THE ECONOMY OF

THE EU AND TURKEY

PA R T I – H I S T O R Y, E C O N O M I C S , E C O N O M I C S P O L I C I E S
LECTURE-1:
AN OVERVIEW OF THE EU
TODAY’S PLAN:

• Syllabus – introducing the course

• A brief introduction – an overview of the EU
NEXT WEEK:

• The History and Institutions of the EU

– Readings:
• Baldwin & Wyplosz Ch 1*,2*
• Neal, Ch 2
 THE ECONOMY OF
THE EU AND TURKEY

LECTURE-2:
THE HISTORY AND INSTITUTIONS OF THE EU
TODAY’S PLAN:

• The History and Institutions of the EU

– Readings:
• Baldwin & Wyplosz Ch 1*,2*
• Neal, Ch 2
THE HISTORY
• European integration – the initial idea was to prevent new wars within Europe
– Two devastating wars:
– WW-1 and WWII (Axis: Germany, Italy, Japan; Allied: The US, Soviet, Britain)
• Lost lives, the income levels went back to the levels of late 18s and early 19s.
• Cold War between the US & Soviet Union – Europe was one of the playfields
• Germany was divided between West and East (Berlin Wall)
• The strategy was to leave Germany weak first, but then the strength of it became important to
prevent the communist spread into west.
MARSHALL PLAN AND OEEC
• Marshall Plan & OEEC (Organization for European Economic Cooperation – 1948). Two
important factors behind the initial steps in European integration
– Removing the trade barriers
– Creating a payment system (European Payment Union) 50-58: multilateralization of the
deficits/surpluses
• At first, Marshall Plan was to distribute aid to European countries for their deficits (nominated
in the US dollar). Later, the aid was provided on the basis of further integration (liberalization).
• Starting from mid 50’s European countries experienced trade improvement & high growth
• Experiencing high growth, the integration became important not only politically but also
economically.
• Integrate, but how? - disaggreements
FEDERALISM VS
INTERGOVERNMENTALISM
• More Europe vs less Europe – a debate that has been going since the 50’s
– How much power should be centralized and how much of it should be kept at the national level
• Centralizers: federalists (seeing the nation power as the cause for the problems, and the world wars)
• Decentralizers: intergovernmentalists – nation-state system is more effective – integration should be based
on cooperation (UK view)
• Countries that were devastated the most were favoring the federalist view more: the original six members of
the EU: Belgium, Germany, Italy, Luxembourg, France, the Netherlands
• Countries that avoided foreign occupation and great number of losses favored the intergovernmentalist view:
the UK, Norway, Denmark, Iceland; neutrals: Ireland, Sweden, Switzerland
• Spain and Portugal (Franco & Salazar) were still being ruled by fascist regimes until the 70s, and Austria &
Finland were under Soviet pressure till late 80s.
INITIAL STEPS OF INTEGRATION
• The integration was dominated more on the basis of intergovernmentalist view.
• But a big step was taken towards federalism: ESCS (European Steel and Coal Community) was
built as a part of Schuman Plan (French Foreign Minister Robert Schuman & Jean Monnet –
father of European integration). 1952, France and Germany
– Coal and steel – commanding heights of an industrial economy (also crucial for military strength).
– An important step to prevent any more wars between France and Germany
– Italy, the Netherlands, Belgium and Luxembourg were also invited. This is called a group ”Six” –
leading force behind the integration.
– Decisions (pricing, imports, exports, production) made by the High Authority (consisting officials
appointed by the six members).
THE TREATY OF ROME &
THE CREATION OF EEC
• The strength of Germany remained an issue – the occupation formally ended in 55, became a
member of NATO. More integration needed to prevent wars: The Treaty of Rome (57) – the
creation of EEC (came into existence in 58) (European Economic Community) – Britain first
partook then dropped out in 55 from the meetings.
• Deep economic integration of the Six
• The Treaty of Rome promises: removing all trade barriers, free movement of workers, capital
market integration and free trade in services
• Setting supranational institutions: European Parliamentary Assembly (now European
Parliament), the European Court of Justice and the European Commission.
• Creating reaction among west European nations led by Britain – forming EFTA (European Free
Trade Association)
EFTA & DOMINO EFFECT
• Inner Six vs Outer Seven
• Formation of EEC created discrimination
• Before EEC, barriers were removed for all OEEC countries
• After EEC, tariffs within EEC are lower than for other countries (including the OEEC countries
remain out of EEC).
• Seven OEEC countries owned their own bloc in 1960 (EFTA) via Stockholm Convention:
Great Britain, Norway, Denmark, Austria, Portugal, Sweden and Switzerland (Ireland remained
outside – won full independence from Britain in 1948 and already has close trade linkages).
THE DOMINO EFFECT
EFTA MEMBERS JOINING EEC
• Once these two blocs are formed and reduced tariffs within, the EFTA7 were hurt, as the
members of EEC had higher income and income growth. Preferential integration creates
pressure for outsiders and force them to join, the bigger the group gets, the heavier the pressure
becomes (domino effect – Baldwin).
• The UK applied for EEC in 1961. (Ireland, Denmark, Norway quickly followed). – granted in
1973 because of earlier France (de Gaulle) opposition.
• Norway refused because of the negative votes in a referendum.
• 1973 EEC enlargement shrank EFTA – the second domino effect: firms put pressure on their
governments – bilateral agreements between EEC and remaining EFTA countries.
EURO-PESSIMISM
• Soon after EEC (trade liberalization), economic integration stagnated due to political crises in 60s
and economic shocks in 70s. – a period for Euro-pessimism.
• Political shocks:
– regaining confidence due to growth – national sovereignty (de Gaulle is leading)
– Final stage of the Treaty of Rome (decision-making body is the Council of Ministers) voting is being
switched to majority – France opposed and forced unanimity – decreased the ability to make decisions
especially with the expansion of EEC in 1973.
• Failure of monetary integration:
– Exchange rate stability was proved to be important for economic performance
– Bretton Woods system broke down – search for creating a union to stabilize the xch rate within EEC –
Werner Committee’s step by step plan – failed due to the oil shock
– Yom Kippur War – OPEC countries refused to sell oil to Europe and the US. Sharp increase in the oil p.
– High inflation, falling income, rising unemployment (stagflation) were the results.
– Recovering from 1973, then the second oil shock in 1979 (Iranian Revolution).
EURO-PESSIMISM
• Failure of deeper trade integration
– new type of barriers (technical regulations and standards): TBT(technical barriers to trade): as they
become richer, they demanded for tighter regulations.
– While protecting costumers, inhibited intra-European trade.
– Due to unanimity – trying to harmonize the regulations took too long while new regulations came
into effect day by day.
• Bright spots
– Spain, Portugal, Greece adopted democratic governments – became eligible for EEC membership.
– Greece joined in 1981, Iberians in 1986.
– EMS (the European Monetary System) started operation in 1978 – success in stabilizing intra-EEC
xch rates.
– Democratic control of EEC – electing the EU Parliament in 1979 (previously the members were
drawn from the national parliaments – European Parliamentary Assembly).
SINGLE MARKET PROGRAMME
• Jacques Delors (President of the European Commission 1985-1994) pushed for the completion of
the internal market.
– Among the promises of The Treaty of Rome’s, only liberalization of trade in goods was achieved.
Services, capital&labor markets??
– The initiative: Single Market Programme
– The policy proposal in 1985, ratified by all members by 87 (the Single European Act).
– The biggest step in economic and political integration since the Treaty of Rome.
• there were still many barriers (standards and regulation, capital controls, public procurement,
administrative formalities, differences in tax rates, transportation regulations, service providers
held certificates given by local authorities)
– Steps taken for harmonization and liberalization.
– No more unanimity requirement in decision-making process. Now on the basis of majority.
– Capital mobility – unintended (later) consequence: single currency
• Without capital controls, choose either control on xch rate on monetary policy (trilemma).
COLLAPSE OF BERLIN WALL &
MAASTRICHT TREATY
• Construction of Berlin Wall in 1961 – division of Europe into communist and capitalists camps
• The living standards were similar in the beginning, but by the 1980’s it was much higher for the Western
Europeans. Even the USSR started to implement pro-market reforms.
• Soviet no-intervention and hands-off policy. First Polish labor movement forced the communist government to
hold parliamentary election and triggered other events. Spreading into Hungary, Czechoslovakia and East
Germany. Collapse of the Berlin wall in 1989 – a new challenge (a unified Germany was three times of other big
European countries – concerns about power imbalances – solution is to integrate even more)
• The Treaty of Maastricht (1992): commitment to form a monetary union (euro is adopted by 2002); creation of
Euro citizenship (not only move around but also right to live); strengthening cooperation in security, defense,
asylum, immigration policies; strengthening the power of European parliament; ‘Social Chapter”: worker’s
health, safety, working conditions.
• European Community became European Union.
• EEA (European Economic Area) Agreement (94): access to single market without being an EU (93) member (for
EFTA): obey and pay with no say – Norway option(72, 94 referendum rejections – nearly but not quite
relationship), Swiss option, debates during Brexit.
EU ENLARGEMENT &
COPENHAGEN CRITERIA
• Gaining independence, and fearing that future Russian governments start putting pressure
again, Central and Eastern European Countries all wanted to join the EU and NATO. But the
EU was first reluctant about the membership, provided bilateral agreements instead.
• Proving pro-market reforms, the ultimate prize was gaining membership.
• But hesitation as CEEC were poor and agrarian – the budget would all go to these countries.
• Hesitation ended in 1993 – meeting in Copenhagen (Copenhagen Criteria)
• Approved membership subject to membership criteria:
– Political stability – rule of law, democracy, human&minority rights
– A functioning market economy – capable of dealing with the competitive pressure
– Accepting all EU economic and politic rules - and ability to take on the obligations
PREPARING FOR THE ENLARGEMENT
• The Community started with six members and already enlarged before a new enlargement with CEEC
countries.
• The inclusion was difficult – political problems within the members as it benefited some and hurt others.
• Back in the time it was Germany, France and Italy (large) vs Belgium, Luxembourg and the Netherlands
(small). They shared a voting power but it was good back then as the small countries balanced the power of
the large ones.
• Now with the new enlargement – there is fear of too many small countries can now dominate the decision-
making.
• 4 attempts at reform (Amsterdam ‘97, Nice 2000, Constitutional and Lisbon Treaties) about defining more
precise division of power between the EU and its members, defining the role of national parliaments.
Amsterdam was only tidying up Maastricht, Nice and Constitutional Treaties were not a success. The reform
had to wait till 2004 (when enlargement with 10 new members took place).
• Constitutional treaty was rejected in a referendum by French and Dutch voters – instead of ratification, a
period of reflection.
THE LISBON TREATY
• The reform process was relaunched when Germany took on the rotation EU presidency in
2007.
• Signing the Lisbon Treaty in December 2007
• As there is more belief in nation-states, the language (emphasizing supranationality) had to
change.
• Germany wanted to avoid referendum and instead wanted ratification of the treaty through
national parliaments. Happened except Ireland (required referendum for any change in the
relationship between the Irish Law and EU Law). But then with some promises in hand, they
switched to yes in October 2009.
• The Treaty came into effect in December 2009 – still in force.
EUROZONE CRISES
• Great moderation period during 90s and much of the 2000s – low unemployment rate, low and steady
inflation, good growth.
• Convergence of long-run interest rates with the low levels achieved by Germans (an interest rate that is
demanded by investors for locking up their money).
• The stability led not only investing the savings but also taking on debts to invest (leveraged investing -
especially the USA, the UK and Ireland) in Greek, German bonds etc.
• Global crisis in 2008 – subprime mortgages in the US – financial stress for banks spreading & massive
panic after Lehman Brothers’ collapse. Panic = stop lending to others. No loans no paying off earlier debts.
• Eurozone crisis starts in 2009 – resuming lending with high interest rates. Two big events:
– A very large Irish bank went bankrupt due to inability to borrow to finance massive loans it made to property
developers. The bank (the debt) was nationalized.
– In Oct 2009, it turned out the previous president of Greece cooked the books (concerning the size of the Greek
national debt).
– Higher interest rates – greater fears about the nations’ solvency – fear of leaving the euro (and loss of its value)
EUROZONE CRISES
• Emergency lending packages to Portugal (2011), to Spanish (2012), and to Cyprus (2013).
• Solution: institutional reform concerning transferring the power from nations to eurozone decision
making bodies.
• New restrictions on the tax and spending policies
• Banking oversight – from nation to ECB (European Central Bank)
• A new type of Euro-skepticism. This time not about how to advance the integration, rather if it should
be stopped.
• Dissatisfaction and distrust of Europe’s political establishment has rise to alarming levels.
• Unemployment soared from 2008 to 2013 and stayed high. unemployment rate today is much higher
than it was before the crises.
• Real gdp drop by 5% in 2008 and stayed low till 2014.France and Germany recovered more quickly, but
not others. Spain recovered only in 2017. Italy and Greece still not recovered. Imposed fiscal austerity.
• Rise of populism
THE MIGRATION CRISES
• Wave of migrants into Europe from the Middle East and North Africa starting from 2014.
• Gigantic wave in 2015-2016
• Mostly arrived in Greece, Italy and Spain by the sea and Hungary by the land. Moved to
Germany and other northern EU countries.
• Two shortcomings of EU
– Removing the internal borders made the external border control very crucial.
– The rules for managing asylum seekers were not designed to handle great number of people.
• Turkey becomes the destination for asylum seekers who were refused.
• Anti-immigration becomes one of the elements in populist rise throughout the Europe – also
one of the reasons behind the Brexit
BREXIT (JAN 2020)
• June 2016 – British Exit (Brexit) was considered
• The voting first started as a gamble due to conflicts within the Conservative Party.
• With a close margin, the vote turned out to be ‘leave”
• The vote to remain was clear but the vote to leave isn’t clear. Stay out of eurozone but stay in the common market,
complete exit??
• Exit is governed by the Lisbon Treaty (a max of 2 years for negotiations – divorce or remarriage).
• Many issues: what happens to the EU citizens who have been living in the UK for a long time?? What is the future
relationship??
• The EU: the UK cannot pick as it wishes among the elements of the Single Market.
• Three options:
– Hard Brexit (WTO option): large increases in barriers
– Deep free trade agreement: tariff-free but many technical barriers – specific harm to services (UK Financial services)
– Soft Brexit: economic cooperation arrangement of the Single Market like Norway. Pay but no say.
• No-deal option: Brexit without a withdrawal agreement
• After some agreements and re-agreements, Brexit came into force in Jan 2020
– Free trade in goods
FACTS, LAW, INSTITUTIONS, BUDGET CH2
THE TREATY OF ROME

• Institutional features of the integration

• Intentions of the Treaty of Rome – setting a unified economic area where
– All firms and consumers have equal opportunity to sell or buy goods and services
– Workers would move freely (no discrimination while hiring) – after Lisbon: people would move freely
– Capital to be mobile: firms can set up anywhere – also free capital flows (although very little liberalization was
undertaken until to 80s for the fear of economic fragility). But also there was a loophole: allowing restrictions in the
presence of disturbances.
– Due to turmoil of the 20’s and 30’s interventionists policies for the agricultural sector – continued with CAP(1962)
(great competitiveness differences between the Six did not allow free trade in agr).
– But omitted two important areas: harmonization of social policies, and harmonization of taxes.
• Two schools within the first: harmonize before liberalizing, no need to harmonize
• The second: the discussion is much about the taxation on specific sectors which would give advantage to some firms, rather
than on taxation that directly affect income distribution.
THE STRUCTURE –
PRE VS POST LISBON
• The Treaty of Rome had broad articles in it, and the Court was given the power to make decisions in line with the
Treaty – created concerns about losing national power
• Concerns regarding supranational power vs national power
• Maastricht treaty – clear lines between supranational and intergovernmental policies,
• Based on three pillars:
– The first: deep economic integration (supranational)
– Foreign and defence matters (Intergovernmental)
– Police, justice and other home affairs (national)
• Initiatives like Schengen were not forced. Maastricht was consider to leave the members in control in 2 nd and 3rd
pillars. Court had no power to force members for deeper integration.
• Post-Lisbon: two pillars
– Supranational: economic integration, justice and home affairs
– Intergovernmental: common foreign and security policy
SUPRANATIONALITY IN THE EU

• The commission can propose new laws – then voted by the member states (in the Council of
Ministers) and the European Parliament. If passed, then these are binding for every member.
• The commission has a direct authority in some areas: competition policy (blocking the merger
for example)
• The rulings of the European Court of Justice can alter laws, practices and rules in member
states in limited areas.
• So, the Lisbon Treaty merged the third pillar of Maastricht into the first one.
EU LAW
• Supranational legal system
• Even the highest courts in EU member states must obey to the decisions taken by the EU’s Court of Justice
– which has the ultimate say on questions concerning European Law
• Pre-Lisbon: the COJ was only concerned with the first pillar issues. But now it is concerned with any areas
except the ones specifically excluded.
• The source?? Not a constitution. The treaty of rome created the court, and the court created the legal system.
• Treaties (primary laws), EU laws (secondary), decisions of the Court (case law)
• Principle of direct effect – EC Laws must be enforced as if the law had been passed by the national
parliament. The direct effect also applied to EU Laws that were passed by majority. A country has to obey
even if they voted no.
• Primacy of EU law over the national law.
• Autonomy: the EU legal system is independent from the member states’ legal systems.
THE BIG 5 INSTITUTIONS

• The European Council (head of the state and governments)

• The Council of the European Union (Member nations’ ministers) (old name: Council of
Ministers)
• The European Commission (appointed eurocrats)
• The European Parliament (directly elected)
• The Eu Court (appointed judges)
THE BIG 5 INSTITUTIONS
THE EUROPEAN COUNCIL &
COUNCIL OF THE EU
• The European Council includes national leaders – they provide guidance to the European Commission
(executive branch) – meets at least twice a year.
– The president is selected by the Council (qualified majority voting – weighted votes with large nations getting
more weight). Serves a 2.5 year term.
– The most important decisions are published as the ‘Conclusions of the Presidency”
– No formal role in law-making
• The Council of the EU (Ministers)
– Main decision making body
– Any legislation subject to its approval.
– Consists of one representative from each EU member: finance ministers on budget issues etc.
– Passes European laws, approves the budget with the Parliament etc.
– Accepting new members, setting multi-year budget requires unanimity, most of the others – quality majority
voting
– Rotating presidency in every six months.
EUROPEAN COMMISSION
• The Commission (executive branch)
– Propose legislation to the Council and Parliament, Administer and implement EU policies, Provide surveillance and
enforcement of EU law
– Commissioners from each member including the president and two vice presidents. They are appointed all together and
serve for 5 years. President has to be approved by the Parliament.
– Each commissioner is in charge of a specific are of EU policy (like a national ministry). They are called Directorates-
General (DG).
– Commissioners are expected to not act on behalf of their nations. They are also forbidden to take instructions from their
government.
– Independent but answers to the Parliament (Parliament can dismiss the entire Commission).
– Law making duty is to prepare proposals.
– Executive duty in everything, but most obviously in competition policy
– One key responsibility is to manage the EU budget (year by year allocation of Structural Funds), subject to supervision by
the EU Court of Auditors.
– In principle, decision making is on the basis of consensus. Otherwise the decision possibly won’t pass the approval of
Council and the Parliament.
THE EUROPEAN PARLIAMENT
• Two main tasks: sharing legislative powers with the Council of Ministers and the Commission; and
overseeing all EU institutions, especially the Commission.
• Acts as conscience of the EU – condemning nations for human right violations etc.
• Increased role over the budget and in treaty revision
• Around 750 members – directly elected by the Eu citizens (every 5 years).
• The distribution of members are based on nations’ population (but not with a direct ratio): 6 for
Luxembourg, 96 for Germany (Germany is 160 times Luxembourg).
• Rise in the election of anti-European integration candidates.
• Election campaigns are generally run by each nation’s political parties. Elected members are forming
political/ideological groups (center-right, center-left etc) in the Parliament. These two constitute about
2/3 of the Parliament.
• National delegations don’t sit together, rather the political groups are lined from left to right accordingly
with their ideological positioning. They have their own secretariats, staff, structure etc.
• Located in Strasbourg. Secretariat in Luxembourg. Offices in Brussels.
COURT OF JUSTICE
• Settles the disputes about the ambiguity in interpreting the laws and decisions.
• Highest authority on the application of EU law.
• Consists of one judge from each member state. Appointed by member states’ governments and
they serve for 6 years.
• 8 advocates-general to help judges by constructing ‘reasoned submissions’ that suggest what
decision should be made.
• Decision is made on the basis of majority voting.
LEGISLATIVE PROCESSES
• The Commission initiates the EU decision-making process by proposing new legislation. The
proposal is sent to Council, and most legislation has to be approved by the Parliament. This
main procedure is called the ‘ordinary legislative procedure’.
• The council acts on the weight-majority system and the Parliament on the simple majority
system
• National parliaments are not a part of the process. They are included only when many of them
believe that the EU oversteps in a specific area – Commission either withdraws and leaves it to
nations, or justifies it.
SOME IMPORTANT FACTS
POPULATION
• https://ec.europa.eu/eurostat/data/database
• Before Brexit, about 510 million EU citizens (larger than the US).
• In terms of population:
– Six big nations (having more than 35 million): Germany, the UK, France, Italy, Spain and Poland –
accounts for about 70%
– The medium: Greece, Portugal, Belgium, the Czech Rep, Hungary, Sweden, Austria, and Bulgaria
– The small: Denmark, Finland, Slovakia, Ireland, Croatia, Lithuania, Slovenia, Latvia, Estonia
– The tiny: Cyprus, Luxembourg, Malta
– Netherlands and Romania in between big and medium.
SOME IMPORTANT FACTS
INCOME
• Income per capita
– High income (above the average of EU28): Luxembourg, Ireland, Austria, NL, Denmark, Germany, Sweden,
Belgium, Finland, UK, France
– Medium income (between 25000 to 30000 euros – per capita): Italy, Malta, Spain, Czech Republic, Slovenia,
Cyprus
– Low income (less than 25000): Lithuania, Estonia, Portugal, Slovakia, Poland, Hungary, Greece, Latvia, Romania,
Croatia
• In terms of GDP:
– the big 5 (Germany, the UK, France, Italy, Spain) and the Netherlands account for the 75% of EU’s total GDP.
– Small (1-3 %): Sweden, Poland, Belgium, Austria, Ireland, Denmark, Finland, Portugal, Czechia, Romania, Greece
– Tiny: (<1%): Hungary, Slovakia, Luxembourg, Bulgaria, Croatia, Slovenia, Lithuania
– Miniscule: Latvia, Estonia, Malta, Cyprus
THE BUDGET
• Total EU spending for 2017: 160 billion euros, Total income: 16 trillion, only 1% (falls to 310
euros per person). So it is fairly small but generates great disputes among the members about
distribution.
• Spendings on farming,(37%)!, poor regions(35%)!, and the rest (R&D and Training 14%,
Overseas Development Assistance 6%, Administration 6% etc).
• At first, it was the CAP that took over most of the budget (80-90%), after enlargement, the
spending on poor regions also gained important share.
• Italy and Spain are the top recipients; for Denmark and Ireland farming receipts are crucial; for
Central and Easterns, poor regions receipts; for Luxembourg and Brussels, administrative
spending - due to located EU institutions; the UK had remarkably low receipts compared to its
size.
THE BUDGET - SOURCES
• The budget, by law, must be balanced every year. To ensure, each member has to pay close to
1% of their GDP.
• Four main sources:
– No more major (WTO!): common external tariff (CET), agricultural levies
– VAT (value added tax – less significant), GNP-based (the top revenue resource).
• Net contribution figures was one of the major topics behind Brexit. UK paid but not received
(not many poor regions, no significant agricultural activities). They actually earned rebate
when Thatcher opposed making full payment in 1984.
• The budget is decided and controlled jointly by the European Parliament, the Council and the
Commission.
• Medium term agreement on spending priorities – Multiannual Financial Framework
• The Commission first prepares a preliminary draft budget – presented to the Council for
amendments and adoption – when passed, goes to the Parliament (also has power to amend it).
DECISION MAKING
• Who decides what. Each member has its own local, provincial and national laws and
regulations, and now there is also the EU. How is the task allocation? Who has the
competence?
– Exclusive (union) competences: EU alone decides: customs union, eurozone monetary policy,
competition policy, conservation of marine resources,
– Shared competences: either EU already passed a legislation and the state cannot anymore(certain
social policy, environments, agriculture and fisheries), or state still can make policy in the same area
(humanitarian aid, development cooperation, R&D policies) – the responsibility is shared.
– Supporting competence: EU pass laws that support the action by members: culture, tourism,
education and training, certain human health policies.
DECISION MAKING
• Finding the right level is always a hard task as policies benefit some but hurt others. The
exclusive competence is therefore for the protection of the Single Market.
• Another difficult task: each member state should have equal say (simple majority ruling) vs
each EU citizen should have equal say (quality majority voting system – weighted by pop of
states)
– Choose the first, then people don’t have the same say
– Choose the second: then some states have more power (Germany, France, Italy, Spain, Poland) in
voting – specifically after Brexit
NEXT WEEK:

• The Microeconomics of the European Integration –

Open Economy Supply & Demand
– Readings:
• Baldwin & Wyplosz Ch 4*
• Neal, Ch 3