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European Union

Since its creation in 1957, the central objective of the European Community (EC--see Glossary) has been to advance the economic integration of Western Europe, primarily through the reduction or elimination of barriers to free trade and investment. The EC has long enjoyed a high level of sustained popularity in West Germany. Building on this foundation of support, West German leaders in the late 1980s set out to pursue, in concert with other West European states (Britain and some of the smaller countries in northern Europe did not participate), the objective of a more complete political and economic union (see Germany in the European Economy, ch. 6).

The Single European Act of 1986-87, designed to create a single common market without internal frontiers, was implemented in principle on January 1, 1993. In December 1991, EC leaders met in Maastricht to reach agreement on the Draft Treaty on Political Union. As a consequence of the treaty, Europe was committed to the creation of a common currency, set to begin in 1999 at the latest. At Maastricht, EC heads of state, in addition to agreeing on a path to political union, also agreed to the goal of establishing a common foreign and defense policy. The Maastricht Treaty provided the foundation for a federalized United States of Europe by creating the European Union (EU--see Glossary), of which the EC is a part.

In part as a consequence of the momentous changes in Central and Eastern Europe and the Soviet Union, steps toward European unity suffered setbacks in the early 1990s. War in Yugoslavia and the inability of the EC to fashion a cogent and effective response decimated the infant concept of a common defense policy. Meanwhile, mired in the uncertainties about Maastricht's chances for ratification during the autumn of 1991, Europe's financial markets were driven into a brief convulsive episode in September, with the result that EC efforts to impose a common financial discipline were effectively undermined.

At the same time, popular opinion in EC countries signaled that their own elected leaders and EC bureaucrats had lost touch with their respective electorates' concerns. Paramount were popular fears in Europe about a loss of sovereignty and national identity and the uncontrollable expansion of the EC's bureaucracy. Although political elites in Germany remained firmly committed to Maastricht, the German public was especially restive about the potential loss of the deutsche mark--the country's symbol of postwar economic success and in some respects its postnational identity. Roughly 70 percent of Germans rejected the notion that they should trade their vaunted currency for an untested European currency, the European currency unit (ECU--see Glossary).

In the wake of votes in Denmark and in France against ratification of the Maastricht Treaty, Chancellor Kohl showed no loss of overall optimism. Continuation of the process of European integration had been a central foreign policy objective of the Federal Republic. Following a special one-day EC summit in Birmingham, England, on October 16, 1992, Kohl proclaimed that the "European locomotive [would] continue," because all EC members still voiced a desire to ratify the Maastricht Treaty. In a speech before the Bundestag delivered three weeks earlier, Kohl had restated his support for what he interpreted as the treaty's five main objectives: common foreign and security policies; development of an economic and monetary union; development of common policy on domestic security matters; intensified cooperation in environmental protection; and enhancement of the role of the European Parliament.

In political terms, German officials viewed the Maastricht Treaty as a way to reassure European neighbors of Germany's trustworthiness as an international partner. To this end, in fact, Germany had actually sought a special leadership role of sorts. In October 1992, Minister of Foreign Affairs Kinkel stressed his country's unique responsibility, as the most populated and economically strongest country in Europe, "to send a signal of confidence in a common future to our still-hesitant partners." Germany (where only parliamentary approval was required) approved the treaty in December of the same year.

Indeed, many Europeans, the French perhaps in particular, interpreted the Maastricht Treaty as a German containment policy. EC president Jacques Delors had already sought to place German unification within the EC framework. Rather bluntly, during the weeks prior to the country's referendum, a number of Maastricht's supporters in France had argued that European unity would serve as an instrument with which to bind and tame the newly united Germans. French opponents of the treaty, conversely (and ironically), contended that European union would inevitably be controlled by an overwhelmingly powerful Germany. British prime minister Thatcher later stated essentially the same view, calling for a halt to the process of European union, whose final form would inevitably be dominated by the Germans. Indeed, because of its economic size and success, at the time of unification Germany presented a foreboding economic appearance on the European landscape.

In principle, united Germany is not in a position to advance its own agenda within the EU without compromise and consensus. On larger issues, approval by all EU members is required. On minor legislation, a weighted majority voting is applied, meaning that Germany has the same number of votes as France or Britain. Nevertheless, few would dispute the incomparable importance of German support in the EU for significant policy initiatives. Likewise, a strong German effort to implement a policy could be opposed in practice only with considerable difficulty.

A new German confidence, provoking irritation from Germany's allies and partners within the EC, became evident during the first years after unification. Member states fighting recession in the early 1990s blamed Germany's refusal to lower interest rates on Bonn's irresponsible self-absorption with its domestic issues. Through tight-fisted monetary policies, critics argued, the Germans were forcing their European neighbors to pay for the high and unexpected costs of unification. The United States also called on Germany to lower its interest rates to stimulate the international economy.

In addition to economic disagreements, Bonn's policy toward the Balkans in the second half of 1991 provoked charges of unilateralism and strong-arm tactics both within the EC and in Washington, as Bonn attempted to convince its EC partners and allies to recognize the Yugoslav breakaway republics of Croatia and Slovenia. A number of European governments, notably Britain and France, tended to view German policy through the lens of the world wars. German policy was not driven, however, by resurgent hegemonic impulses toward the region, as some critics argued. In fact, German motives were varied.

On the one hand, Germany made it clear that it wished to see the principle of self-determination applied in Yugoslavia. On the other hand, domestic considerations also played an important role. The unofficial lobby of several hundred thousand guest workers from Croatia and the millions of West Germans who had vacationed in Zagreb and along Croatia's Dalmatian coast strongly expressed their horror at the daily bloodshed they viewed on television.

In this context, and ignoring reservations among a number of EC members, Germany unilaterally recognized Croatia and Slovenia before Christmas 1991. Germany's recognition forced the EC to follow suit by January 15, 1992. The United States, after initial opposition over the recognition policy, recognized Slovenia, Croatia, and Bosnia and Herzegovina in April 1992. These developments led Chancellor Kohl to declare that the recognitions represented a major "success for German and European policy." Some European observers were left chagrined, however, by what they saw as the diplomatic flexing of united Germany's muscles.

The Yugoslav case aside, it had become clear in the early 1990s that the EC's policy toward the former Soviet bloc would be shaped to a large extent by German interests. Germany above all was preoccupied with fostering stability and prosperity in the region, especially in neighboring Central and Eastern Europe. In the early 1990s, Germany had established itself as the leading donor of aid, the single largest investor, and the most important trading partner for the former Soviet bloc. In addition to assisting democratic and market reforms, the expansion of economic and commercial ties was of direct benefit to German industry.

In the first years immediately after unification, Germany established bilateral agreements and treaties on good neighborly relations and friendly cooperation with the Soviet Union, Poland, Czechoslovakia, and Bulgaria. In the case of the last three, Germany pledged to help set up contacts with EU member states.

German policy makers soon began to advocate expanding the EU by admitting northern and eastern European countries as members. Germany's interest in this so-called "widening" of the EU appeared at times in conflict with France's preference for a "deepening" of the western structures of the EU before taking on new members. In the French view, new members, including Austria, Sweden, and Finland, strengthened Germany's hand in the EU and, as a consequence, diminished France's influence in the organization.

Although it remained unclear in the mid-1990s just how quickly the EU might expand in membership, it was evident that the EU would search for ways to include the emerging democracies in Central and Eastern Europe. With strong German support, the EU had begun to develop, for example, association agreements or "European agreements" that were intended to offer former communist countries access to EU markets to sell their goods. The EU also sought to provide a framework for economic and technical cooperation and for political and cultural dialogue.

At least on a rhetorical level, EU officials, in accord with the goals of the 1957 Treaty on the European Economic Community, envisaged the gradual establishment of a free-trade area for industrial products. To this end, the EU pledged to dismantle barriers to the access of industrial goods from Central and East European countries at a quicker pace than the partners were required to remove trade barriers to EU goods. This step was to be supplemented, when economic conditions in applicant countries existed, by the free movements of capital, services, and labor. Legal foundations of the new economic systems would also be required to conform with the EU model.

The EU's track record of stubborn adherence in certain instances to restrictive trade practices (especially in the agricultural and textile sector), however, raised profound questions about the feasibility of a smooth and relatively prompt EU membership for Europe's developing democracies. Nonetheless, in the first half of the 1990s, a number of analysts speculated that the Czech Republic, Slovakia, Hungary, and Poland might reasonably expect EU membership by the end of the twentieth century, followed shortly thereafter by Slovenia and the three Baltic states of Estonia, Latvia, and Lithuania.

As the EU's largest and economically strongest state, united Germany assumed an enhanced role in discussions about liberalizing world trade. Although some signs had emerged in the early 1990s that cast doubt on a successful conclusion of the General Agreement on Tariffs and Trade (GATT--see Glossary) negotiations, there were strong reasons to believe that Germany would use its influence to strengthen international trade and thwart any moves that could lead to transatlantic trade wars (see Foreign Trade and Investment, ch. 6).

When the EU's generous price supports of the Common Agricultural Policy (CAP--see Glossary) came under heavy fire from the United States in the GATT negotiations, Germany and Britain--leading food importers--showed an inclination to accept cuts in EU subsidies. But when Paris resisted vehemently, officials in Washington had looked for a stronger German role, hoping Bonn would exert greater pressure on its neighbor to cut farm subsidies and thereby overcome an important stumbling block in the GATT talks.

Germany itself was locked in debate over the issue of agricultural policy. Germany's free-trade lobby was led by the classically liberal FDP, which traditionally had one of its members serve as minister for economics. Kohl had shown himself sympathetic to Germany's farm lobby, and the German government had traditionally been a strong defender of the CAP. The German economy's dependence on foreign trade and investment, however, often pushed the country toward pragmatism and compromise on trade issues. In the early 1990s, Germany was exporting a third of its GNP. In the United States alone, it held a stake of US$34 billion in direct investment.

Data as of August 1995

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