Theorie und Politik der Europäischen Integration
Prof. Dr. Herbert Brücker
Lecture 2
EU Institutions and Decisionmaking
Theory and Politics of European Economic Integration
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Last Lecture
• Course Overview
• EU History· Why European Integration: Preventing another war in Europe· Two competing concepts: federalism vs. intergovernmentalism· Links between deeper integration and expansion· Europessimism· Single Market Programme 1992· Collapse of Communism· Eastern enlargement and ‘finalisation’ of Europe· German unifcation, Maastricht and EMU· EU Treaties and EU Constitution· Euro crisis
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
• EU Institutions• Key Facts• EU Law• The “Big 5” Institutions• Legislative process• Budget
• Decisionmaking• Task Allocation and Fiscal Federalism• Evolution of Voting Rules• Efficiency of Decision-making• Fair Power Distribution and Legitimacy
Today’s Lecture
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Today's Reading
• EU History, Institutions, Decision Making and the Budget· Baldwin & Wyplosz (2009/2012) “The Economics of European
Integration”, McGraw-Hill, Chs 2 + 3
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
A heterogeneous group: per capita GNP and population, 2010
0.0
10,000.0
20,000.0
30,000.0
40,000.0
50,000.0
60,000.0
70,000.0
0.0 100.0 200.0 300.0 400.0 500.0 600.0 700.0
population in millions
PPP
GN
P pe
r cap
ita in
USD
LX
IE
ATDK
NLBE UK FISE FR DE IT
SPGRPT
CYSLCZ
HUSVK
PL LV
ROBU
CRORU SB TK MK
BO UKR ALB
EU-15 NMS-12 Future Members?
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Also in absolute size …
B+W Fig. 2.2
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Is heterogeneity a problem?
• How to device institutions that ensure the rights of small countries
• Why then should big countries surrender some powers• EU a consensus driven enterprise • Mutual benefits … find win-win situations … may stem from
trade
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Facts: EU15’s Trade Pattern
B+W t. 2.2
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
EU trade patterns
• EU-27 members are all comparatively open economies
· openness and size · figures for Japan and the US are 10 per cent and 8 per cent
respectively.• EU15 market is very important for all EU-27
· share of exports going to the EU15 ranges between 50 per cent to 80 per cent.
• The EU trades mainly with Europe, especially with itself
· about two-thirds of EU exports and imports are to or from other Western European nations
· the EU’s exports to North America amount to only 10 per cent of its exports
· Asia’s share is only 8 per cent • About 80 per cent of EU exports consist of
industrial goods· ‘intraindustry’ trade
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
EU organization: three pillars and a roof
• First pillar · Integration issues, Common Market, Competition (4 Freedoms) · Supranational
• Second pillar · Common foreign and security policy· Intergovernmental, some supranational decisionmaking
• Third pillar· Justice and Home Affairs· Intergovermental coordination, no suprantional decisionmaking
• Roof· European Union and their institutions
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
The EU Court created by the Treaty of Rome:• court then established the Community’s legal system
EC law was established on the basis of:• the EU institutions ensuring that actions by the EC take
account of all members’ interests, i.e. the Community’s interest
• the transfer of national power to the Community. • Constitutional Treaties and Constitution replaces this as the
source of EU law.• Future Treaties may follow, e.g. on financial sovereigneity
Law – sources of
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Autonomy:• system is independent of members’ legal orders.
Direct Applicability:• has the force of law in member states so that Community law
can be fully and uniformly applicable throughout the EU. Primacy of Community law:
• community law has the final say, e.g. Bundesverfassungsgericht can be overruled on a matters pertaining to intra-EC imports
Primary legislation:• treaties (including constitution/constitutional treaty).
Secondary legislation:• collection of decisions made by EU institutions.
Law: Key principles
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Institutions
There are dozens of EU institutions –but only five are really important:• European Council • Council of Ministers • Commission• Parliament• EU Court.
Others matter in specific areas or at particular moments.
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Institutions: European Council
• Consists of the leader (prime minister or president) of each EU member plus the President of the European Commission.
• By far the most influential institution: • its members are the leaders of their respective nations.
• Provides broad guidelines for EU policy.
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Institutions: European Council
Thrashes out compromises on sensitive issues:· reforms of the major EU policies· the EU’s multiyear budget plan· Treaty changes· final terms of enlargements, etc.
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Institutions: European Council
Meets at least twice a year (June and December):• meets more frequently when the EU faces major political
problems• highest profile meetings at the end of each six-month
term of the EU Presidency • these meetings are important political and media events
· determine all of the EU’s major moves
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Institutions: European Council
• most important decisions of each Presidency are contained in a document, known as the ‘Conclusions of the Presidency’, or just the ‘Conclusions.
• Strangely enough, the European Council has no formal role in EU law-making:
• its political decisions must be translated into action via Treaty changes or secondary legislation.
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Institutions
There are dozens of EU institutions –but only five are really important:• European Council • Council of Ministers • Commission• Parliament• EU Court.
Others matter in specific areas or at particular moments.
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Institutions: Council of Ministers
Usually called by old name Council of Ministers (formal name is now ‘Council of the EU’).
Consists representatives at ministerial level from each Member State, empowered to commit his/her Government:
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Institutions: Council of Ministers
• typically minister for relevant area:· e.g finance ministers on budget issues · confusingly, Council uses different names according to
the issue discussed. – Famous ones include EcoFin (for financial and
budget issues), the Agriculture Council (for CAP issues), General Affairs Council (foreign policy issues).
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Institutions: Council of Ministers
• Is EU’s main decision-making body (almost every EU legislation must be approved by it).
• Main task to adopt new EU laws:• measures necessary to implement the Treaties• also measures concerning the EU budget and
international agreements involving the EU • is also supposed to coordinate the general economic
policies of the Member States in the context of the Economic and Monetary Union (EMU), e.g. famous 3 per cent deficit rule.
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Council/Council of ministers: Qualified Majority Voting (QMV)
QMV is complex and is changing (see Part II).Three sets of rules:
• Procedure that applies until mid 2004:· basic form unchanged since 1958 Treaty of Rome.
• Procedure post-2004 (from Nice Treaty) unless Constitutional Treaty supersedes them:
· political agreement in Nice Treaty; implemented by Accession Treaty for 2004 enlargement.
• Procedure from Constitutional Treaty· Effective now since ratification
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Institutions
There are dozens of EU institutions –but only five are really important:• European Council • Council of Ministers • Commission• Parliament• EU Court.
Others matter in specific areas or at particular moments.
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Institutions: The Commission
Has three main roles:• propose legislation to the Council and Parliament• to administer and implement EU policies• to provide surveillance and enforcement of EU law
(‘guardian of the Treaties’) • it also represents the EU at some international
negotiations.
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Commissioners, Commission’s Composition
Before the 2004 enlargement:• one Commissioner from each member:
· extra Commissioner from the Big-Five (Germany, UK, France, Italy and Spain in the EU15)
· this includes the President, two Vice-Presidents and 17 other Commissioners.
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Commissioners, Commission’s Composition
Under Nice Treaty each member in EU25 had one Commissioner
• Current president: BarrosoDraft Constitution, only 15 Commissioners:
• rotating evenly among all members• would have non-voting Commissioners from other
nations (IGC likely to change this).
Commissioners are chosen by their own national governments:· subject to political agreement by other members · Commission, the Commission President individually,
approved by Parliament after hearing
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Commissioners, Commission’s Composition
Each Commissioner in charge of a specific area of EU policy:• Directorate-Generals (DGs).
Executive powers• Commission executive in all of the EU’s endeavours• power most obvious in competition policy and trade
policy.Manage the EU budget, subject to EU Court of Auditors. Decision making:
• decides on basis of a simple majority, if vote taken • almost all decisions on consensus basis.
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Institutions
There are dozens of EU institutions –but only five are really important:• European Council • Council of Ministers • Commission• Parliament• EU Court.
Others matter in specific areas or at particular moments.
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Institutions: European Parliament
Two main tasks:• oversees EU institutions, especially Commission• has to approve Commission • it shares legislative powers, including budgetary power,
with the Council and the Commission.• traditional problem …: democratic deficit
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Institutions
There are dozens of EU institutions –but only five are really important:• European Council • Council of Ministers • Commission• Parliament• EU Court
Others matter in specific areas or at particular moments.
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Institutions: European Court of Justice
• EU laws and decisions open to interpretation that lead to disputes that cannot be settled by negotiation:
• Court settles disputes, especially disputes between Member States, between the EU and Member States, between EU institutions, and between individuals and the EU.
• EU Court’s supranational power highly unusual in international organisations (very influential)
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Institutions: European Court of Justice
• As a result of this power, the Court has had a major impact on European integration.
· 1964 judgment established EC law as an independent legal system that takes precedence over national laws in EC matters
· 1963 ruling established the principle that EC law was directly applicable in the courts of the members.
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
The Budget
The EU Budget
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
The Budget: Expenditure
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Evolution of Spending Priorities
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Evolution of Spending, Level
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Funding of EU Budget
EU’s budget must balance every year.Financing sources: four main types:
• Tariff revenue – common external tariff• ‘Agricultural levies’ (tariffs on agricultural goods)• ‘VAT resource’ (like a 1 per cent value added tax – reality
is complex) • GNP based (tax paid by members based on their GNP).
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Evolution of Funding Sources
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Contribution vs. GDP, 1999, 2000
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Contribution vs GDP, 1999, 2000
• Percentage of GDP per member is approximately 1 per cent regardless of per-capita income.
• EU contributions are not ‘progressive’, e.g. richest nation, (L) pays less of its GDP than the poorest nation (P).
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
Net Contribution by Member
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
Part II: Decisionmaking
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
Which level of government is responsible for which task? • Why centralize, why decentralize? What are the
trade-offs?• Which task at which levels?
How efficient and fair are the EU’s decision rules?• Ability to act• Distribution of power
What are the questions?
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
Typical policy areas:• foreign policy• school curriculum• speed limit• trade policy
Typical levels• local• regional• national• EU / supranational
Task allocation (“compentencies” in EU jargon)
Task allocation
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
Before looking at the theory, what is the practice in EU?Task allocation in EU guided by “subsidarity” principle (Maastricht Treaty)
• Decisions should be made as close to the people as possible • EU should not take action unless doing so is more effective than
action taken at national, regional or local level Background: “creeping competencies”
• Range of task where EU policy matters was expanding. • Some Member States wanted to discipline this spread.
The subsidarity principle
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
3 Pillar structure delimits range of:• Community competencies (tasks allocated to EU).• Shared competencies (areas were task are split between EU and
member states).• National competencies.
1st pillar is EU competency.2nd and 3rd are generally national competencies
• details complex, but basically members pursue cooperation but do not transfer sovereignty to EU.
Recall: three pillars and task allocation (lecture 2)
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
What is optimal allocation of tasks?Basic theoretical approach is called “Fiscal Federalism”.Name comes from the study a taxation, especially which taxes should be set at the national vs. sub-national level.
Theory: Fiscal federalism
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
What is the optimal allocation of tasks?• There is no clear answer from theory, just list of trade-offs to be
considered.Diversity and local informational advantages
• Diversity of preference and local conditions argues for setting policy at low level (i.e. close to people).
Scale economies• Tends to favour centralisation and one-size-fits-all to lower costs.
Spillovers• Negative and positive spillovers argue for centralisation.
– Local governments tend to underappreciated the impact (positive or negative) on other jurisdictions.
– Examples: defense (positive), VAT (negative)
Fiscal federalism: The basic trade-offs
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
Democracy as a control mechanism· Favours decentralisation so voters have finer choices.
Jurisdictional competition· Favours decentralisation to allow voters a choice.
Fiscal federalism: The basic trade-offs (cont.)
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
Closer look at the trade-offs
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
One-size-fits-all policies tend to be inefficient since too much for some and too little for others.Central government could set different local policies but local Government likely to have an information advantage.
Qd2Qd1 Qc,1&2
D1
D2
Davg
MC per person
MVc,2
MVc,2
A
B
Quantity
euros
Diversity and local information
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
By producing public good at higher scale, or applying to more people may lower average cost.This ends to favour centralisation.
• Hard to think of examples of this in the EU. Defense?
Qd1 Qc,1&2
D1
Davg
MC p.p. (decentralised)
C
D
MC p.p. (centralised)
Quantity
euros
Scale
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
Example of positive spillovers.If decentralised, each region chooses level of public good that is too low.
• e.g. Qd2 for region 2.Two-region gain from centralisation is area A.Similar conclusion if negative spillovers.
• Q too high with decentralised.
Spillovers
Qd2 Qc,1&2
Combined region 1 & 2 Marginal Benefit Curve
MCd
Quantity
euros
Private and Social Marginal Cost
Region 2’s Marginal Benefit Curve (demand curve)
MCc A
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
If policy is in hands of local officials and these are elected, then citizens’ votes have more precise control over what politicians do.High level elections are take-it-over-leave-it for many issues since only a handful of choices between ‘promise packages’ (parties/candidates) and many, many issues.Example of such packages:
• Foreign policy & Economic policy.• Centre-right’s package vs Centre-left’s package.• At national level, can’t choose Centre-right’s economics and
Centre-left’s foreign policy.
Democracy as a control mechanism
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
Voters influence government they live under via:• ‘voice’
· Voting, lobbying, etc.• ‘exit’.
· Change jurisdictions (e.g. move between cities). While exit is not a option for most voters at the national level, it usually is at the sub-national level. And more so for firms.
• Since people/firms can move, politicians must pay closer attention to the wishes of the people.
• With centralised policy making, this pressure evaporates.
Jurisdictional competition
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
Using theory to think about EU institutional reforms.• e.g., institutional changes in Constitutional Treaty, Nice Treaty,
etc.Take enlargement-related EU institutional reform as example.
Economical view of decision making
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
Since 1994 Eastern enlargement was inevitable & EU institutional reform required.
• 3 C’s: CAP, Cohesion & Control.• CAP: budget problem due to large agricultural sectors in NMS• Cohoesion: budget problem due to low income levels in NMS• Here the focus is on Control, i.e. decision making.
Endpoint: EU leaders accepted the Constitutional Treaty June 2004. Last country ratified November 2009!Look Nice Treaty and Constitutional Treaty.
• Constitutional Treaty is after several postponements in force now
Focus on Council of Ministers voting rules.• See Chapter 2; these are the key part of EU decision making.
EU enlargement challenges
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
Three sets of rules
Voting rules in the Constitutional Treaty
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
No longer used since 1 November 2004, but important as a basis of comparison.“Qualified Majority Voting” (QMV):
• ‘weighted voting’ in place since 1958, • Each member has certain number of votes,• Populous members more votes, but far less than population-
proportional.· e.g. Germany 10, Luxembourg 2
• Majority threshold about 71% of votes to win.
Pre-Nice Treaty Voting Rules
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
3 main changes for Council of Ministers:Maintained ‘weighted voting’.
• Majority threshold raised to 71-72%Votes re-weighted.
• Big & ‘near-big’ members gain a lot of weight.Added 2 new majority criteria:
• Population (62%) and members (50%).ERGO, triple majority system.
• Hybrid of ‘Double Majority’ & Standard QMV.
Nice Treaty Voting Rules
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 2 Institutions
190%190%190%190%
238%238%
160%140%140%140%140%140%
150%150%
133%133%133%133%133%
33%33%33%
100%100%
50%
GermanyUnitedKingdo
FranceItaly
SpainPoland
NetherlandsGreece
CzechRepublicBelgiumHungaryPortugalSwedenAustria
SlovakiaDenmark
FinlandIreland
LithuaniaLatvia
SloveniaEstoniaCyprus
LuxembourgMalta
Consider percentage increase by member:
• members ranked by population.
Who win?Who lose?
QMV: Nice/Accession Treaty Reforms
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
Voting rules
Voting rules can be complex, especially as number of voters rises.Number of yes-no coalitions is 2n.
• Example: All combinations of yes & no votes with 3 voters Mr A, Mrs B, and Dr C;
Example: EU9 when Giscard d’Estaing was President of France.
• 512 possible coalitions.When Giscard considered Constitutional Treaty rules, it was for at least 27 members:
• 134 million coalitions.
Yes No
A, B, C
A, B C
A B, C
B,C A
C A,B
A, B, C
A, C B
B A,C
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
1. “Passage Probability” measures ‘Decision making efficiency’. • Ability to act
2. Less formal: Number of „blocking coalitions“3. Normalise Banzhaf Index measure Power distribution among members.
• Many others are possible
2 Formal Measures
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
Passage probability is ratio of two numbers:• Numerator is total number of winning coalitions.• Denominator is total number of coalitions.
Passage probability equals probability of win if all coalitions are equally likely.
• Idea is that for a ‘random’ proposal, all coalitions equally likely.• Nations don’t know in advance whether they will ‘yes’ or ‘no.’
Caveats: This is a very imperfect measure.• Not random proposals,
But, still useful as measure of change in decision-making efficiency.
Passage probability explained
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
Step Forward: • Re-weighting improves decision-making efficiency.
2 Steps Backwards:• 2 new majority criteria worsens efficiency• raising vote threshold worsens efficiency.
The ways to block in Council massively increased.• EU decision-making extremely difficult.
Main point is Vote Threshold raised.• Pop & member criteria almost never matter .
· About 20 times out of 2.7 million winning coalitions.• Even small increases in threshold around 70% lowers passage
probability a lot· The number of blocking coalitions expands rapidly compared to the
number of winning coalitions.
Nice reforms: 1 step forward, 2 steps backward
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
Historical Passage Probabilities
0%
5%
10%
15%
20%
25%Passage
Probability QMV: Historical QMV: No Reform QMV: Nice Reform
QMV: Historical 21.9% 14.7% 13.7% 9.8% 7.8%QMV: No Reform 7.8% 2.5%
QMV: Nice Reform 8.2% 2.1%
EU6 EU9 EU10 EU12 EU15 EU27
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
Blocking coalitions.Easier to think about & probably what most EU leaders used.Try to project likely coalitions and their power to block.For example, coalition of “Newcomers” & coalition of “Poor”.
Less formal analysis
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
Examples: 2 blocking coalitions, Nice rules
14
91
183
16
166 170
12
108 106
0
200
Members Votes Population
Poor coalition votesEast coalition votes
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
0
5
10
15
20
25
Pass
age
prob
abil
ity
Historical 21.9 14.7 13.7 9.8 7.8
Status quo: May 04 to Nov 04 2.8
Nice rules: Nov 04 to Nov 09 3.6 2.8 2.3
CT rules: Nov 09 onwards 10.1 12.9 12.2
EU6 EU9 EU10 EU12 EU15 EU25 EU27 EU29
Constitutional Treaty rules increase ability to act
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
Formal power measures:Power = probability of making or breaking a winning coalition.
• SSI = power to make.• NBI = power to break.
Focus on the NBI.In words, NBI is a Member’s share of swing votes.
Power measures
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
Why use fancy, formal power measures?Why not use vote shares?
• Simple counter example: 3 voters, A, B & C• A = 40 votes, B=40 votes, C=20 votes• Need 50% of votes to win.
All equally powerful!Next, suppose majority threshold rises to 80 votes.
• C loses all power.
ASIDE: Power measures
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
Power measures in EU15
0%
2%
4%
6%
8%
10%
12%
14%
NBI Vote share
NBI 11.2% 11.2% 11.2% 11.2% 9.2% 5.9% 5.9% 5.9% 5.9% 4.8% 4.8% 3.6% 3.6% 3.6% 2.3%
Vote share 11.5% 11.5% 11.5% 11.5% 9.2% 5.7% 5.7% 5.7% 5.7% 4.6% 4.6% 3.4% 3.4% 3.4% 2.3%
D UK F I E NL Gr B P S A DK SF Ire L
• For EU15, NBI is very similar to share of Council votes, so the distinction is not so important as in 3 country example.
Distribution of power among EU members
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
0
2
4
6
8
10
12
0 5 10 15 20 25
Vote Share/Population Share
Bud
get S
hare
/Pop
ulat
ion
Shar
e
Luxembourg
Do power measures matter? The budget measure
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
Do power measures matter? The budget measure
y = 0.9966x + 0.0323R2 = 0.7807
0
0.5
1
1.5
22.5
3
3.5
4
4.5
0 1 2 3 4
Vote Share/Population Share
Bud
get S
hare
/Pop
ulat
ion
Shar
e
Ireland
Greece
BelgiumPortugal
DenmarkSpain
Finland
AustriaSwedenNL
France
Italy
UK
Germany
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
Impact of Constitutional Rules:Change in power in EU-25 compared to Nice rules, %-points
-0.04 -0.03 -0.02 -0.01 0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07
GermanyTurkey
UKFrance
ItalySpain
PolandRomania
NetherlandsGreece
Czech RepublicBelgium HungaryPortugalSw edenBulgariaAustria
SlovakiaDenmark
FinlandCroatiaIreland
LithuaniaLatvia
SloveniaEstoniaCyprus
LuxemburgMalta
NBI SSI
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
Impact of Constitutional Rules (cont.):Power change Const. Treaty and Nice rules in EU-29, %-points
-0.02 -0.01 0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07
GermanyTurkey
UKFrance
ItalySpain
PolandRomania
NetherlandsGreece
Czech RepublicBelgium HungaryPortugalSw edenBulgariaAustria
SlovakiaDenmark
FinlandCroatiaIreland
LithuaniaLatvia
SloveniaEstoniaCyprus
LuxemburgMalta
NBI SSI
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
Enlargement impact on EU power, Nice rules (%-points)
-0.016 -0.014 -0.012 -0.010 -0.008 -0.006 -0.004 -0.002 0.000
GermanyTurkey
UKFrance
ItalySpain
PolandRomania
NetherlandsGreece
Czech RepublicBelgium HungaryPortugalSw edenBulgariaAustria
SlovakiaDenmark
FinlandCroatiaIreland
LithuaniaLatvia
SloveniaEstoniaCyprus
LuxemburgMalta
NBI SSI
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
Enlargement impact on EU-25 power, CT rules (%-points)
-0.025 -0.020 -0.015 -0.010 -0.005 0.000 0.005
GermanyTurkey
UKFrance
ItalySpain
PolandRomania
NetherlandsGreece
Czech RepublicBelgium HungaryPortugalSw edenBulgariaAustria
SlovakiaDenmark
FinlandCroatiaIreland
LithuaniaLatvia
SloveniaEstoniaCyprus
LuxemburgMalta
NBI SSI
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
Legitimacy is slippery concept.• Approach: equal power per citizen is legitimate ‘fair’.
Fairness & square-ness.• Subtle maths shows that equal power per EU citizen requires
Council votes to be proportional to square root of national populations.
Intuition for this:• EU is a two-step procedure
· Citizens elect national governments, · These vote in the Council.
• Typical Frenchwoman is less likely to be influential in national election than a Dane.
• So French minister needs more votes in Council to equalise likelihood of any single French voter being influential (power).
• How much more? • Maths of voting says it should be the square root of national
population.
Legitimacy in EU decision making
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
Legitimacy is slippery concept• Approach: equal power per citizen is legitimate ‘fair’.
Fairness & squareness• Subtle maths shows that equal power per EU citizen requires
Council votes to be proportional to square root of national populations.
Legitimacy in EU decision making
Prof. Dr. Herbert BrückerLehrstuhl für Volkswirtschaftslehre, insbesondere Integration Europäischer ArbeitsmärkteUniversität Bamberg | [email protected] | www.uni-bamberg.de/sowi/bruecker
Theory and Politics of European Integration Lecture 3 Decisionmaking
NEXT LECTURE
• November 13, 15:00 hours• The Microeconomics of Trade and Tariffs and
Preferential Trade Liberalisation• Baldwin & Wyplosz (2009/2012) “The Economics of European
Integration”, McGraw-Hill, Ch 4-5.
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