricht Treaty of 1992 established the C o m m o n Foreign and Security Policy (CFSP) formally as part of the new EU structure. C F S P set broad EU foreignpolicy objectives and required m e m b e r states to pursue these goals. The degree of pressure on Ireland's declared neutrality was institutionally increasing, yet the end of the Cold War allowed the Irish government more latitude as the convergence of the European Union and NATO was decreasing. In 1982 the European Community imposed economic sanctions on Argentina in support of Great Britain after Argentina invaded the Falkland Islands (if one supports London) or recovered the Malvinas Islands (if one supports Argentina). The Irish went along with the sanctions until the British were prepared to invade the island. T h e Irish opted out at that point, saying that continuation of Irish sanctions was inconsistent with their policy of neutrality in the context of an armed conflict. Though creating much friction with London, the Irish action was not challenged by other European Community members. In 1986, the Irish government adopted the SEA through legislative approval rather than using a referendum on an amendment to the constitution. T h e process was challenged by a private citizen, William Crotty, w h o argued that the Irish government could not legislatively approve an act that itself contained provisions that were potentially unconstitutional and required approval in a r e f e r e n d u m . T h e Irish High Court did issue an injunction to prevent the SEA's ratification, but then addressing the case, the High Court rejected Crotty's argument. The

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Irish Supreme Court on appeal, in the 1987 case Crotty v. An Taoiseach, held that the section of SEA codifying European political cooperation did require an amendment to the constitution for ratification. Three of the five judges thought that the SEA was fundamentally changing the nature of the European Union from an economic union to a political one. Two judges, however, saw the E P C process as essentially consultative and not a concession of sovereignty and thus not an eschewing of Irish neutrality. When Ireland approved the SEA through a constitutional amendment in 1987, it lodged a statement about neutrality, declaring that the act "does not affect Ireland's right to act or refrain from acting in any way which might affect Ireland's international status of military neutrality." 14 Eventually, the issue would come to a head in the 1992 referendum in Ireland on the Maastricht Treaty, which took the Western European Union and made it the putative defense arm of the European Union. Opportunities The 1996 foreign policy white paper Challenges and Abroad noted that neutrality "has taken on a significance for Irish people over and above the essentially practical considerations on which it was originally based. Many have come to regard neutrality as a touchstone for our entire approach to international relations, even though, in reality, much of our policy is not dependent on our non-membership of a military alliance." Having said that, the white paper goes on to note that since 1973 " s u c c e s s i v e g o v e r n m e n t s have indicated that Ireland would be prepared to enter into discussion with other member states on the development of c o m m o n arrangements in relation to security and defense matters." Finally the white paper indicates that the ratification of the Maastricht Treaty bound Ireland to a " C o m m o n Foreign and Security Policy." 1 5 In 1999, at the Helsinki Summit, the EU members agreed to the creation of a rapid-reaction force of 60,000 troops, and the current Irish government indicated that the contribution of Irish troops did not violate Irish neutrality. Critics argued that the action required a referendum as it was rejecting the policy of Irish neutrality by stealth. The Irish government indicated that the rapid-reaction force is not a standing army but a contribution of forces from the EU states. Moreover, the missions are defined by the "Petersburg Tasks," which allow only humanitarian and peacekeeping responsibilities. The Irish government has assigned army officers to the EU Interim Military Committee and the European Council Secretariat and a representative from the Department of Foreign Affairs to an interim political and security committee. While defining military actions under the Petersburg Tasks, the increasing security cooperation of the EU is clear, as is Ireland's increasing participation.

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In the realm of foreign policy, the (diminishing) ambiguity about the commitment to neutrality has been more than offset by the access the Irish government has to a sophisticated diplomatic network, participation in a larger framework of global trade and development policy, and a diminished dependence on the UK. 1 6 As a small country, Ireland has acquired an intangible sense of being " E u r o p e a n " over the past twenty years that has both diminished the sense of insecurity vis-à-vis Britain and been accompanied by an explosion of creativity in Irish culture.

Institutions and Decisionmaking Negotiating the social partnership reveals the degree to which being in the European Union creates a new kind of politics for Ireland. The intersection of Irish and European public policy represents an intermediate step between domestic and foreign policy. The regulatory areas of the EU are extensive and cover infrastructure, fisheries, farm incomes, research and development, conservation programs, social policies, and education, among other areas of domestic policy. The areas of policy falling under the EU have expanded with the SEA and the Maastricht and Amsterdam Treaties of 1992 and 1997. Irish public agencies are looking simultaneously toward both Brussels and Cork and Galway. Foreign Affairs with overall authority for European matters, Agriculture with respect to the CAP, and Finance with respect to EU funding are departments continuously and deeply involved in negotiations with their counterparts from other EU countries, as well as with the representatives of interested pressure groups, and with party leaders in Ireland. The prime minister's department is central to setting the overall direction of Irish policy and assessing the policy consequences of European Union initiatives, especially during Ireland's Council presidencies. 17 The growth in European integration and the widening of the Union since 1973 have allowed Ireland to expand its bureaucratic and institutional capacity as the EU expanded its institutionalization and regulation. 1 8 Nevertheless, the Irish policymaking process was relatively unprepared for entry into Europe, and the pragmatic approach to policymaking that prevailed in Ireland has led to three deficiencies in the Irish-EU interface. The departmental autonomy of the Irish civil service caused poor management of issues crosscutting through departments that should have been addressed by interdepartmental committees. The Irish government can respond to issues in the short term, but

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no planning structures examine problems emerging from the EU in the medium and long term. In addition, the Irish government pays little attention to the institutional d e v e l o p m e n t of the European Union itself and tends to react to institutional reforms proposed by the other states. 1 9 The streamlined d e c i s i o n m a k i n g and qualified majorities of SEA, Maastrich, and A m s t e r d a m have speeded up EU policymaking process and accentuated the Irish deficiencies. The Irish parties and the Parliament have had relatively little influence on Ireland-EU matters. The absence of a committee system in the Parliament, the orientation of the Irish members of the Dail Eireann to their constituencies, and the centralization of policymaking in the cabinet have made the Dail traditionally weak. The absence of a committee system eliminated a continual accounting on the part of the executive on European matters. The Joint Committee on Secondary Legislation, appointed in 1974 to monitor the implementation of the European directives, did not engage in a critical oversight role. The appointment of a Joint C o m m i t t e e on Foreign A f f a i r s in 1993 appeared to be a step in the right direction, but the c o m m i t t e e had inadequate time and resources to consider the plethora of European matters affecting Ireland. Another Joint Committee on European Affairs was established in 1995 but, as political scientist Brigid Laffan notes, the record of both committees is mixed. Lacking resources and attendance, the committees are dependent on the Department of Foreign Affairs for information and positions, which is of course the point. 2 0 Neill Nugent bluntly states, " T h e Fact is that in Ireland EU policy tends to be in the hands of a small, government dominated, network of politicians and officials who listen to Parliament only as they see fit." 2 1 The Irish parties align themselves with their ideological confreres in the European Parliament. This was easy for the Labor Party, which had connections to the international socialist organizations and joined the socialist group in the Parliament. The choices for Fine Gael and Fianna Fail were somewhat different. Both were relatively nonideological conservative parties that, for reasons of domestic competition, could not join the same group. The Fine Gael Party joined the International Union of Christian Democrats and integrated into a wider European group of parties. This group, however, is the most vigorous in asserting the need for a c o m m o n European Community d e f e n s e policy, putting Fine Gael occasionally in the clumsy position of asserting Irish neutrality. Fianna Fail, traditionally the most isolationist and nationalist Irish party, was left looking for a home and eventually f o r m e d a pragmatic alliance with the French Gaullists in a group consisting essentially of those two parties. They share little other than a lack of

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connection with the other parliamentary groups and a p r o - C A P stand to protect small farmers. As the power of the European Parliament grows within the E U , it leaves the voice of Fianna Fail weaker than that of Fine Gael in the context of the European Parliament. The members of the Dail who are elected to a seat in the European Parliament hold both positions until the next election and then have to decide if they are going to hold their Dail seat and make their political career in national politics or to k e e p the EU position and make their career c o n s u m i n g (and perhaps creating) "Belgian waffles." Despite the difference between the Irish Parliament and the European Parliament, the decisionmakers in the Irish g o v e r n m e n t have moved smoothly into the EU policymaking style and skillfully negotiate their way through the c o m m i t t e e s advancing the interests of Ireland. Some interest groups, such as large farmers and industrial organizations, have also thrived in the Brussels e n v i r o n m e n t . As L a f f a n states, " G r o u p s in Ireland can play nested games at the national level and connected games in the Brussels arena." 2 2 Participation in the European Union, as Laffan also points out, has created "a ' E u r o p e a n i z a t i o n ' of government in the Republic." 2 3 Government officials are regularly in Brussels at meetings of the Council of Ministers and the C o m m i s s i o n ' s functionally divided 23 directorates. The ministers of the m e m b e r governments and the bureaucrats of the European Union interact in a series of policy circles. The directors of the European departments are at once policymakers, legislative negotiators, and policy implementors. At the European level, there is the C o m m i t t e e of Professional Agricultural Organizations, the Union of Industries, the European Trade Union Confederation, and a host of sectoral organizations (banking, chemicals, textiles, etc.). T h e actual process, in fact, much more closely resembles neocorporatist policymaking involving developing positions, bargaining, reshaping, and bargaining in an extended negotiation until the point of approval. Policies m a d e in Brussels can have a far greater impact on areas such as agriculture than the policies made in Dublin, and pressure group activity reflects this reality. Centralization and neocorporatism are features of Irish government that contribute to a democratic deficit in the Irish political process. In the Irish case, as a small country, the n u m b e r of people who represent aggregated interests in Dublin is small, as is the n u m b e r of ministers and civil servants. Their connection with a small group of Brussels technocratic specialists in policy means that a state-level neocorporatist model is replicated in two ways in the European policy process: the EU overall policymaking is neocorporatist and, for the microcosm of Ireland-in-Europe, the Irish circle of

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policymakers and shapers is small and close-knit and needs to refer policy positions back no further than their respective clienteles. Members of the Dail are not focused on the European Union, despite their rhetorical nods, and their view is distinctively constituency bound. The Irish focus on the e c o n o m i c d i m e n s i o n s of the Union, and their relative weakness, meant that policymakers were reasonably effective at getting the benefits of the C o m m o n Agricultural Policy and the Structural Funds in the early years of their membership though, as noted above, soon will be excluded from having a claim on them. 2 4 The line between domestic law and European law in Ireland is increasingly blurred, and European law expands into domestic law to a greater and greater degree. The European Court is to resolve conflicts between domestic law and EU law, deciding on breaches in domestic observance of EU regulations and declaring domestic law void if it conflicts with EU obligations. In Ireland, EU Court decisions have impacted such issues as gay rights, women's rights to equal pay, equal opportunity, pensions, and access to services in another m e m b e r state, which arose in the abortion issue. A British j u d g e has said that it is "like an incoming tide. It flows into the estuaries and rivers. It cannot be held back." 2 5 Plunging into the European policy process has increased the sophistication of Irish policymakers and bureaucrats. Policies of the EU have rapidly pushed the Irish government's agenda to include agriculture, monetary policy, w o m e n ' s rights, consumer law, and health and safety. The education system has pushed through student exchange programs and pressured the elimination of sexist stereotypes in texts. The convergence of centralization in the Irish government and its neocorporatist policy process interlocks with the European Union policy process to reinforce the democratic deficit in Ireland's policy process. The issue of Northern Ireland taken up by the European Court of Human Rights and the European Parliament has impinged on relations between London and Dublin. The EU's overall influence has been to diminish the provincial perspective of traditional Ireland. The Irish are among the most enthusiastic of Europeans and well they should be, as participation has been economically advantageous, politically beneficial, and culturally enriching.

Notes 1. Anthony Foley and P. Walbridge, The Socio-Economic Position of Ireland Within the European Economic Community. 2. Garrett FitzGerald, "Ireland and the European Challenge."

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3. See J a m e s L. W i l e s and R i c h a r d B. F i n n e g a n . Aspirations and Realities: A Documentary History of Irish Economic Development Policy Since 1922; and R i c h a r d B. F i n n e g a n a n d J a m e s L. W i l e s . " T h e I n v i s i b l e H a n d or H a n d s A c r o s s the W a t e r ? A m e r i c a n C o n s u l t a n t s and Irish E c o n o m i c P o l i c y , " especially pp. 5 0 - 5 5 . 4. C o r p o r a t i s m has m a n y m e a n i n g s but in t h i s i n s t a n c e it m e a n t t h e m o v e m e n t a w a y f r o m l a i s s e z - f a i r e a r r a n g e m e n t s in the s e t t i n g of w a g e s and even prices. G o v e r n m e n t s in E u r o p e had m o v e d in this direction in the 1970s with national w a g e a g r e e m e n t s and it signaled the explicit p a r t n e r s h i p of labor, g o v e r n m e n t , a n d i n d u s t r y . V a r i e t i e s of c o r p o r a t i s m had e m e r g e d in E u r o p e a f t e r the World War II as g o v e r n m e n t s s o u g h t stability, l a b o r sought security, and i n d u s t r y s o u g h t p r o f i t s . T h e i m p l i c i t or e x p l i c i t b a r g a i n w a s that e a c h w o u l d c o o p e r a t e to the d e g r e e n e c e s s a r y to a c h i e v e their e n d s : social w e l f a r e p r o g r a m s f o r the w o r k e r s , s u b s i d i e s and tax b e n e f i t s f o r industry, and political parties in g o v e r n m e n t that w o u l d m a i n t a i n the b a r g a i n . 5. B r i g i d L a f f a n and R o r y O ' D o n n e l l , " I n t e r n a t i o n a l G o v e r n a n c e , " pp. 157-158. 6. Ibid., p. 165. 7. P a t r i c k K e a t i n g e , B r i g i d L a f f a n , and Rory O ' D o n n e l l , " W e i g h i n g U p G a i n s and L o s s e s , " pp. 2 7 9 - 2 9 1 . 8. R o r y O ' D o n n e l l , " R e g i o n a l P o l i c y , " pp. 7 2 - 7 3 . O ' D o n n e l l p o i n t s out that s o m e E U p o l i c i e s are d e s i g n e d to c r e a t e c o n v e r g e n c e a m o n g p o o r e r reg i o n s , s u c h as the s t r u c t u r a l f u n d s , w h i l e o t h e r s , s u c h as the C A P , h a v e the c o n s e q u e n c e of c r e a t i n g g r e a t e r d i f f e r e n c e s . 9. T h e c a s e s in I r e l a n d w e r e Attorney General v. Open Door Counseling in 1988 and the SPUC v. Grogan and Others in 1989. T h e E u r o p e a n case w a s Open Door Counseling, Well Women's Center and Others v. Ireland, 1992. 10. L a f f a n and O ' D o n n e l l , " I n t e r n a t i o n a l G o v e r n a n c e , " p. 170. 11. D e p a r t m e n t of F o r e i g n A f f a i r s , Challenges and Opportunities Abroad: White Paper on Foreign Policy, 1996, p. 52. 12. Patrick K e a t i n g e , " F o r e i g n P o l i c y , " pp. 1 5 0 - 1 5 1 . 13. I r e l a n d is u n d e r r e p r e s e n t e d a b r o a d . All t h e s m a l l e r states of E u r o p e m a i n t a i n t w i c e the n u m b e r of o v e r s e a s m i s s i o n s and h a v e t w i c e the n u m b e r of d i p l o m a t s as I r e l a n d ; L a f f a n a n d O ' D o n n e l l , " I n t e r n a t i o n a l G o v e r n a n c e , " p. 172. I d r a w h e a v i l y on the w o r k of Brigid L a f f a n in this entire section as she has d o n e e x t e n s i v e and e x c e l l e n t w o r k on Ireland in the E U . 14. P a t r i c k K e a t i n g e , " S e c u r i t y P o l i c y , " p. 161. 15. D e p a r t m e n t of F o r e i g n A f f a i r s , Challenges and Opportunities Abroad, 1996, pp. 5 1 - 5 2 . 16. W h i l e out of the orbit of the U n i t e d K i n g d o m , this d o e s not n e c e s s a r ily m e a n o p p o s i t i o n to the U n i t e d K i n g d o m . D u b l i n and L o n d o n h a v e s h a r e d interests in E u r o p e a n m a t t e r s s u c h as o p p o s i t i o n to a strong E u r o p e a n P a r l i a m e n t — I r e l a n d b e c a u s e their r e p r e s e n t a t i o n is so small and Britain b e c a u s e they seek to g u a r d their s o v e r e i g n t y ; both o p p o s e d m a j o r i t y rule f o r f o r e i g n and security p o l i c y — I r e l a n d b e c a u s e of neutrality and Britain b e c a u s e of s o v e r e i g n t y ; and both g o v e r n m e n t s o p p o s e d e x t e n s i o n s of E u r o p e a n social p o l i c y — I r e l a n d b e c a u s e of t h e f i n a n c i a l b u r d e n and Britain b e c a u s e of sovereignty. 17. B r i g i d L a f f a n , " I r e l a n d , " p p . 2 9 4 - 2 9 5 ; S h a r p , " E x t e r n a l C h a l l e n g e s and D o m e s t i c L e g i t i m a c y , " p p . 8 3 - 1 0 3 .

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18. L a f f a n and O ' D o n n e l l , "International G o v e r n a n c e , " p. 166. This is an a d v a n t a g e that Ireland had over the n e w m e m b e r s w h o are both a d a p t i n g to m e m b e r s h i p policies in the EU and trying to build the institutions necessary to adapt. 19. Brigid L a f f a n , " G o v e r n m e n t and A d m i n i s t r a t i o n , " pp. 193-194; Laffan, " I r e l a n d , " pp. 2 6 2 - 2 6 3 . 20. L a f f a n and O ' D o n n e l l , "International G o v e r n a n c e , " p. 168. 21. Neill N u g e n t , The Government and Politics of the European Union, p. 418. 22. L a f f a n and O ' D o n n e l l , "International G o v e r n a n c e , " p. 169. 23. Brigid L a f f a n , " M a n a g i n g E u r o p e , " p. 53. 24. Brigid L a f f a n , " ' W h i l e You Are over T h e r e in Brussels, Get Us a G r a n t ' : T h e M a n a g e m e n t of the Structural Funds in Ireland," pp. 4 3 - 5 7 . 25. Lord Justice D e n n i n g q u o t e d in Basil C h u b b , The Government and Politics of Ireland, p. 51.

9 Denmark: Small State with a Big Voice Leslie Eliason

With a small, open e c o n o m y and a well-developed social-democratic welfare state, D e n m a r k provides a test case for some of the most widely held assumptions about the impact of European integration on domestic policy. Small states with open e c o n o m i e s and large public sectors are expected to s u c c u m b to the pressures of the international economy and the demands of European integration. Surprisingly, Denmark has not only avoided m a j o r cuts in social-welfare spending, but its e c o n o m y continues to thrive and u n e m p l o y m e n t rates remained among the lowest in E u r o p e without having joined the euro currency market in the first round. Furthermore, in some policy areas including environmental and consumer protection, along with gender equity and the social agenda, the Danish government has succeeded in helping to level EU standards up, rather than being forced to lower Danish provisions in response to the demands of other larger EU states. While Sweden and Finland face similar challenges, their comparatively recent accession has given them less time to adjust domestic policy processes in response to the demands of EU membership. Denmark did not suffer the e c o n o m i c shocks of the early 1990s that wreaked havoc with national accounts and government budgets in Sweden and Finland, forcing u n e m p l o y m e n t levels to unprecedented p o s t - W o r l d War II highs. Denmark has had over 25 years' experience as a m e m b e r state. During much of that time, the Danish government has struggled with the combined challenges of high u n e m p l o y m e n t , inflation, and low economic g r o w t h — e v e n at times when other European economies were thriving. As fiscal stress and public debt rise, most analysts predict substantial policy retrenchment, particularly in m a c r o e c o n o m i c and social-welfare policy. 1 Some have even heralded the 1980s as the

191

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The Second Wove

advent of the retreat of the state. The increasing involvement of most countries in the global economy along with the increasing mobility of capital, goods, and services in the 1980s and 1990s exacerbated the domestic problems of many states. Indeed, the further deepening of European integration, including the completion of the internal market and the transition from the European C o m m u n i t y to the European Union, has been one of the most significant institutional responses to these international trends. As a small, open trading state in an increasingly volatile international economy, 2 we would expect Denmark to be highly vulnerable to these trends and unable to do more than steer a prudent course through the turbulent waters of international economic relations. In fact, the Danish welfare state has survived even in spite of some less than stellar macroeconomic management by its government. And since 1993, Denmark has prospered, with u n e m p l o y m e n t levels dropping dramatically along with strong economic growth when other EU member states within the euro zone have fared far worse. Even so, no one would expect Denmark to exert much influence over the rapidly expanding supranational power of EU, especially as qualified majority voting was extended to additional areas of C o m m u nity d e c i s i o n m a k i n g . And yet Denmark emerges as a " l e a d e r " state, pushing for greater EU regulation in some areas, while having maintained significant exceptions to the agreements to deepen economic integration in other areas. Thus Denmark has not been pressured to conform to or "level d o w n " to lower or even average EU levels of public spending, social welfare, and other areas of policy activity. On the contrary, in some policy areas, the Danes have formed coalitions with likeminded m e m b e r states to fight for higher standards. In the area of social and e m p l o y m e n t policy, the Lisbon 2000 summit reflected the engagement and activism of Denmark and other member states as full employment and poverty reduction became explicit goals for the EU. While it is true that almost no area of public policy today remains unaffected by EU lawmaking, the general trajectory of Danish domestic policy in the areas of macroeconomic, social welfare, and environmental policy remain remarkably resilient to potential pressures to shift course or reduce public commitments to the social-democratic model of active state involvement. Yes, there has been substantial reform of the internal administrative conditions under which social-welfare policies in particular are funded and implemented. But these changes have been shaped more by the choices of Danish politicians than by directives emanating f r o m Brussels. The public has supported, if not insisted, that their politicians steer an independent course. The commitment to national institutions as the

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expression of popular sovereignty and democracy runs deep among the Danish electorate. Voters in 1992 required their government to negotiate substantial concessions from the EU, including four special exemptions from the Maastricht Treaty and nonparticipation in the currency union— even though Denmark has almost continuously met the convergence criteria for Economic and Monetary Union (EMU) since 1995. Both at home and in Brussels, Danish politicians have excelled at their own particular brand of "muddling through" 3 over the last two decades. Even having made less than fortuitous domestic economic policy choices, the government has been able to invoke the adaptive and consensusgenerating capacity of the corporatist bargaining structures embedded in the public sector, allowing the welfare state to endure with only marginal changes. In some areas, social-welfare policies have even expanded. On September 28, 2000, Danish voters once again went to the polls, this time to determine whether the Danish krone would be replaced by the euro. The referendum debate was heated and emotional throughout as proponents attempted to paint a picture of vulnerability and unpredictable economic consequences should Danes vote to stay out. The opposition gained already gathering momentum, pointing out that the government had failed to make clear to the public that adopting the euro meant irrevocably giving up the krone. This led to a sevenhour debate on the floor of the parliament over the exact wording of the ballot. The government succeeded in pushing through the wording most likely to ensure joining the euro zone. 4 Nevertheless, as the pro-euro forces launched a serious effort to convince the Danish electorate to vote "yes," it appeared that their efforts only tended to pull undecided voters toward a "no" vote. Right up until the last days before the vote, the "yes" and "no" sides were neck and neck, with as much as 15 percent of the electorate undecided as late as three weeks before the election. In environmental policy, where Danish regulations are among the toughest in Europe, Denmark has not only avoided leveling down, but instead, along with Germany and the Netherlands, has exerted a leadership role. Since the 1970s, many of the Danish public-policy measures to protect the environment have been adopted all or in part by the EU. The Danish case points to the unexpected resilience and influence of one particular small state. Denmark has managed to keep its welfare state largely intact—with fewer dramatic cuts than either the Swedish or Finnish governments have had to enact in recent years. Danish initiatives, especially in the environmental sphere, have helped mobilize the regulatory capacity of the EU to encourage a "greening" of EU policy not anticipated by the framers of the original treaties that established the European Community and Union.

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A f t e r a brief review of the history of Danish m e m b e r s h i p in the European Community/European Union, we turn to a discussion of the domestic policymaking system involved in nationalizing EU policy. Danish m a c r o e c o n o m i c and social-welfare policy are then discussed, with special attention to the impact EU policies have had directly or indirectly. Then we turn to e n v i r o n m e n t a l policy where D e n m a r k has also succeeded in influencing the direction and content of EU policy. By way of conclusion, the Danish case is considered in light of the general expectations about the role of small states facing a large and potentially powerful international organization, the EU. The September 2000 referendum offered the latest m a j o r test of the degree of congruence between Danish public opinion, Danish political leadership, and the EU. Yet again, observers found the vote too close to call even in the final days b e f o r e the poll, again reflecting the divided and s o m e w h a t reluctant support of Danish voters for an increasingly powerful supranational government based in Brussels. The September 28, 2000, referendum c a m e amidst r e n e w e d concern about oil prices including strikes by truck drivers in several European countries, and a falling Euro that led to E C B intervention in the last days b e f o r e the vote. While opinion polls found the vote too close to call just hours before the polls opened, the result was a clear " n o " — 5 3 . 1 percent against joining the E M U to 46.9 percent in favor. The high turnout rate of 87.5 percent of the eligible voters was further evidence of the i m p o r t a n c e attached to EU issues by the Danish electorate.

A Brief History of Danish E C / E U M e m b e r s h i p Denmark followed the United K i n g d o m into the European Community in 1973, after a referendum held in 1972. 5 One of the key characteristics of the E u r o p e a n question throughout Scandinavia over time has been the highly divisive nature of the debate and intense sentiments it continues to evoke, as evidenced since January 2000 as the debate over the euro r e f e r e n d u m has heated up. Historically, the Scandinavian states have favored removing barriers to free trade and the free flow of investment capital while eschewing binding commitments to collective decisionmaking at the supranational level. 6 As Eric Einhorn and John Logue put it, the Danes prefer cooperation over unity. 7 In the battle between those who favor a state-centered approach and those advocating federalism, both the Danish public and the Danish parliament lean more

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heavily toward strengthening the role of the member-state parliaments in European decisionmaking. 8 Danes are not the only members of this club, but they are certainly among the most vocal. 9 While EC/EU membership offered admission to the insider trading club of Europe, the specter of a potential "United States of Europe" and the potential surrender of sovereignty to external powers was and remains political dynamite in Scandinavia. Throughout the 1950s and 1960s, the Nordic states opted instead for the less ambitious European Free Trade Association. However, as Britain considered entry, the Danes too faced the necessity of "joining Europe." Alternative institutions—a Nordic union or the European Free Trade Area—could not promise Denmark a secure position vis-a-vis its now largest trading partner, Germany. The Danish government had long supported free trade, even in agriculture where most other Scandinavian (and many other European) states still resist efforts to lower tariff barriers or subsidies. As Table 9.1 shows, despite a quarter century of membership, popular support for EC/EU membership as expressed in national referenda has never been higher than it was in 1972. Today, the European question splits most political parties into two camps, a dangerous situation in an already highly fragmented party system where minority coalition governments are c o m m o n . The debate over joining the euro has proved no exception. The euro question continues to split political parties. For example, Jann Sjursen, leader of the Christian P e o p l e ' s Party, announced on March 14, 2000, that he was personally opposed to revoking the Danish exception to E M U , even though his fellow party members are as yet free to vote their conscience since the party itself has not taken an official position. The party's vicechairman, F l e m m i n g K o f o d - S v e n d s e n , supports euro m e m b e r s h i p .

T a b l e 9.1

E C / E U Referenda: Danish Voting Record

Referendum

Year

Yes

No

Turnout

EC membership EC package Maastricht Treaty Edinburgh Agreement Amsterdam Treaty

1972 1986 1992 1993 1998

63.3 56.2 49.3 56.7 55.1

36.7 43.8 50.7 53.5 44.9

90.1% 75.4% 83.1% 86.5% 74.8%

Sources: D a n m a r k s Statistik, Stalistisk Website, 1998.

tiârsoversigt,

p. 30; D a n i s h Ministry of Interior

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Other leading m e m b e r s of Folketing (both for and against) have asserted that Sjursen's opposition legitimizes opposition among moderate m e m b e r s of the centrist parties. Danish voters are quick to discriminate among coalition parties and punish those that are responsible for poor policy p e r f o r m a n c e or unpopular actions. 1 0 EU issues can split parties internally, endangering the often delicate compromises that make coalition government possible. No one wanted to end up on the wrong side of the September 2000 referendum, even though the leadership of both the Social Democratic Party as well as most of the bourgeois parties were strongly c o m m i t ted to euro m e m b e r s h i p . Indeed the g o v e r n m e n t has been accused of having overzealously pursued support for the euro to the point of having commissioned biased reports of the impact of euro adoption. T h e first of two m a j o r reports, Danmark og euroen, released by the Ministry of E c o n o m i c s on April 14, and the subsequent Danish Foreign Policy Research Institute's report requested by the Europe C o m m i t t e e of parliament and released May 8, both clearly advocated euro m e m bership even though both were commissioned as nonpartisan government-sponsored expert studies. The gathering opposition among bourgeois party membership provoked Hans Engell of the Conservative Party to urge bourgeois e u r o supporters to "get their act t o g e t h e r " and not leave d e f e n s e of euro membership to the Social Democratic leadership. Meanwhile, the core of the opposition is a motley combination of the far right and the far left of the political party spectrum. O p p o s e d to euro m e m b e r s h i p are the Danish P e o p l e ' s Party, the Unity List, and the Socialist P e o p l e ' s Party (these last two are located to the left of the Social Democrats on the party spectrum). Supporters include Venstre, the C o n s e r v a t i v e Party, the Center D e m o c r a t s , Radikale, and the Social Democrats. A representative of the Danish P e o p l e ' s Party (a successor party of the 1970s tax revolt Progress Party) in the European Parliament, M o g e n s Camre, went so far as to call Marianne Jelved's (Minister of E c o n o m ics and a m e m b e r of the government coalition partner party Det Radikale) pronouncement that a " n o " vote might lead to a drop in the krone e x c h a n g e rate "a kind of treason." On the national television channel T V 2 on April 10, 2000, Camre argued that losing the nation's currency was the beginning of the end of the Danish nation. Nor do voters tolerate hypocrisy: since the 1980s, politicians of all stripes have advocated decentralization and increasing local control to increase the accountability, responsiveness, and efficiency of public institutions. To simultaneously argue that voters should support increased

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powers and deepening of EU authority can create uncomfortable contradictions for national politicians. 1 1 This reticence to surrender national sovereignty to create some kind of supranational authority has deep and abiding roots in Danish political culture, as the 1992 vote revealed. The problem with advocating greater "states' rights" is that, over the last half century, the parliaments of the member states have also been losing ground in their control of political decisionmaking to organized interests and experts. 1 2 Forging alliances across the s o c i a l - d e m o c r a t i c - b o u r g e o i s divide has complicated policymaking ever since, reducing the maneuvering room to any government seeking m a j o r policy change. Danish skepticism runs sufficiently d e e p to be reflected in the Danish delegation to the European parliament. Anti-Unionists continue to make up one-quarter of the Danish E u r o p e a n Parliament delegation. 1 3 T h e " J u n e M o v e m e n t " that gained m o m e n t u m after the June 1992 r e f e r e n d u m remains an active voice opposing E M U and other policies that interfere with domestic decisionmaking. T h e anti-Union activist m o v e m e n t continues to attract supporters even among those w h o do not f a v o r leaving the EU but are concerned about increasing the power of Brussels to undermine Danish self-governance. Perhaps the most visible form of Danish resistance to EU conformity pressures is its special exemption f r o m several provisions of the Maastricht Treaty. Denmark gained international attention in June 1992 when a f e w thousand voters suddenly pulled the emergency brake on the integration locomotive. Many feared that French voters would follow suit. By narrowly rejecting the Maastricht Treaty on European U n i o n , less than 50,000 Danish voters derailed the " E u r o - p h o r i a " of many in Brussels and C o p e n h a g e n . T h e debate about the democratic deficit gained new m o m e n t u m , as did the speculation that of a "twos p e e d " E u r o p e in which some countries in the "inner circle" m o v e d ahead with integration at a faster pace than those in the outer circle. Amidst the often amusing but frequently mistaken international interpretations of the vote, Danes r e i n f o r c e d the value of c o m p r o m i s e and popular sovereignty as important principles of both Danish politics and European integration. At the heart of the tensions in the Danish relationship to the European Union lie the ultimate constitutional questions of sovereignty, legitimacy, and democracy that the European proj e c t engages. Persistent concerns about d e c i s i o n m a k i n g authority f l o w i n g to institutions that lack the more rigorous democratic accountability of national and local institutions is the most powerful source of " E u r o - s k e p t i c i s m " a m o n g the Danish electorate. But as more than a

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few commentators have observed, there is really no turning back. Even if Denmark somehow did manage to extract itself from its treaty obligations in order to leave the EU, its economic relations are deeply entwined with the other m e m b e r states. Its currency and current accounts situation would still be shaped by the effects of decisions m a d e in Brussels. 1 4 This conclusion is shared by both proponents and opponents of joining the Eurozone. The Danish exceptions to the Maastricht Treaty include the option to remain outside the euro and the West European Union, along with reservations about immigration policy. The Danish situation challenges the notion that only full participation in all aspects of the EU can ensure economic competitiveness, growth, and full e m p l o y m e n t — t h e cornerstones of the success of the postwar Scandinavian model. The furor of the post-Maastricht debate that the Danish vote touched off was a catalytic event that led to the Edinburg compromise granting Denmark these exemptions. Inclusion of a social agenda and unemployment issues in the subsequent Amsterdam Treaty was meant to shore up some of these concerns, but did little to quell anti-Union sentiments in Denmark. Meanwhile, while Denmark has opted out of E M U at least until 2002, the Danish krone has become a "virtual member of Euroland." 1 5 The European Central Bank (ECB) and the Danish central bank have agreed that the Danish krone will vary no more than 2.25 percent from the established euro rate and that the ECB will help defend the krone from any speculative attacks, which appeared to be increasing during 1998. The good n e w s is that the e c o n o m i c expansion in D e n m a r k has now lasted over five years, promoting strong employment growth and reduced structural u n e m p l o y m e n t with an inflation rate of around 2 percent. Interest rates are converging to EU levels as part of the exchange-rate stability policy and continuing budget balances. Imports have been outpacing exports, though, so that economists are forecasting slower G D P growth. Like the U.S. economy in the late 1990s, the outlook for the Danish economy is generally good, although many are beginning to w o n d e r how long it can last. Joining the E M U may be viewed either as the magic wand to sustain the expansion or the bitter pill to cure a coming downturn. In either case, the Danish exception to E M U reflects a political bargain the government struck between voter sentiment and the practical realities of the European political economy in the last years of the 20th century. Most agree that the question on the ballot in S e p t e m b e r 2000 was not whether D e n m a r k would join the E M U but when. 1 6 But a " y e s " vote could not be taken for granted and pro-euro forces feared that the inevitability argument would feed a " n o " vote. M e m b e r s h i p in the euro zone would have taken effect on

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January 1, 2 0 0 2 , at the latest when the official conversion rate between the Danish krone and the Euro would have been set. Euro currency and coins would have been introduced over a one- to two-month period around January 1, 2004. With the defeat of the referendum, these dates have become moot. 17

Policy S t r u c t u r e s and I m p l e m e n t a t i o n of E U Policy Despite the reputation for reluctance, Denmark has adopted a comparatively high proportion of EU directives and regulations into domestic iaw. There have been relatively few European Court of Justice cases brought against the Danish state for noncompliance. Denmark, like the other Nordic states, is a unitary state with a highly developed socialwelfare system of publicly funded and provided services and extensive transfer payments with universal coverage. The party system, as mentioned, is highly fragmented with 8 to 12 parties represented in parliament since 1973. These parties range from leftist socialists to the antitax party that intermittently engages in nationalistic, anti-immigration rhetoric. The center of the party system is occupied by several small parties that often exercise the swing votes in key policy decisions, if not in the actual formation of governments. Throughout most of the period from the end of World War II up until the surprise election of 1973, the Social Democrats remained the "natural" party of government. Since 1973, the bourgeois parties gained new power as both the left and the center of the party system split. By the early 1980s, the balance of power in the party system shifted and the Conservative Party, with Prime Minister Poul Schliiter at the helm, led several successive bourgeois coalition governments up until 1993 when a scandal involving the minister of justice and his improper handling of immigration cases brought down the government. Since then the Social Democrats have returned to power, albeit with a less certain grip on their leadership position than in the past. Danish public policymaking, perhaps even more so than Swedish, can be characterized as "principled pragmatism," a term originally coined to describe the Swedish political system. 18 Corporatist policymaking remains the general rule, with organized interests of unions, professional groups, employers, and industry representatives playing key roles in the formulation as well as implementation of public policy. The divided nature of the party system since 1973 has meant that budget deals are often protracted battles requiring compromises between bourgeois ambitions to reduce the size of the public sector in order to lower

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The Second Wave

taxes and social-democratic and leftist concerns about social equality, environmental protection, and the interests of their key constituencies, especially organized workers. As the middle class has expanded dramatically since the 1950s, Danish Social Democrats, like their counterparts elsewhere, have increasingly become a party of the educated middle class. This has at times created critical splits between the party and the labor unions that have traditionally been part of the movement. Perhaps part of the explanation for the remarkable compliance of Danish law and practice with C o m m u n i t y law has to do with the impact that the Europe Committee of the Danish parliament (Folketinget) has had on EU-related policymaking. Known as the Market Committee until 1993, this unique institution reviews all EU directives and legislation, considers the necessary and appropriate measures required, referring matters when appropriate to one of the other 23 standing c o m m i t t e e s of the parliament. While the legislatures of many other m e m b e r states of the EU have since formed similar committees, none exercises quite so m u c h power over the sitting government. The Europe C o m m i t t e e does not just advise the government on pending EU laws and directives; it has the established legal authority to authorize the g o v e r n m e n t ' s negotiating stance in matters coming before the Council of Ministers. The 17 m e m b e r s and 11 alternates meet weekly for two to five hours and the government is obligated to present its negotiating positions in advance to the Europe Committee. As long as there is not a majority opposing the government's stance, the ministers may proceed to Brussels as planned. By c o m m o n practice, almost all legal acts are presented to the Europe Committee before the Council of Ministers meets. T h e Europe C o m m i t t e e rarely directly opposes the g o v e r n m e n t ' s position. However, the government often m o d i f i e s its stance to take into account majority views on the committee. In this way, the Europe Committee exerts influence over the Danish negotiating position in Brussels. To ensure that the sense of the c o m m i t t e e ' s meetings are carried out, since 1984 a stenographic record of the committee's meetings has been kept and ministers are expected to return to the committee upon returning f r o m Brussels to brief the committee on the negotiations. A written report f r o m the minister is also delivered to the committee and, since 1993, these reports have been made available to the public. The Europe Committee receives about 1,000 written reports and other documents each year from the government, and 95 percent of these are publicly accessible. 1 9 However, the effectiveness of the Europe Committee has been repeatedly questioned, particularly as the volume and complexity of EU

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activity has e s c a l a t e d . A study c o m m i s s i o n e d by the E u r o p e C o m m i t t e e s h o w e d that the total annual p r o d u c t i o n of rules by the E U in the p e r i o d 1 9 8 7 - 1 9 8 9 w a s about 5 , 0 0 0 legal a c t s , while in the p e r i o d 1 9 9 6 - 1 9 9 7 this n u m b e r h a d f a l l e n to 3 , 5 0 0 . A g r i c u l t u r e and f i s h e r i e s c o m p r i s e d fully 75 percent o f this rule p r o d u c t i o n , or about 2 , 6 0 0 legal acts. Fully 8 0 p e r c e n t o f all E U r u l e s are i s s u e d by the E u r o p e a n C o m m i s s i o n , which m e a n s that t h e s e m e a s u r e s fall o u t s i d e the l e g a l c o m p e t e n c e o f the E u r o p e C o m m i t t e e ' s authority o v e r the D a n i s h g o v e r n m e n t ' s p o s i tion since the C o m m i s s i o n e r is f o r m a l l y a servant of the E U and not the D a n i s h p e o p l e . T h u s , it m a y be that despite the e x p a n d i n g c o m p e t e n c e of the E U , the actual work l o a d f a c e d by the E u r o p e C o m m i t t e e has not e s c a l a t e d a s m u c h r e c e n t l y as m a n y s u s p e c t e d . O f c o u r s e , these n u m bers do not take into a c c o u n t the q u a l i t i e s of these legal acts, including the extent o f their i m p a c t and the c o m p l e x i t y of their p r o v i s i o n s . F u r t h e r m o r e , while the total n u m b e r of rules p r o d u c e d per year app e a r s to be f a l l i n g , in s e c t o r s other than a g r i c u l t u r e and f i s h e r i e s (where m a n y o f the rules are o f short duration with built-in e x p i r a t i o n d a t e s ) , the rule p r o d u c t i o n a p p e a r s to b e i n c r e a s i n g . A c c o r d i n g to the E u r o p e C o m m i t t e e report, both rules relating to the internal m a r k e t and those i n v o l v i n g e n v i r o n m e n t a l and c o n s u m e r protection are on the rise (see Table 9.2). E v e n s o , the s m a l l E u r o p e C o m m i t t e e staff has been wholly inadequate to r e v i e w m o r e than a fraction o f the total. T h i s lack o f personnel is mirrored in the relatively s m a l l political s t a f f s within the m i n i s t r i e s . T h u s D a n i s h p o l i t i c s r e l i e s at least a s m u c h on p u b l i c d e b a t e and app e a l s by g r a s s - r o o t s o r g a n i z a t i o n s to p o p u l a r o p i n i o n a s it d o e s on the a d v i c e of p o l i c y e x p e r t s within the g o v e r n m e n t and a d m i n i s t r a t i o n . T h e p r o p o r t i o n a l r e p r e s e n t a t i o n of the p a r l i a m e n t a r y parties in the c o m p o s i t i o n o f the E u r o p e C o m m i t t e e m e m b e r s h i p e n s u r e s that the

Table 9.2 E U Legal Acts W i t h i n the Internal Market and Environmental and Consumer Protection Areas (Annual Average): W o r k Load of the Europe Committee

Internal M a r k e t

1987-1989

1990-1992

1993-1995

1996-1997

34

39

48

89

25 51

28 67

59 107

58 147

Environmental and C o n s u m e r Protection Totals

Sources: Europaudvalget, "Regelproduktionen I E U . Tal for perioden 1 9 8 7 - 9 7 . " Info-note I 74. http://www.folketinget.dk/Samling/19981/udvbilag/EUU/Info-note_74.htm

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leadership of all parties feel politically bound by the actions taken in committee. Recently the parliament passed legislation allowing the Europe Committee to hold open meetings when it desires, a provision that was subsequently extended to all standing committees of parliament. Taken together with the frequent use of the referendum to legitimize major changes in the relationship between Denmark and the EU, politicians have built a bulwark of protection from politically unpopular decisions. Since the referenda are technically not binding, any "no" vote technically means that they can always return to the voters for a different decision on the same issue at a later date. The most controversial EU policies have been those that would threaten to undermine hard-fought advances in regulatory protection of collective interests. In particular, consumer protection and environmental protection measures have raised widespread concern. 2 0 One recent example has been the debate over product labeling, especially in foodstuffs. Danish regulations require full disclosure of all food additives. A tiny but vocal organization of individuals who are highly allergic to various additives gained considerable media attention over the last few years in their attempts to fight the relaxation of standards that would allow, for example, German sausages or margarine to be sold on the Danish market without labels identifying artificial colors, specific preservatives, and other chemical additives. Another example was the Danish request to continue its ban on pentachlorophenol (PCP) and thus not implement the 1991 European Union law permitting its limited use. Because Denmark relies exclusively on groundwater sources for its drinking water and PCP levels already exceeded legal EU levels, Denmark was allowed to join Germany in continuing its ban. 21 While issues such as this may seem relatively inconsequential, they point to one of the central concerns Danish voters have with the EU: Will membership undermine political decisions made by Danes for Danes? Perhaps in no other area is this more feared than with respect to social-welfare provisions because of the implications that public spending has for meeting the economic convergence criteria of EMU. Even standing outside the EMU, the centripetal force exerted by "Euro-land" seems unavoidable.

Theoretical D e b a t e s One of the central debates that engages not only academics, but also politicians and voters is the extent to which membership and full

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participation in the European Union—including monetary union—will reshape or limit domestic policy choices. Since e c o n o m i c and fiscal policy shapes what is possible in almost every other policy area, decisions that limit economic policy choices also limit policy options in health, welfare, education, the environment, and a host of other areas, including defense and foreign aid. The general view is that small states are largely at the mercy of the interests and agenda of the larger, more powerful states. With the advent of qualified majority voting, this situation was expected to become even more acute since small states have lost their veto power. In the case of the northern European welfare states, the conventional wisdom holds that these policy constellations are inherently unsustainable and that further integration and deepening of economic and monetary cooperation will necessitate their dismantlement. For a number of scholars, recent changes in welfare policies in Scandinavia (and elsewhere) have already signaled the beginning of the end of welfare as we have known it. Participation in European monetary cooperation has been widely linked to policy retrenchment and fiscal austerity. Most analysts have assumed that fiscal austerity would unavoidably force welfare retrenchment. Others have pointed to the political utility of promoting this perception, whether or not it is true. A f t e r 1983, the European Monetary System ( E M S ) b e c a m e the principal vehicle for promoting monetary stability and fiscal consolidation in Europe. For countries with traditions of high inflation and fiscal laxity, the E M S offered to bind the hands of national politicians and to shunt the b l a m e for disinflation or austerity onto vaguely d e f i n e d market forces or faceless Brussels bureaucrats. 2 2 H o w e v e r , in Denmark, these kinds of arguments will not wash with a public that is seriously divided about the legitimacy of E C authority (the so-called democratic deficit). Furthermore, f e w advocates of full participation in E M U discuss the potential impact of C o m m o n Agricultural Policy (CAP) reform or EU expansion. As a net beneficiary of EU budget transfers because of agricultural subsidies from the CAP, Denmark stands to lose ground if C A P reform scales back on these payments. If agricultural markets are opened to central and eastern E u r o p e a n states, the impact will undoubtedly lead to d o w n w a r d price pressures on Danish agricultural commodities. Both the economic and political impact of these changes are rarely discussed. Not only does E M U impose fiscal and economic responsibility on governments that otherwise would be inclined to " b u y " support through

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increased spending, but the p o w e r of the bloc itself will p r o b a b l y m a k e r e m a i n i n g " o u t s i d e " e c o n o m i c a l l y i m p o s s i b l e . W h i l e it m a y well be still too soon to tell if this p r e d i c t i o n holds true, the D a n i s h e c o n o m y has not yet s h o w n clear signs of being left behind due to n o n p a r t i c i p a tion in the e u r o . B e c a u s e D e n m a r k has p e g g e d its c u r r e n c y to the d e u t s c h e m a r k for over a d e c a d e , c o m p l i a n c e with the c o n v e r g e n c e criteria n e v e r t h e l e s s serves as an important set of e c o n o m i c o b j e c t i v e s . G o v e r n m e n t reports a d d r e s s i n g the e u r o question prior to the vote e m p h a s i z e d the a d v a n t a g e s of m e m b e r s h i p in p r o v i d i n g stability and p r e d i c t a b i l i t y a l o n g with virtually u n l i m i t e d c u r r e n c y r e s e r v e s to d e f e n d the e u r o in the unlikely e v e n t of an international crisis. F u r t h e r m o r e , the reports predicted that international f i n a n c i a l m a r k e t s w o u l d punish the krone should voters say no to the euro.

E c o n o m i c Policy and Social W e l f a r e T h r o u g h o u t most of the 1970s and 1980s, the Danish e c o n o m y underp e r f o r m e d m a r k e t e x p e c t a t i o n s . T h e w e a k p e r f o r m a n c e of the D a n i s h e c o n o m y in the 1970s was the result not only of i n t e r n a t i o n a l f o r c e s (oil shocks) but also poor e c o n o m i c policy choices. International forces could not have been the p r i m a r y causal agent of the t u r n a r o u n d in the late 1980s and 1990s since m o s t of the e l e m e n t s of this n e w e c o n o m i c policy p r e c e d e d the international d e v e l o p m e n t s . The D a n i s h e c o n o m i c policy style has been largely the p r o d u c t of t r i a l - a n d - e r r o r political c o m p r o m i s e s and a good deal of m u d d l i n g through. 2 3 T h e " D a n i s h M i r a c l e " of the last f e w years has been the product of s o m e luck, s o m e s u c c e s s f u l strategic choices, but m o r e than a n y t h i n g else the o p e r a t i o n of the logic of e x i s t i n g i n s t i t u t i o n s . A s H e r m a n S c h w a r t z d e m o n s t r a t e s , by e n c o u r a g i n g and subsidizing i n v e s t m e n t in r e s e a r c h and d e v e l o p m e n t a m o n g the p r e d o m i n a n t l y small and m e d i u m - s i z e d enterprises that c o m p r i s e the D a n i s h industrial and services sectors, the g o v e r n m e n t helped to e n h a n c e the c o m p e t i t i v e n e s s of these f i r m s ' p r o d u c t s on international m a r k e t s . 2 4 W h i l e C o n s e r v a t i v e s m a y w i s h to play the " t w o - l e v e l " s t r a t e g y against d o m e s t i c a c t o r s ( p a r t i c u l a r l y the l a b o r u n i o n s and the S o c i a l D e m o c r a t s ) , the option of c l a i m i n g to be "tied to the m a s t " of the E U ship with respect to e c o n o m i c policy c h o i c e s w a s p e r m a n e n t l y u n d e r m i n e d by the d e b a t e s u r r o u n d i n g the M a a s t r i c h t Treaty. 2 5 S u b s e q u e n t votes h a v e b e e n p e r h a p s less w e l l - p u b l i c i z e d i n t e r n a t i o n a l l y , but n o less h e a t e d a m o n g activists at h o m e in D e n m a r k . T h u s the a r g u m e n t

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that E M U m e m b e r s h i p necessitates more stringent e c o n o m i c policies registers a m o n g many Danish voters as a point in favor of the antiUnionist position. Those favoring m e m b e r s h i p in the monetary union are left to argue that only through participation do Danes lay claim to a legitimate voice and votes in the process that will determine policies that in turn will exert considerable influence over D e n m a r k ' s position in the international economy. Danish EU advocates in the policy community accomplished some of their goals by tying the Danish krone to the d e u t s c h e m a r k and r e f u s i n g despite e n o r m o u s and repeated pressures (especially in the face of Swedish devaluations) to refuse to give up the fixed exchange rate. But the e c o n o m i c turnaround could probably not have been accomplished without the successful containment of public spending in order to bring about a budget surplus. Danish central authorities were able to contain spending by amending the fiscal division of labor between local and central governments. Through a series of often heated and conflictual negotiations, local governments gained greater autonomy in deciding how to spend central-government bloc grants for the provision of public services in e x c h a n g e for the central g o v e r n m e n t setting limits on overall spending. (The previous arrangement had involved per capita reimbursement, which meant that reimbursable expenditures by local governments always exceeded what central authorities had b u d g e t e d . ) So for an extended period in the 1980s, public consumption did not grow in real terms. 2 6 This has meant greater variation across local governments in how public services are provided. In Denmark, local authorities have traditionally held primary responsibility for the provision of social-welfare services. However, the basic contours of social-welfare rights are defined at the national level so that this diversity in provision properties has not, contrary to what some observers have argued, eroded the basic principle of universality. 2 7 T h e real changes that have occurred in the Danish social-welfare policy system have been of two kinds: marginal reductions in the levels of p r o v i s i o n on the one hand (e.g., adding one day to the waiting period for sick pay), and outright increases in transfer payments. 2 8 The new programs adopted after 1979 include: •

A n e w early retirement plan that allows e m p l o y e e s to retire at age 60 (rather than 67)—since 1993, the long-term unemployed can receive a "transitional allowance" f r o m age 50 on • Extended maternity and parental leave

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• Better financial support for students over age 19 • Enhanced sabbatical and educational leave programs Thus while the central government imposed austerity on local governments in the provision of social welfare services, transfer payments that are wholly set by national government authorities were actually expanded during this period. Linkages between policy areas play an important role in understanding the dynamics of Danish social policy during the 1980s and 1990s. Persistently high unemployment rates throughout the 1970s and 1980s became a primary policy concern for the Social Democratic-led government that came to power in 1993 after the extended reign of Schliiter's Conservative-led governments of the 1980s. 29 In the seven years (as of this writing) since the Danish agreement on the four exceptions, including exclusion from the EMU, unemployment had declined significantly and economic growth remained strong. Opponents of the euro argue that prosperity is quite possible without giving up the krone; in fact, they argue, joining the euro might well undermine domestic policy tools to regulate the economy. While full employment has become part of the EU agenda as of the Lisbon summit, this is a very recent addition to an already ambitious set of future plans to coordinate policy areas where member states vary considerably in their current policies and their willingness to surrender domestic policies to pursue coordination at the EU level. Having battled back from persistently high levels of unemployment in the 1980s, Danes are reluctant to tinker with a strong economic situation. Supporters of the euro argued that joining is the best (if not only) way to preserve the current situation and protect the Danish economy from future threats. The single most important factor contributing to the expansion of the size of the Danish work force since the 1970s has been the increased participation of women. Furthermore, the hard-core long-term unemployed were often individuals who after leaving the educational system never found regular employment. Thus, these transfer payment schemes tended to target these two groups: mothers and students (or potential students). Women have not only increased their labor market activity; 30 they have also become more active politically and, in general, women have moved to the left on almost all political issues. Thus it comes as little surprise that parties of both the left and the right have sought policy solutions to the unemployment and underemployment problem that specifically target the interests of women and reshape the relationship between family, market, and state, the "three essential factors of social reproduction." 31

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The rise of w o m e n ' s paid e m p l o y m e n t outside the h o m e corresponds to the dramatic expansion of public-sector e m p l o y m e n t . Thus as women entered the work force, they largely took jobs in the public sector. These new jobs involved providing care for the elderly, for children in schools and day care, and within the health-care sector. Women moved outside their unpaid caring functions within the family to provide many of these same functions within the paid labor force as government assumed responsibility for the public provision of caring functions. This also means that w o m e n have also joined the ranks of the public-sector labor unions with strong interests both as consumers of social welfare provision such as child care as well as providers of these same services. 3 2 Child care leave is a policy area where there has been significant expansion of the role of the state in recent years in D e n m a r k , even under long-term Conservative rule in the 1980s. As Anette Borchorst details, the consensus across political parties supporting this legislation was based on very different arguments. But the net e f f e c t both under the final Schliiter (Conservative) government and the first Nyrup Rasmussen (Social Democratic) government in the early 1990s was the adoption of yet another comparatively generous policy of transfer payments. 3 3 In this area, as in the provision of child day-care places, the welfare state has been expanding in the 1990s. 34 This flies in the face of the prediction that increasing globalization does not allow for both welfare state expansion and economic prosperity. As a " l e a d e r " nation with respect to gender-equality measures, Denmark has not had to adapt significantly to comply with EU directives in this, one of the few active areas of social policy at the EU level. Instead, Danish policy has served as a model for potential emulation and Danish policymakers have advocated for leveling up, rather than suffer the erosion of Danish provisions to some average EU level or worse yet, a l e a s t - c o m m o n - d e n o m i n a t o r approach. This leadership position in gender policy is reinforced by the strong representation of w o m e n in the national parliament, in the cabinet, and in the European Parliament. Ritt Bjerrgaard, until recently the controversial Danish EU c o m m i s s i o n e r with the environmental portfolio, has also long held a high profile in gender-equality issues, not to mention her stint as minister of social policy. Many Danish voters feared that what some anticipate will be the fate of EU social policy may well turn out to be true should they join the EMU. . . . Despite the widespread assumption that EU involvement in social policy has been minimal, the dynamics of market integration have led

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to a substantial spillover on to the Community level. . . . M e m b e r states have lost more control of national welfare policies, in the face of the pressures of integrated markets, than the E U has gained in transferred authority. The multi-tiered pattern which has emerged is largely courtdriven, marked by policy immobilism at the centre and by market integration, which i m p o s e s tight constraints on national policies. 3 5

The problem facing politicians supporting EMU membership is that welfare-state policies continue to enjoy strong and widespread support among the electorate. 3 6 Although the majority of Danes feel that current social welfare spending is not sustainable in the long run, the support for these programs runs wide and deep, especially among public-sector employees and recipients of transfer payments and these two groups taken together constitute two-thirds of the Danish population. For example, it is worth noting that public opinion about the proper role of government in the provision of basic social-welfare functions is generally stronger among Danes than among Britons, Germans, or even Norwegians. Fully 94 percent of Danes asked about the appropriate responsibilities of government included health care in the "definitely yes" category; the corresponding percentages for Germany, the UK, and Norway were 57, 85, and 84 respectively. 3 7 Thus despite dire p r e d i c t i o n s — o r perhaps fervent h o p e s — t o the contrary, the Danish welfare state has managed to survive and even expand despite enormous economic pressures to retrench. The recent reforms of the Swedish transfer-payments system are in some instances more far-reaching and f u n d a m e n t a l than in Denmark. While it may have been D e n m a r k ' s economic misfortune to be tied to the EU during S w e d e n ' s prosperous years in the early 1980s, that longer period of adaptation to the competitive economic pressures of European integration may have secured Danes a longer period in which to muddle through and find policy solutions to external pressures that did not require major overhauls or cuts in social-welfare provisions. The most significant changes in the Danish social-policy system have come in the area of public-sector management. In addition to the fiscal measures described above in which local governments traded off fiscal limits for greater local control, both central and local government administrators have embraced rationalistic managerial reforms that enhance the productivity and cost-effectiveness of public-sector organizations and institutions. This has included initial experiments with and now wider adoption of contracting out for some services, the introduction of competitive incentive structures within the public sector, and greater emphasis on consumer satisfaction and results-oriented evaluation. 3 8

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Leading analysts o f E U social policy remain skeptical o f the potential for F.uropeanizing the sovereign s o c i a l - w e l f a r e responsibilities o f the member states. 3 9 Domestic policies are apparently far more resistant to dismantling than strictly economic evaluations of the condition of the late capitalist state would suggest. In the Danish (and S w e d i s h ) c a s e , the weakened but enduring political power of corporatist actors continues to provide a degree o f stability and capacity for imposing wage restraint to preserve longer-term interests and autonomy.

E n v i r o n m e n t a l Policy Denmark has helped influence the European agenda not only by its citizenry's reticence to surrender sovereignty to the E U , but also through its activism to promote environmental protection policies. Denmark has not only lent its support to German initiatives; 4 0 in some instances it has forged new E U policy even in the face of German opposition. One notable exception to D e n m a r k ' s generally compliant behavior with respect to E U policy directives serves as a powerful demonstration o f the potential impact o f even a small nation's domestic policy on E U policy. In the Danish bottle c a s e , the European Court o f J u s t i c e held that environmental protection can supersede intra-member-state competition concerns. For over a century, Danish breweries have bottled b e v e r a g e s in reusable glass containers. T h e deposit c o l l e c t e d per bottle (and case container) is refunded or rolled over as the bottles (and container) are returned. German producers argued that this constituted an unfair restraint on trade since foreign producers were not included in this system. T h e Danish government argued that the state should not have to bear the additional burden o f disposing o f bottles that could not be integrated into this privately financed recycling scheme. T h e European Court o f J u s t i c e found in f a v o r o f the Danish position, thus allowing environmental considerations to trump restraint o f trade concerns.41 T h i s points to an additional unexpected aspect o f the interaction between domestic and E U policy processes in Denmark. In the area o f environmental protection, little D e n m a r k has proved to be an important m e m b e r of the " g r e e n " leaders c l u b within the E U . Along with G e r many and the Netherlands, Denmark has been at the forefront o f securing new competencies for the E U . In many instances, the E U environmental policy that Danish leaders have pushed through at the E U level represents a "leveling up" of environmental protection regulations.

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Environmental protection also has important "spillover" effects in areas such as agricultural policy and occupational safety and health. The highly controversial water plans developed by local and regional authorities in Denmark pitted environmentalists (often urban and suburban constituents) against agricultural interests. The problem of agricultural runoff—the contamination of drinking (and other) water due to pesticides and intensive use of fertilizers—suggested the need for increased regulation (and restriction) of the use of chemical agents in farming. Farmers, on the other hand, faced the potential loss of profitability due to reduced harvests or less-expensively produced foreign imports. Similar hard-fought protections against safety and health hazards in the workplace contributed to higher prices for Danish products vis-à-vis those produced in more hazardous environments in other EU countries. As an area heavily influenced by networks of experts and scientists, environmental policymaking has turned out to be quite compatible with the regulatory bent of EU policy. 42 Through a combination of promoting the role of epistemic communities of experts, scientists, and policymakers in the environmental sector and working with likeminded states such as Germany, Denmark has been able to provide policy leadership in this crucial area that actively regulates firm behavior and thus represents a constraint of free-market forces. These policies are probably more visible and widely discussed in Denmark than would be the case in larger states such as Germany or France. The Danish position, therefore, was to support the most stringent regulation of water quality that could be achieved at the EU level. Ironically perhaps, the Danish position helped fuel the British and French reassertion of the principle of subsidiarity, a principle that Danish EU skeptics argue is observed mostly in the breach.

Conclusion

Few other European states have endured such long periods of economic policy failure during the second half of the 20th century as has Denmark. Peter Nannestad argues that in fact the Danish economy did worse than expected during much of the 1970s and into the early 1980s. 43 On the other hand, the success of the fiscal restraint policies undertaken by the Conservative-led government in the mid-1980s made possible the preservation—indeed the continued expansion—of Danish social-welfare provision. This is no irony: few Conservatives advocate the elimination of public welfare. Instead, they have argued for

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deregulation, decentralization, and contracting out for private provision where there is no clear loss of accountability in doing so. What the Danish case reveals is the residual adaptive capacity of institutions based on structured consultation and negotiation predicated on an expectation of pragmatic compromises among competing interests. Furthermore, the Danish case also suggests that competition among different levels of government and jurisdictions does not always have to lead to less-efficient outcomes. In Denmark, the structured organization of governments—e.g., the Association of Municipalities and Counties—facilitated the eventual resolution of the conflict over costcontainment measures by providing an arena for binding negotiations. The thesis presumes that states can cut spending if only they want to or must. But m u c h of the research of the last two d e c a d e s has repeatedly demonstrated the obstacles to major r e f o r m s that actually result in less government spending. The more " s u c c e s s f u l " reforms have at best succeeded in controlling the rate of increase of spending. Major social policy change—especially the scaling back of the northern European w e l f a r e states—if it were necessitated by EU developments would require some kind of imposition of cuts. As yet, the EU lacks the popular legitimacy or even the instruments to create credible sanctions to m a k e this h a p p e n , especially w h e n a g o v e r n m e n t faces c o n s i d e r a b l e public opposition and risks its control of the domestic political system. T h e conventional wisdom for at least two d e c a d e s has been that big government is unsustainable. Critics of both the left and the right have argued that the welfare state is unsustainable. Indeed, public opinion in Denmark supports this view. But the remarkable empirical reality in Denmark is that the welfare state has not died or collapsed. Instead it has steadily grown in terms of overall expenditures, transfer p a y m e n t s , p r o g r a m m a t i c areas, and personnel. If m e m b e r s h i p in the European Union was supposed to bring retrenchment or a regression to the least c o m m o n denominator, those forces have not yet made themselves felt in Denmark. At minimum, those pressures have not exerted a stronger pull on politicians than has the desire to appease the interests of large segments of the voting public by continuing to expand both the variety of public provisions of welfare and the amount of transfer payments. Thus we can conclude that, in the case of Denmark, the hypothesis that EU membership will force significant cutbacks in welfarestate provisions is not confirmed and no deep political or economic crisis has occurred as a consequence. Indeed, the Danish economy stands in reasonably good shape compared to other EU m e m b e r states.

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In other realms of social policy, e s p e c i a l l y gender-based p r o v i s i o n s and e n v i r o n m e n t a l p o l i c y , D e n m a r k r e m a i n s a l e a d i n g - e d g e country largely b e c a u s e the d o m e s t i c p o l i c i e s related to w o m e n and e m p l o y m e n t h a v e b e c o m e a m o d e l for e m u l a t i o n transmitted in part by Brussels. T h e D a n i s h c a s e points to the n e c e s s i t y of d e v e l o p i n g a m o r e nua n c e d understanding o f the interaction b e t w e e n d o m e s t i c p o l i c y norms and e x p e c t a t i o n s and E U p o l i c y m a k i n g . It is clear that the causal arrow p o i n t s in both d i r e c t i o n s and must be u n d e r s t o o d not just in terms o f the e c o n o m i c l o g i c o f the situation but a l s o the c o n c e r n s of a d e m o c ratically c o m m i t t e d and p o l i t i c a l l y attentive and astute p u b l i c . T h e c a m p a i g n prior to the e u r o r e f e r e n d u m o n S e p t e m b e r 2 8 , 2 0 0 0 , ref l e c t e d the o n g o i n g d y n a m i c t e n s i o n b e t w e e n a strong i n c l i n a t i o n toward international c o o p e r a t i o n and a f i e r c e l y d e f e n d e d c o m m i t m e n t to national s e l f - d e t e r m i n a t i o n and a broad and strong c o n s e n s u s about preserving the D a n i s h " w e l f a r e society."

Notes 1. Evelyne Huber and John D. Stephens, "Internationalization and the Social Democratic Model." 2. Peter J. Katzenstein, Small States in World Markets: Industrial Policy in Europe. 3. Charles E. Lindblom, "The Science of 'Muddling T h r o u g h , ' " pp. 7 9 88; and Charles E. Lindblom, "Still Muddling, Not Yet T h r o u g h , " pp. 517— 532. 4. Public opinion polls from late 1999 and early 2000 indicate that the wording of the question had a clear impact on how voters reacted. When asked if they wanted to join the euro, a narrow majority responded " y e s . " W h e n asked if they want to surrender the krone, a small majority said "no." Thus the battle over the wording of the ballot was crucial. Furthermore, as the independent m e m b e r of parliament, Frank Dahlgaard (an EMU opponent) has hammered home repeatedly in questions to the economics minister on the so-called paragraph 20 question (number S 1278, January 27, 2000); this must mean that many Danes failed to comprehend that adopting the euro requires giving up the krone. 5. D e n m a r k is second only to Switzerland in the use of the r e f e r e n d u m . The provisions for referenda in the Danish constitution are one important reflection of the deep-rooted commitment to direct democracy. Any legislation (except finance and tax laws) can be put to a referendum with the support of one-third of the parliament. Any legislation that impinges on national sovereignty can be put to a referendum with only one-sixth of the parliament. Unlike Swedish and Norwegian referenda, these votes are binding. See Eric S. Einhorn and John Logue, Modern Welfare States: Politics and Policies in Social Democratic Scandinavia, pp. 117-120.

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6. Thus NATO membership remains latently controversial and the Danes have also demanded certain restrictions there as well, including the prohibition of nuclear submarines and nuclear materials on Danish soil. This provision has been violated, as the Thule scandal reveals, but not without considerable political fallout. 7. Einhorn and Logue, Modern Welfare States, p. 232. 8. Lykke Friis, "EU og d e m o k r a t i — d e n dobbelte n0dvendighed," pp. 290-291. 9. The political scientist turned politician Drude Dahlerup has captured the essence of anti-Unionist sentiment in Hvad er meningen!? et kontant svar om EU. 10. Jiigen Goul Andersen, "Welfare State Legitimacy in a One-Third Society: Attitudes Towards the Welfare State Among Public Employees, Publicly Supported, and the State Non-Dependent Minority." 11. Leslie C. Eliason, "Reading the Cards on the Table: Danish Politics in the Era of European Integration"; Leslie C. Eliason, "Scandinavia and the New Europe." 12. Erling Olsen, "Magten tilbage til Folketinget"; Ove K. Pedersen et al., Demokratiets lette tilstand: Syv beslutningstagere om Danmark og fremtid. 13. Eric S. Einhorn and John Logue, "Scandinavia: Still the Middle Way?" p. 25. 14. Friis, "EU og demokrati." 15. Leif Beck Fallesen. "Living Outside Euroland." Europe (Issue 383); February 1999, pp. 2 4 - 2 5 . 16. Organization for Economic Cooperation and Development ( O E C D ) , Economic Survey of Denmark, p. 3. 17. 0 k o n o m i m i n i s t e r i u m , Danmark og euroen, p. 43. 18. Hugh Heclo and Henrik Madsen, Politics and Policy in Sweden: Principled Pragmatism. 19. Folketinget, "Europaudvalget." 20. It is no accident that it is precisely these areas selected by the Europe Committee's study on rule production in the EU. 21. "Denmark Keeps P C P Ban," Chemical Week, March 6, 1996, p. 6. 22. Jeffrey Frieden and Eric Jones, " T h e Political Economy of European Monetary Union: A Conceptual Overview," pp. 166-167. 23. Peter Nannestad, "Keeping the Bumblebee Flying: Economic Policy in the Welfare State of Denmark, 1973-94." 24. Herman Schwartz, "The Danish ' M i r a c l e ' : Luck, Pluck or Stuck?" 25. Robert Putnam, " D i p l o m a c y and Domestic Politics: The Logic of Two-Level Games." 26. Niels Ploug and Jon Kvist, "Continuity or Change in the Danish Social Security System?"; Poul Erik Mouritzen, "Local Government in Denmark." 27. E.g., Robert H. Cox, "The Consequences of Welfare Retrenchment in Denmark." 28. Ploug and Kvist, "Continuity or Change"; Neils Ploug and Jon Kvist, Overf0rselsindkomster i Europa: Systemerne I grundtrcek; Goul Andersen, "Welfare State Legitimacy." 29. Finansministeriet, Medium Term Economic Survey.

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30. Lise Togeby, "Political Implications of Increasing Numbers of Women in the Labor Force." 31. Gerda Falkner and Emmerich Talos, "The Role of the State Within Social Policy," p. 71. 32. Peder Pedersen and Nina Smith "The Welfare State and the Labor Market"; Goul Andersen, "Welfare State Legitimacy." 33. Anette Borchorst, "Den k0nnede virkelighed—den k0nsl0se debat." 34. Jens Beyer Damgaard, " G r o w t h by Rules: The Case of Danish Day Care." 35. Helen Wallace and William Wallace (eds.), Policy-Making in the European Union, p. 185. 36. Goul Andersen, "Welfare State Legitimacy." 37. Ibid., p. 19. 38. Organization for Economic Cooperation and Development (OECD), Public Management Developments in Denmark; OECD. Management Across Levels of Government: Denmark. 39. Stephan Leibfried, "Towards a European Welfare State? On Integrating Poverty Regimes into the European Community"; Stephan Leibfried and Paul Pierson, "Social Policy"; Stephan Liebfried and Paul Pierson (eds.), European Social Poticx: Between Fragmentation and Integration. 40. Alberta Sbragia, "Environmental Policy: The ' P u s h - P u l l ' of PolicyMaking." 41. On the other hand. Denmark lost the battle to restrict imports of beer in aluminum cans. 42. Peter M. Haas, Robert O. Keohane, and Margaret Levi, Institutions for the Earth: Sources of Effective International Environmental Protection. 43. Nannestad, "Keeping the Bumblebee Flying."

Part 3

T H E 1980S

10

Greece: A European Paradox Christos Markou, George Nakos & Nikolaos

Zahariadis

Membership in the European Union since 1981 has had a tremendous, mostly positive, impact on Greece. This is evidenced f r o m the routinely high m a r k s of approval that the EU receives in public-opinion polls and the vocal, almost u n a n i m o u s , position by Greek elites for deeper integration within Union institutions. Greeks are consistently among the most enthusiastic supporters of the EU, although oddly this is hardly the impression one gets f r o m the Greek g o v e r n m e n t ' s policies. And here lies the Greek paradox: How can a country so united in its pro-integrationist stance and buttressed by significant rates of public approval concerning the Union behave so oddly and find itself so out of touch at times with the rest of EU members? We argue that the contradiction underlying the answer can be explained in terms of the significant costs brought on by integration that were exacerbated by domestic politics, a lack of Greek leadership, and a preoccupation with gaining primarily political rather than economic benefits. The factors that make Greece an interesting case are its geography, its starting point relative to other EU members, and the reasons Greece j o i n e d the EU in the first place. First, its geographic location in the troubled Balkan p e n i n s u l a far f r o m other EU m e m b e r states, surrounded by (now former) communist countries with Turkey, its historical arch rival, as the only " f r i e n d l y " neighbor, and its proximity to the Middle East, elevate foreign-policy concerns to levels at least as high as the economic issues that concern the rest of the EU. Second, the fact that Greece, and later Spain and Portugal, started out at a substantially lower level of economic development than other EU states created unique problems for the adoption and implementation of policies for which there were no established models or patterns. Finally, the arguments put forth 217

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by G r e e c e for m e m b e r s h i p d i f f e r e d d r a m a t i c a l l y f r o m t h o s e of most other c o u n t r i e s b e c a u s e of their political rather than e c o n o m i c nature. G r e e c e was the first c o u n t r y — S p a i n and Portugal later used the same logic as w e l l — t o a r g u e that m e m b e r s h i p w o u l d help c o n s o l i d a t e dem o c r a t i c p r a c t i c e and a n c h o r the c o u n t r y f i r m l y in the W e s t e r n alliance. E c o n o m i c considerations, h o w e v e r important they were d e e m e d to be at the time, were relegated to s e c o n d a r y status. We first e x a m i n e the impact of EU policy on the Greek e c o n o m y . M o r e specifically, we e x p l o r e the impact on industry and agriculture, the p r o s p e c t s for j o i n i n g E c o n o m i c and M o n e t a r y Union ( E M U ) , and r e f l e c t u p o n the G r e e k inability to a d j u s t e f f e c t i v e l y to the E u r o p e a n c h a l l e n g e . We finally take on the t h o r n i e r f o r e i g n and security issues by d r a w i n g on the u n i q u e p r o b l e m s f a c i n g G r e e c e and the sharp differe n c e s that have at times existed b e t w e e n the G r e e k s and other E U poli c y m a k e r s . G r e e k - T u r k i s h r e l a t i o n s are used to illustrate the d i f f i c u l ties. D e s p i t e the p r o b l e m s , we f i n d that the E U has g e n e r a l l y had a highly positive impact on G r e e c e .

E c o n o m i c Policy T h e a c c e s s i o n of G r e e c e to the E U had a t r e m e n d o u s i m p a c t on the Greek e c o n o m y . G r e e k e n t e r p r i s e s had to c o m p e t e with p o w e r f u l foreign entities without the protection of tariff and nontariff barriers. T h e blow to the e c o n o m y was s w i f t and dramatic.

Impact of Membership on the Industrial Sector Prior to G r e e c e ' s full m e m b e r s h i p , there was a general o p t i m i s m in the c o u n t r y that m e m b e r s h i p w o u l d be a d v a n t a g e o u s f o r the e c o n o m y . 1 H o w e v e r , the E u r o p e a n p a r t n e r s did not share this o p t i m i s m . S o m e of the m a j o r a n t i c i p a t e d p r o b l e m s w e r e the structural p r o b l e m s of the G r e e k e c o n o m y , m o r e s p e c i f i c a l l y the p r e d o m i n a n c e of small and m e d i u m - s i z e d enterprises, and the large agricultural sector. In addition, pressure on the G r e e k trade b a l a n c e was predicted due to the obligation of G r e e c e to accept the E u r o p e a n C o m m o n E x t e r n a l Tariff and elimination of m o n e t a r y and n o n m o n e t a r y import restrictions a f t e r a period of time for p r o d u c t s o r i g i n a t i n g inside the E u r o p e a n C o m m u n i t y . Of c o u r s e , as in any c u s t o m s u n i o n a g r e e m e n t , certain b e n e f i t s to the G r e e k e c o n o m y w e r e p r e d i c t e d , such as i n c r e a s e d e c o n o m i c stability, by b e c o m i n g a m e m b e r of a w e a l t h y multinational organization. 2

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Examining the development of the Greek economy in the years following the accession to the EU, it appears that the more pessimistic scenario p r o v e d to be more accurate. The growth rate of the Greek economy, one of the highest among Organization for Economic Cooperation and D e v e l o p m e n t ( O E C D ) countries throughout the postwar years at around 6 percent, slowed considerably in the 1980s and 1990s. Of course nobody claims that the cause of this economic slowdown is EU m e m b e r s h i p . It is more likely that the reasons are to be found in e c o n o m i c policies undertaken by Greek socialist governments. Their e m p h a s i s on redistribution of wealth rather than attempting to retool the Greek e c o n o m y for competing in the new globalized environment has had disastrous results. For example, between 1981 and 1989 Greek commercial fleet ownership fell by 10 percent and the annual amount of receipts f r o m merchant marine foreign exchange registered a decline of 3.4 percent. 3 During the same period, the carrying capacity of ships flying the G r e e k flag dropped by more than 50 percent. T h e r e f o r e , it is in the context of Greek internal politics that the e c o n o m i c performance of the last 20 years has to be examined. According to the accession agreement signed in 1979, Greece was given five to seven years as an adjustment period to lift all tariffs and barriers on trade with other m e m b e r states. Greece did not use this transition period effectively and as a result the vast majority of Greek industrial enterprises could not c o m p e t e against more efficient European-based companies. The roots of the inefficiency of Greek companies are to be found in the way the postwar Greek economy developed. Most companies were created as part of an import-substitution strategy. H o w e v e r , large corporations, particularly in the areas of c o n s u m e r goods that were the pride of the country in the p o s t w a r years, either sought g o v e r n m e n t protection through what amounted to nationalization or they went out of business. Many observers feared a deindustrialization of the Greek economy. It is only in recent years that more e f f i c i e n t c o m p a n i e s have e m e r g e d able to compete in the new environment. This new competitiveness is probably attributed to the n e w f o u n d maturity of the Greek political environment, new business opportunities with the collapse of the Soviet bloc, and the acceptance by Greek businessmen that the country will have change in order to survive in an open competitive environment. The protected business world of earlier years has radically been changed. As a result of this new attitude toward the European Union and the globalization trends that i n f l u e n c e all nations, the Greek e c o n o m y is

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moving into new directions. For the first time in history Greek companies are b e c o m i n g heavily involved internationally. T h e fall of communism provided them the opportunity to expand in the Balkan hinterland and in Eastern Europe. Many Greek companies are just realizing the advantages of being located in a country that is a member of a large trading bloc. Taking advantage of EU membership, more than a thousand Greek companies have established themselves in the Balkans and beyond. For e x a m p l e O T E , the Greek t e l e c o m m u n i c a t i o n s provider, has recently purchased controlling stakes in the state telecommunication c o m p a n i e s of Yugoslavia, R o m a n i a , and Armenia. 4 A f e w years ago a Greek businessman making the most unusual investment, purchased Pravda, the once powerful newspaper of the Soviet Communist Party. Other companies in construction, banking, and food processing, where Greece enjoys technological advantages relative to its neighbors, have expanded tremendously. On the other hand, labor-intensive industries such as textiles, where Greece earlier enjoyed a comparative advantage relative to other EU members, have been decimated by the flood of cheaper imports from Third World countries such as China and Turkey, and the need to take advantage of less-costly labor in countries such as Bulgaria. The result has been that many small firms went out of business or contracted out services similar to the maquiladoras along the Mexican border. The internationalization of Greek companies is expected to accelerate in the near future. Another area where Greece has been trying to capitalize on its m e m b e r s h i p in recent years is in trying to attract foreign investment. Foreign capital was essential in the early stages of Greek industrialization in the 1950s and 1960s. However, due to the unfavorable domestic political environment following the country's accession to the EU many foreign countries and their investments stayed away. If we compare G r e e c e ' s foreign investment intake with that of other EU m e m bers, the c o m p a r i s o n is abysmal. Spain, Portugal, and Ireland were very successful in attracting foreign investment. Greece, in many sectors, witnessed a reversal as many multinationals, such as G o o d y e a r , decided to close local facilities and instead import their products f r o m large factories located in other EU nations. The hope that multinationals would use Greece as a base for exporting to other EU countries by taking advantage of its cheaper labor costs did not materialize because of adversarial government policies and the existence of militant labor unions. Another m a j o r reason, and one that has not been studied extensively in Greece, is the country's geographic isolation. The absence of a land frontier with the European Union heartland makes it difficult for

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many foreign corporations to locate there. The wars that followed the disintegration of Yugoslavia took a toll on Greece's trade. Sixty percent of all Greek exports to Western Europe went through Yugoslavia. They have since had to be rerouted either through Italy, which involved an additional sea leg to the trip, or over poor roads in through Bulgaria, Romania, and Hungary. One has to keep in mind, however, that the absence of a land connection did not preclude Ireland and certain regions of Great Britain from becoming favorite locations for foreign investment. Therefore, the transportation issue in all its facets needs to be examined thoroughly by Greek policymakers. The negative image that Greece had acquired as an undesirable location for foreign investment has been gradually changing, however. Recent governments are trying to sell the country's EU membership as a major advantage. 5 It appears that they are becoming successful and an increase of foreign investment is to be expected in the future. 6 If the impact of EU membership on the growth rate of the Greek economy has been mixed, Greek consumption patterns have experienced a transformation. In many ways, Greece is a very different country today because of EU membership. The country has moved much closer to EU norms in terms of consumption patterns, life-styles, social attitudes, and demographics. While the official economy appeared to be stagnant during the 1980s and early 1990s, one has to keep in mind that Greece has a very large informal sector, the "paraeconomy" as it is called, that if included in official statistics could increase the country's G D P by at least 30 percent. 7 This informal sector has created certain affluence not experienced in Greece in previous decades. As a result, one can observe in Greece social characteristics often associated with more prosperous counties. During these years the aging of the population, smaller household size, and higher female employment were observed. In addition, the marketing environment has been modernized with many international retailers moving into the country. 8 These changes will probably bring the country much closer to the other member states in the near future. Overall, although Greece is currently the European Union's poorest country, if present economic trends continue, official per capita income is expected to rise from 69 percent of EU average to 80 percent by 2006. 9

Impact of Membership on Agriculture EU membership has had a tremendous impact on Greek agriculture. The farming sector is still very important for Greece. Until a few years

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a g o m o r e than 30 p e r c e n t of the labor f o r c e w a s e m p l o y e d in f a r m s . A l t h o u g h this p e r c e n t a g e has declined to 18 percent and is expected to fall still b e c a u s e a large n u m b e r of f a r m e r s are a p p r o a c h i n g retirement age, a g r i c u l t u r e r e m a i n s a very i m p o r t a n t sector in G r e e c e , c r e a t i n g a r o u n d 10 p e r c e n t of the c o u n t r y ' s GNP. 1 0 T h e C o m m o n A g r i c u l t u r a l Policy ( C A P ) p r o v i d e d G r e e c e with m u c h - n e e d e d f u n d s to m o d e r n i z e its u n d e r d e v e l o p e d rural sector. T h e aim was to significantly raise the productivity of G r e e k f a r m e r s through technology, training, and a d a p tation to market needs. U n f o r t u n a t e l y , C A P f u n d s also m a d e the f a r m ers d e p e n d e n t on EU s u b s i d i e s for a large portion of their i n c o m e . In s o m e c a s e s f a r m e r s w e r e r e c e i v i n g m o r e than 80 p e r c e n t of their income from community subsidies." It is difficult to predict the f u t u r e of G r e e k agriculture in an era of s h r i n k i n g EU a g r i c u l t u r a l b u d g e t s . W i t h o u t a d o u b t the n u m b e r of G r e e k f a r m e r s will f u r t h e r decline in the f u t u r e and a consolidation of Greek f a r m s will occur. The c h a n g e in EU policies will force the Greek f a r m i n g sector to adjust to a f u t u r e without subsidies. 1 2 T h e importance of f a r m i n g for the Greek e c o n o m y will f u r t h e r d i m i n i s h in the f u t u r e . T h i s e v o l u t i o n will have not only e c o n o m i c but also social i m p l i c a tions, as G r e e c e will f i n a l l y t r a n s f o r m itself f r o m a rural society to a nation of urban d w e l l e r s . H o w e v e r , as F r a n c e , Italy, Spain and o t h e r n a t i o n s are f i n d i n g out, the political t r a n s f o r m a t i o n that n e e d s to acc o m p a n y this transition is e x t r e m e l y d i f f i c u l t to a c c o m p l i s h . F a r m e r s still wield substantial p o w e r in those c o u n t r i e s despite their d w i n d l i n g n u m b e r s . T h e r e is no reason to believe that G r e e c e will be an exception to this general pattern.

EMU Membership Prospects T h e m a j o r i t y of G r e e k s h a v e e m b r a c e d the idea of E M U m e m b e r s h i p . Support a m o n g top and m i d d l e m a n a g e r s and e x e c u t i v e s of the G r e e k private sector has been o v e r w h e l m i n g at over 98 percent. 1 3 G r e e k s believe that being part of the e u r o zone will e n a b l e the country to attract b i g g e r f l o w s of f o r e i g n direct i n v e s t m e n t and a h i g h e r e c o n o m i c g r o w t h rate. F o r t h e s e r e a s o n s , E M U p a r t i c i p a t i o n has b e c o m e the m a i n policy o b j e c t i v e of the G r e e k g o v e r n m e n t . In the last three years the G r e e k g o v e r n m e n t has slashed g o v e r n m e n t b u d g e t deficits f r o m 15 percent of G D P in 1990 to less than 3 percent in 1998, achieving a rate b e l o w the M a a s t r i c h t Treaty criterion for single-currency m e m b e r s h i p . Inflation has d r o p p e d f r o m m o r e than 20 percent in the early 1990s to 2.6 for 1999, a rate lower than Spain and Ireland. 1 4 Although the ratio

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of public debt relative to G D P remains very high, it is declining and is lower than that of Belgium and Italy—both countries participate in the euro zone. Currently it stands at 104 percent of GDP, and it is expected to further fall as declining interest rates m a k e debt servicing more manageable. 1 5 In March 2000, Greece formally applied to join the euro after successfully meeting all the Maastricht criteria and despite inflationary pressures of the high oil prices in early 2000. These are monumental a c h i e v e m e n t s in that they represent the healthiest macroe c o n o m i c indicators in the last 30 years. Following these e c o n o m i c achievements, most Greek and foreign observers expect Greece to become a m e m b e r on January 1, 2001. 1 6 Whether membership in the euro zone will bring all the expected benefits remains to be seen. For the time being, support for m e m b e r s h i p is o v e r w h e l m i n g and the goal of achieving membership has revitalized the Greek economy. Benefits from EMU participation extend beyond economic matters. Full accession into the euro zone will signal a change in G r e e c e ' s power vis-à-vis Turkey for two reasons. First, e c o n o m i c benefits will increase Greece's ability to pay for its defense expenditures. A higher growth rate will provide the luxury of more armaments should the need arise. Second, being part of a huge market with no national borders or artificial economic dividers means that the cost of potential conflicts with Turkey will negatively affect all countries in the euro zone and not just Greece. If Greece enters E M U , Greco-Turkish disputes will become Europe's problem. 1 7 But several m a j o r problems remain unaddressed. In 1998 Greece was admitted to the Exchange Rate Mechanism (ERM), which is a prerequisite for joining E M U . One of the E R M ' s biggest drawbacks, however, is the loss of effectiveness for manipulating intra-Union nominal exchange rates as a policy instrument of competitiveness. Certainly the drachma has stabilized considerably since entry to E R M , but such stability is crucially dependent on the flexibility of the Greek market to k e e p labor costs low and on the nature of external shocks. 1 8 Greece must change the basic structure of its labor market in terms of the quality of labor's skills and the militancy of the unions. These issues have only recently been addressed, m a k i n g i m p r o v e m e n t s in the macroeconomic indicators highly ephemeral. Under adverse conditions, they might reverse sharply and plunge Greece into a recession with few policy instruments to use to claw its way out. Adverse conditions include external shocks such as the volatile situation in a number of regions of former Yugoslavia, which cost Greece more dearly than any other EU (or NATO) member. It has been estimated

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that the c r i s i s in Y u g o s l a v i a h a s s h a v e d 0 . 5 p e r c e n t o f f the p r o j e c t e d rate o f g r o w t h . T h i s d o e s not s e e m l i k e a h i g h p e r c e n t a g e , but f o r an e c o n o m y that it is s t r i v i n g to c a t c h up with its w e a l t h i e r E U p a r t n e r s the d a m a g e c a n n o t b e e a s i l y d i s m i s s e d . T h e c o u n t r y s u f f e r e d e c o n o m i c s e t b a c k s in t w o m a i n a r e a s , t o u r i s m and t r a n s p o r t a t i o n . L a r g e n u m b e r s o f A m e r i c a n , B r i t i s h , and n o r t h e r n E u r o p e a n t o u r i s t s c a n c e l l e d t h e i r r e s e r v a t i o n s . R e s o r t s in northern G r e e c e , l o c a t e d c l o s e to the c o n f l i c t , s u f f e r e d the m o s t , with f o r e i g n c a n c e l l a t i o n s a p p r o a c h i n g 5 0 p e r c e n t . T h e Y u g o s l a v w a r a l s o c l o s e d o n c e m o r e the shortest o v e r l a n d route to o t h e r E u r o p e a n c o u n t r i e s . G r e e k f a r m e r s and m a n u f a c t u r e r s c o u l d not ship their p r o d u c t s to the E u r o p e a n h e a r t l a n d u s i n g the s h o r t e s t B a l k a n r o u t e . B e l a t e d a t t e m p t s b y the G r e e k g o v e r n m e n t to use the A d r i a t i c S e a r o u t e a l l e v i a t e d the s i t u a t i o n , but p r o v e d to b e m o r e c o s t l y f o r exporters.19

Foreign Policy and Security Issues A s m e n t i o n e d e a r l i e r , G r e e c e b e c a m e a m e m b e r o f the E u r o p e a n U n i o n to s t r e n g t h e n its i n t e r n a l p o l i t i c a l i n s t i t u t i o n s . O n c e d e m o c r a t i z a t i o n w a s a c h i e v e d and m o d e r n i z a t i o n w a s on t r a c k , G r e e c e started l o o k i n g to E u r o p e f o r a s s i s t a n c e in m a t t e r s o f f o r e i g n p o l i c y . L o c a t i o n and hist o r y s h a p e G r e e c e ' s f o r e i g n - p o l i c y p o s i t i o n , w h i c h is c l o s e l y

inter-

l i n k e d with e c o n o m i c m a t t e r s . G r e e c e is l o c a t e d in the s o u t h e a s t c o r n e r o f the E u r o p e a n c o n t i n e n t , b o r d e r i n g o n e o f the m o s t t r o u b l e d s p o t s o f the w o r l d today. It is the o n l y E U m e m b e r s t a t e that d o e s not s h a r e a c o m m o n b o u n d a r y with a n o t h e r E U n a t i o n . A d d i t i o n a l l y , all n e i g h b o r ing c o u n t r i e s are c h a r a c t e r i z e d by o n g o i n g d o m e s t i c p r o b l e m s that c r e ate i n s t a b i l i t y o u t s i d e t h e i r b o r d e r s . T h e s e p r o b l e m s r a n g e f r o m c o r r u p t i o n or w e a k d e m o c r a t i c r u l e s to h u m a n r i g h t s v i o l a t i o n s . H i s t o r y h a s p l a y e d an i m p o r t a n t r o l e in the c o u n t r y , w h i c h c o u l d b e c h a r a c t e r ized as a b l e s s i n g as w e l l as a b u r d e n . F o r m a n y g o v e r n m e n t s t o d a y the " p e a c e d i v i d e n d " a f t e r the e n d o f the C o l d W a r h a s m e a n t an u n w a v e r i n g e m p h a s i s on s h i f t i n g r e s o u r c e s f r o m d e f e n s e to e c o n o m i c g r o w t h . F o r G r e e c e , t h i s is a l u x u r y it c a n hardly a f f o r d . F o r e i g n and s e c u r i t y i s s u e s c r e a t e u n i q u e p r o b l e m s that c a n n o t b e e a s i l y a d d r e s s e d or r e s o l v e d . A f t e r y e a r s o f c a r e l e s s u n f o c u s e d g o v e r n m e n t p o l i c y , the c o u n t r y is m a k i n g h u g e s a c r i f i c e s on the e c o n o m i c and s o c i a l f r o n t s in o r d e r to b e part o f the e u r o z o n e . G r e e c e c o n t i n u e s to s p e n d o v e r 4 . 5 p e r c e n t o f its G D P o n d e f e n s e (the h i g h e s t in N A T O w h e n the a v e r a g e in the E U is 2 p e r c e n t ) w h i c h c o r r e s p o n d s

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to over 10.8 percent of government spending (the corresponding number for Europe is 5.5 percent). 2 0 Foreign Policy Before and After Entry

To shed light on the E U ' s impact on Greek foreign policy, we need to offer a brief account of the problems Greece has faced since 1974. This will put G r e e c e ' s behavior since its entrance into the EU into proper perspective. In 1974, Constantine Karamanlis, the first Greek prime minister after the return of democracy in Greece, identified himself with the process of European integration. He envisioned that "participation in the EC [European C o m m u n i t y ] would liberate Greece f r o m all forms of dependency." 2 1 Thanks to Karamanlis's personal relations with Giscard d ' E s t a i n g and Helmut Schmidt, then president and chancellor of France and Germany respectively, Greece's application to the European C o m m u n i t y was approved and processed with expedience despite the Commission's negative opinion. This link was initially viewed as a safety valve in the Greek political system. But it proved very useful in economic terms as well later on. Nimetz points out that the EU was the saving grace in Greece's economic policies under the 1981-1989 Andreas Papandreou/ Socialist Party government. 2 2 During this time the E U ' s subsidies to Greek agriculture were presented as evidence of Papandreou's interest in the well-being of Greek peasants. Consequently, the EU provided the Greek people with an institutional link to other European d e m o c racies and served as an antidote to the provincialization and isolationism that was always an important factor in Greek politics but which was intensified by P a p a n d r e o u ' s Socialists. Basically, European agricultural subsidies allowed the Socialists to pursue a populist, clientelistic policy with someone else's money. Karamanlis's conservative New Democracy Party could not harvest the fruits of Greece's membership in the European Community on January 1, 1981, because the outcome of the elections in 1981 brought to power a party that was overtly anti-Western, almost hostile to the EU. As soon as Papandreou's socialist PASOK government made its political debut in the EC, it showed its intention to drop its predecessor's proEuropean stance in favor of a new, high-sounding populist policy. 23 This policy consisted of an eclectic blend of national pride, distrust of Brussels, a preference for privileged links with the nonaligned countries, upgraded relations with Moscow, and a willingness to quarrel with Washington. As Christodoulides suggests, Papandreou never realized that

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implementing two foreign policies does not mean that you have one more; it means that you have none. 2 4 The PASOK years contributed to a great deal of "lost opportunities" for Greek foreign policy. The government paid lip service to the concept of European cooperation. But it made very serious mistakes that caused considerable d a m a g e to G r e e c e ' s image. Four examples illustrate the point. First, Papandreou erroneously sided with Argentina in the Falklands War at a time when an EU member state was attacked by a third country. While all others were behind the British, the Greeks were inexcusably the odd men out. Second, Papandreou failed to exploit the opportunity opened by the Single European Act to give concrete meaning to the term "community solidarity." The latter would have been made possible by a provision s p e c i f y i n g the obligation by E u r o p e a n Political C o o p e r a t i o n (EPC) m e m b e r s to take e c o n o m i c and diplomatic measures against a third country that threatens the security or territorial integrity of an EU m e m b e r state. It was essential for Greece to get such guarantees in order to fully exploit the advantages that membership offered it vis-àvis potential security threats. Third, during the Greek-Turkish crisis of 1987, the government totally ignored the EPC system; instead, the foreign minister informed the Warsaw Pact ambassadors while his subordinate briefed the EU m e m b e r s through the NATO f r a m e w o r k . While most EU m e m b e r s were also N A T O m e m b e r s , the problem was that solidarity could have been achieved much more easily within the EU rather than NATO. Fourth, there were a number of well-publicized instances of scandalous bias in favor of anti-Western countries, such as the failure to c o n d e m n the Soviets for shooting down Korean Airlines Flight 007 in 1983 and the unwillingness to blast the Libyans and Syrians for supporting terrorism at a time when all other EU and NATO partners were united in their resolute condemnation. To be sure, such policy suited Papandreou well but ultimately it proved disastrous for the country. There were several changes in direction but few in substance. 2 5 Some analysts, including Papandreou himself, argued that the Socialists charted a new course for Greece's now " i n d e p e n d e n t " foreign policy, but the record shows that was m o r e rhetoric for domestic consumption than a real turning away from Western interests. 2 6 Three factors account for the shift in rhetoric. First, there was a strong Marxist orientation within P a p a n d r e o u ' s Socialist Party that tried to push the country sharply to the left in domestic as well as foreign affairs. 2 7 Second, the unwillingness of the United States and European allies to thwart the Turkish invasion of Cyprus in 1974 left Greeks along the entire political spectrum with a sense of betrayal.

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While the right wing was willing to live with this fact, Papandreou used it to his electoral advantage. Third, his personality affected his relations with his European counterparts. Papandreou was a man of intrigue. He was a risk-seeker who was at his best in times of crisis. Charisma, which Papandreou clearly possessed, works best when things are going wrong. Hence, he would not hesitate to muddy the waters, so to speak, in order to convincingly demonstrate to his supporters that he could rise to the occasion. Of course, the end result was disastrous for the country because it alienated its Western (American but also European allies) who could not stand financing his misdirected policies from their point of view. Although they did not publicly acknowledge it, the EU allies were relieved to see the Socialists lose the elections of 1989. Relations between the allies and Greece definitely improved during the tenure of the short-lived conservative government of Constantine Mitsotakis in the early 1990s, but they were strained again by the Yugoslav crisis. The government had a parliamentary majority of only one seat, which made it extremely difficult to make the tough decisions necessary to begin the process of adjusting to new economic imperatives or to even make wise foreign-policy decisions. 2 8 Lack of strategy, amateuristic handling, and the ferocity of Greek nationalism (some have argued it is a sign of Greek insecurity) led to a costly waste of resources on the campaign against the naming of the former Yugoslav Republic of Macedonia (FYROM) and the fall of the government. 2 9 In October 1993, Papandreou makes his triumphant return to power, three months prior to Greece assuming the presidency of the Union. Many feared a repeat of the turbulent 1980s, and Papandreou, at least initially, did not disappoint them. In 1994 Greece imposed an embargo on the FYROM in an effort to make that republic change its name to one more suitable to its history and less offensive to Greek sensitivities. With this action Papandreou was once again able to score political points domestically, but he failed miserably in his relations with his EU partners. 30 It was indeed tragic to see the Commission taking Greece to court, the very nation that was then holding the EU presidency, in order to make it change its policy. This period was probably the lowest point in Greek-EU relations, when analysts were starting to question aloud the need to keep such an unreliable partner in the Union. However, the world was a very different place when Papandreou came to power for the second time. The fall of the Berlin Wall and the collapse of the Soviet Union did not provide the socialist government with any non-EU-centered policy options. Even PASOK, a party created

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by P a p a n d r e o u , had c h a n g e d . A large faction in the party, led by Costas Simitis, wanted a c h a n g e in policy and advocated a b a n d o n i n g socialist Utopian ideas and the re-creation of P A S O K as a social-democratic prointegrationist party. Similar c h a n g e s also occurred in a n u m b e r of center-leftist parties a c r o s s E u r o p e ; B l a i r ' s L a b o r Party in the U K and S c h r o e d e r ' s Social D e m o c r a t s are e x a m p l e s of similar m a r k e t - d r i v e n transformations. In S e p t e m b e r 1995, G r e e c e signed an interim a g r e e m e n t with the F Y R O M a l l o w i n g for a n o r m a l i z a t i o n of r e l a t i o n s b e t w e e n the two c o u n t r i e s w h i l e still a c k n o w l e d g i n g the need f o r n e g o t i a t i o n s on the issue of the n a m e . The E u r o p e a n e f f e c t of this a g r e e m e n t was that the C o m m i s s i o n d r o p p e d the suit. Later in 1995, P a p a n d r e o u fell gravely ill and finally passed away in early 1996. His successor, Costas Simitis, has proven to be a brilliant strategist with a staunch pro-EU orientation. S i n c e he c a m e to p o w e r in 1996 his m a i n g o a l s h a v e been to m o d e r n i z e the G r e e k e c o n o m y , f i r m l y a n c h o r the country in the econ o m i c and political i n s t i t u t i o n s (EU and N A T O ) in w h i c h it was already a m e m b e r , and gain full m e m b e r s h i p in E M U . In recent years, as G r e e c e has b e c o m e m o r e secure in its m e m b e r ship in the EU and Greek o f f i c i a l s have learned the inner w o r k i n g s of U n i o n policy structures, an attempt has been m a d e to achieve foreignpolicy goals by utilizing the p o w e r of EU institutions and by restructuring Greek institutions. Virginia T s o u d e r o u , a j u n i o r minister of foreign a f f a i r s u n d e r the c o n s e r v a t i v e g o v e r n m e n t in the early 1990s, r e c o m m e n d s a m o r e systematic shaping of goals by establishing a Fore i g n Policy N a t i o n a l C o u n c i l , u p g r a d i n g p a r l i a m e n t ' s role, and prom o t i n g closer ties with EU g o v e r n m e n t s and citizens of Greek descent in other EU c o u n t r i e s . 3 1 A g e n e r a l f e e l i n g e x i s t s that G r e e c e has bec o m e m o r e important in the international political system and that the c o u n t r y n e e d s to c a p i t a l i z e on this power. Of c o u r s e , this f e e l i n g is t e m p e r e d by a certain sense of d i s a p p o i n t m e n t that can a l s o be obs e r v e d w h e n the EU c a n n o t d e l i v e r the f o r e i g n policy gains at w h i c h G r e e k s are a i m i n g .

The Greco-Turkish Dispute T h e main f o r e i g n policy area w h e r e G r e e c e has tried to take a d v a n t a g e of E U institutions has b e e n its a n t a g o n i s t i c r e l a t i o n s h i p with Turkey. A l t h o u g h the t w o c o u n t r i e s are f e l l o w m e m b e r s in N A T O and o t h e r Western organizations, they have d e e p d i f f e r e n c e s over T u r k e y ' s invasion and illegal o c c u p a t i o n of C y p r u s , d i v i s i o n of m i n e r a l rights, and

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control over the air space in the Aegean Sea. Turkey's parliament has authorized the government to declare war on Greece if Greece extends its territorial waters to 12 miles, as provided by the Law of the Sea Treaty. In recent years, Greece has been able to intervene and freeze developmental aid to Turkey as well as customs agreements between the EU and Turkey. Although other EU m e m b e r s have pressured Greece to allow aid to Turkey, the unanimity rule in EU decisionmaking has allowed Greece to dictate Union policy. Moreover, Greece has succeeded in persuading the Council of Ministers to block further financial assistance to Turkey until there is progress on the Cyprus issue. To take a closer look, in 1995 Greece finally agreed to lift its veto over a customs union between the European Union and Turkey. In addition to substantial assistance in the form of structural funds, the Greek position attached great importance to the U n i o n ' s promise to invite Cyprus to join and to the hope that fellow m e m b e r s would look more favorably upon Greco-Turkish disputes. Unfortunately, not all was realized. Cyprus was invited to join and the customs union with Turkey was signed despite serious reservations by the European Parliament. However, EU f u n d s to alleviate trade difficulties by Turkish businesses that were supposed to accompany the customs union have yet to be released. The glitch has been Turkish behavior toward the Kurds, h u m a n rights abuses, and n o n c o m p l i a n c e with the UN resolutions on Cyprus. Relations between the two Aegean neighbors soured considerably in January 1996 as a result of Turkish claims that two islets lying 3.5 miles off the Turkish coast were Turkish territory. The problem is that the claim had not been previously raised, and up to that point Greek shepherds were the sole users of the uninhabited islets. The two countries almost came to blows over the issue. Apart from the significant legal concerns that it raises, it showed two more things. First, the Turkish government's response that raising the Greek flag on the islets constituted a cause of war revealed a determined opponent that for the first time since the C y p r u s invasion in 1974 was raising the serious prospect of war. To the Greeks, this was the opposite of what they had expected since lifting their veto. Instead of a more conciliatory Turkey they encountered a more assertive one. The "cause of w a r " argument by Turkey has since been repeated quite frequently with regard to issues such as extension of territorial waters and the placement of S - 3 0 0 surface-to-air missiles, first in C y p r u s and then in Greece. Second, vocal support of G r e e c e ' s position was not f o r t h c o m i n g . Several EU m e m b e r s , such as Germany, Britain, and France, sought to distance themselves from the dispute, which they did not fully understand in the

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first place, and urged both parties to seek s o m e f o r m of diplomatic solution. F r o m the G r e e k p e r s p e c t i v e , h o w e v e r , this lack of s u p p o r t by f e l l o w EU m e m b e r s violated the acquis communautaire in the sense that there was e q u i d i s t a n c e in a dispute b e t w e e n a m e m b e r and a nonm e m b e r state. Besides, the G r e e k s regard this islet problem as a legal issue in light of the existing treaties g o v e r n i n g the borders in dispute. T h e y therefore pressed for a legal process, such as letting the International Court of Justice decide, rather than forging a diplomatic solution to the dispute. T h e end of 1999 b r o u g h t an u n e x p e c t e d d r a m a t i c shift in G r e e k Turkish relations. F o l l o w i n g G r e e c e ' s h u m a n i t a r i a n assistance to Turkish e a r t h q u a k e victims, the relationship b e t w e e n the two countries sudd e n l y started i m p r o v i n g . At the H e l s i n k i E u r o p e a n s u m m i t , G r e e c e d r o p p e d its l o n g - t e r m o b j e c t i o n s to T u r k e y ' s c a n d i d a c y for f u l l EU m e m b e r s h i p and T u r k e y in return accepted that the International Court of J u s t i c e is the a p p r o p r i a t e f o r u m for s o l v i n g the dispute o v e r the A e g e a n continental shelf. A l t h o u g h it is still too early to predict the future, a n u m b e r of c o n f i d e n c e - b u i l d i n g m e a s u r e s h a v e f o l l o w e d and it a p p e a r s that the r e l a t i o n s h i p b e t w e e n the t w o c o u n t r i e s has entered a new era. 3 2 All in all, as P. C. I o a k i m i d i s points out, p a r t i c i p a t i o n in the EU " h a s more than anything else c o n f e r r e d upon G r e e c e an e x p a n d i n g role in the regional and international system and p r o v i d e d it with an institutional f r a m e w o r k and the political r e s o u r c e s to p r o j e c t an international image and, m o r e importantly, to d e f e n d and m a x i m i z e its foreign policy objectives, particularly in dealing with its traditional adversary, Turkey." 3 3 But it has been a d i f f i c u l t road. For a country s u f f e r i n g for years f r o m an identity crisis as to its international orientation and posture, located in an e x t r e m e l y p r e c a r i o u s and volatile geographical area, and subject to blatant f o r e i g n intervention a l m o s t since its inception as a m o d e r n state, the p s y c h o l o g i c a l and political significance of being an institutional participant in a wider collective b o d y of p o l i c y m a k i n g like that of the E U can h a r d l y be o v e r s t a t e d . E U m e m b e r s h i p , along with the collapse of Soviet C o m m u n i s m , m a d e clear that G r e e c e belongs unm i s t a k a b l y to E u r o p e and, by implication, to the West. 3 4

Conclusion We have e x a m i n e d the impact of the European Union on Greece. More specifically, we explored the paradox of a very pro-integrationist country

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that acts at times in a very anti-integrationist fashion. We looked more closely at several e c o n o m i c areas, including industry and agriculture, foreign policy and security, and issues of sovereignty, and found that despite initial poor results the overall impact has been positive, primarily in the foreign-policy area. The reasons for the poor initial results were a lack of Greek leadership, domestic political considerations, and an e m p h a s i s on stressing mostly political security as opposed to e c o n o m i c benefits. Our findings have significant implications for the study of policymaking, European integration, and future enlargement efforts. In terms of policymaking, the example of Greece demonstrates the point that domestic leadership plays a big role in smoothing out any conflicts of interest at the European level. The consensual style of decisionmaking in the EU Council of Ministers has yielded significant benefits to the Greeks, but it has taken a long time for the latter to adapt to the professionalism that consensual norms require. Because politics in Greece has tended to depend more on the personality of its leaders than in other Western European country, E U - G r e e c e relations were very rocky at first. Papandreou had a difficult time adjusting to a consensual style because consensus was not how he won the Greek political battles. So it was the personality of the leader who happened to be at the helm during the initial years, but also the kinds of polarizing politics he inspired, that made m e m b e r s h i p very difficult. But there was room for o p t i m i s m . During his third term in p o w e r in the early 1990s, the ailing Papandreou took painful measures to help the economy adjust to the new realities. It was this kind of indirect political support that enabled his successor, Costas Simitis, to take adjustment one step further and m a k e E M U a national goal. Far f r o m being an aberration, the P a p a n d r e o u legacy should be of concern to the entire Union. In the absence of towering pro-integration figures, such as France's Mitterrand or G e r m a n y ' s Kohl, the process of integration may be severely strained by populist, inward-looking leaders. One example, G e r m a n y ' s Oskar Lafontaine, is but a glimpse of things that may come. Lafontaine shared some of Papandreou's ideology but not his charisma. Had he been able to deliver the votes to the Social Democrats, integration would have taken a very different turn. While Greek behavior was a nuisance, a possible G e r m a n (or French) populist policy will almost certainly be catastrophic. Far from being a unique case, the Greek example has implications for the aspiring m e m b e r s f r o m east-central E u r o p e and the Mediterranean. It may be argued that the s u c c e s s f u l e x a m p l e s of Spain and

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P o r t u g a l , w h i c h u s e d s i m i l a r a r g u m e n t s to gain e n t r a n c e into the EU, s u g g e s t that t h e G r e e k c a s e is an a b e r r a t i o n , but this a r g u m e n t is not v a l i d . N e i t h e r of t h o s e t w o c o u n t r i e s e x p e r i e n c e t h e t y p e s of security t h r e a t s that G r e e c e d o e s . H o w e v e r , f o r m e r S o v i e t b l o c c o u n t r i e s also f a c e c o n s i d e r a b l e s e c u r i t y c h a l l e n g e s . G r e e c e r e p r e s e n t s a v e r s i o n of t h e E a s t e r n E u r o p e a n c o u n t r i e s ' a n d the E U ' s f u t u r e s . T h e m a i n reason f o r m e m b e r s h i p f o r t h e s e c o u n t r i e s is p o l i t i c a l . E a c h of t h e m sees int e g r a t i o n p r i m a r i l y as an act that c a r r i e s s i g n i f i c a n t p o l i t i c a l b e n e f i t s , such as s o l i d i f y i n g f l e d g l i n g d e m o c r a c i e s and a n c h o r i n g t h e m firmly to the W e s t e r n c a m p . For e x a m p l e , f o r m e r f r o n t l i n e states such as P o l a n d see the E U as the ticket out of R u s s i a n d o m i n a t i o n . But such c o u n t r i e s are c u r r e n t l y not e c o n o m i c a l l y r e a d y to a d j u s t to t h e s h o c k of integration, a n d they are not likely to be by the t i m e they j o i n . E v e n t h o u g h the political i m p e r a t i v e s m a y in the e n d o v e r c o m e e c o n o m i c o b s t a c l e s , the k i n d s of e c o n o m i c b e n e f i t s that n e e d to be p r e s e n t in o r d e r f o r their g o v e r n m e n t s to c o n t i n u e to d e m a n d substantial s a c r i f i c e s of their p o p u l a t i o n s f o r the sake of U n i o n will not c o m e . N e i t h e r will the interest g r o u p s be t h e r e to f a c i l i t a t e s p i l l o v e r . S u c c e s s i v e G r e e k g o v e r n m e n t s w e r e able to j u s t i f y m e m b e r s h i p by b r i n g i n g h o m e t h e " p o r k . " T h e y r e c e i v e d s i g n i f i c a n t b e n e f i t s f r o m C A P and the S t r u c t u r a l F u n d s . H o w ever, such levels of aid c a n n o t be s u s t a i n e d f i s c a l l y or politically in the l o n g r u n . T h e E U n o l o n g e r h a s t h e m e a n s or the d e s i r e to s u b s i d i z e w e a k e c o n o m i e s at s i m i l a r levels, largely b e c a u s e the size of the aspiring e n t r a n t s is e n o r m o u s r e l a t i v e to G r e e c e . E c o n o m i c c o n s i d e r a t i o n s m u s t be g i v e n f a r m o r e attention that they w e r e in the G r e e k case. O t h e r w i s e , the c o s t s f o r e v e r y o n e will b e p r o h i b i t i v e l y h i g h .

Notes 1. Panagiotis Fotilas, "European Community and the Greek Industrial Enterprises: Some New Economic and Social Problems," pp. 23-24. 2. Joachim Fels, "Trade Effects of Greece's Accession to the European Community," pp. 98-99. 3. Athens News Agency, May 6, 1999. Daily Bulletin. Drakos Georgios, "Hamena Hronia" (Lost Years: Socialism in Greece), Elliniki Euroekdotiki, Athens 1993, p. 113. 4. To Vima, April 11, 1999, p. D l . To Vima is a leading Sunday newspaper in Greece. 5. ELKE, Annual Report, 1997. 6. Kerin Hope, "Black Sheep on the Brink of Acceptance: The Ambition for the 21st century Is to Become a Business and Transport Hub, Linking SouthEast Europe with EU Markets," Financial Times, December 8th, 1998, p. 4.

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7. A. Kouremenos and G. Avlonitis, "The Changing Consumer in Greece," pp. 435-448. 8. Ibid. 9. Financial Times, December 21, 1999, p. 1: Special Greece Survey, "On Course for Euro Era with New Capitalism." 10. To Vima, February 14, 1999, p. A44: "Rixi sto metopo twn agroton," D. Stampoglis. 11. To Vima, February 7, 1999, pp. A58-59: "Oi Oplarxigoi ton Trakter." Dhmhtra Kroustalh. 12. Financial Times, February 8, 1999, p. 2. 13. Oikonomikos Tahidromos, March 18, 1999, pp. 50-56. Oikonomikos Tahidromos is Greece's business weekly. 14. Financial Times, December 21, 1999. Special Greece Survey, "EuroZone Entry Within Sight." 15. Ibid. 16. Hope, "Black Sheep," p. 4. 17. To Vima, March 21, 1999, A32: Y. Roubatis, "Another Benefit from the EU." 18. Lucas Papademos, "European Monetary Union and Greek Economic Policy," pp. 125-161. 19. Odyssey, May-June 1999, p. 40. 20. Oikonomikos Tahidromos, March 4, 1999, p. 110. 21. Greece, the New Europe and the Changing International Order, p. 406. 22. Matthew Nimetz, in "Greece Under Socialism," p. 8. 23. Theodore Christodoulides, in "Greece Under Socialism." 24. Ibid., p. 302. 25. A. Kalaitzidis and N. Zahariadis, "Papandreou's NATO Policy: Continuity or Change?" pp. 105-116. 26. Yannis Kapsis, "The Philosophy and Goals of PASOK's Foreign Policy," p. 41. 27. John Loulis, "Papandreou's Foreign Policy," pp. 380-391. 28. Greece Survey, The Economist, May 22, 1993. 29. Nikolaos Zahariadis, "Nationalism and Small-State Foreign Policy: The Greek Response to the Macedonian Issue," p. 647; Nikolaos Zahariadis, "Greek Policy Toward the Former Yugoslav Republic of Macedonia, 19911995," p. 303. 30. Ibid. 31. Virginia Tsouderou, "Foreign Policy: The Great Patient," p. 35. 32. Financial Times, December, 21, 1999, p. 1. Greece Survey, "Dramatic Shift in Relationship Between Two Enemies." 33. P. C. Ioakimidis, "Greece in the EC: Policies, Experiences, and Prospects," p. 410. 34. Ibid., p. 411.

Spain and Portugal: Betting on Europe1 Joaquin Roy & Aimee Kanner

A C o m m o n History Comparing the two Iberian states, Spain and Portugal, in terms of their membership in the European Community/Union opens a window on how medium-sized states, the so-called middle powers, deal with the political and economic issues of today's world, both domestically and internationally. Spain and Portugal have viewed the European Union from different perspectives, yet they share some striking historical, social, and economic characteristics. 2 In the second half of the 20th century, belonging to the European Union, in the eyes of Portuguese and Spanish citizens, meant finally being a part of " E u r o p e " and its association with liberty, democracy, and progress. Joining the European club was a mission that was not questioned. Resistance, ambivalence, or (worse) rejection of the European project was seen as unpatriotic, regressive, and pointless in these two nations. Several historic elements provide some explanation for the Iberian enthusiasm. Neither Spain nor Portugal was a major participant in World War II, although Portugal was a founding member of NATO shortly afterward. Nor were there major wars against each other after the competitions o f the Middle Ages and the voyages of discovery. When the first wave of Europeanism occurred with Jean Monnet, Spain and Portugal were outside the major events of both Europe and the world at that time. The historical "splendid loneliness" 3 experienced by Spain and Portugal provided the authoritarian and traditional sectors of both nations with a shield against disturbing foreign influences, including the consolidation of liberal democracy in the 20th century. Rephrasing a tourism motto from Spain of the 1960s, Iberia was "different"

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both in the eyes of other Europeans and in the mentality of the Portuguese and Spanish establishments. 4 These feelings were particularly evident during the "dark ages of dictatorship" that each endured. Spain was ruled by General Francisco Franco from 1939 to 1975 and Portugal's dictator, P r o f e s s o r Antonio Oliveira Salazar (continued by Marcelo Caetano) held sway f r o m 1928 to 1974. Spain, lacking international respectability, elected to reinforce its links with Latin America in the form of a new hispanidad. This overseas focus masked Spain's limitations on the European stage. The Portuguese regime tried to convert its African colonies into provinces, adopting the concept of luso-tropicalismo.5 This mirage of an expanded Portuguese nation was illustrated by m a p s showing the African and Asian colonies, and S a l a z a r ' s repeated statement, "Portugal is not a small country." A generally expressed desire for peace and the recognition of the strategic value of coal and steel f o r m e d the basis of the " E u r o p e " founded by a handful of people: Monnet, Schuman, Adenauer, and De Gasperi. However, these two goals were not important to Spaniards and Portuguese at that time. With the exception of certain intellectual and political minorities, the axis running from Luxembourg to the Alps was a foreign territory populated by people with different cultures, far away from S p a i n ' s and P o r t u g a l ' s slow-paced existences along the sunny Atlantic and Mediterranean shores. Ultimately, an unlikely coalition formed to promote the c o m p l e m e n t a r y goals of d e m o c r a c y and open markets. A combination of selected intellectual, economic, social, and political groups put pressure on the progressive political sectors and on the business c o m m u n i t y to promote interest in the E u r o p e a n Community (EC). By becoming members of the European Community, Spain and Portugal sought to leave behind the ills of isolationism and authoritarianism. Their hidden political agenda for joining the EC was to promote democracy and economic development and to regain respectability in the international community. Political and strategic interests seem always to take precedence over economic concerns in the eyes of Iberian leaders. For example, although the 1995 EU expansion posed a threat to Spain's fishing and agricultural industries, the Spanish government strongly supported the inclusion of Austria, Finland, and Sweden as m e m b e r states, recognizing that a larger and stronger Union would provide more benefits than disadvantages, especially in attaining international goals. 6 The same sentiments were echoed more recently by the Portuguese premier, Antonio Guterres, with regard to the next expected additions of central and eastern

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European countries. Despite the fact that some of these nations, especially Poland, could pose considerable competition for the agrarian products of Iberia, he is on record endorsing the expansion on the grounds that "it is essential for peace." 7 In addition, Portugal has also assumed the responsibility for cooperating with other candidate states. The Portuguese leaders want to facilitate their transition f r o m centralized economies to c o m petitive market economies and consolidated democracies. 8 Joining the Union T h e process of j o i n i n g the E u r o p e a n U n i o n took Spain and Portugal a f u l l d e c a d e . Both n a t i o n s e l i m i n a t e d their a u t h o r i t a r i a n dictatorial r e g i m e s a l m o s t s i m u l t a n e o u s l y , with the d e a t h of F r a n c o in S p a i n in 1975 and with the P o r t u g u e s e r e v o l u t i o n of 1974. In 1977, each o f f i cially p r e s e n t e d their c a n d i d a c i e s for m e m b e r s h i p in the E U . O n c e Spain and Portugal decided they w a n t e d to b e c o m e m e m b e r states, they f a c e d three crucial h u r d l e s : s t r e n g t h e n i n g their e c o n o m i c and m o s t importantly their political systems; d e t e r m i n i n g what the impact of m e m b e r s h i p would do to their e c o n o m i e s ; and establishing int e r n a t i o n a l status r e g a r d i n g s o v e r e i g n t y and f o r e i g n relations. All the political f o r c e s in S p a i n w e r e solidly b e h i n d E U m e m b e r s h i p . H o w ever, in P o r t u g a l , the political p a r t i e s w e r e initially d i v i d e d b e t w e e n the radical left, w h i c h o p p o s e d the process, and the m o d e r a t e s and cons e r v a t i v e s , w h o w e r e p r e s s i n g to j o i n . B o t h n a t i o n s b e g a n n e c e s s a r y crash c o u r s e s in d e m o c r a c y while they w e r e a p p l y i n g f o r EU m e m b e r ship. T h e p r e v i o u s f a i l u r e s of Spain and Portugal to b e c o m e m e m b e r s of the international c o m m u n i t y b e c a u s e of their authoritarian political s y s t e m s f o r c e d m o s t of the political p a r t i e s to p u s h f o r integration in order to g u a r a n t e e political stability. T h e c o m m u n i s t s c o n t i n u e d to oppose m e m b e r s h i p and to press for their g o a l s of a centralized e c o n o m y and an e x t e n d e d state role. T h e y t h o u g h t that E C m e m b e r s h i p w o u l d slow d o w n the c o m i n g of the r e v o l u t i o n . But, in 1988, they finally acc e p t e d P o r t u g a l ' s entry into the E C . E c o n o m i c c h a n g e s were also essential for both countries. Political leaders worried that their productivity levels would lag far behind those of other E C states. Iberians favoring m e m b e r s h i p recognized that the effort required for e c o n o m i c restructuring would be challenging, but they a c c e p t e d these d i f f i c u l t i e s as a n e c e s s a r y price to pay f o r e c o n o m i c modernity. In contrast, sectors such as the P o r t u g u e s e c o m m u n i s t s and both the c o m m u n i s t s and the socialists in Spain were unwilling to m a k e sacrifices for long-term economic goals. Despite dissension, both nations

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adopted a customs union, harmonized legislation, and developed a c o m m o n tax system in order to qualify for EC/EU membership. In addition, the increasing predominance of marketplace considerations over the political sector isolated those parties opposed to membership from the growing majority who accepted joining Europe as inevitable. The debate over the international status of Spain and Portugal presented a more complex lineup of the factions. Conservatives and centrists in both countries accepted the equation of the EC and NATO. The Portuguese socialists have always supported the adoption of EuroAtlanticism. However, the communists expressed concern in Spain to becoming a member of either international organization and opposition in Portugal to joining the EC. Ultimately, conservatives, centrists, and socialists in Portugal saw integration into the EC as an opportunity for the military to develop a new, nonpolitical mission unlike their positions during the prior era of authoritarianism and colonialism. Overall, entering the EU was not an easy process for either nation. A combination of e c o n o m i c and political factors related to the pessimistic era of the 1970s, when progress toward integration generally slowed, prolonged, and obstructed the process for both Iberian states. Portugal began with the intention of becoming a m e m b e r on its own, following the Greek model. The British government, headed by Margaret Thatcher, supported Portuguese entry based in part on historical backing and in part on Thatcher's vision of a weaker community with rapid expansion of its borders. This strategy for Portuguese entry proved unsuccessful because of France's opposition, which was based in part on its fear of both competition in the textile area and potential migrant worker problems. France under Giscard D'Estaing, opposed Spain's entry as well as Portugal's and noted that membership would increase the C o m m u n i t y ' s agricultural area by 30 percent and its work force by 25 percent. However, in 1981, Giscard D ' E s t a i n g lost a difficult election and a new socialist government headed by François Mitterrand took office. At the same time, recently elected socialist leadership in both Spain and Portugal provided new impetus for the membership process. Mário Soares f r o m Portugal and Felipe G o n z á l e z f r o m Spain j o i n e d with G r e e c e ' s socialist leaders and the three, in turn, formed a loose southern coalition with France and Italy that also had socialist leaders. When another socialist, Jacques Delors, became president of the EC C o m m i s s i o n , he put membership for Spain and Portugal as one of the primary items on the agenda that led to the adoption of the Single European Act. Other e c o n o m i c changes m a d e m e m b e r s h i p feasible, including a d j u s t m e n t s made to the enlargement f u n d i n g , the lessening of tensions b e t w e e n

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Spain and F r a n c e on fishing policies, and an International Monetary Fund i m p r o v e m e n t program f o r Portugal. In turn, other influential m e m b e r s of the C o m m u n i t y were willing to accept the argument that Iberian m e m b e r s h i p would anchor these nations in the new Europe. 9 M e m b e r s h i p was enthusiastically finalized in treaties signed the same day in two separate ceremonies, the first in the morning in Lisbon and the second during the a f t e r n o o n in Madrid. A f t e r w a r d , when the enthusiasm and euphoria faded, the countries faced many challenges. Adapting to the Single European Act, the Maastricht Treaty, the common currency, and other EU policies would be a difficult process. Former political divisions reopened within the two nations under the strain. T h e c o m m u n i s t s expressed concern about u n e m p l o y m e n t ; the socialists resisted what was perceived as the lack of a social dimension in the new Union. 1 0 However, the ideological differences in both governments did not translate into animosity or lessen cooperation.

The Iberian Nations Discover Each Other Both countries have made substantial economic and political progress since joining the European Union. Their improving interrelationship is one of the most interesting areas of development. For several centuries, Spain and Portugal lived de costas voltadas ("with backs turned"), isolated from each other. Each distrusted the other. Spaniards have been disdainful of the Portuguese, for whom they have frequently expressed contempt. Portuguese felt the same way, as expressed by the popular expression, "De Espanha nem bom vento nem bom casamento" ("From Spain, neither good wind nor good wedding"). This mutual misunderstanding stems from long historical perceptions as well as some political and economic realities. It became particularly acute during World War II when Portugal sided with Britain and the Allies, and Spain favored Hitler. After Community membership became a reality, both countries had to develop ways of dealing with each other. In Portugal, there was acceptance that Spain would be one of the five "big" states in the European Community with more votes in the Council, a larger number of deputies in the Parliament, and with two commissioners. Portugal skillfully began to exercise its Spanish policy through Brussels to avoid Spanish "protection" and adopt the umbrella of the Community institutions. Both Portugal and Spain differed in their attitudes toward EU gove r n m e n t . Although it seems counterintuitive, Spain favored supranationalism while Portugal maintained a more intergovernmentalist stance. T h e expectation of the smaller country having more supranational tendencies than the larger country is not met in this case f o r

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several reasons. For Spain, becoming a m e m b e r of this supranational organization, legally bound to the other m e m b e r states, was the only perceivable way to regain international respectability after decades of ostracism under Franco's authoritarian regime. Additionally, although Spain has the larger economy on the Iberian peninsula, it has one of the lesser-developed economies in the European Union, and therefore benefits f r o m EU funding, allocated to those member states needing assistance to reach the e c o n o m i c advantages of the European Union. The circumstances associated with Portugal's inclinations toward intergovernmentalism include being a founding member of NATO. Situated on the periphery of the European continent, Portugal took advantage of its m e m b e r s h i p in this alliance, favoring a more Atlantic foreign policy. Portugal tended to follow the lead of Great Britain, a country that remains more inclined to intergovernmentalism, in order to protect Portugal's special interests with regard to European Union issues. Furthermore, although Portugal and Spain have developed closer relations since their accession to the European Union, Portugal still wants to be identified as a country, independent of Spain, and taking its own approach toward the Union rather than following in Spain's footsteps. As time went on, several quarrels developed over perceived "Spanish economic invasion of Portugal" and over sharing of river waters. But these quarrels did not deter a growing realization that Spain and Portugal would be better off cooperating with each other. Portugal realized that Spain was also " p o o r " and needed allies in the fight to protect cohesion funds. Before 1986, economic ties between the two Iberian nations were virtually nonexistent. They developed and improved at a rapid pace because of Union membership and have resulted in the normalization of relations today." Indeed Portugal came to the conclusion that it was to its benefit to reach Brussels through Madrid. 1 2 Today the Portuguese people have come to terms with the overpowering presence of their neighbor, and both countries are becoming more integrated into Europe. The administrations of Portugal and Spain have made great efforts to jointly address the issues of special interest to both m e m b e r states. After the March 12, 2000, reelection of Spanish prime minister José Maria Aznar, of the center-right Popular Party, the relations between the Spanish government and that of Portugal's socialist prime minister Antonio Guterres have continued to follow this positive trend. T w o years after joining the Union, S p a i n ' s share of the total imports f r o m the C o m m u n i t y had risen more than 14 percent and Portugal experienced a dramatic 23 percent increase in this category. Both countries sent approximately 70 percent of their total exports to the

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Community. Spain's percentage increased more than 15 percent and Portugal's more than 7 percent. It only took these Iberian nations four years after membership to make significant progress in terms of investments. As a percentage of GDP, investment in Spain rose from 19 percent to over 25 percent, and in Portugal it reached over 30 percent, representing a more than 8 percent increase in this short time. The increase in economic relations between the two countries has been even more pronounced. In 1993, Portugal was the recipient of nearly 25 percent of all Spanish investments. Between 1983 and 1993, trade between Portugal and Spain increased 10 times from what it was prior to 1983, although it is still not balanced due to the smaller size and capabilities of the Portuguese economy. Spain has become the top supplier of all foreign goods to Portugal, and Spain is Portugal's thirdlargest market, following Germany and France. While Portuguese companies have begun to increase their presence in Spain, more than 2,500 Spanish enterprises now operate in Portugal. Spanish and Portuguese companies are also taking advantage of joint business ventures. The case of a partial takeover by Spain's Banco Santander Central Hispano of Portugal's Grupo Champalimaud demonstrates the EU's determination to support such cross-border business initiatives. The deal accepted by the two companies in June 1999 was rejected by the Portuguese government. In an effort to resolve this matter, the companies brought their case to the European Commission, which redesigned the venture in a manner acceptable to both companies and to the Portuguese government. Portugal was threatened with a fine if it did not comply with the EU regulations regarding business competition. The success of this case should encourage continued cooperation between the business communities of Spain and Portugal. Tourism between the two countries has also increased substantially. Portugal is now the number-one destination for Spanish tourists who, on an annual basis, outnumber Portuguese citizens. The previous contemptuous and distrustful attitudes of the Portuguese and Spanish people are changing as the benefits of presenting a united front in the European Union become increasingly obvious.

Spain The Return to Europe Referring to the problematic movement of Spain into the mainstream European currents, the Spanish philosopher Ortega y Gasset said that

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"Spain is the problem and Europe is the solution." 1 3 With the rebirth of democracy in 1975, Spain became one of the most "Euro-enthusiastic" states. Spanish citizens usually rank S p a i n ' s m e m b e r s h i p in the EU very positively, and Spanish leaders have been granted important EU 1 4 and other international positions, culminating with the appointment of former minister of foreign affairs Javier Solana as secretary general of NATO, and most recently as the E U ' s representative for the C o m m o n Foreign and Security Policy (CFSP). When Spain became a m e m b e r of the European Union in 1986, its leadership was determined to play an active role in this organization. It saw itself in an influential position, not only in Europe but also in the international community as a whole. Spain played an important part in the negotiations of the Maastricht and A m s t e r d a m Treaties and not only helped strengthen the traditional economic and social ties between the m e m b e r states but also e n c o u r a g e d progress in other issue areas such as the environment, employment, labor rights, and foreign policy. Because of the almost u n a n i m o u s domestic political support, the Spanish government was able to pass domestic laws with relative ease in order to adopt the approximately 800 E u r o p e a n Union directives necessary to complete the m e m b e r s h i p process. 1 5 In some areas, such as the environment, the European Union has had a major influence on Spain. Concerning the CFSP, Spain has played a critical role in the EU because it has attempted to get its priorities, Latin America and the Mediterranean, included in the C F S P agenda. Spain has followed a policy of adopting European Union policies early, in the full spirit of Maastricht. An institutional apparatus f u n c tions within the Spanish g o v e r n m e n t to facilitate this process. T h e transfer of sovereignty of specific competencies to European Union institutions is included in Article 93 of the Spanish constitution. On a more practical level, all EU directives had to be incorporated into Spanish national law upon Spain's accession to the European Union. In order to accomplish this daunting task in a quick and efficient manner, a parliamentary system now exists to more effectively adopt EU policies. Finally, the Spanish Cortes f u n c t i o n s as the only body of the Spanish government with the power to ratify European Union treaties. This system has enabled Spain to continuously be a leader in progressive E u r o p e a n Union policies and programs. For example, Spain became one of the founding members of the euro currency market. 1 6 N o w that Spain has become a m e m b e r of the Economic and Monetary Union and has met the euro criteria, the e c o n o m i c policies of Spain and the EU are becoming even more closely linked.

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E c o n o m i c and Social Policies T h e Franco regime made futile efforts to be admitted to the European Community, yet all that he a c h i e v e d was a 1 9 7 0 preferential trade agreement that, despite its limitations, enabled the Spanish e c o n o m y to prepare for the future because it included a mutual reduction o f tariffs and quotas. 1 7 L a c k o f democracy prevented full membership, and when the dictatorship died, many e c o n o m i c obstacles remained. Spanish membership had a number of major e c o n o m i c implications for the C o m m u n i t y as a whole. T h e huge Spanish agricultural sector enlarged E U fruit production by 4 8 percent and olive oil by 5 9 percent. The Spanish fishing fleet is 7 0 percent o f the total E U fleet, and Spanish fishermen became one-third of all E U fishers. Spain's EU membership made financing the Cohesion Funds quite a struggle, which was finally resolved in 1 9 9 2 , and provided a total budget of about E C U 15 billion until 1 9 9 9 , with 8 billion destined for Spain. T h e bill o f transfers to the four poorest EU c o u n t r i e s — S p a i n , Portugal, G r e e c e , and Ireland—rose to about U S $ 4 6 billion by the end of the 1990s. Under the 1 9 8 2 socialist government o f Felipe Gonzalez, there was a concerted effort to prepare Spain for inclusion into the European Union by increasing liberalization of the e c o n o m y , implementing industrial reconversion plans, and adopting more international e c o n o m i c practices. After Spain b e c a m e a m e m b e r o f the E U , the country had to concentrate on expanding the free movement o f goods and capital, as well as providing for the increase o f multinational c o m p a n i e s within Spain and Spanish multinationals in other countries. 1 8 To b e c o m e more competitive in these areas, the state was forced to reduce its role in the domestic e c o n o m y in two m a j o r ways: privatization o f public assets and the elimination o f subsidies to s p e c i f i c s e c t o r s . 1 9 Furthermore, Spain has either on its own or in accordance with E U mandates implemented a number o f progressive laws. T h e Spanish e c o n o m y has benefited dramatically from these new p o l i c i e s . 2 0 B e t w e e n 1 9 8 5 and 1 9 9 4 , Spain e x p e r i e n c e d an average growth rate of 2.9 percent, above the E U average, and income per capita has risen an average o f 3.5 percent annually, or a total o f 4 1 . 3 percent in the 10 years between 1 9 8 6 and 1 9 9 6 . In 1 9 8 5 , the purchasing-power parity of Spain as compared to the rest of the E U countries was 6 6 percent, which went up to 7 7 percent in 1 9 9 4 . Finally, trade with other E U member states increased substantially, rising from 5 0 percent to 6 4 percent for goods imported into Spain, and going from 6 0 percent to 71 percent for goods exported to other countries. 2 1

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The Spanish government was determined to become a full-fledged member of Economic and Monetary Union ( E M U ) at its inception. 2 2 In order to achieve this goal, the Spanish government adopted a convergence program that was approved by the Council of Ministers. After Spain signed the Maastricht Treaty, the country had to meet the standard convergence criteria: a public-sector deficit of no more than 3 percent of G D P ; public debt no more than 6 0 percent of G D P ; interest rates no more than 2 percent above the average of the three lowest rates in the EU; inflation no more than 1.5 percent above the three lowest in the EU; and it had to remain in the narrow band of the Exchange Rate Mechanism ( E R M ) for two years. In the early stages of compliance with the convergence criteria, Spain had one of the worst records for meeting many of these requirements. It did have public debt less than 6 0 percent of GDP, but in 1991 Spain's public-sector deficit was 4 . 4 percent o f G D P and rising. It had the highest interest rates in the E U , about 13 percent in 1992. Inflation was 4.1 percent above the three lowest in the EU and the currency was in the wide band of the E R M . 2 3 All o f these indicators demonstrate how hard Spain had to work to meet the new E M U requirements. Between February 1997 and January 1998, the average inflation rate fell to 1.8 percent, well below the goal o f 2.7 percent. For Spain, the hardest part o f achieving the euro requirements was decreasing the interest rates in order to fit within the designated parameters. Between February 1997 and January 1998, the average interest rate was reduced to 6.3 percent, well below the minimum goal of 7.8 percent. In 1996, the requirement of keeping the public debt below 6 0 percent o f G D P was raised to 7 0 percent. In 1997, after many years of increases, Spain's public debt was reduced to 68.8 percent of GDP. 2 4 In 1994, legislation reformed the Central Bank of Spain in order to facilitate following the rules and regulations of the E M U . The new law called for the autonomy of the central bank, and established price stability as the primary objective of monetary policy. Spain's entry into the final phase o f the E M U was fully supported by the Spanish Central B a n k . 2 5 The benefits for Spain to join the first group of nations as a member o f the " E u r o C l u b " far outweighed any o f the disadvantages and justified the strict fiscal policies that led to this result. One o f the most important and unifying symbols o f the European Union is the euro. This single common currency will create the second-largest economic zone in the world and will be managed by a completely independent institution, the European Central B a n k , based in Frankfurt. Individual

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m e m b e r s t a t e s ' e c o n o m i c o p t i o n s will b e s e r i o u s l y r e s t r i c t e d , e s p e cially during times of crisis. H o w e v e r , the e u r o is designed to stimulate trade, e l i m i n a t e risks f r o m e x c h a n g e - r a t e f l u c t u a t i o n s , s i m p l i f y a d m i n istrative and a c c o u n t i n g p r a c t i c e s , i n c r e a s e c o m p e t i t i o n , and facilitate travel b e t w e e n the m e m b e r countries. T h e s e results are most a d v a n t a g e o u s to Spain. Spain b e g a n the c o n v e r s i o n steps to the E u r o by adopting the N a tional Plan for the Transition to the E u r o . 2 6 T h e idea of h a v i n g a c o m m o n c u r r e n c y is widely a c c e p t e d in Spain. Spain is the only country in w h i c h 100 p e r c e n t of the e x e c u t i v e s i n t e r v i e w e d b e l i e v e d that the adoption of the euro would h a v e a positive impact on the e c o n o m i c situation, and the only country in which 100 percent of e x e c u t i v e s interv i e w e d w e r e in f a v o r of the transition to the e u r o . 2 7 S p a i n has b e e n s u c c e s s f u l in its e x p e r i m e n t with e c o n o m i c and political i n t e g r a t i o n into the E u r o p e a n U n i o n , and there have been the d e m o n s t r a t e d b e n e fits of a m o r e open e c o n o m y . In turn, the p e o p l e have been very supportive of increased integration.

Employment T h e e m p l o y m e n t picture is not as rosy. Spain is f a c i n g one of the worst e m p l o y m e n t crises in the E U . E v e n b e f o r e m e m b e r s h i p , h u n d r e d s of t h o u s a n d s of S p a n i s h w o r k e r s e m i g r a t e d to other E U c o u n t r i e s in s e a r c h of e m p l o y m e n t . N o w , m e m b e r s h i p has m e a n t i n c r e a s e d l a b o r rights and a 94 percent g r o w t h in the n u m b e r of w o m e n in the Spanish w o r k f o r c e . 2 8 Without e c o n o m i c structural flexibility, it has been d i f f i cult f o r the Spanish g o v e r n m e n t to create e n o u g h j o b s . S p a i n e n a c t e d labor r e f o r m s in 1994, a d o p t i n g similar m e a s u r e s used in the more dev e l o p e d E U countries. In addition, in the 1996 I n t e r g o v e r n m e n t a l C o n f e r e n c e , Spain p r o p o s e d that e m p l o y m e n t b e c o m e a m o r e active issue on the E U a g e n d a . S p e c i f i c a l l y S p a i n s u g g e s t e d t h r e e p r o p o s a l s : (1) that the E u r o p e a n U n i o n institutions establish general guidelines to c o ordinate the policies of the m e m b e r states; (2) that the E U c o m b i n e individual e m p l o y m e n t reports into a j o i n t E U d o c u m e n t ; and (3) that the E U c r e a t e an e m p l o y m e n t c o m m i t t e e . All of these p r o p o s a l s w e r e inc l u d e d in the Treaty of A m s t e r d a m . 2 9

Environment A l t h o u g h the Spanish c o n s t i t u t i o n includes a legal d e f i n i t i o n of the env i r o n m e n t and quality of life, 3 0 p r o t e c t i o n of the e n v i r o n m e n t in Spain

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b e f o r e its i n c l u s i o n in the E u r o p e a n U n i o n did not m e e t g e n e r a l international

standards.

D e s p i t e t h e f a c t that the n a t i o n h a s a d i v e r s e

e c o s y s t e m , u n i q u e g e o g r a p h i c l o c a t i o n , and a n e e d to m a i n t a i n a profi t a b l e t o u r i s m industry, S p a i n had f e w c o n s e r v a t i o n l a w s , and e n v i r o n m e n t a l p o l i c i e s w e r e not h i g h on a n y g o v e r n m e n t a l a g e n d a . A l t h o u g h many e c o n o m i c improvements began even before Spain became

a

m e m b e r state, o t h e r s o c i a l i s s u e s , e s p e c i a l l y the e n v i r o n m e n t , w e r e not a d d r e s s e d until a f t e r S p a i n ' s E U a c c e s s i o n . S i n c e the S p a n i s h g o v e r n m e n t did not b e g i n to m a k e r e a l a d j u s t m e n t s until its E U m e m b e r s h i p w a s c o m p l e t e , S p a i n w a s w e l l b e l o w the E U a v e r a g e on i m p l e m e n t i n g E U e n v i r o n m e n t a l d i r e c t i v e s . F u r t h e r m o r e , u n l i k e P o r t u g a l , S p a i n did not r e q u e s t an a d j u s t m e n t p e r i o d to adapt its e n v i r o n m e n t a l p o l i c i e s . T h e e n d r e s u l t w a s that b e t w e e n 1 9 8 9 and 1 9 9 4 , the E u r o p e a n C o m m i s s i o n o f t e n r e p r i m a n d e d S p a i n f o r its m a n y i n f r a c t i o n s o f E u r o p e a n e n v i r o n m e n t a l l a w s . It had the t h i r d - h i g h e s t n u m b e r o f c a s e s under inv e s t i g a t i o n at that t i m e . 3 1 C l e a r l y c h a n g e w a s n e c e s s a r y , and S p a i n m o v e d to adopt a c o m p r e h e n s i v e e n v i r o n m e n t a l p r o t e c t i o n plan. B e g i n n i n g in 1 9 8 2 , S p a i n b e g a n to p a s s m e a s u r e s in this a r e a . 3 2 B y 1 9 8 6 , the m a n a g e m e n t o f e n v i r o n m e n t a l c o n c e r n s w a s a c o m p e t e n c y t r a n s f e r r e d to the 17 " a u t o n o m o u s c o m m u n i t i e s " that m a k e up S p a i n , and a f t e r S p a i n ' s a d m i s s i o n to the E u r o p e a n U n i o n the c o u n t r y adopted m o s t o f the E U e n v i r o n m e n t a l l e g i s l a t i o n . T h e s e e v e n t s m a r k e d the b e g i n n i n g o f a g r e a t e r a d m i n i s t r a t i v e r o l e f o r e n v i r o n m e n t a l p o l i c y , o f all o c a t i n g m o r e n a t i o n a l f u n d i n g to the e n v i r o n m e n t and s p e c i f y i n g the u n i q u e e n v i r o n m e n t a l n e e d s o f S p a i n at both the n a t i o n a l and E U leve l s o f g o v e r n m e n t . 3 3 O t h e r l e g i s l a t i o n , d i r e c t e d to c r i t i c a l and p o t e n tially h a r m f u l industrial s e c t o r s , b e g a n to c o n t a i n e n v i r o n m e n t a l p r o v i s i o n s . 3 4 F u r t h e r m o r e , S p a i n , in a r e l a t i v e l y s h o r t t i m e ,

incorporated

h u n d r e d s o f E U d i r e c t i v e s r e l a t e d to the e n v i r o n m e n t , t h u s d e m o n strating its d e d i c a t i o n to i m p r o v e e n v i r o n m e n t a l standards and p a r t i c i p a t e f u l l y in the E U . W h i l e t h e E u r o p e a n U n i o n d e v o t e d s u b s t a n t i a l a m o u n t s o f its c o h e s i o n f u n d s t o w a r d e n v i r o n m e n t a l p r o t e c t i o n

in

S p a i n , the S p a n i s h g o v e r n m e n t m o r e than d o u b l e d its f i n a n c i n g o f e n v i r o n m e n t a l p o l i c i e s b e t w e e n 1 9 8 7 and 1 9 9 2 . P r o t e c t e d n a t u r a l a r e a s i n c r e a s e d f r o m 3 7 5 , 0 0 0 h e c t a r e s in 1 9 8 5 to 2 . 8 m i l l i o n h e c t a r e s in 1 9 9 4 , and the s y s t e m o f n a t i o n a l p a r k s h a s a l s o i m p r o v e d . 3 5

Foreign and Security Policies S p a i n has pursued a very a c t i v e f o r e i g n p o l i c y and b e e n i n v o l v e d in m o s t m a j o r events o f world politics. B e c a u s e o f military b a s e a g r e e m e n t s with

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the United States beginning in the 1950s 36 until today and with its membership in NATO since 1981, Spain has been solidly aligned with the West. Spain has also been involved in every aspect of European defense through membership in the Western European Union and the Organization for Security and Cooperation. 3 7 It has also sent staff and military units to join the Eurocorps. Spain has participated in all operations in the former Yugoslavia (from peacekeeping operations to humanitarian missions in Bosnia, to helping with the Kosovo crisis) under both NATO and the UN. In every area, Spanish diplomats have been involved, serving as head of NATO and in important mediation posts. These activities do not even include the mandated activities for the second and third pillars of the Community that Spain must accomplish. This global activity has been sarcastically labeled by Spanish commentators as apuntarse a todo ("a compulsive need to belong").

Immigration Before joining the European Union, Spain generally sent immigrants to the other Union countries, and had one of the most lenient and passive immigration policies in all of Europe. Since joining, the Spanish government has reversed this policy. More and more immigrants are coming into Spain, generally from Morocco and across the Mediterranean. Furthermore, Morocco has become a way station for immigrants from poorer nations in sub-Saharan Africa who want to enter the European Union. 3 8 Today, immigration policies are generally coordinated with those of the European Union. Moroccan citizens and others now need visas to enter Spain, and must acquire residency and work permits if remaining in the country for more than 90 days. Spanish and EU immigration policies are proactive in attempting to resolve the problems inherent in increased immigration from the Maghreb countries. The 1991 immigration law, supported by all political parties except Izquierda Unida, provides a model for the other EU nations dealing with immigration problems. Included in its complex provisions are ways to ensure that immigrants go into areas where they are most needed economically and are kept away f r o m those areas that are in economic trouble. The law also stops potential immigration by providing economic and social-development aid programs and by promoting job-creating industries in the areas of heaviest illegal immigration. 3 9 Potential difficulties loom ahead with the Latin American countries, a number of whom have signed dual nationality treaties with Spain in consideration of historical and familial links. Immigrants from the Americas

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represent 18 percent of the Spanish i m m i g r a n t c o m m u n i t y today. H o w ever, unrest and unstable political and e c o n o m i c situations could stimulate an increase in these n u m b e r s , w h i c h would be difficult to control. Schengen Accords I m m i g r a t i o n into S p a i n w o u l d not be such a c o n t r o v e r s i a l topic if it were not for the S c h e n g e n A c c o r d s . T h e s e a g r e e m e n t s p r o v i d e for the f r e e circulation of p e o p l e across the internal borders of the S c h e n g e n s i g n a t o r i e s . 4 0 A l t h o u g h this p r o v i s i o n w o u l d not s e e m to c a u s e m a n y difficulties for the E u r o p e a n U n i o n m e m b e r states, p r o b l e m s can arise b e c a u s e of the f r e e p a s s a g e of p e o p l e w h o have entered the U n i o n territory but are not citizens. Thus, all the M o r o c c a n citizens w h o live and work in Spain could easily m o v e and work in any other S c h e n g e n Accord country. A m o r e i m m e d i a t e crisis f a c e s other E u r o p e a n Union nat i o n s with the i n f l u x of d i s p l a c e d p e r s o n s f r o m the B a l k a n c o n f l i c t s and Eastern E u r o p e . S c h e n g e n created an i n f o r m a t i o n system that provides for a c o m p u t e r i z e d database f o r police i n f o r m a t i o n . It also m a n dates c o m m o n rules for entry and visa r e q u i r e m e n t s at all external bord e r s , and c o o p e r a t i o n with b o r d e r c o n t r o l s . 4 1 T h e r e is still a n e e d to d e v e l o p further controls to prevent immigration inequalities throughout the Union as well as in Spain.

Political Asylum Spain has been struggling to control its B a s q u e nationalists, violent terrorist g r o u p s such as E T A , and c r i m i n a l s w h o e s c a p e f r o m S p a i n and s e e k political a s y l u m in other E u r o p e a n U n i o n states. T h u s , in c o n j u n c t i o n with the S c h e n g e n A c c o r d s , at the 1996 I n t e r g o v e r n m e n t a l C o n f e r e n c e S p a i n p r o p o s e d a c l a u s e p r o h i b i t i n g political a s y l u m to a citizen of any other m e m b e r state of the E u r o p e a n Union. S p a i n ' s proposal to i n c l u d e l a n g u a g e r e g a r d i n g political a s y l u m in the Treaty of A m s t e r d a m s t e m s f r o m a p a r t i c u l a r i n c i d e n t b e t w e e n B e l g i u m and Spain regarding ETA. In 1993, B e l g i u m a p p r o v e d the political a s y l u m r e q u e s t of a c o u p l e a c c u s e d of c o l l u s i o n with ETA. O n c e a d m i t t e d to B e l g i u m , they obtained political r e f u g e e status and S p a i n ' s request f o r extradition was denied. S p a i n ' s a r g u m e n t for this clause is based on the fact that in a c o m m u n i t y w h e r e p e o p l e can pass freely f r o m country to country, political a s y l u m in a n o t h e r m e m b e r state should be illegal. Since there is no f o r m a l legal text in any of the European Union treaties,

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Spain was attempting to reduce confusion in this area. 4 2 Although the full text of Spain's proposal was modified to incorporate three exceptions to this general rule, the ability of citizens of any European Union m e m b e r state to claim political refugee status within the EU has been seriously diminished. 4 3 The Mediterranean The Mediterranean f o r m s the southern border of the European Union and is a potential source of concern for the seaside nations, especially Spain. Geography and history have demonstrated the importance of the M a g h r e b region in North Africa to Spanish foreign policy, but the instability of the region also makes it one in which monitoring and quick responses are essential tasks of the Spanish government. Young democ racies, economic inequalities, social injustices, and religious differences combine to make the stability of the region seem, at best, questionable. 4 4 Due to this volatile situation, and the desire to increase common foreign and security policies in the European Union, Spain, along with some of its southern neighbors, has convinced the European Union to dedicate more attention and resources to the Maghreb area. The European Union has adopted policies supporting modernization of the Maghreb, knowing it would be in the best interest of its m e m b e r states. To start, the Union institutionalized dialogues between its institutions and those of the Arab Maghreb Union and the Arab League. Because peace and stability of this region are foremost foreign-policy concerns, the European Council has fully supported the idea of a Euro-Mediterranean partnership and held a c o n f e r e n c e in 1995 in Barcelona, during the Spanish presidency of the EU. While this area has gained importance for both Spain, in particular, and the EU, in general, the ties are still not as developed as the ones between Spain and Latin America.

Latin America Before the 1980s, Latin America was not a high priority on the European Union agenda. Since Spain joined the Union, the EU has developed more concrete policies and increased its interests in Latin America. The special relationship between Spain and Portugal and Latin America was part of the 1986 membership package. Since that time, the European Commission has established more delegations in the Latin American countries, and more formal relations with regional international organizations in

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Latin A m e r i c a . It has increased the quantity and quality of a g r e e m e n t s in areas of m u t u a l e c o n o m i c , political, and cultural interest. 4 5 Spain has been a m a j o r player in this area of foreign-policy growth. T h e portfolio of the E U ' s Latin A m e r i c a n posts has generally b e e n held by Spanish c o m m i s s i o n e r s . S p a n i s h influence has e x t e n d e d to secondand third-level o f f i c e r s as well. Several e x a m p l e s illustrate S p a i n ' s inf l u e n c e on the EU in this area. W h e n F r a n c e s o u g h t the i n c l u s i o n of F r e n c h - s p e a k i n g Haiti in the L o m é Accords, Spain pressured f o r the inc l u s i o n of the D o m i n i c a n R e p u b l i c . A f t e r the e l e c t i o n s of 1996, the S p a n i s h c o n s e r v a t i v e g o v e r n m e n t e n c o u r a g e d the EU to adopt a m o r e critical policy t o w a r d C u b a , d e s p i t e traditional EU o p p o s i t i o n to the U.S. e m b a r g o . T h e EU also p a s s e d a C o m m o n Position that m a d e aid to C u b a c o n d i t i o n a l on the r e f o r m of the C u b a n r e g i m e , and in 1999 v o t e d to c e n s u r e C u b a ' s h u m a n rights p o l i c i e s . Yet S p a i n e n d o r s e d C u b a ' s application to have an observer status at the A f r i c a n , C a r i b b e a n , and P a c i f i c countries under the L o m é C o n v e n t i o n . In the 1990s, Mercosur, a new attempt at regional integration, was f o r m e d in the Western H e m i s p h e r e , a d e v e l o p m e n t that Spain and the w h o l e European Union could ill afford to ignore. S p a i n ' s influence led to the inclusion of declarations in European Union law regarding cooperation b e t w e e n the E u r o p e a n U n i o n and individual Latin A m e r i c a n countries, and integrated organizations. C u l m i n a t i n g a steady series of d e c l a r a t i o n s and a g r e e m e n t s o v e r a d e c a d e , 4 6 on D e c e m b e r 15, 1995, the European Union and M e r c o s u r signed the Interregional Cooperation A g r e e m e n t . Next c a m e the o f f e r of a free-trade a g r e e m e n t negotiated at the E u r o p e - L a t i n A m e r i c a n S u m m i t held in Rio de Janeiro in 1999.

Autonomous Communities S p a i n is d i v i d e d into 17 " a u t o n o m o u s c o m m u n i t i e s " that e a c h h a v e specific responsibilities and authorities (competencies). B e c a u s e of this r e l a t i v e d e c e n t r a l i z a t i o n of p o w e r , these c o m m u n i t i e s deal d i r e c t l y w i t h the E u r o p e a n U n i o n in a n u m b e r of s i g n i f i c a n t w a y s . 4 7 T h e B a s q u e C o u n t r y and C a t a l o n i a are the most visible and active t h r o u g h their E U delegations 4 8 and lobbies located in Brussels. T h e t w o centrist and nationalist parties, C a t a l o n i a ' s C o n v e r g è n c i a / U n i o and the Partido N a c i o n a l i s t a Vasco, present separate candidates in the e l e c t i o n s for the E u r o p e a n P a r l i a m e n t . Various n a t i o n a l i s t m o v e m e n t s in t h e s e a r e a s , s e e k i n g i n d e p e n d e n c e , c o n s i d e r the E u r o p e a n U n i o n an a l t e r n a t i v e to the " S p a n i s h State," which they consider " u n n e c e s s a r y . " Using the Belgian m o d e l , B a s q u e and C a t a l a n n a t i o n a l i s t s are p r e s s i n g f o r a m o r e

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aggressive and explicit representation in the executive and decisionmaking bodies of the EU. They feel the C o m m i t t e e of Regions is of limited use for them because as nationalists they have little in c o m m o n with regional subdivisions in France, Italy, or Germany. 4 9 They plan to continue to pursue their claims and interests through Brussels and feel their regions may reap significant political and economic benefits.

Portugal Europe's Gateway to the Atlantic The citizens of Portugal are periodically reminded by their leaders of the three most important dates in contemporary history: of October 5, 1910, when Portugal ended the m o n a r c h y ; April 25, 1974, the day a military coup brought down the dictatorship; and June 12, 1985, when Portugal signed the Treaty of Accession to b e c o m e a m e m b e r of the European Union on January 1, 1986. The Portuguese are proud to point out that in all of these m a j o r occasions, they beat the Spaniards, even joining the Community ahead of Spain by signing the accession treaty a few hours earlier. The road to Portugal's return to Europe began with the fast-paced dismantling of its overseas colonies in 1974-1975. 5 0 This was the second part of a one-two punch that decisively eliminated the legacies of the past. First was the Revolution of 1910. A f t e r the toppling of the monarchy, Portugal was ruled by authoritarian dictators, the last of whom was Marcelo Caetano, the successor to Salazar who had ruled since 1933. For 40 years, both leaders kept the country in a state of political and economic backwardness that was reinforced by a conservative, right-wing variety of fascism. A disgruntled military toppled the dictatorship in 1974, leading to a period of instability that included the loss of colonies, failed coups, and finally the development of a democratic regime where power has alternated between the social democrats (centrist) and the socialists. 5 1 The nation was sadly behind the rest of Europe and the world. In the mid-1970s Portugal was still rural and relied on its colonies for strategic raw materials. Modern industrialization was not a priority. Between 1 and 2 million unskilled workers left for higher wages in the more prosperous European countries. While Portugal was a founding member of the European Free Trade Association, which did provide a preferential trading program that became a helpful preparation for economic reforms,

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the lack of a democratic regime and the insistence on maintaining preferential trade status with its colonies had prevented Portugal from even an associative agreement with the EC. Since b e c o m i n g a m e m b e r of the European C o m m u n i t y in 1986, Portugal has struggled to be a loyal key player in the process of integration. At the same time, Portuguese leaders and citizens had to develop a m i n i m u m social and e c o n o m i c i n d e p e n d e n c e and a strong sense of identity. It is a delicate balance. On the one hand, Portugal wants to be considered as an integral part of Europe. 5 2 On the other hand, Portugal continues to fight to maintain its cultural rights and identity. For example, when the first samples of the new euro money came out, the EU m a p on the face of all the coins did not depict the 1,231kilometer border between Spain and Portugal. While relations between the two nations may be improving, the Portuguese government, already fighting to ensure that its interests remain evident and distinct f r o m those of Spain, d e m a n d e d that this error be corrected. In an effort to link the euro with Portuguese national identity, the first king of the consolidated nation, D. A f o n s o Henriques ( 1 1 2 8 - 1 1 8 5 ) will be on the Portuguese face of its euro coins. 5 3 The extreme effort exerted to meet the monetary criteria d e m o n strates that Portugal intends to be included in all stages of European integration in order to promote its own interests with respect to European Union policies. The priority given by the government to Portugal's status as a m e m b e r of the European Union is fittingly illustrated by the structure of the Ministry of Foreign Affairs, which is subdivided into three Secretarias do Estado (undersecretaries): one for general foreign policy and international cooperation; one for European affairs; 5 4 and the final one for Portuguese emigrant communities. 5 5 Portugal feels tugs in many directions at once. There is nostalgia for its historical overseas vocation and the quieter rural past. There is also the distance f r o m the main currents of m o d e r n E u r o p e and the strong desire to "catch u p " economically with Europe and the world. Another pull results f r o m Portugal's closeness to Spain, the potentially overpowering neighbor, which has recently become its most important investor. In these " n e w times," Portugal has reluctantly been coping with Spanish economic and tourist invasions, complaining that there are "too many Spaniards, with too much money who talk too loud." Before 1974, there was a saying that the country was ruled by the three " F ' s " : fado (traditional sad music); futebol (soccer); and fatima (traditional

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Catholicism). These new times seem to be characterized by three "D's": democracy, decolonization, and development. Economic and Social Policies In the decade since joining the European Union, Portugal has changed considerably. In 1974 Portugal was one of the lowest-producing societies in Europe. General poverty prevailed: 4 0 percent of the labor force was in agriculture, the industrial sector was on the verge of collapse, and more than 30 percent of laborers were poorly paid in light industry. Twenty years later, the e c o n o m y is growing at a rate above the European median and agriculture has ceased to be the dominant sector. The country has become more urban and littoral, while interior towns have lost about 20 percent of their populations. Per capita inc o m e has tripled while salaries have d o u b l e d . U n e m p l o y m e n t decreased dramatically and dropped to a new low of 5 percent in 1998. Public support of the European Union continues to grow as more and more people become aware of its policies. 5 6 One of the most important r e a s o n s why public opinion has been so high is because the Portuguese people have been experiencing firsthand the economic and political benefits of membership. All political groups were highly supportive of signing the Maastricht Treaty, which was emphatically approved in the P o r t u g u e s e parliament. In April 1992, Portugal j o i n e d the E R M , 5 7 which significantly reduced the ability of the central government to intervene in Portuguese e c o n o m i c and monetary policies. This was a drastic c h a n g e f r o m the high p r o f i l e the g o v e r n m e n t had played in the economy, which included credit ceilings, administered interest rates, and a c r a w l i n g peg f o r the e x c h a n g e rate. Entry into the E M U forced Portugal to adopt legislation providing for the autono m y of the P o r t u g u e s e Central Bank. 5 8 This bank, in turn, has enf o r c e d the m o n e t a r y and structural a d j u s t m e n t s necessary f o r Portugal to be admitted into the final stage of the E M U and to adopt the c o m m o n currency. On M a r c h 23, 1998, the Portuguese g o v e r n m e n t a n n o u n c e d that P o r t u g a l ' s convergence data had been presented in Brussels, and the c o u n t r y ' s e c o n o m y was on track for adopting the euro. Not only did Portugal meet the economic requirements, it surpassed five other countries of the E M U in meeting the euro requirements. 5 9 The economic adj u s t m e n t s that the P o r t u g u e s e g o v e r n m e n t had to undertake to m a k e sure the economy met the euro criteria were significant and not always

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politically palatable. 6 0 H o w e v e r , the Portuguese leaders w o r k e d hard to e n s u r e inclusion so that, like S p a i n , they would be a f o u n d i n g m e m b e r of the new m o n e t a r y system and all u p c o m i n g stages of integration. Employment B e c a u s e of a d j u s t m e n t s in the a g r i c u l t u r a l sector and the c o n v e r s i o n necessary to meet the r e q u i r e m e n t s of the E u r o p e a n U n i o n , agricultural u n e m p l o y m e n t has increased significantly. 6 1 This one sector is suffering, but the overall outlook for the P o r t u g u e s e e c o n o m y is good, indicating fewer manual laborers and more technological improvements and m o d e r n i z a t i o n in this area. F u r t h e r m o r e , as the industrial and serv i c e sectors c o n t i n u e to d e v e l o p , w o r k o p p o r t u n i t i e s in both of these areas have increased, providing a net gain in e m p l o y m e n t . 6 2 Portugal is one of the c o u n t r i e s that p r o m o t e d the inclusion of e m p l o y m e n t issues during the 1996 I n t e r g o v e r n m e n t a l C o n f e r e n c e . It has b e c o m e evident that as the ability of g o v e r n m e n t s to c h a n g e structural e c o n o m i c or m o n e t a r y policy d i s a p p e a r s , e m p l o y m e n t policy needs to b e c o m e an EU concern. For the P o r t u g u e s e g o v e r n m e n t , it is vital "to g u a r a n t e e that the levels of integration already reached or currently in progress in the e c o n o m i c and m o n e t a r y fields are a c c o m p a n i e d by a set of i n s t r u m e n t s c a p a b l e of p r o m o t i n g active e m p l o y m e n t p o l i c i e s all over the U n i o n . " 6 3 Environment W h i l e the E U e n v i r o n m e n t a l p o l i c i e s were i n c l u d e d in the a c c e s s i o n a g r e e m e n t s , Portugal simply has not been very s u c c e s s f u l with implem e n t a t i o n , less s u c c e s s f u l indeed than n e i g h b o r i n g Spain. Portugal has b e e n relying on E U f u n d i n g geared t o w a r d e n v i r o n m e n t a l protection. 6 4 It is expected that closer ties with Spain and p r e s s u r e s f r o m other E U m e m b e r s will p e r s u a d e the P o r t u g u e s e g o v e r n m e n t to d e v e l o p a m o r e substantial e n v i r o n m e n t a l policy. Foreign and Security Policies Portugal has been forced to reconsider its national security and d e f e n s e c o n c e r n s in light of EU m e m b e r s h i p and the end of the Cold War. 6 5 As a result, the Portuguese g o v e r n m e n t had been advocating a slow road to the C o m m o n Foreign and Security Policy. The m a i n t e n a n c e of national

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identity led to this viewpoint. G e o g r a p h y is also a m a j o r factor. EuroA t l a n t i c i s m c o n t i n u e s to be a valid a l t e r n a t i v e to the p e r c e i v e d threat of E u r o p e a n c o n t i n e n t a l h e g e m o n y with c o n t i n u a t i o n of N A T O m e m b e r s h i p and p a r t i c i p a t i o n in the W e s t e r n E u r o p e a n U n i o n . 6 6 C o r d i a l Iberian relations h a v e e n a b l e d this traditional g e o p o l i t i c a l f e a r to d e crease s o m e w h a t but it has not c o m p l e t e l y d i s a p p e a r e d f r o m the Portuguese screen. Ironically, the closer both countries work in the context of N A T O and the E U , the m o r e pressure is exerted on P o r t u g u e s e leaders to reassert a u t o n o m y . In a d d i t i o n , w h i l e p a y i n g c l o s e attention to the c o o p e r a t i v e e f f o r t s under way with the M a g h r e b and Latin A m e r i can n a t i o n s , P o r t u g a l has o p t e d f o r a m o r e i n d e p e n d e n t a p p r o a c h to s o u t h e r n A f r i c a , w h e r e the s p e c i f i c i t y of its interests with f o r m e r colonies need to be preserved. 6 7

Immigration and Schengen Portugal c o n t i n u e s to be a nation that p r o v i d e s e m i g r a n t s to other EU m e m b e r states, b e c a u s e w a g e s in Portugal are still less than the o t h e r s ' average. 6 8 Like Spain, Portugal signed the S c h e n g e n A c c o r d s on M a r c h 26, 1995, a l l o w i n g f o r the f r e e p a s s a g e of p e r s o n s within the internal borders of the signatory states. D u r i n g P o r t u g a l ' s presidency of the Schengen group, in the first half of 1997, emphasis was placed on updating and i m p r o v i n g the accords. Not only did Portugal act to strengthen cooperation for c o m m o n external entry requirements, the sharing of police information, border control m e c h a n i s m s , and issues of political asylum, but it also continued with the development of a Schengen telecommunications c o m m u n i t y in order to increase cooperation for the prevention of drug trafficking and similar illegal cross-border activities. 6 9

International Links At one time Portugal had an i m m e n s e empire. Today, Portugal p r o m o t e s c l o s e r relations w i t h m o s t of its f o r m e r c o l o n i e s , e s p e c i a l l y those in Latin A m e r i c a and A f r i c a . In a d d i t i o n , Portugal has e m p h a s i z e d the need f o r closer M e d i t e r r a n e a n c o o p e r a t i o n , p l a c i n g the region on the a g e n d a for its E U presidency, which began in January 2000. It also has p r o p o s e d a M e d i t e r r a n e a n c o n f e r e n c e f o c u s i n g on i n v e s t m e n t as a foll o w - u p to the 1995 E u r o - M e d i t e r r a n e a n C o n f e r e n c e in Barcelona. 7 0 P o r t u g u e s e leaders h a v e e n c o u r a g e d a c o m m o n E U policy t o w a r d f o r m e r A f r i c a n c o l o n i e s f o c u s i n g on the p r o v i s i o n of aid to p r o m o t e

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stability and peace in the region to alleviate one EU security concern. Portugal has declared some responsibility for assisting its f o r m e r colonies in installing stable governments and increasing economic development. The EU has dedicated funds through the Lomé Convention to support this EU-backed Portuguese pledge, and entrusted the portfolio of cooperation to Portugal's commissioner, Joào de Deus Pinheiro. Brazil is P o r t u g a l ' s largest f o r m e r colony with a large economy, landmass, and population, all of which provide many opportunities for e c o n o m i c investment, trade, and cultural exchange. Since Portugal joined the EU, it has more frequently assumed the role of mediator between the European Union and Brazil, just as Spain has done with its f o r m e r Latin A m e r i c a n colonies. Within the setting of the IberoAmerican summits, Portugal has also strengthened its links with other Latin American nations. 7 1

Future Prospects Expectations The e f f e c t i v e n e s s of Spanish and Portuguese policies in c o n j u n c t i o n with the European Union will depend on an appropriate balance between the perceptions and actions taken by political and business leaders in both countries. In turn, this balance will be determined by the attitudes expressed by the electorate throughout the first decade of the new century—after costs and benefits for the individual become more evident. To date, participation in these elections has been below the EU average, 59.6 percent for Spain and only 35.7 percent for Portugal, which is well below Italy's 74.8 percent and G r e e c e ' s 71.1 percent. 7 2 Perhaps as concrete evidence of EU policies hits home, more participation in these elections will occur. Once it develops, Portuguese and Spanish taxpayers, investors, employers, and workers may ask what the euro can do for them. Spanish and Portuguese participation in the euro is a personal triumph for the respective political leaders w h o invested considerable energies in convincing the national electorates and the European power brokers that the southern European economies were deserving. Spain's conservative premier, José Maria Aznar, was a solitary representative of single-party g o v e r n m e n t s of the right in a European Union ruled in 1999 by socialists or socialist-led coalitions. He presented one of the most aggressive proposals to counter the attempt of

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the German Social Democratic government to reduce its contribution to the EU when the budget expired in 2000. This would have drastically cut the cohesion funds. As a result of his efforts, Structural and Cohesion Funding will both increase more than 10 percent during the 2 0 0 0 - 2 0 0 7 EU budget c y c l e . " Portugal's EU leader, socialist Mario Soares, pointed out a need for real public involvement in Europe, with citizens responsible and available for the construction of a better European Union. 7 4 Socioeconomic Realities As the century has turned, the EU is faced with continuing challenges. In pure economic terms, when the Spanish and Portuguese people read the comparative charts and graphs, the figures do not appear that rosy. The per capital G N P in 1997 for Spain was $14,510 and its ranking was 23d in the world. Portugal was ranked 26th with a per capita G N P of US$10,450. Of all the EU countries, only Greece was lower. 75 Unemployment figures give an even bleaker outlook. Portugal has the lower figure of 5.1 percent in 1999, but unemployed Portuguese go to other European countries seeking work instead of staying at home. Spanish unemployment has been the highest in Europe, at 17.2 percent in 1999. But unemployment for people under 25 was 39 percent in Spain and 15 percent for Portugal in 1997. 76 While most of the EU countries show a trade surplus, Spain's trade deficit is 4.8 percent and Portugal's is 9 percent. 77 Of all European Union countries, inflation is the worst in Spain and Portugal. In 1999, Spain's inflationary rate was 2.4 percent, higher than the 1 percent euro-zone average rate. 78 Portugal brought its decades-high inflation down to 2.8 percent by March 1999, but it was still higher than in the rest of Europe. 7 9 All these figures are cause for alarm as the Iberian countries seek development in the new era. Despite these causes for concern, there are reasons for optimism as well. The increased economic and often political cooperation between Spain and Portugal is undeniable. Direct investment and tourism between the two countries is also rising. 8 0 There is a strong and ongoing feeling that together they will benefit more from the European Union and are more likely to have their interests and needs addressed. Betting on Europe Today, the European gamble represented by the common currency receives mixed reviews in Iberia. Spain is more enthusiastic (72 percent)

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while Portugal is less positive (52 percent). Twenty-two percent of the Portuguese people and 17 percent of the Spanish people reject the new currency. Overall debate about the value of the EU and its various aspects has been largely absent in both nations. Such open consideration was discouraged for fear that it could be interpreted as opposition to the whole package of integration. 8 1 Parceling out the agenda may become the trend of the future when Spanish and Portuguese electorates force the leadership to negotiate EU issues item by item in a fashion similar to the Danish and British. In the past it seemed that Spain and Portugal could not afford Europe "a la carte." In the future, they may demand it. The developments in citizen views remain to be seen. Perceptions of the people of Spain and Portugal about how positive or negative the euro has been for their pockets is crucial for the future of Spain and Portugal's membership in the European Union. However, in the event that the future of the European Union is perceived as endangered, it is safe to predict that both nations will be on the front lines of its defense. Portugal had a unique opportunity to express its views with regard to the European Union and to press its agenda while exercising the EU presidency in the first half of 2000. Portugal demonstrated its ability to lead the European Union in a crisis situation. The Portuguese government coordinated 14 of the EU m e m b e r states in freezing bilateral relations with Vienna in a response to the extreme rightist Freedom Party led by Joerg Haider, joining the Austrian coalition g o v e r n m e n t . Although there was a constant tense environment in the EU because of this incident, Portugal did not allow it to interfere with its priorities on the EU agenda. Closer relations with the Mediterranean countries, EU institutional reforms, and a summit on economic reforms and employment which took place in March 2000 were just some of the continued efforts of the Portuguese presidency to make improvements to the European Union. As expected, Spain supported Portugal throughout its leadership term in an effort to promote common Iberian objectives.

Notes 1. We would like to recognize the generous comments, corrections, and materials offered by Maria Joâo Seabra (Instituto de Estudos Estratégicos e Internacionais, Lisbon), Angel Viñas and Francesc Granell (European Commission), and José da Silva Lopes (Conselho Economico e Social); and the assistance given by the staff of the O f f i c e of the European Commission in Barcelona, the library of the Patronat Català Pro Europa, and the Ministries of Foreign Affairs of Spain and Portugal, and Anna Krift.

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2. See Christopher Bliss and Jorge Braga de Macedo, Unity with Diversity in the European Economy: The Community's Southern Frontier; Bernardo Futscher Pereira, "Portugal and Spain" and Geoffrey Pridham, Encouraging Democracy. 3. Label attributed to Gerald Bender, Angola Sob o Dominio Portugués, p. 35. 4. Howard Wiarda, Does Europe Still Stop at the Pyrenees? Or Does Latin America Begin There? Iberia, Latin America, and the Second Enlargement of the European Community, p. 1. 5. See Bender, Angola Sob o Dominio Portugués, and Joäo Marques de Almeida, Portuguese Security Policy: Between Geopolitical Culture and Institutional Comment. 6. Francesc Granell, "Os Acordos de Adhesión de Austria, Finlandia e Suecia á Unión Europea e os intereses espafiois." 7. Denis Hautin-Guiraut, "L'élargissement de l'Union européenne est essentiel pour la paix," Le Monde, March 4, 1997. 8. Pedro Alvares, The Enlargement of the European Union and the Experience of Portugal's Accession Negotiations. 9. For a succinct review of the Iberian accession, see Desmond Dinan, "The Transformation of the European Community, 1985-1988." 10. Berta Alvarez-Miranda, El sur de Europa y la adhesión a la Comunidad: Los debates políticos, chapters 1 and 5. 11. See José Medeiros Ferreira, Um Século de Problemas: As Relaçôes Luso-Espanholas da Uniâo Ibérica à Comunidade Europeia; and Ministério dos Negocios Estrangeiros, "Resumo dos encontros bilaterais da Cimeira Luso-Espanhola." 12. Maria Joäo Seabra, Vizinhança Inconstante: Portugal e Espanha na Europa. 13. For a review of the idea of Europe from the Spanish perspective, see Andrés Ortega, La razón de Europa. 14. Presidents of the European Parliament (in two occasions), one of the two vice-presidencies of the Commission, and the presidency of the European Court of Justice. 15. Francesc Morata, La Unión Europea: Procesos, actores y políticas, p. 380. 16. For a review of Spain's membership since accession, see Enrique Barón, Europa en el alba del milenio; R. Bassols, España en Europa: Historia de la adhesión a la CEE 1957-1985; Caries A. Gasoliba i Böhm, 1986-1996, deu anys d'integrado europea; Francesc Granell, "La política económica en los diez años europeos de España"; Abel Matutes, "España en Europa"; and Ortega, La razón de Europa. 17. Francesc Granell, "L'Espagne et la Communauté Economique Européenne." 18. Keith Salmon, The Modem Spanish Economy: Transformation and Integration into Europe, pp. 11-12. 19. Salmon, The Modern Spanish Economy, p. 45; and Carlos Alvarez Aledo, "Industrial Policy," p. 22. 20. See Secretaría de Estado de Presupuestos y Gastos, Relaciones financieras entre España y las Comunidades Europeas. For the adaptation of the economic and legal systems, see Victoria Abellán y Blanca Vilá, "España

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1980s

en la Unión Europea"; Juan R. C u a d r a d o Roura y Tomás M a n c h a Navarro, España/rente a la Unión Econòmica y Monetaria; Michel Galy, G o n z a l o Pastor, and Thierry P u j o l , Spain: Converging with the Community; Francese Granell, "La política e c o n ó m i c a " and " A i m s and O u t c o m e of the First Spanish Presidency of the Council of the E u r o p e a n C o m m u n i t i e s " ; Alberto Gil Ibáñez, " S p a i n and European Political U n i o n " ; A n t o n i o J i m é n e z - B l a n c o , "Las Constit u c i o n e s de Francia, E s p a ñ a y A l e m a n i a y el T r a t a d o de la Unión E u r o p e a " ; Araceli M a n g a s Martín and Diego J. Liñán N o g u e r a s , " D e r e c h o C o m u n i t a r i o en Europa: Del Plan de y D e r e c h o E s p a ñ o l " ; P e d r o M o n t e s , La integración Estabilización a Maastricht; A n t o n i o M o r e n o J u s t e , España y el proceso de construcción europea ( 1951-1962); Juan P é r e z - C a m p a n e r o , España ante la Unión Económica y Monetaria en Europa; M a r i a n o Rubio, " E s p a ñ a y la Unión Monetaria"; Angel Sánchez Blanco, " A p l i c a c i ó n de la constitución española ante el Tratado de la Unión Europea"; R a m ó n Tamames, La Unión Europeai; A l f r e d Tovias, Foreign Economic Relations of the European Community: The Impact of Spain and Portugal; and Luis Antonio Velasco San Pedro, " L a integración de España en la C o m u n i d a d E u r o p e a : C o n s e c u e n c i a s jurídicas en la actividad comercial." 21. Ministerio de la Presidencia y Secretaría General del Portavoz del Gobierno, España en la Unión Europea, pp. 53, 58. 22. José M. de Areilza C a r v a j a l (coordinator), España y las transformaciones de la Unión Europea. Madrid: Fundación para el Análisis y los Estudios Sociales, 1999. 23. Salmon, The Modern Spanish Economy, pp. 13-14. 24. T a s k - F o r c e sobre la Unión E c o n ó m i c a y M o n e t a r i a , España y la Unión Monetaria, pp. 4 - 8 . 25. Ibid., pp. 11, 16. 26. Juan A n t o n i o M a r o t o Acín, " E c o n o m í a e s p a ñ o l a : los retos del e u r o para las e m p r e s a s españolas," pp. 5 - 6 . 27. Ibid., p. 13. 28. Ministerio de la Presidencia, España en la Unión Europea, p. 65. 29. Pedro Luis G o m i s Díaz, " L a s n u e v a s políticas de e m p l e o y de asuntos sociales en el Tratado de A m s t e r d a m , " p. 122. 30. A l f o n s o de Esteban A l o n s o and A l e j a n d r o L ó p e z L ó p e z , " E n v i r o n mental Policy," p. 60. 31. Morata, La Unión Europea, pp. 3 8 6 - 3 8 7 . 32. Nuria Castells y Joan Martínez-Alier, " P r o b l e m a s distributivos para la armonización de la política ambiental en la Unión E u r o p e a , " p. 359. 33. Morata, La Unión Europea, p. 387. 34. Esteban Alonso and Lopez, " E n v i r o n m e n t a l Policy," p. 61. 35. All of these policies are the result of the National Strategy for Environmental Conservation, Ministerio de la Presidencia, 1995, pp. 9 5 - 9 6 . 36. See Angel Viñas, Los pactos secretos de Franco con Estados Unidos: Bases, ayuda económica, recortes de soberanía. 37. See Esther Barbé, " L a cooperación política europea: La revalorización de la política exterior española." 38. Laura Huntoon, " I m m i g r a t i o n to Spain," p. 424.

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39. A n t o n i o Izquierdo Escribano, " T h e EC and Spanish Immigration Policy," p. 299. 40. F e r n a n d o A l v a r g o n z á l e z San Martín y Javier Elorza C a v e n g t , " L a libre circulación de personas," p. 86. 41. Morata, La Unión Europea, p. 364. 42. A l f o n s o Diez Torres, "Especial referencia al Protocolo de asilo de nacionales de los Estados m i e m b r o s , " p. 88. 43. Diez Torres, "Especial referencia al Protocolo," p. 102. 44. P a b l o B e n a v i d e s Orgaz, " P o l í t i c a e x t e r i o r e s p a ñ o l a y c o o p e r a c i ó n política e u r o p e a , " p. 15. 45. See A n g e l Viñas, European-Latin American Relations in the EastWest Conflict: A Spanish Perspective, and Spanish Policy Toward Latin America: From Rhetoric to Partnership. 46. Celestino del Arenal M o y ú a , " L a adhesión de España a la C o m u n i d a d Europea y su impacto en las relaciones entre América Latina y la C o m u n i d a d E u r o p e a , " pp. 3 6 2 - 3 6 3 . 47. See Victoria Abellán Honrubia, La integración de España en las Comunidades Europeas y las competencias de las Comunidades Autónomas; F r a n c e s c M o r a t a , " S p a n i s h R e g i o n s in the E u r o p e a n C o m m u n i t y " ; Ana I. Sánchez Ruiz, " C o m u n i d a d e s Autónomas, Unión Europea y subsidiariedad: algunas reflexiones"; and J o s é - E u g e n i o Soriano, Comunidades Autónomas y Comunidad Europea. 48. A right granted by the Spanish Supreme Court ruling of May 26. 1996. 49. In contrast, regional differences in Portugal (with the exception m a d e of the insular nature of Madeira and the Azores) are not as drastic as there are n o administrative divisions of a u t o n o m o u s ambitions. Portugal's still basically centralist vocation was expressed by ballots when in N o v e m b e r 1998 the electorate r e j e c t e d the socialist-inspired r e g i o n a l i z a t i o n project. See A r m a n d o Pareira, " R e g i o n a l i s m in Portugal." 50. This process was completed by the turning over of M a c a o to China on D e c e m b e r 20, 1999. 51. For a r e v i e w of this political evolution, see Jorge Braga de M a c e d o , Portugal Since the Revolution: Economic and Political Perspectives, and Walter Opello, Portugal's Political Development: A Comparative Approach. 52. See E d u a r d o L o u r e n í o , Nós e a Europa ou as Duas Razoes, and Francisco Lucas Pires, Portugal e o futuro da Unido Europeia: Sobre a revisáo dos Tratados em 1996. 53. Isabel Salema, " I d e n t i f i c a 9 a o de um país a n t i g o , " Público, February 20, 1998. 54. For a selected list of declarations, see all F r a n c i s c o Seixas da C o s t a bibliography entries. 55. A n c h o r e d in its c o m m u n i t i e s abroad and cooperation with other cultural and c o m m u n i c a t i o n s organizations, Portugal maintains a cultural and language organization, the Institute C a m o e s , and is proud to have one of the most a d v a n c e d n e w s - o r i e n t e d and culturally e n r i c h e d satellite television p r o g r a m ming networks. 56. Mário Bacalhau, " T h e Image, Identity and Benefits of the E C , " p. 182.

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57. José d a Silva L o p e s , " M o n e t a r y and E x c h a n g e R a t e P o l i c i e s , " p. 98. 58. Ibid., p. 93. 59. J a i m e G a m a , " A s p e c t o s j u r í d i c o s e e c o n ó m i c o s d a i n t r o d u £ ä o d o euro." 60. M i n i s t é r i o d o s N e g o c i o s E s t r a n g e i r o s , " N a h o r a d o e u r o : M o e d a única afirma Portugal no projecto europeu." 61. F o r a d e t a i l e d c o m p a r i s o n of S p a i n and P o r t u g a l w i t h r e g a r d to t h e C o m m o n A g r i c u l t u r a l Policy, see M a g d a l i n i P s a r r o u Y., " L a política agraria d e la C o m u n i d a d E u r o p e a . " 62. M a r i a E d u a r d a R i b e i r o , " E m p l o y m e n t and Vocational T r a i n i n g , " pp. 194-196. 63. Ministry of F o r e i g n A f f a i r s of the P o r t u g u e s e R e p u b l i c , " P o r t u g a l and the I n t e r - g o v e r n m e n t a l C o n f e r e n c e f o r the R e v i s i o n of the T r e a t y on E u r o p e a n U n i o n , " p. 25. 64. Maria d o R o s á r i o G i r a l d e s , " H e a l t h , " p. 2 0 5 . 65. See J o s é C a l v e t d e M a g a l h ä e s , A l v a r o de V a s c o n c e l o s , and J o a q u i m R a m o s S i l v a , Portugal, paradoxo Atlántico: Diagnóstico das retardes LusoAmericanas; A n í b a l C a v a c o S i l v a , Afirmar Portugal no Mundo; Francisco S e i x a s da C o s t a , " W E U on the E v e of the Entry into F o r c e of the A m s t e r d a m T r e a t y " : and all b i b l i o g r a p h y entries of J a i m e G a m a . Ministry of Foreign A f f a i r s of the P o r t u g u e s e R e p u b l i c , and J o ä o de D e u s P i n h e i r o . 66. See M i n i s t é r i o d o s N e g o c i o s E s t r a n g e i r o s , " A n t o n i o G u t e r r e s n o American Club: Portugal deve r e f o r j a r comunidade euro-atlántica" y "Rel a t e s transatlánticas: Futura presidencia portuguesa contacta E U A . " 67. For a r e v i e w of P o r t u g u e s e security policy in the m i d - 1 9 9 0 s , see José C a l v e t d e M a g a l h ä e s , " P o r t u g a l na E u r o p a : o C a m i n h o C e r t o , " and M a r q u e s de A l m e i d a , Portuguese Security Policy. 68. J o ä o Ferreira d o A m a r a l , " P o r t u g a l and the Free M o v e m e n t of L a b o u r , " p. 2 4 3 . 69. M i n i s t r y of F o r e i g n A f f a i r s of the P o r t u g u e s e R e p u b l i c , " A c o r d o de S c h e n g e n : P r o g r a m a de T r a b a l h o da P r e s i d e n c i a P o r t u g u e s a , P r i m e i r o S e m e s tre d e 1997." 70. M i n i s t é r i o d o s N e g o c i o s E s t r a n g e i r o s , " C o o p e r a f ä o M e d i t e r r ä n i c a : Iniciativa portuguesa em 2000." 71. For a r e v i e w of the d e v e l o p m e n t of the I b e r o - A m e r i c a n C o m m u n i t y , see J o a q u i n R o y and A l b e r t G a l i n s o g a (eds.), The Ibero-American Space: Dimensions and Perceptions of the Special Relationship Between Spain and Latin America. 72. Peter N o r m a n , " I n S e a r c h of E u r o - R e l e v a n c e , " Financial Times, M a y 18, 1999, p. 17. 73. M a r i s a C r u z , " E l b a l a n c e de la C u m b r e d e B e r l í n c e n t r a la b a t a l l a e l e c t o r a l entre el P P y el P S O E , " El Mundo, M a y 12, 1999, p. 26. 74. I n t e r n a t i o n a l E u r o p e a n M o v e m e n t r e l e a s e , r e p r i n t e d en El País ( M a d r i d ) , M a y 9 ( E u r o p e ' s d a y ) , 1998. 75. World B a n k , World Development Report 1998/1999, p. 191. 76. E u r o p e a n C o m m i s s i o n . Eurostat Yearbook 98/99, p. 143. 77. For m o r e d e t a i l e d i n f o r m a t i o n r e g a r d i n g the t r a d i n g p a t t e r n s of S p a i n a n d P o r t u g a l , see ibid., pp. 2 7 8 - 3 1 5 .

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78. Tony Barber, "Spanish Inflation Stretches 'One-Side-Fits-All' Policy," Financial Times, May 18, 1999, p. 3. 79. "Inflaçâo mantém derrapagem," Diario Económico, May 17, 1999. 80. "The New Iberia: Not Quite Kissing Cousins," The Economist, May 5, 1990, pp. 55-57. 81. Alvaro Vasconcelos, "Europeístas de 'contra'," Público, December 20, 1995.

Part 4

T H E N E W E S T MEMBERS

12

Austria: Confronting Controversy Reinhard

Heiriisch

"Mentally Austria has not yet arrived in Europe." Such was the assessment of Franz Fischler, 1 Austrian EU c o m m i s s i o n e r for agriculture, three years after Austria had joined the E u r o p e a n Union in 1995. Indeed, history has taught Austrians to shift identities and to live comfortably with contradictory roles. Depending on the prevailing international context, Austria has viewed itself as a gateway to the east, a neutral arbiter, a Western showcase or as the west's abandoned outpost. Complicated also by its historical relationship with Germany, Austria's j o u r n e y toward European integration was, thus, replete with ambivalence and skepticism. Not on the agenda until 1985, joining the European C o m m u n i t y (EC) remained controversial and was long opposed by a significant segment of the population from a broad range of the political spectrum. Yet, on June 12, 1994, Austrians turned out in record numbers (81.27 percent) for the EU r e f e r e n d u m and approved of EU m e m b e r s h i p by margins larger (66 percent) than in any other of the recent applicant countries. Austria joined the European Union on January 1, 1995. A f t e r meeting the stringent criteria for monetary union and following Austria's successful presidency of the EU in 1998, the small Alpine nation seemed well on the way to finding its place in the " N e w Europe." Yet, on January 31, 2000, representatives of 14 m e m b e r governments of the European Union came together in a secret all-night meeting with the expressed goal of isolating their fellow m e m b e r state, Austria, politically and diplomatically. T h e s e measures represented the harshest sanctions ever imposed on a Western European country and were unprecedented in the history of both the European Union and Austria. Along with the 14 EU nations, 267

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most other Western countries downgraded their bilateral contacts with the government in Vienna to a "technical level." Simultaneously, a storm of protest erupted in the international media, which turned Austria from a place of benign neglect into an international pariah to be eclipsed in Europe only by Serbia. What had caused this outrage was the formation of a new government that included ministers of the farright Freedom Party. The new political arrangements, a coalition government between the conservatives and the Freedomites, reflected the outcome of the national elections held a few months earlier on October 3, 1999. After having collaborated for all but 16 years since 1945, the social democrats and conservatives had found it impossible to form yet another, their fifth successive, coalition government.

Pariah, Proporz, and Populism Dropping by 4.7 percent to merely 33.4 percent in the vote, the previously governing Social Democrats (SPO) had their worst showing ever. Their coalition partner, the People's Party (OVP), also known as the Conservatives, lost only 1.4 percent, but for the first time in a national election, managed to slip to the disappointing third place (26.9 percent). A third party, the small Liberal Forum, lost nearly half of its voters and was eliminated outright from parliament. Conversely, the Green Party gained 2.6 percent in electoral support to capture 7 percent of the vote, thus exceeding their wildest expectations. However, the elections received international notoriety because of the success of Austria's right-wing Freedom Party (FPO), led by the controversial populist Jorg Haider. Gaining 5 percent, the FPO obtained 27 percent of the votes and soared to the coveted number-two position, inching ahead of the Conservatives by the narrowest of margins. While it is understandable that outside Austria a tendency exists to interpret Austrian politics in light of the country's troubled Nazi past, the danger remains of overwhelming such an analysis with too much emphasis on right-wing extremism, thereby misinterpreting important developments within the Austrian electorate. While the increase in nationalist and antiforeigner sentiments was undoubtedly a cause for concern, both in terms of Austria's specific historical responsibility and as a reflection of a possible wider European trend, the story of Austrian politics was far more complex and multifaceted. The decade of the 1990s saw major developments in Austrian politics and society. The process of modernization, liberalization, and economic

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integration, as well as the instability in the neighboring Balkans and Eastern Europe, had heightened people's anxieties about economic security, social peace, and political stability. Following an unprecedented influx of foreigners, notably labor migrants and refugees from Eastern Europe and the former Yugoslavia, throughout the 1990s, competition and declining resources intensified both latent xenophobic feelings and material concerns. Despite these enormous developments, the political arrangements in Austria had remained virtually unchanged for decades. Since 1970, the country had been governed without interruption by one of the most powerful SPO parties in Europe. After 1982, the SPO required a coalition partner to secure the necessary majority for the government in parliament in order to compensate for the steady decline of social-democratic electoral fortunes. T h e OVP, Austria's large Christian-Conservative Party, had p e r f o r m e d this role since 1986. This leftist-conservative coalition pulled both parties to the center and converted the traditionally "Euro-skeptical" SPO into supporting an ever-expanding European agenda. M o v i n g to the political center and pushing European integration resulted in defections of core Social Democratic and Conservative Party supporters. The Freedom Party under Jorg Haider, undoubtedly Austria's most savvy politician, skillfully exploited this political vacuum by cobbling together a loose coalition of modernization losers, nationalists, small-business interests, blue-collar workers, and, especially, young voters turned off by politics as usual. Scandals involving influence peddling and corruption in Austria's political system, the problem of foreign immigration, as well as the g o v e r n m e n t ' s inability to communicate its generally very successful policies to the public created an opportunity for Haider to court disaffected voters in all parts of the political spectrum. Haider should be considered neither a " p h e n o m e n o n " nor a "neoNazi," but a savvy and talented populist who looms large in an otherwise small country. His main achievement up to 1999 was to evoke and sustain the promise of c h a n g e without defining it. His rise to p o w e r was made easier by the voters' growing resentment of the fact that the political strength of S P O and O V P was in part attributable to an elaborate patronage system known as Proporz (proportionality). Under this system, positions in virtually all public and quasi-public institutions (e.g., banks, utilities, schools, state media, the executive boards of public companies, etc.) were divided proportionally between the two political camps according to the parties' respective strengths in elections.

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Austria's Road to E U Membership The Austrian Political System: Constructing Consensus Austria is a federal republic consisting of nine Länder (states). All federal legislative power is technically exercised jointly by the bicameral parliament, in which the National Council functions de facto as the central d e c i s i o n m a k i n g organ. Its 183 deputies, elected for four-year terms, carry formally independent mandates from their districts, but owe their legislative careers to the political parties that nominate them on lists of candidates. The most striking political feature of Austria is its so-called social partnership, an elaborate neocorporatist system of e c o n o m i c governance and political conflict resolution. Austro-corporatism is marked by an interorganizational concentration among highly centralized business, labor, and agricultural associations and the government. A particular historical context, along with specific political and e c o n o m i c factors, has given rise to the lasting priority of converging interests for which the social partnership has served as a central bracket. 2 Corporatist actors and organizations as well as their culture of consensus pervade all of Austria's political institutions. 3 A f t e r years of Soviet-imposed neutrality and relative isolation from the West, 4 the Social Democratic-Conservative coalition government made Austria's integration into the Single Market 5 a national priority after 1986. Having to o v e r c o m e e n o r m o u s political opposition 6 f r o m labor groups, farmers, and environmentalists, the government required the backing of the social partners, who secured for themselves a seat at the negotiating table. 7 Austria formally applied for membership on July 17, 1989. In February 1993 in Brussels, Austria, along with Finland and Sweden, began formal negotiations about EU membership, which were concluded by March 1994. Making Austrian law conform to EU law required a total constitutional revision that had to be approved in a national referendum scheduled for June 12, 1994. All parties except the Freedom Party supported the subsequent parliamentary ratification of the accession treaty—the Green Party had changed its negative position after the successful referendum. " E u r o - p h o r i a soon gave way to some disillusionment, in part due to the overblown expectations nurtured by the pro-EU campaign. Austria's EU presidency in the second half of 1998 once again boosted public support for European integration. Generally, Austrians view EU membership more favorably (43 percent approve) than the Swedes (20

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percent), and Finns (33 percent)—the EU average is 46 percent. 8 A majority of Austrians also support the new currency (56 percent), the common foreign policy (64 percent), and even a common defense policy (63 percent). Austria's decision to enter the European Union was clearly motivated by economic concerns. Between 1984 and 1987 Austrian economic growth slowed to 1.8 percent, compounded by massive structural problems in the large state-owned industrial sector. 9 The social partners and the export industry pressured the government to take quick action. Austria's small domestic market, its peripheral geographic location, and numerous barriers to capital imports provided little incentive to foreign investors. While economic forecasts were initially inconclusive about whether EU membership would generate additional G N P growth, 1 0 the fact remained that Austria was entirely dependent on foreign trade. 11 Sensing growing competitive pressures from Germany, Austrian businesses felt that an economic future could only be assured on the basis of equal economic opportunities. The Consequences of Membership By being a member of the European Economic Area (EEA), Austria had already adopted about two-thirds of the acquis communautaire, in all about 1,400 legal enactments of the EC. 1 2 Not included were provisions on the customs union, agriculture, economic and monetary policy, taxes, and regional policy. These additional matters, along with issues from pillars two (Common Foreign and Defense Policy) and three (Justice and Home Affairs) were incorporated into Austrian law in the course of Austria's accession in 1995. Effects on neutrality policy. On July 17, 1989, Austria submitted three applications for accession to the three European Communities, each of which contained a reservation concerning Austria's neutrality. Initially, the EU opposed these reservations, fearing that Austria's neutral status could conflict with Article J(8)2 of the European Union Treaty requiring unanimity for a resolution on joint action related to the common defense policy. In long negotiations with Brussels, Austria subsequently reduced the concept of neutrality to the "military core," which the EU accepted in 1994. 13 Legal effects. Implementing the entire primary and secondary law of the EU, encompassing more than 4,000 EC regulations and some 1,200 EC directives, affected all branches of the federation and the Länder

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g o v e r n m e n t s . Substantial c h a n g e s occurred in constitutional law, labor law, corporate law, telecommunications law, intellectual property rights, and e n v i r o n m e n t a l law (where Austria had m o r e - d e m a n d i n g standards than the EC). By 1998 Austria had i m p l e m e n t e d 89.88 percent of EU directives, thus o c c u p y i n g rank 15 in c o m p l i a n c e a f t e r B e l g i u m . T h e slow rate of i m p l e m e n t a t i o n is partly the result of d i f f e r e n t administrative cultures in A u s t r i a ( d e f e n s i v e , highly h i e r a r c h i c a l , s t a t u s - q u o o r i e n t e d , statusc o n s c i o u s , p r o n e to n e g a t i v e c o o r d i n a t i o n t h r o u g h i n t e r v e n t i o n s ) and the E U ( m o r e innovative, e s p r i t - d e - c o r p s - o r i e n t e d , less f o r m a l , less hierarchical, practicing positive c o o r d i n a t i o n through alliances). 1 4 M o r e over, s p e c i f i c A u s t r i a n legal r e q u i r e m e n t s and E U i m p l e m e n t a t i o n rules, alien to A u s t r i a ' s legal and a d m i n i s t r a t i v e s y s t e m , also h a m p e r implementation.15 Financial consequences. A u s t r i a is a net c o n t r i b u t o r to the E U , p a y i n g a p p r o x i m a t e l y 0 . 5 p e r c e n t of its G D P or U S $ 2 . 5 billion annually. A s u b s t a n t i a l share of this a m o u n t ( a p p r o x i m a t e l y U S $ 2 billion) f l o w s back to Austria in the f o r m of agricultural s u b s i d i e s as well as social and regional structural m e a s u r e s . 1 6 Effects on economic governance. Joining the E u r o p e a n U n i o n implied for the social p a r t n e r s : (1) the loss of policy i n s t r u m e n t s ; (2) the curtailm e n t of legal p o w e r s ; and (3) the t r a n s f e r of regulatory c o m p e t e n c i e s to the supranational level, r e d u c i n g the social p a r t n e r s ' m a c r o e c o n o m i c l e v e r a g e . 1 7 Yet, o r g a n i z a t i o n and r e g u l a t i o n in A u s t r i a c o n t i n u e to be the strategies to increase the c o m p e t i t i v e position of industry. 1 8

Controversial Policy Issues from an Austrian Perspective A s i d e f r o m t r a n s p o r t a t i o n and e n v i r o n m e n t a l policy, w h i c h will be treated extensively in the f o l l o w i n g policy case-study, accession to the EU ignited a n u m b e r of policy c o n t r o v e r s i e s a m o n g Austrians. Agriculture. A u s t r i a ' s agricultural interests clashed with those of other E U nations with l e s s - e x p e n s i v e p r o d u c t i o n . Particularly critical points included p r o d u c t i o n quotas and the a m o u n t and d u r a t i o n of subsidies. 1 9 A u s t r i a eventually agreed to lower p r o d u c t i o n prices but secured t e m porary national c o m p e n s a t i o n p a y m e n t s . Acquisition of real property. T h e w e s t e r n p r o v i n c e s — T y r o l , Vorarlberg, a n d S a l z b u r g — w e r e c o n c e r n e d that E U m e m b e r s h i p w o u l d d r i v e u p

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the price of land suitable for building, an extremely scarce resource in these mountainous areas. One critical question concerned the secondary (holiday) residences purchased by EU (mainly G e r m a n ) residents. Here Austria managed to negotiate a five-year transition period. Anonymous bank accounts. A relic from 1819, anonymous or secret deposit and savings accounts have been hugely popular in Austria. 2 0 In a country of 8 million people, there are currently some 26 million such accounts with approximately US$130 billion. 21 These practices conflict with EU regulations concerning (1) transparency, (2) fair competition (between Austrian and non-Austrian banks), and (3) the equal treatment of EU citizens. In 1996, following mounting pressure f r o m Brussels, Austria changed the law on new deposit accounts, forcing banks to apply the principle of "know your customer." However, fearing a popular uproar, lawmakers left savings accounts unchanged. In 1998, the European C o m m i s s i o n made good on earlier threats and brought the matter before the European Court of Justice, which issued its ruling against Austria in 2000. EU enlargement. Politically, the most sensitive issue for Austrians, apart from Economic and Monetary Union, has been the Union's scheduled eastward expansion. Supported by local politicians, many Austrians fear economic competition as well as a flood of migrant workers and day laborers from Eastern Europe. On the other hand, studies show that Austria stands to benefit economically and would enhance its geopolitical security by pushing the E U ' s external border further east. 2 2 Foreign policy. In terms of C o m m o n Foreign and Security Policy (CFSP), Austria's main foreign policy concerns lie in Eastern Europe and the Balkans. Austrians follow closely the conflicts in the f o r m e r Yugoslavia, which sent waves of refugees to Austria. Cultural and political ties to the region, most of which was part of A u s t r i a - H u n g a r y until 1918, have mobilized widespread support for "containing Serbian aggression." It is to be expected that Austria's most active contributions to C F S P will concern the former Yugoslavia. On February 4, 2000, Austria's foreign policy entered its worst crisis since 1945. As the new center-right government took control, Austria found itself completely isolated within the European Union. The Treaty of Amsterdam signed by the EU members in 1997 served as the basis for the unusually harsh reaction. It included a pledge to fundamental European rights and principles, such as nondiscrimination, justice,

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and democratic practices, that was originally intended for scrutinizing future applicant countries f r o m Eastern European that were suspected of harboring undemocratic political baggage. In was completely unexpected that so soon after the adoption of these principles a Western country such as Austria would become their first test case. Most controversially, the actions by the EU were not taken in response to any Austrian transgressions, but merely intended as a matter of collective disapproval and precaution. In fact, Haider was not even a member of the government and subsequently even resigned as Freedom Party leader. Moreover, the new government's program contained a preamble with an explicit commitment to the values and principles of Amsterdam. Nevertheless, the EU members decided to maintain their sanctions as long as the Freedom Party was to remain in office. This was remarkable because, for the first time, EU countries dared interfere with the internal democratic process in a fellow member state. It seems the reaction of European governments to Austria's center-right coalition had to be understood in light of two well-founded fears: (1) embattled conservative parties elsewhere (particularly in Germany, Belgium, France) might become tempted to form governments with respective far-right parties in their countries; and (2) the spread of H a i d e r ' s populism as well as Austria's shift to the right might seriously jeopardize the E U ' s most ambitious project thus far, its eastward expansion.

Policy Case Study: Transalpine Traffic Jams— Transport Policy Disputes Between Austria and the E U Since the early 1970s, a 200-mile-long band of e x p r e s s w a y (InntalBrenner-Autobahn) through A u s t r i a ' s alpine province of Tyrol has linked two of Europe's largest markets, Italy and Germany. With an average of 50 million motorists and 1 million trucks per year, and some 4 0 , 0 0 0 vehicles on peak days, the B r e n n e r - A u t o b a h n leads through ecologically sensitive alpine valleys that depend heavily on tourism and agriculture. 2 3 Efforts by the Austrian government over the past 25 years to contain the explosive growth of c o m m e r c i a l transit traffic ( 1 9 6 7 - 1 9 8 0 : +22 percent per year) have brought Austria into repeated diplomatic conflict with its neighboring countries and the EU. 2 4 Geography and Swiss truck-weight restrictions are responsible for the lion's share of European transalpine goods transported on Austrian roads (5.2 million tons), compared with smaller freight volumes for France (4.7 million tons) and Switzerland (1.1 million tons). 2 5 Impacted by nitric

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oxide ( N O ) e m i s s i o n s , noise, and road c o n g e s t i o n , vocal and politically p o w e r f u l local interests b e g a n p r e s s u r i n g the A u s t r i a n g o v e r n m e n t in the 1980s to act m o r e decisively to r e g u l a t e c o m m e r c i a l traffic.

Policy Objectives and Strategies A f t e r c o n s i d e r i n g a n u m b e r of o p t i o n s to lessen the i m p a c t of transit t r a f f i c ( " s i l e n t a s p h a l t , " e x p a n d i n g rail f r e i g h t service, m a n d a t i n g cleaner e n g i n e s , etc.), only the application of regulatory and financial m e a s u r e s p r o m i s e d i m m e d i a t e and e f f e c t i v e r e s u l t s . 2 6 Prior to EU m e m b e r s h i p , Austria took full a d v a n t a g e of its u n i m p e d e d sovereignty by i m p o s i n g w e i g h t limits, n a t i o n a l q u o t a s on the n u m b e r of transit trucks, and substantial annual road taxes. W h e n A u s t r i a b e g a n c o n t e m p l a t i n g E C m e m b e r s h i p , while transit v o l u m e s kept g r o w i n g steadily, the Austrian g o v e r n m e n t needed to find an a c c o m m o d a t i o n with B r u s s e l s on this issue. O t h e r w i s e , the E C or individual m e m b e r states could have used the transit question to extract substantial c o n c e s s i o n s f r o m Austria d u r i n g the accession talks.

Different Actors in Multiple Policy Arenas The national setting. All transit routes fall under the e x c l u s i v e jurisdiction of the federal g o v e r n m e n t , specifically the Ministry of Transportation and T r a f f i c , f o r m e r l y an S P Ö p o r t f o l i o . W h i l e the m i n i s t e r of t r a n s p o r t a t i o n was r e s p o n s i b l e f o r s p e c i f i c p o l i c y d e c i s i o n s , overall p o l i c y f o r m a t i o n r e q u i r e d the u n a n i m o u s c o n s e n t of A u s t r i a ' s S P Ö Ö V P coalition g o v e r n m e n t . T h e Ministry of E n v i r o n m e n t (responsible f o r e m i s s i o n s and e n v i r o n m e n t a l i m p a c t ) , the M i n i s t r y of A g r i c u l t u r e ( r e s p o n s i b l e f o r water reservoirs, plant life, and the protection of landscapes), the Ministry of Health (responsible for the health e f f e c t s on ind i v i d u a l s ) , a n d the M i n i s t r y of E c o n o m i c A f f a i r s (in c h a r g e of road c o n s t r u c t i o n , energy, trade, and industry) all have shared c o m p e t e n c i e s in areas related to t r a f f i c and its i m p a c t on the e n v i r o n m e n t . A l t h o u g h transit traffic is a federal issue, its e f f e c t s are felt locally a n d r e g i o n a l l y , i m p a c t i n g t o u r i s m , local t r a n s p o r t a t i o n , the e n v i r o n m e n t , and a g r i c u l t u r e — a r e a s that fall u n d e r the a u t o n o m o u s or partial j u r i s d i c t i o n of m u n i c i p a l and L ä n d e r g o v e r n m e n t s . W h i l e the L ä n d e r m a y e x p r e s s their i n t e r e s t s t h r o u g h v a r i o u s f o r m a l m e c h a n i s m s (e.g., the Federal Council), i n f o r m a l c h a n n e l s provide a m o r e e f f e c t i v e voice. T h e h i g h l y f e d e r a t e d o r g a n i z a t i o n a l s t r u c t u r e of the Ö V P p r o v i d e s

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Conservative Länder leaders, such as the governor of Tyrol, with ample opportunity to shape the Conservative Party's national-level political agenda. Austria's trucking and transportation lobby has also come to play a special role. Local transportation firms and policymakers were anxious that road taxes apply only to foreign vehicles and to short segments of specific transit routes. A more extensive toll system would have affected local deliveries and thus raised prices for Austrian consumers. Local officials also did not want to restrict the flow of noncommercial vehicle traffic for fear it might impede tourism. Owing to the f r a g m e n t e d nature and the territorial differentiation of responsibilities, environmental policy and related agendas are characterized in Austria by issue networks rather than by the otherwise typical (corporatist) policy communities (e.g., such as in social policy). 2 7 Nevertheless, the saliency of the transit issue, combined with the enormous burden it is perceived to impose on the local population, the environment, agriculture, and the e c o n o m y (especially tourism), has created a fairly homogenous Austrian policy perspective on this issue. It is shared across the political spectrum, uniting such disparate interests as " g r e e n " activists, industrial leaders, and farmers. Since the allimportant decisionmaking arena on transit policy is located at the European level, the Austrian federal government has been the paramount architect of Austrian policy initiatives. The international level. The countries most impacted by Austrian restrictions on transit have been Italy and Germany. Business interests and policymakers in both countries, specifically in Germany's southern province of Bavaria, have repeatedly threatened with retaliatory measures and sometimes taken action. In 1989 foreign trucking firms blockaded all m a j o r border crossings in western Austria in response to strict nighttime noise restrictions. A year later, Italy reacted to the construction-related partial closure of the transit autobahn by temporarily revoking all transport permits for vehicles to and from Austria, effectively bringing the entire transalpine traffic to a standstill. Another important player is Switzerland, whose 28-ton weight limit for trucks forces an additional 29 percent of all transalpine commercial traffic on lengthy detours through either Austria or France. 2 8 The most important international actor on this issue has been the European Commission, specifically the directorate-general VII and the commissioner for transportation. Since the conclusion of the Treaty of R o m e , the EC has regarded the alpine transit arteries as "vitally important." 2 9 While expressing s y m p a t h y for the plight of the people

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a f f e c t e d by c o m m e r c i a l traffic, the C o m m i s s i o n has generally o p p o s e d all d i s c r i m i n a t o r y r e s t r i c t i o n s i m p o s e d by A u s t r i a a n d S w i t z e r l a n d , such as national quotas, n i g h t t i m e restrictions, and e x e m p t i o n s for national t r a n s p o r t a t i o n c o m p a n i e s . P u t t i n g the b l a m e partly on A u s t r i a a n d S w i t z e r l a n d f o r their f a i l u r e s to u p g r a d e the rail i n f r a s t r u c t u r e , E C / E U v i e w s the increase in road traffic as the result of an inadequate and a n t i q u a t e d railroad i n f r a s t r u c t u r e (low t u n n e l c l e a r a n c e , small c u r v e r a d i u s , i n a d e q u a t e l o a d i n g f a c i l i t i e s , i n a d e q u a t e train capacity, l o n g c l e a r a n c e p r o c e d u r e s at the b o r d e r s , etc.). W h i l e a t r u c k e r can d r i v e the 4 0 0 k i l o m e t e r s f r o m M u n i c h to Verona in o n e night, rail transportation can take up to two days. T h e E u r o p e a n C o m m u n i t y has f a v o r e d a c o m p r e h e n s i v e a p p r o a c h to a d d r e s s i n g E u r o p e a n t r a f f i c p r o b l e m s , of w h i c h t r a n s a l p i n e t r a f f i c is s e e n as an i n t e g r a t e d c o m p o n e n t . Articles 1 2 9 b - 1 2 9 d of the new Title XII of the E C Treaty p r o v i d e s for the e s t a b l i s h m e n t and e x p a n sion of T r a n s - E u r o p e a n N e t w o r k s ( T E N ) of c o m m u n i c a t i o n , transp o r t a t i o n , and e n e r g y i n f r a s t r u c t u r e s . In a w h i t e p a p e r titled Growth, Competitiveness, Employment, former Commission president Jaques D e l o r s p r o p o s e d s h o r t - t e r m i n v e s t m e n t s of s o m e E C U 8 2 billion in 26 priority T E N t r a f f i c i n f r a s t r u c t u r e projects, i n c l u d i n g the M u n i c h B r e n n e r - V e r o n a axis as one of two transalpine rail c o r r i d o r s . 3 0 T h e EU s u b s e q u e n t l y e n a c t e d t h e s e s u g g e s t i o n s with s o m e m o d i f i c a t i o n s and designated the transalpine corridor a priority project, thus m a k i n g it eligible for additional short-term investments. The planned 409-kilometer Munich-Brenner-Verona rail link with a capacity for of some 18 million tons of freight (1.8 million trucks) a year will consist of 2 3 6 k i l o m e t e r s of new tunnels. Its central 5 5 - k i l o m e t e r Brenner-Base-Tunnel alone is estimated to cost some E C U 12.5 billion. 3 1 However, since the project is not likely to be concluded before 2015, the A u s t r i a n g o v e r n m e n t felt that, in the m e a n w h i l e , it had to p u r s u e both unilateral action and cooperative solutions with the E C / E U .

Policy and Negotiations Prior to Accession To the e x t e n t p o s s i b l e , A u s t r i a in 1988 n e e d e d to c o m e to an u n d e r s t a n d i n g w i t h the E C on t r a n s a l p i n e t r a f f i c b e f o r e f o r m a l l y a p p l y i n g f o r E C m e m b e r s h i p . In a strategic m o v e , A u s t r i a allied itself w i t h S w i t z e r l a n d , w h i c h also n e e d e d to settle its transit p r o b l e m with Brussels. Both countries m a d e clear that without a satisfactory resolution of the transit p r o b l e m they w o u l d v e t o the c o n c l u s i o n of the E E A Treaty b e t w e e n the E C and E F T A .

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On December 6, 1992, following three years of difficult negotiations, Austria and Switzerland each concluded a transit agreement with the EC. 3 2 This transit agreement forced all sides to make substantial concessions. The agreements were viewed by all signatories as a comprehensive attempt to reconcile the c o m p e t i n g interests of e c o n o m i c growth, local needs, and environment. Scheduled to go into e f f e c t in 1993, the arrangements were to remain in force for 12 years. T h e agreement with Austria sought to reduce the impact of transit road traffic by (1) raising soot and N O emissions standards; (2) establishing an enforcement mechanism based on an "ecopoints system"; and (3) applying the "true cost" and "polluter pays" principles as laid out in Article 130r, Section 2 of the EC Treaty. From the start of the negotiations, the main sticking points concerned the tolerable volume of transit traffic, the compatibility of standards of vehicle weights and lengths, unilateral road taxes, and regulatory measures, as well as EC contributions to Austrian and Swiss rail infrastructure investments. The centerpiece of the agreement with Austria was the complex ecopoints system, which allocated point-quotas proportional to the nations' previous transit volumes. The points were purchased for individual trucks on the basis of giving preference to those with the technologically highest feasible emissions standards. The ecopoint system, thus, provided an incentive for trucking firms across Europe to switch to vehicles with cleaner engines. The goal was to reduce h a r m f u l N O emissions by 60 percent of 1991 levels by 2002. 3 3 Although Austria had initially favored a model capping the transit volume once an emission ceiling had been exceeded, the EC insisted on the ecopoints solution. The latter promised greater flexibility and even an increase in transit traffic by reducing the emissions per vehicle. Austria, however, which tacitly agreed to a c c o m m o d a t e standard EC 40-ton trucks, could still unilaterally regulate transit if the annual volume exceeded 8 percent of 1991 levels (1,365,120 trips). Nevertheless, Austria's restrictive interpretation of the agreement after its conclusion continued to be a source of great tension in Austrian-EU relations prior to Austria's accession.

Policy and Strategies During Austria's Accession Talks When Austria applied for EU membership, the European Commission made it clear that a n u m b e r of points in the transit agreement did not conform to EU law. 34 It criticized specifically (1) the special bilateral

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a g r e e m e n t s b e t w e e n Austria and s o m e E U m e m b e r states; (2) the unilateral weight restrictions; (3) the m o n i t o r i n g of e c o p o i n t s and weight limits at A u s t r i a ' s borders; and (4) the A u s t r i a n system of road taxes. 3 5 The EU m a i n t a i n e d that with the realization of the internal market a f t e r J a n u a r y 1, 1993, the c o n c e p t of " t r a n s i t " n o l o n g e r a p p l i e d . Restrictions on the f r e e f l o w of g o o d s would thus be regarded as unacceptable under Single M a r k e t rules. 3 6 In terms of a negotiating strategy with the E U , Austria first hoped to keep a transit a g r e e m e n t out of the accession talks altogether, which Brussels r e j e c t e d . A f t e r long and d i f f i c u l t n e g o t i a t i o n s with B r u s s e l s , Austria was finally permitted to k e e p its ecopoint system for the foreseeable future. 3 7 It had taken a personal appeal by the Austrian chancellor to French president Mitterand to o v e r c a m e a threatened French veto. It w a s e s p e c i a l l y i m p o r t a n t f o r A u s t r i a that the goal of r e d u c i n g N O e m i s s i o n s by 2 0 0 1 by 6 0 p e r c e n t of 1991 levels was written into the treaty. 3 8 U n l e s s the E u r o p e a n C o u n c i l c o u l d r e c o m m e n d an e f f e c tive alternative ( w h i c h A u s t r i a as an E U m e m b e r could a l w a y s veto), the e c o p o i n t s r e g i m e was to be e x t e n d e d e v e n f u r t h e r until D e c e m b e r 31, 2003. W h e n the responsibility for m o n i t o r i n g the e c o p o i n t s shifted to the EU in 1997, A u s t r i a a b o l i s h e d bilateral q u o t a s , r e d u c e d its h i g h e s t r o a d - u s e r c h a r g e s , c e a s e d all b o r d e r i n s p e c t i o n s of e c o p o i n t s , and began setting up an electronic m o n i t o r i n g system. To c a l m the fears of the d o m e s t i c agricultural lobby, Austria was also p e r m i t t e d to p r o v i d e special subsidies to area f a r m e r s . After Austria's Accession: The Transit Standoff with the EU Austria had invested c o n s i d e r a b l e political capital in being allowed to keep its ecopoints system as an E U m e m b e r . In time, however, the A u s trian g o v e r n m e n t was b e g i n n i n g to h a v e serious d o u b t s about the system, w h i l e the E U a p p e a r e d to have g r o w n f o n d of it. W h e n r e v i e w i n g the transit a g r e e m e n t in 1997, the E U C o m m i s s i o n c o n c l u d e d that the e c o p o i n t s m o d e l was an e f f e c t i v e m e a n s of r e d u c i n g pollution. 3 9 Since 1993, h a r m f u l e m i s s i o n s h a d b e e n r e d u c e d by a b o u t o n e - f i f t h , w h i l e the allocated quantity of e c o p o i n t s had n e v e r b e e n e x c e e d e d . In short, e c o p o i n t s were clearly not r e d u c i n g transit traffic v o l u m e s , which c o n tinued to i m m o b i l i z e the a f f e c t e d A u s t r i a n p o p u l a t i o n . 4 0 In f a c t , the a m o u n t of f r e i g h t t r a n s p o r t e d on A u s t r i a n transit r o u t e s had risen sharply f r o m 16.7 m i l l i o n t o n s in 1992 to 2 0 . 3 m i l l i o n t o n s in 1996, while S w i t z e r l a n d had seen o n l y a m o d e s t i n c r e a s e ( f r o m 2.2 to 3.5

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million tons), and France none at all. There, a general road-toll system kept freight volumes constant at 10.3 million tons. The reasons for this increase were several, such as the large number of available ecopoints, rapid fleet modernization, innovative strategies to m a x i m i z e ecopoint usage, and the increased use of legal exemptions 4 1 and smaller 7-ton trucks. Moreover, the E U - m a n d a t e d reduction of road user fees and tolls in 1995 increased road transit by 20 percent. The Austrian government found itself in the unenviable position of having to choose between mounting domestic pressure and international obligations. Political expedience prevailed, and Austria implemented massive unilateral Brenner road toll and transit fee increases, 4 2 while simultaneously lowering the domestic tax on commercial trucks. In response, the European Commission initiated legal proceedings on the grounds that Austrian measures were discriminatory and violated specifically Directive 93/89/EEC concerning road-user charges. When citizens' groups subsequently staged a series of road blockades, Austria threatened to ban nighttime traffic completely. 4 ' By 1998, the situation was becoming increasingly complex, characterized by an array of competing and coalescing preferences among a n u m b e r of players. T h e European Commission was interested in a global solution to the alpine transit problem, based on the principles of "user pays" and "true cost" pricing. Commissioner Kinnock proposed a system of road-user charges (Eurovignettes) designed to exact substantial premiums from the biggest polluters. 4 4 Successive meetings of the Transport Council in 1997 and 1998, however, failed to overcome Italian and G e r m a n objections to the high road fees contained in the Kinnock proposal. 4 5 Switzerland, worried that its flag carrier SwissAir would be kept out of the lucrative European market, signaled its willingness to compromise on alpine transit. Specifically, the Swiss suggested trading their low truck-weight limit for gradually increasing road-user charges. Germany and Italy, however, were determined to block any agreement with either Austria or Switzerland that raised transit road fees. Austria was thus facing a d i l e m m a . It wanted an EU a g r e e m e n t with Switzerland that would force the Swiss to rescind their weight restrictions, thus diverting traffic away f r o m Austria. On the other hand, a threat to veto the deal with Switzerland would provide the Austrian government with enough leverage to persuade the EU Commission to drop its case against Austria b e f o r e the European Court of Justice (ECJ). Furthermore, Austria had to ensure that EU concessions on

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Swiss transit f e e s remained competitive with any agreement Austria reached with the Commission concerning Austrian road charges. The Austrian transport minister, Caspar Einem, decided on a "carrotand-stick a p p r o a c h . " The carrot was an Austrian promise to help deliver both the transit agreement with Switzerland and C o m m i s s i o n e r Kinnock's long-delayed Eurovignettes plan during Austria's upcoming Council presidency. Simultaneously, the Austrian g o v e r n m e n t conveyed to C o m m i s s i o n president J a c q u e s Santer that the transit issue was of "vital national interest," thus signaling determination and obstructionism, if the EU did not relent in its harsh stance. 4 6 An intensive diplomatic exchange preceded the important Transport Council session on December 1, 1998. Austria had found important allies in France and other EU member states that had been most impacted by Swiss transit restrictions. Vienna was also fortunate in that the new German Social D e m o c r a t i c - G r e e n government was largely immune to pressures from the German transportation lobby. By three o'clock A.M. and "after torturous discussion" [sic], determined Italian opposition was finally overcome. 4 7 The package deal contained a mutually satisfactory transit accord 4 8 with Switzerland, and a unanimous agreement on Kinnock's proposed new directive on "road charges for heavy goods vehicles" (Eurovignettes). 4 9 As the transport ministers were ready to depart, Minister Einem placed the issue of the Austrian road toll on the agenda. The weary Council members finally reached a compromise under which Austria could maintain its higher toll on top of the ecopoint-based road fees, provided it applied to the entire 120-km Brenner-Inntal Autobahn (the lower price/km ratio makes the toll compatible with EU law). Finally, when Austria failed to do so, it took a decision by the ECJ in March 2000 to bring the BrennerAutobahn toll in compliance with Directive 93/89/EEC.

Final Analysis and C o n c l u s i o n This outcome of the transalpine traffic imbroglio allowed the Austrian government to extricate itself f r o m a situation in which policymakers were facing a choice between g r o w i n g public anger over m o u n t i n g traffic volumes, or proceedings before the ECJ when Austria had little hope of prevailing. The outcome itself and the strategy e m p l o y e d to bring it about demonstrate how a small but determined actor can take advantage of the fragmented and shifting interests arrayed against it in multiple policy

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a r e n a s . T h e transit issue i n v o l v e d several p l a y e r s at the s u p r a n a t i o n a l , n a t i o n a l , and s u b n a t i o n a l levels w h o f o u n d it difficult to align their obj e c t i v e s , e s p e c i a l l y w h e n c o m p e t i n g interests w e r e at stake. F o r A u s t r i a on t h e o t h e r h a n d , t h e t r a n s i t p r o b l e m w a s of p a r a m o u n t i m p o r t a n c e . A u s t r i a ' s g e o g r a p h i c location gave it a strategic potential to b l o c k vital E U c o m m e r c i a l t r a f f i c . T h e g o v e r n m e n t w a s thus able to prioritize its policy o b j e c t i v e s accordingly. Austria w a s also f o r t u n a t e b e c a u s e it c o u l d rely on a d o m e s t i c c o n s e n s u s . Its n e g o t i a t o r s c o u l d thus p r e s e n t a fairly u n i f i e d position with the f e d e r a l g o v e r n m e n t as the a l l - i m p o r t a n t s t r a t e g i s t a n d actor, F u r t h e r m o r e , A u s t r i a w a s at t i m e s in a p o s i t i o n to veto or d e l a y a g r e e m e n t s i m p o r t a n t to o t h e r parties in to the n e g o t i a t i o n s . F r o m the p e r s p e c t i v e of A u s t r i a n p o l i c y m a k i n g , this case p r o v i d e s f u r t h e r e v i d e n c e that E U m e m b e r s h i p has bolstered the role of the executive vis-à-vis other political institutions such as the Austrian p a r l i a m e n t and subnational political actors. H o w e v e r , the transit issue also e x p o s e s s o m e of the w e a k n e s s e s inherent in the Austrian approach to p o l i c y m a k ing in the E u r o p e a n arena. Prior to Minister E i n e m ' s tenure at the transport ministry, there was a noticeable lack of anticipation, initiative, and i m a g i n a t i o n . T h e r e was generally little Austrian input in the early stages of o p i n i o n and policy f o r m a t i o n at the E u r o p e a n level. I n s t e a d , A u s t r i a waited for a consolidated policy position to e m e r g e , which it then sought to b l o c k , d e f l e c t , or w e a r d o w n in p r o t r a c t e d n e g o t i a t i o n s . O n a m o r e general level, the s h o r t c o m i n g s r e v e a l e d in the transit n e g o t i a t i o n s h a v e p r e v e n t e d the nation f r o m playing a m o r e substantial role in E U policym a k i n g on issues that are of less i m m e d i a t e c o n s e q u e n c e f o r Austria.

Notes 1. "Interview with Commissioner Franz Fischler," Format 1, October 5, 1998, p. 40. 2. Emmerich Talos, "Entwicklung, Kontinuität und Wandel der Sozialpartnerschaft," pp. 11-34; Randall W. Kindley, "The Evolution of Austria's Neo Corporatist Institutions," pp. 53-93. 3. Reinhard Heinisch, "Modernization Brokers: Explaining the Resurgence of Austrian Corporatism in the Mid-1990s." 4. Chong-ko Tzou, Die Rolle der Neutralen—Österreichs Beitritt zur EU und die Europäische Integration. 5. Ferdinand Karlhofer and Emmerich Talos, Sozialpartnerschaft und EU: Integrationsdynamik und Handlungsrahmen der österreichischen Sozialpartnerschaft. 6. The minister of agriculture, Josef Riegler of the ÖVR

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7. Kalhofer and Talos, Sozialpartnerschaft und EU. 8. Profil, November 8, 1998, p. 41. 9. Paul Luif, On The Road to Brussels—The Political Dimension of Austria's, Finland's, and Sweden's Accession to the European Union. 10. Analyses by Austrian economists were inconclusive, even predicting that the expected trade deficit and the transaction costs of membership would offset any economic gains. 11. Austria's trade in percent:

1988 Exports to 1988 Imports from

EU 65 68

Germany 36 44

EFTA 7

Eastern Europe 9

6

From 1986 to 1991 exports to the EU rose by 5.8 percent and imports rose by 3.4 percent—Tzou, Die Rolle, p. 98. 12. Herbert Hausmaninger, The Austrian Legal System. 13. Ibid., p. 84. 14. T h e o Öhlinger "Öffentliche Verwaltung," pp. 113-133. 15. Ibid. 16. Hausmaninger, The Austrian Legal System. 17. Gerda Falkner, "Sozialpartnerschaftliche Politikmuster und Europäische Integration," pp. 7 9 - 1 0 2 . 18. Franz Traxler, "Sozialpartnerschaft am Scheideweg: Zwischen korporartistscher Kontinuität und neoliberalcm Umbruch," pp. 13 -33. 19. Ranier Nick, "Survey of Austrian Politics," pp. 4 0 9 - 4 2 5 . 20. See Leo Pötzelberger, "Bankgeheimnis und Anonymität in Österreich," pp. 8 3 - 8 5 ; Günther Roth and Hannes Fritz, "Anonymität, Identitätsfeststellung und Bankgeheimnis," pp. 4 0 9 - 4 2 8 ; Christian Hausmaninger, "Einschränkung der Anonymität im Einlagen- und Wertpapierbereich—Chancen und Rechtsfolgen einer Verurteilung Österreichs durch den EuGH," pp. 424-428. 21. Financial Times, May 14, 1996, p. 13. 22. Wilhelm Kohler and Christian Keuschnigg, "Die Osterweiterung der EU; Eine österreichische Perspektive," pp. 3 2 4 - 3 3 8 . 23. Eberhard Brandt and Peter Schäfer, "Der alpenquerend Transitverkehr—auf der Suche nach Sustainable Mobility," pp. 2 0 4 - 2 3 8 . 24. Wilfried Puwein, "Der Transitverkehr," pp. 175-181. 25. Wilfried Puwein, "Erste Bewertung des Transitvertrages," p. 110. 26. Ibid., p. 109. 27. Gerda Falkner and Wolfgang C. Müller, Österreich imeuropäischen Mehrebenensystem. 28. Brandt and Schäfer, "Der alpenquerende," p. 205. 29. Ibid., p. 206. 30. Trans-European Networks, The Group of Personal Representatives of the H e a d s of State or G o v e r n m e n t , Reports, O f f i c e for Official Publications of the European Communities, Luxembourg. 31. Brandt and Schäfer, "Der alpenquerende," p. 205. 32. Opinion of the Economic and Social Committee (CES) on the Agreement Between the European Economic Community and the Republic of Austria

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on the transit of goods by road and rail, and the agreement between the European E c o n o m i c C o m m u n i t y and the Swiss C o n f e d e r a t i o n on the carriage of goods by road and rail. Offic ial Journal 313, 30/11/1992, p. 0016. 33. Brandt and Schäfer, " D e r a l p e n q u e r e n d e , " f n . 37. 34. Ibid., p. 223. 35. Council Directive: of 25 October 1993 on the application by m e m b e r states of taxes on certain vehicles, Official Journal L270, 12/11/1993, p. 0 0 3 2 0038. 36. Brandt and Schäfer, " D e r a l p e n q u e r e n d e , " p. 224. 37. Austrian Accession Treaty, Protocol 9, Art. 11/29-08-1994. 38. Austrian Accession Treaty, Protocol 9, Art. 16. 30-12-1994. 39. Puwein, "Erste B e w e r t u n g , " p. 116. 40. Verkehr& Umwelt (transportation journal), April, 1994, p. 3. 41. T h e s e C o n f é r e n c e E u r o p é e n n e Des Ministres Des Transports ( C E M T ) permits are designed to prevent possible bottlenecks in cross-border commercial traffic. 42. Austria doubled the one-trip transit permit f o r l o w - e m i s s i o n s trucks and sharply raised the Brenner-Autobahn toll. 43. Der Standard. July 18, 1998, p. 1. 44. C o m . P R ( E u r o p e a n C o m m i s s i o n Press R e l e a s e ) " K i n n o c k E n d o r s e d Principle for Europe-Wide Approach to Transport Pricing," June 2, 1998. 45. C o . P R 2119 (Council Press Release), T r a n s p o r t C o u n c i l , March 11, 1997, p. 3. 46. Der Standard, February, 2 1998, p. 36. 47. See Co.PR 2142 (Council Press Release), Council-Transport, N o v e m ber 30, 1998, p. 5.; Profit, January 2, 1999, p. 24. 48. Switzerland accepted annually increasing quotas of 40-ton trucks after 2000, and lower-than-intended transit fees. 49. Co.PR 2142, Council-Transport, p. 5.

13

Sweden: Retreat from Exceptional ism Karen Anderson

Like Great Britain and Denmark, Sweden is a reluctant participant in the European integration process. Since the end of World War II, the Swedish political establishment has viewed European integration with suspicion and ambivalence. Until about 1990, the dominant view held that participation in the European C o m m u n i t y (EC) was not consistent with S w e d e n ' s long-standing policy of neutrality and would threaten the viability of S w e d e n ' s extensive welfare state. Thus, for more than 4 0 years, Sweden eschewed m e m b e r s h i p in the EC in favor of following its own distinctive path in both foreign and domestic affairs. 1 The image of Swedish e x c e p t i o n a l i s m was shattered in October 1990, however, when the social-democratic government announced its intention to apply for full E C membership. This dramatic policy reversal was made during an acute currency crisis and was negotiated by party elites without public debate. As the Swedish economy fell into its worst recession since the 1930s, the m o m e n t u m in favor of E C membership increased as politicians and the public looked to membership in the Community as the solution to S w e d e n ' s economic difficulties. Sweden submitted its EU application in July 1991, and 52.3 percent of the Swedish electorate voted in favor of membership in a referendum held in N o v e m b e r 1994. On January 1, 1995, Sweden joined Austria and Finland as a new m e m b e r of the European club. However, recent public opinion polls reveal w i d e s p r e a d dissatisfaction with EU m e m b e r ship. Acutely aware of the public's skepticism about the benefits of EU m e m b e r s h i p , the current social-democratic government has adopted a "wait and s e e " attitude to Economic and Monetary Union (EMU). Like fellow Euro-skeptics Denmark and Great Britain, Sweden is not part of the euro zone created in 1999.

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Members

T h i s c h a p t e r investigates the impact of EU m e m b e r s h i p on S w e d ish p o l i t i c s . T h e first section s u m m a r i z e s S w e d e n ' s a m b i v a l e n t relationship with E u r o p e and analyzes how this legacy has influenced Swed e n ' s b e h a v i o r in the E U . T h e s e c o n d part of the c h a p t e r p r o v i d e s a brief o v e r v i e w of the impact of EU policies on S w e d i s h e c o n o m i c , social, e n v i r o n m e n t a l , and f o r e i g n policy. T h e d i s c u s s i o n e m p h a s i z e s S w e d i s h c o n c e r n s related to national sovereignty, subsidiarity, and the E U ' s d e m o c r a t i c deficit. T h e third section p r o v i d e s a detailed analysis of the i n f l u e n c e of EU m e m b e r s h i p on S w e d i s h e c o n o m i c a n d social policy. Finally, the c h a p t e r c o n c l u d e s with s o m e c o m m e n t s a b o u t the likely f u t u r e d e v e l o p m e n t of S w e d i s h E U m e m b e r s h i p .

The National Context: Sweden's Ambivalent Relationship with Europe S w e d e n ' s decision to join the E C must be seen as the result of a radical r e i n t e r p r e t a t i o n of its l o n g - s t a n d i n g attitude of a l o o f n e s s and u n i q u e n e s s vis a vis Europe. 2 The belief that Swedish political and econ o m i c institutions were d i f f e r e n t and e v e n superior to those on the Eur o p e a n c o n t i n e n t was b a s e d on S w e d e n ' s s e l f - p e r c e p t i o n as an " i n t e r nationalist sovereign state." S w e d i s h political identity, like its N o r d i c n e i g h b o r s ' , was based in part on " b e i n g better than E u r o p e . " 3 In short, S w e d e n saw itself as an e x c e p t i o n a l state with little n e e d f o r integration into E u r o p e . T h e central e l e m e n t s of S w e d i s h e x c e p t i o n a l i s m are its socialw e l f a r e m o d e l and an activist foreign policy based on a r m e d neutrality. As one analyst o b s e r v e s , the s o c i a l - d e m o c r a t i c vision of the folkhem or " p e o p l e ' s h o m e " c a p t u r e s the e s s e n c e of the S w e d i s h (and N o r d i c ) welfare-state model. Unlike the continental w e l f a r e states, the S w e d i s h welfare model is based on universal social citizenship rights that provide w a g e e a r n e r s with g e n e r o u s social insurance b e n e f i t s and h i g h - q u a l i t y public services. 4 T h u s , by c o m b i n i n g c o n c e r n s for social equity with a capitalist e c o n o m y , the s o c i a l - d e m o c r a t i c w e l f a r e state r e p r e s e n t e d a " m i d d l e " or " t h i r d " way between raw capitalism and state socialism. S w e d i s h neutrality p o l i c y w a s the natural c o r o l l a r y to d o m e s t i c s o c i a l - w e l f a r e policies. U n l i k e m o s t of Western E u r o p e , S w e d e n w a s spared the devastation of both world w a r s , and the policy a c h i e v e d the status of g o s p e l a m o n g political elites and the public. D u r i n g the postw a r p e r i o d , S w e d i s h n e u t r a l i t y policy took on a m o r e i n t e r v e n t i o n i s t c h a r a c t e r . E x t e n s i v e aid p r o g r a m s and solidarity with l e s s - d e v e l o p e d

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countries were the hallmarks of international activism. In sum, Swedish collective identity, especially on the left, was based in part on its difference from Europe. For decades, leading social democrats viewed European integration with suspicion, for it seemed to represent "Capitalism, Catholicism, Conservatism, and Colonialism." 5 When the Treaty of Rome was signed in 1957, Sweden chose to remain outside of the EC. Because the original six were members of NATO and the EC had political ambitions, the new institution appeared to conflict with Swedish neutrality policy. Because of Sweden's reliance on foreign trade, however, access to foreign markets was crucial. In January 1960, Sweden joined Great Britain, Norway, Denmark, Portugal, Switzerland, and Austria to establish the European Free Trade Association (EFTA). In contrast to the EC, EFTA was only a free-trade area with few political ambitions. At the time, Sweden's most important export markets were the other Scandinavian countries and Great Britain, all non-EC members. Thus, the cost of remaining outside the EC was deemed acceptable by big business. Great Britain's and Denmark's subsequent interest in EC membership altered the context of Sweden's EC policy, and Swedish leaders seriously considered EC membership by the early 1960s. However, the ruling social democrats eventually rejected full membership, with Prime Minister Tage Erlander's "Metall Speech" on August 22, 1961, setting the tone for nearly three decades of Swedish EC policy. Erlander declared that Sweden could not join the EC because of the EC's federal ambitions and its perceived role as a complement to NATO. The decision was fairly noncontroversial and had the support of the major parties. Sweden's free-trade agreement with the EC in 1972 effectively removed the issue from the political agenda. The EC's renewed efforts at integration during the 1980s nudged the EC question back onto the political agenda, and the ruling Social Democratic Party (SAP) leadership initiated a gradual reassessment of its EC policy. By the mid-1980s it was apparent that the free-trade agreement would not suit Sweden's economic interests. By this time, Sweden's most important export markets were EC states, especially Germany, Great Britain, and Denmark. 6 Like the other EFTA states, Sweden did not want to be excluded from the benefits of the EC's planned internal market. As a result, the EFTA countries negotiated the European Economic Agreement (EEA) with the EC during the late 1980s. The EEA would create a European Economic Space (EES) enabling the EFTA states to participate in the 1992 internal market program. In return for sharing in the benefits of the internal market, EFTA

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m e m b e r s would be subject to EC internal market rules. Nevertheless, official Swedish policy continued to stress that full m e m b e r s h i p was incompatible with neutrality. 7 In 1989, the Swedish EC debate took on new urgency. The end of the Cold War dramatically altered the external context of Swedish neutrality policy. In November 1989, the influential Employers Organization publicly called for full membership. The Conservative and Liberal Parties changed their position to the pro-membership line the following summer. In the summer of 1990, the ruling Social Democratic government cautiously expressed its support for possible EC membership provided that the EC did not develop into a political union. 8 On October 26, 1990, the SAP made its historical about-face. The government's pro-membership policy was announced as part of a series of measures designed to stabilize the e c o n o m y and bring investment capital back to Sweden. Despite appearances to the contrary, Swedish leaders were not abandoning their neutrality policy; the government declared that Swedish EC m e m b e r s h i p must be c o m p a t i b l e with the country's desire to remain neutral. In May 1991, the Swedish currency was tied to the ECU, and on July 1, 1991, Sweden formally submitted its application to Brussels. 9 Three factors explain the dramatic reversal of Swedish EC policy. First, the collapse of communism and the spread of democracy and free markets to central and eastern Europe undermined the f o u n d a t i o n s of neutrality policy. The dissolution of superpower bloc politics made it difficult to justify strict adherence to neutrality. Moreover, the decision of other neutral states (Austria and Finland) to seek m e m b e r s h i p lessened the harshness of Sweden's reinterpretation. 1 0 That other EC aspirants intended to reconcile neutrality or nonalignment with EC memberships offered credibility to the Swedish position. Second, strains in the Swedish welfare-state model led to reexamination of EC m e m b e r s h i p . " For the first time, Swedish politicians began to view EC membership as a vehicle for reviving the e c o n o m y and thereby safeguarding the welfare state. Between 1990 and 1993, Sweden went from budget surplus to a deficit of 12.3 percent of GDP. During the same period, u n e m p l o y m e n t climbed f r o m 1.7 percent to 8.2 percent. From 1991 to 1993, e c o n o m i c growth was negative. As Peterson and Bomberg put it, "High unemployment and economic stagnation in Sweden diminished both the perceived sanctity of the 'Swedish m o d e l ' and concerns that EU membership would do violence to it by lowering labor, environmental, and consumer standards." 1 2 Finally, Swedish business actively c a m p a i g n e d f o r E C m e m b e r ship. Because of S w e d e n ' s export d e p e n d e n c e and the d o m i n a n c e of

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large multinational corporations in the e c o n o m y , the attractiveness o f the E C increased with the adoption o f the Single Market Initiative. B e tween 1985 and 1 9 8 8 , Swedish businesses dramatically increased their investments in the E C while investments in S w e d e n lagged. 1 3 F o r e x ample, between 1987 and 1989, Swedish investments in the E C tripled. 1 4 Capital flight was a serious threat to the S w e d i s h e c o n o m y and c o n tributed to the rapid reorientation o f S o c i a l D e m o c r a t i c E C policy. Organized labor was less enthusiastic about E C membership, but nevertheless adopted a cautiously p r o - E C policy. In addition to these contextual factors, S w e d i s h leaders no doubt c a m e to the realization that participation in the E E S would result in de facto integration with the E C without any influence on the integration process. B e c a u s e of the importance o f the E C membership decision, an advisory referendum was scheduled for N o v e m b e r 13, 1 9 9 4 . T h e referendum was timed so as to occur two months after the Swedish national elections as well as after the Austrian and Finnish E C referendums. B e cause the Austrian and Finnish votes were considered safe bets, it was hoped that the momentum o f previous " y e s " votes would help sway the Swedish electorate. 1 5 Moreover, the September national election would serve to partly deflect attention from the E U issue until relatively close to the referendum. This policy was especially important for the S o c i a l D e m o c r a t s because they faced considerable internal opposition to their new pro-membership stance. S i n c e the leaders o f the other m a j o r parties recognized that S o c i a l Democratic votes were vital to a " y e s " vote, they acquiesced in this strategy. 1 6 T h e m a j o r parties succeeded in preventing the E C from b e c o m i n g an issue in the parliamentary election campaign. T h e S e p t e m b e r e l e c tion brought the S o c i a l Democrats back to power with 4 5 . 3 percent o f the vote. 1 7 With election victory secured, the S A P leadership began the task o f convincing the electorate to vote in favor o f E C membership. T h e divisions concerning E U membership roughly corresponded to conventional left-right cleavages. T h e L e f t Party and the Green Party opposed membership while the nonsocialist parties (Conservative, L i b eral, and Christian D e m o c r a t s ) supported it. F o r the C o n s e r v a t i v e Party, the E U was a way to rid S w e d e n o f its s o c i a l - d e m o c r a t i c baggage and to facilitate the introduction o f neoliberal, market-oriented reforms. In contrast, the S o c i a l D e m o c r a t i c Party portrayed the E C as a vehicle for spreading social-democratic policies in the rest o f Europe. 1 8 F o r E U proponents, divisions within the S A P were especially worr i s o m e because the S A P is the largest party, and a successful referendum campaign would require " y e s " votes from a substantial number o f S o c i a l D e m o c r a t i c voters. S i n c e the S A P had historically espoused

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n o n m e m b e r s h i p , the S A P leadership's p r o - E C stance was bound to cause irritation among rank-and-file party members. For example, the w o m e n ' s and youth sections of the party opposed m e m b e r s h i p . In an effort to manage these internal divisions, the party leadership suspended party discipline and allowed party m e m b e r s to vote their conscience in the r e f e r e n d u m . As another gesture to Euro-skeptics in the party, Prime Minister Carlsson appointed two w e l l - k n o w n EC opponents to his cabinet. 1 9 T h e r e f e r e n d u m c a m p a i g n centered on issues related to national sovereignty, particularly the future of Swedish neutrality, social welfare, and environmental policy. EU opponents, led by the Left Party and the Green Party, warned that EU membership would bring the deterioration of S w e d e n ' s strict environmental standards, gender-equality policies, and generous social-welfare programs. Moreover, EU critics emphasized the nondemocratic character of EU institutions. Why, the o p p o n e n t s d e m a n d e d , should Sweden transfer its sovereignty to nondemocratic capitalists and bureaucrats in Brussels? The r e f e r e n d u m was close; as late as October 27, polls showed equal support for both sides, with 25 percent undecided. Social D e m o cratic voters represented the greatest number of undecided voters. 2 0 As noted, the "yes" side prevailed in the referendum, but the issue of EU membership continues to cast a long shadow over Swedish politics. In May 1995, only 20 percent of voters felt that EU m e m b e r s h i p was an advantage, while 47 percent thought it was a disadvantage; 26 percent were undecided. 2 1 In November 1998, a similar poll revealed that only 49 percent of those polled thought that Sweden should remain in the EU, 37 percent thought that Sweden should leave, and 14 percent were unsure. 2 2 As these poll results demonstrate, Sweden is probably the most ambivalent m e m b e r in the EU.

The Impact of E U Membership on Swedish Political Institutions EU membership has not dramatically affected the workings of Swedish political institutions. However, the EU level of d e c i s i o n m a k i n g has been formally incorporated into existing parliamentary routines to ensure parliamentary participation in and oversight of EU decisions taken by the g o v e r n m e n t . T h r o u g h o u t this process, Sweden has looked to Danish institutions for ideas about how to combine EU decisionmaking with parliamentary institutions.

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Prior to accession, parliament established an Advisory Committee on EU Affairs that serves as a forum for consultation between the government and parliament on EU matters. The committee consults with the relevant cabinet minister prior to meetings of the Council of Ministers, and the meetings may result in revisions or additions to the government's position. 2 3 The Advisory Committee also has the right to request information and consultation concerning issues that have not yet reached the agenda of the Council of Ministers. EU issues are also integrated into the normal work of the parliamentary standing committees. Whenever a parliamentary proposal deals with a policy related to EU cooperation, it is referred to the relevant standing committee. The standing committees and the Advisory Committee have additional opportunities to gain early access to information related to EU issues. The government is obliged to submit all proposals originating in the EU to the secretariat of the parliament. For more important proposals from the EU, the government must also submit a written analysis of its impact on Swedish regulations. These documents are then sent to the relevant standing c o m m i t t e e and to the Advisory Committee. Thus, the parliamentary committees are involved at a fairly early stage in the decisionmaking process for EU matters. In addition, the Ministry of Foreign Affairs set up a separate EU Secretariat that coordinates Swedish participation in EU institutions and transmits information to the Swedish Permanent Representation in Brussels after a draft proposal f r o m the commission reaches the Committee of Permanent Representatives. The EU Secretariat also serves as a liaison with the Advisory Committee on EU Affairs. The changes in policymaking routines described above are intended to ensure that decisions on EU issues are made as democratically as possible, that is, with the greatest possible participation of the parliament. On the whole, the institutional changes appear to have functioned satisfactorily. Considering the role of ambivalent public opinion about Swedish EU membership, this is not surprising. Sweden could hardly risk the perception that domestic EU decisionmaking procedures conflicted with deeply held values about the role of parliament in Swedish democracy.

T h e Impact of the E U on Swedish Policies Because Sweden's tenure as an EU member is relatively short, this section focuses on the E U ' s impact on a range on policy areas during both

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the accession negotiations and the period since Sweden became a full member. For the most part, the conflicts that arose between Sweden and the EU during membership negotiations are the same or similar to the lines of disagreement that continue to exist. During the accession negotiations, Swedish representatives emphasized several issues. First, Sweden insisted on retaining its neutrality policy. Second, Sweden sought guarantees that EU membership would not compromise its environmental standards. Third, Sweden asked for permission to maintain its free-trade arrangement with the Baltic states. Fourth, Sweden insisted on keeping its restrictive alcohol control policies. Fifth, Sweden sought assurances that EU rules would not jeopardize its policy of public access to official records. Finally, Sweden requested that its contribution to the EU budget be phased in over several years because of the government's large budget deficits. After tough negotiations, the Swedish and EU negotiators struck a deal that satisfied many of the Swedish demands. Economic Policy As noted, EU policy had substantial influence on economic policy even before Sweden finally opted for membership. Swedish corporations fled the domestic market and invested substantial amounts in the EC countries. This trend was reversed after the 1990 announcement that Sweden would seek full membership, and investment levels have stabilized since then. Even though the economy has recovered, the effects of the 1 9 9 1 1993 recession can hardly be overemphasized. By 1993, Sweden was h o m e to the largest budget deficit in the Organization for Economic Cooperation and Development (OECD), at almost 13 percent of GDP. Unemployment also skyrocketed from 2 percent to over 10 percent. Given the dire state of public finances, one of the toughest items to negotiate was Sweden's contribution to the EU budget. The Swedish negotiators achieved a gradual phase-in of the m e m b e r s h i p fee for the first four years of membership. After the transition period, Sweden is scheduled to be a net-contributor to the EU, as are the other two newest members, Austria and Finland. Since accession, Sweden has devoted considerable political resources to expanding the E U ' s role in employment policy. Because of Swedish concerns that EU membership would lead to higher unemployment, these efforts must be seen as an attempt to push EU policy in a more social-democratic direction. In the 1996/97 Amsterdam Treaty

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negotiations, Swedish officials successfully pushed for the inclusion of a treaty chapter on e m p l o y m e n t policy. At an extra summit held in L u x e m b o u r g in N o v e m b e r 1997, the EU adopted new guidelines for employment policy that are very similar to Swedish active labor market policy. Agricultural policy has been the source of disagreement between Sweden and the EU. As a net contributor, Sweden has an interest in reducing EU spending, half of which finances the C o m m o n Agricultural Policy (CAP). In addition, the Swedish agricultural sector was liberalized prior to accession, so Swedish officials are hardly interested in maintaining the C A P as it is currently constructed. Although Swedish efforts to promote reform have produced few results, this item remains a priority. Despite S w e d e n ' s status as a net payer to the EU, the accession negotiations resulted in a significant victory for Sweden concerning the Structural Funds. S w e d i s h negotiators convinced the EU to create a sixth category of regional funding for sparsely populated areas. Swedish regional d e v e l o p m e n t policies already provided substantial subsidies to sparsely populated areas in northern Sweden, so the addition of EU f u n d s fit well with existing policies. Moreover, the news of f u ture EU f u n d i n g for the north helped to increase support for the EU during the 1994 r e f e r e n d u m campaign. Between 1995 and 1999 Sweden will receive E C U 1.4 billion from the Structural Funds. 2 4

Foreign Policy Swedish neutrality is not codified in law, but has evolved since 1814 as a de facto attempt to remain outside of alliances and avoid armed conflict. Because the political dimension of European integration is so underdeveloped, Swedish elites eventually interpreted EC membership as compatible with neutrality and f r e e d o m f r o m alliances. 2 5 Negotiations resulted in a S w e d i s h opt-out f r o m f u t u r e d e f e n s e cooperation. T h e presence of three other neutral EU members (Ireland, Austria, and Finland) no doubt facilitated this process and allayed Swedish fears about being drawn into undesirable foreign-policy cooperation. Despite clinging to its policy of n o n a l i g n m e n t , Swedish officials have not ignored the foreign-policy dimension of the EU. During the 1996 Intergovernmental Conference, Sweden and Finland proposed improving the E U ' s capacity for crisis m a n a g e m e n t , p e a c e k e e p i n g , and humanitarian e f f o r t s . T h e s e policies are written into the A m s t e r d a m Treaty as central c o m p o n e n t s of the E U ' s security policy cooperation,

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and they are consistent with d e c a d e s of Swedish participation in UN crisis management efforts. 2 6 Thus, the EU is now a forum for Swedish foreign-policy initiatives that it once pursued almost exclusively in the UN. Like the other ambivalent EU members, Sweden strongly advocates EU enlargement, especially the early entrance of Poland and the Baltic states. This policy is part of the overall Nordic effort to achieve stability in the Baltic region. Swedish concerns about stability in northern and northeastern Europe is also reflected in its attempts to push the EU toward more comprehensive and cooperative relations with Russia.

Environmental Policy During the accession negotiations, Sweden adopted a tough stance on environmental policy. The result was a compromise permitting Sweden to keep its higher standards in certain areas for four years while the EU investigated the possibility of raising EU standards to Swedish levels. If the EU did not improve its standards, Sweden could still k e e p the tougher rules under Article 100a(4) of the EC Treaty. This deal applied to Swedish legislation banning the use of dangerous substances such as asbestos, mercury, and chlorinated solvents, as well as automobile emissions standards. The EU also agreed to allow Sweden to keep its ban on antibiotics in animal feed. In 1996 and 1998, the EU adopted stricter controls of dangerous substances and automobile emissions that raise them to Swedish levels. 2 7 The current government credits itself for helping to get tougher environmental policies written into the A m s t e r d a m Treaty. As an EU member, Sweden has emphasized sustainable development and stricter measures to combat acidification ("acid rain"), a particular problem in Sweden. At the December 1997 EU summit, Sweden pushed for treaty revisions requiring stricter environmental protection and promoting the goal of sustainable development. 2 8 With the 1999 appointment of Margot Wallstróm as the EU c o m m i s s i o n e r for the environment, S w e d e n will have additional opportunities to push for tougher EU environmental policies.

Social Policy Given the extensive e f f o r t s of Swedish g o v e r n m e n t s to pass r e f o r m s aimed at correcting a wide range of market failures and social ills, it is not surprising that the EU debate prompted fears that m e m b e r s h i p

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would lead to an erosion of social-welfare benefits. F o r the most part, this has not b e e n true, at least in the c a s e o f social security entitlements. S o c i a l policy remains the domain o f the m e m b e r states, and Swedish o f f i c i a l s have gone to considerable lengths to emphasize this fact to the public, and they have made significant efforts to push the E U social policies that do exist in a more social-democratic direction, as was seen in the case o f employment policy. Existing E U social policies mostly take the form of minimum standards. With the most expensive and extensive welfare state in the world, meeting minimum standards was hardly an issue for Sweden. Concerning the requirements of the Social Chapter, the only potential source o f conflict concerned the status of collective bargaining, which Sweden relies on to set pay levels and other working conditions. In the accession negotiations, the E U agreed that E U labor rules could be implemented through collective agreements, thereby assuring their status in Sweden. Several social policies of the nontraditional sort were the source o f c o n s i d e r a b l e c o n f l i c t between the E U and S w e d e n . S w e d e n ' s restrictive alcohol policy is the clearest e x a m p l e o f this c o n f l i c t , and it will be discussed later in the chapter. Another instance o f this type o f policy is S w e d e n ' s ban on television c o m m e r c i a l s aimed at children. In this c a s e , it was more difficult for Swedish officials to gain the support o f the E U . T h e issue at stake was the right o f S w e d i s h authorities to take action against television stations in other E U states that broadcast c o m m e r c i a l s aimed at children. The Swedish law was challenged in the E U court system and resulted in a victory for the Swedish rules. However. the burden o f proof is on S w e d i s h authorities to show that the c o m m e r c i a l s are misleading. 2 9 Special policies.

Several other types o f policy were the source o f c o n -

flict between Swedish and E U regulations. F o r e x a m p l e , Sweden got a permanent exemption from E U ' s ban on a type of snuff that is c o m m o n in S w e d e n . R u l e s governing the purchase o f vacation houses in S w e den were also a sticking point between Sweden and the E U . B a s e d on the Danish precedent, S w e d e n requested a derogation from E U rules that would have allowed any E U citizen to purchase vacation property in S w e d e n . T h e a c c e s s i o n negotiations resulted in a c o m p r o m i s e allowing S w e d e n to keep its residency requirement for the purchase o f a vacation h o m e for five years. S w e d e n j u s t i f i e d its position on the grounds that allowing n o n - S w e d e s to purchase vacation

property

would drive up real estate prices and lead to unwanted development o f coastal areas. A more cynical interpretation emphasized the latent fear

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among Swedes that Germans would invade Swedish resort areas, buy up the most desirable property, and price Swedes out of their own market. These restrictions will be phased out in 2000.

Sovereignty, the Democratic Deficit, and Subsidiarity As noted, Swedish EU m e m b e r s h i p is predicated on the assumption that it will be able to maintain its sovereignty in vital areas, particularly foreign and social policy. In addition, several aspects of domestic policy deserve further exploration. The issue of member-state sovereignty within the EU involves an assessment about the extent to which national governments are free to pursue domestic policy goals without interference f r o m Brussels. In addition, in order for national governments to freely set policy priorities they must be assured that the de facto effects of EU membership will not reduce their policymaking capacity. In other words, one must distinguish between the de jure and the de facto loss of sovereignty. Existing Swedish policies produced little formal conflict with EU regulations, and the conflicts that did exist were negotiated largely in S w e d e n ' s favor. The de facto effects of EU membership are harder to estimate. However, one vital concern is that the market-building efforts of the EU not undermine Swedish social and environmental policies through the process of social or environmental " d u m p i n g . " If firms in m e m b e r states with less-stringent environmental and social legislation gain a competitive advantage, and this process leads to downward pressure on existing Swedish policies, public support for EU membership is likely to drop even further. The fear of downward pressure is an important motivation for Swedish efforts to upgrade EU standards. Like the issue of national sovereignty, the E U ' s democratic deficit has sparked considerable debate in Sweden and has motivated Swedish officials to press for the reform of EU institutions. Thus, increasing the openness and democratic character of EU institutions is a high priority for Sweden f o r two reasons. 3 0 First, several aspects of EU decisionm a k i n g collide with important Swedish policies such as the right of public access to information and the right of public officials to pass information on to the media. That the Treaty of Amsterdam includes provisions for limited public access to official documents for the first time in EU history is partly due to S w e d e n ' s tough stance in favor of increasing the openness of the decisionmaking process. 3 1 Given the partial success of efforts by Sweden and other like-minded EU m e m b e r s

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to m a k e EU institutions m o r e d e m o c r a t i c , this issue will be at or near the top of S w e d e n ' s EU a g e n d a for the f o r e s e e a b l e f u t u r e . S e c o n d , the perception that EU institutions are not s u f f i c i e n t l y democratic reduces the appeal of m e m b e r s h i p a m o n g the electorate. With public approval of EU m e m b e r s h i p at alarmingly low levels, the image of an u n d e m o c r a t i c EU can only m a k e matters worse. In addition, voter turnout was only 4 1 . 6 percent in the first E U p a r l i a m e n t a r y e l e c t i o n s held in N o v e m b e r 1995, and turnout was even lower in the June 1999 E u r o p e a n elections, at 38.2 percent. ' 2 Given that 7 5 - 8 5 percent of voters typically p a r t i c i p a t e in national e l e c t i o n s , low turnout is a worrisome trend.

In-Depth Analysis of Economic and Social Policy Economic Policy An i m p o r t a n t f a c t o r e x p l a i n i n g S w e d i s h r e s i s t a n c e to E M U is its historical c o m m i t m e n t to full e m p l o y m e n t and e x c h a n g e - r a t e flexibility. Full p a r t i c i p a t i o n in E M U t h r e a t e n s both. I n d e e d , prior to EU a c c e s sion, S w e d e n m a i n t a i n e d an i n d e p e n d e n t m o n e t a r y policy, resisting prior E C e f f o r t s at m o n e t a r y c o o p e r a t i o n . Public s k e p t i c i s m about the EU contributed greatly to this resistance and is a vital c o n s i d e r a t i o n in the current g o v e r n m e n t ' s current caution about E M U . U n l i k e the U K and D e n m a r k , w h i c h have f o r m a l o p t - o u t agreem e n t s , S w e d i s h nonparticipation is based on the current g o v e r n m e n t ' s " w a i t and s e e " strategy. In f o r m a l t e r m s , S w e d e n , along with G r e e c e , did not meet all of the c o n v e r g e n c e criteria, but the d e e p e r reason f o r S w e d e n ' s n o n p a r t i c i p a t i o n is the p u b l i c ' s lingering s k e p t i c i s m about E M U . T h i s a m b i v a l e n c e is also p r e v a l e n t a m o n g l e a d i n g Social D e mocrats, although the party leadership has taken pains to d o w n p l a y this. In typical S w e d i s h f a s h i o n , the issue of E M U m e m b e r s h i p w a s t h o r o u g h l y investigated by an expert c o m m i s s i o n chaired by e c o n o m i s t L a r s C a l m f o r s . T h e c o m m i s s i o n ' s report, i s s u e d in N o v e m b e r 1996, advised against Swedish participation in the c o m m o n c u r r e n c y b e c a u s e of the threat to Swedish e f f o r t s to r e d u c e u n e m p l o y m e n t . T h e c o m m i s sion r e c o m m e n d e d m e m b e r s h i p only a f t e r S w e d i s h u n e m p l o y m e n t levels had fallen to acceptable levels. 3 3 T h e g o v e r n m e n t later rejected the c o n c l u s i o n s of the C a l m f o r s r e p o r t , c l a i m i n g that the e c o n o m y w a s strong e n o u g h f o r E M U m e m b e r s h i p and that the t r a n s f e r of m o n e t a r y policy authority would have little impact on the g o v e r n m e n t ' s ability to

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reduce unemployment. Instead, the government cited negative public sentiment as the principal reason for nonparticipation. Thus, the government signaled its cautious desire for future participation, and in March 2000 the Social Democratic Party Congress approved the principal of EMU participation, subject to a national referendum. However, no date has been set for eventual membership. Despite its nonparticipation, EMU affects Swedish economic policy because of the importance of the implementation of the convergence criteria. The Riksbank is now independent and pursues a mandatory policy of price stability. The convergence criteria provide concrete targets for economic policy, making them an indispensable tool in economic management. This tool is especially important, even for the Social Democrats, considering Sweden's disastrous experience with high inflation and large budget deficits in the late 1980s and early 1990s. As the 1995 (Social Democratic) convergence program puts it, the Maastricht targets are a "plan for economic health." 34 However, the Maastricht targets are problematic from the point of view of public opinion. Moses argues that in Sweden, EMU functions as a scapegoat for the painful austerity policies taken to bring the country out of economic crisis. As Jonathan Moses puts it, "If government officials are not able to convince their voting publics that Sweden's current economic hardships are not the result of an attempt at EMU, or if the public begins to see the convergence criteria (and not full employment) as the government's primary economic objective, the government's popularity will go the way of the European Union's." 3 5 In other words, the convergence criteria have become rationalizations for difficult economic decisions. For the current Social Democratic government, adhering to the EMU convergence criteria while remaining outside of the euro zone is likely to be a delicate balancing act. The Swedish economy does not seem to be suffering from its self-imposed exclusion from the euro zone. 36 In spring 1999, Sweden had lower inflation and better public finances than most of the euro zone. However, despite government pronouncements to the contrary, Sweden's nonparticipation in the euro zone probably means that in the future, Sweden is likely to pay a risk premium in terms of higher interest rates and lower currency values than the euro zone countries, as was the case during the 1998 Russian crisis. 37 The current government has stated that it wants EMU to be a success and has pledged to meet the convergence criteria for its own policy reasons, that is, without regard to possible future participation. 3 8 Thus, future participation in EMU is not likely to be prevented because

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of failure to meet the convergence criteria. Because of the role of public opinion in any Swedish government's decision about future membership, much will depend on the success or failure of E M U in the rest of the EU. Despite the weakness of the euro against other important currencies, it is still too early to offer any predictions about the future performance of E M U . Similarly, the future course of Swedish E M U policy will also depend on the performance of the Swedish economy outside the euro zone. If the Swedish economy continues to recover and the government makes good on its pledge to reduce unemployment, the Swedish electorate is likely to be that much more skeptical about the benefits of E M U .

Social Policy As noted, one of the principal arguments against EU membership was that it would endanger Sweden's extensive social-welfare policies. This issue was a particular concern for Swedish women because of their numbers in public social-welfare service employment and their access to benefits that enable them to combine paid employment with childrearing. Moreover, EU critics charged that membership would threaten Swedish gender equality policies. Gender equality policy. The concern about EU-led social-policy retrenchment is reflected in public opinion results that show Swedish women to be more opposed to EU membership than men. For example, prior to the referendum, 4 4 percent of women polled opposed membership compared to 38 percent of men. 3 9 For many opponents, the EU was and is perceived as a set of institutions dominated by men. With this type of male-dominated influence, it was argued, the EU could hardly be expected to be responsive to gender equality. Although EU accession had little formal impact on Swedish equality policies, Swedish officials give the policy area high priority, not least to counter criticisms about the hostility of E U institutions to women's concerns, especially equality. As part of this effort, Sweden presented proposals to strengthen E U equality policy during the 1 9 9 6 - 1 9 9 7 Intergovernmental Conference, by increasing the number of women in the decisionmaking process. 4 0 Sweden also claimed credit for helping to get the goal of gender equality written into the Amsterdam Treaty. These small successes notwithstanding, EU equality policy can only be described as rudimentary. As with other aspects of social policy, Swedish politicians face the challenge of negotiating to get the

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EU to toughen its standards in equality policy. If these efforts fail and EU equality policy stalls, Swedish public opinion concerning EU membership is likely to turn that much more negative. Alcohol policy. Alcohol policy is where Swedish and EU policies clash most dramatically, and EU accession has accelerated domestic dem a n d s for liberalization. Like its Nordic neighbors, Sweden has a highly restrictive alcohol control policy; taxes on alcoholic beverages are high, and a public monopoly controls the sale and import of wine and spirits. During the accession negotiations, Sweden d e m a n d e d an exemption from EU rules for its alcohol policies, emphasizing concerns about public health. The EU was skeptical, however, because it defines alcoholic beverages as goods subject to the regulations of the internal market. In response, Swedish officials argued that restrictive alcohol policy decreases consumption, thereby reducing alcohol-related problems. Not surprisingly, Swedish consumption levels are much lower than those on the continent. In 1995, Swedish annual alcohol consumption was 6.14 liters per capita, the lowest in the EU. The figure for Germany was 13.1 liters. As one journalist put it, the Swedish government "fears that excessive relaxation of the rules could take the country back to its consumption levels of a century ago, an average of 46 liters per year." Moreover, because 6.5 percent of tax revenues come from alcohol taxes, liberalization would threaten public finances. 4 1 Despite some temporary exemptions from EU rules, EU m e m b e r ship threatens Swedish alcohol policy in several ways. First, there is considerable domestic opposition to restrictive policies, and EU membership can only accelerate this trend. Second, Sweden's obligations to the EU concerning competition in retail and wholesale markets are at odds with its alcohol monopoly system. The EU does not possess an authentic alcohol control policy. Beer sales are subject to EU rules about national tax regimes, and wine is categorized as an agricultural product. T h e EU has no policy directly related to distilled spirits. Moreover, EU policy does not recognize alcohol consumption as a social ill requiring policy intervention. During Sweden's membership negotiations, the Commission argued that Swed e n ' s public health goals could be achieved with alternative m e t h o d s that did not conflict with the internal market. The Swedish position prevailed, however, using the argument that its public m o n o p o l y did not violate EU law because Article 36 of the Treaty of Rome allowed m e m b e r states to retain public m o n o p o l i e s for overriding national goals. In the end, the C o m m i s s i o n d e m a n d e d that Sweden d i s m a n t l e

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the monopoly on the production, export, import, and wholesale distribution of alcohol, but the retail monopoly was allowed to remain. Sweden also successfully negotiated for the retention of limits on the alcohol imports of travelers. In practice, travelers within the EU may import as much alcohol as they wish provided they can prove that it is for personal use. For Sweden, the retention of limits on personal imports was crucial to the continuation of the retail monopoly because significant increases in personal imports would jeopardize sales by the retail m o n o p o l y and reduce tax revenues. This is exactly what happened, however. B e f o r e joining the EU, S w e d e s could import one liter of spirits, one liter of wine, and two liters of beer. A f t e r EU accession, S w e d e s could bring in one liter of spirits, five liters of wine, and fifteen liters of beer. Even with these restrictions, "alcohol tourism" became a serious problem as Swedes crossed the Oresund to buy beer in Denmark. Swedes also increased their personal import of wine and distilled spirits from other EU countries. In 1995, Swedes brought 15,000 bottles of beer per hour into the country f r o m D e n m a r k . The increase in crossborder trade has cut sharply into retail sales in southern S w e d e n , reducing alcohol revenues by 20 percent and leading to reduced profits at Swedish breweries and the state-run retail monopoly. Smuggling also increased dramatically. 4 2 EU m e m b e r s h i p also sparked a campaign by the private sector to use EU policy as a vehicle for liberalization. In a highly publicized case, a grocery store owner began selling wine on the first day of Sweden's EU membership. When Swedish authorities took the store owner to court, his defense was based on the provisions of the Treaty of Rome that prohibit public monopolies f r o m interfering with trade and fostering discrimination. The Swedish court requested a preliminary ruling f r o m the European Court of Justice (ECJ) about w h e t h e r the m o n o p oly violated the Treaty, and in 1997 the ECJ ruled in S w e d e n ' s favor. Despite the victory, the Court required Sweden to liberalize its licensing system in order to make it less costly. 4 3 Tough negotiations between Sweden and the EU resulted in the extension of S w e d e n ' s exemption f r o m rules concerning personal alcohol imports until the end of 2003. However, despite the retention of most aspects of alcohol policy, further liberalization is likely. Public opinion strongly supports further liberalization, especially the sale of wine and strong beer in grocery stores. If this happens, it is likely to threaten restrictive policies even more because of the price competition that will occur. As one analyst puts it, "alcohol policy is under siege." 4 4

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Conclusion Economic considerations compelled Sweden to seek EU m e m b e r s h i p after more than 30 years of aloofness. However, there is little evidence that Sweden wholeheartedly embraces the grand designs of European integration. Like fellow Euro-skeptics Great Britain and Denmark, Swedish participation in the EU is premised on the belief that European integration will not j e o p a r d i z e Swedish sovereignty, especially the capacity to preserve the core Swedish values of nonalignment, international activism, and the social-democratic welfare state. Although EU m e m b e r s h i p has i n f l u e n c e d the content of these central policies, S w e d e n ' s behavior as an EU m e m b e r demonstrates the desire to steer the d e v e l o p m e n t of EU policy so that it c o n f o r m s more closely to Swedish priorities: a difficult task for a small state on the EU periphery. That Sweden joins fellow Nordic states Denmark and Finland in the EU, as well as neutral, social-democratic Austria, means that several Swedish EU priorities are shared by other EU states. Thus, Swedish EU policy is likely to resemble that of Denmark in many respects: the pursuit of widening rather than deepening and the promotion of social-democratic values. As a net contributor to the EU budget, Swedish accession also strengthens the coalition of states, led by Germany, that advocate budgetary reform and the liberalization of agricultural policies. Finally, Swedish m e m b e r s h i p enhances the prospects that a Nordic bloc will emerge within the EU, joined in some cases by other like-minded states. Nordic unity in the EU is most likely concerning EU policy in the Baltic, and social and environmental policy. However, Finland's participation in E M U reveals the limits of such a Nordic dimension. Sweden is scheduled to assume the EU presidency during the first half of 2001. The Swedish presidency will emphasize EU enlargement, the promotion of employment policies, increased EU attention to environmental considerations, the promotion of increased equality in the labor market, and improved relations between the EU and Russia. 4 5 These priorities are consistent with the policy priorities Sweden has promoted since becoming a m e m b e r in 1995. It is worth repeating that a m a j o r argument in f a v o r of Swedish EU membership was that it would give S w e d e n the opportunity to influence the development of EU policy. Obviously, Swedish influence in the EU is constrained because Sweden is a small state. However, future Swedish participation in the EU, including E M U , depends crucially on the ability of Sweden

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to retain some of its "exceptionalism" and failing that, to participate in the successful social democratization of the European Union.

Notes 1. I use the labels EU and EC interchangeably. 2. Ingemar Dörfer, "Sixty Years of Solitude: Sweden Returns to Europe," p. 605. 3. Quoted in Peter Lawler, "Scandinavian Exceptionalism and European Union," p. 571. 4. G0sta Esping-Andersen, The Three Worlds of Welfare Capitalism. 5. Dörfer, "Sixty Years of Solitude," p. 600. 6. Ibid. 7. Kaare Str0m, "Norway, Sweden, and the New Europe," p. 509. 8. Nicholas Aylott, "Between Europe and Unity: The Case of the Swedish Social Democrats," p. 123. 9. The EES was established in 1994. 10. Str0m, "Norway, Sweden, and the New Europe," p. 513. 11. Paulette Kurzer, Business and Banking: Political Change and Economic Integration in Western Europe, p. 197. 12. John Peterson and Elizabeth Bömberg, "Northern Enlargement and EU Decisionmaking," p. 48. 13. Christine Ingebritsen, "Coming Out of the Cold: Nordic Responses to European Union," p. 246. Ì4. Str0m, "Norway, Sweden, and the New Europe," p. 512. 15. The Norwegian referendum was the last of the four votes. 16. Aylott, "Between Europe and Unity." 17. From 1991 to 1994, Sweden was governed by a nonsocialist minority coalition led by Carl Bildt (Conservative Party). 18. Lawler, "Scandinavian Exceptionalism," p. 583. 19. These were Margareta Winberg, the minister of agriculture, and Marita Ulvskog, the minister of culture. 20. SIFO Research and Consulting, "Fortfarande jämt mellan Ja och Nej i EU-frâgan." 21. SIFO Research and Consulting, "Varannan tycker EU-medlemskapet är en nackdel." 22. SIFO Research and Consulting, "Majoriteten vili at Sverige ska stanna kvar i EU." 23. Utrikesdepartementet. EU 1996. Àrsboken om EU 1996-i korthet. 24. Ibid., p. 26. 25. Ingebritsen, "Coming Out of the Cold," p. 246. 26. Utrikesdepartementet. EU 1997, Àrsboken om EU 1997-i korthet. 27. Regeringskansliet, EU-rapport (October 1998), p. 5. 28. Utrikesdepartementet. EU 1997, Àrsboken om EU 1997; EU 1998, Àrsboken om EU 1998. 29. Utrikesdepartementet, EU 1998, Àrsboken om EU 1998.

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30. The Swedish EU commissioner from 1994 to 1999, Anita Gradin, is responsible for the fight against fraud. 31. Utrikesdepartementet, EU ¡997, Arsboken om EU 1997. 32. " Y ä l j a r n a valde soffan," Fran Riksdag och Departement 19, June 18, 1999, p. 6. 33. " S k j u t upp inträdet i E M U , " Fran Riksdag och Departement 32 (November 8, 1996), 4. 34. Ministry of Finance (Sweden), Konvergensprogammet, p. 5. 35. Jonathan W. Moses, "Sweden and E M U , " p. 217. 36. Financial Times, May 17, 1999. 37. Financial Times, May 28, 1999. 38. Regeringskansliet, EU-rapport, no. 6 (November 1998). 39. Moses, "Sweden and E M U , " p. 206. 4 0 . For example, in the recent EU summit held in Vienna in December 1998, only three of the forty participating ministers were women: Swedish foreign minister Anna Lindh, Finnish foreign minister Tarja Halonen, and the Danish minister of finance, Marianne Jelved. See Regeringskansliet, EU-rapport. Aktuellt i EU-samarbetet. no. 1 (January 1999). 41. Financial Times, July 27, 1996. 4 2 . Kurzer, Business and Banking, p. 24. 43. Ibid. 44. Ibid., p. 32. 45. Regeringskansliet, EU info. Faktablad om EU-samarbetet, no 1 (April 1999).

14

Finland: An Integrationist Member State Alexander C-G. Stubb, Heidi Kaila & Timo Ranta1

Finland joined the European Union on January 1, 1995, after a clear victory in a referendum on October 16, 1994. Some 57 percent voted in favor and 43 percent against m e m b e r s h i p on a turnout of 74 percent. Much to the surprise of many observers, Finland has turned out to be an integrationist m e m b e r state in the EU. This progressive approach has been based on many factors, not least of which is a conviction that a Union with strong institutions especially benefits small member states. This conviction, c o m b i n e d with strong leadership by pro-European prime minister Paavo Lipponen, has guaranteed Finland a place in the core of Europe. 2 One of the key a r g u m e n t s for EU m e m b e r s h i p was that Finland wanted to be part of the decision-shaping structure of the Union—this goal has been achieved during the first five years of membership. Finland is not a new m e m b e r state anymore. Finland is a f u l l - f l e d g e d m e m b e r of E c o n o m i c and M o n e t a r y Union ( E M U ) , it has been involved in the constitution-building process through the 1 9 9 6 - 1 9 9 7 Intergovernmental C o n f e r e n c e (IGC) that led to the A m s t e r d a m Treaty, and it has held the presidency of the Council of Ministers for the second half of 1999. The aim of this chapter is to provide an outline of Finnish policymaking and policy implementation in the European Union in both regular EU business and the 1 9 9 6 - 1 9 9 7 IGC. The chapter is divided into three parts. The first part looks at the institutional setup of the coordination of Finnish EU policy. T h e second part examines F i n l a n d ' s approach to the E U ' s C o m m o n Foreign and Security Policy (CFSP). The third part analyzes Finnish EU policymaking in justice and h o m e affairs, including issues that have been moved f r o m the third to the first 305

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pillar. The conclusion of the chapter gives an assessment of Finland as an EU member state. The basic line of argument is that Finland is a member state with an integrationist vocation beyond that of its Nordic neighbors. Unlike Swedish and Danish EU strategy, Finnish participation in European decisionmaking has not been constrained by a "Euro-skeptic" or antiEuropean public sentiment. In terms of policymaking, Finland has sought a constructive role as a policy broker in search of compromises. The Finnish government has pursued integrationist policies with regard to the 1996-1997 IGC, the EMU, and enlargement.

A Functioning Coordination System3 The foundation of Finnish EU policy shaping has been a solid coordination system. The coordination of Finnish EU policymaking and implementation is based on wide consultations throughout the administrative structure. The key to the system is a functioning relationship between the ministries in Helsinki, the government, the parliament, and the Permanent Representation in Brussels. The aim is to speak with one voice on all levels of decision shaping in Brussels: the 250 working groups, the Committees of Permanent Representatives (COREPER) I and II, and the 21 formations of the Council. The preparation of a Finnish position begins in sector-specific working groups with lower-level civil servants from the ministries concerned. On the basis of those preparations, the EU Committee, a group composed of the highest civil servants of each ministry, fine-tunes the draft position. Thereafter, the draft position is moved up for decision to the EU Ministerial Committee, i.e., the government, which establishes the Finnish position in close consultation with the parliament. The Finnish position is then relayed to Brussels where it is presented by the Permanent Representation or a representative from the capital. The key coordinating institution in Helsinki is the EU Secretariat, which was moved from the Foreign Ministry to the Prime Minister's Office after the Finnish presidency in the first half of 2000. The EU Secretariat is composed of civil servants from all the ministries. They function as a link between Helsinki and Brussels, making sure that the Finnish position remains consistent. The EU Secretariat tries to make sure that the Finnish position on the reconstruction of Kosovo, for instance, is consistent in the Budget Council and the General Affairs Council.

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When Finland held its first presidency o f the E U , much o f the coordination system changed for six months. T h e national position was still defined through the regular machinery, but the practical work of the presidency was arranged differently. Instead o f taking guidelines from Helsinki, through the E U Secretariat, the nexus o f the system b e c a m e the close link between the chairmen of the working groups, C O R E P E R , and the Council. T h e key during the presidency was to achieve results by hammering out compromises between divergent national positions. T h i s could not be achieved by pushing the Finnish national position. T h e most important additional element to the coordinating system was the C o u n c i l Secretariat, helping the presidency with its institutional memory and expertise of almost half a century o f presidencies. T h e implementation o f Finnish E U policy is similar to that in other m e m b e r states. O n c e a decision has been taken on the E U level, Finnish authorities in respective ministries make sure that Finnish national legislation is changed accordingly. After the national implementation takes place, competent ministries send the notification to the C o m m i s s i o n via the Ministry for Foreign Affairs.

C o m m o n F o r e i g n a n d S e c u r i t y Policy Quite soon after accession Finland became, rather unexpectedly, an important player in the development o f the E U ' s C o m m o n F o r e i g n and Security Policy. We will here explore Finland's approach to the C F S P all the way from the p r e a c c e s s i o n period to today, and attempt to explain Finland's ability to make the right proposals at the right time.

Hidden Agenda During the accession period, the attitude o f Finnish political leadership to C F S P was rather paradoxical. W h e n explaining the benefits o f E U membership to the national parliament and to the public, Finnish politicians hardly mentioned this aspect, which, it has to be admitted, was a novelty for the Union itself. At the same time, the trade and consumer b e n e f i t s o f E U m e m b e r s h i p were emphasized at great length. I f anything was said o f C F S P , it was estimated to be " n o n p r o b l e m a t i c " for Finland. 4 T h i s suspicious silence might have contributed to the fact that s o m e m e m b e r states and, most notably, the European

Parliament,

feared that as a member Finland might not fulfill its obligations in the second pillar.

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At the time this a p p r o a c h s e e m e d s u b c o n s c i o u s . S o m e b e l i e v e d that C F S P was s i m p l y too d i f f i c u l t to u n d e r s t a n d for F i n n s , w h o , not long ago, called t h e m s e l v e s " n e u t r a l " in international politics. It was only in 1997, long after the a c c e s s i o n , that the real reason f o r this lowkey a p p r o a c h to the C F S P was revealed. M a u n o Koivisto, w h o was the president of the republic at the time of the accession negotiations, was largely r e s p o n s i b l e for F i n l a n d ' s initial a p p r o a c h to CFSP. A c c o r d i n g to K o i v i s t o , F i n l a n d ' s strategy w a s not s u b c o n s c i o u s at all. H e maintained that if the c o u n t r y ' s leaders had revealed at the time that accession to the EU had s o m e t h i n g to d o with security, Finland would have been in an a w k w a r d position if the m e m b e r s h i p had not materialized. 5

Hesitant Beginning A f t e r a c c e s s i o n , the F i n n i s h g o v e r n m e n t was quick to e x p l a i n to the national p a r l i a m e n t , E d u s k u n t a , what being a m e m b e r state w o u l d entail. It p u b l i s h e d a general strategy d o c u m e n t entitled " T h e G u i d e l i n e s of F i n l a n d ' s E U P o l i c y . " 6 T h i s d o c u m e n t included a brief section on C F S P and categorically stated that the E U ' s C o m m o n Foreign and Security Policy is and must remain in the sphere of intergovernmental coo p e r a t i o n , w h i c h m e a n t u n a n i m i t y in d e c i s i o n m a k i n g and a weak role for the C o m m u n i t y institutions. 7 In light of F i n l a n d ' s C F S P approach today, these positions m a k e an entertaining read. Finland is now one of the strongest a d v o c a t e s of dec i s i o n m a k i n g by q u a l i f i e d m a j o r i t y v o t i n g and one of the strongest opp o n e n t s of rigid structures based on the three pillars established by the M a a s t r i c h t Treaty. It is p r o b a b l y f a i r to say that Finnish security policy has c h a n g e d m o r e in the last f o u r years than it had d u r i n g the preceding forty years. On the other h a n d , this first strategy d o c u m e n t already m e n t i o n e d m o s t of the C F S P priorities that F i n l a n d has b e e n p u r s u i n g in subseq u e n t n e g o t i a t i o n s . T h e s e p r i o r i t i e s i n c l u d e the e m p h a s i s on crisis m a n a g e m e n t , r e g i o n a l c o o p e r a t i o n in the Baltic and B a r e n t s r e g i o n s , and the " N o r t h e r n D i m e n s i o n , " which was first presented as an internal priority f o r the U n i o n . 8 Finland later tried to play d o w n the internal aspect of the " N o r t h e r n D i m e n s i o n " and a t t e m p t e d to p r e s e n t it a l m o s t exclusively as a g u i d e l i n e for the E U ' s external action. 9

1996-1997 I G C : A W i n d o w of Opportunity T h e 1 9 9 6 - 1 9 9 7 I n t e r g o v e r n m e n t a l C o n f e r e n c e was i n s t r u m e n t a l in bringing about a shift in F i n l a n d ' s attitude to the E U ' s CFSP. During the

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negotiations, Finland realized that by saying "no" to the development of CFSP, it would lose the ability to influence the direction of its development. Finland decided to downplay its hesitations and to emphasize aspects where all member states, including the nonaligned ones, could play an active role. This strategy proved very successful. Finland's original position in the IGC did not differ from its initial reluctance to CFSP. A general strategy paper on Finland's security policy presented to the Finnish parliament in June 1995 summarized this position as follows: "In Finland's view, the key principle in developing the Union's common foreign and security policy is intergovernmentalism." 1 0 But during the actual conference, something changed fundamentally. No more than half a year after the publication of the document cited above, the Finnish government published a strategy document for the IGC, which included these examples: • A coherent, cross-pillar approach [to external action] should be strengthened. • The use of decision-making based on qualified majority in implementation of the CFSP should be supported. • It is useful for Finland that military crisis management is part of CFSP." Finland's will to develop the EU's crisis management capacity proved fruitful to the IGC itself. A common initiative by Finland and Sweden resulted in the insertion of a new article in the Amsterdam Treaty that enshrined military crisis management as part of CFSP. 12 This policy shift was not just a passing idea tailored for negotiations only, but a new orientation that has later proved to be permanent and open to new applications. It was confirmed by the government in a general EU strategy document after the IGC. 13 This shift in Finnish thinking was coupled in a timely fashion with a strong personal emphasis on human rights as a key variable in foreign policy by Finnish foreign minister Tarja Halonen, who had held this post since May 1995. In November 1998, she presented a specific strategy document to the Finnish parliament on this aspect of Finnish foreign policy. The document states, for example, that "promoting human rights in different parts of the world is a essential aspect of EU's common foreign and security policy." 14 In practice, Finland has strongly promoted the use of qualified majority voting when the EU Council makes decisions about suspending agreements with third-party countries because of human rights violations.

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Analysis F i n n i s h p o s t w a r f o r e i g n p o l i c y is r e g a r d e d by s o m e o b s e r v e r s as exc e e d i n g l y c a u t i o u s and r e a c t i v e . F i n l a n d h a s rarely b e e n seen in intern a t i o n a l c i r c l e s as an a g g r e s s i v e i n i t i a t o r or as the c o n s c i e n c e of the rest of the w o r l d . In its f o r e i g n policy, F i n l a n d is not a p o l i c e m a n n o r a p r i e s t , but a d o c t o r , w h i c h w a s a m e t a p h o r c o i n e d by P r e s i d e n t U r h o K e k k o n e n in the C o l d War days. This a p p r o a c h is very easy to u n d e r s t a n d . In the i m m e d i a t e p o s t w a r period, the f u t u r e of Finland hinged largely on its ability to c o n v i n c e the Soviet U n i o n of the fact that its interests w o u l d a l w a y s be taken into acc o u n t in F i n n i s h f o r e i g n policy. O n the o t h e r h a n d , F i n l a n d very e f f i c i e n t l y used all the l e e w a y it had to s t r e n g t h e n its ties with the West w h i l e a v o i d i n g s t a t e m e n t s that c o u l d h a v e b e e n i n t e r p r e t e d as t a k i n g sides in East-West quarrels. It thus b e c a m e natural for Finnish f o r e i g n p o l i c y s h a p e r s to take into a c c o u n t the i n t e r n a t i o n a l c o n s t r a i n t s but at the same time to m a k e the best of the possibilities available. This dualistic orientation of Finnish f o r e i g n policy is deeply rooted in public o p i n i o n . A w i d e - r a n g i n g poll c o n d u c t e d during the I G C n e g o tiations indicated that 61 percent of Finns thought that Finland should in all c i r c u m s t a n c e s be able to take r e s p o n s i b i l i t y f o r its security alone. At the s a m e time, 5 3 percent of Finns s u p p o r t e d F i n l a n d ' s a i m to r e i n f o r c e the E U ' s CFSP, and 64 percent t h o u g h t that EU m e m b e r s h i p w o u l d give security to F i n l a n d as a n e i g h b o r of an u n s t a b l e Russia. 1 5 T h e s e attitudes are naturally r e f l e c t e d in the p o s i t i o n s taken by the Finnish p a r l i a m e n t , w h i c h in its o p i n i o n on the I G C requires, f o r e x a m ple, that " n o s o l u t i o n s r e a c h e d at the I G C [be] in conflict with F i n l a n d ' s p o l i c y of m i l i t a r y n o n - a l i g n m e n t a n d i n d e p e n d e n t d e f e n s e , " and that "the C F S P should c o n t i n u e to be i n t e r - g o v e r n m e n t a l c o o p e r a t i o n . " 1 6 It will be i n t e r e s t i n g to see h o w t h e t h i n k i n g of the F i n n i s h g o v e r n m e n t d e v e l o p s in t h e f a c e of u n p r e c e d e n t e d f o r e i g n - p o l i c y c h a l l e n g e s to the E U and h o w the n e w m o v e s will be sold to t h e n a t i o n a l p a r l i a m e n t a n d to a p u b l i c i n c r e a s i n g l y h o s t i l e to m i l i t a r y a l i g n m e n t a f t e r the N A T O " a g g r e s s i o n " in K o s o v o . T h e latest c h a l l e n g e to F i n n i s h t h i n k i n g h a s b e e n t h e will of s o m e m e m b e r s t a t e s , m o s t n o t a b l y F r a n c e a n d t h e U n i t e d K i n g d o m , to dev e l o p a c o m m o n d e f e n s e f o r the E u r o p e a n U n i o n . F i n l a n d h a s att e m p t e d to e m p h a s i z e the fact that c o m m o n d e f e n s e will only m e a n crisis m a n a g e m e n t , i.e., i m p l e m e n t a t i o n of the A m s t e r d a m Treaty, but it is at the s a m e t i m e clearly p r e p a r i n g f o r a n o t h e r leap f o r w a r d .

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Justice and H o m e Affairs Justice and home affairs (JHA) matters have gradually become one of the most central fields of cooperation within the European Union. The increasing importance of this area is also reflected in the Finnish positions. Justice and home affairs is a new field within the European Union. The main objective for launching it was to ensure that the implementation and success of the internal market would not weaken the security of individuals resident within the European Union. Hence, the Treaty of Maastricht, which institutionalized such cooperation, dealt primarily with measures to compensate for the abolition of internal border controls. It contained provisions on asylum policy, external border controls, immigration policy, combating drug addiction, combating fraud, judicial cooperation in civil matters and criminal matters, customs cooperation, and police cooperation. That cooperation was to be conducted on a intergovernmental basis. T h e Treaty of A m s t e r d a m implies another m a j o r step f o r w a r d . It sets out more far-reaching objectives and contains a five-year program for establishing an area of freedom, security, and justice. It also transfers a substantial part of justice and home affairs cooperation from the intergovernmental sphere to C o m m u n i t y competence. The underlying argument is that intergovernmental instruments and working methods are no longer sufficient to guarantee the free m o v e m e n t of people and internal security. T h e Finnish approach to justice and h o m e affairs has been progressively more supportive. The slight reluctance felt in the beginning of Finnish m e m b e r s h i p has evolved into enthusiasm. A more integrationist approach was apparent especially during the 1 9 9 6 - 1 9 9 7 Interg o v e r n m e n t a l C o n f e r e n c e . T h e trend continued during the Finnish presidency. On October 15-16, 1999, the presidency organized an extraordinary European Council meeting in Tampere, Finland, dealing solely with justice and home affairs. Through careful preparation, the summit meeting managed to establish a road map for the future development of this important field.

The Preaccession Period and Accession Negotiations Cooperation in the fields of justice and home affairs was not one of the core issues in the public debate on Finnish membership or in the accession negotiations. Instead, cooperation was based on intergovernmental

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instruments and decisionmaking procedures. The m e m b e r states had a right of initiative alongside the C o m m i s s i o n , decisions were taken unanimously, and the European Parliament and the European Court of Justice played a limited role. Thus, the transfer of competence from the national level to the European Union level was not very drastic at the early stages of Union accession. Furthermore, cooperation in this area was to a great extent a novelty within the Union and few acts had been adopted b e f o r e Finland became a member. Those acts, which had been adopted, were mainly legally nonbinding EU recommendations and conclusions, or EU conventions subject to ratification at the national level. According to the Finnish government, accession to the justice and h o m e affairs acquis communautaire did not require constitutional a m e n d m e n t s or any other substantive changes to national legislation. The g o v e r n m e n t also noted that Finland could continue cooperation with international organizations and third-party countries to the extent that it was not contrary to the obligations incumbent in the Union treaties. 1 7 The Early Days of Membership From the beginning of its membership, Finland faced difficult negotiations on developing new justice and home affairs instruments. A m o n g the most challenging issues were the negotiations on the conventions concerning external border controls, corruption, protection of C o m m u nity interests, a customs information system, and the establishment of a European police o f f i c e (Europol). Finland had to define its position not only in relation to the relevant substantive provisions but also in relation to certain institutional issues, such as the c o m p e t e n c i e s to be given to the European Court of Justice. Both the Finnish government and the national parliament tended to e m p h a s i z e the intergovernmental character of the cooperation and adopted s o m e w h a t restrictive positions, especially on institutional issues. One of the main concerns was to maintain the competency to use coercive means at a national level. It could be argued that the Finnish negotiating positions did not d i f f e r m u c h at that stage f r o m the approach adopted by the m e m b e r states considered to be the least integrationist. That period of skepticism remained short-lived. A first clear step toward a more pro-European approach was taken at the level of heads of state and government at the European Council meeting in C a n n e s in June 1995. T h e countries c o m p r o m i s e d on the

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role of the Court of Justice in certain EU conventions that went beyond the initial Finnish position. Further steps in that direction were taken by the government and the national parliament in the context of preparing for the 1996 Intergovernmental Conference. Toward the 1996 I G C The 1 9 9 6 - 1 9 9 7 IGC gave a unique opportunity for Finland to participate in the revision of the Union treaties from the very beginning of its m e m b e r s h i p . The Finnish point of departure in the IGC preparations was that the Union should be brought closer to its citizens, and that it should be made more efficient and comprehensible. These general guidelines were also reflected in the Finnish negotiation positions in justice and h o m e affairs. According to the Finnish g o v e r n m e n t , cooperation alone had not been efficient enough and progress had remained limited. This limited progress was to a large extent due to the complexity of the decisionmaking system and the lack of clearly defined objectives and instruments. In the view of the Finnish g o v e r n m e n t , clearer objectives should be inserted in the treaties, the C o m m i s s i o n ' s right of initiative should be expanded, more decisions should be taken by qualified majority voting, and the role of the Court of Justice should be e n h a n c e d . Finland was also prepared to transfer some issues from intergovernmental competence into C o m m u nity competence and made a proposal to that end. 1 8 As a result of the 1 9 9 6 - 1 9 9 7 Intergovernmental C o n f e r e n c e , an agreement on freedom, security, and justice with clearly defined objectives and timetables was established. Obtaining this consensus entailed transferring the areas of asylum, immigration, and other policies related to the free m o v e m e n t of persons, such as judicial cooperation in civil matters, f r o m the intergovernmental level of the third pillar cooperation to that of the first pillar. The transfer was made smoother by adding a transition period of five years—during this period not all of the first-pillar procedures would be applicable. Provisions connected with the security of people, such as police cooperation in criminal matters, remained at the intergovernmental level. The range and effectiveness of the legal instruments and the role of C o m m u n i t y institutions were thus enhanced. 1 9 The end results of the Intergovernmental Conference did not differ much f r o m the initial Finnish negotiating positions and were warmly w e l c o m e d by Finland. This was the case notwithstanding the constitutional implications of some treaty changes. 2 0

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Members

The Finnish Presidency The entry into force of the Treaty of Amsterdam in May 1999 gave Finland an ideal opportunity to begin implementation of the new provisions to the fullest possible extent at the very beginning of its EU presidency. Justice and h o m e affairs issues had a high priority on the Finnish agenda. A c c o r d i n g to the presidency program, 2 1 creating an area of f r e e d o m , security, and justice required a c o m p r e h e n s i v e , cross-pillar approach and consistency in relations with third-party countries and international organizations. The program also stressed that its inspiration came from the previous successes of the Union, such as the program on the internal market. The proposed program in justice and home affairs would entail a combination of harmonization of legislation and, where considered more appropriate, creation of c o m m o n minimum standards with the application of the principle of mutual recognition. Furthermore, Finland used its presidency to argue that the Union should intensify its efforts to remove administrative and legal obstacles that impeded cooperation. The importance attached to cooperation in the fields of justice and home affairs was also reflected by the fact that an extraordinary meeting of the European Council was organized in Tampere, Finland, in October 1999. The meeting provided an opportunity for the heads of state and government to ensure that the new provisions of the Treaty of A m sterdam were realized and to give further guidance on how to achieve results. The implementation of a comprehensive immigration and asylum policy, the fight against cross-border crime, and the establishment of a European judicial consensus also received special attention at the 1999 meeting.

Conclusion It is s o m e w h a t paradoxical that F i n l a n d — w h i c h was still a Grand Duchy of Russia in the beginning of the twentieth century—was, at the end of the century, in charge of drafting the M i l l e n n i u m Declaration for the European Union. W h o would have thought 10 years ago that the first qualified-majority decisions based on a C o m m o n Strategy on Russia would be taken during the Finnish presidency of the EU? T h e preaccession debate in Finland indicated that as a m e m b e r state Finland would most probably want to be in the core of the EU. It did not want to be excluded from the decisionmaking processes of an

Finland

315

organization it was about to join. The first years of m e m b e r s h i p have proved that Finland is an active contributor to the F,U process, As a member, Finland has sought to participate constructively in all of the work of the EU, whether in E M U , CFSP, or in J H A . Finland is considered to be a m e m b e r state that has an eye for the EU game, is able to f o c u s on the essentials, and is able to create c o m p r o m i s e s suitable to all parties involved. Finland also recognizes that the EU brings many benefits to small states and offers the country an opportunity to have a greater global influence than would be otherwise possible. The European Council of Cologne left the Finnish presidency with four important tasks: (1) the preparations of IGC 2000, (2) the implementation of Council working methods (the so-called Trumpf-Piris report), (3) the preparations of a charter on f u n d a m e n t a l rights, and (4) the development of the Union's defense policy. These four issues, combined with a special European Council on J H A in Tampere and a European Council in Helsinki paving the way for enlargement, indicate that the other m e m b e r states were willing to have the new presidency shoulder a lot. The rest of the EU trusted Finland to manage these important tasks, an indication that the first five years of Finnish membership have been a success. The current " r a i n b o w " coalition g o v e r n m e n t in F i n l a n d — e n c o m passing the Social Democrats, the Conservatives, the Left Alliance, the Swedish People's Party, and the Greens—maintained its majority in the March 1999 elections. The strong leadership and European orientation of Prime Minister Paavo Lipponen indicates that there will be no immediate change of Finnish EU policymaking and implementation in the near future. The only direction is forward and the next big issue for the Finnish government will most probably be Article 5 - r e l a t e d defense.

Notes 1. All three authors work in Brussels at the Permanent Representation of Finland to the EU. The opinions expressed are the collectively personal views of a political scientist (Stubb), a lawyer (Kaila), and an economist (Ranta), and do not necessarily reflect the official position of the Finnish government. 2. A. C-G. Stubb, "The Finnish Debatem," p. 10. 3. See R. Lampinen, O. Rehn, and P. Uusikylä, EU-asioiden valmistelu Suomessa. 4. See, for example, Finland, "Government's Report to the Parliament on the Effects of EC Membership for Finland" (VNS 2/1991). 5. See M. Koivisto, "Witness to History, memoirs of Mauno Koivisto."

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6. F i n l a n d , " S u o m e n E U - p o l i t i i k a n s u u n t a v i i v a t " ( V N S 3 / 1 9 9 4 vp). 7. Ibid., p. 7. 8. Ibid., p. 8. T h e " N o r t h e r n D i m e n s i o n " is a F i n n i s h initiative a i m e d at c r e a t i n g c l o s e r ties b e t w e e n R u s s i a and E u r o p e in, for e x a m p l e , e n e r g y and the environment. 9. S e e J a a k k o B l o m b e r g , f o r e w o r d to " A p p r o a c h i n g the N o r t h e r n Dim e n s i o n of the C F S P , " pp. 7 - 1 0 . 10. See F i n l a n d , " S e c u r i t y in a C h a n g i n g World: G u i d e l i n e s f o r F i n l a n d ' s S e c u r i t y P o l i c y , " p. 61. 11. See F i n l a n d , " M e m o r a n d u m C o n c e r n i n g F i n n i s h Points of View with R e g a r d to the 1996 I G C of the E u r o p e a n U n i o n " ; a n d F i n l a n d , " F i n l a n d ' s Points of D e p a r t u r e and O b j e c t i v e s at the 1996 I n t e r g o v e r n m e n t a l C o n f e r e n c e " ( V N S 1/1996 vp), pp. 2 3 - 2 5 . 12. See A r t i c l e 1 7 - 2 ) of the T r e a t y on E u r o p e a n U n i o n . In t h e Treaty on European Union. O f f i c e of O f f i c i a l P u b l i c a t i o n s of the E u r o p e a n C o m m u n i ties, L u x e m b o u r g , 1997. 13. See F i n l a n d , " S u o m e n E U - p o l i t i i k a n yleiset l i n j a u k s e t . " 14. See F i n l a n d , " I h m i s o i k e u d e t j a S u o m e n u l k o p o l i t i i k k a . " 15. See EVA, " S u o m i E u r o o p a s s a . S u o m a l a i s t e n E U - k a n n a n o t o t , " pp. 46-^8. 16. See F i n l a n d , " F i n l a n d and the 1996 I n t e r g o v e r n m e n t a l C o n f e r e n c e , " pp. 1 7 - 1 8 . 17. See F i n l a n d , " G o v e r n m e n t ' s P r o p o s a l to the P a r l i a m e n t on the A d o p t i o n of the A g r e e m e n t on the A c c e s s i o n of F i n l a n d to the E u r o p e a n U n i o n " ( H E 1 3 5 / 1 9 9 4 vp). 18. See F i n l a n d , " M e m o r a n d u m C o n c e r n i n g F i n n i s h P o i n t s of View w i t h R e g a r d to the 1996 I G C of the E u r o p e a n U n i o n " ; F i n l a n d , " F i n l a n d ' s P o i n t s of D e p a r t u r e a n d O b j e c t i v e s at t h e 1 9 9 6 I n t e r g o v e r n m e n t a l C o n f e r e n c e " ( V N S 1/1996 vp), pp. 1 0 - 1 1 . See also F i n l a n d , " F i n l a n d and the 1996 I n t e r g o v e r n m e n t a l C o n f e r e n c e , " pp. 9 - 1 0 . 19. See A r t i c l e s 2 9 - 4 2 of the T r e a t y on the E u r o p e a n U n i o n and A r t i c l e s 6 1 - 6 9 of the T r e a t y on t h e E u r o p e a n C o m m u n i t i e s . 2 0 . See F i n l a n d , " G o v e r n m e n t ' s P r o p o s a l to the P a r l i a m e n t on the A d o p tion of the T r e a t y of A m s t e r d a m ( H E 2 4 5 / 1 9 9 7 vp), pp. 1 6 5 - 1 6 7 . 2 1 . S e e F i n l a n d , " T h e P r o g r a m m e f o r the F i n n i s h P r e s i d e n c y of t h e E u r o p e a n U n i o n , " J u n e 24, 1999, pp. 2 9 - 3 2 .

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Acronyms and Abbreviations

CAP CDU CEMT CES CFSP CJD COREPER DG DM EC ECB ECJ ECOFIN ECSC ECU EDC EEC EFTA EIB EMU ERDF ERDP ERM EUROPOL FF FNSEA FPÖ

Common Agricultural Policy Christian Democratic Union (Germany) Conférence Européenne Des Ministres Des Transport Comité Economic et Sociale Common Foreign and Security Policy Creutzfeldt-Jakob brain disease Committee of Permanent Representatives Directorate-general Deutschemarks European Community European Central Bank European Court of Justice (the Court) Council of Economic and Financial Ministers European Coal and Steel Community EC monetary unit prior to 1998 European Defense Community European Economic Community (also, Common Market) European Free Trade Association European Investment Bank Economic and Monetary Union European Regional Development Fund European Regional Development Policy Exchange Rate Mechanism European Police Office French Francs National Federation of Farmers' Unions Freedom Party (Austria) 341

342

Acronyms and Abbreviations

GATT GDP GNP IC IMPs JHA NATO NCP NO OECD ÖVP PR QMV SAP SEA SGCI SPD SPÖ TEU VER WEU WTO

General Agreement on Tariffs and Trade Gross Domestic Product Gross National Product Instruction Committee Integrated Mediterranean Programs Justice and Home Affairs North Atlantic Treaty Organization New Commission Proposals nitric oxide Organization for Economic Cooperation and Development People's Party (Austria) Proportional Representation Qualified Majority Voting Social Democratic Party Single European Act General Secretariat of the Interministerial Committee Social Democrats Social Democrats (Austria) Treaty on European Union (aka, Maastricht Treaty) Voluntary Export Restraints Western European Union World Trade Organization

The Contributors

JOHN S. AMBLER is professor of political science at Rice University. He is author or editor of four books on French politics. His current research deals with comparative education policy in Europe. KAREN ANDERSON is a postdoctoral researcher at the University of Twente, (Enschede, the Netherlands). Her work focuses on the impact of European integration on the social policies of the member states. JAN BEYERS is a research fellow at the Katholieke Universiteit Leuven (Belgium). He has published several articles on EU decisionmaking, EU negotiations, and the role of Belgium. Currently, he is examining the social basis of the EU. PETER BURSENS is postdoctoral research fellow of the Flemish Fund for Scientific Research at the University of Antwerp (Belgium). He has researched and published on EU decisionmaking, EU environmental policy, and the implementation of EU policies. LESLIE ELIASON is associate professor and program director in the Graduate School of International Policy Studies at the Monterey Institute of International Studies. She is co-editor (with Lene Bogh Sorensen) of Forward to the Past? Continuity and Change in Political Development in Hungary, Austria and the Czech and Slovak Republics and has published various articles on comparative public policy in Scandinavia and Europe. RICHARD B. FINNEGAN is professor of political science and director of Irish studies at Stonehill College. The latest of his five books are 343

344

The

Contributors

Ireland: Historical Echoes, Contemporary Politics (with Edward McCarron) and Women and Public Policy in Ireland (with James E. Wiles). M A R C O G U I L I A N I is senior lecturer in c o m p a r a t i v e politics at the University of Milano. He has written several articles in international journals and chapters in edited books on the relationship between Italy and the European Union. R E I N H A R D H E I N I S C H is assistant professor of political science at the University of Pittsburgh at J o h n s t o w n . His research interests and publications have focused on h u m a n rights, European Union policies, European labor market organization, and corporatism. A I M E E K A N N E R is a doctoral candidate at the School of International Studies at the University of Miami (Florida). Her research focuses on the integration of the European Union and Mercosur. HEIDI K A I L A is at the Permanent Representation of Finland to the European Union. She deals with legal and institutional issues as well as justice and home affairs. She has published several recent articles on the legal aspects of the European Union. BART K E R R E M A N S is associate professor at Katholieke Universiteit Leuven (Belgium) teaching international relations. His recent publications include work on EU decisionmaking, European integration, and the E U ' s external trade policy. C A R L L A N K O W S K I is currently with the U.S. State Department after service with the American Institute for Contemporary German Studies. He is author of Germany and the European Community: Beyond Hegemony and Containment? as well as several other books and numerous articles. J O H N M C C O R M I C K is associate professor of political science at the Indianapolis c a m p u s of Indiana University. A m o n g his many publications are the recent The European Union: Politics and Policies (2nd Policy in ed.), Understanding the European Union, and Environmental the European Union. C H R I S T O S M A R K O U is with Delta Airlines working on strategic planning issues. He has worked extensively in both the United States and Greece on a wide variety of development projects.

The Contributors

345

G E O R G E N A K O S is assistant professor of marketing at Clayton College and State University in Morrow, Georgia. He has had extensive consulting experience in both the United States and Greece in international political risk. S I M O N A PIATTONI is associate professor of political science in comparative politics at the University of Tromsoe (Norway). She has written on regional development policy, local politics, and clientelism. She has a v o l u m e f o r t h c o m i n g entitled Clientelism. Interests and Democratic Representation. E L L E N B. P I R R O is president of Pirro International Research, a research and consulting firm based in Des Moines, Iowa, and former director of the Carrie C h a p m a n Catt Center for Women and Politics at Iowa State University. A m o n g her publications in the field of international relations are several books and numerous articles, most recently on d e v e l o p m e n t of democratic c o m m u n i t y and public policy implementation. Her recent writings have focused on southern Africa, China, and the developing areas. T I M O R A N T A is at the Permanent Representation of Finland to the European Union. He participates in the work of the interim Political and Security C o m m i t t e e of the EU and has previously worked on the development of the C F S P and on parliamentary affairs. J O R G E N R A S M U S S E N is Distinguished Professor Emeritus at Iowa State University, A m e s , Iowa. One of the founders of the British politics group, he served as its executive secretary for 20 years. In addition to publishing articles in various scholarly j o u r n a l s in Britain and the United States, he is co-author of Major European Governments, which has gone through nine editions. M. S H A W N R E I C H E R T is a doctoral candidate at Rice University completing a dissertation on the voting behavior of members of the European Parliament. J O A Q U I N R O Y is currently p r o f e s s o r at the School of International Studies, University of Miami (Florida). He is a noted scholar in the areas of Iberian politics, c o m p a r a t i v e politics, and international relations. He has written and published n u m e r o u s articles and books, including most recently The Ibero-American Space.

346

The Contributors

A L E X A N D E R C-G. S T U B B is at the Permanent Representation of Finland to the European Union. He deals mainly with the Intergovernmental Conference and has published and taught extensively on European affairs. N I C O L A O S Z A H A R I A D I S is assistant professor of g o v e r n m e n t and public service at the University of Alabama at Birmingham. He is currently vice-president of the International Studies A s s o c i a t i o n - S o u t h . He has written extensively on European policy and political economy. E L E A N O R E. Z E F F is professor of comparative politics and international relations at Drake University in Des Moines, Iowa. She has publications on European politics and on the politics of developing areas in several scholarly journals, and is actively involved in international organizations in her community and profession.

Index

Adenauer, Konrad, 31, 105 Agenda 2000, 96, 107 Agricultural policy, 23, 31; French, 45-50; GATT negotiations and, 48-49; Greek, 221-222; Swedish, 293; U.S. and, 49. See also Common Agricultural Policy (CAP) Air France, state subsidization of, 40-43 Airbus Consortium, 43 Ambler, John S., 29 Amsterdam Treaty, 242, 296; and Austria's condemnation, 273-274; employment policy and, 292-293; and EMU opt-outs, 198; environmental policy and, 101; gender equality policy and, 299; justice and home affairs policy and, 153, 311; political asylum and, 248 Austria, 258, 267-282; agricultural subsidies, 272; Balkans conflict and, 273; center-right coalition government in, 268, 273-274; economy/economic governance, 271, 272; ecopoints system, 278-279; environmental policy, 276; EU campaign and accession, 267, 270-271, 278-279; EU compliance, 271-272; EU membership consequences, 271-272; EU sanctions, 258, 267, 273-274; farright politics in, 268-269, 274; foreign policy, 273-274; industrial sector, 271; immigration and

xenophobia in, 269; as international pariah, 268; neutrality policy, 271; patronage system (Proporz), 269; political and social partnership system, 270; political and social trends of 1990s, 268-269; transalpine transport policy disputes, 274-282 Axnar, Jose Maria, 240, 256-257 Balkans crisis, 248; Austria and, 273; European intervention in, 53; Germany and, 108-111; Greece and, 221, 223, 227 Belgian-European integration: compliance record, 77; Cooperation Agreement and, 65, 69-70; coordination mechanism in, 65-70; notification and infringement procedures in, 72-73; state structure and, 63-64; subnational governing bodies' roles in, 64-70; transposition mechanisms in, 78-80, 83; voting rights directive in, 68 Benelux countries, 81-84; as consociational democracies, 83; EU policy representations in, 59-60; EU implementation records, comparative, 72-74. See also Belgium; Luxembourg; Netherlands Beyers, Jan, 59 Blair, Tony, 53, 110-111, 151, 156, 164, 170 Bosnia, 108

347

348

Index

Brenner-Inntal Autobahn, 2 7 4 - 2 8 1 Britain: agriculture, 1 6 1 - 1 6 4 , 1 6 9 - 1 7 0 ; constitution, 157; e c o n o m i c policy, 1 4 8 - 1 4 9 , 161-165; elections, 156; environmental policy, 1 5 0 - 1 5 1 ; executive structure, 1 5 9 - 1 6 0 ; Falkland Islands invasion, 183; historical relations with Europe, 1 4 5 - 1 4 7 , 157; House of Lords, 159; justice and home affairs and, 153; m a d - c o w disease in, 167-170; party politics, 148, 149, 165, 166, 168, 169, 170; and Portugual's EU entry, 238; regional policy, 1 5 4 - 1 5 6 , 161; social policy, 1 4 9 - 1 5 0 , 165-167; and U.S. relations, 146, 154; working conditions and regulations, 1 6 5 - 1 6 7 British-European integration: British policymaking impacted by, 1 5 7 - 1 6 1 ; C o m m o n Market m e m b e r s h i p and, 147; democratic deficit and, 156, 158; euro entry and, 1 5 6 - 1 5 7 ; joint foreign and security policy and, 151-153; legislative scrutiny process in, 158-159; politics and, 147-148; sovereignty and, 153-154; subsidiarity and, 1 5 4 - 1 5 6 Brittan, Leon, 39 Brussels Treaty Organization, 106 Bursens, Peter, 59 Caetano, Marcelo, 236, 251 C a l m f o r s , Lars, 297 Central and Eastern European ( C E E ) states, m e m b e r s h i p prospects of, 107, 2 3 1 - 2 3 2 , 2 3 6 - 2 3 7 , 273, 274 Chirac, Jacques, 38, 50, 51, 53, 54 Christian Democratic Union (Germany), 91; coalition g o v e r n m e n t , 101 Clinton, Bill, 5 3 Cohesion Fund, 127, 257 C o m m i t t e e of Permanent Representatives ( C O R E P E R ) , 12; Benelux countries and, 6 1 - 6 2 , 65-68 C o m m o n Agricultural Policy ( C A P ) , 23, 31, 1 6 1 - 1 6 2 , 203, 293; Britain and, 47, 1 6 1 - 1 6 4 ; f a r m surpluses and, 47; France and, 4 5 - 5 0 , 5 4 - 5 5 ; Greece and, 222; Ireland and, 175,

176, 177, 178, 179, 188; reforms, 47, 48, 107 C o m m o n Foreign and Security Policy (CFSP), 54, 107, 254, 2 7 3 - 2 7 4 ; Britain and, 1 5 1 - 1 5 3 ; Finnish role in, 3 0 7 - 3 1 0 ; Ireland and, 183-184; second-pillar issues of, 4; Spain and, 242 C o m m o n Strategy of the European Union on Russia, 111 C o m m u n i s t Party (France), 33 Competition rules, 39, 4 0 - 4 1 Competitive federalism, 93, 95, 96, 112-113 Confederation of British Industry (CBI), 166 Consensus, 3 Conservative Party: of Austria, 268, 269, 270, 2 7 5 - 2 7 6 ; of Britain, 148, 149, 165, 166, 168, 169, 170; of D e n m a r k , 196 Consociational democracies, 8 3 C o n s u m e r protection, 202 C O R E P E R . See C o m m i t t e e of Permanent Representatives Crédit Lyonnais, 4 3 - 4 4 Croatia, 108; recognition of, 152 Crotty, William, 1 8 3 - 1 8 4 Cuba, EU aid to, 250 Cyprus, 228, 229 Czech Republic, 53; E U accession, 152 Dayton Accords, 1 0 8 - 1 0 9 De Gaulle, Charles, 3 1 - 3 2 , 53, 176, 177 Debré, Michel, 4 6 Delors, Jacques, 33, 39, 54, 149, 238, 277 Democratic deficit, 1 5 6 - 1 5 7 , 158, 1 9 6 - 1 9 7 , 290, 2 9 6 - 2 9 7 D e n m a r k , 1 9 1 - 2 1 2 ; activist stance, 192; agricultural policy, 203, 210; democratic deficit and, 197; domestic policy, 1 9 2 - 1 9 3 , 2 0 2 - 2 0 3 , 2 0 9 - 2 1 0 , 2 1 1 - 2 1 2 ; economy, 192, 198, 2 0 4 - 2 0 5 , 206, 208, 210; e m p l o y m e n t , 198, 206; environmental policy, 193, 202, 2 0 9 - 2 1 0 ; euro nonparticipation, 191, 193, 1 9 5 - 1 9 6 , 1 9 8 - 1 9 9 , 202, 2 0 3 - 2 0 5 , 208; E u r o p e C o m m i t t e e ,

Index

200-202; free trade support, 195; gender equality policy, 206-207; Maastricht Treaty and, 193, 197, 198-199, 204; party system, 195, 196, 199-200; policymaking and EU implementation, 194-195, 199-202; regulatory protection policies, 202; social welfare policy, 191-192, 193, 202, 205-209, 210-211; sovereignty and democracy principles of, 193, 197-198 Development funding. See European Regional Development Policy (ERDP) Domestic leadership, integration process and, 231 Domestic policy, EU membership and, 203 Eastern and Central European states, membership prospects of, 107, 231-232, 236-237, 273, 274 Economic and Monetary Union (EMU), 154, 202; convergence criteria, 90-91, 92, 112, 204, 205, 244; Danish exceptions to, 191, 193, 195-196, 198-199, 202, 203-205, 208; Finland's membership in, 305; Germany and, 90-93, 96, 112; Greece and, 222-224; Italy and, 115; macroeconomic rules and, 91; Portugal and, 253; Spain and, 244-245; Swedish nonparticipation in, 285, 297-299; tax harmonization and, 93-94 Economic and Social Committee, 60 Eco-tax, 103 Einem, Caspar, 281 Elections, EU, 156 Eliason, Leslie, 191 Employment policy, 98, 254, 292-293; tied to environmental policy and, 103. See also specific country Energy tax, 94, 102 Engell, Hans, 196 Enlargement debate, 107; Baltic region in, 294; on broadening versus deepening, 112, 152, 302; Central and Eastern European (CEE) countries and, 107, 231-232, 236-237, 273, 274 Environmental management and

349

auditing system (EMAS), 105 Environmental policy, 104, 294; employment incentives and, 103; in EU constitutional development, 100-101; and policy uniformity and differentiation across states, 105. See also specific member state Erlander, Tage, 287 Europe of the States, 29 European Atomic Energy Community, 3 European Central Bank (ECB), 90, 91, 93 European Coal and Steel Community, 3, 29, 30, 105 European Commission (EC). 227, 228; alpine transit disputes and, 276-277, 280-281; directives and regulations, 17-18, 68, 122-123, 165, 242; directorates-general (DGs), 14, 24; first pillar issues, 3; policy role, 4 - 5 , 9 - 1 0 , 11, 12, 13, 15, 18, 19, 20; reasoned opinions of, 18; state subsidies and, 37, 38, 39, 40, 41, 42, 43 European Common Market, 31, 147 European Community (EC), 3; supranational features of, 31-32; treaty, 278 European Council of Ministers, 5, 160; environment and, 105; policy role of, 9, 12, 13, 14, 15; qualified majority voting and, 3, 97, 203, 112, 309 European Court of Justice (ECJ), 4, 41, 42, 44, 166, 301, 313; Britain and, 149-150; Irish abortion law and, 180-181; policy role, 9, 10, 12, 18, 20 European Defense Community (EDC), 29-30,106 European Economic Agreement (EEA), 271, 287; treaty, 277 European Economic Community (EEC), 30-31, 34; Britain and, 147, 148; treaty, 94 European Economic Space (EES), 287 European Employment Pact, 98 European Free Trade Association (EFTA), 147, 195, 251, 277; Swedish membership in, 287-288 European Investment Bank (EIB), 97;

350

Index

environmental charter, 101 European Monetary System (EMS), 178, 179, 203 European Parliament, 112, 115, 197; policy role, 9, 10, 11, 12, 19, 20, 156 European Police Office (EUROPOL), 4 European Political Cooperation (EPC) system, 183-184, 226 European Regional Development Funds (ERDF): Britain and, 155; Ireland and, 180; Italy and, 126-140. See also Structural funds European Security and Defense Identity (ESDI), 53-54, 108, 110 European Union: agenda-setting, at national versus European level, 10; authority, 5; balance of power, 20-25; competition law, 94; customs union, 25; defense and force structure, 53, 111, 184; democratic deficit in, 15-16; economic policy, 20-21, 25; European identity versus national identity in, 1, 33; full employment agenda, 206; informal politics in, 14-15; institutional distribution of power, 4; military force, 53, 184; neutrality and, 271; political benefits of membership, 231-232; and shared responsibilities with member states, 22-23; social policy, 5, 52-53; sovereignty and, 146-147, 153-154; supranationalism versus intergovernmentalism in, 8, 14, 24, 192, 239-240; treaties, 7 - 8 , 22, 242, 313. See also Enlargement debate; Policy/policymaking; specific policy Exchange Rate Mechanism (ERM), 148-149, 223, 253

186-187 Finland, 305-315; Economic and Monetary Union (EMU) membership, 305; EU accession, 305; and EU crisis management, 309; EU policy coordination system, 306-307; EU presidency, 305, 307, 314; foreign policy, 307-310; integrationist policies, 305, 306; Intergovernmental Conference negotiations and, 308-309, 313; justice and home affairs role, 311-314, 314; rainbow coalition government, 315 Finnegan, Richard B., 175 Fischer, Joschka, 109-110, 113 Foreign and security policy. See Common Foreign and Security Policy France, 29-55; agricultural policy, 45-50, 54-55; British beef ban and, 169; British EC entry and, 176, 177; economic and monetary policy, 34, 51; EU compliance record, 35; and EU entry of Portugal and Spain, 238; EU integration, historical overview of, 29-30; European security force and, 53-54; industrial subsidies, 35-44; national identity, 33, 53; public commitment to EU, 33; social policy, 50-52; state structure, 34-35; U.S. perceived hegemony and, 53 Franco, Francisco, 236, 237, 243 Free Democratic Party—Christian Democratic Union government (Germany), 101 Freedom Party (Austria), 270; controversial coalition government of, 268, 274

Falkland Islands, 183, 226 Federalism: Belgian system of, 63-64; Britain and, 146; competitive, 93, 95, 96 Fianna Fail Party (Ireland), 176, 186-187 Financial policy, EU: agriculture in, 23; and British rebate demand, 161-164; budget and, 8, 22-23, 302; members' contributions to, 164 Fine Gael Party (Ireland), 176,

Gender equality policy, 299-300 General Agreement on Tariffs and Trade (GATT), 4 8 - 4 9 German Democratic Republic, 105 Germany, 89-113, 152, 169; Balkans crisis and, 108-111; Basic Law, 101, 102, 103, 106; containment and rehabilitation of, 30, 31, 34, 105-106; Council presidency, 107, 109-110, 111, 113; détente policy, 106; economic/macroeconomic

Index

policy, 9 0 - 9 5 ; enlargement and, 107; e n v i r o n m e n t a l policy, 100-105; and EU f i n a n c i n g , 164; EU policy responses, 8 9 - 9 0 , 112-113; foreign and security affairs, 105-113; Ireland and, 177, 178; industrial-relations system, 9 8 - 1 0 0 ; rearmament, 106; regional enterprise aid and, 9 4 - 9 5 ; reunification, 106-107; social policy, 9 5 - 9 8 ; soft p o w e r role, 108, 111; structural f u n d allotment, 9 6 - 9 7 ; transalpine transit and, 276; and U.S. relations, 111 Giscard d ' E s t a i n g , Valéry, 238 Giuliani, M a r c o , 115 Goldsmith, J a m e s , 156 González, Felipe, 238, 243 Greece, 2 1 7 - 2 3 2 ; agricultural sector, 2 2 1 - 2 2 2 , 225; consensus and, 231; defense spending, 2 2 4 - 2 2 5 ; Economic and Monetary Union ( E M U ) participation, 2 2 2 - 2 2 4 ; economy, 217, 2 1 8 - 2 2 2 , 2 2 2 - 2 2 3 ; foreign and security issues, 217, 2 2 4 - 2 3 0 ; geographical isolation, 217, 2 2 0 - 2 2 1 ; informal sector, 221; industrial sector, 2 1 8 - 2 2 1 ; integrationist stance, contradictions of, 217; socialist g o v e r n m e n t in, 2 2 5 - 2 2 8 ; solidarity and, 226; Turkey and, 223, 226, 2 2 8 - 2 3 0 ; Yugoslav crisis and, 221, 223, 227 Green Party (Austria), 268, 270 Green Party ( G e r m a n y ) , 101, 104; Social D e m o c r a t s alliance with, 9 1 - 9 3 , 94, 98, 102, 103, 107, 109 Guterres, A n t ó n i o , 236, 240 Haider, Jòrg, 258, 268, 269, 274 Hallstein, Walter, 31 Halonen, Tarja, 309 Harmonization of policies, 30, 152 Heinisch, Reinhard, 267 Helsinki Accords, 106, 184 H u m a n rights violations, 309 Hungary, 53; and E U accession, 152 Hurd, Douglas, 152 Immigration policies, 107; Austria and, 269; Spanish law on, 2 4 7 - 2 4 8 ; Schengen Accords and, 153, 248, 255

351

Industrial subsidies, 37, 38, 39, 40, 41, 42, 4 3 Integrated Mediterranean P r o g r a m s (IMPs), 1 2 7 - 1 2 8 Ireland, 175-188; abortion and, 1 8 0 - 1 8 1 ; and balance of trade shifts, 1 7 7 - 1 7 8 ; Britain and, 175; C o m m o n Agricultural Policy and, 175, 176, 177, 178, 179, 188; democratic deficit in, 187; diplomatic status, 182; domestic law, 188; and domestic policy consensus, 179; e c o n o m i c transition, 175, 177-180; European C o m m u n i t y entry, 1 7 5 - 1 7 7 ; European Monetary System effects, 177, 178, 179; foreign policy, 1 8 2 - 1 8 5 ; industrial sector d e v e l o p m e n t , 177-179; institutional capacity and policymaking, 1 8 5 - 1 8 8 ; Maastricht Treaty and, 181, 184; neocorporatist m o d e l in, 178, 187-188; neutrality policy, 176, 182-184; poverty, 180; Structural Funds and, 175, 177, 1 7 9 - 1 8 0 , 188; w o m e n ' s equality issues in, 180 Italian-European integration, 115-140; administration and adjudication in, 120; c o m p a r a t i v e p e r f o r m a n c e , 1 2 0 - 1 2 6 ; E u r o p e a n Regional D e v e l o p m e n t Policy ( E R D P ) implementation, 1 2 6 - 1 4 0 ; implementation deficiencies, 115, 117, 1 2 3 - 1 2 6 ; institutional f r a m e w o r k and capacities, 116-126, 1 3 9 - 1 4 0 ; monetary union and, 115; parliamentary approval process, 117-119; political system and, 1 2 5 - 1 2 6 ; regional p o w e r s ' role in, 119, 1 3 8 - 1 4 0 ; and structural f u n d r e f o r m s , 1 2 7 - 1 2 8 ; transalpine transit and, 2 7 6 Jospin, Lionel, 43, 49, 50, 52 Justice and h o m e affairs: Finnish role in, 3 1 1 - 3 1 4 ; third pillar issues of, 4 Kaila, Heidi, 305 Kanner, A i m e e , 235 Karamanlis, Constantine, 225 K e r r e m a n s , Bart, 59

352

Index

Kohl, Helmut, 32, 91, 107, 163 Koivisto, Mauno, 308 K o s o v o crisis, 53, 109-111. See Balkans crisis K y o t o Protocal, 102

also

Labour Party: of Britain, 148, 156, 159, 165, 1 6 6 - 1 6 7 , 168, 169, 170: of Ireland, 186 Lafontaine, Oskar, 9 2 - 9 3 , 231 L a n k o w s k i , Carl, 89 Latin A m e r i c a n policy, 236, 2 4 9 - 2 5 0 Lemass, Sean, 176, 1 8 2 - 1 8 3 Lévy, R a y m o n d , 38 Lipponen, Pavo, 305, 315 Lisbon 2 0 0 0 summit, 192 L o m é Convention, 256 L u x e m b o u r g C o m p r o m i s e , 32 L u x e m b o u r g - E u r o p e a n integration, 93; coordination m e c h a n i s m , 7 0 - 7 2 : implementation process and record, 81. 84; notification and infringement procedures, 7 2 - 7 3 Maastricht Treaty, 14, 20, 21, 31, 3 2 - 3 3 , 35, 38, 64, 107, 242, 244, 253; Britain's opt-out, 99, 166, 167; convergence criteria, 9 0 - 9 1 , 92, 96, 112, 204, 205, 244; Danish exceptions to, 193, 197, 1 9 8 - 1 9 9 ; e n v i r o n m e n t and, 101; Irish protocol to, 181; Social Protocol, 99, 149, 151, 152, 166, 167; subsidiarity in, 5; three pillars of, 3 M a g h r e b region, 247, 249 Major, John, 1 4 8 - 1 4 9 , 156, 166, 167, 168 Markous, Christos, 217 M c C o r m i c k , John, 7 Mercosur, 250 Mitsotakis, Constantine, 227 Mitterrand, François, 3 2 - 3 3 , 34, 50, 54, 107, 163, 238 Monnet, Jean, 2 9 - 3 0 , 34, 36 Monti, Mario, 4 4 Nakos, George, 217 National Federation of F a r m e r s ' Unions ( F N S E A ) [France], 45 NATO, 32, 105, 106, 107, 108-111, 113, 151, 235, 240; French army

and, 53; Greece and, 226, 228 Neofunctionalist theory of integration, 30 Netherlands-European integration: coordination m e c h a n i s m s , 6 0 - 6 3 ; Dutch legislative process and, 63; implementation procedures and records, 7 4 - 7 7 , 8 3 - 8 4 ; notification and infringement procedures, 7 2 - 7 3 Neutrality, and EU accession, 271 Nordic unity, 302 Nuclear energy, 44, 104 O m b u d s m a n office, 20 Papandreou, Andreas, 2 2 5 - 2 2 8 , 231 Peacekeeping and humanitarian efforts, 2 9 3 - 2 9 4 . See also Balkans crisis People's Party (Austria), 268, 269, 275-276 Periphery countries, Europeanizalion of, 107, 110 Permanent representation. See also C o m m i t t e e of Permanent Representatives ( C O R E P E R ) , 12 Petersburg Tasks, 111, 184 Piattoni, Simona, 115 Poland, EU accession, 107, 152, 232, 237 Policy/policymaking, EU, 4 - 2 5 ; agenda, 2 1 - 2 2 ; c o m p r o m i s e and bargaining in, 13; coordination m e c h a n i s m s in, 116-117; as elitist and top-down, 15-16; harmonization of, 152; implementation, 4 - 6 , 12, 16-20; legitimation of, 11; permanent representation in, 116; preparations, m e m b e r states' involvement in, 5 9 - 6 0 ; power struggles in, 13-14; spillover effect in, 16, 21; state-centered versus federalist approach in, 194-195; subnational g o v e r n m e n t s ' role in, 64; subsidiarity in, 151 Political asylum, 107, 153 P o m p i d o u , Georges, 32 Populism, 231 Portugal, 2 3 5 - 2 4 8 , 2 5 1 - 2 5 8 ; A f r i c a n and Asian colonies of, 236; Austria and, 258; authoritarian rule in, 251; c o m m u n i s t and socialist party

Index

p o l i t i c s in, 2 3 7 - 2 3 8 ; e c o n o m i c g r o w t h a n d policy, 2 3 7 , 2 5 3 - 2 5 4 , 2 5 7 ; e l e c t o r a l p a r t i c i p a t i o n , 256; e m p l o y m e n t in, 2 5 4 ; e n v i r o n m e n t a l policy, 2 5 4 ; and E U e n l a r g e m e n t , 2 3 6 - 2 3 7 ; and E U integration, 232, 2 3 6 - 2 3 9 , 251; E U presidency, 258; euro participation, 2 5 3 - 2 5 4 , 256, 2 5 7 - 2 5 8 ; and European continental h e g e m o n y , 255; f o r e i g n a n d security policies, 2 5 4 - 2 5 5 ; f o r m e r c o l o n i e s a n d , 2 5 5 - 2 5 6 ; historical isolation a n d a u t h o r i t a r i a n i s m of, 2 3 5 - 2 3 6 , 2 3 7 ; i m m i g r a t i o n policy, 2 5 5 ; i n t e r g o v e r n m e n t a l i s m and, 2 3 9 - 2 4 0 ; and Latin A m e r i c a n n a t i o n s , 2 5 6 ; and M e d i t e r r a n e a n c o o p e r a t i o n , 2 5 5 ; national identity in, 252, 2 5 5 ; N A T O a n d , 235, 2 4 0 ; p o l i c y e f f e c t i v e n e s s p r o s p e c t s , 2 5 6 - 2 5 7 ; S p a n i s h policy o f , 2 3 9 - 2 4 1 , 257; w o r k e r s d i r e c t i v e a n d , 100 Privatization, 44 P r o p o r t i o n a l r e p r e s e n t a t i o n , 156 Q u a l i f i e d m a j o r i t y v o t i n g , 3, 97, 112, 203, 309 R a m b o u i l l e t C o n f e r e n c e , 109 R a n t a , T i m o , 305 R a s m u s s e n , J o r g e n , 145 R e g i o n a l aid, and m a t c h i n g n a t i o n a l funds, 155-156 R e g u l a t i o n , E U , 185, 193, 2 0 2 Reichert, M. Shawn, 29 R e n a u l t a u t o m o b i l e c o m p a n y , state aid to, 3 7 ^ 0 Renewable Energy Sources Act ( R E S A ) , 102 Roccard, Michel, 39 Romania, 53 R o m e Treaty, 97, 100, 107, 147, 149, 183; c o m p e t i t i o n rules, 39, 4 0 - 4 1 ; public monopolies and, 300-301; supranational features of, 32 Roy, Jaoquin, 235 R u s s i a , 110, 111, 3 0 2 Salazar, Antonio Oliveira, 236, 251 S c h e n g e n A c c o r d s , 21, 153, 2 4 8 , 2 5 5 S c h l ü t e r , P o u l , 199

353

S c h r o d e r , G e r h a r d , 50, 103 S c h u m a n , R o b e r t , 30, 5 4 S c h u m a n P l a n , 105 Serbia, 53 Simitis, Costas, 228, 231 S i n g l e E u r o p e a n A c t ( S E A ) , 21, 32, 97, 107, 122, 127, 149, 1 5 0 - 1 5 1 , 2 2 6 ; Irish neutrality p o l i c y and, 183-184 S i n g l e m a r k e t p r o g r a m , 21, 20, 2 3 - 2 4 , 25, 149; d i r e c t i v e s , c o m p a r a t i v e , 1 2 2 - 1 2 4 ; E U c o m p e t i t i o n law and, 94; G e r m a n y a n d , 100; s p i l l o v e r e f f e c t , 16 S i n n F e i n (Irish L a b o r P a r t y ) , 176 Slovenia, 53 Soares, Mario, 238, 257 Social D e m o c r a t i c Party ( A u s t r i a ) , 2 6 8 , 269; coalition government, 270 Social D e m o c r a t i c Party ( D e n m a r k ) , 196 Social Democratic Party (Sweden), 287, 288, 2 8 9 - 2 9 0 , 2 9 7 - 2 9 8 S o c i a l D e m o c r a t i c P a r t y / G r e e n Party c o a l i t i o n ( G e r m a n y ) , 9 1 - 9 3 , 94, 98, 102, 103, 107, 109 S o c i a l P r o t o c o l of M a a s t r i c h t Treaty, 149, 151, 152; B r i t a i n ' s o p t - o u t , 9 9 , 166, 167 S o l a n a , Javier, 53, 110, 2 4 2 S o l i d a r i t y , t r a n s n a t i o n a l , 9 5 - 9 6 , 97 Sovereignty: British, 153-154; supranational institutions and, 146-147 Spain, 94, 2 4 1 - 2 5 1 ; autonomous communities of, 246, 2 5 0 - 2 5 1 ; c o m m u n i s t a n d socialist party politics in, 2 3 7 - 2 3 8 ; economy/economic policies, 237, 2 4 3 - 2 4 4 , 257; electoral participation, 256; e m p l o y m e n t and labor reform, 2 4 5 ; e n v i r o n m e n t a l policy, 2 4 2 , 2 4 5 - 2 4 6 ; EU activism of, 242; and E U implementation, 242; and EU expansion, 2 3 6 - 2 3 7 ; and E U funding, 240; and European integration, 2 3 1 - 2 3 2 , 235, 236, 2 3 7 - 2 3 9 , 242; euro participation, 242, 2 4 4 - 2 4 5 , 256, 2 5 7 - 2 5 8 ; foreign a n d security policy, 2 4 6 - 2 4 7 , 2 4 9 ; historical isolation a n d a u t h o r i t a r i a n -

354

Index

ism of, 2 3 5 - 2 3 6 , 237; immigration policies, 2 4 7 - 2 4 8 ; Latin A m e r i c a and, 236, 2 4 9 - 2 5 0 ; M a g h r e b region and, 249; nationalist m o v e m e n t s , 2 5 0 - 2 5 1 ; policy e f f e c t i v e n e s s prospects, 2 5 6 - 2 5 7 ; political asylum and, 2 4 8 - 2 4 9 ; Portugal and, 2 3 9 - 2 4 1 , 257 Stability and G r o w t h Pact, 92 Structural Fund, 257; additionality principle in, 128, 155; G e r m a n y and, 96, 97; qualification criteria proposals, 180; r e f o r m s , 107, 127-128; subsidiarity principle and, 128; and Swedish d e m a n d s , 293 Stubb, Alexander C - G . , 305 Subsidiarity principle, 5, 14, 119, 151; Britain and, 154-156; in structural f u n d i n g , 128 Sweden, 2 8 5 - 3 0 3 ; alcohol control policy, 3 0 0 - 3 0 1 ; democratic deficit and, 290, 297; e c o n o m y / e c o n o m i c policy, 285, 2 8 8 - 2 8 9 , 2 9 2 - 2 9 3 , 2 9 7 - 2 9 9 ; and E M U c o n v e r g e n c e criteria, 2 9 8 - 2 9 9 ; environmental policy, 292, 294, 296; EU financing, 292; EU integration, 285, 2 8 6 - 2 9 0 ; EU policy influence and priorities, 3 0 2 - 3 0 3 ; euro nonparticipation, 285, 2 8 7 - 2 8 9 , 2 9 7 - 2 9 9 ; foreign policy, 286, 2 9 3 - 2 9 4 ; gender equality policy, 2 9 9 - 3 0 0 ; international activism, 2 8 6 - 2 8 7 ; neutrality policy, 285, 2 8 6 - 2 8 7 , 288, 292; political identity of exceptionalism, 2 8 6 - 2 8 7 ; political institutions and EU decisionmaking, 2 9 0 - 2 9 1 ; socialwelfare policies, 286, 287, 288, 2 9 4 - 2 9 5 , 2 9 9 - 3 0 0 ; sovereignty, 296 Switzerland, transalpine transit and, 276, 2 8 0 - 2 8 1 Taxation policy, 95, 177; on alcohol production, 300; eco-tax and, 103; harmonization of, 9 3 - 9 4

"Television Without B o r d e r s " (EU directive), 68 Thatcher, Margaret, 47, 52, 148, 149, 160, 238; rebate tactics, 161-164; sovereignty and, 1 5 3 - 1 5 4 Transalpine traffic disputes, 274—282 Trans-European Networks, traffic infrastructure projects of, 277 Transparency, EU regulations and, 273 Treaty on European Unity. See Maastricht Treaty Trittin, Jürgen, 104 Turkish-Greco relations: conflict in, 223, 226, 2 2 8 - 2 3 0 ; EU customs union veto and, 229; improvement in, 230 United States of Europe, Association for, 29 Van Miert, Karel, 43, 94 Voluntary Export Restraints ( V E R ) , 38 Wales, and EU regional funds, 1 5 5 156 Wallström, Margot, 294 Welfare states: Scandinavian, EU m e m b e r s h i p impacts on, 203, 2 1 0 - 2 1 1 ; social-democratic, 286; types of, 95. See also specific country Western E u r o p e a n Union ( W E U ) , 106, 110, 184 Working-hours directive, 1 6 5 - 1 6 7 Works councils, 99 World Trade Organization ( W T O ) , 49. 51 Yugoslav Republic of Macedonia, 227, 228 Yugoslavian crisis. See Balkans crisis Zahariadis, Nikolaos, 217

About the Book

How, and in what areas, has E u r o p e a n U n i o n policy i n f l u e n c e d — a n d been i n f l u e n c e d b y — t h e m e m b e r states? H o w is EU policy implem e n t e d d o m e s t i c a l l y ? T h i s w e l l - w r i t t e n and i n s i g h t f u l c o l l e c t i o n explores this c o m p l e x reciprocal process, o f f e r i n g an inside view of each of the fifteen m e m b e r states. T h e authors consider what individual states do in particular policy areas, as well as the history, politics, and institutions that led to their p o s i t i o n s . C o v e r i n g the full r a n g e of i s s u e s — f r o m e c o n o m i c , social, and e n v i r o n m e n t a l , to security, to j u s t i c e and h o m e a f f a i r s — t h e y provide a l o n g - n e e d e d view of the interaction of new EU initiatives with strong, existing national policies and traditions. Eleanor E. Z e f f is assistant p r o f e s s o r of political s c i e n c e at D r a k e University. Ellen B . Pirro is president of Pirro International Research.

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