EUROPEAN INTEGRATION

INTRODUCTION

International Relations – Concepts

International Law: Consists of the rules and principles pf general application dealing with the
conduct of States and international organizations in their international relations with one
another and with private individuals, minority groups and transnational companies.

Internal Legal Personality: Refers to the entities or legal persons that can have rights and
obligations under international law.

i.e.:

 States
 International Organization

State: A State has the following characteristics:

1) A permanent population
2) A defined territory
3) A government
4) The capacity to enter into relations with other States
5) Some writers also argue that a State must be fully independent and be recognized as a
State by other states.

Sovereignty is the exclusive right to exercise supreme political authority over a defined
territory (land, airspace and certain maritime areas such as the territorial sea) and the people
within that territory. No other State can have formal political authority within that State.
Therefore, sovereignty is closely associated with the concept of political independence.

Nation: The word nation” refers toa group of people who share a history, traditions, culture
and often a language – even if the group does not have a country of its own. People within this
type of nation share a common identity and think of themselves as belonging to the same
national group.

Treaties are written agreements between States governed by international law establishing
rules expressly recognized by the contesting states. Treaties are referred to by different
names, including agreements, conventions, covenants, protocols and exchanges of notes.

States can sign treaties in order to:

a) Establish a legal framework (rights and obligations) that will govern the relationship
between states.
o Treaties can be set up between two (bilateral) or more states (multilateral).
 o Can be focused on general or specific topics
b) Establish international organizations

International Organizations

International Organizations are established by States through international agreements and

their powers are limited to those conferred on them in their constituent document.

Example of International Organizations:

® United Nations
® International Monetary Fund
® World Trade Organization
® World Bank
® World Health Organization
® European Union

What is the European Union?

® Supranational organization
® Confederation with features of a federal state

Article: International Organization

International organization, institution drawing membership from a least three states, having
activities in several states, and whose members held together by a formal agreement. The
Union of International Associations, a coordinating body, differentiates between the more
than 250 international governmental organizations (IGOs), which have been established by
intergovernmental agreements and whose members are states, and the approximately 6,000
nongovernmental organizations (NGOs), whose members are associations or individuals.

IGOs range in size from three members to more than 185 (e.g., the United Nations [UN]), and
their geographic representation varies from one world region (e.g., the Organization of
American States) to all regions (e.g., the International Monetary Fund). Whereas some IGOs
are designed to achieve a single purpose (e.g., the World Intellectual Property Organization),
others have been developed for multiple tasks (e.g., the North Atlantic Treaty Organization).
Their organizational structures can be simple or highly complex depending on their size and
tasks.

Although nascent international organizations were formed by Greek city-states and were
envisioned by European writers such as Pierre Dubois (c. 1250–c. 1320) and Émeric Crucé (c.
1590–1648), they did not appear in their contemporary form until the 19th century. Following
the French Revolution and the Napoleonic wars of the late 18th and early 19th centuries,
leaders of the major European powers met periodically, in a system of consultation known as
the Concert of Europe, to attempt to preserve the status quo and to protect their governments
from internal rebellion. Later in the 19th century, various international organizations, such as
the International Telegraph Union (1865; now the International Telecommunication Union),
were established to provide specialized services and to perform specific tasks. In 1899 and
1907 European and non-European states met to develop rules to regulate armaments and the
conduct of war. These conferences produced the Hague Conventions, which included
agreements on the peaceful settlement of war, the treatment of prisoners of war, and the
rights of neutral states. These various meetings and agreements served as precursors to the
international organizations of the 20th century, such as the League of Nations and the United
Nations (UN). Spurred by the political and economic interdependencies and advances in
communication and transportation that developed after World War II, the UN became the
centrepiece of a network of international organizations.
International organizations serve many diverse functions, including collecting information and
monitoring trends (e.g., the World Meteorological Organization), delivering services and aid
(e.g., the World Health Organization), and providing forums for bargaining (e.g., the European
Union) and settling disputes (e.g., the World Trade Organization). By providing political
institutions through which states can work together to achieve common objectives,
international organizations can help to foster cooperative behaviour. IGOs also serve useful
purposes for individual states, which often use them as instruments of foreign policy to
legitimate their actions and to constrain the behaviour of other states.
Although the daily operations of most international organizations are managed by specialized
international bureaucracies, ultimate authority rests with state members. IGOs often work
closely with other organizations, including NGOs (e.g., Greenpeace and Amnesty
International), which serve many of the same functions as their IGO counterparts and are
particularly useful for mobilizing public support, monitoring the effectiveness of international
aid, and providing information and expertise. Although many of the thousands of NGOs direct
their activities toward less developed countries in Africa and Asia, some of which have
authoritarian forms of government, most of these groups are based in developed states with
pluralist political systems. Only a small fraction of NGOs are international in scope, though they
have played an increasingly important role in international relations.
Five scenarios for Europe by 2025  white paper
Scenario 1: Carrying on, continue with integration framework we have
Scenario 2: nothing but the single market, forget to get more economic integrated. Focus on
freedom on market
Scenario 3: these who want more do more, should we institutionalize that countries get more
what they want (army).
Scenario 4: doing less more efficiently. not go more forward.
Scenario 5: doing much more together. All in the same direction, much more integrated.

POLITICAL TERRITORY DIVISION

States: A nation or territory considered as an organized political community under one

government (US, California, France, Spain)
Regions: A region is an area. A region can be geographic — like a part of a country

European union
Is an Organization of states or a Supranational Organization
Who are more integrated, EU’s states or EU regions? How they differ?
- In the US there is a more nationalism feeling that attach people, in terms of language
there are more homogeneous in the EU there is more cultural diversity.
- We can say that in the EU there is an economic integration, we have a shared
monetary policy, even not all the countries have the euro currency

ECONOMIC INTEGRATION

Economic Integration is a process in which two or more states in a broadly defined geographic
area reduce a range of trade barriers to advance or protect a set of economic goals.

The level of integration involved in an economic regionalist project can vary enormously from
loose association to a sophisticated, deeply integrated, transnationalized economic space. It is
in its political dimension that economic integration differs from the broader idea of
regionalism in general. Although economic decisions go directly to the intrinsically political
question of resource allocation, an economic region can be deployed as a technocratic tool by
the participating government to advance a clearly defined and limited economic agenda
without requiring more than minimal political alignment or erosion of formal state
sovereignty. The unifying factor in the different forms of economic regionalism is thus the
desire by the participating states to use a wider, transnationalized sense of space to advance
national economic interests.

Types of integration

Forms of economic integration

Although there are many different forms of economic integration, perhaps the most
convenient way to order the concept is to think of a continuum that ranges from loose
association at one end to an almost complete merging of national economies at the other end.
Although it is far from a given that positive experiences in the simpler forms of economic
integration will lead to a deepening of the process to increasingly integrated shared economic
spaces, the more-complex forms incorporate and are founded on the substantive elements of
the earlier forms. The significant point is that although economic integration is explicitly
framed by trading relationships, it acquires an increasingly political character as it reaches
deeper forms.

Simple free-trade area

The most basic type of economic integration is a simple free-trade area. In this form, attention
is focused almost exclusively on a reduction of the tariffs and quotas that restrict trade.
Emphasis is placed almost entirely on increasing the exchange of goods. The articulation of
transnationalized production chains, trade in services, labour mobility, and more-sophisticated
forms of economic integration are not an explicit goal and emerge as merely tangential to the
primary goal of securing access to foreign markets for domestic firms.

Second free-trade area

In a second-generation free-trade area, the basic nature of simple free trade is expanded to
include trade in non-goods such as services. Where a simple free-trade area need only address
the question of tariffs and quotas, the trade in services and a widening of trade in goods raises
questions of regulatory convergence and the harmonization of rules of operation and
governance. At this stage, attention needs to be turned to such things as the transferability of
professional certifications as well as questions of labour mobility, particularly for the highly
skilled professionals such as legal, accounting, technology and medical services. The increased
interdependence between the participating economies that comes with expanded trade in all
economic areas and a measure of regulatory convergence can lead to an increased distribution
of production chains across national boundaries.

Customs union

As national production structures transnationalize across the regional space, the next stage is
to deepen regulatory harmonization to present a common stance to the extra-regional market.
The result is the formation of a customs union relying upon a common external tariff. One of
the key attractions of this regulatory convergence between participating economies is that it
reduces the challenges of monitoring and taxing external inputs that are used to produce
goods and services that circulate within the region. Implicit in the adoption of a common
external tariff is a further harmonization of national rules and regulations, particularly those
relating to the control and flow of external trade into the regional economic space.

There are some countries that do not form part of the European Union which are inside the
Customs Union, for instance: Andorra, Monaco, San Marino and Turkey.

Is the EU custom union a different organization and also different membership from the
European Union? No, it is the same organization as the European union.

Their organization is the European Union and all the member states of the EU participates in
the EU custom union. So, the EU created the custom union and they allowed other countries to
introduce to their framework integration.

EFTA do not participate in the EU custom union. They need to sign Free Trade Agreements to
each country of the Customs Union and EFTA has not signed a Free Trade Agreement with each
one of the EU members.

Common market

The idea of a common market grows from the possibilities presented by the adoption of a
common external tariff. As trade flows increase and factor inputs imported into the integrating
economies begin to circulate freely, production chains crossing the intra-regional national
boundaries begin to form. This results in sustained pressure to reduce the costs of transporting
finished and semifinished goods between the states participating in the integration project.
The solution is the harmonization of border procedures, which in its ultimate form leads to the
virtual elimination of national boundaries as internal barriers to trade and the formation of a
free-flowing regional economic space. A concomitant change with this complete opening of an
internal trade is a liberalization of labour mobility, allowing the inhabitants of a member state
to work in all other member states of the region.

Monetary union

With the evolution of a common market and the concomitant surge in intra-regional trade
comes a new source of expenses for business: the costs of transnational transactions. Even
though borders may be open to the free transit of goods and services, the need to constantly
engage in foreign exchange operations to settle payments as well as the differing relative costs
caused by different national economic policies impose a constant financial and administrative
expense of firms operating within the region. The solution and next stage in the integration
progression is some form of monetary union, be it through an agreed fixing of relative
exchange rates or the more commonly discussed adoption of a common currency. At this
point, the economic aspects of integration also begin to take on a strong political flavour.
Adoption of a common currency or monetary policy by all members of the project also
requires a strong convergence in macroeconomic policy, which imposes external restraints on
the domestic fiscal and expenditure policies that a government may pursue. The result is a
gradual blurring of the political as well as economic lines that separate the states participating
in the integration project.
Economic community or union

In an economic community or union, the logic of common external tariffs, regulatory

approximation and harmonization of macroeconomic policy is taken to its full conclusion
through the construction of an overarching governance framework that imposes a common
economic policy system on all countries in the region. In effect, the member states surrender a
significant degree of economic sovereignty to the whole in the expectation of significantly
expanded opportunities presented by a much larger, fully integrated economic space
facilitating the full mobility of finished products, factors of production and labour. The
harmonization of regulations and procedures is facilitated through the creation of an
overarching legislative and legal system that trumps national laws and rules and also ensures
that economic actors will face the same treatment throughout the region.

These are theoretical categories of economic integration. However, the examples of economic
integration we find in the real world (e.g. EU-Canada FTA, or the European Economic Area), do
not fit perfectly in a specific category. Each international agreement that integrates the
economies of different states is unique and respond to the needs, interests and trust (i.e. to
the specific relationship) between the different parties.

Examples:

® European Union
® European Economic Area (EEA)
 ® EU-Switzerland Bilateral Agreements
® EU-Canada FTA (aka CETA)
® EU-Turkey Custom Union Agreement
® WTO Framework

Could you remember what different types of barriers or policies areas are where countries can
decided to join:

- Tariffs more economic related, integration in the way each member follow the same
expending or control taxes
- Regulatory barriers
- Non-tariff barriers

There are different kind of levels of integration, from less to more integrated.

- WTO
- Fra
- CWITA EU bilateral
- EFTA
- EU
o Single market
o Euro area

Why EU member states do not join to create a new state? And why there are some political
parties advocating for leaving the EU (i.e. disintegration)?

a) Integration goes beyond the eliminations of barriers to trade, movement of people,

etc.
b) Integration has it benefits and its downsides.

For decisions taken at the EU level, the positions of each individual states on different policy
issues might get “diluted”.

When there are significant discrepancies about major policy issues (due to differences in terms
of interests and political culture of the different “territories”), some members might question
the overall gains of the current level of integration.

How states decide how is going to be its relationship with different countries? It is something
you have to decide, which level of integration. It is seen easy visually if you put a line and you
say at which proximity you will want to be during the line. There is stages. We have to think
about integration as a continue.
Some countries would like to go deeper, how you go deeper in terms of economic integration?
What can you do if this framework is not enough? Through agreements or treaties

When it is a stage where some states are together in, countries will agree if all this fusion
creating a single market, eliminating trade barriers. It is the case of the European Union. At this
stage there is also levels to have a higher integration, as for example monetary policy, which
will be Euro area. This are furthering integrated.

There are different levels also inside of EU. Is there flexibility to the members of EU to decided
how to be integrated? If you are at the less integrated level possible you don’t have such
important power. When you are more integrated is much different it is much more restricted.
There are critic points to follow, so it is important to follow it and to be accepted. Two
exceptions UK and Denmark, named “Octap”, they have an agreement to be possible to join
the euro area.

“White paper on the future of Europe” it is a program where there are reflections and
scenarios about the future of EU, thinking about should we allow European union go more
indeed in this integration? Different scenarios thoughts there. (copy thoughts by link)

ec.europa.eu/commission/sites/beta-political/files/
white_paper_on_the_future_of_europe_en.pdf

UK was in the part as less integrated members of EU, for example, because they don’t have
euro currency as France. Living the EU and the agreements set up, what does it means living
the EU? What means live EU? It doesn’t mean that UK doesn’t want to have more relation with
EU members, it means they want to make their own decisions when it comes to trade
agreements or tariff, more control, because be at EU means being on a single market, you only
have this freedom inside you own market country not at relation with other members. The
question is more, if you leave that level of integration, which level of integration you want to
be? So, it is not only important how and why you leave, but also where will you get.

Why EU member states do not join to create a new state? And why there are some political
parties advocating for leaving the EU (i.e. disintegration)?

A) Integration goes beyond the eliminations of barriers to trade, movement of people,

etc. Some countries
have such a different
historical background
that for example, a
common army will not
be possible.
 B) Integration has its benefits… and its downsides. For decisions taken at the “EU” level,
the positions of each individual states on different policy issues might get “diluted”.

When there are significant discrepancies about major policy issues (due to differences
in terms of interests and political culture of the different “territories”), some members
might question the overall gains of the current level of integration

They don’t agree with several issues.

ECJ  European Culture Justice

Brexit doesn’t mean “no integration”, but “less” integration. It is not about being in the
European Union, that it is nothing, in the sense, the problem is not that relevant if you
want to get up of that State. The problem is no being in or out, the problem is in which
framework are you going to be. It gets complicated because it is difficult to be in a
framework, follow its own criteria, the UK wants a very specific treaty and the EU
doesn’t want to do it. It is not just a matter to be in or out in EU, is how you want to
end with the countries.

The Brexit example:

Brexit does not mean “no integration”, but “less integration”

Free trade agreements, FTA with all the countries of the world, not. You only create these
agreements with countries you want to relate with on. 20 countries

European Union push agreements to those that doesn’t have FTA: Vietnam, New Zealand.

EFTA

EU BILATERAL AGREEMENTS

EUROPEAN ECONOMIC AREA

EUROPEAN UNION

The European Union itself it is not only a point in the line, states inside they are not integrated
equally, not exactly the same. Inside there are different integration levels. There are countries
which will be more integrated. So there will be ones in the single market (all countries agreed
integrated in terms of regulatory barriers to trade, in goods and services), others at monetary
policy (single currency). Other countries that are in the euro area, for instance, inside EU some
countries only 19 are fully integrated in terms on trade and monetary policy and also fiscal
policy, financial regulations, which is Euro area.

Is there total flexibility for members of EU how to be integrated? Is not like easy. It is harder if
you are less integrated, this treaties don’t allow you much flexibility. The fact that only 19
members have go deeper, it is basically to matter two main points, first different speeds,
because it has been in different moments where they have integrated. Second, not every
country when joint was in the same stage in order for be able to joint the euro, for example.
They were two exceptions UK and Denmark, exceptions called Octap, they have the possibility
to joint euro area, but it was exceptions of its treaties.

What does it mean leaving the EU? UK no relation with EU countries? One of the reasons they
want to leave was for be more free in its trade and market. If you are in EU it means be in a
customs union. UK think, EU It’s so blinding me to have negotiations. Leave EU means not that
they want not to have relation with EU. There is complexity, if they are not going to be that
level of integration of EU, which level of integration you want to be?

Brexit

UK leaves the EU because they want to have their own

agreements, but doesn’t mean not to be integrated,
just be integrated in a lower level, they are not going to
break relationships with EU countries

UK was in the less integrated countries of EU.

® NO Control of immigration (NO free movement

of people)
® No EU regulation (NO standardization, single
market)
ECJ  European Culture Justice

Brexit doesn’t mean “no integration”, but “less” integration. It is not about being in the
European Union, that it is nothing, in the sense, the problem is not that relevant if you want to
get up of that State. The problem is no being in or out, the problem is in which framework are
you going to be. It gets complicated because it is difficult to be in a framework, follow its own
criteria, the UK wants a very specific treaty and the EU doesn’t want to do it. It is not just a
matter to be in or out in EU, is how you want to end with the countries.

Different levels of integration between countries.

Inside the EU there is different levels of integration, we have the EU area and the EU, there is
no country that is in the EU area that is not in the EU, if you are in the EU area you are in a
single market.

The European customs area is created by the EU and allows to some countries like Andorra or
Monaco to be part of this integration, a single market with a common trade policy and
common external tariff policy.

Countries like Norway or Iceland that are not part of the customs area but they have free trade
associations.

Then there is the council of Europe, an international organization founded in the wake of
World War II to uphold human rights, democracy and the rule of law in Europe.
Brexit does NOT mean “no integration”, but “less integration”.

European Union (EU)

Council of Europe  International Organization which goal is not a trade integration, nor
economic integration and neither a free movement integration, actually the goal is a
promotion of the EU states in terms of human rights: property rights…
The term European union was created in 1992 (Maastricht Treaty), but first it was named EEC
and it was created in 1957.

The origin of EU was the Schuman Declaration (9th May 1950): it proposed the creation of a
European Coal and Steel Community. How many countries started the European Coal and Steel
Community? France, West Germany, Italy, the Netherlands, Belgium and Luxembourg. The
main goal of the Schuman Declaration was to prevent internal conflicts, to avoid another war.

Seven years later, this was extended to a declaration of an economic community  European
Economic Community 1957, creating a single market.

European Free Trade Association (EFTA)

Establishment of EFTA

At the initiative of the United Kingdom, the seven non-EEC states of Denmark, Norway, Austria,
Portugal, Sweden, the United Kingdom and Switzerland sign the Convention establishing the
European Free Trade Association (EFTA) in Stockholm on January 1960.

The objective of the Association was to liberalise trade among its Member States and the
Convention thus contained basic rules regarding free trade in goods and related disciplines
(This is intended as a counterbalance to the EEC and EURATOM).

Formed by 30 countries.

EFTA Convention

The Convention was updated in 2001/2002. Important new provisions included the free
movement of persons, trade in services, movement of capital and protection of intellectual
property.

The EFTA Member States (currently Switzerland, Iceland, Liechtenstein and Norway) also
developed close trade relations with the EU, as reflected in the EEA Agreement (1994) and the
EU-Swiss Bilateral Agreement (1999).

The EFTA States jointly negotiate free trade agreements (FTAs) with partners outside the
European Union in order to strengthen their competitive position and increase market access
for their products. Today, EFTA has 29 FTAs covering 40 countries and territories outside the
EU.

However, EFTA does not envisage political integration. It does not issue legislation, nor does it
establish a customs union. That’s why the EFTA States are not obligated by the EFTA
Convention to conclude preferential trade agreements as a group. They maintain the full right
to enter into bilateral third-country agreements.

Areas covered by the EFTA Convention:

® Trade in goods
® Services and investment
 ® Land and air transport
® Intellectual property rights
® Government procurement
® Movement of persons, social security and mutual recognition of diplomas
® Technical barriers to trade
® Competition, public undertakings and monopolies, and state aid.

EFTA through the years

1960: The European Free Trade Association (EFTA) is founded by Austria, Denmark, Norway,
Portugal, Sweden, Switzerland and the United Kingdom, to promote closer economic
cooperation and free trade in Europe.

1961: Finland becomes an associate member of EFTA. The EFTA Consultative Committee is
established (representatives of trade unions and employers’ organisations).

1966: Full free trade in industrial products is achieved between the EFTA States.

1970: Iceland becomes a member of EFTA

1972: Denmark and the United Kingdom leave EFTA to join the European Economic
Community (EEC). The remaining EFTA States sign bilateral free trade agreements (FTAs) with
the EEC during the 1970s.

1977: The EFTA Parliamentary Committee is established. Tariffs on industrial goods in trade are
eliminated between the EEC and EFTA States.

1979: EFTA’s first FTA is signed with Spain.

1984: The Luxembourg Declaration on broader cooperation between the EEC and EFTA is
signed.

1985: Portugal leaves EFTA to become a member of the EEC.

1986: Finland becomes a full member of the EFTA.

1989: Negotiations start on a European Economic Space, later to become the European
Economic Area (EEA). An agreement on free trade in fish between the EFTA States is signed.

1991: Liechtenstein becomes a member of EFTA. An FTA is signed with Turkey, EFTA’s oldest
agreement still in force. A further 12 FTAs are signed in the 1990s, of which three are still in
force (Israel, Morocco and the Palestinian Authority). The others, all of which are with Central
and Eastern European countries, lapse when those countries join the European Union (EU).

1992: The Agreement on the European Economic Area is signed in Oporto, Portugal.
Switzerland rejects participation in the EEA by referendum.

1994: The EEA Agreement enters into force between the EU and five EFTA States. An EEA
Financial Mechanism for the reduction of economic and social disparities in the EEA is
established for the period 1994 to 1998.
1995: Austria, Finland and Sweden leave EFTA to join he EU. Liechtenstein becomes a full
participant in the EEA Agreement together with Iceland and Norway.

2000: A new EEA Financial Instrument is established for the period 1999 to 2003. Eight FTAs
are signed between 2000 and 2004 (in chronological order: Macedonia, Mexico, Croatia,
Jordan, Singapore, chile, Lebanon and Tunisia).

2001: The updated EFTA Convention is signed in Vaduz, Liechtenstein, entering into force a
year later.

2003: An agreement on EEA enlargement is signed as ten Central and Southern European
countries join the EU. New EEA and Norwegian Financial Mechanisms are established for the
period 2004 to 2009.

2004: EU and EEA enlargement enter into effect simultaneously.

2005: Five FTAs are signed between 2005 and 2008 (in chronological order: Republic of Korea,
Southern African Customs Union (SACU), Egypt, Canada and Colombia).

2007: AN agreement on EEA enlargement is signed as Bulgaria and Romania join the EU.

2009: Iceland applies for the EU membership. New Financial Mechanisms are agreed for the
period 2009 to 2014. FTAs are signed with Albania, the Gulf Cooperation Council and Serbia.

2010: Iceland begins accessions negotiations with the EU. The EEA EFTA Forum of Elected
Representatives of Local and Regional Authorities is established. FTAs are signed with Peru and
Ukraine.

2011: FTAs are signed with Hong Kong China and Montenegro.

2013: FTAs are signed with Bosnia and Herzegovina and with Central America States (Costa-
Rica and Panama).

2014: An agreement on EEA enlargement is signed following the accession of Croatia to the
EU.

How Switzerland is integrated through this type of integration?

I am a Swiss citizen who wants to start trading. I'm selling my goods and I want to send my
bicycles to Norway. What is the framework of the regulation that is going to tell me how is the
relationships in terms of economic relationship with Norway? Free Trade Agreement.

I am a Norwegian citizen that wants to sell their goods to Italy. What is the framework of the
regulation that is going to tell me how is the relationships in terms of economic relationship
between Norway and Italy? EEA (European Economic Area). It is an agreement between an
EFTA state and an EU member state in order to govern the relationships between these two
organizations.
® European union is a supranational organization that contains different levels of
integration of its countries which are inflexible (not movable).
TRUE  it is true that it contains different levels of integration however this does not
allow each country to choose in which level they want to be integrated. There are
some exceptions for instance deciding on whether to be part of the Euro or not, but
these do not imply flexibility. In the case of UK and Denmark they have “opt-outs”
which mean that in their treaty they have exceptions.

® The European zone is the set of countries which join the European Union that are
most integrated though having a single currency. The other EU countries have
different economic development terms. Furthermore, it is compulsory to join the EU
if a country wants to enter in the Eurozone. Is it an organization or is just a set of
countries?
Eurozone is an organization from European Union, but this does not mean that there is
a flexibility to choose about further terms of integration.
® EFTA is an organization of trading. It is nowadays composed by Iceland,
Liechtenstein, Norway and Switzerland. TRUE. Except Switzerland, all the others
manage relations with the European Union through the EEA framework. TRUE. The
EEA extends to a Single Market regulation (movement of people, services, goods and
capital) to both (EU and these three countries)? TRUE. but EFTA countries needs to
apply them straight away? TRUE

® Switzerland is related to the rest of EU through European Free Trade Association. Is

EFTA a synonym a bilateral agreement? How would it be Switzerland-Norway?

It is a single market, a custom union which means that the 27 Member states of the
European Union they negotiate and have a common trade policy with third countries.
The trade relationship with third countries are at a European Union level as a whole.
Switzerland – Norway: EFTA
The European Economic Area (EEA)

Members of the EEA

The EEA consists of 30 countries: The 27 EU member states, plus Norway, Iceland and
Liechtenstein. We refer to the last three ones as the “EEA EFTA states”. Switzerland is the
fourth member of EFTA, but it is not an EEA member.

What exactly is the EEA?

Through the EEA Agreement, Norway, Iceland and Liechtenstein are equal in the internal
market, on the same terms as the EU member states. This includes having access to the
internal market’s four freedoms, the free movement of goods, persons, services and capital. In
addition, the Agreement covers cooperation in other important areas such as research and
development, education, social policy, the environment, consumer protection, tourism and
culture.

When was it established? The EEA Agreement was signed in 1992 and entered into force in
1994.

What is not covered by the EEA Agreement?

The EEA Agreement does NOT cover the EU common agriculture and fisheries policies, the
customs union, the common trade policy, the common foreign and security policy, justice and
home affairs or the monetary union.

Are the EEA EFTA states connected to the EU in any other ways?

Yes. The EEA EFTA states participate in many EU programmes and agencies. They are also
members of the Schengen cooperation, which abolishes border controls between members.
Norway also cooperates closely with the EU on foreign and security policy issues.

Does the EEA have its own institutions? Yes.

Common bodies such as the EEA Council and the EEA Joint Committee administer the EEA
Agreement. Moreover, because the EEA EFTA states are not members of the EU, they are
constitutionally not able to accept direct decisions by the European Commission or the Court
of Justice of the European Union. Separate EEA EFTA bodies have therefore been set up that
correspond to these EU bodies: The EFTA Surveillance Authority (ESA) and the EFTA Court.

Can the EEA Agreement be amended? The EEA Agreement is dynamic in character.

This means that it is continuously updated and amended to incorporate new internal market
legislation in order to maintain common rules across the EEA.

How does enlargement of the EEA take place?

All new members shall apply to become party to the EEA Agreement.
Introduction to the EEA Agreement

Objectives and principles of the EEA

“… establishing a dynamic and homogenous European Economic Area, based on common rules
and equal conditions of competition and providing for the adequate means of enforcement at
the judicial level, …”

Which means: Extending the internal market to the participating EFTA States.

Incorporation of all relevant legislation and the establishment of an institutional set-up for
incorporation of new legislation (“dynamic”)

Institutional set-up for surveillance and judicial litigation (“homogeneous”)

Extending the EU Internal Market

Four freedoms

1. Free movement of goods

2. Free movement of services
3. Free movement of capital
4. Free movement of persons

Horizontal Policies

® Environment
® Social policy
® Consumer protection
® Statistics
® Company law

Common Rules

® State aid
® Competition: it does so by prohibiting anti-competitive agreements between
undertakings and abuse of the market
® Public procurement

Cooperation

® EU programmes
® EU agencies

Cohesion

® EEA and Norway Grants: funds and projects which idea is to develop the lowest leveled
countries in order to be countries in the same level of the single market.

The EEA does NOT cover

 ® Common trade policy
® EU customs union
® Common agricultural and fisheries policies
® EU regional policy
® Economic and monetary union
® Common foreign, security and defense policy
® Justice and home affairs

However…

EEA extended to cover Food Safety and Veterinary matter in 1998.

EFTA States’ bilateral agreements on

® Schengen
® Dublin

The challenge: Reconciling two different models of cooperation

The EU model The EFTA model

Supranationality: transfer of competence and Intergovernmental cooperation: No
sovereignty transfer of competence, no “common
policies”
Institutions with defined roles in the decision-
making processes: Commission – European Decisions taken by consensus between
Parliament – Council the Governments

Important concern: Preserving decision-making Important concern: preserving

autonomy of the EU sovereignty

The two-pillar structure

When you search European Integration you get:

Is the EU a different organization compared to the Euro area? No, both are inside of the same
organization, but in each organization, there are different levels of integration. European
Union is the organization, and inside it there are different levels of integration. It is not
something that is flexibility, that you can decide to joint one day and move. It is true, that
because of the difference of options there are some criteria. You cannot participate in the Euro
area if you are not in the EU. Monetary integration is go deeper, political sensitive. To be at the
euro are you have to have some control in the budget.

European Custom Union it comprises EU member states plus non-European union states that
are Turkey, Andorra, Monaco and San Marino. So it has different membership but still is the
same organization as EU. All the member states of EU participate in European Custom Union
and allows other countries which are mentioned before. The European Custom Union, single
market plus common external tariff.

EFTA does not participate in the European Custom Union. What is the most relevant fact or
consequence to members not participate in the European Custom Union? Members in the
EFTA are different treat inside of EU. The main difference its not so much about single market
regulations, because it is so related through EFTA. The main consequence is dependence, in
terms, one of the things to be at Custom union, you have this common external tariff respect
to third countries, you start signing agreements in conjunction, jointly. Negotiate to third
countries will be jointly. EFTA does not sign to all the rest EU members.

Council of Europe: it is an international organization, intergovernmental based on cooperation,

not free movement of people. It is about promotion between member states, human rights,
democracy. All the EU members, EFTA, EU Commission not members…

Switzerland and the European Union

® Switzerland is NOT a member of the EU

® Switzerland is NOT a member of the EEA (The Swiss electorate’s rejection of the
European Economic Area (EEA) in 1992)

Switzerland conducts its relations with the EU on the basis of bilateral sectoral agreements:

® This bilateral approach enables Switzerland to adopt a policy based on openness and
cooperation with its European neighbours.
® This approach is the European policy instrument that best allows Switzerland to
safeguard its interests with regard to the EU.
® The electorate has endorsed the bilateral approach in various referendums.

Switzerland laid the foundations for this economic exchange in 1972 when it concluded the
Free Trade Agreement with what was then the European Economic Community (EEC), the
predecessor of the European Union.

® This abolishes import and export duties and eliminates quotas for industrial products.

On 21 June 1999, Switzerland and the EU sign seven agreements in the areas of free
movement of persons, technical barriers to trade, public procurement, agriculture, overland
transport, air transport and research. Known as “Bilateral Agreements I”, they form an overall
package and are legally linked to one another. They give Switzerland gradual access to the EU
internal market and facilitate the. Free movement of persons and participation in EU research
programmes.

Switzerland and the EU sign the second set of bilateral agreements on 26 October 2004,
intensifying economic cooperation and extending it to include areas such as security, asylum,
the environment and culture.

On 30 March 2005, the agreement on processed agricultural products comes into force. This
part of the second round of bilateral agreements abolishes customs duties and export
subsidies for wide range of food products.

Overall, Switzerland and the EU have concluded around 20 main agreements and some 100
secondary agreements in several stages.

Of the “four freedoms” that characterize that market, the Swiss.EU law does not include the
free movement of capital, though it should be added that, to a certain extent, the Union’s
rules on the free movement of capital also apply to the movement of capital between the EU
and third countries.

Financial services are a notable omission to the bilateral agreements. Attempts to negotiate a
financial services agreement (FSA) giving access to the single market stretch back to the early
1990s but have faced significant resistance from Brussels.

® In lieu of an FSA, Swiss banks and their overseers have followed four routes into the
single market: passporting from an EU subsidiary, equivalence recognition, cross-
border services and reverse solicitation.

The bilateral agreements are based on mutual recognition of the equivalence of legislation, as
in the case of the dismantling of technical barriers to trade or on the full incorporation into the
national legal order of the entire body of EU law (“acquis Communautaire”).

However, Switzerland does not automatically adopt further amendments to these agreements.
Instead, it is free to decide whether to do so – in line with its own approval procedures.

® In fact, the EU-Swiss agreements have created a complex and sometimes incoherent
network of obligations, which are not easy to sustain. Bilateral agreements are
updated regularly. Unlike the EEA Agreement, the nature of the bilateral agreements
with Switzerland is static, given that there are no proper mechanisms to adapt the
agreements to evolving EU legislation, nor are there any surveillance arrangements or
effective dispute settlement mechanism.

Ukraine and the European Union

It is an association agreement basically divided in two parts, a part more political (political
association) and other one economical, which is Deep and Comprehensive Free Trade Area
(DCFT).

We have a different framework relation between EU and Ukraine. We can divide the EU-
Ukraine Association Agreement into two parts: Political Association and Economic Integration.
http://www.eeas.europa.eu/archives/docs/images/top_stories/140912_eu-ukraine-
associatin-agreement-quick_guide.pdf

MOCK TEST

1. The European Economic Area (EEA) is formed by 4 states (Norway, Liechtenstein,

Switzerland and Iceland).
F  EU Member States + Norway, Liechtenstein and Iceland. NOT Switzerland.

2. A country that takes part of the EU Customs Union also takes part in the four freedoms
of the internal market.
F  EU Customs Union only implies having a Common Trade Policy and a Common
External Tariff.

3. From the Common Market to the Single Market: Eliminating non-tariff barriers.
T  Non-tariff barriers are removed in the Single Market, which imply quality taxes,
while tariff barriers imply no need of authorities collecting taxes for products.

4. Most Free Trade Agreements usually eliminate tariff and non-tariff barriers.
F  Free Trade Agreements only eliminate TARIFF barriers.

5. Countries signing an FTA harmonize legislation to eliminate non-tariff barriers.

F  Free Trade Agreements only apply to tariff barriers.

6. The European Union is a federal state whose member act as a bloc in different policy
areas like trade, foreign policy or defense.
F  EU does not act as a bloc in defense and foreign policy, although in trade they
mostly act as a bloc.

7. Third country products entering the EU from Norway have to go through Customs
controls at the EU border to avoid that goods from outside the EEA enter the EU
through the back door. E.g. Norway could not, for example, just import a car from
China and then export it to Germany without facing a tariff.
T  When importing to the EU from a third country through a non-EU member state,
the products will have to face a tariff in order to be imported to the EU.

8. A German citizen can work in Iceland without the need of a work permit.
T  due to being part of the EEA and the European Single Market.

9. Turkey is inside the single market only with respect to industrial goods (and there is a
common external tariff for these products).
T  Only applied to industrial goods; no freedom of people, services of capital.

10. Norway will need to join the Euro at some point in time, but not the UK and Denmark.
F  Norway is not a part of the EU, thereby it won’t have to join the Euro; neither for
UK nor Denmark, as they have the so called “opt-outs” that allow them to use their
own currency.
11. There are differentiated levels of integration inside the EU. That’s why neither every
MS participates in the Euro Area, nor every MS participates in the four freedoms.
 F  Every Member State of the European Union participates in the 4Fs, although there
are indeed different levels of integration inside the EU, but they include other
countries such as Iceland, Norway or Liechtenstein in the EEA.

12. Switzerland is neither a member of the EEA, nor a member of the European Union.
However, it has signed over 200 bilateral agreements with the EU, covering issues as
free trade, but not free movement of people.
F  Free movement of people is covered in the Schengen Area.

13. There is a free movement of people among the 28 EU Member States.

T  Free movement of people is one of the 4 freedoms of the EU applied to every
Member State.

14. There is free movement of people between Turkey and the EU.
F  Turkey only participates in the European Single Market regarding free movements
of goods and especially industrial goods.

15. There’s NO free movement of people between Switzerland and the UK, since one of
those countries does not participate in the Schengen Area.
F  Although UK does not participate in the Schengen Area, both of them enjoy free
movement of people due to being part of the European Single Market.

16. All of the European Union Member States will end up adopting the Euro, and therefore
participating in the EMU policy areas.
F  UK and Denmark have “opt-outs”, which allow them to use their own currency,
although there are some countries that are obliged to adopt the Euro.

17. Switzerland participates in the Customs Union of the EU.

F  they have different external tariffs and trade policies.

18. After joining the EU, Member States sign international agreements in bloc (e.g.
bilateral trade agreements or defense agreements).
F  They sign international agreements, but not those that involve defense issues as it
is a national matter.

19. The creation of a Free Trade Area between two or more countries eliminates the need
of border check of goods.
F  There’s still needed quality controls (it only removes tariff barriers, not non-tariff
barriers).

20. Countries participating in the Single Market automatically participate in the EU

Customs Union.
F  Single Market involves the four freedoms and removes both tariff and non-tariff
barriers, while Customs Union involves having a Common External Tariff and a
Common Trade Policy.

21. All EU 28 Member States participate in the EU Customs Union.

T  You cannot be a Member State and not participate in the EU Customs Union.

22. Turkey takes part of the EU Customs Union, as Norway, but it does not have full access
to the Single Market.
 F  Norway is not part of the EU Customs Union, although it is true that Turkey does
not have full access to the Single Market.

23. A good coming from China to Spain would face tariffs when entering to France.
F  Spain and France, being EU MS, are part of the EU Customs Union, so the good
will face the same tariff entering either to France or Spain.

24. If Northern Ireland could stay in the EU Customs Union after Brexit, there would be no
need of a Hard Border with Ireland.
F  Northern Ireland and Ireland after Brexit will have different trade policies
(regarding the production of goods)

25. The UK can have independent trade deals with third countries after Brexit without
having to establish customs controls at the borders.
F  They will have to establish customs controls at the borders as they will have to
apply an external tariff to each good, carry out quality controls and so on.

26. One of the reasons the UK voted Brexit was to take back control of their external
borders (i.e. to control migration from third states like India or Pakistan).
F  They wanted to control migration within the EU, as migration from third states is
controlled individually by each Member State, so it is a national issue.

27. A no-deal means with the UK would imply the sudden stop of all EU-UK trade
relationships.
F  No-deal means moving to the less level of integration in terms of trade, but that
still includes a minimum level of trade (imposed by international organizations such as
WTO), so it would not be a total stop.

28. Exiting from the EU requires the UK to sign FTA with each of the EU’s Member States.
F  Since the EU acts as a bloc regarding trade matters, negotiations of FTA would be
made between UK and the whole EU together.

29. Signing FTAs allows non-EU countries to join the EU’s Single Market.
F  Non-trade / Regulatory barriers are not eliminated by FTAs (difficult to remove
them as you would have to change the regulation regarding the production of goods in
the importing country).

PARTIAL EXAM

1. The European Union is a single entity, a single undertaking. This is the reason why
there are not different degrees of integration among the EU Member States.
FALSE  There are different degrees of integration: one type of integration based on
exceptions, which are the opt-outs (ex: UK out of the Schengen Area or Denmark out
of the Eurozone); and other type of integration based on different transition periods
within the European Union (ex: Poland is not inside the Eurozone but it will be as soon
as it complies with certain criteria).

2. One of the benefits of the Single Market is that there is no need for any kind of
Customs Control in border between its members.
 FALSE  Without being in the Single Market there will be Customs Control, but it is
not enough. Countries that want to totally eliminate Customs Control need to join a
Customs Union. For example, Norway, Liechtenstein or Iceland are part of the Single
Market (because they belong to the European Economic Area), but they are not a part
of the Customs Union (and that’s why products coming from third countries that enter
through those countries face Customs Control.

3. Countries that join Customs Union cannot have an independent trade policy.
TRUE

4. Free trade agreements usually eliminate both tariff and non-tariff barriers to trade.
FALSE  They usually eliminate tariff barriers, but non-tariff barriers are NOT
commonly eliminated (in order to be eliminated, they have to harmonize the
legislation or apply the Mutual Recognition principle).

5. The European Union is NOT a federal state, but their members act as a single bloc in
different policy areas like trade, foreign policy or defense.
FALSE  European Union is NOT a federal state (it may be considered a Confederation
or a Supranational organization), and although their members act as a bloc in areas
like trade, they do NOT act together in foreign policy or in defense, that is carried out
in a more nationally level (although some aspects they, in fact, cooperate.

6. A Norwegian citizen can work in Italy without the need of a work permit since
Norway take part of the Schengen Area.
FALSE  A Norwegian citizen can, indeed, work in Italy without the need of a work
permit, but it is not because of the Schengen Area, it is due to Norway being part of
the Single Market, more specifically because of the free movement of people.

7. There are non-EU members that participate in the EU Customs Union as Turkey or
Switzerland.
FALSE  Turkey does participate in the EU Customs Union although it is not part of
the EU, but Switzerland does NOT belong to the Customs Union.

8. One of the reasons the UK voted Brexit was to “take back control” of their external
borders (i.e. to control immigration from third states like India or Pakistan).
FALSE  Immigration from third states is still a policy in the hands of Member States,
which UK cannot control is the free movement within the EU Member States.

9. In the Brexit context, a “no-deal” scenario would imply the sudden stop of all EU-UK
trade relationships.
FALSE  a “no-deal” scenario would be the level of less integration, but they would
have still trade relationships (the minimum under the WTO framework.

10. Since Iceland is part of the Single Market, it participates in the EU decision-making
process.
FALSE  Although Iceland has access to the 4 FTs (free movement of goods, services,
capital and people/labour), as it is not part of the EU it does not have the right to be in
the EU decision-making process.

11. The European Union provides a flexible framework in which countries can decide the
specific level of integration, they feel comfortable with (e.g. deciding whether to join
the Euro or not, or whether to embrace the Four Freedoms or only several of them.
 FALSE  The European Union is NOT a flexible framework; it is a structure that is
based on exceptions (in the case of the Euro). The Four Freedoms are, in fact,
indivisible. Thereby, if you want to be in the Single Market, you need to embrace the
free movement of people, goods, capital and services.

12. One of the reasons why EU Member States find difficulties to reach compromises is
due to the fact that all EU decisions are taken by unanimity.
FALSE  Not all decisions in the EU are taken unanimity, in fact, most are taken by
majority vote.

13. One of the reasons why many Brexiters find the EEA framework a plausible model
for EU-UK relations is because the UK would regain control of their trade policy.
FALSE  In a general trade policy, EEA does not provide independence within trade
areas. In the case of considering only with third countries, the EEA framework implies
that you are out of the Customs Union, thereby, it means that you have your own
trade policy.

14. The EEA model does not break any of the “red lines” set up by Brexiters when voted
to leave the EU.
FALSE  It breaks, actually, several “red lines” imposed by Brexiters. The most
important part is that, as being in the EEA implies belonging to the Single Market, it
means that you take part in the free movement of people, so UK would not regain
control of the borders in terms of intra-EU movement. Also, by being in the EEA, you
are still subject to foreign tribunals (you are legislated by the EU, instead of
participating in the legislation process) and you do NOT regain regulatory control.

15. Similar to the EU, the United States is also composed by different sovereign states
that have decided acting as a bloc for trade purposes.
FALSE  The United States is only ONE sovereign state that is formed by several
regions.

EXAM

1. The European Free Trade Association (EFTA) is a custom union formed by 4

members: Norway, Liechtenstein, Ireland and Switzerland (1/2)
FALSE  Ireland is not a member of the EFTA. The EFTA is formed by Norway,
Liechtenstein, Iceland and Switzerland. Moreover, it is not a custom union, since
they do not have the exact common trade policy regarding third countries.

2. Just as the United States of America, the EU is a union of sovereign states (1)
FALSE: It is true that eu is a union of sovereign states, but US is not a union of
sovereign states.
3. Since Switzerland does not belong to the European economic area, it does not
have access to the EU Single Market (1)
False: It has access but not through the EEA, it has access through bilateral
agreements.

4. Iceland can access the EU single market (1)

FALSE: Iceland can access the EU single market by its participation in the EEA. It
allows to cooperate on areas as research and development, education but not on
common foreign and security policy.

5. When states reach agreements on complex policy topics that require ongoing
cooperation and decision-making processes (1)
TRUE.

6. There are no customs controls between Spain and France; Italy and Switzerland;
or Norway and Sweden, since all of them are participants of the EU Single
Market. (0)
FALSE: customs control is about tariffs, making sure that the product complies with
the registration of your country. All of them participate in the eu single market. To
fully eliminate the customs control you need to participate in the customs
union. ??

7. The most basic type of economic integration is a simple free-trade area. At this
stage, attention is focused almost exclusively (1)
True

8. The EEA is formed by four members states: Norway, Liechtenstein, Iceland and
Switzerland. (1)

False, the EEA is formed by EU Member States and Norway, Liechtenstein and
Iceland

9. Out of the “four freedoms” that characterize the EU single market (1)
true

10. The international community is composed around 195 sovereign states such as
California, England, France, Catalonia and European union. (1/2)
False. California, England, Catalonia are not sovereign states and the European
union it is not also a state

11. After a swiss referendum held on 6 December 1992 rejected the eu membership,
the swiss government (1)
False. After the swiss referendum held in 1992 it did not reject the eu
membership, it rejected the EEA.

12. One of the main difference between the swiss-eu relationship and the EEA. (1)
TRUE
 13. While the efta grants access to the eu single market four freedoms, it does NOT
involves other horizontal policiesas environment, social policy, consumer
protection or economic and monetary union. (1/2)
FALSE. Efta it does not grant access to the EU single market four freedoms.

14. The eu provides a framework of “flexible” integration where each state can
decide the level of integration that better fits its current (1/2)
False. There are different levels of development.

EUROPEAN UNION: THE BASICS

® Eu as an international organization
® Eu Evolution
® Eu Law
® Eu Competences and Policy Areas
® Eu Institutions
® Eu Decision-Making Procedures

Eu as an international organization

European union is an international organization of states, such as ASEAN, WTO, NATO, World
Bank, etc. Regional intergovernmental organization, it is intergovernmental intervention,
cooperation between different areas.

Organization of a states happen in different topics, can be organized regarding environment or

trade. Or maybe organized by regions or global.

EU set up either tackle better soul topics that are cross borders, solve through policies.

EU organization is evolving for its type of international organization.

Intergovernmental vs. Supranational (although this is not a binary yes or not – one or the other
-, it is gradient meaning that some organizations are more intergovernmental and others more
supranational)

Intergovernmental organization states govern the power. It is a framework of debate: they

cooperate and debate, and in order to take a decision they need all to agree  unanimity.
There is not a sense of share sovereignty. The decision-making lies in the hands of the states
since the states retain the power.
However, the European Union it is clear example that towards a supranational organization in
which states are also the center of the decision-making, but these decisions are taken by
majorities. Besides, there are some decision-making institutions (EU Parliament) that there are
not formed by states representatives and some decisions are not made for some states’
benefits, since they defend the benefits of the EU as a whole.

The European Union is an international organization since it is composed by different member

states and as an international organization, it is defined as a supranational organization. So,
the European Union itself is defined as supranational since it is composed by some
supranational and intergovernmental institutions. But what makes an institution
supranational? When the decision-making process in these institutions it is not only lead by
representatives of states, which mean that the representatives do not act on behalf of each
states’ benefits but on behalf of EU benefits as a whole.

But what is the difference between interest of states vs people interests?

Eu evolution

EU was created through Schuman Declaration in 1950, which was the statement at where
beginning production of coal and steel was stated, and which open the cooperation and start
of the EU. European Economic Union in 1957.

The EU evolved in terms of members, competences and institutions and decision-making

processes.

For the EU to be created it was legally needed a treaty, in order to create a legal framework.
The European Coal and Steel Community was created through the Treaty of Paris. Then, it was
the Treaty of Rome.

Members

Treaty of Paris  There were 6 member states: West Germany, France, the Netherlands,
Belgium, Luxembourg and Italy.

What happened to the EU evolution in terms of members? New members were added. So,
there has been an enlargement of the European union.

When the new countries joined the EU, the founding treaties were amended:

2013 Croatia

2007 Bulgaria, Romania

2004 Czechia, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia

1995 Austria, Finland, Sweden

1986 Spain, Portugal

1981 Greece

1973 Denmark, Ireland, United Kingdom

Competences

https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=LEGISSUM%3Aai0020

The European Union has evolved in terms of competences. From just managing the production
of coal steel to a customs union, competition policy, monetary policy, common fisheries policy,
common commercial policy, etc.

Institutions and decision-making processes

When members and competences are expanded, the institutional framework changes as well,
since more institutions are needed, and the decision-making process evolved.

So, more institutions were added which changed the decision-making processes, for instance
when referring to unanimity since it is easier to get unanimity between 6 member states
rather than 27 member states. You need

If the Treaty of Paris was the first one in which the number of members, the competences and
the decision-making processes were limited and specific, for changing the members, the
competences and institutions new treaties are created. The evolution of the EU is reflected in
the creation of new amendment treaties.

The European Economic

Area (EEA) is formed by 4
states (Norway,
Liechtenstein,
Switzerland and Iceland).
F ! EU Member States +
Norway, Liechtenstein and
Iceland. NOT Switzerland
2.! A country that takes
part of the EU Customs
Union also takes part in the
four
freedoms of the internal
market.
F ! EU Customs Union only
implies having a Common
Trade Policy and a
Common External Tar
https://europa.eu/european-union/law/treaties_en

Which of these are EU institutions and which are not?

EU Institutions

® European parliament: It is a supranational Institution in which the members that take

the decisions are not representatives of EU member states, instead they are the Legislative in
representatives of EU citizens.

® The Council: it is an intergovernmental institution in which the ones taking the

decisions are the representatives of the states. The Council it is also known as the
Council of Ministers (they are the same, they are synonyms).

® Council of Ministers: It is the same as The Council, so it is also an intergovernmental

institution but, in this case, the member states are represented by ministers.

® European Council: This institution is NOT the same as The Council and The Council of
Ministers. The European Council is also an intergovernmental institution, composed by
representatives of members states at the highest level. So, instead of being ministers
from different member states, the European council needs the head of states and the
head of government (the Prime Minister, the President…).

® Council of the EU: The Council of the EU is the same institution as The Council and The
Council of Ministers, since they are all of the SYNONYMS. So, it is a legislative
institution, too.

® European Central Bank: Not every member state is part of the European Central Bank,
which is the main body that is in charge of monetary policy decision-making.

NOT EU Institutions:
 ® European Union: It is a supranational international organization in which there are
different decision-making bodies considered institutions.

® Council of Europe: This is NOT a synonym for the European Council. It is a different
international organization with different goals and membership than the European
Council. The competences that this organization tackles are not economic matters; it
tackles human rights. Besides, it has different member states than the EU member
states.

® Eurozone: it is a way for naming the group of countries that are in the level of
integration of a monetary union. So, it names the group of countries that has adopted
the same currency: The Euro.

® Eurogroup: It is an informal body where the ministers of the euro area member states
discuss matters relating to their shared responsibilities related to euro. The Eurogroup
is NOT the same as the Eurozone, since the Eurozone is not a decision-making body
and the Eurogroup is an informal body in order to take some decisions.

® Euro Area: It is the same as the Eurozone, they are synonyms.

® European Banking Union

® ECOFIN: It is a configuration of the Council of Ministers

® EUROPOL
Decentralized agencies: bodies that carry out
® EUROSTAT technical, scientific and managerial tasks that help
institutions to implement policies
® European Banking Authority

EU Institutions  The Council (aka Council of Ministers; aka Council of the EU)

EU Agencies (decentralized agencies)  EUROPOL; Single Resolution Board; EUROSTAT

Committees / Departments / Configurations (of this EU institutions)  ECOFIN

Informal Meetings  Eurogroup

International organizations  e.g. Council of Europe; European Union

EU institutions

® EU PARLIAMENT “the voice of people”

 ® EU COMMISSION “promoting the common interest”
® COUNCIL OF THE EU “the voice of the Member States”

Supranational Intergovernmental
institutions institution

EU Commission EU Parliament EU Council

Co-legislative process (aka

Propose a legislation
ordinary legislative procedure)

Adopting a legislation

European Union law

European Law, everything done in a country as a legal person or individual person, in a state,
any action and policies done, should have be done under its legal basis. This legal basis are in
laws and in legislation. The moment you want to do things, decisions taking outside this
national framework, in terms of legal basis, you have to agree with this laws.

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EU regulations summary:

- General application
- Binding in its entirety
- Directly applicable

There are three sources of EU law:

1) Primary law
2) Secondary law
3) Supplementary law

Part of primary and secondary law, there are international agreements, treaty between
international relationship with EU no member.

Legal base of European Law. Two different kinds of source of laws. Primary law and secondary
law. Primary law are treaties, the main source of primary law. In this treaty is where is said the
distribution of competences between states and EU institutions. Everything that happens in
European Union is said in its treaties. Secondary law is composed by regulations, directives,
decisions, opinions and recommendations. Regulations and directives the most relevant for us
because are harmonization rules, take place at the EU level, the most relevant to eliminate
regulatory barriers.

There is a division of EU competences: exclusive competences, shared competences and

supporting competences. Exclusive competences is when European Union has all the
legislative power. For example custom union. Shared competences, topics decisions and
legislations that can be taking part of the EU level and national level. The last one, supporting
competences where the EU can only Intervene to support, coordinate or complement the
action of EU countries.

Sometimes the problems exist because we don’t know who is carrying out the power of
policies or of each decision. It is so important to know who have each competence. People
don’t know the division of competences inside a state. Control of immigration, for example, is
from member states, so it is not a matter of being part of European Union.

Primary law

The main sources of primary law are the treaties establishing the EU

® The Treaty on the EU, the Treaty on the Functioning of the EU and the Treaty on the
European Atomic Energy Community – Euratom

Secondary law

Secondary law comprises unilateral acts, which can be divided into two categories:

® Regulations, directives, decisions, opinions and recommendations

® Atypical acts such as communications and resolutions, and white and green papers.

International agreements with non-EU countries or with international organizations are also an
integral part of EU law. They are separate from primary and secondary legislation and form a
sui generis category. According

Competences

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® Exclusive competences areas in which the EU alone is able to legislate and adopt
binding acts. EU countries are able to do so themselves only if empowered by the EU
to implement these acts. The EU have exclusive competence in the following areas:
o Customs Unions
o The establishing of competition

® Shared competences: The EU and EU countries are able to legislate and adopt legally
binding acts. Eu countries exercise their own competence where the EU
 ® Supporting competences: The EU can only intervene to support, coordinate or
complement the action of EU countries.
o Protection and improvement of human health
o Industry
o Culture
o Tourism
o Education, vocational training, youth and sport
o Civil protection

There is an institutional framework since it is needed to apply legislation.

Authority and responsibility for public function lays in the central level (not in a supranational
level). In terms of government there are differences between executive, legislative and judicial
branch. In the executive branch the central level is the government (the cabinet of ministers).
In the legislative branch, the central level is the Parliament. And finally, in the judicial branch,
the central level is the Judicial System.

Subnational levels: regions and local (comunidades autónomas)

Decentralization

Taking some authorities from the central level to the subnational level.

® Administrative decentralization
® Political decentralization
® Fiscal decentralization

For specific policy areas /competences:

® Efficiency
® Accountability
® Regional development
 Supranational level

Central

Regional

Local

The EU Commission propose a legislation of an area. Then the ones deciding how the
legislation is gonna be are EU Parliament and EU Council, they pass the legislation. In this
process named co-legislative process or ordinary legislative process.

For legislate we have the EU Parliament, that is the voice of the people, it is composed by
representatives chosen by citizens, and after EU Council which is composed by ministers of
each member states.

So, the process is European Commission  The Council  European Parliament

Who takes the decisions?

Decision-making at EU level involves various European institutions, in particular:

- The European Parliament, which represents the EU’s citizens and is directly elected by
them
- The European Council, which consists of the Heads of State or Government of the EU
Member States
- The Council, which represents the governments of the EU Member States
- The European Commission, which represents the interests of the EU as a whole.

The European Council defines the general political direction and priorities of the EU but it does
not exercise legislative functions. Generally, it is the European Commission that proposes new
laws and it is the European Parliament and Council that adopt them. The Member States and
the Commission then implement them

Every European law is based on a specific treaty article, referred to as the ‘legal basis’ of the
legislation. This determines which legislative procedure must be followed. The treaty sets out
the decision-making process, including Commission proposals, successive readings by the
Council and Parliament, and the opinions of the advisory bodies. It also lays down when
unanimity is required, and when a qualified majority is sufficient for the Council to adopt
legislation. The great majority of EU legislation is adopted using the Ordinary Legislative
Procedure. In this procedure, the Parliament and the Council share legislative power.

Focus on which is the composition and then what it does  arms of the EU

Executive arm  EU Commission

Legislative arm  EU Parliament and EU Council

Judicial arm  Court of Justice of the EU

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European Commission “promoting the common interest”

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Role: Executive arm of the EU that proposes laws, policies agreements and promotes the
Union.

Executive arm – in the EU level the commission acts like “the government”

Members: A college of Commissioners, one from each Member State

The commissioners are individuals that have held political positions in their home countries,
however, once they become commissioners they do not respond for their states’ benefits,
instead, they seek for the benefits of the EU citizens as a whole.

What is the Commission?

The commission is the politically independent institution that represents and upholds the
interests of the EU as a whole

The term “Commission is used in two senses. Firstly, it refers to the Members of the
Commission and secondly, it refers to the institution itself and to its staff.

Informally, the members of the commissions are known as “Commissioners”. They have all
held political positions and many have been government ministers. They are committed to
acting in the interest of the Union as a whole and not taking instructions from national
governments.
The Commission has several Vice-Presidents, one of whom is also the High Representative for
Foreign Affairs and security Policy.

Appointing the Commission

A new Commission is appointed every five years, within six months of the elections to the
European Parliament. The procedure is as follows:

® The Member States governments propose a new Commission President, who must be
elected by the European Parliament.
® The proposed Commission President, in discussion with the Member state
governments, chooses the other members of the Commission.

The new Parliament then interviews all proposed members and gives its opinion on the entire
“College”. If approved, the new Commission can officially start the following January.

What the Commission does:

1) To propose legislation to Parliament and the Council

Under the EU Treaty, the Commission has the “right of initiative”.
In “ordinary legislative process”, it is the EU Commission the one in charge to
propose a legislation. In order to prepare the proposal, they need to detect a
problem or a challenge that needs to be tackled.

Can they make a proposal about any topic they want? They can in the case in
which the topic it is legal inside the treaties and the EU has competences about
that topic. Even if that happens, they need to respect the “subsidiary principle”,
which means that the Commission will propose action at EU level only if it
considers that a problem cannot be solved more efficiently by national, regional or
local action.

2) To manage and implement EU policies and the budget

There are many policy areas in which it is not needed an EU budget.

3) To enforce European law (jointly with the Court of Justice)

4) To represent the Union around the world

How the Commission works

The Commission’s staff is organized into departments, known as directorates-general (DGs)

and services (such as the Legal Service). Each DG is responsible for a particular policy area – for
example, the Trade DG and the Competition DG – and is headed by a Director-General who is
answerable to one of the Commissioners.
European Parliament

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The European Parliament is the only directly elected EU body and one of the largest
democratic assemblies in the world.

Role: Directly elected legislative arm of the EU

Members: 705 Members of the European Parliament (actualized). Members of the European
Parliament are directly elected by EU citizens to represent their interests.

Location: Strasbourg, Brussels and Luxembourg

What the European Parliament does

1) It shares with the Council the power to legislate – to pass laws. The fact that it is a
directly elected body helps guarantee the democratic legitimacy of European law.

The role of passing the legislation to the EU Council it is called “ordinary legislative
procedure”.

2) It exercises democratic supervision over all EU institutions, and in particular the

Commission. It has the power to approve or reject the nomination of the President of
the Commission and Commissioners and the right to censure the Commission as a
whole.

3) It shares authority with the Council over the EU budget and can therefore influence EU
spending. At the end of the budget procedure, it adopts or rejects the budget in its
entirety.

How the Members of the EU Parliament are distributed

The members of the EU Parliament are divided into the different member states depending on
its population.

Could this mean that the Members of the EU Parliament are organized in terms of this
nationality? NO. The members of the EU Parliament are associated with the national political
parties and then, they join together to the members from the same political parties of other
countries. They are organized in terms of the political parties in general, not in terms of
nationality, creating “political groups”.

Council of the EU “the voice of the Member States”

The Council main role is to decide on policies and adopt legislation. It is composed by one
minster from each member state.
The Council is an essential EU decision-maker. Its work is carried out in Council meetings that
are attended by one minister from each of the EU’s national governments. The purpose of
these gatherings is to discuss, agree, amend and, finally, adopt legislation; coordinate the
Member States’ policies; or define the EU’s foreign policy. Which ministers attend which
Council meeting depends on the subjects on the agenda — this is known as the ‘configuration’
of the Council. If the Council is going to meet it is noted to the ministers in charge of the issue
that is going to to be debated and legislate. There are 10 different Council configurations

The Presidency of the Council rotates between the Member States every six months. It is not
the same as the President of the European Council. The responsibility of the government
holding the Presidency is to organize and chair the different Council meetings.

Each minister in the Council is empowered to commit his or her government. Look to the best
interest of EU, but they also represent their government. It is more an intergovernmental
organization comparting to European Commission that is more supranational.

The Council has five key responsibilities:

1. To pass European laws. In most fields, it legislates jointly with the European Parliament.
Negotiate and adopt EU laws  main responsibility
2. To coordinate the Member States’ policies, for example, in the economic field. EU
economic policy is based on close coordination of national economic policies. This
coordination is carried out by the economics and finance ministers who collectively from
the Economic and Financial Affairs (ECOFIN) Council.
3. To develop the EU’s common foreign and security policy, based on guidelines set by the
European Council.
4. To conclude international agreements between the EU and one or more states or
international organizations. The agreement is responsibility of the Council. It is negotiated
by the Commission but it is not concluded if the Council has not been involved.
5. To adopt the EU’s budget, jointly with the European Parliament. EU budget is the money
collected and resources allocate to EU policies. Money need to pay institutions.

How many votes per country?

Decisions in the Council are taken by vote. At present, the Council decides by qualified-
majority voting, except where the treaties require a different procedure, e.g. a unanimous
vote in the fields of taxation and foreign policy. Under qualified-majority voting, the larger the
population the more votes a Member State has, although this system is adjusted to give
proportionally more weight to less-populous countries.

EU law

® EU Primary Law
® EU Secondary Law
® Community / Supranational method vs. Intergovernmental method
® Introduction to the Internal / Single Market legislation
EU Primary Law (treaties)

Supreme source of law in EU. They need to be aligned in what the treaties say.

The European Union is built through creating new amendments of treaties.

After seeing the institutions we are going to see the EU primary law. Because primary law,
treaties, is the source of the supreme source of all Europe, other need to be a line with the
treaty say, and it will be secondary law. There are different treaties, this treaties are updating
itself. There are two main treaties, treaty of the function of European Union, and the treaty on
European Union, are the two founders treaties of the European Union, they are the treaty of
role (how distribution in EU and countries powers or capacities) and the Treaty of Maastricht
respectively.

Without entering in to super details, secondary law, consist in regulations, directives, opinions
and recommendations, and they also include white and green paper. In secondary law, the
part we are going to study and analyze more is regulations and directives. Distinction between
regulation and directives is important.

Regulations: EU regulations have general application, it applies to every member state. Binding
in their entirety, every part EU regulations are binding and other not, so that all binding
applicable. Directly binding applicable means it does transposition into national legal
framework in order to be applicable. It doesn’t have to be spans to have effect. Directly
applicable means create a European legal framework, you need legislation that goes beyond
the national one to harmonize.

After seeing the institutions we are going to see the EU primary law. Because primary law,
treaties, is the source of the supreme source of all Europe, other sources of law need to be in
line with the treaty say, and it will be secondary law. There are different treaties, this treaties
are updating itself. There are two main treaties, treaty of the function of European Union, and
the treaty on the European Union, are the two founders treaties of the European Union, they
are the treaty of role (how distribution in EU and countries powers or capacities, function of
EU, and economic unity) and the Treaty of Maastricht respectively. Amended version of treaty
of role. They are not different treaties, it is an amention treaty.

There are different treaties. This treaties are updating itself, meaning that treaties amend
different treaties, which create EU and its updating create the new EU. Legal basis on primary
law needed.

Without entering in to super details, secondary law, consist in regulations, directives, opinions
and recommendations, and they also include white and green paper. In secondary law, the
part we are going to study and analyze more is regulations and directives. Distinction between
regulations and directives is important. Opinions and decisions are not binding, regulations and
directives yes. White paper is a document contain proposal for a EU action in specific area,
Green paper documents of European Commission to build debate and discuss potential topics.

Important distinction between regulations and directives. EU regulation they have general
application, it applies to every member state. Also, it is biding in their entirety, parts of the EU
regulations are biding and other no, not, is its all biding and it is directly applicable. Directly
applicable means that it does not transpose into national legal framework in order to be
applicable, to be effect. We have national legal framework of each state, which is separated of
each other, what we want to do, create a European legal framework, we need legislation that
goes beyond the national ones to HARMONIZE. We had fragmentation in terms of markets in
the EU. When we are in the same state there is not necessary a lot of requirements, basically
because there is an integrated market inside the state, integrated market in terms of legal
framework. At the EU level what happened we have fragmented in legal systems, so this
fragmentation creates also a fragmentation on the markets. Fragmented markets linked to
fragment legal systems. What the EU tries to do with this harmonization is to rate this
fragmentation, and create a integrated market and single internal market, what we are going
to do is harmonization. Harmonize legislation, not eliminate legal framework, need to create
this harmonization, this body of EU of secondary legislation to create this supranational legal
framework in which then is gonna create this single market, start eliminating barriers in single
market. In this context, regulations and directives are the most import harmonization type of
legislations. As regulations have general application, binding in its entirety and directly
applicable.

International agreements of non-EU members, they are separated of primary and secondary
legislation, they are in another category.

Regulations: EU regulations have general application, it applies to every member state. Binding
in their entirety, every part EU regulations are binding and other not, so that all binding
applicable. Directly binding applicable means it does transposition into national legal
framework in order to be applicable. It doesn’t have to be spans to have effect. Directly
applicable means create a European legal framework, you need legislation that goes beyond
the national one to harmonize.

EU regulations summary:

- General application
- Binding in its entirety
- Directly applicable

Directives doesn’t have general application, it can be address general or specific member
states. It is binding. And it is not directly applicable.

Both of them are type of legislation, that harmonize, that creates legislation that goes different
member states to eliminate fragmentation. Why there is two types? First, because regulations
are more rigid, some results in mind. Results is gonna force states to follow a specific form and
means to achieve this results. Regulations are more rigid. You need to follow what is said in the
regulation, directly applicable means for the moment this regulation is set up in the EU level,
member states must follow what is said. The moment that happens, it enters directly in the
legal systems of member states. And it is different for directives, directives allows members
states to follow or to reach their results, but it least to member states to maneuver. With
directives, once is past EU Commission and enter into force through EU Parliament and the
Council, to be applicable doesn’t enter straight away, it needs to be transpose. It means the
fact, there is need, through a period of time, to give to each national parliament its own
legislation. Two years period normally. Transposition must take place by the deadline set when
the directive is adopted (generally within 2 years). After, this period they have to create their
own law to achieve what are the goals of the results of the directive.
For example, the directive on the organisation of working time sets mandatory rest periods
and a limit on weekly working time authorised in the EU.

However, a directive is distinct from a regulation or a decision:

 unlike a regulation, which is applicable in EU countries’ internal law immediately after

its entry into force, a directive is not directly applicable in EU countries. It must first be
transposed into national law before it is applicable in each EU country;
 unlike a decision, the directive is a text with general application to all EU countries.

Regulations enter away in national law of member states. In directives, go to national

legislation, the directives need to be transpose into internal law, incorporated into internal law
with the creation of a specific internal law. Regulations says how it have to be done.

Maximum and minimum harmonization

It is important to distinguish between minimum and maximum (or full)

harmonization requirements in directives.

In the case of minimum harmonization, a directive sets minimum standards, often in

recognition of the fact that the legal systems in some EU countries have already set higher
standards. In this case, EU countries have the right to set higher standards than those set in
the directive. Let each member state, complied beyond their national law.

In the case of maximum harmonization, EU countries may not introduce rules that are stricter
than those set in the directive.

EU budget

The Council of the Ministers take the decisions through majority voting. Then, they need to
negotiate with the Parliament. In this decision-making process there are the ministers and
inside the Parliament, the members of the Parliament are responsible for taking decisions. In
the case of the EU Commission, the commissioners the ones responsible.

However, beyond the decision-making process there is a bureaucracy, inside these institutions
there are staff that work for them. But who is paying for the European Commission staff? The
member States?

How is this money planned to use in these institutions? The annual budget of the EU.

There are two parts important for a budget: the revenues and the expenses.

In the case of institutions, which are the expenses at the state level? Education, health system,
pensions, unemployment, etc. This happens also at lower levels (regional and local level) since
they have their own budgets. Those expenses vary depending on the competences and policies
each state establish.
In terms of revenue, how is the money collected for each member state budget? It is collected
through taxes and also through transfers from a regional or local level.

Why do we need a budget at a European level?

® EU-wide challenges which require EU-wide policies which requires EU-wide funding.

A budget can be planned for any period of time. National budget works at an annual basis. In
the EU, the states not only negotiate the budget for a specific year, they use a multiannual
budget framework (usually 7 years forecast).

Why the EU budget is so low in comparison with the budget of each of the member states?
Because the policies that require funding are usually the social related security policies and
those policies are not at an EU level. In the case of health care, education… these types of
policies done are at the national level.

How the EU is getting the money?

The European union has its own taxes? No.

They get the money through transfers.

3 sources of revenue:

1. Customs duties on imports from outside the EU (tariffs)

2. Small proportion of the value-added tax, a national tax collected from each member
states.
3. A proportion of GNI (Gross National Income) from each Member states.

® Who approves the EU budget? The Council and the Parliament.

® But who implements the policies of the EU budget? The EU Commission.

Community/Supranational method versus intergovernmental method

As a general rule, EU decisions are taken by means of the Community method involving the
use of the ordinary legislative procedure. This community method involve the use of the
ordinary procedure which involve

o the sole right of the European Commission to initiate legislation

o the co-decision power between the Council and the European Parliament, be agree
between them
o the use of qualified majority voting in Council
It is by definition the method use as general rule for EU decisions, it is the general rule for take
new decisions for the internal market. Are gonna be regulations and directives taken by this
community method.

It is not the case every decision it is done through the community method. There is also the
intergovernmental method. In which is used, and the role of institutions in taking decisions
totally changes.

It contrasts with the intergovernmental method of operation used in decision-making, mainly

on Common Foreign and Security Policy and aspects of police and judicial cooperation. This
method has the following salient features:

 the Commission's right of initiative is shared with the EU countries or confined to

specific areas of activity;
 the European Council, explicitly mentioned in the Lisbon Treaty, often plays a key role;
so, in this case, it is not at the same level as European Parliament
 the Council generally acts unanimously; vet of power
 the European Parliament has a purely consultative role.

Intergovernmental method is used in sensitive areas, for that member states want to still keep
all its power.

Internal market legislation follows community method.

Introduction to Single Market

The single market is an internal created by different Member States with the goal of
eliminating the barriers to the free movement of goods, services, people/workers and capital.
Making sure we don’t have barriers with that at the national level and also in the European
level, that’s the objective.

It is not about expending money: creating a single market for goods, services and capital it is
not required a wide funding. It is about decreasing barriers to any of these goods, services,
capital and people.

As already noted, the core principles of the Single Market rest on four fundamental freedoms:

1) Freedom of movement of goods: no restrictions on the trade of goods between

Member States, such as state subsidies, discriminatory taxes on imported goods, or
preferential tax treatment for exports.

2) Freedom of movement of people: all citizens have the right to work and live in another
Member State without discrimination due to nationality and with a mutual recognition
of educational and vocational qualifications.
 3) Freedom of movement of services: services providers can conduct their business in all
Member States without having to be domiciled there and EU consumers can select
service providers from any Member State.

4) Freedom of movement of capital: no capital controls or restrictions on the amount of

currency that may be imported or exported and greater ease of utilizing the offers of
foreign financial service providers.

When: The Single Market is an unfinished (or perhaps more an ongoing) process that started
with the Treaty of Rome in 1957.

Why: Because the more integrated economies are (i.e., the less fragmented the EU markets
are)  More cross-border trade  Economic growth

® Example: a company willing to sell their products abroad (or citizen willing to work
abroad)

Why does the “fragmentation” of the market (i.e., eliminating the barriers to the
aforementioned four freedoms of movement) arise?

® Protectionism
o Prevent “foreign” goods / services to compete with your national products
o Prevent “foreign” people / workers to come into your country

® Different standards
o E.g., different perceptions of what should be the standards for the production
and commercialization of products, which leads to different regulatory
frameworks, which leads to barriers to trade (e.g., different requirements /
standards on components, packaging, labelling, etc.)
® Other legal and bureaucratic obstacles
® The EU Single market pushes for “negative” integration (eliminate “unjustified barriers
to trade) and “positive” integration (i.e., harmonization of legislation, standardization,
etc.)

The Single Market is the EU core business: The internal market dominates what the EU does
and has accomplished. Example: when in 1995 the countries from Central Europe wanted to
incorporate the internal market (regulatory) acquis under “pre-accession”, the White Paper
(European Commission, 1995) summing up this acquis covered no less than 23 of the 30
negotiating chapters of accession!

Tariff barriers are a protectionism measure. The main role is to eliminate not only the tariff
barriers but also the regulatory barriers: which means creating a harmonizing legislation.

In general, the harmonized legislation that constantly eliminates these types of barriers are:

® REGULATIONS: more rigid. It enters straightway into the national legal system without
allowing members states to have their own versions.

® DIRECTIVES: more flexible. They set a specific goal and it allows member states to
create their own legislation in order to reach the same results but through national
laws.

Evolution of the single Market

1957 – Treaty of Rome

® On 25 March 1957, representatives from six European countries signed the Treaty of
Rome, establishing the European Economic Community (EEC).

® The vision of the founders was to create closer unity between the people of Europe
and to ensure economic and social progress for their countries by eliminating barriers
to trade.

® The Treaty created a Customs Union and a Common Market, which gradually
eliminated all trade tariffs on cross-border trade among the six signatories. I.e., it
promoted the establishment of a common internal market, characterized by the
freedom of movement of goods, services and productive factors (labour and capital).

® By 1968, the Custom Union was established (i.e., tariff barriers and quotas on trade
between Member States had been effectively abolished).

® However, numerous non-tariff barriers continued to hamper trade in goods between

Member States. Moreover, trade in services and cross-border movement of people
and capital were still subject to many restrictions.

1986 – Single European Act (SEA)

® The Single European Act was brought into force in 1987.

® Its aim was to reignite the momentum towards a fully functioning Single Market
characterized by four specific “freedoms of movement (of goods, services, capital and
people) and to achieve this objective by 1992.
 ® The Commission tabled almost 300 legislative acts, and by the end of 1992, EU
policymakers considered that the Single Market was completed, as planned. In reality,
actual progress was uneven, and many barriers still remained.

® Additional liberalization directives were enacted in the ensuing years for opening to
competition services – notably network industries (starting with telecom and moving
on to energy, transport and postal services) and financial services.

1997 – The Single Market Action Plan

® The realization that the single Market was only partially working led to the adoption, in
1997, of the Single Market Action Plan (SMP)
® This action plan set out a wide range of priority actions required to improve the
functioning of the single Market by the deadline of 1 January 1999.
® Although some further progress was made towards the ultimate goal of a Single
Market with no restrictions on the free movement of goods, services, people and
capital, not all internal barriers had been abolished by January 1999.
Single Market for Services

What are the modes of supplying cross-border services?

® Cross-border supply: A service is supplied from the UK into the territory of another
country.

® Consumption abroad: A service is supplied in the UK o a consumer from another

country who travels to receive it

® Commercial presence: A service is supplied by a service supplier of the UK, through

commercial presence in the territory of another country.

® Movement of natural persons: A service is supplied by a service supplier of the UK,

through the presence of UK workers in the territory of any other country.

What are the type of barriers I may find when selling services cross-border?

 Market access barriers: Limits can be placed on the number of foreign

suppliers or total number of services transactions

 Professional qualifications: Making access to a particular profession

conditional upon the possession of a professional qualification traditionally
issues within their territory.
There are some states that force you to have specific professional
qualifications and the problem arises when these qualifications are different
between the member states. At a EU level, it has been tried to have a mutual
recognition of professional qualifications (professional qualifications directive).

In order to set up a brand there is no needed a license, it is true that I will need
to follow some standards and legislations in terms of production and
distribution. Nevertheless, when referring to setting up a bank, before the part
of distribution of the services, there is needed a license.

 Licenses/Authorizations and red tape (e.g., filling out paperwork, obtaining

licenses, having multiple people or committees approve a decision and various
low-level rules that make conducting one’s affairs slower). For instance, the
moment when you want to create some type pf banking services you need to a
license.

 Restrictions on workers/movement of people

 Tariff barriers: NO

PARTIAL EXAM II

1. A regulation is a very important harmonization tool that leaves NO room for

Member States to choose the means to achieve the intended results of the norm.
 transposition must take place by the deadline set when the regulation is adopted
(generally within 2 years).
FALSE: Although it is true that regulation is a very important harmonization tool that
leaves NO room for Member States to choose the means to achieve the intended
results of the norm; regulations are directly applicable, meaning that they apply
automatically and uniformly to all EU countries as soon as they enter into force,
without needing to be transposed into national law.

2. The Council of Europe brings together ministers of EU Member States (One minister
from each of the EU’s national governments).
FALSE: The Council of Europe is NOT an EU Institution, but an international
organization based in Strasbourg which comprises 47 countries of Europe. It was set
up to promote democracy and protect human rights and the rule of law in Europe.

3. The Council is organized into departments, known as directorates-general (DGs).

Each DG is responsible for a particular policy area – for example, the Trade DG and
the Competition DG.
FALSE: It is not The Council, but the European Commission is the institution that is
organized into DGs. The Council meets 10 different configurations.

4. The European Commission is in charge of passing European laws. In most fields, it

legislates jointly with the European Parliament.
FALSE  The European Commission proposes legislation. The Council legislates with
the European Parliament.

5. Decisions at the Council of the EU are taking by consensus.

FALSE  Most decisions at the Council of the EU are taking by qualified majority
voting (sensitive topics like foreign policy and taxation require a unanimous vote).

6. When non-EU citizens plan to move (legally to the EU, residence permit applications
must always be made to the EU authorities, which will take all final decisions on
migrant applications.
FALSE  Residence permit applications must always be made to the authorities of the
EU country non-EU citizens.

7. The border-free Schengen Area cannot function efficiently without a common visa
policy which facilitates the entry of legal visitors into the EU.
TRUE

TOPIC 3: SINGLE MARKET

Single market for free movement of services

It is not compared to goods, goods the legislation is going to depend a lot of sector and in
specific goods.

Goods depend on legislation, a lot of sector or products, regulate same way, sell, distribute
and market. Depending the good the regulation. The same thing, at services. There are
different kind of services, usually there is more about restrictions about services we can find, it
is about, the qualification we need to have in order to provide a service. There are different
kind of services, more about restriction in terms of services we can find, not in fact provide a
service or not, because it is more about the qualification, we need to have in order to provide
the service.

Entrance market barriers has disappeared in EU. But it is different comparing good and
services. If I am a medical, I need a certificate, a qualification, that told us, it will allow us to
provide this service in another member state. There is not that concept of time in services.
There are services, as for example, consulting or advising, which not require me a specific
license.

Harmonization in single market for services means that a certification is recognized in different
countries, allow me to provide my services in any other member states.

FINTECH start up showed in class.

What are the kind of barriers I may find when selling services cross-border?

 Market access barriers: Limits can be placed on the number of foreign suppliers or
total number of services transactions (this may be in the form of mode 1, but specially
in mode 3 and 4):
 Professional qualifications: Making access to a particular profession conditional upon
the possession of a professional qualification traditionally issued within their territory
 Restrictions on workers/movement of people
 Tariff barriers: No
 Licenses/Authorizations and red tape (e.g. filling out paperwork, obtaining licenses,
having multiple people or committees approve a decision and various low-level rules
that make conducting one's affairs slower)

Licenses. The moment you want to create a service, you need to ask for a license. This
happens to a lot of financial services. Traditionally if I create the bank in Spain, I need
Spanish license, so if I want to provide banking services to current accounts in Spain I
need to go to the Bank of Spain and demand I license, and then I have the possibility to
provide this service. if I want to do it in France, I need to demand this license in France.
So, I need a Spanish license, France license… and more if you want to service in
another country. And it is not easy at all get this license. But what has happened is that
thanks to single market, in the EU, for some of this banking licenses the moment you
have ask for a license to start in business in your country, once you are guaranteed
that license allows you in any European member state. Now so, companies that have
licensee in UK will only be able to sell in UK. If you go to sell at USA, you have to go
there and ask them for a license. In USA as there is fragmentation, inside it, doesn’t go
as UE, you need to ask to each state.

At bank service I cannot start directly offering my services without getting a licensee.
For some of this banking licensee need for starts a banking business. The moment you
are guaranteed, the moment the Spanish Bank gives you the license, that licensee is
like you have a passport to give these services to any European union member state.
Single market for free movement of people

Make clear the differentiation free movement of people and what are the kind of rights and
obligations for that regime, what kind of migration we are talking about.

Difference between economic migrants and refugees/ asylum seekers.

Refugees or asylum seekers, people to immigrated are reasons to avoid persecution of its
country, so it is political problems of its country. It is people who must go out of their country.

Economic migrants are people that go out of its country because to improve the standards of
living, trying to find a better live regarding economic terms.

EU refugee policy, this already exist, pat of EU policy regard when there are people from
member states that are seeking for asylum, that is searching for condition of a refugee.

Focusing on EU migrants, change residence because improve living standards, or also because
you want to change the residence, work… we have to distinguish between Intra EU migration
and third country migrants. There is different regulations between citizens to come to another
member state country, of that one that regulates third states.

What kind of rights we are talking about migration?

- Residence permit
- Working permit
- Visiting permit

All this kind of permit is known as VISA, visiting visa, residence visa, working visa.

The legislation in the EU says that inside the EU all this legislation is regarded as single market
for people or free movement of people, so it is an EU competence. Can a German need a
permit to visit Spain? No.

I am a marketing student and I am from Spain, and there is German company that has put a
new job. Do I need to ask for a working permit in Germany? No need for working permit inside
EU.

At third country migrants the framework is different. All this is not govern by single market for
people, it is governed complex. Residence visa and working visa is legislated in the member
state legislation where the third country migrant is. So, it is a state competence.

At residence permit in intra EU migration there is an asterisk because for short stays, which are
less than 3 months, 90 days), nothing. For long stays I don’t need registering, If you can be
legal at this country, you need to prove you are not a burden for the host state. I won’t get my
visa residence until I have enough resources to prove I am not a burden, I can’t be longer than
3 months if I don’t get enough resources.

I am Spanish, I want to live in German. If I have a job in German can I go to live there? Yes,
because I do have a job, by definition I don’t represent a burden for the host country or for
the member state I go. No problem in that situation. Once I am in that country I need to
register, authorities can want to have you registered, it is a procedure to have evidence you
are in that country.

I am in Spain and I want to live in Germany, but I don’t have the resources and a job. Legally I
cannot stay more than 3 months. But how are they want to know? You can be there; the
problem is that legally you shouldn’t be access to all the social security’s services because you
are not registered, and you are not there legally. It is more you are not going to have legal
benefits in the member state. This is relevant because in terms of barriers is much better
compared to third countries, but it is not exactly the same Valencia- Barcelona that Valencia-
berlin. If I am Valencia and I want to go to Barcelona I need a working permit or residence
permit but if I don’t have, I will have securities in more than 3 months.

Where does Schengen legislation enters into this picture? Single market legislation we talk
more the legislation makes easier for you because of the elimination of barriers, about
facilitating you going into another member state. The elimination of this permits is for single
market people. The elimination of procedure in order to be able to go to another country, not
permits or registering, it is free movement of people legislation. The coordination of social
securities, health care system, all this legislation of benefits receives, pension benefits on the
council you have. This coordination of pension benefits, making sure you receive them, it is
where EU works on single market regulation. The fact that I can go to Germany and I don’t
need to ask for a work permit is free movement of people, cross-border without showing
identity, this is what Schengen is about. No borders between the different member states
inside Schengen area, not every member state of EU is in Schengen area, no identity control. It
is different for free movement of people. Single market of people I don’t need of work permit,
but if I am at Schengen area, also not identity control, it doesn’t mean that this country
accepts me.

Since there is a free circulation between no border controls between member states that are
inside Schengen, there is the Schengen visa. For entering for Schengen area coming for a third
country, for long term stays I will need a visa for this member state. Japan wants to enter into
German, that country has to give the permit. Japan into EU, when it is about Schengen
countries it is legislated by Schengen visa.
Schengen area, not internal controls, also entails other things. Schengen visa for visiting for
third country, so, visiting permit of third countries to Schengen area members is named
Schengen visa.

Free circulation exists, no internal controls, it means there is also cooperation in terms of
judicial and justice.

You can enter at www.europa.eu YOUR EUROPEA you will have more information about

Help and advice for nationals, EU members and families  free movement of people

Business  free movement of services or goods

I live in a state, but I work to another, at this case you can take details in that web

Recap class before

We started with free movement of people, and with distinction between refugee policy
(migration not by economic reasons more for political reasons, persecution…) and economic
migration.

There is what is call Common European Asylum System, EU directives as, regarding refugees:

 The revised Asylum Procedures Directive aims at fairer, quicker and better-quality
asylum decisions. Asylum seekers with special needs will receive the necessary support
to explain their claim and in particular there will be greater protection of
unaccompanied minors and victims of torture.
 The revised Reception Conditions Directive ensures that there are humane material
reception conditions (such as housing) for asylum seekers across the EU and that the
fundamental rights of the concerned persons are fully respected. It also ensures that
detention is only applied as a measure of last resort.
 The revised Qualification Directive clarifies the grounds for granting international
protection and therefore will make asylum decisions more robust. It will also improve
the access to rights and integration measures for beneficiaries of international
protection.
 The revised Dublin Regulation enhances the protection of asylum seekers during the
process of establishing the State responsible for examining the application, and
clarifies the rules governing the relations between states. It creates a system to detect
early problems in national asylum or reception systems and address their root causes
before they develop into fully fledged crises.
 The revised EURODAC Regulation will allow law enforcement access to the EU
database of the fingerprints of asylum seekers under strictly limited circumstances in
order to prevent, detect or investigate the most serious crimes, such as murder, and
terrorism.

Single market for people and also Schengen, is about intra movement of people, the
legislation that decreases the barriers of movement of people. Schengen related
elimination of controls of the borders.
 Single market of people: several things to clarify, we could differentiate between three
categories:

- When it is just travelling at EU, so, it would be in short-term. You don’t need nothing
else than your ID with you. You don’t need to show your ID if you are travelling inside
the Schengen area. But take it with you. This is what is required. Less than 90 days.
- Working abroad. Free movement of workers is a fundament principle of the Treaty
enshrined in article 45 of the treaty on the functioning of the European Union and
developed by EU secondary legislation and the case law of the court of justice. So, first
of all was for improve trade. In order to extent this it was necessary free movement of
workers. Fundamental right. EU citizens are entitled to:
o Look for a job in another EU country
o Work there without needing a work permit
o Reside there for that purpose. So, if you work also have residence rights, it go
together.
o Stay there even after employment has finished
o Enjoy equal treatment with nationals in access to employment, working
conditions and all the other social and tax advantages.

EU nationals may also have certain types of health & social security coverage transferred to
the country in which they go to seek work

Free movement of workers also applies, in general terms, to the countries in the European
Economic Area (Iceland, Liechtenstein and Norway) and the United Kingdom.

People working in some occupations may also be able to have their professional qualifications
recognized abroad

EU social security coordination provides rules to protect the rights of people moving
within the EU, Iceland, Liechtenstein, Norway, Switzerland and the United Kingdom.

https://ec.europa.eu/social/main.jsp?catId=457&langId=en

Working abroad

As an Eu national, you are entitled to work, for an employer or as a self-employed person, in

any EU country without needing a work permit.

The moment you are working abroad, if you work into another EU country, be aware of the
benefits and where you will pay taxes. There is a lot of complexity.

There different social security systems, meaning that, the unemployment benefits between EU
member countries are different, and the same with the rest of benefits. EU has not created a
unique social security system. All the social security policies are at the national level. What is
EU doing? Making sure there is this coordination between member states in its social security.

The four main principles:

 1. You are covered by the legislation of one country at a time so you only pay
contribution in one country. The decision on which country’s legislation applies to you
will be made by the social security institutions. You cannot choose
2. You have the same rights and obligations as the national of the country. This is known
was the principle of equal treatment or non-discrimination
3. When you claim a benefit, your previous periods of insurance, work or residence in
other countries are taken into account if necessary
4. If you are entitled to a cash benefit from one country, you may generally receive it
even if you are living in a different country. This is known as the principle of
exportability.

Working right is aligned with residence right as you are living there, but residence goes beyond
working rights.

- Residence: as an Eu citizen, you have the right to move to any EU country to live, work,
study, look for a job or retire.

You can stay in another EU country for up to 3 months without registering there but you may
need to report your presence.

As an EU citizen, you have the right to move to any EU country for a period of up to 3
months as long as you have a valid identity card or passport. If you want to settle in another
EU country but you have no intention to take up any work or education there, you need to
prove that you:

 have sufficient resources for you and your family during the time you want to stay in
your new country
 have comprehensive health insurance

You may live in the other EU country as long as you continue to meet the conditions for
residence. If you no longer do so, the national authorities may require you to leave.

Conditions for residence: to be a worker, or student, sufficient income…

As a student:

You have the right to live in the EU country where you are studying for the duration of your
studies if you:

 are enrolled in an approved educational establishment

 have sufficient income, from any source, to live without needing income support
 have comprehensive health insurance cover there.

As a pensioner, As an EU national, you can live in any EU country if you have:

 comprehensive health insurance cover in your host country

 sufficient income to live there without needing income support.
 As a job seeker you can be 6 months, if you have not find a job you have to return to your
country. After 6 months, national authorities can give you the permit to stay if conditions
are done.

If you have not found a job during the first 6 months of your stay, the national authorities can
assess your right to stay longer. For this, they will ask for evidence that you:

 are actively looking for a job and

 have a good chance of finding one

Always keep copies of your job applications, responses from potential employers, invitations
for interviews and so on.

You are not required to register with the employment services in your new country unless you
are receiving unemployment benefit from your home country. But if you do register, it will
help you to prove that you are actively looking for a job.

Economically inactive EU citizens, As an EU citizen, you have the right to move to any EU
country for a period of up to 3 months as long as you have a valid identity card or passport. If
you want to settle in another EU country but you have no intention to take up any work or
education there, you need to prove that you:

 have sufficient resources for you and your family during the time you want to stay in
your new country
 have comprehensive health insurance

Can you be requested to leave or be deported?

You may live in the other EU country as long as you continue to meet the conditions for
residence. If you no longer do so, the national authorities may require you to leave.

In exceptional cases, your host country can deport you on grounds of public policy or public
security - but only if it can prove you represent a genuine, present and sufficiently serious
threat affecting one of the fundamental interests of society.

The deportation decision or the request to leave must be given to you in writing. It must state
all the reasons for your deportation and specify how you can appeal and by when.

SCHENGEN Area

The Schengen area achievements include:

o The abolition of internal border controls for all persons;

o Measures to strengthen and harmonise external border controls: all EU citizens
need only show an identity card or passport to enter the Schengen area;

 European Border and Coast Guard Agency (Frontex): Role: Frontex helps
EU countries and Schengen associated countries manage their external
 borders. It also to helps to harmonize border controls across the EU. The
agency facilitates cooperation between border authorities in each EU
country, providing technical support and expertise.

o A common visa policy for short stays: nationals of third countries included in the
common list of non-member countries whose nationals need an entry visa may
obtain a single visa, valid for the entire Schengen area.
o Police and judicial cooperation: police forces assist each other in detecting and
preventing crime and have the right to pursue fugitive criminals into the territory
of a neighbouring Schengen state; there is also a faster extradition system and
mutual recognition of criminal judgments.
o The establishment and development of the Schengen Information System (SIS):

 The Schengen Information System (SIS) is a highly efficient large-scale

information system that supports external border control and law
enforcement cooperation in the Schengen States.
https://ec.europa.eu/home-affairs/what-we-do/policies/borders-and-
visas/schengen-information-system_en

There are currently 26 full Schengen members:

 22 EU Member States plus Norway, Iceland, Switzerland and Liechtenstein (which have
associate status).
 Ireland and the United Kingdom are not parties to the Convention but can ‘opt in’ to
selected parts of the Schengen body of law.
 Denmark, while part of Schengen, enjoys an opt-out for any new justice and home
affairs measures, including on Schengen, although it is bound by certain measures
under the common visa policy.
 Bulgaria, Romania and Cyprus are due to join, though there are delays for differing
reasons.
 Croatia began the application process to accede to the Schengen area on 1 July 2015.

Single market for capital

Single market for capital is the elimination of capital controls. Capital controls of various kinds
are prohibited, including limits on buying currency, limits on buying company shares or
financial assets, or government approval requirements for foreign investment.

There are many parts that are not be harmonize.

Movement of capital, law of capital, law of investment, so capital allocation, at in the end law
of raising money. Put into two ways: U citizens means open bank account abroad, put your
money wherever you want, buy shares (an investment). For you is an investment, at the end
for the other side it is funding. So this are the two side, investor and funds. There is something
relevant because it is a matter of people have money, that want a return for this they invest,
and after there is people so interesting in that money.

Single market of capital tries to avoid restriction to that to let make no legal impediments to
me to give money.

The aim of liberalisation is to enable integrated, open, and efficient European financial
markets.

For European citizens, free movement of capital means the ability to carry out many
transactions, such as

 opening bank accounts abroad

 buying shares in non-domestic companies
 investing where the best return is
 purchasing real estate in another country

For companies, it means being able to

 invest in, and own, other European companies

 raise money where it is cheapest

When we say there is free movement for capital it does not need to mean a cross-
border flow of capital, regulatory concerns that incentive to invest.

Why it is true there is no capital controls? No nationality discrimination that prevents

me for investment or funding? Because we saw still there is not still a cross-border
flow of capital.

For this it exists capital market union. There are still barriers to the movement of
capital (market-based funding versus bank-based funding)

The capital markets union aims to get money, investment and savings, flowinga cross
the EU so that it can benefit consumers, investors and companies. It is part of the
Juncker Commission’s ambition to sustain growth in Europe. The Capital Markets
Union aims to break down barriers that block cross-border investment in the EU and
make it easier for companies and infrastructure projects to get the finance they need,
regardless of where they are located. It also sets out to foster sustainable finance by
directing investment to environmentally friendly projects.

Why capital markets union matters? More integrated financial markets create a
cushion to absorb shocks and allow risk to be shared by private actions across EU
borders, making the Economic and Monetary Union stronger and more resilient. This,
in turn, can create an incentive for market participants to use the Europe, therefore
reinforcing its international role. The capital markets union is also an important single
market project. By diversifying sources of finance for EU’s business, it can support
investment in innovation and technological developments, thereby promoting the EU’s
global competitiveness.
What are the current issues?

Banking funding reliable. Capital market dependence in EU. the goal is make the
economy not reliable a lot on banks. As in euro crisis it was shown it is worst. Better
invest through capital markets.

Why single market is not enough, and we need a capital market union? Important
question

Measures are being put forward to make capital markets more attractive for retail
investors

Europe has one of the highest individual savings rates in the world. However, the level
of retail investor participation in capital markets remains very low compared to other
economies.

To increase this flow of capital among members states is creates the capital market
union.

Measures to facilitate capital market integration: E.g. Measures to close the stark
divergence between national insolvency regimes is a long-standing structural barrier to
cross-border investment.

Since most actions of capital market union have been already applied, it has been a
second effort for the EU in order to push and go deeper to eliminate, to facilitate to
get funded, in order to facilitate retailed to get more funding, and to eliminate this
market fragmentation nowadays exist. Still actions and legislation are working on.

We have talk about capital movement and capital controls, and capital market union
as not just for eliminate the restriction for capital movements, to more regulatory
market fragmentation, to avoid this cross-border funding and cross-border investment.
And payments, restriction on payments across- borders and SEPA.

Regarding single market for capital, there is the framework of EU SEPA that is about

Single market overall  horizontal policies, policies or competences that are at the EU
level that have to be taken to Single market.
EU SEPA (Single euro payments area)

It is more about the movement of money. By definition, market fragmentation, we

have different payments system or payments structure, it has a regulatory and
technical component in which at the end we have kind of 27 payments frameworks in
the EU, and we don’t have a unique payment framework. So, the consequences of that
are: problems in card payments

SEPA was established in last 2010. For example, in 2000 I wanted to pay at
Netherlands, and I can’t, my card would not be accepted. I had to exchange money or
if I was living in that country open an account in order to pay.

Three kind of schemes around Europe that creates restrictions or additional costs:

- Credit transfers: pay between banks

- Direct debit payment
- Card payment

So, through SEPA eliminate that barriers of extra charges.

The single euro payments area (SEPA) harmonises the way cashless euro payments are
made across Europe. It allows European consumers, businesses and public
administrations to make and receive the following types of transactions under the
same basic conditions

 credit transfers
 direct debit payments
 card payments

This makes all cross-border electronic payments in euro as easy as domestic payments.

SEPA covers the whole of the EU. It also applies to payments in euros in other
European countries: Andorra, Iceland, Norway, Switzerland, Liechtenstein, Monaco,
San Marino and Vatican City State.

The advantages of a single euro payments area include

 a single system for both domestic and cross-border bank transfers

 allowing cross-border transactions by direct debit, that is to charge directly an
account in one country for services provided in another country
 allowing people working or studying in another SEPA country to use an existing
account in their home country to receive their salary or pay bills in the new
country
 ensuring cheaper, safer and faster cross-border payments and more
transparent pricing thanks to the single set of payment schemes and standards
EU competition law

Competition law has been at national level. Competition rules and authorities is a
package of rules, competences authorities, ensure equal conditions for business.
Supervising rules that are fulfill. Ensure fair and equal conditions for business while
leaving space for innovation. Prevent that there are actions taking by companies that
with the direct goal or aware doing that, thing to avoid any action that are
anticompetitive. State aid, member states protect their industries, help artificially
some companies.

The EU has strict rules protecting free competition. Under these rules, certain
practices are prohibited.

If you infringe the EU's competition rules, you could end up being fined as much
as 10% of your annual worldwide turnover. In some EU countries individual
managers of offending firms may face serious penalties, including prison.

EU competition rules apply directly in all EU countries - the courts in your country will
uphold them. These rules apply not only to businesses but to all organisations
engaged in economic activity (such as trade associations, industry groupings, etc).

When violate competition law is known as illegal contacts and agreements, which are
named cartels. They are forbidden because they restrict competition. They can take
many forms and need not be officially approved by the companies involved. The most
common examples of these practices are:

 Price fixing
 Market sharing
 Agreement on customer allocation
 Agreement on production limitation
 Distribution agreements between suppliers and re-sellers where, for example,
the price charged to customers is imposed by the supplier

All agreements and exchanges of information between you and your competitors that
reduce your strategic uncertainty in the market (around your production costs,
turnover, capacity, marketing plans, etc.) can be seen as anti-competitive.

Related to this is the abuse of a dominant position

If your company has a large market share, it holds a dominant position and must take
particular care not to:

 charge unreasonably high prices which would exploit customers

 charge unrealistically low prices which may drive competitors out of the
market
  discriminate between customers
 force certain trading conditions on your business partners

It gets trickier because the moment you have a very big dominant position, many
cases that have arrive to a position that is very difficult to be another company to
compete. For example, Google. Google was investigated by the EU Commission.
Also, example of Amazon. If me as a company, the other way I can sell is in amazon
marketplace, I am pretty sure anticompetitive trust, as I can sell products in other
market places. Prove that the actions taking by Amazon is not just a better product
also not making sellers out of the market. Not because of the product they are
selling, the problem is that amazon has the structure for showing you the table
then you sell it.

SINGLE MARKET FOR GOODS

Free movement of goods

If a want to start producing my toys at home and sell them to my neighbourhood can I
start selling right away? Do I need to follow rules? Any producer/manufacturer that
wants to produce a good need to follow certain rules and certain standards in terms of
safety, environment…

Type of regulations

https://op.europa.eu/en/publication-detail/-/publication/a5396a42-cbc8-4cd9-
8b12-b769140091cd

Intra Trade (Country A):

® A certain good in country A is regulated to make sure they comply with certain
standards/preference of its population (safety, health, environmental
standards, consumer protection, etc.)
® This regulation will depend on the specific standards of Country A population.
® Depending on the good, the scope of legislation will vary (weigh, composition,
presentation, labelling, type approval…) https://ec.europa.eu/growth/single-
market/ce-marking/manufacturers_en

® How can authorities check if the merchants are complying with the regulations?
o Producers will need to have a third-party certification, or self-
certification
o Merchants are subjects to random controls / inspection

In general, for a member state, the more regulation, safety implies higher costs
associated. As a society we need to define a standardized level of regulations.
A producer sells toys to a retailer, then, the responsibility to comply on the product
standard legislation is for the producer and also for the retailer that wants to sell the
products to the public.

If a product does not comply the standard legislation, the legal responsibility falls into
both the producer and the retailer.

Cross-border trade (Country A and Country B):

® Country A has some standards

® Country B has higher standards

® If Producer in Country A wants to sell also in Country B, it will need to make the
product modifications necessary for complying with the standards/legislation of
country B, which implies higher costs in terms of:
o Information about the legislation you need to comply with (potentially
in a different language)
o New product line (i.e., a product with different characteristics)
o Additional certifications from Country B third-party certification

® All these costly barriers (the so-called “regulatory barriers”) increase

proportionally the moment you want to expand to many countries.

This disincentivizes my cross-border trade because I need all the information about the
legislation in country B that I need to comply. Once I know the legislation, I need to
create a new product line with different characteristics due to different legislation and
I also need to certify that my product is complying the regulations in Country B.

® How do authorities of country B check if the product complies with Country B

legislation?
o Through regulatory controls at the border.
o This, in turn, increases costs, especially in terms of time

If we want to increase intra EU trade, we need to eliminate these cross-border barriers

which is in fact the free movement of goods.

European Union – Single Market for Goods

GOAL: Reduce tariff and non-tariff (regulatory) barriers to trade between EU countries.

How the EU is able to reduce these regulatory barriers? Through mutual recognition,
but what it is more important, through harmonization. The moment we have different
legislations, we have harmonized in order to have the same minimum standard
requirements to produce goods. So, at the EU level, there has been created an
institutional framework for making these harmonized legislations for goods.

Oversimplification: We have unified our product legislation (“harmonization”), so we

have the same standards on the production of the goods. This would imply that:

® We do not need to comply with different legislations depending on the country

we want to sell; so, every manufacturer can sell their products across the EU.
® We do not need to certify out goods with the certification authority of each
country we want to sell (e.g., a Spanish Certification Authority is recognized by
other countries)
® There is no need for regulatory controls at the border anymore.

Reality: Unfortunately, it is not true that every good produced and marketed in one EU
member can be automatically sold in a different country. And this is because we do not
actually have “exactly” the same legislation due to the evolution of the EU over the
years.

Remember that regulations are the ones directly incorporated straight away in each
national legislation, whereas a directive set a goal and in order to reach it, they adopt
a minimum requirement.

For some products, we have “harmonized” our legislation through the adoption of EU
regulations (the so-called “old approach”). This means that we have exactly the same
production standards (e.g., food, medical, chemicals, transport).

® The problem of this old approach. Imagine one of the scenarios where:

a) The population of a member state accepts lower standards for the

production of certain goods.
So, I am a producer in country A which has lower standards than Country B
and I produce goods at a cheaper price. What happens if there is an EU
legislation that makes a raise in standards? The cost will be higher.

b) And the manufacturer is not willing to sell abroad.

If this is the case, the old-approach regulations would force the manufacturer
to comply with some standards that would make their product more expensive,
which would also impact the consumers of that MS.

® As the EU grew, the divergence on the MS preferences / standards for the

production of products increased, so agreeing on a single product legislation
was harder and harder. That is why the so-called “new approach” directives
were introduced (Directives that require CE Marketing). This means that, for
many products:
o Member States need to transpose the directives into their national legal
framework by setting up national legislation that standardizing a
minimum base.
o But there is room for MS to require higher standards for the goods to be
sold in the country.

These new approach directives need to be transposed into national legislation

which allows a Member State that have higher standards they can set up their
own legislation in order to have higher standards. So, we can say that these
directives harmonize the minimum which allow each Member State to set their
own legislation.

Since producing the good according the legislation of one MS does not give
product automatic recognition in other MS; manufacturers have two options:

1) Producing the goods with the goal of selling specifically in a MS:

a. Follow the national legislation of the MS, which is a transposition of
the directive (include the directive essential requirements) + higher
requirements if applicable.
b. Follow the conformity assessment and the certification by the
authorities determined by that MS (the EU created “Contact Points
to facilitate the information).

2) Producing the goods so they can be sold in any market:

a. Comply with the Directive essential requirements
b. Comply with the (voluntarily) technical specifications contained in
the so-called European Standards (developed by European
Standardization Organizations).
c. Carry out conformity assessment with the so-called NANDO
certifications bodies, which allow them to place their products
anywhere in the EU.

If you comply these three standards, you would be able to sell over the
European Union.

European Standards

National Legislation Country B

National Legislation Country A

Directive Minimum
 ® This framework, while “complex” has allowed for the elimination of regulatory
controls at the border, but it still requires the existence of random controls in
the merchant.
o Then, what matters is the concept of legal responsibility of both, the
manufacturer and the seller. That is why the seller is the first interested
in making sure that the product is selling complies with the national
legislation.

https://ec.europa.eu/growth/single-market/ce-marking/manufacturers_en

TOPIC 4: ECONOMIC AND MONETARY UNION

General framework

 Monetary Policy

o Single Monetary Policy (Euro Area)

o National Monetary Policies (Non-Euro Area MS)

 Fiscal Policy (Budget)

o EU Budget (EU level)

o National Budgets
o National Taxations systems (National Level)
o National Issuance of Public Debt (Public Bonds)

 Stability and Growth Pact (Rules that put limits on Public Debt/Deficit)
 European Stability Mechanism

 Economic Policy

o EU Policies (EU level)

o Structural Economic Policies, e.g. Pesions, defense, etc. (National Level)
  European Semester: Coordination at the EU level

 Banking Regulation, Supervision and Resolution

o Single Rulebook (EU level)

o Banking Union (Euro Area level)

Regime which is one of the different levels of integration. Integrate economically, beyond
trade, let’s go into other areas. And it is not usually the case, go further integration between
different states. It was said in Maastricht Treaty. Economic and monetary union was created,
main kind of economic policy is kind monetary policy. Not every member state has adopted
the euro, this means that each member state is not part of economic and monetary union? No,
every member state form part, but some members have not applied the euro. All member
states in the end are at the same level at economic and monetary union. Not all of them are at
the same situation in terms of having criteria to fully join all the policies regarding monetary
unit. Some states are full integrated other not integrated at these policies.

At the EU level, what is at the economic and monetary union? We are going to study two axes:

- which has to be followed by all member states and which from euro member states.
- In terms of policies, which one have still at the national level and which at EU level

Monetary policy basically it is about policy taken carried out by Central banks, which is a
matter of deciding how much money is in the economy. Central banks through different
monetary policy actions they have the possibility to influence and impact the amount of
money that is in the market. Central banks authorities have the possibility to through
conventional monetary policy actions as interest rate, they can influence. Example, central
bank purchasing assets for public administrations.

What part of this monetary policy is done at EU level and which at national level? It implies for
all EU member states or only to euro states?

It is important to distinguish monetary policy from economic policy. d

Monetary policy (only for euro area member states) applies only to euro area members states
and euro member states at monetary policy it is at the EU level. They have an EU institution.
For all the other parts monetary policy is at national level. In this case, they also have a single
currency, but it is not a must. Single monetary policy doesn’t imply single currency.

Economic policy, policies more related investment policies, infrastructure… most of typical
economic policies are still kind from social protection, defense, and that has an implication in
budget. There are European Union policies for all member states and second national policies.

Monetary and economic policy doesn’t enter at the economic and monetary union, but it
enters the Coordination at the EU level, which is for all EU member states.

In terms of fiscal policy, we have the EU budget, to finance these policies. For the national
policies we have the national budgets, what means at national budgets we have national
taxations systems, national’s issuance of public debt. At the EU level we have the Stability and
Growth pact (rules that affect different euro member states and not euro member states),
which are rules limiting the national level of taxation and expenditure. And also, there is the
European Stability mechanism (only for euro are member states) it is a support when members
states have stress to funding or budget.

And also, we have finance and banking regulation which is the Banking union. It is a matter of
framework, which is the supervision of banks that is at the EU level.

TOPIC 4: ECONOMIC AND MONETARY UNION

General information

Monetary policy

Do we have a single monetary policy in the EU? We do not, since there are some countries that
do not have the euro. Having a monetary policy is very linked to having an own currency.

® Single Monetary Policy (Euro Area Level)

® National Monetary Policies (Non-Euro Area MS)
o For instance, Denmark and the UK. They have their own currency and their
own central banks dictating their own monetary policy, setting up interest
rates…

Denmark and the UK were the two first countries that opted out in terms of having a single
common monetary policy.

The moment you want to get into the monetary integration level, there would be a lot of
inefficiencies (problems or challenges) if you do not also have a Single Fiscal Policy. It is not
possible to have a Monetary Union without a Fiscal Union. In addition, a Fiscal Union, also
implies a much more integrated Economic Policy.

Fiscal Policy (Budget)

® EU budget (EU level). Linked to EU policies which means that there is not a EU taxation
(there are NOT EU taxes). The EU budget was introduced before the Economic and
Monetary Union.

® National Budgets linked to the different policies

® National Taxations systems (National Level)

® National Issuance of Public Debt (Public Bonds). National instrument: the moment the
taxes of a member state are not enough for funding their expenses, they can borrow
money through issuing their own public debt at a national level.
o At the EU level, we have the Stability and Growth Pact (Rules that put limits on
Public Debt/Deficit).
 This was introduced by the Economic and Monetary Union.
  The Stability and Growth Pact puts some limits at the national budgets
and national taxation.
 The general rules of the Stability and Growth Pact are for all EU
member states which affect both member states of the Euro area and
member states of the non-Euro Area. However, there are some
specific rules that only affect to the Euro Area Member States.

o European Stability Mechanism. It was introduced three years ago, and it only
affects to the Euro Area Member States.
 It is crisis resolution mechanism that gives money to member states
when they are in trouble or in a crisis situation.

Economic Policy

® EU Policies (EU level)

® Structural Economic Policies, e.g., Pensions, defense, etc. (National level)
o At the EU level, we have the European Semester: Coordination at the EU level
 Introduced by the Economic and Monetary Union
 It is a mechanism or a framework that coordinates the national
structural policies.

Banking Regulation, Supervision and Resolution

o Single Rulebook (EU level). In order to define the resolution for central banks
when they are in trouble.
o Banking Union (Euro Area level). Authorities that supervise banks and that are
in charge of the resolution of banks.

ECONOMIC AND MONETARY UNION

Economic and Monetary Union

Economic and Monetary Union (EMU) represents a major step in the integration of EU
economies.

Whilst all 28 EU Member State take part in the economic union, some countries have taken
integration further and adopted the euro. Together, these countries make up the euro area.

Coordination of economic policymaking between Member States

Coordination of fiscal policies, notably through limits on government debt and deficit (Stability
and Growth Pact)

An independent monetary policy run by the European Central Bank (ECB) > Price Stability 

The single currency and the Euro Area

Single rules and supervision of financial institutions within the Euro Area (Banking Union).
National governments control over economic policy areas. These include:

- Fiscal policy that concerns government budgets

- Tax policies that determine how income is raised
- Structural policies that determine pension systems, labour- and capital-market
regulations.

Economic governance under EMU

Within EMU there is no single institution responsible for economic policy. Instead, the
responsibility is divided between Member States and the EU institutions. The main actors in
EMU are:

- The European Council  sets the main policy orientations

- The Council of the EU (the “Council”)  Coordinates EU economic policymaking and

decides whether a Member State may adopt the euro

- The “Eurogroup”  Coordinates policies of common interest for the euro-area

Member States.

- The Member States  set their national budgets within agreed limits for deficit and
debt, and determine their own structural policies involving labour, pensions and
capital markets.

- The European Commission  monitors performance and compliance

- The European Central Bank (ECB)  Sets monetary policy, with price stability as the
primary objective and act as central supervisor or financial institutions in the euro
area.

- The European Parliament  Shares the job of formulating legislation with the Council,
and subjects economic governance to democratic scrutiny in particular through the
new Economic Dialogue.

Stability and Growth Pact

The Stability and Growth Pact (SGP) is a set of rules designed to ensure that countries in the
European Union pursue sound public finances and coordinate their fiscal policies.

It consists of two main building blocks: the preventive arm and the corrective arm:

- The corrective arm of SGP governs the Excessive Deficit Procedure (EDP).
- The EDP is triggered by:
o The deficit breaching the 3% of the GDP threshold or
o The debt being above 60% of GDP and not diminishing at a sufficiently rapid
pace.
Under the Maastricht rules, each member country was supposed to take care of its own
sovereign debt or banking problems.

The Stability and Growth Pact (SGP) was the only common instrument that existed besides the
ECB, for the surveillance (and correction) of public deficits by the European Commission.

After the start of the Euro Crisis, Euro Area countries aimed to reinforce of the surveillance of
public deficits and debts by the European Commission, with the two-pack and six-pack
measures, and the Fiscal Compact of the intergovernmental Treaty on Stability, Coordination
and Governance.
- These measures aimed to reinforce the monitoring and surveillance of economic
policies and to improve the enforcement of EU fiscal rules in euro-area countries.

Banking Union

Deeper integration of the euro area banking system

As the financial crisis evolved into the euro area debt crisis it became clear that deeper
integration of the banking system was needed for the euro area countries, which particularly
interdependent. That’s why, on the basis of the European Commission roadmap for the
creation of the banking union, the EU institutions agreed to establish a single supervisory
mechanism (SSM) and a single resolution mechanism (SRM) for banks. The banking union
applies to countries in the euro area. Non-euro area countries can also join.

As a further step to a fully-fledged banking union the Commission put forward a proposal for a
European deposit insurance scheme (EDIS) in November 2015. This would provide stronger
and more uniform insurance cover for all retail depositors in the banking union.

3 pillars to break the Sovereign-Bank link:

- Single Supervision Mechanism

ECB + National Authorities

- Single Resolution Mechanism

Single Resolution Board + National Authorities
Single Resolution Fund

- European Deposit Insurance Scheme (EDIS)

European Stability Mechanism (ESM)

The ESM’s mission is to provide financial assistance to euro area countries experiencing or
threatened by severe financing problems.

This assistance is granted only if it is proven necessary to safeguard the financial stability of the
euro area as a whole and of ESM Members.
For this, The ESM counts on several instruments:

- Loans within a macroeconomic adjustment programme

- Loans for indirect bank recapitalization
- Primary market purchases
- Secondary market purchases
- Secondary market purchases
- Precautionary credit line

What is the purpose of ESM loans? The main purpose is to provide financing to an ESM
Member that has lost market access, i.e., it cannot refinance its debt by issuing bonds on the
market due to the excessively high interest that it would have to pay.

The ESM takes a cash-for-reforms approach. ESM Members receive loans in exchange for
economic reforms, called “conditionality”. A Memorandum of Understanding (MoU) details
the reforms and adjustments to be carried out.

At the end of 2015, the interest rate charged by the ESM was below 1% for all beneficiary
countries. As explained, this rate fluctuates according to market conditions.

As the financial crisis evolved into the euro

area debt crisis it became clear that deeper
integration of the banking system was
needed for the euro area countries, which
are particularly interdependent. That’s
why, on the basis of the European
Commission roadmap for the creation of
the banking union, the EU institutions
agreed to establish a single supervisory
mechanism (SSM) and a single resolution
mechanism (SRM) for banks. The banking
union applies to countries in the euro area.
Non-euro area countries can also join.
MONETARY POLICY IN THE EU

- Eurosystem
- Conventional Monetary Policy
- Unconventional Monetary Policy

Different Monetary Policies in the EU

o Euro Area Member States: Single Monetary Policy conducted by the Eurosystem

o Non-Euro Area Member States: Each non-euro area MS conduct its own monetary
policy through their National Central Banks.

Do we have a specific Spanish Monetary Policy or is it the European Central banks that dictates
the Monetary Policy? Both, el banco de España and ECB. Monetary Policy decisions are taken
at the EU level (ECB) and the national bank has different tasks, for instance supervision of
banks.

Eurosystem

The Eurosystem, which comprises the European Central Bank (ECB) and the national central
banks of the Member States whose currency is the euro, is the monetary authority of the euro
area. The basic tasks carried out through the Eurosystem are:

- The definition of foreign exchange operations

- The holding and management of the official foreign reserves of the EU Member States
- The promotion of the smooth operation of payment systems

Monetary Policy Objective

The main objective of the Eurosystem is to maintain price stability: safeguarding the value of
the euro.

® Maintaining inflation below 2%.

Price stability: avoiding inflation

ECB Monetary Policy Measures

 Conventional Monetary Policy  In normal times the central bank sets the level of the
key interest rates and manages the liquidity conditions in money markets and pursues its
primary objective of maintaining price stability over the medium term.

 Unconventional Monetary Policy  In abnormal times conventional monetary policy tools

may prove insufficient to achieve the central bank’s objective, and it is involved in direct
lending to the private sector or the government, nor in outright purchases of government
bonds, corporate debt or other types of debt instrument.
Conventional Monetary Policy

THE TRANSMISSION MECHANISM OF MONETARY POLICY

® The (long) chain of cause and effect linking monetary policy decisions with the price
level starts with a change in the official interest rates set by the central bank on its
own operations.

® In these operations, the central bank typically provides funds to banks. Since changing
the interest rates, the central bank affects the funding cost of liquidity for banks, banks
need to pass on these costs when lending to their customers (“interest rate channel”)

Unconventional Monetary Policy

First, the economic shock is so powerful that the nominal interest rate needs to be brought
down to zero. At that level, cutting policy rates further is not possible, so any additional
monetary stimulus can be undertaken only by resorting to unconventional monetary policy
tools.

® Direct quantitative Easing

® Direct Credit Easing
® Indirect (o Endogenous) Quantitative/Credit Easing

Budget

A budget is composed by revenues and expenses and it is annual based.

- Revenues: Taxes
- Expenses: Education, Health system, Pensions…

What happens when the revenue equals the expenses? When revenue equals expense the
budget is balanced, but do you think it usually matches? No.

® REVENUE = EXPENSES = BALANCED BUDGET

What happens if the revenue is lower than the expenses for an specific year? Then, we identify
this as deficit.

® REVENUE < EXPENSES = DEFICIT

What do Member States usually do in order to fill this deficit? The finance this deficit through
debt. And how does a Member State get indebted? Through issuing debt, for instance, issuing
bonds.

At the EU level, they are not going to tell you how your revenues are going to be or the
expenses that you will have. Instead, the role at the EU level is to trigger Excessive Deficit
Procedure (EDP) when:

- The deficit breaching the 3% of the GDP threshold or

- The debt being above 60% of GDP and not diminishing at a sufficiently rapid pace.

Stability and Growth Pact Goal: to ensure the health of public finances
Risk vs Return of Public Debt/Bonds

The return is the interest revenue that I am going to get. Usually, the higher the risk the higher
the return. The reason why traditionally is been thought that the risk is low and that the state
is always going to pay you back is because of the National Central Banks. So, the actual risk is
low since you will get the return in case of any problem by the National Central Banks.

However, the National Central Banks do no longer exist as a tool due to the Economic and
Monetary Union and due to the Fiscal Policy. ???

The ECB, by contrast, does not intervene in these markets since it its main role cannot be only
for one state specific. The ECB possible actions are mainly restricted because they are not at a
national level.

Imagine this situation: A Member State with no monetary policy and an unavailable National
Monetary Bank. Also, a rising public debt, rising deficit, rising unemployment and low
productivity. In addition, a banking system with non-performing loans. So, the general
economic outlook indicates that the risk of default is increasing which means that the return is
also going up.

What happens if the risk and the return increase by so much? You lose access to this market.

The moment you lose the access to the possibility to pay the deficit through public debt, what
happens then?

There are two possibilities:

1) Asking for money to other Member States

In this case, the interest rate set up in the investment should be affordable.
Instead of asking for a high interest rate, they ask for a loan with conditionality.
This means that the Member State in a critical situation needs to make some
 policy changes in order to guarantee that the situation is going to change, and the
debt is going to be lowered.

Here, the European Stability Mechanism (ESM) takes part: Loans within a
macroeconomic adjustment programme

2) Leaving the EURO, coming back to my national monetary policy.

However, this would imply a huge economic impact among all the member states.

PARTIAL EXAM 3

1. While the ECB is the main monetary authority of the Euro Area, the Eurosystem
comprises the ECB and the national central banks (NCBs) of all EU Member States.
FALSE. It is true that the ECB is the main monetary authority of all the EU Member States,
and also that the Eurosystem comprises the ECB and the national central banks (NCBs),
however, Eurosystem is only for the Euro Area Member States.

2. The main goals of the ESM is to control inflation in the Euro Area (below but close to 2
%). However, some non Euro-area Member States (e.g. Denmark) still preserve their own
monetary policy at the national level.
FALSE. The main goal of the ESM is not to control inflation, this is the main goal of
Eurosystem which is to control inflation in the Euro Area (below but close to 2%).
However, it is true that some non-Euro Area Member States, for instance Denmark, still
preserve their own monetary policy at the national level, taking into account that
Eurosystem affects only the Member States whose currency is the euro.

3. In the context of the Free Movement of People, the Schengen Agreement has been key
to the elimination of barriers between Member States - specially regarding working and
residence permits
FALSE: Schengen is basically about the elimination of identity checks on the borders
therefore there are no identity controls in the border within the Schengen Area.
However, the overall general regulation of Free Movement of People does not apply in
the Schengen Agreement since the Free Movement of People applies also to the
resident permits and Schengen Agreement does not eliminate those barriers.

4. Thanks to the Capital Markets Union, all restrictions on capital movements and
payments across borders were eliminated.
FALSE. All restrictions on capital movement and payments across borders have been
eliminated due to Free Movement of Capital after the Treaty of Maastricht. In fact, the
Capital market union is an EU initiative which the main goal is to further integrate the
capital markets of the EU Member States.

5. After the Euro-area crisis, the competence of Member States to issue its own sovereign
debt and to supervise their banks was transferred to the Euro Area level.
 FALSE: it is true that the competence to supervise their banks was transferred to the Euro
Area level, however, the competence of Member States to issue its own sovereign debt
was not transferred to the Euro Area level.

6. The creation of the Economic and Monetary Union...

- Led to the transfer of monetary and fiscal policy to the Euro Area level
- Was the basis for the creation of the EU budget
- Took place with the signature of the Treaty of Rome
- None of the above

7. The ECB coordinates

- The monetary policy of ALL the EU Member States
- The monetary policy of the Euro Area Member States ONLY
- The structural economic policies of the Euro Area Member States
- None of the above

8. The EU budget
- Is funded through European taxes
- Largest spending share is on administration (i.e. EU staff salaries and pensions, schools
for children of staff members, buildings, etc.)
- ...was created with the introduction of the Economic and Monetary Union
- None of the above

9. The ECB
- ...has the responsibility to provide fiscal support to Member States when these are
under financial pressure
- ...as one of its ESM-related responsibilities, has as a primary objective: the maintain
price stability in the Euro Area
- ...and the Eurosystem was created with the Treaty of Maastricht, which led to the
abolishment of Euro Area central banks.
- None of the above

10. Thanks to the Single Market for Goods...

- ...there are no custom controls on border between Member States
- ...there are no regulatory controls on border between Member States
- ...all regulatory controls have disappeared
- None of the above