Week 3 - Summarized Notes + Flashcards
Levels of Economic Integration and Historical Evolution of the European Union
Taxonomy of Economic Integration Levels
Free Trade Agreement (FTA): An arrangement where participating member states agree to eliminate or significantly lower tariffs, import quotas, and non-tariff trade barriers among themselves. Member states retain full sovereignty over their individual trade policies toward non-member nations.
Customs Union: Extends a Free Trade Agreement by requiring member states to adopt a Shared External Trade Policy, including a Common External Tariff (CET) applied to all goods entering the union from non-member countries.
Single Market (Internal Market): A comprehensive economic area that builds upon a Customs Union by guaranteeing the borderless "Four Freedoms": free movement of goods, services, capital, and people. It mandates the removal of technical, administrative, and legal non-tariff barriers.
Economic Union: The most advanced stage of regional integration short of full political union. It combines a Single Market with unified or highly coordinated macroeconomic, fiscal, and monetary policies, including a common currency managed by a centralized monetary authority.
Historical Widening of the European Union (Enlargement Chronology)
1957 (Founding Members): The foundational "Inner Six" establish the European Economic Community (EEC) through the Treaties of Rome: Belgium, France, Germany (West Germany), Italy, Luxembourg, and The Netherlands.
1973: The first enlargement wave incorporates Denmark, Ireland, and the United Kingdom. (Greenland joined as part of Denmark in 1973, but subsequently withdrew in 1985 following a 1982 referendum).
1981: Mediterranean expansion begins with the accession of Greece.
1986: Iberian expansion incorporates Portugal and Spain.
1990: Automatic territorial enlargement occurs via German Reunification.
1995: Post-Cold War enlargement incorporates neutral EFTA nations: Austria, Finland, and Sweden.
2004: The "Big Bang" enlargement integrates ten nations simultaneously: Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia.
2007: Eastern expansion continues with the accession of Bulgaria and Romania.
2013: Accession of Croatia as the 28th member state.
2020: The first formal disintegration step occurs through Brexit (the withdrawal of the United Kingdom on January 31, 2020).
Historical Deepening of the European Union
1951 (Treaty of Paris): Establishes the European Coal and Steel Community (ECSC) to communitarize coal and steel production. Creates core supranational governance institutions: the High Authority (predecessor to the European Commission), the Parliamentary Assembly (predecessor to the European Parliament), and the Court of Justice.
1957 (Treaties of Rome): Creates the European Economic Community (EEC) and the European Atomic Energy Community (Euratom). Proposes the creation of a customs union and single market, and launches the Common Agricultural Policy (CAP).
1979: The first direct general elections to the European Parliament take place between June 7 and June 10, transitioning the body from an assembly of appointed national parliamentarians to a directly elected legislature.
1985: The Schengen Agreement is signed, creating a legal framework to abolish internal border checks.
1986 (Single European Act - SEA): Formalizes the completion of the Customs Union and sets a strict deadline of December 31, 1992, for the full establishment of the Single Market.
1993 (Maastricht Treaty / Treaty on European Union - TEU): Formally establishes the European Single Market and marks the official launch of the European Union.
1995: Permanent internal border controls are completely dismantled across participating member states within the Schengen Area.
1999: Creation of the Eurozone; the euro is introduced as an accounting currency, followed by physical euro coins and banknotes entering circulation on January 1, 2002.
The Institutional Architecture and Governance Models of the EU
Supranational vs. Intergovernmental Institutions
Supranational Institutions: Institutions granted independent executive, legislative, or judicial authority transferred from member states. They can make rules, enact decisions, and issue judgments that directly bind all member states regardless of individual national objections.
European Commission: Politically independent executive body. Holds the sole right of legislative initiative, acts as "Guardian of the Treaties," enforces community law, and manages the joint budget.
European Parliament (EP): Directly elected legislative body representing EU citizens. Adopts community law jointly with the Council and exercises budgetary control.
Court of Justice of the European Union (CJEU): Judicial authority ensuring uniform interpretation, application, and enforcement of EU law across all member states.
European Central Bank (ECB): Independent monetary authority managing the single currency (euro) and executing monetary policy for the Eurozone.
Supranational Policy Domains: Customs union, trade policy, competition rules, and Eurozone monetary policy.
Intergovernmental Institutions: Frameworks where member states maintain state sovereignty, directly represent national governments, and make decisions primarily through consensus or unanimity.
European Council: Body composed of national heads of state or government, defining the overall political direction, priorities, and long-term strategic agenda.
Council of the European Union (Council of Ministers): Decision-making body consisting of national ministers; passes legislation and coordinates policy portfolios jointly with the European Parliament.
Intergovernmental Policy Domains: Common Foreign and Security Policy (CFSP), Justice and Home Affairs (JHA), national taxation policies, and healthcare policy.
Legislative Procedures in EU Decision-Making
Ordinary Legislative Procedure (OLP): The standard supranational decision-making process. The European Commission submits a legislative proposal to both the Council of the European Union and the European Parliament. The two co-legislators amend, reject, or adopt the proposal. In the Council, voting typically operates via Qualified Majority Voting (QMV), requiring of member states representing at least of the total EU population. Applied in economic policy, energy regulation, border controls, and asylum policy.
Intergovernmental Method: Legislative proposals are submitted directly by member states to the Council. The Council amends, rejects, or adopts decisions, typically requiring strict national unanimity. Applied in CFSP (including international sanctions), tax policy, social security integration, and treaty revisions.
Theoretical Models of European Integration and the "Failing Forward" Framework
Foundational Theoretical Debates
Liberal Intergovernmentalism (LI): Formulated by Andrew Moravcsik. Asserts that regional integration is driven by national state interests formed domestically. Interstate bargaining among powerful national governments determines integration outcomes, consistently producing lowest common denominator (LCD) solutions.
Neofunctionalism (NF): Conceptualized by Ernst Haas, Leon Lindberg, and Philippe Schmitter. Posits that initial integration in specific economic sectors generates functional spillovers into adjacent policy fields, creating self-reinforcing dynamics and pressures for supranational rule-making managed by political entrepreneurs and interest groups.
Historical Institutionalism (HI): Focuses on path dependency, institutional feedback loops, critical junctures, and intertemporal bargains. Highlights how decisions taken at critical junctures structure long-term institutional trajectories, even when actors discount future costs.
The "Failing Forward" Theoretical Synthesis
Framework Mechanism: Developed by Erik Jones, R. Daniel Kelemen, and Sophie Meunier. Synthesizes Liberal Intergovernmentalism (explaining short-term crisis decision-making) and Neofunctionalism (explaining long-term cumulative trajectories) using Historical Institutionalism.
Sequential Dynamic:
Interstate bargaining between states with heterogeneous domestic preferences produces lowest common denominator (LCD) agreements, resulting in structurally incomplete institutional architectures.
National leaders discount long-term institutional risks for short-term political convenience, accepting flawed designs on the assumption that issues can be managed later.
Institutional incompleteness unleashes functional spillovers and market friction that trigger systemic economic or political crises.
Facing existential threats to the integration project, states return to negotiate. Divergent preferences force another LCD bargain that preserves the status quo and deepens integration, but leaves the new framework still incomplete.
The cycle repeats continuously. Analogous to Zeno's dichotomy paradox, European leaders travel half the distance toward a complete framework during each crisis, leaving full integration perpetually out of reach while steadily expanding the scope of supranational authority.
Systemic Risks of "Failing Forward":
Economic Costs: Severe economic dislocation, financial distress, and elevated unemployment forced onto citizens in crisis-afflicted peripheral states.
Political Erosion: Continuous crisis management erodes public trust, fuels Euroscepticism, damages democratic legitimacy, and renders integration self-undermining over time.
Case Study: Financial Regulation and the Eurozone Crisis
Initial Incompleteness: The Maastricht Treaty centralized monetary policy under the ECB and liberalized capital flows, but left banking supervision, capital backstopping, and resolution entirely in national hands. National governments rejected centralizing supervisory power in the ECB (ignoring Article 105(6) TEU) and adopted soft-law coordination via the Lamfalussy process and the Committee of European Banking Supervisors (CEBS).
Crisis Eruption (2007–2008): The US subprime mortgage collapse spilled over into European financial markets, exposing cross-border exposure in banks such as BNP Paribas, IKB, Northern Rock, UBS, and Credit Suisse. Cross-border capital flows during the 2000s had inflated massive private sector debt in peripheral states.
The Irish Banking Crisis (September 2008): Facing a run on Irish banks, ECB President Jean-Claude Trichet instructed Irish Finance Minister Brian Lenihan: "You must save your banks at all costs." On September 30, 2008, Ireland issued a blanket guarantee covering all deposits and liabilities across six main domestic banks, absorbing over €62 billion in private banking liabilities onto the public balance sheet. The ECB prohibited Private Sector Involvement (PSI) or bondholder haircuts, socializing private bank losses into a massive sovereign debt crisis.
First Incremental LCD Response: Raising minimum deposit insurance guarantees across member states from €20,000 to €50,000 (a compromise down from €100,000), and commissioning the 2009 Jacques de Larosière Report, which recommended macroprudential systemic risk oversight but stopped short of establishing a single European regulator.
Path to Banking Union (2012–2015):
Spanish regional savings banks (cajas) merged into Bankia, threatening sovereign insolvency and forcing a structural rescue response.
Euro Area Summit (June 29, 2012): An LCD compromise agreed to allow direct bank recapitalizations by the European Stability Mechanism (ESM), contingent on creating the Single Supervisory Mechanism (SSM) under the ECB.
Systemic financial panic abated only after ECB President Mario Draghi delivered his "whatever it takes" address in July 2012 and introduced Outright Monetary Transactions (OMT).
Once acute panic subsided, member states scaled back structural ambitions: the Single Resolution Mechanism (SRM) was encumbered with complex voting procedures and inadequate funds, while common deposit insurance (EDIS) was downgraded to harmonized national standards under Directive 2014/49/EU.
The Cypriot banking bail-in (2013) imposed losses on depositors and capital controls, with Eurogroup President Jeroen Dijsselbloem framing the intervention as a template to avoid European recapitalizations.
Differentiated Integration, Disintegration, and Future Horizons
Conceptual Structure of Differentiation
Definition: An umbrella term covering heterogeneous modes, strategies, and instruments of centripetal integration and centrifugal disintegration within and beyond the EU.
Sociopolitical Shift: Transition from early post-war "permissive consensus" (public deference to elite integration) to a modern "constraining dissensus" (politicized public opinion restricting deepening and widening).
Categorization Models of Differentiation
Alexander Stubb's Tripartite Classification (1996):
Multi-Speed: Temporary differentiation where all member states are bound to the same ultimate objectives, but achieve them across varying timelines based on capacity (time dimension).
Concentric Circles: Spatial differentiation where an avant-garde "inner core" deepens integration while an "outer core" maintains permanent opt-outs (space dimension).
À la Carte (Cherry-Picking): Functional differentiation allowing member states to select participation across specific policy domains while opting out of others (matter dimension).
Additional Structural Variants:
Enhanced Cooperation: Constitutionalized mechanism requiring a minimum of nine member states to pursue deeper integration using EU institutions (e.g., Permanent Structured Cooperation - PESCO, established in 2018).
Instrumental / Capacity Differentiation: Temporary exemptions or transitional periods applied to newly admitted member states during accession.
Constitutional / Sovereignty Differentiation: Permanent opt-outs negotiated by reluctant member states during major treaty revisions.
Experimental Differentiation: Small-scale, short-term pilot programs tested under EU institutional oversight (e.g., the Nordic Battlegroup).
Differentiated Disintegration: The selective reduction of a state's level and scope of integration (e.g., Brexit).
Supply and Demand Dynamics (Schimmelfennig & Winzen 2020)
Supply Side: Core member states willing to allow flexibility away from uniform integration. Supply depends on core group size, perceived negative/positive externalities, voting rules, and institutional path dependency.
Demand Side: Reluctant states seeking exemptions driven by three forms of heterogeneity:
Heterogeneity of Preference: Ideological or constitutional objections regarding national sovereignty.
Heterogeneity of Dependence: Asymmetric policy exposure or lack of perceived national benefit.
Heterogeneity of Capacity: Administrative, technical, or financial shortfalls (driving multi-speed demands).
Empirical Case Studies of Differentiation in Crises
Denmark (1992): Following the rejection of the Maastricht Treaty in a 1992 referendum, the 1992 Edinburgh Agreement granted Denmark four opt-outs: EMU, JHA, CSDP, and Citizenship. (The CSDP opt-out was formally abolished after a 56.7% vote in a June 1, 2022 referendum triggered by Russia's invasion of Ukraine).
Sweden (2003): Postponed Eurozone entry following the 1997 Calmfors Commission report. A September 2003 referendum (55.9% opposed) resulted in an informal, de facto opt-out from ERM II.
Iceland (2008–2015): Applied for EU membership in 2009 during the global financial crisis, but accession negotiations stalled over Common Fisheries Policy (CFP) requirements, leading to the application's withdrawal in 2015.
Greece (2015): A temporary "Grexit" proposal advocated by German Finance Minister Wolfgang Schäuble was averted through an emergency bail-out agreement.
United Kingdom (2016): PM David Cameron negotiated symbolic opt-outs from "Ever Closer Union" and an emergency brake on welfare benefits for EU migrants. The June 23, 2016 referendum result triggered Article 50 TEU, leading to formal Brexit on January 31, 2020.
Scenarios for Future EU Integration (Commission 2017 White Paper)
Carrying On: Maintaining incremental progress under current operational models.
Nothing but the Single Market: Homogeneous disintegration scaling back integration exclusively to trade.
Those Who Want More Do More: Expanding enhanced cooperation into concentric circles.
Doing Less More Efficiently: Deepening integration in selected priority sectors while exiting others.
Doing Much More Together: Comprehensive supranational deepening across all policy fields.
A Union of Values (Juncker 2017): Unshakeable institutional focus on freedom, equality, and the rule of law.
Normative Debates: Benefits vs. Systemic Risks
Benefits: Prevents integrational paralysis, preserves demoicratic fairness, accommodates state sovereignty, and provides operational flexibility.
Risks: Induces legal indeterminacy, political fragmentation, and "Fax Democracy"—demonstrated by non-EU European Economic Area (EEA) members like Norway, Iceland, and Liechtenstein, which must adopt EU directives without legislative representation.
Emerging Horizons: The European Political Community (EPC)
Proposed by French President Emmanuel Macron on May 9, 2022 (resembling François Mitterrand's failed 1989 European Confederation initiative).
Functions as an informal "sandbox institution" bringing together 44 European states (EU member states, accession candidate countries, and non-EU nations such as the UK) to coordinate on energy security, infrastructure, and regional defense outside formal accession processes.
EU Governance Under Strain: Rule of Law Enforcement and Backsliding
Constitutional Foundations
Article 2 TEU establishes that the European Union is founded on shared fundamental values: human dignity, freedom, democracy, equality, the rule of law, and respect for human rights.
Institutional Architecture for Rule of Law Enforcement
Rule of Law Framework (2014): A non-binding pre-Article 7 mechanism establishing a three-stage dialogue: Stage 1 (Commission Assessment / Opinion), Stage 2 (Commission Recommendation), and Stage 3 (Monitoring). Poland was the first and only member state subjected to this framework, receiving four formal recommendations between July 2016 and December 2017.
Article 7 TEU Mechanism:
Preventative Procedure (Art. 7(1) TEU): Requires a 4/5 Council majority plus European Parliament consent to determine a "clear risk of a serious breach" and issue recommendations. Activated against Poland (Commission proposal, Dec 2017) and Hungary (EP proposal, 2018).
Determination of a Serious and Persistent Breach (Art. 7(2) TEU): Requires unanimous consent of the European Council (excluding the member state under review). The unanimity requirement creates a protective veto shield when illiberal states collude.
Sanctioning Mechanism (Art. 7(3) TEU): Qualified majority Council vote suspending treaty rights, including voting rights in the Council.
Infringement Proceedings (Article 258 TFEU): Binding legal procedure: Formal Notice Reasoned Opinion CJEU Referral. Confirmed in Case C-619/18 (Commission v. Poland) as an independent legal mechanism that operates alongside Article 7 TEU.
Cooperation and Verification Mechanism (CVM): A transitional monitoring framework set up in 2007 for Romania to address judicial reform benchmarks.
Budgetary Conditionality Regulation (Regulation 2020/2092): Empowers the Council to suspend EU budget disbursements when rule of law violations threaten the sound financial management or financial interests of the Union. Upheld by the CJEU Grand Chamber in Joined Cases C-156/21 and C-157/21 (Hungary and Poland v. Parliament and Council); triggered against Hungary in September 2022.
Case Study: Abusive Constitutionalism and Judicial Backsliding in Poland
Abusive Constitutionalism: Defined by David Landau as the deliberate use of constitutional amendment mechanisms to make a state significantly less democratic.
Constitutional Tribunal Crisis (2015): In October 2015, the outgoing Sejm elected 5 judges (3 validly filling current vacancies, 2 prematurely filling future ones). In November 2015, the new Law and Justice (PiS) majority annulled all 5 nominations and elected 5 replacement judges, who were sworn in overnight by President Andrzej Duda. Despite Constitutional Tribunal rulings (Cases K 34/15 and K 35/15) confirming the validity of the original 3 appointments, the government refused to publish or implement the judgments, seating "unlawfully appointed" judges on the bench.
Institutional Capture: Following Julia Przyłębska's appointment as President of the Constitutional Tribunal in December 2016, the court functioned as an instrument protecting the legislative majority.
Removal of the Ombudsman (2021): The captured Constitutional Tribunal ruled in Case K 20/20 (drafted by former PiS MP Stanisław Piotrowicz) that Ombudsman Adam Bodnar could not remain in office past his statutory term while Parliament failed to elect a successor.
Subordination of the Judiciary and Supreme Court:
Lowering Retirement Age: Mandatory retirement for Supreme Court judges was reduced from 70 to 65 to purge sitting judges; struck down by the CJEU in Case C-619/18 (Commission v. Poland).
Politicization of the National Council of the Judiciary (KRS): Reconstructed to allow the Sejm to appoint judicial members. In Joined Cases C-585/18, C-624/18, and C-625/18 (A.K. and Others), the CJEU ruled that the KRS must be independent of legislative and executive influence.
Creation of the Disciplinary Chamber: A new body established in 2017 to discipline judges. The Polish Supreme Court’s 3-Chamber Resolution (Jan 23, 2020) declared KRS-appointed judges unlawful.
Reaction of the Constitutional Tribunal: Issued an order (Case Kp 1/20) attempting to suspend the Supreme Court resolution and asserting exclusive presidential power over judicial appointments.
The "Muzzle Law" (Act of Dec 20, 2019 / Feb 14, 2020): Broadened disciplinary offenses to penalize judges who evaluate the independence or legality of judicial appointments.
Prime Minister Mateusz Morawiecki's Challenge (Case K 3/21): In October 2021, the Constitutional Tribunal ruled that Articles 1, 2, 4(3), and 19(1) TEU—insofar as they establish the primacy of EU law over national constitutional law—were incompatible with the Polish Constitution, directly challenging the foundation of the EU legal order.
Critical Assessment of EU Responses and Enforcement Delays
Judicial Non-Compliance: In Case C-791/19 R, the CJEU ordered interim measures suspending the Disciplinary Chamber on April 8, 2020. The Disciplinary Chamber ignored the order, lifting judicial immunity to target independent judges (e.g., Igor Tuleya, Beata Morawiec).
Enforcement Delays: The Commission took nearly 16 months to refer the "Muzzle Law" to the CJEU (Case C-204/21) and delayed requesting daily penalty payments until late 2021.
Financial Penalties: On October 27, 2021, the CJEU Vice-President imposed a €1,000,000 per day penalty on Poland for non-compliance (deducted directly from EU fund allocations starting April 2022).
Incomplete Remediation: Although Poland formally abolished the Disciplinary Chamber 12 months after the CJEU judgment, unlawfully appointed judges were retained in other chambers, illustrating the enforcement challenges facing the EU when dealing with persistent state non-compliance.