rjea vol6 no4 dec2006

RomanianJournalof European AffairsVol. 6, No. 4, December 2006

EUROPEAN INSTITUTE OF ROMANIA

DirectorNicolae Idu

Editor-in-ChiefOana Mocanu

Associate EditorsElena BotezatuGilda Truicã

Editorial Board

Farhad Analoui – Professor in International Development and Human ResourceManagement, the Center for International Development, University of Bradford, UK

Daniel Dãianu – Professor, Academy of Economic Studies, Bucharest, formerMinister of Finance

Eugen Dijmãrescu – Vice Governor of the National Bank of Romania

Nicolae Idu – Director General of the European Institute of Romania

Andras Inotai – Professor, Director of the Institute for World Economics, Budapest

Mugur Isãrescu – Governor of the National Bank of Romania

Alan Mayhew – Jean Monnet Professor, Sussex European Institute

Costea Munteanu – Professor, Academy of Economic Studies, Bucharest

Jacques Pelkmans – Jan Tinbergen Chair, Director of the Department of EuropeanEconomic Studies, College of Europe – Bruges

Andrei Ple∫u – Rector of New Europe College, Bucharest, former Minister ofForeign Affairs, former Minister of Culture

Cristian Popa – Vice Governor of the National Bank of Romania

Tudorel Postolache – Member of the Romanian Academy, Ambassador of Romaniato the Grand Duchy of Luxembourg

Helen Wallace – Professor, Director of the Robert Schuman Centre for AdvancedStudies, European University Institute, Florence

CONTENTS

SOCIAL POLICIES AND STRUCTURAL REFORMS IN EUROPE Ferran Brunet CidMar López Rancaño 5

LABOUR MARKET AND EU ENLARGEMENT: IS THERE A REAL THREAT FOR EU – 15?Florin Bonciu 36

THE EURO ZONE EASTERN ENLARGEMENT: CHALLENGES TO CURRENT MEMBERS AND THE ECBMihai Sebea 41

ROMANIA’S WAY TOWARDS COMPETITIVENESSAndreea Vass 53

EU CHARTER OF FUNDAMENTAL RIGHTS: WHAT IS THE LEGAL IMPACT OF BEING CHARTERED?Rufat R. Babayev 63

EUROPEAN DIMENSION OF NATIONAL PARLIAMENTS IN THE EUROPEAN UNION Endre-Sandor Erdõdi 76

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SOCIAL POLICIES AND STRUCTURAL REFORMS IN EUROPE

FERRAN BRUNET CID*MAR LÎPEZ RANCAÑO

Abstract**. This paper considers the social and structural policies in contemporaryEurope. The presentation is organized in four sections. First, we discuss the emergingEurope, the new unity based on democracy and the market economy, the specialEuropean Union formula, and comparisons with America.

Second, we analyze the dynamics of the European economy, the convergenceprocess, the gaps between United States in productivity and standard of living,competitiveness issues, and the emergence of a new European economy and newEuropean policy mix.

Third, we consider European social conditions, the stationary and aging population,Europe’s low employment rate and permanently high unemployment. European economicgrowth could draw on two major sources: the labor reserves and reforms in factor, productand service markets. In a monetary union, advanced industrial relations should promotelabor mobility and salary flexibility. The social security systems permit the redistribution andcohesion which defines the European model.

Fourth, for the new Europe, the structural reform strategy is the way forward for thechallenge of European economic policy and social policy: more and better jobs thanksto sustainable growth in a dynamic and competitive knowledge-based economy,favoring greater social cohesion.

Keywords: Europe, Economic Policy, Social Policy, Structural Reforms,European Integration.

JEL F15, I30, J21, O52.

ROMANIAN JOURNAL OF EUROPEAN AFFAIRS VOL. 6, NO. 4 2006

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I. EUROPE AND THE EMERGINGEUROPEAN UNION

What is Europe? What is it to beEuropean? Finding answers to thesequestions is not so simple. Whatroute should Europe follow? What isthe best approach for the West:modernity and/or post-modernity?

A. The emerging EuropeEurope is at a sweet moment of its

contemporary history. On May 1st 2004,

ten new countries joined the EuropeanUnion. The division of Europe into twoopposing political and economicsystems is now a thing of the past. TheEuropean integration process forging anew political and economic Union hasbeen a major success, due to the‘miracle’ of economic growth during thesecond half of the 20th century and,then, the quiet death of the Soviet Unionand real socialism. For Europeans theEuropean Union (EU) has emerged as

* Ferran Brunet Cid is Professor at the Faculty of Economics, Universitat Autònoma de Barcelona,University Campus, Building B, E-08193 Bellaterra, Spain <[email protected]>.

Mar López Rancaño is Professor at Faculty of Economics, Universidad Nacional de Educación aDistancia, Vapor Universitari, Colom 114, E-08221 Terrassa, Spain <[email protected]>.** This paper was presented to the Fifteenth International Conference of the U. S. Council of EuropeanStudies, Chicago, Il, March 29-April 2, 2006.

the means to maintain freedom andimprove economic and social conditions.

The EU now comprises two types ofcountries: the 15 Western EuropeanMember States (MS) and the ten newCentral and Eastern European MS.These new MS represent 16.2 per centof the overall EU population, 22.8 percent of total EU territory, and 4.6 percent of total EU Gross DomesticProduct (GDP); yet their average GDPper capita is 52.6 per cent of the EU15average. The EU10 have majordevelopment and structural problems.

The EU15 share a long commonhistory –including many great and evenworld wars– and are relatively wellintegrated, though less so in culturaland political terms. Its MS abide by theEU rules –European laws prevailingfrom the MS laws. The Treatyestablishing a Constitution for Europewhich is now being presented forratification by MS codify the Europeanlegal system and underlines the visibilityand effectiveness of European rights.

Europe has largely been a recipientof the output of the United States ofAmerica (USA, US), from US aid in theSecond World War to the Europeandemocracies against Nazi Germany tothe contemporary US corporatepresence, investments, trade flows,technological advances, culture, politics,and news. The global instability ofrecent years has clouded transatlanticrelationships, yet the soft power(Keohane & Nye, 2001, and Nye, 2002)of the US in Europe is solid. Europeancountries share many structures,systems and institutions, while there are

differences to country size, to longseparate histories –perhaps wars, todifferent languages and cultures. Thedifferent MS cultures and institutionsare essentially different combinations ofthe same ingredients.

B. The European Union WayThe EU’s1 development has been

highly successful. It is precisely thissuccess that has led to certainproblems: all the neighboring countriesare knocking at the EU door, keen tobecome MS and acquire the stability,democracy and standard of livingdenied to them for centuries.

The objectives of the EU areaccumulative, from peace to human rights,economic growth and sustainability, a sreflected in the European Constitution.The European unification process ispolitical in its objectives and in its means,but its implementation is first and foremosteconomic: gradualism is a feature of theEU. EU development is guided by anumber of steering principles: nondiscrimination for reasons of nationality,equal treatment for all, transparency,respect for difference, minority culturesand diversity, subsidiarity. (Constitution forEurope, 2004)

The EU functions along the lines ofa confederal institution: the Council ofthe Union comprising State ministers onthe relevant topic, assisted by a directly-elected Parliament (since 1979). TheEuropean Commission proposes andexecutes the common policies andregulations, and the legality of all issupervised and ensured by the Court ofJustice. There is a Court of Auditors, an

FERRAN BRUNET CID & MAR LÎPEZ RANCAÑO

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1 The EU develops from 1950 by six States (France, Germany, Italy, the Netherlands, Belgium, andLuxembourg) that created successively the European Communities and was enlarged by some otherStates (Great Britain, Ireland, Denmark, Greece, Portugal, Spain, Sweden, Finland, and Austria). Itinclude the almost territory of Western Europe. In 2004 eight States of Central and East Europe (CzechRepublic, Estonia, Latvia, Lithuania, Hungary, Poland, Slovenia, Slovakia) and two islands of theMediterranean sea (Cyprus and Malta) adheres to the EU and form the EU25. Bulgaria, Romania,some countries of the former Yugoslavia, as Croatia, and Turkey would enlarge the EU.

Economic and Social Committee, aCommittee of the Regions and theEuropean Central Bank. All thisinstitutional framework reflects the implicitaim of the founding MS to achieveEuropean integration on a federal basis.

The main channel for EU action is theregulation. European law enacted by theCouncil or Commission prevails overindividual MS law, and is direct in effect.Here we can appreciate a democraticdeficit, which will continue to beinsurmountable as long as the EUremains confederal. The EU budget islimited to 1.24 per cent of GDP and thiscauses an administrative deficit: it doesnot have the means to meet itsambitions. European ambitions go farbeyond EU means. Almost half of the EUbudget goes towards funding theCommon Agricultural Policy (which fixesprices) and a third is redistributed underthe Common Regional Policy. Theremaining European policies, such ascompetition, industry, foreign trade, andmonetary policy are also the exclusivecompetence of the EU and generate alarge body of EU-wide bindingregulations. In social issues, in justice andpolicing, and in foreign affairs, individualMS still hold the main powers. Inter-statecoordination is developing slowly.

The nature of the Europeanintegration process (Brunet, 2004) tendsto intensify EU policies. Europeanenlargement reinforces the Commonpolicies, as seen in regional andstructural policies with the first (AtlanticMS), second and third (Mediterraneancountries), and fourth enlargement(Baltic countries). The recent entry ofCentral and Eastern European countriesis in many ways a political enlargement.The institutional arrangements requiredto manage an EU of 25 and more MSare partially determined by theEuropean Constitution. However, acontradiction is beginning to emerge

between enlargement and inten-sification. The number and diversity ofmembers is affecting the integrationprocess. Quantity tends to have abearing on quality.

Now the question is the futurefunctioning of the EU and whether theproposed future enlargements to includenon European and widely diversecountries in terms of economics, c u l t u r e ,language, religion and n a t i o n a l i s tsentiment will accentuate or not thecontradiction between enlargement andintensification. Should such enlargementsoccur, the EU will change its verynature, the federal objective willdisappear, the States will enact theirown laws, and the European dream ofa political federation based on freedomwill vanish in a nightmare of confusedcivilizations. (Garton Ash, 2004).

The EU’s limitations may also be itsassets. Non federal but inter-stateunanimity is frequently required for actionand rarely achieved. Lengthy discussionsoften end in an impasse and lack ofaction. This is welcome when the actionproposed is war. Peace is alwayspreferable to war. But in other cases, animpasse represents a serious problem.(Elazar, 1991, and Calleo, 2001).

C. America vs. Europe: Dreams orRealities, Models & Development

The emergence of a Europe engagedin a process of unification invites us toreread its history, economy, p o l i t i c s ,society, in a half-scientific, half ideologicalbid to define its spirit, its identity, thereality of Europe. Is Europe reality ordream? Is it the last possible utopia orwill it eventually lead to mere confusion?

Excellence is always perceived asbeing obtained from afar: America, utopia,God, … Intellectual rapport betweenAmerica and Europe is perhaps not theoutcome of objective criteria so muchas ideas and feelings, attraction or/and


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repulsion.2 America is always the mirrorof Europe, and occasionally Europemay be the mirror of America. For thisreason, we Europeanists like America.For the Europeans the dream was (andis)… America; for some Americans thedream is (or will be) Europe. For theEuropeanist dream the future of Europeis America or the US, for someAmericans the American dream isEurope or the EU.

In this way America and Europeseem to be in contrast. Which of thetwo dreams is best? The Americandream, the American way of life? Orthe European dream, the Europeansocial model? The American frontier orEuroland? Recently Jeremy Rifkinstates this contraposition (Rifkin, 2004):the European dream excels theAmerican dream. The American dreammay have been excellent; however,Rifkin sustains, Europe now representsall that is best about that dream and itwill spread it to the entire world.

This European dream is welcome;all the more welcome if it is the workof an American analyst (Rifkin). Peoplemay need dreams and ideals if they areto develop.3 Certainly, the EU faces achallenge in shaping a common identity,while the US does not. However, realitycontradicts the dream, although this isof the essence of dreams and reality:being different, even in opposition.

What is Europe and what is aEuropean? Europe must also face thechallenges posed by unity and diversity.

At least 51 independent states occupyterritorial space in the continent ofEurope, a fact which complicates thingsfor the European Security Conference;just as EU25 complicates things for theEuropean Union.4 In Europe we havedoubts and must ask questions such as‘Who are we?’ (Huntington, 2004). InEurope, we have the problem ofknowing exactly what Europe is. Europeis not defined by political frontiers or byterritory, not by a single language,culture or history. Rather what bindEuropean countries are their commonand parallel development and a conver-gence to similar patterns.

D. The Old and the New EuropeThis is a cliché. All Europe is old,

historical; yet all in Europe is new,contemporary. The contradictionbetween Europe as community andEurope as diversity is decreasing dueto convergence. Not only will the futurecommon policies be different, policieschanged before the accession of thenew MS, from the mid 1990’s on, asthe aspirants abandoned their socialistsystems and entered accessionnegotiations with the EU. But Europeanregional policy –the most European‘social’ policy– is no longer what it usedto be, especially in terms of benefits forthe original 15 MS. ‘Europe’, i.e., theEU, today comprises two major groupsof countries: the 15 older MS and the10 new MS.


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2 From philosophy to transatlantic affairs, from Alexis de Tocqueville (1835-1840) to Kagan (2003),Read (2004) and Reid (2004).3 Renewing the historical sentence “We have created Italy, now we need to create the Italian people”,now it’s said: “We have created Europe, now we need to create the European people”. Economicintegration (market, capital) and some social and political measures (free circulation of people, a newadditional European common law and some common institutions), favors this community. Neverthelessthe fragmentation of Europe in languages, cultural expressions, and politic life make this a largeprocess. (Brunet, 2005)4 The differences between the European countries are enormous: Turkey have a GDP per capita of25.4 per cent of medium of the EU15, Luxembourg the 194.6 per cent, Spain the 87.3 per cent,Poland the 42.2 per cent.

Table 1Economic and Social Issues and Problems in the European Union – the original 15 old developed MS and the 10 new developing MS


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These two groups of MS representvery different economic and socialconditions: on the one hand, theproblems of contemporary advancedcapitalism –the most similar to the issuesfacing American society– and on theother, the problems of transition anddeveloping capitalism. The socialconditions of 15 advanced MS generatematurity problems (aging, structuralreforms). The social conditions of the 10transition MS generate problems ofchanging social relations, stark socialdisequilibria and development. Thus, theEU comprises a group of MS with massconsumption and welfare states, and agroup of MS undergoing economicupheaval and social restructuring. In

strategic and political terms, the new MSadopt attitudes which are moretransatlantic in outlook than some of theoriginal EU states.

II. THE DYNAMICS OF THEEUROPEAN ECONOMY

Europe’s catching up on Americanproductivity came to a stop in 1990. Thegap between US and EU standards ofliving is growing due to low Europeanemployment rates. The EU has importantsources of growth, e.g., labor reservesand structural reforms needed to improvecompetitiveness. A new integratedEuropean economy may emerge, moreintegrated and competitive, together with

a new European policy mix, and astable monetary policy.

A. Long Term Dynamics From a long term perspective,

economic development may be repre-sented as the growth of Gross DomesticProduct (GDP) and employment. Thedifference between GDP andemployment, productivity, is a strategic

indicator of development, reflectingcapacity to produce. As shown in figure1, the profiles of Europe and Americacould hardly differ more:

– In America the growth ofemployment explains the growthof GDP.

– In Europe the growth of productivityexplains the growth of GDP.


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Figure 1Trends In American, European, And Japanese Growth:

GDP, Employment, And Productivity, 1960-2005

From this dynamic we can postulatethree shared temporal phases:

a) The ‘miracle’ phase 1960-1975:with annual growth rates surpassing 6per cent.

b) Long-term recession 1975-1990:deindustrialization, some years growth,employment and productivity were innegative figures.

Figure 2

Economic Convergence Process:Catching-Up Between America,

Europe, And Japan, 1950-2005


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c) Recovery phase 1990-2005: withthree sub-phases 1990-1 to 1995, thebuoyant 1996-2000 and then after 2000-1.

To sum up, from high growth rates tolow growth rates, to booming economy tostationary economy. From the indicatorsconsidered, we can establish:

– GDP growth: in general, thegrowth of GDP dropped from levels of6 per cent per year during the 1960’sto 2-3 per cent at present.

– Employment growth: employmentdropped many years. Comparison ofGDP and employment growth (saw andcolumns, respectively) shows thatemployment explains most US growth. Inthe EU however, employment frequentlyfalls whereas in America it grows.

– Productivity growth: considered asthe difference between growth of GDPand growth of employment, productivitygrowth is the cause of the growth ofGDP in the EU. Thus, Europe reducesthe economic gap between itself and theUS by means of high productivity growth,investment and by reducing employment.

We can draw important conclusionsregarding these two economic zones:

– Europe: GDP growth is due togrowth in productivity. EU growths arerelatively stable.

– America: GDP growth is due togrowth in employment. US growth ratesare more unstable, and some indicatorseven show decreases for various years.

B. Convergence and Catching-up inProduction

The consequence of Europe’s greatergrowth is convergence, reduction of thegap. Figure 2 sets out the convergenceprocess. Two indicators are used: GDPper hour worked and GDP per capita.The first expresses productive capacity,the second consumption level.Examination of the economic evolutionof America and Europe permits us todraw many conclusions:

– GDP per worked hour rises from59 per cent in 1950 to 91 per cent in1990. But this convergence inproductivity ends in 1990.

– Comparison of European andAmerican GDP per capita showsstability between 67 and 75 per cent.

– Thus the economic gap betweenEurope and America in productivity felluntil 1990, but the gap in per capitaconsumption levels was maintained.

– Thus the question for the Europeaneconomy is why the gap betweenproductivity and consumption per capita?

– Analyzing the evolution of majorEuropean countries such as Germany,France, Italy, Great Britain and Spain(as in Panel B of figure 2), we find anaccentuation of the trends: economicconvergence is so strong, especially inproductivity, that American levels areeven surpassed,

– Three periods are evident in theeconomic dynamics of all the representedcountries: in 1975, enormous growth andcatching-up; the 1980’s, where per capitaconsumption does not match production,and the 1990’s and after 2000, wherethe major new American growth is incontrast to Europe’s relative slump.

Convergence between the EU and theUS, Europe’s catching-up on America, isnot only in economic performances butalso in economic structures, e.g. incompetition and enterprise law. (W i l e n s k y ,1998) Convergence is also occurring inother areas, society and politics, forinstance. The US and the EU15 haveeconomies based on capitalist and marketstructures, and democratic societies withhigh productivity levels. This permits asystem of economic relations devoted tomass consumption, the welfare state andwell-being.

C. The Gap between Productivityand the Standard of Living

Having examined growth trends inEurope and America, and the catching-up and convergence phenomena, it isnow of interest to analyze differencesbetween productivity and standards ofliving. For this we will draw on theconceptual framework set out in figure 3.As many people are aware, salaries andproductivity in some EU countries are

higher than in the US. (US Bureau ofLabor, 2005) Yet European GDP percapita is a third lower than the US figure.

Certainly, Europeans work fewer hoursper year than Americans, they ‘preferleisure’ (Gordon, 2002 & 2004). However,a closer look reveals that Europe’s activityrate is 10% lower, the employment rate15% lower, and the female employmentrate 20% lower (OECD, 2003a). Figure 3shows a double process:

– From productivity per employee tostandard of living, income drops 47 percent in America and 51 per cent inEurope.

– Europe is lagging behind:productivity is 22% lower and standardof living 28% lower.

Other aspects can also bedetermined from this diagram. Europeansalaries are higher than in the US (+5.8 %) and productivity per employee islower in Europe (-22 %). Healthspending is higher in the US (althoughpublic funding of this spending islower), education spending is similarand spending on pensions lower. Theresult is that social spending in the USamounts to 33% of GDP and to 34.1%in the UE. Consumption of electricityand materials is much higher in the USthan in Europe, as is capitalization.Pollution and waste is also higher inthe US. The European employment rate(60.2 % of the population between 15and 64 years of age) is much lowerthan that of the US (70.1 %).

D. Low European EmploymentRates and European Competitiveness

The lower European employmentrate is the origin of the gap betweenthe productivity of the Europeaneconomy (similar to that of the US) andEurope’s standard of living (a thirdlower): due to a lower employment rate,European production is 10 per cent lessthan the US figure, and the proportionreceiving a pension is 10 per centhigher (OECD, 2004a) (see figure 3).


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The gap between productivity (GDPper worked hour) and the standard ofliving (GDP per capita) is the priceEuropeans pay for the Europeanwelfare state, which is generous withthe non active. And perhaps it is alsothe price paid for an economic policywhich is not sufficiently efficient tocreate jobs, favor growth andaccumulation and investment of capital.

These are average values. Analysisof the European employment rate couldalso be taken to the level of age,gender and individual country. We findthat the lower European employmentrate tends to be concentrated in certaingroupings and areas:

– In younger and older age groups.This is one of the more evidentdifferences in employment patternsbetween the EU and the US. Europeanunemployment among those seekingtheir first job and among older ex-employees is markedly higher.

– Among females; the femaleemployment rate being ten per centlower than the general rate. Femaleinactivity and unemployment ratesdouble the general rates.

– In the Mediterranean countries. InItaly, Spain, Portugal and Greece,general employment rates are around50 per cent, female employment ratesbeing around 42 per cent.5

In 1992 the European Commissionheaded by Jacques Delors published aWhite Paper on competition, occupationand growth known as the EuropeanGrowth Initiative (Delors, dir., 1993).Prepared in the context of theresurgence of European vigor followingthe Single European Act and in theaftermath of the 1975-1985 recession,this initiative placed a priority onemployment. Increased employmentdemands growth and growth demands

competitiveness. Krugman (1994)responded with a paper that earned himcelebrity –competitiveness can be adangerous obsession, he said. Througha combination of approaches, Krugman’spaper warned of the main Europeanproblem: the lower the general emplo-yment rates, the higher the unemplo-yment rate. As a consequence, Europehas less productive capacity and highersocial expenses.

Europe’s problems are its agingpopulation, its low employment rate,especially among woman, both youngand old, its high unemployment rates,its low number of worked hours and itslimited competition in basic activities(European Commission, many years).The gap between real and potentialGDP is an accurate reflection of theseeconomic problems.

E. The New European Economy andthe New Policy Mix

The European economy looks new:a monetary union between 12 MS, amore integrated product market, a newpolicy mix. As we see, GDP growthfizzled out somewhat but social andterritorial cohesion continues to work.The new European economy is also theproduct of the new European policy mixin the style of the ‘Washingtonconsensus’ and the OECD recom-mendations. The Maastricht criteria foraccess to the European monetary unioninvolves strict limits on inflation, interestrates, budget deficit and public debt,unemployment and salary costs.Maintenance of the Maastricht criteriaafter monetary union is the basis of thePact for Growth and Stability and of theStability and Convergence Program(European Commission, DG Economicand Financial Affairs, 2005). The basesof the new European policy mix are theMS: the European level, and the such


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5 Eurostat (2005).

institutions as the Council, theCommission and the European CentralBank only work in subsidiary way.

In an effort to overcome the basicstructural deficits generated by the1975-1985 recession in the labormarket (unemployment), finance(inflation), the public sector (budgetdeficit and public debt), and partly as aresult of the new liberal winds ineconomic policy arriving from America,the new European policy mix preparedthe way for structural reforms, makingthem more acceptable in a context ofstability, cohesion and context.

This new European policy mix,national and cooperative, is performingsuccessfully in terms of price and foreigntrade stability. Even if the euro exchangerate is not used as a commercialinstrument, Europe has a positive currentbalance. This is undoubtedly animportant and positive difference inEurope’s favor as opposed to the UScase. However, some EU countries arebeginning to show signs of difficultieswith the foreign trade balance, includingFrance. The continuity of the dollarshutdown may cause major problems forthe EU (European Central Bank, 2005,and Blanchard, Giavazzi, and Sa, 2005).Comparing salaries, the Europeanposition was untenable, especially intradable manufactures –even incomparison with the US, where salarylevels are also very high. Maastrichtestablished that MS public deficits mustbe under 3 per cent of GDP, yet budgetdiscipline is never seriously discussed inproposed reforms of the Stability Pact.

In terms of the three sides of theeconomic triangle, the new Europeaneconomy and policy mix works well interms of stability and cohesion, but there

is room for improvement in the area ofeconomic growth (Viñals, 2005). In theshort and medium term, the Europeaneconomy is stable, as are macroeconomicand microeconomic considerations. Socialand regional cohesion is also well-founded, aided by MS social securitysystems and EU structural funds forregional investment. The problem itseems, is clearly growth and employment.

Despite the Krugman (1994) position,productivity and competitiveness are ofmajor concern to certain agents.6Competition by price, in fact by cost,especially labor cost –hourly salary, hasa direct effect on tradable manufactureswith a similar level of technology andlabor component. (Aiginger andLandesmann, 2002) In fact, although itis less competitive, the EU has aforeign current surplus, whereas the UShas a large deficit. (Council of EconomicAdvisers, many years, and EuropeanCommission, many years a).

F. The Sources of European Growth:New Economy, Labor Reserves, andStructural Reforms

The so called ‘New Economy’modifies the conditions of growth:capital-technology investment and theinnovation capacity of the entre-preneurial system are critical.(Rodrigues, 2002) The New Economyaccentuates the role of technologicalaspects and labor-saving investments,and thus increases the Europeanemployment problem and thetechnology gap with America. (van Arkand al., 2003) This explains whyEuropean economic performance wasworse after 2000, and why convergenceceased.


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6 There is a very competitive industry to produce reports on country competitiveness: See some ofthis excellent products: Conference Board (2005), European Commission (many years), Hughes (2005),International Labour Office (2005), ICON Group International, Inc. (2004), International Institute forManagement Development (2004), NTC Research (2004), O’Mahony and van Ark, eds. (2004), Sharpe(2003), US Labor Statistics (2005), and World Economic Forum (2004).


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Figure 4Policy Mix Performance in America and Europe

7 For America an evident source of growth as per Europe is employment, which should be the economyin energy and material consumption, certainly disproportioned and not sustainable. (World ResourcesInstitute, 1997 and 2004)8 See the Lisbon strategy special website <http://europa.eu.int/growthandjobs/index_en.htm>.9 EU Economic Policy Committee (various years) and European Commission - DG for Economic andFinancial Affairs (2005b).

Europe’s growth has one main sourceand a number of secondary sources. Themain source is its large unemployedlabor force. Thirty-two million additionalworkers need to be employed to matchthe US employment rate. The othersources of European growth areproductivity-related: technology, leading tomore sharply focused research anddevelopment investment, and regulationthat facilitates competition in factor,product and services markets, especiallyin labor and industrial relations.7 (OECD,2003a, Nicoletti and al., 2001, and Bailyand Kirkegaard, 2004)

This was the purpose of theproposals accorded in 2000 by theEuropean Council in Lisbon: “to becomethe most dynamic and competitiveknowledge-based economy in the worldcapable of sustainable economic growthwith more and better jobs and greatersocial cohesion, and respect for the

environment.” (Council of the EU,2 0 0 0 ) .8 To realize this “strategic goal forthe next decade”, the EU established aprogram of structural reforms until 2010to create jobs by ensuring fullcompetition in all markets, generatinggrowth and raising employment.

The Lisbon strategy added decisivelyto European economic policy. Theproblem is that the EU does not havethe instruments to implement thisstrategy. The MS have a number ofinstruments but also face the traditionalsocial opposition to changes and noincentives.9 The European economyneeds to create employment if it is notonly to maintain its current economicconditions with a minimum of growthbut also to converge to the US level.Employment is the major challengefacing European industrial restructuring.Globalization and EU enlargement toEast and Central Europe will increaserelocation problems.


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III. THE EUROPEAN SOCIALCONDITIONS AND THE EUROPEANSOCIAL SYSTEM

This section will consider five socialfactors which are related to the dynamicsof the economy and which influenceEuropean social conditions. These arethe population, employment, the labormarket, social security and distribution.

Figure 5Employment and Unemployment Rates

Dynamics in America, Europe, and Japan, 1960-2005

A. Towards a Stationary Population:The Problems of an Aging Society

Europe is heading towards astationary population. Fertility does notassure reproduction of the Europeanpopulation. What are the consequencesof this? Short-term, the process ofpopulation aging has already led torelative increases in the 15-64 age-group, i.e., the potential activepopulation. This is why advancedcountries experience an increase in theactive population, and perhaps anincrease in the numbers in employmentalso. (Rand Corporation, 2004)

The decrease in European birthrates is compensated to some extent byimmigration from third countries. As inthe US, European immigration has itsproblems, the main one being the illegalnature of much of the immigration. Thismakes immigration-related issues adelicate issue, subject to the dictates ofwhat is politically correct. But there isevidence that European socialconditions and policies are changingdue to the immigration phenomenon.(Eurostat, 2004a and 2004b)

Naturally, the scale of thisimmigration is not only due to the agingWestern societies but also toglobalization of the world economy, torelatively open borders, social andeconomic breakdown in the origincountries, and political conditions thatdo not permit persecution of illegalimmigrants. In addition, in Europe withits free internal circulation of citizens,there is a flow between permissive andprohibitive MS. Immigrants tend to entervia the more permissive MS, then maketheir way to more attractive EUcountries.

The aging population requires morepersonal care, leading to increasedsocial services and health spending.(Mc Morrow and Roeger, 1999) Theimpact of an aging population on the

social security systems is important,threatening the base of Western welfaresystems. (OECD, 2000)

The directly economics-relatedaspects of social conditions in WesternEurope are relatively stable. This is thecase of class distribution, salarizationrate, distribution by activity sectors, andterritorial distribution. The majorchanges to this situation are broughtabout by factory closure and relocation,normally to non European countries.

B. The Low European EmploymentRate

The dynamics of employment, thenumber and proportion of employedpersons, are strategic economic andsocial variables. They affect productioncapacity and consumption constraints.The relation between those inemployment and the population aged15-64 years, the general employmentrate, is low in Europe. The gapbetween European and US employmentrates was as high as 15 per cent in the1990’s. (Eurostat, 2004a) Figure 5shows the evolution of EU and USemployment rates over recent decades.Over the 1970-1995 period, Europeanemployment rates fell from 65 to 60 percent. Indeed, Europe has only justrecovered the initial rate. In the US thesituation is the opposite: from 1970 to2000, the employment rate grew by tenpoints, later dropping to 70 per cent.

As seen earlier, the US economyhas a great capacity to createemployment. (Wilensky, 1992) The EUeconomy creates unemployment, growthin GDP being due to productivity gainsand catching-up. The employment rateevolves in the opposite direction to itscomplement, the unemployment rate.What underlies such lowemployment/high unemployment rates?Is it regulations that militate against jobcreation, or insufficient growth? And, ifso, what is the cause of the shortfall ingrowth? Over-regulation? Excessively

high salaries? (Schettkat, 2003, andCox and Alm, 2004).

Combining age and sex statisticsreveals some important details:employment is lower among theyounger and older cohorts than amongthe middle-aged. Among women, theyears of highest fertility are the yearswith the lowest employment rates. Infact, the most serious employmentproblem is among females ofreproductive age. Adding country detailsto the mix reveals that the main emplo-yment problems are among females inSouthern European countries, PortugalSpain, Italy and Greece, withemployment rates between 42.1 and47.8 per cent; in the US the figure is70.7 per cent.

C. …and the Permanently HighEuropean Unemployment Rate

The other side of the employmentcoin is unemployment, Europe’s mainsocial, economic and political problem.It continues to be high, especially in theafore-mentioned South Europeancountries. The hysteresis effect meantthat unemployment stayed high afterrecession had ended (OECD, 2002).

In this situation, it is clear that it isnecessary to move away from passivepolicies e.g., subsidies, to activepolicies that improve the skills andemployability of the unemployed. Themaintenance of employment ratedifferentials between countries reflectsthe immobility of the European laborforce. Calls for labor market reforms tofavor flexibility are widespread. Theunemployment problem has led to manyinterventions in the form of modifiedwork contracts. That labor marketreform is needed seemsunquestionable. However, in social andeconomic policy the gap betweenstatement and action, objectives andresults, is vast. Analysis ofunemployment –and thus Economic


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Policy Analysis and proposals– waslargely changed with the introduction of:

The Philips Curve, originally arelationship opposing unemployment andprice inflation. This offers a range ofpossibilities to policy makers: selectingthe combination of unemployment andinflation they wish to explore.

The notion of a natural unemploymentrate, proceeding to the more neo-classicalapproaches, and of a Non-AcceleratingInflation Rate of Unemployment (NAIRU)and a Non-Accelerating Wage Rate ofUnemployment (NAWRU). Calculations ofthese rates shows a substantial differencefrom the effective unemployment rate thatthe policy mix should achieve (EuropeanCommission, many years).

D. Labor Market and Salaries:Immobility and Inflexibility

The European labor market is notone: nor indeed is it even 25; for notonly is each state a case apart, inmany cases there are also intra-stateregional labor markets. Europeanworkers are in effect decidedlyimm o b i l e .1 0 This contemporary immobilityis in contrast with previous times whenEuropean immigrants were numerous,not only in America but also in otherEuropean countries, even after theSecond World War. Now immigration isa matter of non-EU countries.

Salary inflexibility is the other threatto the European labor market. Theconcept of salary flexibility – eitherupward in response to growth ordownward with drops in productivity, orto business, supply and demand factorsis not accepted by European unions.Under these two problems, Europecannot aspire to become an optimummonetary zone, despite the monetaryunion in existence since 1999.

The hourly salary in some Europeancountries surpasses the average

American figure (US Bureau of Labor,2005, OECD, 2005b, and ILO, 2005).As we know (see figure 2), hoursworked in the EU15 are also fewer thanin the US. This is why Europeanproductivity per employee remains belowthe American level. Related to salaries,the European questions are as follows:

Figure 6Employment Rates

in a Range of Countries


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10 Only 1.6 per cent of Europeans live in a different country to the one in which they were born(OECD, 2003b).

– To what extent are salaries linkedto the dynamics of productivity?

– High personal taxation rates andsocial security payments have the effectof raising salaries, especially in lesswell paid categories, thus limitingemployability. In this light, the EuropeanCommission has been calling for sometime now on MS to limit social welfarepayments in the case of the low paid.

EU productivity downturns arestructural in nature. The bulk of thedeterioration results from an outdatedand inflexible industrial structure whichhas been slow to adapt to theintensifying pressures of globalizationand rapid technological change (Denisand al., 2005). The EU’s productivityproblems are driven by the combinedeffect of:

– An excessive focus on low andmedium-technology industries (withdeclining productivity growth rates anda globalization-induced contraction ininvestment levels);

– An inability to seriously challengeUS dominance in large areas of theICT industry, as reflected in therelatively small scale of its ICTproduction sector; and finally,

– Its apparent slowness in reapingthe productivity enhancing benefits ofICT in a range of ICT-linked industries,although measurement issues severelyhinder assessment of the gains fromICT production and diffusion.

Most labor market policies aim toflexibilize access to and exit fromemployment. It is interesting to see howeach MS labor market performs. Betterresults are obtained by countries in whichlabor market reform began early and inwhich active rather than passive policieswere applied. This is the case of theUnited Kingdom and the Baltic countries,respectively. (Schulmeister, 2000, andMadsen, 2002). Undoubtedly, labor marketreform is the main challenge in EuropeanStates. The power of the unions limits

changes in a system designed underconditions of full employment and lowerlevels of social protection.

E. The Social Security SystemsThe European welfare state is

based on redistribution of incomeproduced by the tax and socialsecurity system (SSS). The MS SSSare guided by distributive criteria andnot by capitalization. In Europe, thereis a multiplicity of State SSS: eachsystem is independent but all aresimilar, in that their function is toredistribute income between the activeand inactive population. European SSSare currently undergoing reform, withintroduction of private and capitali-zation criteria. But the task is beyondthe capacity of the financial system asthe funds needed for capitalizationwould be enormous. (Feldstein andSiebert, eds., 2002, and Wolff, 2002b)Furthermore, SSS capitalizationi n volves a political obligation to developa non contributive fund, which i sdifficult to finance.

Figure 7Social Expenditure and Pensioners



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Data Data for 2004 from Eurostat(many years b), OECD (2004 and 2005b),

and US fedStats (2006).

This explains the relative stability ofthe contemporary SSS. The agingpopulation will accentuate the SSSfinancing problem. The SSS redistributivefunction will be more evident and thiswill make capitalization more difficult.(Krugman, 2005)

In contemporary economies thefinancial impact of the SSS is huge.Public pensions represent just slightlyless than a quarter of GDP, and thosereceiving pensions represent 50.7 percent of the population aged 15-64 years(see figure 7 and Atkinson, 2000)

F. Distribution and Re-distribution:Trends in Stocks and Income

What are the trends in(re)distribution? The primary distributionof income follows the trends ofincreased production and productivity tobring about an absolute increase in

salaries and profits, leading to awidening of the gaps between rich andpoor and greater inequality in incomeand stock distribution. US1 1 a n dEuropean data (Atkinson, 2002) provideevidence of a double process: anincreased gap in stock distribution anda decreasing gap in final incomedistribution.

What are the distributive impacts ofeconomic development and of the policymix on distribution? Are there changesin social structures due to the new(European) economy, the new(European, economic and social) policy(mix)? The ratio of total income of thehighest-earning 20 % of the population(top quintile) to that received by thelowest-earning 20 % (lowest quintile)evolved for EU15 from 5.1 in 1998 to4.4 in 2003 (European Commission,2005a). There are different ways to fightpoverty. (Alesina and Glaeser, 2005)

As in the US, EU15 population risk-of-poverty is decreasing. Those with anequivalized disposable income set at6 0 % of the national averageequivalized disposable income beforesocial transfers represented 26 per centin 1995 and 24 % in 2001. If weconsider income after social transfersthe figures are 17 per cent in 1995 and15 per cent in 2001. (EuropeanCommission, 2005a). Remember thescale of the redistribution impact is 9per cent of disposable income.

G. Discussion on the American/European Economic/Social Model

A typical American and Europeandiscussion is along the lines of doesAmerica’s/Europe’s Economic/Socialmodel/reality provide better economicperformance/well-being? The basis ofthis discussion, whether among laypeople or academics, is the idea that


21

11 See Katz (1990), Jones and Weinberg (2000), Karger and Stoesz (2001), Wolff (2002a), Appelbaum,Bernhardt & Murname (eds.) (2003), and Baumol and Others (2003).

America performs better economicallywhereas Europe wins in social terms.European catching-up on Americaceased in the 1970’s in terms of GDPper capita and in GDP per employeeafter 2000.

The gap between GDP per hour ofwork and GDP per capita financesEurope’s lower employment rate and itssocial protection. With productivity peremployee at 20 per cent lower thanthat of the US, Western Europe worksless time and supports a higherunemployed, inactive, retired andpensioned population, thus having a percapita GDP which comes in at a thirdlower than the American.

EU 15 performs less well than the USin economic terms, its production peremployee and per capita thus being lower;its social protection and redistributiveinstitutions lead to a more egalitarian finaldistribution of the lower consumptionlevels. Social cohesion is perhaps greaterin Europe, but at a consumption levelwhich is lower than the US.

As we shall see, European SocialPolicy is not one, but 15, and even 25with the new MS. And what is mostsurprising about these social policies istheir similarity despite their indepen-dence from one another. And what wefind in social policy, we also find ineducation and in health.12 The majorcontemporary question is whether the‘European social model’ is the problemor the solution? The ‘European socialmodel’ is a consequence of the specialeconomic and social conditions existingin Europe after the Second World War:a major social conflict arising from thedivision of Europe into two political,social and economic areas. (Aiginger,2004).

Europe may aspire to Americaneconomic performance; America mayaspire to match Europe’s social cohesion.However, of course, the economy andsociety are intertwined: you cannotchoose the American model for economicissues and the European for the socialdimension. It is probably the financialimpact of the ‘European social model’that underlies the European shortfall withrespect to American standards ofproduction and living.

IV. ON EUROPEAN SOCIALPOLICIES

Some aspects of European socialpolicy will be considered here: thestructures and competence of EuropeanMS social policies, the impact ofEuropean economic policy, contra-dictions with other policies, new pathsin European development and Europeanpolicies.

A. Structures and Competences ofSocial Policy in Europe

According to the sovereignty andsubsidiarity principles, the EU haslimited competences in social policy.13Unions, salaries and SSS are allmatters for the individual MS. Nevert-heless the application of the nondiscrimination by nationality principle tolabor gave rise to the second economicliberty: the free circulation of salariedworkers, latter extended to include theentire European citizenship as providedfor by the European Union Treaty(1993). To realize this principle,coordination of MS SSS went aheadunder the terms of international laborlaw. Now Europeans are covered bythe SSS of their own MS in all other


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12 Estevez-Abe, Iversen, and Soskice (2001) and Michie and Sheenan (2003).13 Thus issues of sovereignty are in principle excluded. When the expansive momentum of integrationattributes further fields to the EU, unanimity is need. Subsidiarity orders the MS to develop itself firstthe EU objectives.

MS, and can choose to collect andspend their pensions in the EU countryof their choice.

The EU also has importantc o m p e t e n c e s regarding safety conditionsat work, in professional education, and inequal treatment for both genders. TheEuropean Commission applies itsadministrative power to many othermatters, including poverty and lowerincome groups (compensative approach),cancer and personal rights (demonstrativeapproach). EU social policy issues are setout in tables 2 and 3.

The major issues of social policy(pensions, health, and education) andtheir orientation (expansive, regressive,deregulation, privatization, etc.) remainat State level. Also, if there is any newtrend in Europe regarding allocation ofcompetences in social policy matters, itis from top-down, i.e., from MS toregional and local level, as opposed tobottom-up, from MS to EU. In Europe,social protection is universal, andmainly covered by the MS SSS. EachMS fixes citizens’ entitlements and alsofunding mechanisms. No harmonizationis needed, except in the area ofworking conditions affectingmanufacturing costs. Thus someimportant social areas, as well asimmigration policy and family policy,remain underdeveloped: population,housing policy, social compensatoryservices may not exist in someEuropean countries. however, socialdumping is not occurring, MScompetences in the labor market,salaries, and SSS are not managed toimprove the MS share of Europeanmanufacture.

The combination of all thesequestions could be potentially explosive:the European Union is suffering from asocial deficit. The EU, rather than aninstitution with an interest in socialmatters and people, should really be

seen as focused on economic andState interests. However, although theEuropean Union continues to fail toexercise major social policy(ies), thecitizens of Europe are highly enthusedby the European integration process.

B. Social Policy, Economic Policy,and other EU Policies

The EU plays little major role insocial policy and this has no means ofchange. There is one exception to this.The EU needs to implement a strongemployment policy –unemploymentbeing Europe’s most pressing problem.And it is at precisely EU level wherethis policy can best be implemented.However, this policy has had fewimmediate or visible effects, andperhaps would require such politicallydifficult measures as policies aiming tostrengthen competitiveness. Thisunpopularity is what underlies thereluctance to undertake structuralreforms in Europe. (Bourrinet andNazet-Allouche, 2005)

The main objective of Europeaneconomic policy is the same as that ofEuropean social policy: employment. Andthe way to achieve employment is throughgrowth, reform of the labor market,making it more flexible and promotinglabor mobility and salary flexibility, andthrough increasing competition in productand service markets.

In socio-political debate, economicpolicy frequently appears to be inopposition to social policy: resourcesshould be assigned elsewhere. In fact,the opposition is not between alleconomic policy and all social policy,but between a style of economic policyand a style of social policy. However,can an orthodox economic policy favoran innovative social policy?

The aim of economic policy is tomaintain growth at a level between 2and 4 per cent per annum. Stabilization is the second Western


23


24

objective. In a micro sense (pricestability) and in a macro sense (countercycle), this means no inflation and nounemployment. (Boyer, 2002, and Solow,dir., 2002). Orthodox policy mixes are

combinations of no public deficit,veritable cost, no price inflation, no taxbands, privatization, responsibility, andprivate-sector criteria in publicm anagement.

Priorities and Objectives The Social Agenda

Employment European employment strategy (EES) Employment analysis EURES: European employment services Local development

European Social Fund European social fund (ESF) EQUAL: Community initiatives Innovative measures

Working conditions and worko r g a n i z a t i o n s Social dialogue Corporate social responsibility Labour law and work organization Health & safety at work Free movement of workers Coordination of social security schemes

Inclusive Society Social situation and demography Social inclusion Social protection in the EU MISSOC: Social Protection in the

Member States Anti-discrimination and Relations with

Civil Society Civil Society Disability issues

Gender Equality Equality between women and men

Horizontal activities Enlargement International Affairs Knowledge society Evaluation Socio-Economic Research

Table 2European Union Social Policies

Source: European Commission - Directorate General of Employment, Social Affairs andEqual Opportunities.

C. The Lisbon Strategy forStructural Reform, Competitiveness,and Employment

Freedom to make choices withineconomic policy is limited. In advancedcountries the de-industrialization crisiswas seen as a crisis of supply, thuseconomic policy turns to the supplyside and to monetarism. The newWestern rightwing political orientationworks to consolidate this policy. Thefall of the Berlin wall and real socialism

around the world, and the movetowards a global economy make thenew economic policy unassailable.

In fact there is a program ofEconomic Policy: Europe needsstructural reforms permitting it toincrease employment and competition.Labor market reform to activateemployment policies was among theessential features of this structuralpolicy. Another major component wassupport for research and developmentinvestment.


25


26


27

The key elements of the Lisbonstrategy are as follows:

Effective Internal Market: t ocomplete the Single European Act.

Free and fair trade: to open theEuropean economy to the world.

Better regulation: to improveEuropean governance.

Improving European infrastructure: atwofold objective, competitiveness andemployment.

Investing in Research andDevelopment - the New Economy.

Boosting innovation Creating a strong industrial base:

the basis for competitiveness. More and better jobs: to increase

employment.Adaptable workforce: mobility and

flexibility in the labor market.Better education and skills:

overcoming the challenges in education.

The Lisbon Strategy does not setindividual targets for economicperformance. However, a soundeconomy is a precondition for achievingits objectives. That is why particularemphasis has been placed on theStability and Growth Pact and onstructural reforms intended to raise thegrowth and employment potential of theUnion. The Lisbon approach implies:

That if the Lisbon measures areimplemented against a sound macro-economic background, an averagegrowth rate of around 3 per cent peryear should be a realistic prospect.

That Member States’ budgets arekept close to balance or in surplus overthe medium term, ensuring the long-term sustainability of public finances.

That public expenditure is redirectedtowards increasing the relativeimportance of capital accumulation(physical and human) and supportingresearch and development, innovation,

Figure 8Productivity & Standard of Living


and information and communicationtechnology.

The Lisbon objectives in terms ofemployment, as expressed in the

Data from Eurostat (2006) and USfedStats (2006).

European Employment Strategy, coverthe three overarching objectives of fullemployment, improving quality andproductivity at work, and strengtheningsocial cohesion. This in specific termsmeans:

– An overall employment rate of 70per cent in 2010 (67 per cent in 2005).

– A female employment rate of 60per cent in 2010 (57 per cent in 2005).

– An employment rate for olderworkers (aged 55-64) in 2010 of 50 percent.

– An increase by 2010 of five yearsin the average age at which peopleleave the labor market.

– Availability of childcare by 2010for 90 per cent of children between 3years and compulsory school-going age,and 33 per cent of children under 3years.

For MS four priority areas wereidentified: a) Attracting more people intoemployment; b) Increasing theadaptability of workers and enterprises;c) Investing in human capital andmaking life-long learning a reality; andd) Improving the implementation ofreforms through better governance.(European Commission, 2003 and2005)

But development of the Lisbonstrategy has been very slow due toEuro-pessimism, the preparations forthe EU enlargement to the East,1 thedifficulties in transatlantic relations overrecent years, and the growingdifferences between the MS. The needto pursue the Lisbon strategy waswidely agreed. However, the reactionagainst reforms in Germany, Franceand other countries hindered progress.Two official reports propose a re-launching of the Lisbon strategy, firston EU budget prospects (Sapir, dir.,

2003), second on European economicreforms (Kok, dir., 2004).

D. The Common Task of EuropeanEconomic Policy and European SocialPolicy: The Employment

There is a European consensus:employment is Europe’s priority. Theproblem is how to solve it: by growthor by regulation, by promoting economicdynamism or protecting social benefits?When the approach has been settled,they key will be promotion of theconditions which will increase growth.And again, a question will arise: whatis the correct balance between EU andMS action?

This is a paradigmatic situation ofsocial policies: in Europe there isunanimity regarding analyses andobjectives, but there is no means toact, to progress. The central role ofemployment policy and structuralreforms is evident yet there is no actionat MS or EU level. Thus progress isextremely slow (see figure 6). In thissituation, there is no contradictionbetween the objectives of economicpolicy and social policy –i.e., structuralreform and employment.

But the problem is the limitations ofsocial policies: their entry into conflictwith other sector policies, the trade-offbetween:

– Social policy and regional policy:both serve for cohesion and inclusionobjectives. Yet, as seen in table 3, thefinancial impact of regional policy isgreater than that of social policy. Socialpolicies are the competence of MS.

– Social policy and industrial policy:The EU does not have a strongindustrial policy. There is an implicitindustrial policy due to competitionpolicy and sector difficulties. Europeanindustrial policy comprises foreign


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1 The new MS are in transition to some ports: merchant eonomy, political democracy, and EU rules.(van Ark and Piatkowski, 2004)


29

protection, social compensation and thecommon actions supporting researchand development.

– Social policy and trade policy:Social protection needs foreignprotection but trade policy exigenciesaffect the employment and thus socialcohesion. (Baily and Lawrence, 2004,and Baily and Kirkegaard, 2004)

However, consensus existsconcerning the need to complete thetraditional social policies (passive, socialsecurity, unemployment) with theadvanced social policies (active,employment and specific by age, sex,

and condition: aging, poverty, lowincome, less skilled, immigration). Themore active employment-orientedpolicies produce the best results inemployment creation.

V. Conclusions

We present our conclusions in theform of a series of epigraphs. Thereader is asked to bear in mind thecontextual setting for each. Theconclusions are set out in threeseparate fields and total thirtyepigraphs.

On Europe and the EU I. Europe and Social Policy: Identity questions. Problems: created by non

identity. Solutions: will emerge from complexity, from preservation of the smalland the different.

II. The EU’s objectives are peace, democracy, personal, human and civil rights,non discrimination, growth, competition, welfare, sustainability. An EconomicUnion from 1956-7, a Political Union from 1991-3, and a Monetary Unionfrom 1999.

IIII. The unique nature of the EU: Inter-State (international) origins and Direct(domestic) effects.

IV. The first priority in EU development is the Economy. Procedural patterns inthe EU: State consensus, Gradualism, non MS nationality discrimination,subsidiarity. Instruments of the EU: law, budget: 1% GDP.

V. The EU had a number of ‘deficits’: democratic, social and administrative.There is also a policy deficit, especially in economic policy and in socialpolicy.

VI. The EU: a Non-Identified Political Object or a Post-modern State? It is anOpen and Transparent new level of Administrative Policy.

VII. There is an EU Contradiction between Enlargement (more countries, theWorld) and Intensification (concentration and effectiveness of policies).

VIII. 25 MS and maybe more: the economic, social, cultural and politic differencesand interests may be so large as to sterilize the common purposes.

IX. There are great problems associated with EU dynamics.

On the European Economy and the Economic PolicyI. Economic Dynamics: Growth in GDP, Employment Stagnation and Catching-

up in Productivity.II. Dialectics of the EU vs US: EU: less growth, more social cohesion and

stability. US: greater capacity, especially in technology and economics, morecompetition.


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III. Analysis of the Gap between Productivity (GDP per hour worked US=100,EU= 78) and Standard of Living (GDP per capita US=100, EU= 48.7). Thegap EU/US in economic performance is important and growing.

IV. The Sources of European Growth: Increasing Employment Rate, StructuralReform and Integration of Economies and Policies.

V. The New Western Policy Mix: from correcting Structural Deficits(unemployment, inflation, public deficit and foreign trade deficit) to a EuropeanMonetary Policy, and towards a Cooperative European Economic Policy.

VI. A New European Economy: more integrated, with a growing EuropeanEconomic Policy.

VII. Is there an Optimal Monetary Area? Impact of European Monetary Union onthe Labor Market and on Social Policy.

VII. The European Labor Market: Geographical Immobility and Salary Inflexibility.There are at least 25 MS labor markets, although more since there areregional and city-specific markets.

On European Society and Social PoliciesI. Europe vs America: Dreams and Nightmares, Models and Realities, Ideas

and Analysis.II. The Central position of the MS (25) in European Social Policy and Welfare.III. Does Social Cohesion exist? Is the EU a Political Union or is it tending

towards an Alliance of Civilizations? It may end up where it began: a FreeTrade Area.

IV. The Structure of European Employment: lower participation by Women, andYounger and Older Workers.

V. The American Job Machine vs the European Unemployment Machine: Whatare the consequences of American Dynamism and European Protectionism?

VI. (Re)distribution affects 4.5 per cent of GDP: this offsets concentration butpoverty survives for 5/15 per cent of the EU MS population.

VII. The central role of employment policy in European developments and policy.VIII. The Lisbon Strategy: Structural Reforms of factor, product and service

markets to generate employment, growth and social cohesion in the mosteconomically competitive and high performing area of the world.

IX. Equilibrium between MS Social Dumping and EU Social Harmonization.X. From Welfare to Workfare? From passive to active employment policies.

Innovation and good practices in MS.XI. The European Social Model: SSS (public health and pensions), education,

labor market regulation.XII. Complementarities in European policy objectives: growth, employment,

stability, social cohesion, domestic protection and foreign trade protection,sustainability, non-discrimination.

XIII. Trade-off between European policy instruments: EU vs MS, regulation vsbudget, economy vs social, social vs industrial, social vs regional.

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GLOBAL COMPETITION AND THENEED FOR REFORMS IN THE EU

The general implications ofglobalization as well as those resultingfrom 2004 and 2007 enlargements haveforced EU to think seriously aboutapproaching issues related to rigidityand stagnation in the major EUeconomies. The problems are wellknown and recognized. Their solutionimplies anyway to accept a number ofliberal measures characterized bycompetitive labor markets and mobilecapital. In this context, during theBritish presidency of the second half of2005 Tony Blair mentioned clearly theareas which needed reform (althoughhe was not very popular because ofthat): labor markets, energy depen-dency, innovation, falling demographics,and the need for balance between workand lifestyle2.

In fact it seems that the citizens ofEU-15 resent above all the idea ofcompetition be it due to globalization or

to enlargement. EU-15 has a laborforce used to the comfortable benefitsof the welfare state and quite unhappyto change or give up any of that. If wecompare the 35 hours working week inFrance with the 7 days a week work inChina we can quite easily understandwhy competition due to globalization isan ugly world for many Europeans.

To a less extent the same reactionholds true for the position vis-à-vis thenew EU member states from Centraland Eastern Europe. As someonenoted, “Western Europe used to beafraid of invading Warsaw Pact troops.Now Western Europe fear an invasionof Polish plumbers!”

In 2004, when 10 countries havejoined the European Union 73 millionnew EU citizens acquired the right tosettle in all other EU member states.Anyway they did not get at the sametime full access to the EU labor marketbecause free movement of workers hasbeen temporarily postponed for up toseven years.

1 Florin Bonciu, Ph.D., is a University Professor with Romanian American University in Bucharest,Dean of Faculty of European Integration Studies; Associated Professor with Romanian Canadian MBAProgramme; Senior Researcher with Institute for World Economy in Bucharest. Activity materialized in12 books and over 100 papers on issues related to international economics, European integration,international investment, international business.2 Helle C. Dale, Challenges Facing Europe in a World of Globalization, Heritage Lectures, No. 914,November 28, 2005.

LABOUR MARKET AND EU ENLARGEMENT: IS THERE A REALTHREAT FOR EU – 15?

Florin Bonciu1

Abstract. The paper analyzes the existing and potential impact of 2004 and 2007enlargements on EU economy and argues that in order to increase its competitivity onthe global market EU needs to deepen the liberalization of markets. More focus is puton the implications of the liberalization of the labor market and answers are found to thefears expressed in Western Europe on the effects of enlargements on local labormarkets, particularly vis-à-vis the forthcoming accession of Romania and Bulgaria inJanuary 2007.

Immediately after the 2004enlargement 12 out of the 15 “old” EUmember states restricted access to theirlabor markets for citizens of new EUmember states. During the period 2004-2006 Ireland, Sweden and the UnitedKingdom did not implement suchrestrictions, while countries like Austria,Italy and the Netherlands offered laborpermits on a quota base.

In 2006 Finland, Greece, Portugaland Spain finally decided to give EUcitizens from Central Europe and theBaltic States (EU8) full access to theirlabor markets. In 2007 the Netherlandsare likely to follow their example.

It is interesting to note that, asresult of their option, the UnitedKingdom and Ireland have experiencedrobust economic growth. There migrantlabor from new EU member states hasplayed a vital role in achieving thisresult.3

By October 2006, less than 3months before the EU enlargement withRomania and Bulgaria, new debatesemerged the EU-15 media on the risksfor their labor market associated withan open labor policy. For instance, theBritish government is planning to restrictthe numbers and categories of workersfrom Bulgaria and Romania who wish tocome to the U.K., even after those twonations join the European Union onJanuary 1, 2007.

This type of mixed reactions asksfor a more in-depth analysis. Which isin fact the real problem in the EU-15labor market? And, more generally,which is the problem with the EU-15economy in the global context?

EU’s competitivity dilemma: toreform or not to reform?

The difficulties experienced by theEU-15 member states in the context ofeconomic global competition requireflexibility and reform in response to thefast changes determined byglobalization. The EU’s dilemma is: toreform and become more competitiveinternationally but in this way to affectthe welfare state and generate negativereactions from voters or to postpone orsoften the required reforms and tofurther lose ground in the globalcompetition game?

Up to now the second optionprevailed and attempts to do someserious reforms (like in Germany orFrance) determined quite seriousnegative social reactions.

In fact, if we reduce globalization tocompetition, then EU has to reducecosts in order to remain competitiveand, in order to do that there are,among others, two ways of action:

– increase the use of immigrants (ina US style). This is not new, theuse of immigrants was used forinstance by West Germany somedecades ago. Starting from theearly 1960s and well into the1970s, large numbers of Turkishnationals migrated to WesternEuropean countries, particularlyWest Germany. This phenomenonstarted with an agreement signedby the Turkish and West Germangovernments in 1961. Theagreement coincided with a WestGerman economic boom whichlasted until the economicdownturn in Western Europe thatarrived with the oil crisis of 19734.

LABOUR MARKET AND EU ENLARGEMENT: IS THERE A REAL THREAT FOR EU – 15?

37

3 Hannah Zackrisson, Labour Migrants Unbound? EU Enlargement, Transitional Measures and LabourMarket Effects, Situation 2004-2006, Institute for Futures Studies, Stockholm, Sweden June, 20064 Kemal Kirisci, Turkey: A Transformation from Emigration to Immigration, Center for European Studies,Bogaziçi University, Migration Policy Institute, Washington, D.C., 2006

Interesting to note, in 2006, manyWestern European countriesstarted to think about a selectiveacceptance of foreign labor basedon skills and qualifications.

– Enlarge towards Central andEastern Europe in order toachieve economies of scale and aregulated access to cheap labor.

From a political perspective it isobvious that the second approach ismuch more favorable from all points ofview. Among other things, the secondsolution solves not only labor issues butalso boosts exports and allows accessto a significant amount of resources.Even more, enlargement could be alsosupporting the needed reform of EUinstitutions just because 27 memberstates require new institutional andorganizational rules and even the mostconservative members could not denythis reality.

EU enlargement as an acceptablereform that improves competitivity

Estimates calculated after the firsttwo years showed that the enlargementhas had a positive economic impact onall EU member states, the gains beingobtained mostly in trade andinvestment. Some EU countries, inparticular Austria and Germany, havedone particularly well out of exporting toCentral and Eastern Europe’s fast-growing markets. And many WestEuropean companies have profitedsubstantially from investing in retail,telecoms, energy or the media in thenew EU member states.

At the same time the EUenlargement towards Eastern Europeimproved the region’s competitivenessin a globalized world. The price ofenlargement was very convenient as it

amounted to less than 0.1 % of theEU’s combined GDP.

Some analysts consider anyway thatthe main bonus of the enlargement isnot the positive economic impact butrather the fact that the enlargement hasforced EU’s economy to start makingthe reforms required to maintaincompetitiveness in a globalized world.From this perspective the enlargementhas been EU’s “trial run” for globa-lization.

The rationale for this explanation isthat the economic integration betweenWestern and Eastern countries beganat a time when global competition putan increasing pressure on the EU-15.Companies from EU-15 responded byoutsourcing labor intensive production tolow-wage areas in Eastern and CentralEuropean countries. This happened notonly due to the geographical location ofthe Eastern European countries, butalso due to the fact that theenlargement process continued todiminish the differences between thebusiness environments in the old andnew EU countries.

Enlargement, labor movementwithin EU and economic growth: theneed for a better understanding

In fact outsourcing of productionfrom Western to Eastern Europe hasenabled more Western Europeancompanies to maintain their competi-tiveness. Enlargement has determined anew European division of labor in whichthe lost factory jobs in the Western partwere replaced by new jobs indevelopment, research, and design5.

We can quote here some foreigninvestors in Romania that said thatwithout relocating their operation to theEast they would be out of business dueto global competition. At the same time

38

FLORIN BONCIU

5 Thorkild E. Jensen, Hans Skov Christensen, Enlargement has Strengthened Europe’s Globalization,The Confederation of Danish Industries, 05-05-2006

German car companies, Swedish mobilephone producers and Italian fashionhouses have reacted to heightenedglobal competition by shifting someproduction processes into EasternEurope, where wages are cheaper.

This change forced the Europeancompanies to meet the challenges ofincreased international competition, tostreamline their businesses, and tomake the hard, but necessarydecisions. In this way enlargementrepresented a true training room forglobalization.

From an economic point of view theenlargement towards Central andEastern Europe may be exactly whatthe EU needs to return to highergrowth. The new members are toosmall to act as an economic engine forthe slow growth euro zone. However,the availability of a large pool of low-cost, highly skilled workers at theirdoorstep has helped West Europeancompanies to better cope withglobalization. And it has put pressureon governments in the old EU to maketheir labor markets more flexible andtheir business environments moreattractive6.

The next step is more difficult: thepolitical system in the EU should adaptto the changes that took place ineconomic areas.

For EU enlargement can be asuccessful policy tool only if it decidesto deal with the misperceptions that fuelpublic opposition to enlargement. EUdecision makers have to explain howenlargement has benefited bothWestern and Eastern Europe.

EU officials have to explain thatglobalization would have forced WesternEurope to change anyway, and thatenlargement has helped many West

European companies to stay compe-titive. At the same time WesternEuropean politicians should stopexploiting fears of an invasion ofEastern European low cost immigrantsand instead pursue the kind of reformsthat would allow their economies tobenefit from a larger participation ofEast European workers. A key point isto understand that reforms are to bedone not because of enlargement butbecause of globalization.

The fact that this public awarenesscampaign on the benefits ofenlargement to Western Europe is farfrom being effective is well understoodin Romania where one can read in thepre-accession period until January 1,2007 almost daily about negativereactions in the old member states onthe possibility of waves of low costlabor from the new member statesinvading the labor market in GreatBritain, Germany or France.

And yet the reality is just theopposite. A recent survey carried out in2006 by the Caixa Catalunya SavingsBank (Spain) showed that the GDP percapita in Spain in the past 10 years(1995 – 2005) would have beendecreasing by 0.6 % without the 3million immigrants, many of them fromCentral and Eastern Europe. In fact,these immigrants contributedthemselves with about 2.6 % of eachyear’s GDP growth in Spain. During thedecade 1995 – 2005 immigration wasresponsible for more than 50 % ofemployment growth in Spain.

At the same time, withoutimmigration, per capita GDP growth inIreland would have dropped from 5.9 %a year to 1.1 %, and in France, from1.6 % a year to 0.3 %. In mostEuropean countries, economic activity

LABOUR MARKET AND EU ENLARGEMENT: IS THERE A REAL THREAT FOR EU – 15?

39

6 Katinka Barysch, Enlargement two years on: Economic success or political failure? Centre forEuropean Reform, Briefing paper for the Confederation of Danish Industries and the CentralOrganization of Industrial Employees in Denmark April 2006.

40

would have posted negative rateswithout the labor of foreign nationals,particularly in Germany (-1.5 % a year)and Italy (-1.2 % a year)7.

The Caixa Catalunya study showedthat the contribution of immigrants toeconomic growth in the EU as a wholehas averaged 2 % a year over the last10 years. Without their presence, GDPgrowth per person would have fallen to-0.2 percent a year.

The same survey showed that theGDP per capita in many EuropeanUnion countries like Great Britain,Germany or Sweden would havedecreased without the cheap labor fromthe Central and Eastern Europe.

The fact that EU is still far from apragmatic approach to globalization isalso supported by the proposal madeby the European Commission in 2005for the establishment of a GlobalizationAdjustment Fund, which will give anaverage of $10,500 each toapproximately 50,000 workers a yearwho lose their jobs because ofcompetition. The proposal of this Fundis a proof that subsidies are proposeda lot quicker than reform8.

This concept of a GlobalizationAdjustment Fund is not tied toeducation, research and development,and the other preconditions necessaryfor the creation of job growth. It is notclear how this Fund will compensatewhen a member state loses jobsbecause of competition from aneighboring member state. Withcorporate tax rates ranging from single

figures to nearly 50% within the EU25,competition among EU member statesmay prove more dangerous than Chinaor India.

What would be the solution?Western Europe needs to improve itsentrepreneurship, innovation anddynamism, not protectionism or socialprotection. And in this respect, maybeonce again, EU may look to the USmodel.

The United States has faced thesame economic pressures as the restof the world, and its tax-cutting, low-regulating, high-tech investmentstrategies have thus reaped therewards of global growth. It is easier toget fired in the United States, but it isalso a lot easier to find another jobrelatively quickly.

This economic mobility has seenunprecedented social mobility in allquarters of society, most notably amongimmigrants and young people.

For EU a combination of liberalreforms with large public awarenesscampaigns related to the benefits ofenlargement towards Central andEastern Europe would definitely help inturning globalization from a menace towhat it really is: a giant opportunity.

This is why we consider that after2004 and 2007 enlargements EU wouldbe better if accepts a deepening of theliberalization of its markets, particularlyof the labor market, instead of beingafraid of it.

FLORIN BONCIU

7 Carlos Alfieri, Immigrants Make the Economy Grow, Inter Press Service News Agency, Barcelona,August 30, 2006.8 Sally McNamara, The EU’s Globalization Fund: Economic Life Support, American Legislative ExchangeCouncil, 2006.


41

IntroductionEven if tempted to analyze only the

difficulties that new or upcomingmembers are likely to be up against, itwould be erroneous to fail to analyzethe challenges that enlargement posesto current euro zone members.

It is obvious that, should a new eurozone member accede without sufficientpreparation, macroeconomic issues canemerge, and they automatically extendto the whole area, since there aretensions, disfunctionalities anddifficulties that can endanger the eurocredibility. Such problems can emergeboth because nominal criteria getstretched and because there is a lackof structural or real convergence.

The present paper does not set outto analyze the issue from the point of

view of a member state but from theviewpoint of the way in which theoverall group is affected, including itscentral bank.

In this sense, there are two mainaspects to be assessed with referenceto the Economic and Currency Unionenlargement. Firstly, a need to assessany eventual additional risks that mightemerge in an enlarged currency unionthat draws away from the status ofoptimum currency area, and the moreso since the degree if divergence andasymmetry is increasing, as well as thedifficulties of a unique currency policy,suitable for all members. Secondly, theECB voting mechanism is of interest, inthe case of an enlarged euro zone.

Most studies show that there areissues as far as the structural and real

1 Mihai Sebea is a lecturer at the Romanian American University where he teaches World Economicsand European Monetary Policy. He has a doctoral degree in the field of International Business andEconomics, with a thesis about Stability, Convergence and Discontinuity in the Process of Economicand Monetary Union

THE EURO ZONE EASTERN ENLARGEMENT: CHALLENGES TOCURRENT MEMBERS AND THE ECB

Mihai Sebea1

Abstract. The eastward enlargement of the euro area entails significant implicationsboth for acceding countries and for the current euro area member States or for theEuropean Central Bank. The present analysis intends to assess the challenges upagainst the latter. The issue is analyzed from two points of view: firstly, relating to therisks caused by the group’s drawing away from the status of optimum currency area,complemented by increasing development disputes and the difficulty of implementing aunique currency policy, and secondly – the issue of the voting mechanism within theECB. When analyzing those two issues, we can easily notice that the difficulties for ECBand even for the actual euro zone member will increase. Since the extended euro zonewill draw away from the status of optimum currency area, the costs of the monetaryunification will increase for the new group as a whole (not only for the new members).Moreover, for the new euro zone, which is becoming more divergent, it will be very hardto find suitable monetary policy instruments for all. With reference to the second subject,the ECB will implement a new voting mechanism, but this will not solve the problem ofhaving large economies with weak representation, and small economies that havestrong representation in the Governing Council.

convergence of new members to eurozone state is concerned. In this respect,we will proceed to see what ECB andeuro zone member states might “fear”in the case of a much too early Easternstate accession.

The Optimum Currency Area andthe Eastern extension of the euro zone

The Optimum Currency Area Theoryis based on the seminal work of RobertMundell (1961), but it was developed bysome economists as Mc. Kinnon(1963), Kenen (1969), Frankel & Rose(1998) etc.2

The theory analyzes the costs andbenefits of monetary unions (focusingon the cost component) and showsthat the costs will be minimized ifsome conditions are accomplished.For benefits side, a common currencyreduces transaction costs andeliminates exchange rate volatilitybetween union partners. Further, lowertransaction costs and lower uncertaintyencourage trade flows betweenmembers. For SEE countries, but notonly for them, monetary union meanscredibility import and inflationexpectation anchoring. This will bringstability and lower interest rates, as wellas higher investment.

As about costs, the loss of monetarypolicy and exchange rate are the mostimportant. Once in monetary union, acountry has to comply with monetarypolicy decisions of the monetary unionauthority. As SEE countries are smallcountries it is clear that their interestswill not weigh heavily in ECB’s decisionmaking. Without an autonomousmonetary policy, the member countries’ability to respond to idiosyncraticshocks is reduced. Moreover, the fiscalconstraints imposed by the Growth andStability Pact restrict the ability torespond to asymmetric shocks.

Following this cost-benefits analysis,OCA theory shows the criteria thatmakes the monetary union successful.The theory is based on two types ofcriteria. The first one consists ofconvergence and symmetry: countrieswith the symmetric economic responsewill not experience high costs ofmonetary union. The second explainsus that even with asymmetric response,countries still can benefit from monetaryunion if they have other mechanisms toadjust the economy (the issue offlexibility).

The criteria that define OptimumCurrency Area are listed below, byproposing a specific way ofclassification:

1. Criteria related to the possibilityof asymmetric shocks (they can provethe existence of s t r u c t u r a lconvergence):

a. The degree of economicopenness

b. The similarity of productionstructure

c. Production and consumptiondiversification

d. Similarities of inflation rate

2. Criteria that prove the possibilityof market adjust (market flexibility):

a. Labor mobilityb. Capital mobilityc. Price and wage flexibilityd. Financial integration

3. Criteria that show authorities thecapability to intervene in the absenceof the exchange rate mechanism:

a. Fiscal integrationb. Political union

4. “Meta” criteria; (the two criteriapresented are more complex):

a. Similarity of demand shocksb. Similarity of supply shocks

MIHAI SEBEA

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2 For an interesting OCA theory analysis see Mongelli (2002)

THE EURO ZONE EASTERN ENLARGEMENT: CHALLENGES TO CURRENT MEMBERS AND THE ECB

43

Anyway, it is not easy to determineeither if a group of countries representsan OCA or not. Most of the analysis3couldn’t conclude that EU as a wholerepresents an OCA at the moment ofthe stage three of EMU. We can seeinstead, that there is a small group ofmember states that could form an OCA.Moreover we can follow Frankel andRose analysis to find out that a groupof countries can form a monetary union,even if is not an OCA4. From our pointof view, that EU is a “ f u n c t i o n a lmonetary area”, an area that could havebenefits from monetary integration evenif it does not represent an OCA.

As regarding East EuropeanCountries, few of them seem to beready for EMU from OCA theory pointof view. If the euro area enlargementwill imply only the countries that areready from the structural convergencepoint of view, the specific pressures forthe euro zone will not be high.

But if we consider an euro zone thatcomprises 25 (or even 27) members,we can say that this group is going faraway from the OCA status, and therewill be specific risks for the group as awhole, and not only for those membersthat are not prepared.

Graph 1 best represents thesituation. Two concepts can be outlinedin this case: the functional currencyarea and the optimum currency area.The AA line represents the outline ofthe functional currency area, in thesense that when a group of countriesis above the line, then it lies outsidethe functional currency area, meaningthat the risks entailed by making up amonetary union are high. The BB lineseparates the optimum from thefunctional areas, meaning in the case

3 Mc Morrow (1996), Bini-Smaghi & Vori (1993), Bayoumi & Eichengreen (1992) etc.4 See Frankel and Rose 1998, for endogeneity of OCA criteria. Those economists said that the criteriacould be better fulfilled after unification, and countries should look after long term benefits.

when a group of states are within thisperimeter, they can make up amonetary union together, even if is notan optimum one.

In practice, the AABB rectanglehypothetically outlines the “grey” area ofthe monetary union costs and benefits,where it is not clear whether benefitsare higher yet there are still premisesfor the monetary union to operateproperly.

If for the 12 countries there aresufficient reasons to say that they couldbe in the grey area, a 27 membermonetary union will be situated outsidethe gray area, and draw away from thestatus of an optimum currency area.

Even so, for the twelve countriesthere will remain premises for netbenefits.

Graph 1 The monetary areaoptimum parameters related to theEMU eastern enlargement

What are we interested in, in fact?Euro is an EMU currency, comprisingall members. Should this structure bejeopardized, then all members are likely

to suffer, not only those whoseeconomies do not evince OCA criteria.Therefore, drawing away from theoptimum currency area is an elementaccounting for the qualms currentmembers (and the ECB) have when itcomes to an early accession of newmembers to the euro zone. They mightwant new member states to switch toeuro after they come close to thestructural convergence and flexibilityrequirements set up, so that the risksinvolved in enlarging the EMU shouldbe mitigated.

An important element we shouldtake into account is Great Britain’saccession to the EMU, since its impactcan be more significant than the one ofthe 12 new members or of the futureEU members. And this is because ofthe EU member states, Great Britain’seconomy is the least correlated with theeuro zone. Moreover, the British GDPis approximately 17% of the EU GDP,as opposed to the 5% of the 12member states’ GDP.

The necessity of real convergence:why does it matter for EMU?

Real convergence means thereduction or even elimination of percapita GDP gap between the EUcountries and candidate countries. Thischallenge of real convergence needseconomic growth for SEE countriesgreater than EU’s, which implies theconvergence of prices and wages.Eastern countries have a weakperformance concerning per capitaGDP.

Should real convergence be reachedwithin the EMU, it is to be expectedthat poorer countries should havegrowth rates that are superior to theoverall euro zone, until the levels of

prices and productivity no longersubstantially differ. This process will goon due to competitive markets, until theGDP per capita is the same allthroughout the euro zone.

Before 1999, there used to be atrend stating that an enlarged monetaryunion including Portugal, Spain, Italyand Greece will pose difficulties to theECB in implementing a restrictivemonetary policy. Experience has shownthat “poorer” countries register highergrowth rates than the strongest, Franceand Germany. Moreover, the realconvergence process involving “poorer”countries also entails higher priceshence higher inflation rates. Suchcountries would rather have a harshermonetary policy than the ECB’s currentone, addressing the overall interests ofthe euro zone.

Currently, even a fast convergencein the case of Portugal, Spain orGreece is not likely to pose problemsfor the Eurosystem to reach its inflationtarget. These countries are nonethelessclose to the EU average, and their ratioin the harmonized commodity priceindex for the euro zone is and shallremain low.5.

After EMU enlargement, thingsbecame more complicated becauseECB will follow a monetary policy forthe euro area interest, and it will notlook at a specific country’s inflation.

Anyway the Eastern countries willstill have a low per capita GDP at themoment of EMU accession, when theywill have voting rights in the GoverningCouncil. This will complicate the votingprocess, in the context of moredynamic economies.

That means that an enlarged euroarea will be more dynamic and willneed higher interest rates. Are there

MIHAI SEBEA

44

5 Spain and Portugal’s ratios are 1,8 respectively 9,1, meaning that even in the case of rampant 10%inflation in these countries, the zone target can be reached if it is under 1% in the other countries.Anyway this situation could have negative effects by affecting the competitiveness of these economies.

any chances for higher rates to be inthe interest of the euro area as owhole? Which are the challenges forthe Governing Council voting system?How important will be the inflation ratein Eastern countries for euro areainflation? We can see a few morechallenges that EMU members as wellas Eastern Countries have to meet.

From this standpoint, we can seethat both the ECB and the euro zonestates would have reasons to fear newmembers acceding to the EM, even themore so if we take Great Britain’saccession into account.

Difficulties in the New ECBDecision-Making System

The necessity of a reform of thevoting mechanism

The EMU institutional framework ischaracterized by centralizing decisionand decentralizing implementation. Thevoting mechanism is extremelyimportant since the participation ofnational representatives to decision-making is not to hold national interestinto account. Even if the currentmechanism is deemed adequate, thesituation is likely to change followingEMU enlargement by new members.

The prospect of EMU enlargementthus raises challenges for the ECBorganizational structure, as well.Starting from the assumption that theeuro zone will be enlarged by 15 newmembers, and lacking an ECB reform,we would have a Governing Councilcomprising 33 members. The ECBCouncil would become the body havingthe highest number of voters, ascompared with other decision-making

structures of other central banks, suchas the FED. Many analysts haveproved that it will be very difficult forsuch a body to make monetary policydecisions.

Another issue of the enlarged eurozone would be an overemphasizedrepresentation of national central banksin the decision-making mechanism (ascompared with Bundesbank or the FED,where the Executive Board membersdominate decision-making bodies).Moreover, taking into account the lowratio of the new members’ economies,they would have a politicalrepresentation that surpasses by far thesize of their national economies6.

In this respect, the votingmechanism of the ECB decision-makingbodies will change. There were a seriesof proposals for change in publicationsin the field, among which: setting up alimited participation Monetary PolicyCouncil that would operate under theGoverning Council; introducingconstituents, as in the case of the IMF;increasing the Executive Board’snumber of votes or adjusting thenational governors’ vote rights functionof the economic size of every country.7

Consequently, the reform issue hasbeen seriously taken into consideration.In December 2002, the ECB GoverningCouncil has unanimously decided onthe content of the voting mechanismreform proposal, which is absolutelynecessary when contemplating the eurozone enlargement prospects.8

Once the Nice Treaty was in forceon February 1st 2003, the ECB hasformally adopted a recommendationregarding the change of the Governing

45


6 For a sound analysis, see Berger et alia (2003).7 Also see De Grauwe (2003), Berger (2003), European Commission (2004).8 The proposal was made based on the Nice Treaty provisions. European leaders have been unable tofind a solution at the Nice meeting but they have inserted the empowerment clause, which has allowedthe Council to change the voting system based on a proposal from the Commission or the ECB.

Council’s voting mechanism. The ECBrecommendation was passed on to theEU Council in February 2003. based onthis recommendation and taking intoaccount the opinions expressed by theCommission and the EuropeanParliament, The EU Council, convenedat the level of state or governmentheads, has unanimously decided9 tochange article 10.2 of the SBECstatute. The decision was ratified by the15 member states in order to be inforce10.

What does the decision comprise?According to it, all the members of theGoverning Council will continue toattend meetings. Yet the number ofnational central bank governors havinga right to vote will not be larger than15, the 15 votes being covered byrotation based on a pre-set rule,whereas the Executive Board memberswill preserve their vote rights. In orderto cover the necessity that governorswith a right to vote should at all timesbe from countries that would representtogether the euro zone interests, theywill have the right to vote with a certainfrequency, based on groups ofcountries.

Governors will thus be part ofdifferent groups, function of theireconomies’ ratios in the euro zone,resulting by calculating an index thatwill comprise, apart from the GDP, thesize of financial markets. When thenumber of countries in the euro zonereaches between 16 and 21, therotation system will operate based ontwo such groups, and when the zone ismade up of 22 members, the systemwill be based on three groups.Governors in each group will hold theright to vote for equal periods of time.

Let us now exemplify its operationwith 21 and 27 members. According tothe above-presented data, the proposalstipulates that once the EMU reaches16 members, the number of nationalcentral bank governors with a right tovote in the Governing Council shouldbe restricted to 15, based on therotation system. Thus, in the case whenEMU comprises 21 members, the twogroup system will be used. Memberstates among the 5 large economieswill have 4 votes, whereas the other 16countries will hold 11 votes. In case theEMU is enlarged to 27 members, thethree group system will operate, wherethe first 5 economies receive 4 votes,the following 14 have 8 votes, and theother 8 will have 3 votes.

To conclude, the new vote system ischaracterized by soundness, beingdesigned to adapt to the euro zoneenlargement up to 27 states (thecurrent EU states, which Romania andBulgaria will join).

Nonetheless, one can appreciatethat in time, the rotation system mightprove difficult even if sound, and that itis likely to lead to decision-makinggaps when the euro area comprises ahigh number of members.

Anyway, even in the event thatreform does not fully do away withdifficulties in the decision-makingsystem, it nonetheless represents astep forward. We should not forget thatBundesbank or the Federal ReserveSystem (FED) have improved theoperation of their bodies in time. It tookyears for these institutions to learn howto combine the benefits of a regionalstructure with the effectiveness of acentralized one11.

MIHAI SEBEA

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9 On 21.03.2003.10 European Commission (2004).11 See also Berger 2002.


47

Will the new voting mechanismeliminate the problems?

Thus, the reform of the ECBGoverning Council’s vote system is ofspecial importance to easternenlargement, which as we have shown,entails a limited number of 21 votes12,regardless of the number of membersthe euro zone will comprise.

The proposed ECB reform will notfundamentally respond to enlargementchallenges. Thus, with a total numberof 21 members with a right to vote, theGoverning Council will be smaller thanwithout a reform but larger than, forinstance, the similar FED body.

12 15 of the Governors + 6 of the Executive Board13 See also Berger (2004).

Graph 2 Economic importance and each country’s prevalence ratio in the governors’group

Source: according to the annex, own calculations13

Moreover, reform will not do away withthe issue of member state representation.Even in the case of the proposed reform,states such as Italy, France or Germanywill be insufficiently represented, whereasstates such as Malta, Latvia or Estoniawill have a larger ratio than the size oftheir economies. There are fears that a“tyranny” of minority might emerge evenwith a reform.

Graph 2 proves the lack ofsymmetry between the economic

importance of every country and thepart they will play in an EMU enlargedto comprise 27 members.

The lack of correlation betweeneconomic importance and the role ofnational governors is even betteroutlined by graph 3, where one cansee that the first group has a 74.63%economic participation and 4 votes,whereas the second group wouldhave just a 24.21% GDP ratio and 8v o t e s !

MIHAI SEBEA

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If we are to refer to the last groupas well, it will represent just 1.16% ofthe GDP yet it will hold 3 votes in theGoverning Council. If in the case of thecurrent euro zone composition, theExecutive Board could vote for anaverage interest rate, in case ofenlargement it is highly likely that thedesired interest rate distribution shouldbe asymmetrical. Therefore the votingprocess will be difficult, running the riskthat certain countries with majoreconomic importance should bedissatisfied with the interest rate votedby the Governing Council. In thissense, the ECB and large states’apprehension might be, again,grounded.

Consequently, even if prone tocontroversies, the reform is a stepforward. One should not forget that it tookyears to the Bundesbank or the FED toperfect the operation of their bodies.

ConclusionA process like the euro area

enlargement has a lot of challenges: forthe future euro area members, as they

will give up national prerogatives; forcurrent euro area members, becausethey have to accept economies that arenot yet ready for euro; and for theECB, because we can imagine howhard will be to implement a monetarypolicy for 25 or 27 members.

From the OCA theory point of viewwe can say that an Easternenlargement of the euro area, coulddraw this group of states from the levelof optimum they have in the present,and this will represent a problem notonly for a specific state, but for thegroup. Moreover real convergenceseems to be a problem. The differencebetween GDP per capita level in euroarea and GDP per capita level incandidate countries is quite big and thisis a major difficulty. It is obvious thatthe economic measures taken to catchup (to eliminate economic disparities),and different economic dynamics willcreate pressures for the singlemonetary policy, that needs to reach ameasure that fits for all.

Graph 3 Economic ratio and number of votes per group of countriesSource: calculations in the annex


49

If we look at the ECB’s votingmechanism, the proposed reform willnot fundamentally respond toenlargement challenges: the GoverningCouncil will be smaller than without areform but larger than, for instance, thesimilar FED body.

Moreover, reform will not solve theissue of member state representation.Even in the case of the proposedreform, larger economies such as Italy,France or Germany will be insufficientlyrepresented, whereas smallereconomies states such as Malta or

Estonia will have a larger ratio than thesize of their economies.

It is clear that the euro area Easternenlargement launches major challengesalso for the actual members and for thesingle monetary policy. Under theseassumptions, the actual members ofeuro zone could be against a quicklyenlargement to the East. But exceptingMaastricht criteria, there are no othermechanisms to block EMU accession. Itwill not be a surprise if the EuropeanCommission and the ECB will be veryexigent in evaluating the level ofnominal convergence.

REFERENCESBabetski, Jan (2003)-EU Enlargement and Endogeneity of OCA Criteria: Evidence

from the CEECs, CERGE-EI Charles University Bayoumi, T. & Eichengreen, B. (1992)-Shocking aspects of European monetary

unification, NEBR, Working Paper, No. 3949, JanuaryBayoumi, T. & Eichengreen, B. (1993)-”Shocking Aspects of European Monetary

Integration” În Francisco Torres and Francesco Giavazzi eds., Adjustment andGrowth in the European Monetary Union, Cambridge University Press andCEPR

Bayoumi, T. and Eichengreen, B. (1996)-Ever Closer to Heaven? An Optimum-Currency-Area Index for European Countries, CEPR, august 1996

Berger H., J. De Haan and R. Inklaar (2003)-Restructuring the ECB, CESIFOWorking Paper No.1084.

Berger, H. (2002)-The ECB and Euro-Area Enlargement, IMF Working Paper,02/175

Berger, Helge (2004)-The economic challenges of EMU enlargement, ÓnDeutscheBank Research, EU Monitor, April

Bini-Smaghi, L. & Vori, S. (1993)-Rating the EC as an optimal currency area, Temidi discussioni, nr. 250 Roma, Banca d’Italia

Bjorksten, Nils (2000)-Real convergence in the enlarged euro area: a comingchallenge for monetary policy, Bank of Finland, Working papers, no.1/2000

Boreiko, Dimitri (2002)-EMU and accession countries: fuzzy cluster analysis ofmembership, ONB, working paper 71

Corden, W. M (1972).-îMonetary Integration, Essays in International Finance”,Princeton University, International Finance Section no.93,

De Grauwe, Paul (2003)-Economics of Monetary Union, Oxford University Presss,6th Edition

Deutsche Bank-EU Enlargement Monitor, January 2003

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Deutsche Bank -EU Monitor, April 2004European Central Bank-Annual Reports, 2000, 2001, 2002European Central Bank-Monthly Bulletin, January 1999European Monetary InstituteI-Report on convergence, 1998European Comission (2003)-European Economy, nr. 6/2003European Commission (2004)-EMU after 5 years, Directorate-General for Economic

and Financial Affairs, 15 july 2004Fidrmuc, Jan (2002)-Strategic Aspects of Exchange Rate Regime Choice for the

Accession Countries, ECARES, Universite Libre de Bruxelles, November 2002Fidrmuc, Jarko and Iikka Korhonen (2001) -Similarity of Supply and Demand

Shocks between the Euro Area and CEECs, BOFIT Discussion Paperno.14/2001, Bank of Finland, Institute for Economies in Transition

Frankel, J. And Rose, A. (1998)-„The Endogeneity of the Optimum Currency AreaCriteria”, Economic Journal 108, July

Gaspar, Pal (2001)-Real and Nominal Convergence of Pre-Accession Economiesand the Choice of Exchange Rate Regime

Kenen, Peter (1969)-The Optimum Currency Area: An Eclectic View, University ofChicago Press,

Kenen, Peter (1969)-The Optimum Currency Area: An Eclectic View, University ofChicago Press

Mc Kinnon, R. (1963)-Optimum Currency Areas American Economic Review, Vol.53

Mc Morrow, K. (1996)-The wage formation process and labour market flexibility inthe Comunity, the US and Japan, Economic Studies, no.118, EuropeanCommission, (DG ECFIN)”

Mongelli, Francesco Paolo (2002)-“New” views on the optimum currency areatheory: what is EMU telling us?, BCE working paper no. 183, 2002

Mundell, Robert (1961)-A Theory of Optimum Currency Areas, American EconomicReview, vol. 51

The Oesterreichische Nationalbank (OeNB) (2001)-Focus on Transition, no. 2Part, Peter (2003)-Real exchange rate developments in the accession countries,

Working paper no.1/2003, Federal Ministry of Finance, Vienna July Schweickert, Rainer (2002)-The Integration of accession Countries into EMU -

Concerns about Convergence, ACE-Phare Seminar, February 15-16, 2002Sebea, Mihai (2005)- “Challenges for South - East European Countries on their

way to EMU; the case of Romania”, in îOne Enlargement Is Not Enough, SouthEast European Debates on EU Integration”, Bulgarian European CommunityStudies Association

-www.ecb.int-www.europa.eu

-www.bnro.roEurostat, EC Economic Data Pocket Book, no.2/2004


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Annex 1 The ratio/weight calculation in the case of ECB’s voting mechanism reform

Table 1.1

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Table 1.2

Notes:1. The division per groups (table 1.1) is performed function of the GDP weight only;2. In table 1.2, columns 1 and 2, groups and number of votes comply with the ECB

proposal;3. In column 5, the group weight in the overall governors’ votes is calculated by dividing

the number of votes (4, 8 or 3) to the whole number (15);4. In column 6, every country’s ratio/weight matches the group ratio to the number of

countries in the group


53

Romanian GDP per capita stands at36% of the European average level(EU-25) in 2006 (table 1). The mainobjective of the policy-mix for the next7 years is to cover this gap with atleast 10 percentage points1. In order togradually recover it, Romania needs anannual average economic growth of atleast 7% for the next 25 years, basedon real competitiveness. For achievingthis target, we need a dynamiceconomic environment, based onnational and foreign direct investmentsthat may develop activities with higheradded value. These activities will lead

to higher exports, productivity andgenerate well paid jobs.

Romania: a small economy with avast consumer market

Romania’s population stands for4.7% of the EU-25 population, and itsshare in the GDP is 0.7% at currentprices (1.5%, at PPS), according toestimates for 2005. In order to have adegree of comparison with the newmember states, let us consider Hungarywhich, with less than half of Romania’spopulation, contributes with a largershare – of 0.8 % – to the EuropeanUnion’s GDP ( table 3).

*Andreea Vass is a Researcher, Institute of National Economy and Adviser to the RomanianPresidential Administration, [email protected] 1 National Development Plan 2007 -2013 - strategic vision.

ROMANIA’S WAY TOWARDS COMPETITIVENESS

Andreea Vass*

Abstract. We want Romania to become a benchmark for our region, a center ofclear competencies and a top reference exporter. Still, our integration in the globaleconomy through the strategic partnership with the European Union has been builtmainly on the cheap labor and low and medium-technology exports. Severe socialproblems have been solved by creating new jobs. Yet, these exports are low valueadded and have a small contribution to raising the living standard through high andlasting economic growth rates. There is definitely no place for further illusions. We havebasically two options left:

To compete globally with the Chinese dragon and the Indian elephant on thelabour-intensive product markets, or

To build a sound policy for attracting foreign direct investments (FDI) that may turnRomania from a spectator into an active player on the high-technology based globalmarket.

Taking into account the perishable first option, we are left to play the second card.In other words, to achieve sustainable global competitiveness, Romania has no choicebut to become a vibrant knowledge economy.

The last few years witnessed constant economic growth and adjustment of thestrategic investors’ perception of risks. But I believe that Romania is still un undervaluedasset. The reasons are gathered on three late bloomer pillars: economics, propertyrights and geo-strategic advantage. Romania is now in a position to cash in on its geo-strategic location, savvy foreign policy, abundance of natural resources, soundmacroeconomic policies, skilled and still inexpensive labor force and the stock-marketspectacular growth.

Romania is as large in squaremileage as UK and has a populationroughly the size of Canada (Romaniahas 21,6 million inside its borders andanother 5 million Romanian speakersaround its borders), making it thesecond largest East European countryafter Poland. Romania will soonbecome the 7th largest EU member(out of 27) after the country’s EUaccession on January 1st 2007.

Romania has been a late bloomerin the region—especially in economicterms. Even though it has been slatedfor EU accession since 1999, it hasmanaged to make a case for itself inthe EU on political and geo-strategiccriteria rather than on economic terms.Economically Romania remained alaggard till the year 2000, when itstarted experiencing quite spectacularand constant growth (table 2). In thelast year, only, it gained the status of“functional market economy” and it isonly this year (2006) that it will reachagain the GDP it had before thecommunist collapse (though the waythe GDP was calculated before 1990remains problematic). In-depthestimations of the speed and magnitudeof Romanian convergence on the EUand explanations of the main laggingbehind driving forces were provided inan earlier research study2.Convergence can certainly not betaken for granted. The transition of theCEE countries to a new stage ofdevelopment – as economies driven bythe innovation on which the EU focuses– is very hard, and is calling forcomplex transformation of manyinterdependent aspects of competition.Policymakers generally focus onaspects of macroeconomic quality. Theyshould also address microeconomicreforms as qualitative indicators togauge the nation competitiveness. The

challenges are still hard to meet:despite having economies at differentlevels of development, the CEEcountries must compete with the EU-15.At the same time, they are poised tojoin the EU’s strong institutional andlegal systems. Romania lags behindless in macroeconomic stability than interms of national business environmentand public institutional development:contracts and law enforcement,corruption perception, and governmentwaste.

We push different pedals for theeconomic growth

In order to recover the differences tothe European economic giant, we haveto speed up real economy. In reality,however, in 2005 consumption,investments and exports have playeddifferent roles in the European andRomanian economic growth. While theexport is the main vector of theEuropean growth, the consumptionprevails in Romania.

In the meantime, while agriculturalproduction steeply decreased because ofunfavorable meteorological conditions (-14%), industry was the basis for oureconomic development, which accountsfor approximately 27% of GDP. Thedynamics of the industrial activity inRomania was three times lower in 2005,as compared to 2004. More than that, itsgrowth rate was insignificant higher thanthe European, especially looking from thegaps reducing perspective. A strongnegative impact was produced byRomanian clothes, leather and shoes,textile industries, with a 10.5% share inthe total production, while c o n s t r u c t i o nmaterials and other non-metallic mineralsproducts, machines and equipmentindustries had a slighter negativeinfluence, with a share of 11% in thetotal Romanian production. The industrialoutput growth was a positive surprise i n

ANDREEA VASS

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2 Vass, A., Romania: the Trade and the Development Approaches to CEE Convergence with the EU, underthe Competitive Pressures of Integration, Institute for World Economics - Hungarian Academy of Sciences,Working Paper No.151, February 2005.

2 0 0 6. After a very poor performance in2005 (2% growth), industrial outputexpanded by 7.2% in August 2006. Theincrease was even higher in themanufacturing sector - 7.7%.

Performers in recovering thebusiness environment quality

Pre-conditions are favorable formedium- and long-term economicdevelopment. Strategic investors areadjusting their perception of risk andare increasingly interested in Romania.We have received lately reliable votesof confidence from prestigiousinternational institutions:

World Bank ranked Romania onthe 2nd place worldwide in termsof speed and quality of reformingthe business environment and 1stin Europe. However, Romaniastands at the 49th place in termsof ease of doing business in2006, up with 22 positionscompared to the last year, and7th place in terms of ease ofopening a business and enteringthe market.

In terms of foreign directinvestments performance, Romaniaranks 24 in a list of 141 countries,benchmarked by the UnitedNations Conference on Trade andDevelopment (UNCTAD), up with7 positions from the last year –the legislative favorable frameworkand the flat tax rate of 16% havebeen the main reasons for thec h a n g e .

Moody’s upgraded Romania’sforeign currency long-term debtrating to Baa3 – “investmentgrade” - from Ba1.

Performers in recovering the pricegaps

The Euro zone ended 2005 with ageneral price increase of 2 . 2 % .Obviously, there are still rather bigdifferences between the EU member

states and the candidate countries. Forexample, Romania remains the countrywith one of the highest inflation rates inthe region, of 8.6%.

Anyway, in certain economic sectors– such as industry and energy –Central and East European prices tendto adjust faster to the EU prices:

In industry, except for theconstruction sector, pricesincreased by 5.5% for EU – 25,in November 2005, as comparedto the same period of last year.At the same time, prices for totalindustrial production increased inRomania by 22.4%.

Similarly to Romania, at the EUlevel, the most spectacular priceevolution is to be seen in theenergy sector, with a 14.8%increase for the Euro zone,20.1% for EU-25 and,respectively, 59.1% for Romania.

However, the deflation processc o n t i n u e d in 2006, dropping inSeptember to 5.48% on year on yearbasis. The annual rate of inflation willcontinue to drop further towards theNational Romanian Bank target of 5%for 2006.

Dynamics of wages versusdynamics of productivity

The evolution of the labor cost inthe EU indicates a convergent trend ofsalary and non-salary related earningsbetween Western European countriesand the new member states. Thus, theaverage growth of the salary costs forthe Euro zone is estimated to 2.2% andto 2.7% for the EU – 253.Comparatively, the gross average salaryincrease in Romania of 14% exceedsthe growth in the EU – 25 (except onlyfor Latvia: +15.7%).

Romania is positioned among themost dynamic labor markets, however, itis not accompanied by a higherdynamics of productivity (of only 5.6% in


55

3 Eurostat, February 2006

ANDREEA VASS

56

November 2005 as compared toNovember 2004). Romania faced asignificant loss of competitiveness in theindustry sector during 2005. It is ratherobvious that in the race for recovering

the gaps between Romania and the EU,2005 witnessed a steep price and salaryearnings growth, but feels painful interms of GDP, industrial production,labor productivity and exports growth.

Box 1. Salary increase in 2005 as compared to 2004, between necessity andcompetitiveness crisis

îLast year, authorities granted multiple and excessive salary increases that were correlated to a littleextent to productivity or to the professional requirements of a modern public sector. Such practiceshave a short term impact and affect any attempt to control inflation. At the same time, such practicesincrease budgetary expenses in favor of salaries and consumption and are far from encouragingefficient investments meant to improve the education, health and infrastructure”. (IMF, 2006)

The average net revenues earned by Romanians, expressed in RON, increased by 24% last year.Romanian employees’ net average income increased to 848 lei in December 2005, from 686 leiin December 2004. Obviously, the comparison with the previous month is more eloquent. Novemberdoes not include the year-end bonuses, so that Romanians benefited of an increase to 774 lei inNovember 2005, from 625 lei in November 2004. This dynamics translates into an annual growthof gross average salary of 17.2% in the economy. Taking into account the effects of the flat taxrate of 16%, we reach an increase of the net average salary of almost 24% in the economy.The net salary increase for budgetary employees was six percentage points higher than theaverage on the economy. Salaries of civil servants, of employees in the health and educationsectors increased by 30%.

The most accentuated net average salary growth pace was felt in the health sector ( 3 5 . 7 % ) ;however it remained the only public segment with revenues lower than economy’s average (witha weight of almost 93% in November 2005, as compared to 85% in November 2004).

On the other hand, for the first time after 1989, the annual average salary in theeducation field substantially exceeds the average salary on the economy in 2005 (with a weightof almost 108%). However, such evolutions have been witnessed starting October 2004, whichexplains the similar weight of salaries in this sector in the total economy, between November2004 and November 2005.

Civil servants benefited of a 33.5% increase of net salaries, which allowed for theincrease of their weight in the total economy from 144% in November 2004 to 155% inNovember 2005.The effects of the exchange rate push the salary increase towards 50%. If we are to add lastyear’s real appreciation of the RON/Euro exchange rate by 15%, to the previous net salaryincreases, we obtain a 45% growth of net salaries in the general public administration, brokendown as follows:

48,5% for the civil servants; 38,5% for the staff in the education system; 50,8% for the staff in the health system.

It is relevant and justified to report such increase in employee’s purchasing power as long asproducts are predominantly imported. Such salary increases are welcome and fair, allowing many Romanians to improve their livingstandards. Still they have exercised major inflationary pressures and they have stimulated theincrease of the commercial balance deficit. Civil servants’ salaries have to grow. We have tohire more skilled staff in many agencies and ministries, in order to cope with the obligationsarising from the coming accession to the European Union. Yet, this is to be done based on aunitary strategy, that should aim at increasing salaries no more than once a year, according toEuropean standards. Such increases should be clearly defined in the annual budgeting. Then, increases in salaries and jobs have to be offset by a reduction of bureaucracy and anincrease of public administration efficiency. In order to be able to talk about a real reform in thesesectors, it is absolutely necessary that higher salaries be matched by an increased responsibility,a higher quality of human resources and of the services they provide, and a zero tolerance forcorruption. Last but not least, salary increases in the public sector have to reflect better the staff’sknowledge and qualification. Otherwise, salary expenses will increase, undermining the capacity toabsorb European funds and sacrificing the objective of creating a modern civil service.

Note: Calculations based on the Institute of National Statistics database, March 2006

From disintegration to reintegration

As reflected by a study published bythe World Bank in 2006, during the lastten years, the exports have tripled inthe Eastern European and formerSoviet Union region. The imports haveincreased 2.5 times and the foreigndirect investments have intensified morethan anywhere in the world4. The reportdraws on two poles, with slightly flexiblelimits:

Euro-centric: a wider group, withcountries focused on rapid reforms –richer countries;

R u s s o - c e n t r i c: made of poorercountries, with a slower reform pace;

Romania was classified in a “middlegroup”, next to Bulgaria and Croatia.Even though these countries haveadopted liberal commercial policies,they did not encourage enoughcompetition on the domestic market,they did not consolidate governanceand they did not implement otherstructural reforms with respect to traderelations. Although, the imports and theexports have increased, no significantgrowths were witnessed in terms ofnational productivity and revenues.However, Romania is mentioned as oneof the countries with the mostimpressive performances in terms ofexports, mainly because of thereorientation of its foreign trade towardsthe EU and of the remarkableexpansion of its trade despiteinternational competition for productsthat incorporate cheap labor (textile,clothes).

12% of Romanian exports and 15%of imports are based on hightechnologies, as compared to 30% theworld average and 20% the Europeanaverage5

Within the community ballet toredefine the Lisbon criteria, exports’promotion has to be, for Romanians,the catalyst of the economicdevelopment. We have one of thelargest consumer markets in the regionand we are at the crossroads of threefuture European transportation routes:4, 7 and 9, which allow for an easyaccess to the countries in the formerSoviet Union, Balkans, Middle East andNorth Africa. However, within the exportstructure, competitiveness factors arethose expressing the degree ofeconomic development and our capacityto interact with the global market.

During the transition years we couldnotice slight changes in the structureof Romanian exports in favor of cheaplabor-intensive and to thedisadvantage of capital intensive andhighly skilled labor intensive exports,according to the above mentionedWorld Bank report (see table 4). We arebetter positioned than Bulgaria but wellbelow Poland or Hungary. In terms ofimports, most of the countries in theregion mainly focus on capital intensiveexports, but also on highly labor-intensive imports, the upwards trend oftheir weight being maintained inRomania, as well.

Romania significantly improved itscompetitiveness of the trade with EU-15(see table 5), still the demand has beenthe main catalyst for the intra-regionaltrade in the last few years (see table 6).

The competitiveness and diversi-fication factors are the reasons forRomania losing the export market in theformer communist European region,worth more than USD 210 million,between 2000 and 2003.

In 2005, the export and importstructure was clearly favorable to lowtechnologies (54% in exports, 35% in


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4 World Bank, From disintegration to reintegration, January, 20065 Competitiveness and the Export Performance of the Euro Area, European Central Bank, June 2005

imports) and to medium technologies(34%, respectively 45%) (according toour estimations based on the Anderssonmethodology, 1999). It reflects the lowcapacity of Romanian companies toinnovate in order to develop theirproducts and services. 83% of thesecompanies are non-innovative, 3% arestrategic innovators and only 2%implement new technologies6. There’slittle innovation and, as a consequence,there are few industries using newtechnology intensively. Instead offocusing on exporting cars, computers,equipment, ecological agriculturalproducts, tourism or services in order toachieve the economic growth, we reliedon shoes and clothes (still the largestweight in the Romanian exports’volume), that is on lower labor costsand on primary resources.

In the last two years, based on thesignificant economic growth and impro-vements in the business environment,the structure of Romanian exports haschanged slightly in the benefit for goodswith a higher added value. Most likely,this reflects the important FDI inflows,as well as the changes on theinternational market of textile products.Still, real imports have expandedconstantly higher than the exports,meaning nothing else but a furtherdeterioration in the current accountdeficit (estimated at 10% of GDP in2006).

The further steps towards produc -tivity and competitiveness

Illusions don’t fit this landscape anylonger. We have basically two optionsleft:

To compete globally with theChinese dragon and the Indianelephant on the labour-intensiveproducts markets,

or

To build a sound policy forattracting FDI that may turn Romaniafrom a spectator into an active playeron the high-technology based globalmarket.

If we are to take into account theperishable nature of the first option,we’re bound to play the second card.In other words, to achieve sustainableglobal competitiveness, Romania has nochoice but to become a vibrantknowledge economy.

Ireland has proven that by investingin three main directions: attractingsubstantial foreign direct investments,supporting a high level of education and ahighly skilled labor force, consolidating thedomestic social consensus and the realinstitutional transformations, it hasbecome the biggest performer inrecovering the gap in terms of GDP percapita. Eire is now one of the mostdynamic European economies (seechart 1). Poland and Hungary also havetaken measures to promote thecompetition among enterprises, tostrengthen the governance and tostimulate foreign direct investments,aiming at including domestic companiesin the global production network.

What should we do? For us, theRomanians, the coming accession onJanuary 1, 2007, means first andforemost a full market liberalization. Inorder for its positive effects to betranslated into reality, we have to solveseveral critical problems: the h i g h l yskilled labor force, the infrastructureand the attracting of foreigninvestments. Pragmatically, economicplanning has to be coherent and unitary,as to cover a few key objectives (eventhough “urgencies seem endless”), that isthose niches that could unfreezed e v e l o p m e n t : Maintenance of a stable and

attractive fiscal environment forforeign investments, that should

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6 CIS 3 Report of the National Institute of Statistics , European Commission, 2006

favor the transfer of capital andtechnology – FDI increased by 47%in 2005 and it keeps a similar speedfor 2006, but Romania continues tohave one of the lowest FDI percapita. At the same time, it wouldbe desirable for internationalacquisitions to place on the worldmap other foreign investments inRomania, as well. A sound nationalprogram facilitating investmentsinitiated by Romanians that studyabroad would have the capacity toattract real know-how resources andto turn into good account the humancapital, so much appreciatedworldwide.

Channeling investments towardsseveral key-fields, n a m e l yinformation technology and hightechnology sectors – the role of theindustrial parks and of the recordnumber of software developers perhabitant in Romania is stillfundamental in this respect. In 2005,wood processing was the sectorattracting the highest weight of FDIin Romania (12.6%), followed by theenergy sector (8.3%), the cars andthe transportation vehicles (7.8%)and the constructions (5.15%)7.

Training a specialized and skilledlabor force for these sectors - byreconfiguring the content and thepriorities of the academic curricula.The reform of higher educationcould only be put into practicebased on a strong coercive systemincreasing the competencies of theacademic staff. Despite the recordamounts allocated for education(4.7% of GDP in 2006), theRomanian universities are laggingmuch behind the performance of top500 universities worldwide (accordingto the Shanghai classification).

A stronger focus on innovation intechnology – the t e c h n o l o g i c a lplatforms should play their major

role. The results of the fifth editionof the European InnovationScoreboard (2006) show thatRomania’s performance in theinnovation field are at 38% of theEuropean average, with a slightdownwards trend as compared tothe previous year (the indicatorslimiting our capacity to innovate aremainly limited by the intellectualproperty rights, life-long learning, theearly stage venture capital, thepublic and private expenditures forr e s e a r c h - d e v e l o p m e n t - i n n o v a t i o n(RDI), the public subsidies forinnovation, the exports of high-techproducts and the weight of expenseswith communication and informationtechnologies in the GDP, the new tofirm product sales8). The evolution ofthe RDI policies in Romania isundergoing important positivechanges, mainly due to the futureperspective of EU accession.Romania is committed to increasingthe public funding up to 1% of theGDP by 2010. Many challenges areleft to be addressed. In developingthe innovation capacity, the publicpolicies have focused until now onstrengthening the human resourcesand the research capacity in theresearch institute and the universitysectors, but fewer measures weregeared towards the development ofinnovative performance in industry.

More favorable financing conditions– the spread between the interestfor loans and for new deposits ismaintained at a rather high level, of5.2%, in the context where theinterest for new loans used to be, atthe end of 2005, around 13%9;

Prudent fiscal and governmentalspending management, especiallyby giving up the promotion of anexpansionist policy: large salaryincreases and the extension of theadministrative body;


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7 Romanian Agency for Foreign Investments - ARIS, February 20068 European Innovation Scoreboard , European Commission, 2006

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Practicing a wide opening in theinternational trade and competition– in reality, preferential measurescould have a negative impact on theeconomic performance as theydecrease the enterprises’ motivationto increase efficiency, innovation andquality. For example, d i r e c t i n gsubsidies and state aids towardsresearch, education and environmentcould change expenses into long-term economic efficiency. Althoughin 2004 the state aid diminished byone third as compared to 2001, thefollowing continued to be seen aspriorities: the rescuing-restructuringas horizontal objective (24%), steeland mining industry as sectoralobjectives (with another 26%).

Public acquisitions based on opentenders and on competitivedialogue – for 2004, approximately60% of the total public procurementsexceeding Euro 100,000 would stillbe granted based on a single sourcenegotiation10;

Reduction of the degree of energyintensiveness in the Romanianindustry – an average of 790 kg ofoil-equivalent products are used inorder to obtain Euro 1000 in theGDP, namely 4.5 more than the EU-25 average11. This lack of efficiencyappears both at the production andthe distribution levels, and at theconsumption one;

Decrease of transportation costs –by improving the roads’ quality andinfrastructure, which will also reflectthe decrease of traffic jam costs fortransiting Romania; with only 200km of highway, Romania is far fromHungary or Poland.

Anchoring economic developmentinto the social partnership andpublic consultation pattern – it willincrease the quality of governance inareas such as: the impact analysis,the monitoring, the assessment, themulti-annual programming and theregional partnership.

European financing should play animportant role in reconfiguring theRomanian economy based oncompetitiveness principles. Thestrategic vision and the managementof related projects, not necessarilythe funds available (more than 32billions Euro for 2007 - 2013), arestill our main shortcoming. Ireland isagain mentioned as a “ b e s tpractices” example - in most of thespecialized studies on this issue - inintegrating community assistancewithin a coherent, macro-economicpolicy framework, supported bysocial consensus. The Irish haveestablished human resourcesfinancing as a priority, with a weightof 35% in the total structural funds,as compared to a 25% average inthe other European states, foreducation and training.

9 Romanian National Bank - BNR, March 200610 National Authority for the Regulation and Monitoring of Public Procurement - ANRMAP, February 200611 Atlas method of World Bank, 2005

Conclusions As a matter of fact, we do not need an accentuated dynamics of priorities,

amended from one decision-making commission to another, nor do we need aplethora of overlapping economic strategies. Instead, what we need is a realeconomic dynamics. The local administrations that will succeed in improving thequality of their governance, and the Romanian companies that will successfully attractforeign investments and will prepare a highly-skilled labor force will contribute to thedeath of the old habits, walking the road towards productivity and competitiveness.


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ANNEXES

Chart 1. Economic gaps between Romania and EU in 2005. Effects of candidatecountries accession to EC/EU on the GDP/capita dynamics

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INTRODUCTION

In 2000 all European population sawa new document of the European Union– the Charter of Fundamental Rightsand Freedoms. This Charter for the firsttime in the European Union’s historysets out the whole range of civil,political, economical and social rights ofEuropean citizens and all personsresident in the European Union.

This paper argues that the Charterof Fundamental Rights broughtinnovations not only by structuring thehuman rights mechanisms of theEuropean Union, but also advancing theexisting international legal mechanismsfor the protection of the human rights.The mere fact that the institutions ofthe European Union and member statesacting in the area of the Communitylaw should comply with the provisionsof the Charter is an evidence ofwidening of the base that the Europeancitizens can rely on to protect theirrights and freedoms. Although theCharter is not legally binding, it has agreat legal impact on the human rightsprotection in the European Union.

Before analyzing the status and theprovisions of the Charter, the paperpresents an overview of the humanrights protection mechanisms theEuropean Union. Here it mainly focuseson the Treaty provisions regardingfundamental rights and freedoms.Analyzing these legal acts of theEuropean Union this paper shows thegradual development of the humanrights protection mechanisms in theEuropean Union. Besides that togetherwith Treaty provision it presents basiccases heard by the European Court ofJustice, which have played an importantrole in embedding the protection ofhuman rights clause in the treaties ofthe European Union.

Basing on the above mentioned thispaper refers to the Charter offundamental rights and analyzes itslegal status. Basically it focuses on thecontent of the Charter by presentingmain legal provisions and provisionsand the innovative provisions that itembeds. For the purpose to explore theinnovative articles of the Charter, thecomparative analysis between the

* Rufat R. Babayev - LLB in International Law (Baku State University), MA in International Relationsand European Studies (Central European University) and candidate of LLM in European Law (LeidenUniversity).

EU CHARTER OF FUNDAMENTAL RIGHTS: WHAT IS THELEGAL IMPACT OF BEING CHARTERED?

Rufat R. Babayev*

Abstract. This paper argues that the Charter of Fundamental Rights broughtinnovations not only by structuring the human rights mechanisms of the EuropeanUnion, but also by improving the existing international legal mechanisms for theprotection of the human rights. A comparative analysis between the Charter ofFundamental Rights and European Convention of Human Rights is also presented inthe paper. Comparing these two legal texts, the paper aims to determine whether theCharter competes with ECHR, aims to replace it or merely complements it. The humanrights clause of EU conditionality policy plays a crucial role in raising the level of humanrights protection and democratic development in the candidate states.

Charter of Fundamental Rights andEuropean Convention of Human Rightsis presented in this paper. It is chosenparticularly this legal text, since it wasthe main regional legal mechanism forthe protection of human rights inEurope, before adoption of the Charter.Comparing these two legal texts thepaper aims to determine whether theCharter competes with ECHR, aims toreplace it or simple complements it. Inthis part it is also presented the caseswhereby ECJ, ECHR, national courtsinvoke the Charter, as a clear examplefor my argument that the Charter haslegal impact.

Finally, this paper analyses thehuman right protection as one of thebasic requirements of the EuropeanUnion towards candidate memberstates. It is argued that the humanrights clause of EU conditionality policyplays a crucial role in raising the levelof human rights protection anddemocratic development in thecandidate states. The Charter as aconsolidator of human rights in the EUstrengthens the influence of EU overthe candidate and member states. Herethe paper focuses on the EUconditionality policy concerning Bulgaria,Romania, Turkey and Croatia.

Legal Premises for the CharterThe Paris Treaty founded the

European Coal and Steel Communitydid not contain any provisions regardingthe protection of human rights andfreedoms. Subsequent Rome Treatycan be determined as the starting pointof the development of the human rightsprotection mechanisms of the EuropeanUnion, because precisely in the

preamble of the Rome Treaty, thefounding member states express theirwillingness to “preserve peace andliberty” and make the Union “ever closeunion of Europe’s peoples”1. As RomeTreaty (EEC Treaty) started “as aneconomic treaty, of limited ambitions,with the aim of creating a commonmarket” it only contained such provisionas improving living conditions andabolishing discrimination on the groundsof nationality, equal treatment of menand women at workplace, equaltreatment for immigrant workers, andright of movement and establishment2.

Subsequent treaty amendmentsmade explicit references to the mainprinciples that the Community is basing.The preamble of the Single EuropeanAct of 1986 reflected the will ofmember states “to work together topromote democracy on the basis of thefundamental rights recognized in theConstitution and laws of the memberstates3”. The most important treatyconcerning the development offundamental rights principle isMaastricht Treaty embedded that “theUnion shall respect fundamental rights,as guaranteed by the EuropeanConvention on Human Rights and asthey result from the constitutionaltraditions common to member states asgeneral principles of Community law4”.This provision is mainly a result of thejudgments of the European Court ofJustice. The following AmsterdamTreaty made innovation, by stating that“the Union is founded on the principlesof liberty, democracy, respect of humanrights and fundamental freed0ms, andthe rule of law5”. Moreover this

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1 European Economic Treaty, Rome 1957, Preamble2 Ibid., Art. 7, 48- 51, 119 3 Single European Act, 1986, Preamble 4 Treaty on European Union, Maastricht, 1992, Article 6.25 Amsterdam Treaty, Article 6.1

provision strengthened by a sanctionprocedure, whereby a member state’srights may be suspended if it engagesin a serious and persistent breach ofprinciples of fundamental human rights6.

The European Court of Justice hasplayed a crucial role in developing theprinciple of fundamental human rights,whereby their judgments were mirroredin the subsequent treaties of theEuropean Union. One of the first timidreferences to human rights can befound in Stauder case of 19697. In thiscase the ECJ for the first time ruledthat the protection of fundamentalhuman rights constitutes one of thegeneral principles of the CommunityLaw and protected by the Court. TheECJ provided no further comment inthis case on the nature, identity, orextent of these general principles8. Thiscase put the basis for the developmentof the general principles since “the ECJhas already paid some attention to thedevelopment of general principles ofindividual protection, drawing not just onTreaty provisions but also on theprinciples of domestic origin such legalcertainty, proportionality and dueprocess9”. In addition to the judgment inStauder case, in subsequent case theECJ went further by specifying that theprotection of fundamental rights,

inspired by the constitutional traditionscommon to the member states, must beensured “within the framework of thestructure and objectives of theCommunity10”.

Nold case further advanced theprinciple of fundamental human rights,where “ECJ affirms that it would strikedown the provisions of Communitylegislation which are contrary to thefundamental rights protected by theconstitutions of the member states andit adds that international treaties for theprotection of human rights can supplyguidelines which should be followedwithin the framework of Communitylaw11”. In this case the Court refers tothe European Convention on HumanRights, stating that the Community lawbases on acts of public internationallaw such as ECHR12. In the followingRutili case the ECJ went further, whereit not only invoked the specific articlesof the ECHR, but also applied them,and not only to acts of Communityinstitutions but to an act of a memberstate derogating from the Communityfreedoms13. Thus, member states mustobserve fundamental human rights“when they are enforcing Communitypolicy and interpreting Community rulesas well as derogating from Communitylaw14”. Moreover in one of the leading

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6 Ibid., Article 77 Case 29/69, Stauder vs. Ulm, [1969] ECR 4198 Paul Craig and Grainne de Burca, European Union Law: Text, Cases and Materials, Oxford UniversityPress, New York, 20039 U. Scheuner, Fundamental rights in European Community and in National Constitutional Law, 12 CMLRev.171, 197510 Case 11/70, Internationale Handelsgesellschaft vs. Einfurh und Vorratssetelle Getreide, [1970] ECR112511 Nanette A. Neuwalh, The European Union and Human Rights, Martinus Nijhoff Publishers, TheHaque, 199512 Case 4/73, Nold [1974], ECR 491, the Court reiterated the Nold judgment in Hauer case, where itreferred to the Protocol 1 of the European Convention on Human Rights.13 Case 36/75 Rutili [1975] ECR 121914 Sionaidh Douglas-Scott, Constitutional Law of the European Union, Pearson Education, Edinburg, 2002,p. 443

cases, the Court reiterating therequirement over member states thatthey must comply with fundamentalrights, centered on the issue whetherthe adoption by a member states ofcertain way of implementation ofCommunity laws in compatible with theprotection of fundamental humanrights15.

The Legal Status of the Charter ofFundamental Rights

The Charter of Fundamental Rightsis a result of long deliberations ofwhether the European Union shouldaccede ECHR of it should have its ownlegal act including fundamental humanrights. The new Convention process bywhich the Charter was adopted, whichbecame a new model of adoption theConvention on the future of Europe,adopted a draft Charter within less thata year period16. As a result of theConvention, on 7 December 200o, theEuropean Union Charter ofFundamental Rights was proclaimed bythe respective representative of EUinstitutions, European Parliament,Council and European Commission.

The Charter with “a lofty preamblein the name of the peoples of Europerefers to the common and indivisibleuniversal values on which the Union isfounded and to diversity of cultures,tradition and identities in Europe, isdivided into seven parts17. First sixparts are headed Dignity, Freedoms,

Equality, Solidarity, Citizen’s rights andJustice. Basically 50 rights embedded inthe Charter are taken from preexistinglegal text, such as ECHR, theEuropean Social Charter, theCommunity Charter of Social Rights ofWorkers, ruling of ECJ and Court ofHuman Rights and constitutionaltradition of member states18.

The rights contained in the firstchapter, such as right to life, freedomfrom torture, slavery and execution,appear to sit oddly within a Charterwhich is primarily directed towards theinstitutions of the EU, given that theirpowers to infringe such rights remainvery limited19. The chapter on freedomsmainly concentrates on basic civil andpolitical liberties to be found in theECHR, such as liberty, association,expression, property, private and familylife, but also contains certainfundamental social rights such as theright to education, the right to engagein work, the right to asylum and moreparticular provisions as the rights toprotection of data and the freedom toconduct a business2 0. Chapter IIIincludes “a basic equality before thelaw guarantees” and manly refers to apositive action in the field genderequality, protection for children’s rights,and some weaker provisionsquarantining respect for culturaldiversity, for the rights of elderly andperson with disabilities21. Chapter IV onsolidarity contains certain labor rightsand reflects some of the provisions of

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15 Case C-5/88, Wachauf vs. Federal Republic of Germany, [1989] ECR 260916 Grainne de Burca, The rafting of the EU Charter of Fundamental Rights, 26 ElRev. 126, 200117 Paul Craig and Grainne de Burca, European Union Law: Text, Cases and Materials, Oxford UniversityPress, New York, 2003, p. 35918 Sionaidh Douglas-Scott, Constitutional Law of the European Union, Pearson Education, Edinburg, 2002,p. 47519 Ibid. 20 C. McGlynn, Families and the EU Charter of fundamental rights: Progressive change or entrenching thestatus quo? 26 ELRev. 582, 200121 Paul Craig and Grainne de Burca, European Union Law: Text, Cases and Materials, Oxford UniversityPress, New York, 2003, 359

the European Social Charter which isalready integrated into EC law22. Thechapter of citizens’ rights basicallyprovides certain specific right to thecitizens of the European Union. Justice,the final chapter, includes several rightsof defense such as the right to fair trial,the presumption of innocence, theprinciple of legality and proportionalityof penalties, and right to effectiveremedy23.

The charter as it was drafted is notcurrently legally binding, though thereare scholars who think that a properlegal analysis makes it cleat that it islegally binding24. First, the Charter doesnot create any impediments for theplaintiffs to protect his/her rights relyingon exiting EU law on human rights andsecond the Charter Convention wasgiven a mandate to consolidate theexisting EU law of fundamental humanrights and not to amend it25. Thus asMenendez writes, “the Charter would bebased not on its formal incorporationinto community law, but on its characteras authoritative consolidation of existinglaw26”.

Although the Charter was designedas no having legally binding effect, ithas already begun to have legal impactas a result of reference by theEuropean Court of Justice and Court ofFirst Instance. The widest use of the

Charter was in the case BESTU vs.Secretary of State for Trade and Industry,which concerns entitlement to annualleave. The Advocate General relying onthe article 31 of the Charter stated that“the Charter provides us with the mostreliable and definitive confirmation ofthe fact that the right to paid annualleave constitutes a fundamental right27”.In D and Sweden vs. Council case theAdvocate General in his opinion statedthat although the Charter is not legallybinding, it still constitutes “the mostvaluable evidence on the commondenominator of the basic legal valuesshared by Member states28”. Moreoveras Advocate General Mischo stated theCharter constitutes “the expression atthe highest level of a democraticallyestablished consensus on what musttoday be considered as the catalogueof fundamental rights guaranteed by theCommunity legal order29”. Furthermorethere are cases that basically based onthe innovative articles of the Charter.As an example in the case Netherlandsvs. European Parliament, the AdvocateGeneral invoked the provisions of theCharter, stating that it directly determinethe fundamental status of the right tohuman dignity and the right to ‘free andinformed consent’ of the personconcerned in the fields of medicine andbiology30.


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22 M. Gijzen, The Charter: A milestone for social protection in Europe? 8 MJ 33, 200123 Paul Craig and Grainne de Burca, European Union Law: Text, Cases and Materials, Oxford UniversityPress, New York, 2003, 35924 Agustin Jose Menendez, Human rights: The European Charter of fundamental rights, ContemporaryEuropean Foreign Policy, London, 2004, p. 825 Ibid.26 Ibid.27 Case C-173/99 Broadcasting, Entertainment, Cinematographic and Threatre Union (BECTU) [2001] ECRI-4881, opinion of Advocate General delivered on February 8, paragraph 2628 Case C-208/00, Uberseeing BV vs. NCC Nordic Construction Company Baumangement, AdvocateGeneral opinion, delivered on December 4, 2001 paragraph 5929 Joined cases C-20/00 and C-64/00, Broker Aquaculture ltd trading as Marine Harvest McConnell andHydro Seafood GSP ltd vs. Scottish Ministers, Advocate General’s opinion delivered on September 2001,paragraph 12630 Case C-377/98, Netherland vs. European Parliament and Council of the European Union, [2001] ECR I-7079, Advocate General’s opinion delivered on June 14 2001, paragraph 197

Besides that the European Court ofJustice and Court of First Tribunal, theCharter of fundamental rights was alsoinvoked by the European Court ofHuman right and national courts.Regarding the former, Judge Costa incase Hatton, referred to the Article 37of Charter on environmental protection,showing that the ECHR is not a uniquelegal text concerning environmentalissues31. An example for latter can bedecision regarding protection ofpersonal data of the SpanishConstitutional Court, where it cited theCharter as legal authority and decisionwas took place some days before theCharter was solemnly proclaimed byEuropean institutions32.

From the above mentioned it can beproved that the Charter of fundamentalrights has legal impact though it is notlegally binding text. Enumerating insystematic way the fundamental rightsexisting in the EU, the Charter is onthe way to acquire the status of softlaw as a part of A c q u i sCommunautaire33 (my italics). Thisconsequently cause that the Charter isreferred in judgments, regulations,directives, opinions, resolution orcommunications, “legal representativeand advocates of sectional interests willinvoke the Charter without further adoabout its formal status34”.

The Charter and the ECHRThe European Union Charter of

Fundamental Rights is innovative incontaining, in comparison to otherinternational documents on humanrights on which it was based, especiallyEuropean Convention on Human Rightsof 1950. The Charter covers moreeconomic and social rights in additionto the more traditional political and civilrights contain in the ECHR. As anexample can be certain economic andsocial rights reflected in the chapterSolidarity. Thus, each worker is entitledwith such rights as “rights to getinformation and consultation in goodtime within undertaking35”, “workershave right to negotiate and concludecollective agreements at the appropriatelevel and in case of conflict to defendtheir interests, including strike36”, eachworker has right to protection againstunjustified dismissal37”, while workingeach worker shall be provided with“working condition with respect to his orher healthy, safety and dignity and withmaximum working hours per day withweekly rest periods and annually paidleave38”. All of these provisions areembedded in the chapter Solidaritywhich is innovate as it reflects the thirdgeneration of fundamental rights, groupand collective rights introduced by KarlVasak.

In contrast to the ECHR, the Charteralso emphases the special rights of thechildren, whereby “children shall have

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31 Case Hatton and other vs. the United Kingdom, judgment delivered on October 2, 2001, p. 1932 Judgment 292/200, delivered on November 2000, the Spanish Constitutional Court invoked thedirective 95/46 on date protection and Article 8 of the Charter, which mandates public authorities toensure the protection of personal data.33 Sionaidh Douglas-Scott, Constitutional Law of the European Union, Pearson Education, Edinburg, 2002,p. 47434 Agustin Jose Menendez, Chartering Europe: Legal Status and Policy Implication of the Charter ofFundamental Rights of the European Union, Arena Working Papers, WP 01/1335 Charter of Fundamental Rights and Freedoms, 2000, Article 2736 Ibid., Article 2837 Ibid., Article 3038 Ibid., Article 31

the right to such protection and care asis necessary for their well being”39, forthe elderly where it states that therights of elderly are respected in theway “to lead a life of dignity andindependence and to participate insocial and cultural life40”, and ofpersons with disabilities, precisely theirrights are respected by the Union andtheir rights to independence, social andoccupational integration andparticipation in the life of Communityare recognized4 1. The last twoprovisions are rooted on the articles ofthe European Social Charter of 1965and the Community Charter ofFundamental Social Rights of Workersof 1989.

Moreover the Charter of Funda-mental Rights presents certain newhuman rights provision such asconsumer protection, which basing onEuropean Community Treaty providesthat the “Union policies shall ensurehigh level of consumer protection42”.Besides that the Union policies alsoshall ensure high level of environmentalprotection in accordance with theprinciples of sustainable development43.In the area of health care, everyone’sright of access to preventive healthcare and to benefit from medicaltreatment is observed4 4. Theseprovisions which in their nature are

innovative are embedded in the chapterSolidarity.

As a response to the challenge ofthe new technology, the most recentdevelopments reflected in the Charterare provisions regarding protection ofpersonal data, where everyone has “theright to the protection of personal dataconcerning him or her and such datamust be processed fairly for specifiedpurposes and on the basis of the ownerconsent45”. Besides that the Charterreflects the new technologies in thefield of medicine and biology, wherebyit prohibits eugenic practices, makingthe human body and its parts a sourceof financial gain and prohibitsreproductive cloning46. Here basicallythe Charter bases on the principlesalready have been set in theConvention on Human Rights andBiomedicine adopted by the Council ofEurope of 1997, especially regardingreproductive cloning. The partconcerning eugenic practices includespractices aiming at the selection personwhich in its turn includes campaign forsterilization, forced pregnancy,compulsory ethic marriage47.

In addition, as the Charter mainlyreflected the rights and freedoms ofEuropean Union citizens, it containsseveral articles on their political rights,such as write to vote and stand as acandidate at the election to the


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39 Ibid., Article 2440 Ibid., Article 2541 Ibid., Article 2642 Ibid, Article 38, it bases on article 153 on consumer protection of the treaty establishing theEuropean Community.43 Ibid., Article 3744 Ibid. Article 35, this provision mainly bases in the European Social Charter and certain articles such2, 4, and 174 of the Treaty establishing the European Community.45 Charter of Fundamental Rights and Freedoms, 2000, Article 846 Thomas von Danwitz, The Charter of Fundamental Rights of the European Union between PoliticalSymbolims and Legal Realism, Denver Journal of International Law and Policy, 29, 2004, p.297 47 Draft Charter of Fundamental Rights of the European Union, text of explanations, Brussels 2000,article 3, all these campaigns are deemed to be international crimes according to the Statute ofInternational Criminal Court, Rome 1998

European Parliament, right to petition tothe European Parliament and EuropeanOmbudsman, right to access todocuments of all institutions of theEuropean Union, freedom of movementand residence on the territory of anymembers states, right to diplomatic andconsular protection by any memberstates of the European Union. Theseprovisions are included in the chapteron Citizens rights and essentiallyconstitute an additional base for thestrengthening the institution ofcitizenship in the European Union.

Although there are certaindifferences between the Charter andthe ECHR, these two international legaltexts have more commonalities; mainlyit is due to that the Charter mainlybases on the ECHR which was adopted50 years before it. Thus it can bestated that the Charter basicallycomplement the ECHR, because themere fact of 50 articles of the Charterand 18 of ECHR on human rights isevidence. Both legal texts reflect suchfundamental rights as right to life,liberty, security, freedoms of expression,conscience and religion, freedoms ofassembly and association, right to fairtrial and effective remedy, prohibition ofdiscrimination and torture, right to founda family and have a private life.Therefore, certainly the Charter offundamental rights does aim to competeneither with the ECHR nor with anyother legal text in the area of humanrights protection such as UniversalDeclaration on Human Rights. Moreoverthe Charter does intend to replace themany sources and systems ofprotection of fundamental rights whichcoexist in Europe such as ECHR48.

This can be seen from the preamble ofthe Charter, whereby it reaffirms therights derived from “the constitutionaltraditions and international obligationscommon to the members states, theTreaty of the EU,…, the EuropeanConvention for the Protection of HumanRights and Fundamental Freedoms,Social Charter ….49”.

Human Rights and Membership inEuropean Union

The ECSC, EACT and TEC werethe first the legal texts which merely putthe basic conditions for candidatestates, European Condition, which weredemocracy with respect for basichuman rights50. The term EuropeanCondition did not mean merely in ageographic sense, but had normativesense, including rule of law and humanrights. The subsequent EuropeanParliament’s Birkelbach report elaboratedfurther this condition, whereby it stated:

îThe states in which governmentsare not democratically elected and inwhich citizens do not participate incollective decision-making either directlyor through freely chosen represen-tatives, cannot expect to be admitted tothe society of peoples of the EuropeanCommunities.“

Human Rights protection requirementw as strengthened after the firstenlargement process. Human rightsprotection as a condition for membershipstrictly was applied regarding the furtheraccession of Greece, Portugal andSpain. Thus, in 1962 Spain’s applicationto join the European Community wasterminated on the basis that non-democratic countries could not meet thesole criterion of membership that is

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48 Agustin Jose Menendez, Chartering Europe: Legal Status and Policy Implication of the Charter ofFundamental Rights of the European Union, Arena Working Papers, WP 01/1349 Preamble of the Charter of Fundamental Rights and Freedoms of the European Union, 200050 Treaty on European Community, Article 237, Treaty establishing Coal and Steel Community, Article98, European Atom Community Treaty, Article 205

being a ‘European country51’. Following13 years the Community suspendednegotiations on a trade agreement withSpain on the grounds of violations ofhuman rights and absence ofdemocracy52. In the same time theCommunity indicated to Portugal thatwhile it can start to negotiate oneconomic cooperation, it could notsupport the low level of pluralisticdemocracies in Portugal53. In 1967 theCommunity, following a military coup inGreece, froze its association with it,applying only specific obligations ofassociation agreement54.

The Treaty establishing EuropeanUnion added two new articles regardinghuman rights standards as a mainrequirement for state who want tobecome a member of the EuropeanUnion. Article 6 embedded the basicprinciples of Union such as liberty,democracy, respect for human rightsand fundamental freedoms, and rule oflaw. Basing on the above mentionedprinciples article 49 TEU, which firstwas applied to ten new member states,Bulgaria and Romania provides that:

îAny European State which respectsthe principles set out in Article 6(1) mayapply to become a member of theUnion. It shall address its application tothe Council, which shall actunanimously after consulting theCommission and after receiving theassent of the European Parliament,

which shall act by an absolute majorityof its component members.“

Basing on these two articles of theTreaty on European Union,Copenhagen European Council set thebasic conditions “Copenhagen criteria”on compliance with human rights anddemocratic principles that had to bemet by states applying for EUm e m b e r s h i p5 5. According to thesecriteria, the countries must haveachieved “stability of institutionsguaranteeing democracy, the rule oflaw, human rights and respect for andprotection of minorities56”.

It can be inferred that Menendez isright when he wrote that “the Charter offundamental rights, whether formallyadopted or not – will become thedocument to which reference will bemade in order to determine whatarticles 6 and 49 TEU require57”.Indeed the Charter is a legal text thathas the highest authority regardingprotection of fundamental rights in theEuropean Union. The Charter offundamental rights sets out in a singletext for the first time in the EuropeanUnion’s history, the whole range of civil,political, economic and social rights ofEuropean citizens and all personsresident in the European Union58 (Myitalics). The mere fact that there certaincases where the courts, ECJ, CFT,ECHR refer to the provisions of theCharter is evidence that the Charterbecame a single text in the directmeaning of this word that modifies


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51 Lorand Bartels, Human Rights Conditionality in the EU’s International Agreements, Oxford UniversityPress, Oxford 2005, p. 5052 Ibid.53 Ibid.54 Ibid.55 Copenhagen European Council, Conclusions, 21 and 22 June 1993, Bull C 6-1993, point I.1356 Ibid.57 Agustin Jose Menendez, Chartering Europe: Legal Status and Policy Implication of the Charter ofFundamental Rights of the European Union, Arena Working Papers, WP 01/1358 Charter of Fundamental Rights and Freedoms, Brochure, 2000

preexisting provisions of treaties andcases.

Each of the ten new member statesupon signing Accession treatiesaccepted the obligation to protectfundamental human rights contained inthe Charter. Basically the conditionalitypolicy concerning the level of humanrights protection and rule of law of theEU has given its results in the newlyjoined member states. Thus, accordingto the Freedom House reports the levelof protection of civil liberties in thestates of Central and Eastern Europewas 2 in 200259. This assessmentshows the result of conditionality policyof the European Union toward theseCEE states during roughly 10 yearsupon submission of application formembership. According to thesubsequent Freedom House report of2005, the level of civil liberties is 160.This level proved the hypothesis thatthe conditi0nality policy of the EU,especially requirement concerninghuman rights protection, indeed has agreat impact over candidate states.

Bulgaria and Romania are the nextstates that will become members of theEuropean Union. The accessionprocedure is regulated by variety ofprovisions of EU legal texts. Essentially,Bulgaria and Romania have to complyfirst of all with the article 6 of theTreaty on European Union, becausethis article can be said became thefundament of conditionality policyconcerning fundamental human rights.Besides that there are “human rights

‘commitments’ in the EuropeAgreements, which in the case ofRomania and Bulgaria include a humanrights clause requiring ‘respect for thedemocratic principles and human rightestablished by the Helsinki Final Actand the Charter of Paris for a NewEurope61”. In this process the actions ofBulgaria and Romania is regulated bythe provision of the Council Regulation,whereby it states:

îWhere an element that is essentialfor continuing to grant pre-accessionassistance is lacking, in particular whenthe commitments contained in theEurope Agreements are not respectedand/or progress towards fulfillment ofthe Copenhagen criteria is insufficient,the Council, acting by a qualify majorityon a proposal from the Commission,may take appropriate steps with regardto any pre-accession assistance grantedto an applicant State62.“

In contrast to the EuropeAgreements between EU and Bulgariaand Romania, the European Community– Turkey agreements do not containany human rights clauses as a part ofconditionality policy of the EuropeanUnion. As a result the only standardsthat Turkey should comply is provisionsof article 6 and 49 and obligationstowards meeting Copenhagen criteria63.The situation is with Croatia, wherebythe progress of Croatia is mainlyregulated by the Council Decisions,which states that the Communityprogress to the western Balkan

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59 Freedom House Reports 2002, http://www.freedomhouse.org/template.cfm?page=15&year=2002,accessed on April 1, 2006. In general Freedom House has seven levels of assessment (from 1 till 7,whereby 7 is the lowest level and 1 is the highest one. 60 Freedom House Reports 2005, http://www.freedomhouse.org/template.cfm?page=15&year=2005,accessed on April 1, 2006.61 Lorand Bartels, Human Rights Conditionality in the EU’s International Agreements, Oxford UniversityPress, Oxford 2005, p. 5562 Act 4 of Council regulation 622/199863 Lorand Bartels, Human Rights Conditionality in the EU’s International Agreements, Oxford UniversityPress, Oxford 2005, p. 56


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countries is conditional on furtherprogress in satisfying the Copenhagencriteria. Croatia in its turn shouldcomply not only with Copenhagencriteria but also with the conditionsdefined in the EU Council Conclusionsof 1997, which states that Croatia canget financial assistance only “if there isa country’s credible commitment todemocratic reforms and progress incompliance with the generallyrecognized standards of human andminority rights64”.

ConclusionThe Charter of fundamental rights is

a product of a long period ofdevelopment of human right protectionmechanisms in the European Union.Including the basic and innovativehuman rights articles, the Charter canbe perceived as a pick-point offurthering the human rights in theEuropean Union. Although the Charterdoes not have legally binding force, ithas a great impact over human rightsissues, as it is the first single text inthe European Union’s history whichembedded a whole range of social,political, economic and civil rights.Without being legally binding theprovisions of the Charter is invoked bythe European Court of Justice, Court ofFirst Tribunal, European Court ofHuman Rights and national courts.

Having been divided into sixsections, the Charter includes the basicand innovative provisions that meet thedevelopment of new technologies, suchas protection of personal date andprohibition of cloning of human beings.In comparison the ECHR, the Charter

presents a wide range of civil andeconomic rights. Besides that the wholesection four, Solidarity is devoted to thebasic group and collective rights.Basing on the main provision of theEuropean Convention on Human Rightsand adding new articles, the Charterdoes not aim to replace the ECHR orcompete with it, but merelycomplements it.

As a result of long run developmentof human rights in the European Union,human rights clause became one of thecore requirements for candidate statesto be admitted to the European Union.At the present the two main articles ofTEU, article 6 and 49 provide the basisfor the EU membership. Copenhagencriteria developed as a respond to thewillingness of Central and EastEuropean states to become a memberof the EU after the collapse of theSoviet bloc, mainly rely on theabovementioned article 6 and 49. TheCharter in its turn plays an importantrole in the conditionality policy ofEuropean Union, since it includes thewhole of basic human rights that eachcandidate and member should provide.It basically clarifies the fundamentalhuman rights that constitute theprinciple contained in the Article 6 TEU.Having a great impact over thecandidate state the European Unionsucceeds in its conditionality policy. Thefact of democratic development in thenewly joined ten CEE state can beclear evidence and creates convictionthat this success will be repeated incase of Bulgaria, Romania, Turkey andCroatia – the main candidates forEuropean Union’s membership.

64 Council Conclusions on the principle of conditionality governing the development of the EuropeanUnion’s relations with certain counties of South – East Europe, April 29 1997, Bull EU 4-1997, p. 2.2.1

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Bibliography

Amsterdam Treaty, adopted in 1997 and entered into force in 1999

Bartels, Lorand, Human Rights Conditionality in the EU’s InternationalAgreements, Oxford University Press, Oxford 2005

Burca, Grainne de, The rafting of the EU Charter of Fundamental Rights, 2001

Case 11/70, Internationale Handelsgesellschaft vs. Einfurh und VorratssetelleGetreide, [1970] ECR 1125

Case 29/69, Stauder vs. Ulm, [1969] ECR 419

Case 36/75 Rutili [1975] ECR 1219

Case 4/73, Nold [1974], ECR 491

Case C-173/99 Broadcasting, Entertainment, Cinematographic and TheaterUnion (BECTU) [2001] ECR I-4881

Case C-208/00, Uberseeing BV vs. NCC Nordic Construction CompanyBaumangement, 2001

Case C-377/98, Netherland vs. European Parliament and Council of theEuropean Union, [2001] ECR I-7079

Case C-5/88, Wachauf vs. Federal Republic of Germany, [1989] ECR 2609

Case Hatton and other vs. the United Kingdom, judgment delivered onOctober 2, 2001

Cases C-20/00 and C-64/00, Broker Aquaculture ltd trading as Marine HarvestMcConnell and Hydro Seafood GSP ltd vs. Scottish Ministers, 2001

Charter of Fundamental Rights and Freedoms, 2000

Charter of Fundamental Rights and Freedoms, Brochure, 2000

Copenhagen European Council, Conclusions, 21 and 22 June 1993, Bull C6-1993

Council Conclusions on the principle of conditionality governing thedevelopment of the European Union’s relations with certain counties of South– East Europe, April 29 1997, Bull EU 4-1997

Craig, Paul and Grainne de Burca, European Union Law: Text, Cases andMaterials, Oxford University Press, New York, 2003


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Danwitz, Thomas von, The Charter of Fundamental Rights of the EuropeanUnion between Political Symbolims and Legal Realism, Denver Journal ofInternational Law and Policy, 29, 2004

Douglas-Scott, Sionaidh, Constitutional Law of the European Union, PearsonEducation, Edinburg, 2002

Draft Charter of Fundamental Rights of the European Union, text ofexplanations, Brussels 2000

European Atom Community Treaty, 1958

European Economic Treaty, 1958

Freedom House Reports 2002

Freedom House Reports 2005

Gijzen, M., The Charter: A milestone for social protection in Europe? 8 MJ 33,2001

Judgment of the Spanish Constitutional Court, 292/200, delivered onNovember 2000

McGlynn, C., Families and the EU Charter of fundamental rights: Progressivechange or entrenching the status quo? 26 ELRev. 582, 2001

Menendez , Agustin Jose, Human rights: The European Charter of fundamentalrights, Contemporary European Foreign Policy, London, 2004

Menendez, Agustin Jose, Chartering Europe: Legal Status and Policy Implicationof the Charter of Fundamental Rights of the European Union, Arena WorkingPapers, WP 01/13

Neuwalh, Nanette A., The European Union and Human Rights, MartinusNijhoff Publishers, The Haque, 1995

Scheuner, U., Fundamental rights in European Community and in NationalConstitutional Law, 12 CMLRev. 171, 1975

Single European Act, 1986

Treaty establishing Coal and Steel Community, 1951

Treaty on European Community

Treaty on European Union, 1993


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A. Functions and role of nationalparliaments in the European Union

National parliaments in theEuropean Union fulfil two majorcategories of functions (13, p. 30):treaty-based parliamentary functions(constitutional ratification of treaties,implementation of the acquis commu-nautaire in the domestic legislation)and parliamentary functions outside thetreaties. The first class includes the ex-post functions, meaning that nationalparliaments only become involved afterthe basic decision has already beenmade. Functions outside the treatiesnevertheless enable parliaments tointervene in the decision-makingprocess. Concretely, what intervene

here are the national functions ofparliaments in the area of EU matters.

The role of national parliaments wasfirst officially recognised in the Treaty ofMaastricht of 1991, in an annex to thetreaty with the headline ‘Declaration onthe role of national parliaments in theEuropean Union’ (14, p. 213) theprimary intention of which was to opennew prospects for co-operation amongthe Member State parliaments. Thedeclaration recommended that contactsbetween the European Parliament andthe national parliaments should bestepped up, national governments wereasked to ensure that their parliamentsreceive information on Europeanmatters and encouraged regularmeetings between members of nationalparliaments.

* Endre-Sandor Erdõdi studied Economics, Specialization International Transactions (degree completedin July 2003) and European Studies and International Relations (Master degree completed in June2006) at the University of the West in Timisoara. From March until July 2005 he was a scholarship-holder of the German Bundestag (International Parliament Internship Programme -IPP). As part of atwo-year EU-Phare programme “Developing a Corps of Professional Public Managers in the RomanianCivil Service – Young Professionals Scheme (YPS)” he is currently studying European Studies (MA)at the Europa-Kolleg Hamburg.

EUROPEAN DIMENSION OF NATIONAL PARLIAMENTS IN THEEUROPEAN UNION

Endre-Sandor Erdõdi*

Abstract.The institutions of the member states have been changed in the Europeanintegration process through the transfer of a part of their political and economiccompetences to the European Union. The national parliaments made no exemptionsfrom this rule, even if they did not observed the loss of sovereignity from the verybeginning. But in the ’80 and in the post-Maastricht era they realised this phenomenaand the related consequences. Since then we can observe a mobilisation of the nationalparliaments to exert an increased influence on the decision making process in theEuropean Council and in the Council of the EU, in order to compensate their loss ofcompetencies in the past.This article presents the main functions of the nationalparliaments and their role on European level and also tries to show the mecanisms bywhich they participate in defining european policies. Finally, some recommendations willbe made related to the necessary measures to be taken by the Romanian Parliament inorder to be an effective participant in the EU decision making process after theaccession date.

A novelty is brought by theAmsterdam Treaty to which a ‘Protocolon the role of national parliaments in theEuropean Union’ was annexed,containing two items:

Information for national parli-aments by the member states byforwarding all Commission consul-tation documents and proposalsfor legislation, in good time, witha period of six month elapsingbetween a legislative proposal ismade available by the Commi-ssion and the date when it isplaced on the Council agenda fordecision for the adoption of acommon position;

The Conference of EuropeanAffairs Committees establishingthe ‘COSAC’1 of nationalparliaments founded in Paris in1989. COSAC may address toEU decision-makers anycontribution in selected areas ofEU competence, noting thatCOSAC contributions do not bindnational Parliaments.

Every year, COSAC brings togethersix members from every nationalparliament, from the EuropeanParliament as well as three MPs fromevery associate or applicant countries,with an observer’s statute. COSACregularly meets in the capital city of thecountry holding the EU rotatingpresidency at that time.

Substantial developments aresubsequent to the Convent on theFuture of Europe where therepresentatives of the nationallegislatures were in majority concretisedin the Treaty establishing a Constitutionfor Europe adopted in 2004, butcurrently experiencing a stall back inratification. Among the protocols

annexed to the Treaty, there are twothat refer to:

The role of national parliaments inthe European Union, stating a clearobligation on behalf of the EuropeanCommission and of other EU relevantbodies to forward all Europeandocuments to the national Parliamentsof the member states;

The application of the principles ofsubsidiarity and proportionality, w h e r enational Parliaments are given for thefirst time the right to raise a reasonedopinion on Commission proposals. Bythe early warning system regarding thecompliance with the principle ofsubsidiarity, where reasoned opinionson a draft European legislative act’snon-compliance with the principle ofsubsidiarity represent at least one thirdof all the votes allocated to the nationalParliaments, the draft must bereviewed. Another option of control afterthe adoption of legislative acts isthrough the European Court of Justicethat has jurisdiction in actions ongrounds of infringement of the principleof subsidiarity by a European legislativeact notified by the member states onbehalf of their national parliamentConsistently with the same line ofthinking, the Commission must submiteach year to the national parliaments ofthe member states a report on theapplication of the principle ofsubsidiarity

B. Mechanisms for the involvementof the national Parliaments in theEuropean decision-making process

National Parliaments therefore fulfil avariety of functions in Europe. Whilstthose functions that are mentioned inthe treaties somehow limit the ability ofParliaments to become involved in the

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1 Conférence des Organes specialiseés dans les affaires communautaires et européennes desparlaments de l’Union européenne

European decision-making process,those unspecified in the treaties givethem broader discretion. However, theexploration of such functions is not apurpose in itself for the legislatures ofthe member states. The enlargement ofthe competence of the EuropeanParliament while downsizing democraticdeficit in the EU, hence givingEuropean policies legitimacy presentsits own limitations, at least under thepresent social and economiccircumstances in Europe. In such acontext, it should not come as asurprise that mechanisms for theinvolvement of national parliaments inthe legislation generating process arebeing developed as a measure ofconsolidating the EU democraticfundament.

A relevant element in thisdevelopment is a decision of theFederal Constitutional Court inGermany2 further to the MaastrichtTreaty being challenged by a number ofdeputies on the Bundestag on groundsof unconstitutionality. The said decisionassigns a fundamental role to nationalparliaments in effecting democraticlegitimacy at a Community level:‘Democratic legitimacy (in democraticstates) is achieved by the action of theEuropean bodies being connected tothe parliaments of the member states’(5., page 40).

In the specialised literature, too, onecan notice a trend towards recognisingthe importance of national parliamentsin the European Communities systemas well as a number of theoreticalmodels designed to strengthen theirrole in ensuring a democratic characterfor the European Union.

Starting from these premises as wellas from the experience of the Europeanintegration process that has ratherdeprived them of some of their

components, the EU member stateparliaments have developed a range ofdomestic constitutional mechanismsdesigned to augment their influence onEuropean policies. The following will bea review of such mechanisms withseveral references being made to thesituation in the Federal Republic ofGermany, the Bundestag in thisparticular case, given the fact that myfive-month internship there enabled aclose-up view.

Primarily, one must note that theinfluence of national parliaments ismainly being reflected by how theycontrol the activity of their nationalgovernments in the Council of theEuropean Union. There are two base-line systems for such control (5., page184):

The model of the ex-post controlover the ministers (a passive-reactive kind of control), where thegovernment enjoys discretion innegotiating with the Council whileretaining responsibility for itspositions and the way it votesbefore the Parliament after thedecision has been made;

The model of ex-ante control, bydirectly influencing the decision-making process (a proactive-anticipative kind of control) – the‘control by commitment’ concept –according to which the parliamentis given the legal option toactively influence the content ofthe position of the governmentbefore a decision is made in theCouncil.

Roughly, almost all parliaments ofthe member states pursue the model ofcontrol by commitment, the differenceamong them becoming notable when itcomes to the effectiveness of thepractical employment of the model. Anexception to that is the Hellenic

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2 Known by the name of îMaastricht-Entscheidung” (the Maastricht Decision)

Republic where the rights of theparliament are greatly restricted to theulterior oversight of the activity of theministers.

Irrespective of the model pursued,parliaments use the tools set out below.

1. Governments informing parliaments Apart from traditional control tools

(interpellations, hearings, interrogations,etc.) fit for overseeing the activity of thegovernment in the EU Council, inalmost all member states legalprovisions have been introduced makingit mandatory for governments to reportto parliaments on the legislativeintentions at a EU level, by transmittingto them the proposals for legislationdrafted by the European Commission,as well as to produce regular (everysemester or year) reports on Europeanaffairs before the parliament plenum.

As regards the legal foundation ofthis tool of parliamentary involvement,in Germany, France, Austria andPortugal the obligation of thegovernment to inform the parliament isenshrined in the constitution of thosecountries. Art. 23, paragraph 2 of theGerman Constitution (Grundgesetz)reads: ‘…the federal Government isunder an obligation to inform theBundestag and the Bundesrat withoutdelay’ (15., page 23).

In the majority of the member statesthis obligation of the executive isregulated by ordinary legislation, and byorganic legislation in the Scandinaviancountries. In Denmark, the legal basisfor the right of the Folketinget to beinformed is the EU Accession Act, art.6: ‘the Government reports to theFolketinget on developments in theEuropean Communities’ (13., page115). In the UK and Ireland, the legalfoundation is represented by theregulations of the parliaments and thevarious conventions they have with the

government. In The Netherlands andLuxembourg there are no legalprovisions in that respect, but thegovernment has undertaken it to shareEU-relevant information to thelegislature. Only The Hellenic Republicis an exception to that, as it has neitherprovisions nor a unilateral obligation ofinformation taken on by thegovernment. The available controlinstruments are the annual reports thegovernment writes on the application oftreaties, and the interrogations in theparliament.

As far as the scope of the informationpresented by governments is concerned,two modalities can be identified in theEU:

In certain member states theinformation is comprehensive andencompasses the totality of theEU activities (Denmark, Germany,Austria, Portugal, Sweden andGreat Britain);

In most of the member states thelegal obligation to provideinformation is restricted toforwarding the official proposalsof the European Commission fornew directives or norms. The restof the documents are sent only ifrequested by the parliaments.

In conclusion, the information ofparliaments by the governmentsconsists at least in the forwarding ofthe legislative initiatives developed bythe Commission, with the exception ofGreece. In practice, however,parliaments seem to be facing a varietyof hurdles in the process of receivinginformation: documents are oftenincomplete (Italy, Portugal, Spain) orsent with delays (France, Luxembourg,Belgium, Great Britain).

Many national parliaments solicit,apart from the EU official documents,also extra information from theirgovernments in the form of


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substantiation notes, information fichesor standardised memorials putting everyEuropean legislative project in apolitical, economic, social and legislativeperspective. In Austria, Denmark,Germany and Great Britaingovernments have an obligation toforward such information, and in therest of the member states additionalexplanations are only given if requestedby the parliament or by its specialisedcommittees.

A major importance presents theongoing reporting on the subsequentdevelopments in the negotiations on theCouncil of the European Union. Theanalysis of legislative proposals is onlythe first step in informing theparliament, since negotiations withinCOREPER3 and then in the Councilcan take an unexpected turn, and theparliaments need detailed informationon those processes in order toinfluence government positions. Inseveral member states such as Austria,Denmark, Finland, Germany and theUK, this information practice isenshrined in the constitution of thosecountries or in special laws. In themajority of the member states, theparliaments raise information regardingthe developments within the Council ofthe EU via traditional interrogation toolsas well as informally, through theirEuropean affairs and specialisedcommittees.

Governments of all member statesare supposed to present detailedreports on the state of play of theEuropean integration and of theEuropean Union, as well as onexpected developments every sixmonths or annually. The HellenicParliament attaches special attention tosuch government reports.

2. Parliament committees onEuropean affairs

The first parliament committeedealing with European affairs was the‘committee for the single market and forthe free trade area’ of the GermanBundesrat, created in 1957 acting toensure that the positions of thegovernments of the German lands inthe area of European integration wouldbe considered to a greater extent bythe federal government. Following theexample of the Bundesrat, otherparliaments of the six member states atthe time also established similarcommittees in the years to come.

The lower chambers of the GermanFederal Parliament, the Bundestag, tookthe first step towards a committee onEuropean affairs by establishing aCouncil for Integration in 1963, with atask to take over information from thegovernment and disseminate it to thespecialised committees. Nonetheless,the Council only met a few times in fiveyears. A substantive change occurredas from 1979, pursuant to the firstdirect elections organised for theEuropean Parliament, abrogating thedouble mandate of the deputies, andguaranteeing a direct flow ofinformation. The Europe Committee ofthe Bundestag was established in 1983,including 11 federal and Europeandeputies. The primordial role of thecommittee was to make Europeanpolicy or decision recommendations aswell as to liaise with the Europeanparliament, therefore not having thestatute of a proper parliamentcommittee (11., page 70). Given therather ineffective performance of thecommittee, it was replaced, in 1987, bya sub-committee for the EC of theforeign affairs committee, where themembers of the European parliament


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3 Committee of the Permanent Representatives of the Council of the European Union

were only observers. It unclear statuteand authority-related issues, thecommittee was dissolved in 1991, whenit was replaced by a Commission forthe European Communities with a roleof studying European documents,improve relations with the nationalparliaments and with the EP. Thatformula did not prove to be any moresatisfying than the ones before, beingundermined by the competition of thespecialised committees. In general,before the early 1990s, political forumsin the Bundestag had failed to deliverand live up to the expectations whencreated, focussing on issues andthemes of principle in connection withthe European Communities rather thanactually analysing European legislativeinitiative which would remain in thecompetence of the specialisedcommittees. A large-scale changeoccurred after the entry into effect ofthe Treaty of Maastricht, when theCommittee for European Union Affairswas established by constitutionalprovision4, with 50 members 11 ofwhom were MEPs with the statute ofobservers. The main functions of thiscommittee are the following5:

Process EU documents receivedfrom the Government, select themand co-ordinate the subsequentanalyses procedure;

Can turn any EU theme that mayaffect the interest of Germanyinto its own item of debate,meaning that the committee canaddress any European subjectirrespective of expertise-associated competences andfollow-up on any EU policydevelopment;

The Bundestag, under article 45in the Constitution, can empowerthe committee to represent itsplenum before the government,which gives it a privilegedposition among the specialisedcommittees that cannot committhe plenum of the parliament inany area.

The first direct elections for theEuropean Parliament were a goodopportunity to institute a delegation tothe European Communities in France,too; those delegations had beendesigned primarily as informationproviding bodies to the two houses ofthe French parliament. (5., page 102).

With the accession of the newmembers in 1972, 1986 and 1995,European affairs committees were alsoestablished within those nationalparliaments, and, in a majority of thecountries that joined the EU in 2004relevant parliament committees werealready in place on the date ofaccession, with a role to oversee theintegration processes undergoing bythose countries.

Currently, there are 34 committeeson European affairs in the parliamentsof the 25 EU member states. Twelvemember states have a bicameralparliamentary system which means thateach house has its own committee, butthere are also legislatures that opted formerged committees on Europeanaffairs, such as in Belgium, Ireland andSpain6.

In many member states there areprovisions according to which membersof the EP also have a commitment inthe national parliament as well. Inparliaments in Belgium and The


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4 Art. 45 in the Constitution of the Federal Republic of Germany (Grundgesetz fuer die BundesrepublikDeutschland, Bundeszentrale fuer Politische Bildung, Bonn, 2001)5 www.bundestag.de6 www.cosac.org

Hellenic Republic, national members ofthe EP are fully-fledged members of theEuropean affairs committees as well. Ina majority of member states the MEPscan attend the sessions of thecommittees as observers. In theScandinavian countries, the UnitedKingdom and the Netherlands theycannot attend the sessions of theEuropean affairs committees , but canbe consulted as experts in specificfields.

3. Procedure of the involvement ofparliaments in the European legislativeprocess

In principle, two kinds of procedurescan be identified in what concerns theexamination of the initiatives of theEuropean Commission and influencingdecision-making by the Council of theEuropean Union:

Centrally organised systems(mandating systems) where thepolitical control is concentratedwith the parliament committeeso n European affairs (Austria,Belgium in the Senate, Denmark,Estonia, Finland, the HellenicRepublic, Ireland, Latvia, Lithuania,Poland, Slovakia, Slovenia.,Sweden, Spain and Hungary).The system was sourced by theDanish parliament in the 1970s,where the ‘Market Committee’ ofthe Folketinget was placed at theheart of the process that enabledit to act on behalf f theparliament and impose negotiatingpositions binding on the Danishgovernment7.Going back, as partof the system, the principaladdressee of the informationdocuments forwarded by thegovernment (Commissioninitiatives, additional information,progress on the legislative

process in the Council, regularreports) is the committee forEuropean affairs. The committeeis also competent to conduct apolitical scrutiny of the Europeandocuments and to makerecommendations or take standson the conduct of therepresentatives of the governmentin the Council of Ministers of th eEU. The committee for Europeanaffairs in that way undertakes theposition of representation of theplenum, practically becoming‘ d o w n s i zed plenum’ (5., page189) and can adopt bindingdecisions on the government. InGermany, for example, theEuropean affairs committee canbe mandated in specific cases torepresent the plenum of theBundestag.

Decentralised systems (document-based systems) where the politicala s sessment of the Europeandocuments is shared by thespecialised committees of theparliament (Belgium in the Houseof Deputies, the Czech Republic,France, Ireland, Italy, Luxembourg,Malta, Great Britain, theNetherlands). Despite the strongerinfluence of the specialisedcommittees, the European affairscommittees still have an importantrole in such systems, too. First,their task is to select from themyriad of EC papers the relevantones and to assign them to therelevant specialised committees.Second, they coordinate theactivity of the parliament in thearea of European affairs. Third,they take the role as an interfacebetween the government and thespecialised committees. In thebulk of the states that acceded to


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7 Idem 6

the EU in 2004, as well as Italy,the European affairs committeesmainly perform work in the field ofthe transposition of the acquiscommunautaire into the domesticlaw and are less involved in theEuropean legislation making. Thespecialised political activity iscontributed by traditional committeesof parliaments. Nevertheless, theycannot commit the plenum of theparliament while the Europeanaffairs committee in a centrallyorganised system can, and theyare only entitled to table reportsand recommendations to theplenum. In the decentralisedsystems, the lead actor in themaking of the ultimate decision isthe plenum of the parliament.

The advantage of the c e n t r a lsystems compared to the decentralisedone is that the activities of theparliaments that have implications in theEuropean law-making process isconcentrated in a single place whichmeans that a closer connection can bemade between the parliament and thegovernment of a country. Thecentralised systems are alsocharacterised by a greater degree offlexibility regarding the tasks they aresupposed to fulfil in order for them tobe able to influence the decision-making process in the Council, bothfrom a time perspective and from apolitical point of view.

Decentralised systems present theadvantage that a member of parliamentspecialised in a national field cancapitalise on his/her competence easierin identical or similar European areasby his/her work in the specialisedcommittees. That is very important witha view to the future implementation ofEU norms into national legislations.

4. Right of the parliaments to adoptpositions on European topics

This right is enshrined in thelegislation of the member states, insome even by the constitution, in therest being regulated by ordinary laws,and takes various shapes:

Consultation of the parliament: inthe majority of countries theobligation to ask the parliament toproduce a point of view beforeevery meeting of the Councilwhere final decisions are to bemade is not stated in the law. InAustria, Denmark, Germany8 andSweden, the government mustconsult the parliament, and,should it fail to do so or shouldit not wait for a position to beadopted by the plenum of thelegislature, while the latter hasmanifested such an intention, it isconsidered in principle that thegovernment has breached theconstitution and the law. In GreatBritain, although there are nolegislative provisions to thateffect, a resolution of the Houseof Communes adopting the codeof conduct of its representative inthe Council establishes the‘parliamentary reserve’ on Europeanprojects (5., 128-129). In Francewe can find a similar situation:the government voluntarilyrecognises the right of theparliament to a ‘réserve d’examenparlementaire’, according to whichthe government agrees, in theCouncil, to a draft only after theparliament has finishes examiningit. (5., 113-115).

Binding parliament positions: onlythe representatives of theAustrian government in the


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8 Art 23, para.3 in the Constitution of the Federal Republic of Germany (Grundgesetz fuer dieBundesrepublik Deutschland, Bundeszentrale fuer Politische Bildung, Bonn, 2001)

Council can be mandated by theNationalrat. Positions adopted bythe European affairs committeesor by the plenum of theparliaments of the other memberstates are legally binding only onthe representatives of thosestates in the Council of the EU.However, this latter category arenot totally independents from thewill of the parliaments. Thestrongest position in relation tothe executive is with the DanishFolketinget, that enjoys broadprivileges in European affairs andthat is underlain by spontaneouscoalitions formed among thenumerous parties represented inthe parliament plus the oftenpolitical alignments where thegovernment finds itself in aminority. A similar situation canbe also found in theScandinavian countries. InGermany, the government can bemade defend a Bundestagposition only in the beginning ofthe debates in the Council. Butthere is no such statutoryobligation in that respect (4.,page 20). A failure of thegovernment to act on therecommendation of the parliamentcan be politically punished,possibly by a constructive non-confidence vote cast against thechancellor, but it has neverhappened so far. The situation ofthe French and Britishparliaments should be looked atin the particular constitutionalcontext of those countries. InFrance, because of the weakposition of the parliamentcompared to the government theparliament cannot issue bindingpositions on the government,therefore the extent to which the

latter chooses to comply with theparliament recommendations isgiven by mere politicalcalculations revolving around thetopic at issue. In the UK, thanksto the tight relations between theparliamentary majority and thegovernment, the House ofCommons does not enjoy anindependent power to oblige thegovernment. An interestingsituation can be found in theBenelux states, where theparliaments have waived theirrights to binding the governmentto their positions for Europeanintegration political considerations.

The mandating of therepresentatives in the Council ofMinisters of the EU is not the ‘secretweapon’ of the parliaments in imposingtheir own point of view in Europe, as itmay seem, because, after theenlargement of the qualified majorityvoting to the detriment of the unanimityrule in the Council, countries pursuingsingular positions can no longerinfluence final decisions, even if theyare bound to the positions of theirnational parliaments. According to PeterM. Huber, in such situations, ‘theconstitutional decision for a people’ssovereignty can be subjected topressures’. (4., page 11).

5. Ex-post control and politicalaccountability of the government

The control of the action ofgovernments in the Council of the EUis done, in the majority of parliaments,by traditional ways, namely byinterrogating the ministers and byinterpellation debates. The non-confidence vote – another traditionalcontrol tool, does not play a major rolein punishing the government for aconduct in the Council against theposition of the parliament. Nevertheless,


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it can be noted that in those memberstates where the parliament canwithdraw its political endorsement forindividual ministers and not from thewhole of the government only thepositions of the ministers in the EUCouncil are quite consistent with thepositions of the parliaments, not onlyfor legal considerations, but rather forpolitical considerations.

Apart from traditional methods,governments are under a duty to reporton the outcomes of the negotiations inthe Council, while accounting for theirposition in the negotiations. Thereporting takes place repeatedly, and isdone to the parliamentary committeeson European affairs.

In conclusion, the position of thenational parliaments of the EU memberstates on their participation in EUdecision making processes has beenstrengthened especially after theadoption of the Treaty of Maastricht byintroducing various constitutional orlegal mechanisms. The manner ofinvolvement in the EU also presentsimportant differences.

The involvement of nationalparliaments as a plausible guarantee ofdemocratising and legitimating theaction of the European supra-nationalbodies is however a process that growstogether with the EU institutionalframework and needs an ongoingadjustment of the national structuresand mechanisms through which nationalparliaments can have a nationalinfluence on governments or anexternal influence, directly upon EUfora.

C. The Romanian Parliament in thecontext of the EU integration process

Our country officially lodged its EUaccession application on the 22nd ofJune 1995, but negotiations proper onlycommenced early in the year 2000 (10.,page 277).

As far as the implication of theparliament in the accession process isconcerned, in 1995 the Committee forEuropean Integration of the RomanianParliament was established9, a specialcommittee working under its ownregulations but enjoying the sameprivileges as the standing committees. Itis a mixed committee of the parliament,therefore it comprises both deputiesand senators – currently 35 members.The chairperson of the committee iselected by majority, direct and openvoting by all members of thecommittee, and is nominated by thepolitical groups in the parliament. Thechairman is assisted by two deputychairpersons and by two secretaries.

The European Integration Committeehas played a major role in Romania’saccession to the EU through the manycontacts it has initiated with Europeanbodies, mainly with the EuropeanParliament and with COSAC, by anactive commitment to the accessiontalks and by expediting theapproximation of the Romanianlegislation with the Europeanrequirements and standards (6., page191).

During that time, the EuropeanIntegration Committee has acquired animportant baggage of expertise in themonitoring of the accession processand in using EU pre-accession funds,as well as in the field of the Europeanparliamentary diplomacy10. Although allthat experience is valuable, circum-


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9 Resolution of the Parliament of Romania no. 8 of 28 June 199510 Valeriu ™tefan Zgonea (Deputy): Role of the Committee of the Romanian Parliament for EuropeanIntegration , Presentation within the ‘Techniques of transposition of European Law’ Programme,22.03.2005

stances are bound to change after ourcountry’s accession to the EU on the1st of January 2007. The Parliament ofRomania will need to undergo a changeof functions and roles, to turn from a‘ m o n i t o r ’ of the deliverance onintegration commitments into a‘modulator’ of the EU primary andsecondary legislation. In the EU, asshown above, there are variouspractices and opportunities for theinvolvement of the national parliaments,but, bore option for one or another,domestic realities must be scrutinised.In my opinion it would berecommendable for the RomanianParliament to:

Adopt a special law regulating theinvolvement of the houses in theEuropean decision-making processand legislation development,c l early specifying its rights andthe obligations incumbent on thegovernment, while also indicatingthe national mechanisms for theimplementation of the twoprotocols to the Treatyestablishing a Constitution for theEuropean Union, related to thenational parliaments (The Protocolon the Role of NationalParliaments in the EuropeanUnion and the Protocol on theApplication of the Principles ofSubsidiarity and Proportionality),and of the early warning systempertaining to the latter.

Give the committee for Europeanintegration a central role i nreceiving the EU documents fromthe government and from theEuropean Commission, inselecting and forwarding them tothe specialised committees of theparliament and in processing theresults and the recommendationsthat should be then presented tothe plenum of the two chambers.In essence, I suggest that theRomanian Parliament should

follow the centrally organisedsystem in contributing to theEuropean legislative process. Fora more effective co-ordination thechairpersons of the specialisedcommittees or other membersappointed by them should attendthe sessions of the Europeanintegration committee followingthe model of the Baltic states; thesame should apply to the futureRomanian members of theEuropean Parliament;

Mandate, whenever the situationso requires, the Europeanintegration committee to act onbehalf of the two houses of theparliament, considering thedifficult process of decisionmaking and prolonged debatespreceding it, that is a commonpractice in the RomanianParliament. This ‘downsizedplenum’ plus a few other things –for example the members of thecommission should be recognisedintegration specialists – arebound to achieve an effectiveinvolvement of the parliament inthe drafting of European policieswhile strengthening its positionbefore the government.;

Appoint national representatives ofRomania to the Europeaninstitutions (the European Commi-ssion, the European Court ofJustice, so on and so forth) thusstrengthening its position in frontof the government;

Organise regular public debates inplenary sessions in the chamberson the occasion of the six-monthreporting by the government, topresent the Commission multi-annual legislation drafting pipeline,the accession of new states tothe EU, or whenever there is aEuropean matter of relevance toRomania. By such debates the


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public opinion can be betterinformed and rendered aware ofexisting European topics, and theapproval rate of such EU-stemmed measures could go up.

The adoption of such measures callsfor a serious assessment, debates onproposals made and a consensusamong the political parties, a process

that is already behind the schedule. Wecan only hope that our parliamentrealises the importance of its activecommitment in the European Union andundertakes the role as a democraticlegitimating binder between theRomanian people and the Europeansupra-national bodies.

References:1 Steven Andersen: The European Union: how democratic is it?, Sage Press,

London, 1996 2 Robert A. Dahl: Despre democra˛ie, Institutul European, Ia∫i, 2003 3 Herbert Doering: Parliaments and Majority Rule in Western Europe ,

Frankfurt/Main, New York, St. Martin’s Press, 1995 4 Peter M. Huber: Die Rolle der nationalen Parlamente bei der Rechtsetzung der EU.

Zur Sicherung und zum Ausbau der Mitwirkungsrechte des DeutschenBundestages, Hans Seidel Stiftung e.V., Muenchen, 2001

5 Hans-Georg Kamann: Die Mitwirkung der Parlamente der Mitgliedstaaten an dereuropaeischen Gesetzgebung, Peter Lang – Europaeischer Verlag derWissenschaften, Frankfurt am Main, 1997

6 Susanne Kraatz, Silvia von Steindorff: Parlamente und Systemtransformation impostsozialistischen Europa, Leske und Budrich, Opladen, 2002

7 Andreas Mauer, Peter Becker: Die Europafaehigkeit der nationalen Parlamente,SWP-Studie, Berlin, 2004

8 Andreas Maurer: Die nationalen Parlamente im Rahmen desEU-Verfassungsvertrages –Moeglichkeiten und Grenzen im neuen Europa, SWPStudie, Berlin, 2005

9 Werner Patzelt: Parlamente und ihre Funktionen. Institutionelle Mechanismen undinstitutionelles Lernen im Vergleich, Wiesbaden, VS-Verlag, 2003

10 Ioan Rotariu: Sistemul economiei mondiale ∫i mecanismele sale de func˛ionare,Editura Mirton, Timi∫oara, 2001

11 Ruoers Schick, Hermann Schreiner: So arbeitet der Deutsche Bundestag, NDV,Rheinbreitbach, 2003

12 Carina Sprungk: Catching up with Europe: Explaining varying patterns of nationalparliamentary participation in EU policy-making, Paper presented at the CentralEuropean Political Science Association Conference, Budapest, 2004

13 Mattias Zier: Nationale Parlamente in der EU, V&R Unipress, Goettingen, 2005 14 XXX, Europaeische Union. Europaeische Gemeinschaften. Die Vertragstexte von

Maastricht mit den deutschen Begleitgesetzen, Bundeszentrale fuer politischeBildung, Bonn, 1998

15 XXX, Grundgesetz fuer die Bundesrepublik Deutschland, Bundeszentrale fuerPolitische Bildung, Bonn, 2001

16 XXX, Vertrag ueber eine Verfassung fuer Europa, Europaeische Gemeinschaften,Luxemburg, 2005

17 www.bundestag.de 18 www.cdep.ro 19 www.cosac.org 20 www.euparl.eu.int

GUIDELINES FOR AUTHORS

ROMANIAN JOURNAL OF EUROPEAN AFFAIRS is the firstRomanian publication to focus exclusively on the Europeanintegration debate and on Romania’s role in an enlarged EuropeanUnion.

The publishers warmly welcome submissions of papers. TheRJEA comprises mainly articles. We also intend to develop asection of book reviews. The Romanian Journal of EuropeanAffairs may include articles that go beyond the scope of Europeanintegration topics, but are, nevertheless, intrinsically connected tothem.

The ideal length of an article (written in English or French) isfrom 4 000 to 8 000 words, including a 200-word abstract inEnglish or French and a very brief autobiographical note. Bookreviews will be no longer than 2 000 words.

RJEA is published on a quarterly basis, therefore contributorsshould consider notifying us of their intention to submit articles assoon as possible (specifying title of the article, name of the author,abstract and a brief autobiographical note). Please send yourarticles or book reviews before February 1st, May 1st, August 1stand November 1st respectively, so that your contribution may beconsidered for publication in the upcoming issue.

Authors should send notifications, as well as the final andrevised version of their articles or reviews in electronic form [email protected].

rjea vol6 no4 dec2006

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