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The Balkans stand on a fault-line which has run through the south-eastern part of Europe since pre-history. There Helen's abduction led to the Trojan War and Greece fought off the Persian invasion. There lay the troubled border between civilisation and the so-called barbarians, from Alexander the Great to Julius Caesar and on until the fall of the Roman Empire. The Balkans marked the point where Eastern Christianity met Islam, Teuton met Slav, Europe met Asia. World War I started there, and the Bosnian massacres of the 1990s were but the latest in countless such ethnic or religious tragedies over the centuries.
The Balkans is an ill-defined term describing the mountainous region bounded by the Adriatic, the Aegean and the Black Sea. It is generally accepted to comprise Albania, Bulgaria, Greece, Romania, Yugoslavia and the former Yugoslav states of Bosnia-Herzegovina, Croatia, Macedonia and Slovenia. True to its history, the region remains full of tension and conflict, the latest trouble spot being Kosovo. Of its constantly shifting states, only Greece is a member of the EU, though several others have applied and Slovenia has been encouraged to expect membership early in the 21st century.
Estonia, Latvia and Lithuania, formerly part of the Soviet Union, now all independent democracies, each of which has a Europe Agreement with the EU and has applied for full membership - though only Estonia, which has pulled ahead of its neighbours, has been promised early admission. Under Soviet domination the Baltic states were integrated into the monolithic command economy of the USSR, making transition to market freedom a painful undertaking. In 1992, a Baltic Council was formed to promote regional development. This comprised the three Baltic states, six others with a Baltic seaboard (Denmark, Germany, Finland, Poland, Russia and Sweden) and two Nordic countries (Iceland and Norway).
The EU gives advantageous trade terms to banana growers in the former dependencies (mainly in the Caribbean) of its member states. In the late 1990s the USA objected, seeking equal access for Central American bananas. The WTO voted in favour of the USA. The EU rejected the ruling. The USA retaliated with import duties on other, unrelated, EU products. The EU protested that the USA did not come with clean hands to the court, since American corporations that owned Central American plantations made party political contributions in Washington. The affair epitomised the bad-tempered trade atmosphere prevailing between the two blocs.
In 1996 British experts announced a possible link between BSE, or 'mad cow' disease, and a new strain of the fatal human brain illness, CJD. The scientific evidence was obscure and the number of reported human cases minuscule. Nevertheless, outrage and panic ensued. The outrage came because BSE was more prevalent in England than elsewhere and the link with CJD had previously been officially denied. The panic was caused by predictions of a plague-like epidemic. In reality, BSE was on the wane, among its possible causes being pesticides and the overfeeding of British dairy cattle with sheep and cattle remains in the 1980s.
The EU inflamed the crisis by prohibiting exports of British beef, including exports to non-EU countries. The then British government responded by threatening to bring the workings of the Community to a halt. This brought forth a half-promise to lift the ban progressively, provided the UK culled potentially affected cattle at a cost of several billion pounds. Despite the resultant slaughter the EU's ban remained, and British anger turned against the Community, which was perceived as favouring Continental farmers and breaching the principles of the single market. The affair, from which no party emerged well, soured relations within the EU and led to a welter of mutual accusations of insanitary practices, misreporting of BSE and evasion of import restrictions. In 1999, after a favourable ruling by a European scientific panel, British beef was declared safe. But France defied Community law by continuing its ban, to the intense frustration of Prime Minister Tony Blair, who had pinned his hopes on a friendly settlement of the dispute.
Caught in both world wars in Germany's opening offensive against France, Belgium's instincts are defensive or neutralist. Its most prominent statesman during and after World War II, Paul-Henri Spaak, played a major role in many leading supranational institutions and in the negotiation of the Treaty of Paris and the Treaty of Rome, of which in each case Belgium was a founder signatory.
Even before the establishment of the European Coal and Steel Community in 1951, Belgium had been among the first members of NATO and had participated in Benelux, which prefigured many of the characteristics of the Common Market. The success of Benelux, allied to mistrust of its own domestic institutions, has made Belgium one of the EU's strongest supporters. Brussels is also the virtual capital of the Community, from which the country derives considerable revenue and an influence disproportionate to its size.
Since 1968 Belgium has gradually ceased to be a coherent state. Divided into the mutually antagonistic Flemish and Walloon (French-speaking) regions, together with some smaller minority regions, it has seven legislatures, with Brussels uneasily holding the reins. Its standards of public morality are not high. Indeed, Belgium must be unique among advanced Western economies in having witnessed popular demonstrations against the corruption of its politicians, judges and police. These domestic problems have reinforced the country's communautaire attitude, and although Belgium's indebtedness, at around 120% of GDP, far exceeds the ceiling set in the Maastricht Treaty's convergence criteria, its right to join the single currency was never seriously questioned.
Originally a customs union conceived in 1944 by the exiled wartime governments of Belgium, The Netherlands and Luxembourg, Benelux came into being in 1948 and was reinforced by a Treaty of Union in 1960. With its headquarters in Brussels and its own supranational framework, Benelux is recognised as a regional union in the Treaty of Rome; and its ambitious - though as yet only partially fulfilled - plans for accelerated full economic and social union are regarded by integrationists as a model for the EU.
In the pre-euro era, Belgium and Luxembourg, despite the relatively greater strength of the tiny Luxembourg economy, shared their gold and foreign exchange reserves and treated each other's currency as interchangeable.
The star-shaped Brussels headquarters of the European Commission, symbol of bureaucracy, rented from the Belgian government and found in 1991 to be riddled with asbestos and uninhabitable until cleansed. The Commission hopes to resume occupation in 2001. Meanwhile, the Commissioners are located in the Breydel building.
The youngest of Europe's great cities, Berlin was the historical capital of Germany, a position to which it was reinstated a year ahead of schedule in 1999 when the government began its move from West Germany's post-war capital, Bonn. The city, which lay in the Soviet zone of occupation when Germany was divided after World War II, was itself also divided, its eastern sector becoming the capital of the new Soviet satellite state, the German Democratic Republic. An oasis of freedom behind the Iron Curtain, Berlin was the focus of three dramatic episodes in modern European history. In 1948/9 it was blockaded on Stalin's orders but rescued from starvation by the Berlin Airlift, when the Western allies flew more than 275,000 relief flights. In 1961 the communist government built the Berlin Wall across the centre of the city to prevent the exodus of refugees from the East. And in 1989, the Wall's breach symbolised the disintegration of the Soviet Empire and the birth of German reunification.
Anecdotal evidence suggests that the unofficial 'shadow' or black economies of Europe have been growing, leading to an erosion of the tax base and the risk of mistaken (because based on misleading figures) policy decisions. Italy has even prided itself on the size of its black economy, relying on it in the 1980s to boast of il sorpasso, or the overtaking of the UK's GDP. Although no reliable economic analysis is possible, such estimates as have been made put the black economies of Italy, Spain and Belgium at upwards of 20% of GDP, with the UK, France and Germany at approximately half that level and The Netherlands and Sweden mid-way between the two groups.
Fish landed illegally, so as to avoid Common Fisheries Policy quotas.
See White Wednesday.
Elected prime minister in 1997, Tony Blair had previously transformed the Labour Party by shedding its socialist past and embracing Margaret Thatcher's free-market reforms. Although sharing a leftist political label with the majority of his fellow EU premiers, his substantive policies on economic issues were little different from those of his Conservative predecessor, John Major.
A fluent French-speaker and culturally a Europhile, Blair started his tenure with a strong predilection for playing a positive role in Europe, tempering a wait-and-see stance on the euro with statements that his government in principle favoured participation.
He demonstrated his acceptance of the 'social dimension' of the EU by signing up to the Social Chapter of the Maastricht Treaty, coupling this with a pledge to block any legislation that undermined competitiveness - a pledge that would have to rely on persuasiveness, given the extent of qualified majority voting. He took the lead among European nations in the Kosovo conflict, albeit with a belligerence that did not endear Britain universally to its partners. He proposed the creation of a European rapid reaction force for crisis control. And he attempted to launch a 'third way' crusade to woo other European centre-left governments to economic liberalism.
These initiatives brought scant rewards. Although Chancellor Kohl's dominating presence was soon gone and a weak Commission was forced to resign en bloc for maladministration, Blair's expectations of exercising significant influence in Europe were thwarted by events. The 'beef crisis' he had inherited erupted again late in 1999 when France unexpectedly continued its health ban on British beef, contrary to Community law and the advice of the EU's own scientific panel; and Britain found itself isolated when it blocked the introduction of a European withholding tax (which Germany particularly favoured) on the grounds that it would damage the City's position as a financial centre.
The result of these disputes was to harden British public opinion against the euro and to blight Blair's honeymoon with the EU. The 'third way' was shunned by France and quietly shelved. Blair reacted calmly and gave no ground, but he was having to come to terms with the reality that friendly gestures in Europe achieve little in the way of practical reciprocity and that the roots of Euroscepticism in Britain would not be easily eradicated, even by the most popular prime minister of the century.
The break-up of the former Yugoslavia in the early 1990s led to declarations of independence by Slovenia and Croatia and growing nationalist aggression by Serbia, which had inherited most of the Yugoslav army's weaponry. In 1991 Germany recognised Slovenia and Croatia, forcing the EU to follow suit in 1992. Bosnia's independence was recognised immediately afterwards, but that country (with a mainly Muslim and Croatian population) contained a large Serbian minority, and fighting broke out. Assisted by Serbia, which had also intervened militarily in Croatia, the Bosnian Serbs took advantage of a Western arms embargo to terrorise the country, besieging its capital Sarajevo.
While the EU attempted to broker a peace process, the Serbs embarked on the 'ethnic cleansing' of Bosnia's Muslims. This led to atrocities on both sides, but British and French reluctance to appear partial, allied to Germany's paralysis (doubtless the legacy of the Nazi occupation of Yugoslavia during World War II), left the Serbs free to commit genocide unhindered. A smattering of United Nations peacekeeping forces soon became more of a hostage than an effective military presence, and it was not until the USA lost patience and organised NATO bombing of Serbian positions in 1995 that a modicum of order was restored.
A partitioned Bosnia currently enjoys an uneasy peace. But the ineffectiveness of the EU has left a lasting impression of weakness and expediency, and gives the lie to the notion that Europe is yet capable of responding in a unified way to external crisis. (See also Yugoslavia and Common Foreign and Security Policy.)
Willy Brandt's pedigree as a young socialist, who had escaped the Nazis and fled to Norway in 1933, spending the war (under his real name, Herbert Frahm, or under the pseudonym Felix Franke) partly in the Norwegian Resistance and partly as a 'journalist' in Sweden, fitted him well to lead a peacetime Germany which had reacted against the past with a strong predilection for social democracy. By 1947 he had assumed the name of Major Willy Brandt. After serving in the Bundestag from 1949 to 1957, he was mayor of West Berlin during the Berlin crisis of 1961, when the Wall was built almost overnight. Elected chairman of the Social Democrats in 1964, within two years he had become foreign minister, a position he held until becoming chancellor in 1969. Having won the Nobel Peace Prize in 1971 for his contribution to East-West relations, he resigned in 1974 after a spy scandal in which a close aide was revealed as an agent of the Stasi, the East German secret police.
Brandt had established his liberal credentials under Chancellor Konrad Adenauer, criticising the 'Hallstein doctrine' of refusing diplomatic relations to states that recognised East Germany. An advocate of détente, he cultivated friendship with the Iron Curtain countries, allaying Soviet suspicions of West Germany's strategic role in NATO by his commitment to nuclear non-proliferation. Following the signature of treaties with the USSR and Poland, which settled the disputed East German border, Brandt was able in 1970 to ease the restrictions on contact between East and West Berlin. His Ostpolitik made him a welcome guest in the Warsaw Pact countries, but won him few friends in NATO circles or among his Christian Democrat opponents at home. He counterbalanced suspicions of a lack of attachment to the West by his support for enlarging the EC, in particular by bringing in the UK. But he resented the Common Agricultural Policy and annoyed the French, among others, by rejecting the general assumption that Germany should pay for every EC extravagance.
After his resignation, Brandt served as an MEP from 1979 to 1983 and continued to play a role on the international political scene as president of the Socialist International and a champion of aid to developing countries.
The Bretton Woods Conference of July 1944 shaped the world's post-war monetary order at a time when German defeat looked inevitable. Its most important institutional creations were the World Bank and the International Monetary Fund. The Conference also designed a regime of fixed, but in the last resort flexible, exchange rates, which was to last for some 30 years. Under the Bretton Woods system each participating state tied its currency to the US dollar and maintained dollar reserves, but was able to adjust its parity if its economy fell fundamentally out of alignment. The weakening of the dollar in the early 1970s caused the system to collapse, to be replaced by floating currencies and by a series of European attempts to create an area of regional stability centred on the D-Mark.
Three months after the 'Prague Spring' was crushed by the Soviet military in 1968, Leonid Brezhnev declared the USSR's right, indeed 'socialist duty', to intervene in the internal affairs of its satellite states if communism was at risk. Effectively a restatement of the old Stalinist position, Brezhnev's doctrine was a negation of the widely accepted international principles of self-determination and freedom from outside interference. It was designed to frighten the East European countries, which already had Soviet troops stationed in their territory, into passive acquiescence in Moscow's hegemony, as well as warning NATO and the EC not to meddle in the Soviet sphere of influence. The Brezhnev Doctrine was a contravention of the 1975 Helsinki Agreement, to which all the Warsaw Pact countries except Albania were later to become signatories, but it was formally abandoned only in 1988, by Mikhail Gorbachev.
Known also as the British abatement, the UK's annual rebate from the EC was achieved by Margaret Thatcher after a long struggle in which she demonstrated that the UK was making a disproportionate contribution to the Community budget as a result of the workings of the Common Agricultural Policy. The rebate was finally agreed at Fontainebleau in 1984 and ran in its original form until 1999. Although it cannot formally be changed without British consent, the other member states tried unsuccessfully to reduce it in 1999 and the Commission has made it plain that it will propose a re-examination at the time of the EU's next enlargement. The rebate is calculated on a formula related to the VAT-based portion of the UK's contribution.
In 1986 Leon Brittan resigned from Margaret Thatcher's cabinet when a row about the rescue of the helicopter manufacturer Westland blew up into a political storm of which he became the victim. Appointed subsequently by Thatcher to the Commission in Brussels, he developed a growing hostility to her Euroscepticism. From 1989 to 1992 he was responsible for the Community's competition policy; he later took on external economic policy and played a key role in the successful conclusion of the difficult Uruguay Round of the GATT negotiations. His zealous free-trading ideology and overbearing manner sometimes riled his colleagues and national governments (especially the French) and he had an uneasy relationship with Jacques Delors, whom he had the stature, but not the support, to succeed as President. Hypersensitive to any British criticism of the EU, he suffered an ironic fate in 1999 when the entire Commission was forced to resign for maladministration - a charge of which Brittan himself was conspicuously innocent.
Chancellor of the Exchequer since Labour's 1997 election victory, Gordon Brown gave independent control of interest rates to the Bank of England and designed a special set of criteria - derided by some as being incapable of objective verification - to determine whether conditions were right for Britain to adopt the euro. In 1999 he showed himself willing to be isolated in the EU by his sturdy defence of the City against the threatened imposition of a Community-wide withholding tax.
Prime Minister Margaret Thatcher's 1988 speech at Bruges, praising a Europe of Nations and criticising the unaccountability of the EC's supranational institutions, shocked many at the time, although in retrospect it largely served to sharpen differences of vision which were already inherent in the European debate. Thatcher argued for the Eastward enlargement of the Community, for policy co-operation rather than institution-building and for maintaining the Atlantic Alliance: but against the imposition of the Rhine model of welfarist capitalism across the whole community. In later years her speech assumed mythic proportions and was wrongly labelled as anti-European to the point of extremism.
Signed in 1948 by the UK, France and the Benelux countries, the Treaty of Brussels was the precursor to the WEU (Western European Union) and NATO. It envisaged economic and social collaboration as well as collective defence.
The Treaty of Rome decrees that the Community must run a balanced budget. On the revenue side, to give a degree of financial independence, it was agreed in 1970 that contributions from member states should be replaced by a system of 'own resources'. These would belong by right to the Community but would be collected on its behalf by the member states. There was a further revision in 1988 after the trade liberalisation introduced by the Single European Act had reduced the income from duties and levies. Currently, own resources consist of four classes of revenue:
Of these revenue streams, the first two, known as the 'traditional resources', account for a declining share, currently under 20%. The VAT revenue is being reduced annually as a proportion of the whole: at its height it accounted for over 60% of the budget, but by 1999 this had fallen to under 40%. The GDP-related revenue, originally a mere balancing item, is rising rapidly and will soon be financing approximately half the budget. The overall effect of these changes has been an improvement in the fairness of member states' contributions, which in future should be a better reflection of national wealth.
The budget is driven by the expenditure plans, which are drafted by the Commission, approved by the Council of Ministers and then read by the European Parliament, which proposes amendments and returns the budget to the Council. An artificial, but not clearcut, distinction between 'compulsory' and 'non-compulsory' spending determines the next phase of negotiation (the Council has the final say on compulsory spending, which includes agricultural price support, and the Parliament has the final say on non-compulsory spending). Lastly, the Parliament either adopts or rejects the budget. If a budget is in limbo, awaiting further amendments or the resolution of differences, expenditure is eked out month by month at the rate of one-twelfth of the previous year's spending.
Of the total expenditure (some 684 billion in 1998) agricultural price support accounts for just under 50%; the structural funds for about 33%; internal policies (mainly research) for 6%; 'external action', or development assistance, for 5%; and administration for 5%. No other items are significant. The overall budgetary proportions are set by heads of government, meeting as the European Council, the last such financial perspective being agreed at the 1992 Edinburgh summit, covering the years from 1993 to 1999 and stipulating a 1% per year decrease in the percentage taken by agricultural guarantees.
Despite current insistence on budgetary discipline and a boost since 1993 from rising world agricultural prices, the wider picture is that Community spending has risen from 0.03% of the member states' aggregate GDP in 1960 to 0.53% in 1973 and around 1.20% in 1999 (with an agreed ceiling of 1.27%) - an increase in real terms of some 40 times.
The progressive transfer of powers from national governments to the EU is likely to lead in the long run to demands for a further expansion of the revenue base, with more direct access to national taxpayers. Defence expenditure, for example, would rise sharply if the Common Foreign and Security Policy were to develop substance. The enlargement of the EU by the addition of poorer countries from Eastern Europe will also increase the cost of the Common Agricultural Policy and the need for structural funds. For the moment, more ambitious spending goals, which would require the unanimous approval of the Council of Ministers as well as the consent of national parliaments, are off the agenda. Nevertheless, integrationists recall with nostalgia the 1977 MacDougall Report, which reckoned a small Community spending target at up to 7% of the total GDP of the member states and a large target at up to 25%, that is, from five to 20 times the present budget level. (See also Contributions and Fraud.)
Impoverished, ridden by hyperinflation and unreconstructed, Bulgaria was ruined after World War II by the communist dictator Todor Zhivkov and failed to take advantage of his dismissal in 1989. A succession of weak governments was followed by a reformist administration in 1997, but positive results are yet to show and the country's initial application for membership of the EU failed on all counts to win the recommendation of the Commission. After the 1999 Kosovo crisis, however, the mood changed. Britain and France wanted to reward Bulgaria for its steadfastness during the war, and, although membership remained a distant prospect, the new EU policy was to bolster stability in the region by considering ten Central European countries, including Bulgaria, as bona fide candidates.
Until 1999 the most powerful official financial institution in Europe, the Bundesbank is now effectively a branch (and minority shareholder) of the European Central Bank (ECB). Its former influence, however, is felt in the location of the ECB in Frankfurt and the strict controls on European government debts and deficits contained in the Stability and Growth Pact. The Bundesbank built its reputation on its success in maintaining German price stability - an objective transferred to the wider EU stage through the Maastricht Treaty.
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