Economic Integration for European Member States

Paper Info
Page count 10
Word count 2688
Read time 9 min
Subject Economics
Type Essay
Language 🇺🇸 US

The opportunity and even necessity of an increase in the number of members of the European integration association have been incorporated in the idea and fixed in the Roman contract of 1957. As the former chancellor of Germany Helmut Schmidt has declared in one of the interviews, “the fact is that the European community since has begun it the European association of coal and steel, always pursued a policy of a simultaneous deepening and expansion”. If originally the number of participants of “the General market” made 6 in their two decades became 9, then-12, the expert on January, 1st in 1995. – already 15 (instead of 16 as the entering of Norway into the EU has not been approved on a referendum by its people).

Supporters of integration are assured, that other members of the European association of free trade, and also a part of former members will gradually join the EU, including even CIS countries. The increase in a number of the countries-members of EU with inevitability brings attention to the question on a deepening of the process of integration, as twenty and furthermore it is much more difficult for forty states to agree if special rigid rules of the decision of questions at issue and are not made of the competence of the integrated bodies. Despite the fierce disputes not abating till now between “federalists” and “nationalists” this process moves ahead.

The European Union (EU) was formed as the European economic community in 1957 after the merge of the regional organizations:

  • the European association of coal and steel;
  • the Roman contract of 1957 about the creation of European economic community;
  • the European community on an atomic energy

Since January, 1st, 1994 on the basis of the Maastricht contract (1992) The European economic community began to refer to it as the EU. The integration process goes to the EU in two directions deep into and in breadth. Integration in breadth means an increase in the number of full members of the Union and associated members. Now the participants of the EU are 15 states of Western Europe (under the order of the introduction): with 1957 – Germany, France, Italy, Luxembourg, the Netherlands, Belgium; with 1973 – Great Britain, Denmark. Ireland; with 1981 – Greece; with 1986 – Spain, Portugal; with 1995 – Finland, Austria, Sweden. Besides in 1991 for 1995 agreements on economic and trading cooperation with the countries of East Europe and the former USSR have been concluded (Vanhoudt, 1999).

Integration deep into means formation of a regional economic mechanism of Western Europe and expansion of the spheres, exposed to interstate regulation and unification. The occurrence of the European Economic Community had for an object creation of the general market and on this basis increase of economic stability and a standard of life. The contract about the European economic community has defined a sequence of actions:

  • a canceling of the customs duties, import and export quantitative restrictions, and also all other trading restrictions on ways of movement of the goods inside of community;
  • introduction of the general custom duties and a uniform commercial policy concerning the third countries;
  • free movement of factors of manufacture (the capital and a labor), freedom of creation of branches in the territory of European economic community, and free trade in services between the countries-participants;
  • carrying out of the general agrarian and transport policy;
  • creation of the currency union;
  • coordination and gradual rapprochement of economic policies of the countries-participants;
  • Unification of tax laws;
  • alignment of the interstate rules of law important for the general market(Vanhoudt, 1999).

The specified purposes of the European Economic Community were realized gradually in process of its evolution.

The first stage in the evolution of the European Economic Community is a stage of creation of a zone of free trade (1958 – 1966). On it, 1 and 2 purposes stipulated by the Roman contract have been reached. Besides with 1962 the uniform agricultural policy providing for national agricultural manufacturers an opportunity to sell products under the prices has been put into operation, much-exceeding mid world (on 30 % and more) – the uniform agrarian market is created.

With the signing of the 1963 Yond agreement, a number of developing countries (Algeria, Morocco, Tunis, Egypt, Jordan, Lebanon, Syria) has entered into an associated relationship with the European economic community that meant for them an opportunity for duty-free import in European economic community of the industrial and traditional agricultural goods. In 1965 three European communities have made a decision to merge the agencies (Vanhoudt, 1999).

The second stage was the formation of the customs union (1968 – 1986). There is a further expansion of the field of activity of the EU. The purposeful agrarian policy is supplemented with a uniform policy in the sphere of preservation of the environment and in the field of researches and technological development. The joint scientific and technical policy has been concentrated to this stage of development of EU in coal, and iron, and steel industry, and in nuclear power. In 1984 – 1987 the “frame” complex program which entered intermediate-term planning scientific and technical activity has been accepted. In its frameworks with 1985 operates the independent large-scale multi-purpose program of cooperation of 19 countries of Europe – “Eureka” (Landau, 1995).

The third stage was the creation of the general market (1987-1992). On the basis of the Uniform European certificate, and also the document signed in 1985 ” White Paper ” about the program of creation of a home market of the country, EU liquidated the remained barriers on a way of movement of the goods and factors of manufacture. The largest achievement of integration process during this period became acceptance and realization of the Program of creation by the end of 1992 of a uniform home market of EU as a result of which carrying out between the EU countries the following purposes have been reached:

  • tariff and not tariff restrictions in mutual trade in the goods and services are eliminated all, restrictions on interstate movement of the capital inside of EU are liquidated all and the mutual recognition of financial licenses is entered;
  • national restrictions of import of the industrial goods from the third countries are eliminated;
  • the minimal technical requirements to standards, mutual recognition of results of tests and certifications are entered;
  • the markets of the state purchases for firms of other EU countries are opened.

The fourth stage was the creation of the economic union (with 1993 on present time). Strengthening of political integration and the forced development of the currency union on the basis of signed in the beginning 1992 in the Dutch city of Maastricht of the contract about EU (has come into force since November, 1st, 1993). For this purpose is planned to pass three stages:

  • 1-st stage – 1990-1993 – currencies of all countries join in joint navigation within the limits of the European currency system and currency restrictions are eliminated;
  • 2-nd stage – 1994-1998 – is created the European currency institute and coordination of macroeconomic policy amplifies;
  • 3-rd stage – with 1999 – mutual fixing of exchange rates, the introduction of uniform currency, and creation of the Uniform European Central Bank (Landau, 1995).

Within the limits of the EU the uniform legal space is generated. The legal documents accepted by interstate bodies of the EU are subdivided into two categories:

  • the primary legislation including interstate agreements on creation and expansion of EU, and also other agreements mentioning functioning of the Union;
  • the secondary legislation presented:
    • Rules;
    • Instructions;
    • The acts containing general provisions which are concretized in special decisions of the countries-members of EU;
    • Decisions;
    • Recommendations and opinions.

In a financial aspect of the EU has its own financial assets irrespective of the budgets of the countries entering into it. The size of the budget of the EU is defined by Advice and EuroParliament and annually affirms the last.

The profitable part of the budget consists of:

  • own means which develop from
    • the import duties compensating a difference in the prices for agricultural products in the importing country and on a foreign market;
    • the customs duties under the general custom duties, excepting duties;
    • the certain part of deductions from the VAT and other means;
  • the means deducted by the state-participants of the EU. Each EU country-participant allocates 1,2-1,3 % of gross national product(Gill, 1998).

As a whole already realized steps of integration within the limits of the EU render positive influence on the economy of the countries-participants and processes of internationalization in scales of all world economies. So, if in 1958 the share of internal export of European economic community made 37 % from total exports of the countries in it entering, and a share of internal import – 35 % from the general import in 1992 they have reached 59 % and 62 % accordingly. Due to the increase in mutual trade of the country of Western Europe less other countries of the world are subject to change of a conjuncture of the world market (Gill, 1998).

In 2004 ten new countries entered the European Union. Besides political association, the EU moves on a way to the uniform market with the general economic policy, currency? and free movement of goods, services, work, and capital. Free international trade is considered one of the most favorable aspects of economic integration. The advantages of greater financial openness and increase in the international financial streams not so are unequivocal in a view of recent financial crises and the instability caused by them in many developing markets.

Besides, the countries of the Eurozone cannot lower risks of adverse events in the separately taken country by means of tools of monetary policy. The absence of the mechanisms allowing to deversificate the state economic shocks can lead to the further instability of the economy of the separate states and the economy of the European Union as a whole.

Diversification of the economic and financial risks within the limits of a group of the country’s “distribution of risks” is designated in the economic literature concept. A full distribution of risks all industrial shocks in one country are distributed on members of the group so that manufactures in the suffered state was not reflected in their incomes (full distribution of risks under incomes) or consumption (full distribution of risks on consumption).

In our research, we estimate the benefits of financial integration from the international distribution of risks between 25 members of the EU, and we do not consider other aspects of integration promoting the increase of well-being of the population of the European Union. We compare potential benefits from the distribution of risks between the EU countries and we define the states which will most of all win from the full distribution of risks.

Ten new members of the EU possess as a whole higher and changeable average rate of growth of gross national product per capita (4,2 % annually) in comparison with the countries EU%15 (2,5 % annually). A level of fluctuations of growth of manufacture at “beginners” three times above, than in EU%15. Both rates of growth of consumption per capita, and its fluctuations occur under one scheme. Distribution of risks under incomes allows to find out, how effectively the country uses the international share markets for maintenance of the stability of the national income in case of industrial shocks, and to define a degree of its integration into these markets.

On the average in new members of EU the parameter of distribution of risks under incomes above, then in the EU %15, also makes 26 % and 9 %, accordingly (100 % – full distribution of risks). It does not mean that new members of the EU are more opened to the movement of the capital. They, mainly, distribute risks within the limits of the EU while the countries EU%15 distribute risks outside the European Union, in particular, by investments into Northern America and Asia.

Distribution of risks under incomes brings the contribution to the distribution of risks on consumption (or in “alignment of consumption”). On average at EU%15 much higher parameter of distribution of risks on consumption (47 %), than at new members of the EU (15 %). Basically, alignment of consumption within the limits of EU%15 is reached due to the international remittances, budgetary charges? and corporate and private savings.

Speaking about the benefits for new members of the EU we should not forget that quantitatively to define potential benefit from the distribution of risks, we estimate an increase of a standard of well-being as a result of the distribution of risks, expressing it as stable growth of consumption of separately taken representative at achievement by the country of the full distribution of risks. We estimate a cumulative potential increase of well-being as a result of the transition of the country from financial closeness to the full distribution of risks (on the basis of data under gross national product per capita), proceeding from that in conditions of economic closeness the country consumes an only gross national product, and a full distribution of risks – a part of total gross national product of a group of the states.

By a level of distribution of risks, any of the considered countries cannot be considered financially closed. Therefore we estimate and not used benefits from the distribution of risks at the transition of the country from an existing consumption level to a consumption level at the full distribution of risks. Theoretically the countries with high fluctuations of a performance level win from the association of individual industrial risks, then the country with a steady level of production more. Also, the country which is being in an opposite phase of a production cycle in relation to other EU countries can receive “indemnification” for the stabilization of manufacture in the group.

By our calculations, new members of the EU on average can win from financial integration more, than the countries EU%15. For new members of the EU the general average level of increase of well-being makes up to 5,2 % (a constant gain of consumption per capita), and for EU%15 – up to 1,2 %. Benefits by way of increase of well-being are especially great for the small countries, such, as Lithuania, Estonia, Malta, Czechia, and Slovakia.

At new members of EU average indices of not used benefits in the field of increase of well-being also much more above (6,6 %), than at EU%15 (0,9 %). It, first of all, is connected with high fluctuations of release and charges on consumption and sometimes speaks their anticyclicity. Thus, according to empirical results, the further financial integration and promotion of members of the EU to the full distribution of risks will allow all countries to raise a standard of well-being considerably.

Works cited

Delhey, J., 2001, The Prospect of Catching Up for New Members. Lessons for the Accession Countries to the European Union from Previous Enlargements. Social Science Research Center Berlin (WZB),Paper FS III 01-403, Berlin: WZB.

Davenport , M., 1982, The Economic Impact of the EEC // A. Boltho(ed.), The European Economy: Growth and Crisis, Oxford: Oxford University Press.

Emerson, M., M. Aujean, M. Catinat, P. Goybet, A. Jacquemin, 1988, The Economics of 1992. The E.C. Commission´s Assessment of the Economic Effects of Completing the Internal Market, Oxford: Oxford University Press.

Gill, S., 1998, European Governance & New Constitutionalism: EMU & alternatives to disciplinary neo-liberalism in Europe, // “New Political Economy”, 3(1).

Haller, M., 2000, European integration and sociology: The difficult balance between the theoretical, empirical and critical approach // “European Societies”, 2/4.

Landau, D., 1995, The Contribution of the European Common Market to the Growth of Its Member Countries: An Empirical Test //“Weltwirtschaftliches Archiv”, 131/4.

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Vanhoudt, P., 1999, Did the European Unification Induce Growth? In Search of Scale Effects and Persistent Changes, // “Weltwirtschaftliches Archiv”, 135 (2).

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EduRaven. (2021, November 4). Economic Integration for European Member States. Retrieved from


EduRaven. (2021, November 4). Economic Integration for European Member States.

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"Economic Integration for European Member States." EduRaven, 4 Nov. 2021,


EduRaven. (2021) 'Economic Integration for European Member States'. 4 November.


EduRaven. 2021. "Economic Integration for European Member States." November 4, 2021.

1. EduRaven. "Economic Integration for European Member States." November 4, 2021.


EduRaven. "Economic Integration for European Member States." November 4, 2021.


EduRaven. 2021. "Economic Integration for European Member States." November 4, 2021.

1. EduRaven. "Economic Integration for European Member States." November 4, 2021.


EduRaven. "Economic Integration for European Member States." November 4, 2021.