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Author: Francesca Reynolds

  • The Euro and its impact on the European Union

    The Euro and its impact on the European Union

    This brief was originally published by Francesca Reynolds on July 15, 2021. It was updated and republished by Larissa Cursaro on June 22, 2022.

    History

    Although it took until 2002 for the Euro to become a physical currency, the idea of a common currency alongside a united monetary and fiscal policy was an ambition of the European Union since the 1960s. Then on January 17 1989, two decades later, the European Parliament declared the free circulation of goods, capital, services, and people to be the “four fundamental freedoms” of the European Union, thus officially encouraging the adoption of a single-currency. The purpose of the common currency was to support economic activity between states, stabilize economies, and enhance options for consumers.  

    The Euro is now the currency of 19 nations, leaving only 8 EU countries that use an alternative currency (Bulgaria, Croatia, Czech Republic, Denmark, Hungary, Poland, Romania, and Sweden). 

    The European Central Bank (ECB) was established simultaneously in order to coordinate monetary policy (policies relating to interest rates and money supply, used by central banks to influence the level of demand in an economy e.g. management of interest rates) between countries. This necessary measure also further integrated the economies of many EU countries, leaving national governments with only fiscal policy (policies relating to the amount spent by a government e.g. levels of taxation) to manage their country’s economy. 

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    Benefits

    • The Euro enables trade to operate far quicker by removing the need and risk of currency exchanges when operating across eurozone countries. Currency exchanges cost money to complete and are a risk to businesses as fluctuations in rates lead to uncertainty about the cost of the exchange. Therefore, by removing this barrier, trade has flowed easier between countries. 
    • Having a single-currency economy also incentivizes trade between the EU and other countries. The stability of a single-currency economy is attractive to potential trade partners as it ensures a relatively consistent exchange rate. This stability, paired with prudent economic management makes the Euro an attractive reserve currency for non-Euro countries, thus giving it a more powerful voice in the global economy. Fun Fact: The Euro is the world’s second most popular reserve currency. 
    • In theory, a combined currency should also incentivise countries to support each other and thus promote greater stability. There are a few reasons for this. First, countries with larger economies tend to be more stable as they are able to spread risk. For example, a natural disaster in a small country can ruin their economy and currency. On the other hand, a natural disaster in one US state will likely have an insignificant impact on the currency. Second, more successful countries have an incentive to help out less successful countries, otherwise known as “cohesion policy”. This is because the value of the currency impacts all countries using it, so if countries want to prevent harmful impacts to their own country, they need to support others. This benefit was realized during the 2020 Coronavirus Crisis. Although there was initially insufficient support for a collective measure, the ECB consistently bought debt in severely impacted countries to keep interest rates low. Eventually, the Next Generation EU recovery plan was put in place. It is the largest stimulus package ever from the EU and is worth around €750 billion. 

    Issues

    The most significant issue facing the adopters of the Euro is the coordinated monetary policy that often fails to fit local economic conditions. The economies of the countries currently using the currency vary significantly. Germany is the world’s third largest exporter but has to use the same monetary policy as Lithuania whose export value is 67th globally. Without tailored monetary policy for each economy, countries can struggle to solve issues impacting their populations, as was the case during the eurozone Sovereign Debt Crisis.

    There is also concern regarding the economies of some member states that have already adopted the Euro. In order to become a member of the eurozone, countries must meet certain economic standards called “convergence requirements”, one of which requires the country’s debt ratio to be under 60% debt to GDP.  Considering that this is a non-negotiable prerequisite to join the eurozone, many economists wonder if the European Commission should start holding current eurozone members to the same standard. Some of the largest countries in the European Union—such as Italy, France, and Spain—fail this requirement with the average percent debt to GDP in the Euro area being 100 percent. If left unchecked, they may cause the Euro to lose value, which could be devastating for the Euro area’s economy.

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    Future

    • There are frequent reports of the potential collapse of the Euro, however, at least in the near future, this seems unlikely. The Euro was able to survive in Greece despite both economic and political crisis after the 2008 financial crisis, so it seems likely to continue through comparatively steadier times. 
    • The number of countries using the Euro could be set to increase. Since 1991 any country joining the EU has had to adopt the Euro and meet the “convergence requirements” (excluding Denmark). With a number of countries in the pipeline to joining the EU, it is no surprise that the eurozone is set to expand. On June 1st, 2022, the European Commission determined in its convergence report that Croatia has fulfilled the convergence requirements for the adoption of the euro on the first of January, 2023. However, many countries have been on the path to EU accession for many years without having been deemed to fulfill the convergence criteria.
  • Intro to the European Union

    Intro to the European Union

    Formation History

    As of 2021, there are 27 member states of the European Union. However, the current coalition and its structure has developed gradually throughout the latter half of the 20th century and into the present day. In 1950, French statesman Robert Schuman issued the Schuman Declaration, which called for France and Germany to pool their coal and steel production so that the economic crises that contributed to World War II would not happen again. In 1951, the European Coal & Steel Community was founded by France, Germany, Italy, the Netherlands, Belgium, and Luxembourg. By the late 1950s, this independent economic authority had grown into the European Economic Community and through the Treaty of Rome, a common market of goods, services, and people was established. The United Kingdom and Denmark joined in 1973, followed by Greece in 1981. The Schengen Agreement of 1985 was a pivotal moment for the European Community. It eliminated border controls and passport checks within the Schengen Area, facilitating the free movement of people to travel, work, and live within the area. The European Union was created with the Maastricht Treaty of 1992, and by that time Spain, Portugal and a reunified Germany had joined as well. The European Union has three pillars: the judiciary, legislative, and executive branches. It is the first truly supranational organization in modern history, where countries could be held to a greater independent authority than each of their own. Most recently, the Treaty of Lisbon in 2007 increased centralization, improved regulations and introduced a new global diplomatic framework.

    The 5 Main Institutions of the European Union

    The EU has evolved into a system of government that resembles the United States, and its European relatives. There are 5 main institutions –  the European Council, European Parliament, European Commission, Council of the EU, and the Court of Justice of the EU.

    1. The European Council ensures that the highest elected officials in EU nations are represented in the European Union. It is made up of the heads of state of all EU member countries. They nominate the President of the European Council and the European Commission. This body cannot pass laws. It sets the direction of the EU’s common foreign security agenda and may request legislation to be pursued. The European Council President serves a two and a half year term, once renewable, and presides over four meetings a year in Brussels, known collectively as the EU summits. Decision-making is generally by consensus and only heads of state can vote. Additionally, the European Council participates in the Euro Summit, where the heads of state of the Eurozone, the Council President and the Commission President meet exclusively to discuss economic policy in the Euro Area.
    1. The European Parliament is the law-making body of the EU. It could be described as the body of the European citizens, with direct elections held every five years. The Parliament formally elects the Commission President and approves the Commission body, and has the power to form investigative sessions . They also undertake election observations, sending delegations to countries outside the EU, to analyze their election process and ensure democratic principles are upheld. The Parliament establishes the EU budget with the European Council and sets monetary policy with the European Central Bank.
    1. The European Commission is responsible for drafting proposals for legislation for the European Parliament. It represents the interests of the European Union as a whole, implementing its global vision for EU development and funding programs. It proposes and manages the EU budget, which is submitted to the Council of Europe and then Parliament for approval and final ratification. The Commission works with member states to execute funding projects, and acts in a supervisory and regulatory capacity. While the Commission President and commissioners are chosen by the European Council, the European Commission is intended to act as its own independent authority that does not follow a single state’s agenda. The Commission President defines the policy direction, and with the Commissioners produces an annual work programme that outlines the EU’s strategic objectives and how they are to be implemented. In its own words, the European Commission sets objectives that support and promote European values of “freedom, democracy, equality, the rule of law, and respect for human rights.”
    1. The Council of the EU, also known as The Council, works closely with the other branches to finalize the agenda of the European Union. They are the ‘decision-maker’ of the EU. The Council will negotiate and adopt EU laws from European Commission proposals. They are responsible for developing EU foreign and security policy with European Council guidelines, as well as adopting the annual EU budget with the European Parliament. The Council meets with other nations and international organizations to finalize agreements between them and the EU. There are no fixed members and the President serves a six month term that rotates between nations. There are ten different policy areas on which the Council meets, and each member state will send their respective minister for that configuration. For example, if the meeting is on foreign affairs, then 27 foreign ministers will attend. The decision-making process is a qualified majority system with four countries needed for a veto. For ‘sensitive topics’ such as foreign policy and taxation, a unanimous vote is necessary.
    1. As an intergovernmental organization, each nation interprets the EU’s laws in accordance with its own constitution. The Court of Justice of the EU or CJEU is responsible for making sure that EU laws are applied to member states in the same way. It is the judicial branch of the EU. It settles legal disputes between nations and EU institutions. For instance, if the European Commission or a different nation feels that a member state is failing to comply with EU law, then it is up to the courts to rule whether an infringement has occurred. On the other hand, if a member state or any institution believes that an EU act violates EU treaties or the sovereignty of the national court, it can ask the CJEU to annul the legislation. There are two courts of the CJEU, the Court of Justice and the General Court. The Court of Justice is the Supreme Court of the EU, and deals with requests for preliminary rulings from national courts seeking guidance on how to interpret EU law. The General Court is responsible for contestations to EU institution actions against its member states that violate their fundamental rights or EU treaties. It deals mainly with competition law, state aid, trade, agriculture and anti-terrorist law. First, a written statement for annulment of an EU law is submitted to the Court. A general meeting, usually with five judges, then takes place to discuss if a hearing should be held and if the advocate general is necessary. The advocate general issues official opinions on the case to the judges after the lawyers of either side present their case. Their statements are not legally binding, but greatly influence whether an action for annulment will be successful. It is General Court procedure to have most cases heard by three judges. Any EU citizen, private company, or international organization can submit a case to the CJEU.

    Current Issues Facing the EU

    Since 2015, the European Migrant Crisis has been one of the longstanding humanitarian issues for the EU, but since then there have been greater measures taken to ensure a humane migration policy. It remains a very significant global issue, and for detailed analysis read Siena Frost’s article here.

    The United Kingdom, the second largest net contributor to the EU, officially left the European Union in 2020 as a result of the controversial Brexit referendum vote in 2016. This will have wide reaching economic impacts on the United Kingdom and the European Union, and the ongoing negotiations demonstrate the intricate ties that the EU has within countries. 

    With the introduction of the Euro, came the most impactful economic mechanism of the European Union. For a breakdown of the Euro, the EU’s common currency, and its issues, read Francesca Reynolds’ article here.
    With a 2 trillion-plus stimulus package, the EU’s largest long-term budget to date will include a 750 billion euros COVID-19 recovery fund for a post-pandemic Europe. Another significant financial injection is the European Green Deal, with one third of the 1.8 trillion recovery plan going to financing its investments in building a more environmentally sustainable Europe.

  • Francesca Reynolds, University College London

    Francesca Reynolds, University College London

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    Francesca graduated from University College London with a 1st honours in Philosophy, Politics and Economics. Both during and after college, Francesca worked for Members of the British Parliament as a speechwriter and policy researcher. Her research focuses on British politics and democratic governance/innovations and in the past she has written papers on referendums, the UK/US relationship, electoral systems and international relations. Francesca is also an international award-winning competitive debater and continues to coach in her spare time. She now works as a Management Consultant and specialises in public services consulting.

  • Intro to U.S-U.K Relations

    Intro to U.S-U.K Relations

    Read this page as a PDF.

    History:

    The term “special relationship” is used as a catch-all term for the political, diplomatic, military and economic relations between the US and the UK. Although the unofficial term became popularized in a speech by the then-Prime Minister of the United Kingdom, Winston Churchill, in 1946, it is also widely acknowledged that the two states have enjoyed close political and military relations for much of the 20th Century. During this time the two countries were military allies in a number of wars and have often shared prioritized access and close cooperation on a range of issues.

    The relationship is not a consistent one, with the personality traits and policies of both countries’ leaders reportedly playing a significant role in determining its closeness during specific periods of time. The two countries were considered particularly close during the Clinton/Blair period, when the two leaders, as friends more than representatives, would frequently talk about the issues of the day and provide support and guidance to each other. This relationship is often thought to have been a significant factor in the decision by the UK Government to enter the Iraq War alongside the United States.

    Present:

    President Biden’s first phone call to a European leader was to the current British Prime Minister, Boris Johnson, and the call included a joint commitment to strengthening the relationship. However, this came not long after Biden had publicly voiced major concern about the direction of UK policy regarding Brexit. His particular focus was on the UK Government’s decision to break the Good Friday Agreement in order to deliver a Brexit deal that would leave the UK out of the European Union’s Free Trade Agreement.

    It is this disagreement—amongst other differences—that has led to less focus being given to the relationship in recent years. An example of the tension during Trump’s presidency is clear in the following passage in a briefing available to MPs and advisers in 2018:

    “Against the backdrop of increasing American isolationism, the so-called ‘special relationship’ between the United States and the United Kingdom has arguably been subject to even more intense scrutiny, particularly as the UK seeks to define its global role in light of its withdrawal from the European Union. In particular, opportunities for cooperation such as a mooted bilateral trade deal, and areas of disagreement such as the US’s stance on the Iranian nuclear agreement, have prompted a number of questions about the potential nature of future relations between the two countries, and the wider ramifications.”

    HOL Library, 2018

    Future:

    It is clear that the future of the relationship will depend largely on the personality and politics of the future leaders of both countries. The UK Government is eager to see the relationship culminating in a US-UK trade deal. However, given Biden’s recent announcement that a trade deal may not occur till 2024, it is clearly not a US priority. Nevertheless, both countries seem to remain committed to keeping at least a facade of proximity, given their shared values and their status as two of the world’s key powers, economically, militarily and diplomatically.

  • Jeena Patel

    Jeena Patel

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    Jeena Patel (she/her) is a senior at Boston University majoring in Political Science and is on the track for Environmental Law. She is from Tampa, Florida and wants to purse research that advocates for marginalized groups and dispels misinformation. Growing up in Florida she has developed a close connection to the environment and nature. Her research focuses on environmental policy, LGBTQ rights, racial equality, indigenous peoples, and economic inequality. Jeena joined ACE because she believes that accesible information about our government is imperative for democracy. She is a member of Boston University’s Model United Nations travel team and enjoys debate. Music is incredibly important to her life. Outside of school she enjoys producing music, playing the cello, guitar, piano and cooking, making art, reading, and creative writing.