Questions with Answers on “European Economic Integration: From EEC to EU”

1. What were the major objectives behind the formation of the European Economic Community (EEC) in 1957?

Answer: The formation of the European Economic Community (EEC) was primarily driven by economic and political motives to strengthen European cooperation after the devastation of World War II. The major objectives included:

• Economic Integration: The EEC aimed to create a common market and customs union among the six founding members (Belgium, France, Germany, Italy, Luxembourg, and the Netherlands) to promote economic growth, reduce trade barriers, and encourage regional stability.
• Preventing Future Conflicts: One of the key motives was to bind countries economically to prevent future wars, particularly between France and Germany, by making their economies interdependent.
• Promoting Peace and Stability: By fostering economic cooperation, the EEC aimed to promote peace and stability in a war-torn Europe.

2. Explain the Treaty of Rome and its significance in the creation of the EEC.

Answer: The Treaty of Rome, signed on March 25, 1957, laid the foundation for the creation of the EEC and the European Atomic Energy Community (EURATOM). Its significance includes:

• Creation of the EEC: The treaty established the EEC with the goal of creating a common market and eliminating trade barriers between member states, facilitating the free movement of goods, services, capital, and people.
• Economic Cooperation: It sought to harmonize national economic policies, and set up common policies for agriculture and transport, which furthered integration.
• Long-term Peace: The Treaty of Rome was also part of a broader effort to ensure long-term peace and economic recovery in post-war Europe.

3. What role did the Single European Act (SEA) play in European economic integration?

Answer: The Single European Act (SEA), signed in 1986, was a major step toward deepening European economic integration. Its role includes:

• Internal Market: The SEA sought to complete the internal market by 1992, ensuring the free movement of goods, services, people, and capital across member states.
• Policy Harmonization: It introduced significant changes in European policies, focusing on environmental protection, research and development, and social cohesion.
• Institutional Reforms: The SEA also reformed EU institutions to make them more effective, particularly by giving the European Parliament more legislative power.

4. What were the primary objectives of the Maastricht Treaty of 1992?

Answer: The Maastricht Treaty, signed in 1992 and effective in 1993, marked the beginning of the European Union (EU) and laid the groundwork for European economic and political integration. Its primary objectives included:

• Creation of the European Union (EU): The treaty expanded the scope of the EEC, establishing the European Union, and introduced new pillars for political, defense, and justice cooperation.
• Economic and Monetary Union (EMU): The Maastricht Treaty set the criteria for a common currency (the euro) and established the EMU, which included the European Central Bank (ECB).
• Citizenship: It introduced the concept of EU citizenship, granting citizens the right to live and work anywhere within the Union.
• Common Foreign and Security Policy: The treaty also established a framework for common foreign and security policies among EU members.

5. How did the introduction of the euro affect the European economy?

Answer: The introduction of the euro, as the official currency of the Eurozone in 2002, had profound effects on the European economy, including:

• Elimination of Currency Exchange Costs: With the adoption of a single currency, the need for currency exchange between Eurozone countries was eliminated, lowering transaction costs.
• Price Transparency: It made prices more transparent across member states, which fostered competition and economic efficiency.
• Economic Stability: The euro helped stabilize the economies of member states by promoting price stability and economic convergence through the European Central Bank’s policies.
• Challenges: However, the introduction of the euro also posed challenges, especially for countries with weaker economies, as it limited their ability to use monetary policy to address national issues like inflation or unemployment.

6. What were the key institutional changes brought about by the Treaty of Lisbon in 2007?

Answer: The Treaty of Lisbon, which entered into force in 2009, brought about significant institutional changes aimed at improving the efficiency and democratic legitimacy of the European Union. Key changes include:

• Enhanced Role for the European Parliament: The Lisbon Treaty extended the co-decision procedure, giving the European Parliament more legislative power, particularly in areas such as justice and home affairs.
• Creation of the European Council President: The treaty established a permanent President of the European Council, to provide more continuity in EU leadership.
• Charter of Fundamental Rights: It incorporated the Charter of Fundamental Rights into EU law, enhancing the protection of citizens’ rights.
• Qualified Majority Voting (QMV): The treaty extended the use of QMV in the Council of the European Union, allowing decisions to be made more efficiently and with broader support from member states.

7. How did the enlargement process of the EU affect its economic integration?

Answer: The enlargement of the European Union, particularly in 2004 and 2007, had both positive and challenging impacts on European economic integration. The effects include:

• Wider Economic Cooperation: New member states brought in diverse economic practices and resources, increasing trade and economic cooperation within the Union.
• Structural Funds: The EU allocated funds to assist new members in developing their infrastructure and economies, which helped promote more balanced economic growth across the Union.
• Economic Disparities: While enlargement allowed for more trade and integration, it also highlighted the economic disparities between old and new member states, requiring more integration efforts to harmonize economies.
• Challenges in Policy Harmonization: As the EU expanded, coordinating policies across more diverse economies became more complex.

8. What were the primary challenges faced by the European Union in terms of economic integration?

Answer: The European Union faced several challenges in its pursuit of economic integration, including:

• Economic Disparities: The economies of EU member states varied significantly, leading to challenges in harmonizing tax policies, labor markets, and economic growth.
• Financial Crises: The 2008 financial crisis exposed the weaknesses in the economic structure of the EU, particularly the lack of fiscal union and the challenges of a single monetary policy without a unified fiscal framework.
• Brexit: The departure of the United Kingdom from the EU (Brexit) highlighted the challenges of maintaining unity among member states with differing political and economic priorities.
• Migration and Labor Market Integration: The free movement of people raised concerns about migration, job competition, and social integration in certain regions.

9. Explain the concept of the European Single Market and its significance in the EU’s economic integration.

Answer: The European Single Market is one of the most significant achievements of the EU’s economic integration, focusing on removing barriers to trade and economic activity. Its significance includes:

• Free Movement of Goods and Services: It eliminates tariffs, import quotas, and regulatory obstacles, facilitating the free movement of goods, services, and capital across EU countries.
• Promotion of Competition: By fostering competition, the Single Market helps improve efficiency and productivity across industries.
• Consumer Benefits: The market leads to lower prices, improved quality of products, and increased consumer choice.
• Business Opportunities: It enables businesses to operate across borders, creating opportunities for growth and innovation.

10. What role did the European Central Bank (ECB) play in European economic integration?

Answer: The European Central Bank (ECB), established in 1998, plays a crucial role in European economic integration by:

• Monetary Policy: The ECB is responsible for setting and implementing monetary policy for the Eurozone, aiming to maintain price stability and control inflation.
• Interest Rates: It sets interest rates for Eurozone countries, influencing borrowing and lending, which affects overall economic activity.
• Financial Stability: The ECB oversees the banking system in the Eurozone, working to ensure the stability of financial markets and prevent economic crises.

11. What were the main reasons for the introduction of the Common Agricultural Policy (CAP) in the EU?

Answer: The Common Agricultural Policy (CAP) was introduced to ensure a stable food supply, support farmers, and promote rural development. Key reasons include:

• Stabilization of Agricultural Markets: CAP aimed to stabilize food prices and ensure consistent supply through subsidies and price support mechanisms.
• Improvement of Farm Incomes: It was designed to support farmers’ incomes across Europe and encourage productivity in agriculture.
• Rural Development: The policy also aimed to promote rural development and improve the quality of life in rural areas through various funding programs.

12. How did the EU address the economic challenges posed by the 2008 financial crisis?

Answer: In response to the 2008 financial crisis, the European Union implemented a range of measures to stabilize the economy:

• Bailouts for Member States: The EU provided financial aid packages to struggling economies like Greece, Ireland, and Portugal through the European Financial Stability Facility (EFSF) and the European Stability Mechanism (ESM).
• Austerity Measures: Austerity measures were imposed on countries receiving aid, aiming to reduce budget deficits and restore financial stability.
• Strengthening Financial Regulations: The EU introduced stricter financial regulations to prevent future crises, including banking reforms and the creation of the European Banking Union.

13. What is the European Monetary Union (EMU) and how did it contribute to European economic integration?

Answer: The European Monetary Union (EMU) is the process of coordinating monetary policies across EU member states and establishing a common currency, the euro. It contributed to European economic integration by:

• Creating the Euro: The EMU facilitated the adoption of the euro in 1999 for financial transactions and in 2002 for cash transactions.
• Monetary Policy Coordination: It centralized monetary policy in the European Central Bank, promoting price stability and economic growth across the Eurozone.
• Boosting Trade and Investment: The euro eliminated exchange rate risks, promoting increased trade and investment among Eurozone countries.

14. How did the EU’s economic integration affect global trade?

Answer: The EU’s economic integration significantly impacted global trade by:

• Strengthening the EU’s Global Trade Position: By creating a single market and adopting common trade policies, the EU became a major global economic bloc, influencing international trade negotiations.
• Trade Agreements: The EU negotiated numerous trade agreements with countries and regions around the world, improving access to global markets.
• Foreign Direct Investment (FDI): The EU’s integration made it an attractive destination for foreign direct investment due to the large single market and stable economic environment.

15. What is the significance of EU membership for smaller economies within Europe?

Answer: For smaller economies in Europe, EU membership has significant economic benefits:

• Access to the Single Market: Membership provides smaller economies

with access to the EU’s vast single market, allowing their businesses to trade freely with other EU member states.

• Funding and Support: Smaller economies benefit from EU funding programs, particularly in infrastructure development, agricultural subsidies, and regional development.
• Attracting Investment: EU membership boosts investor confidence, leading to higher foreign direct investment (FDI) and economic growth.

These questions and answers explore the progression of European economic integration, from the EEC to the EU, highlighting the key treaties, policies, and challenges involved.