Changes

==Economy==

==Economy==

The institutions of the European Union were originally created to oversee the operation of the several economic communities that later became the Single European Market. Even as the EU’s political integration has continued, the area of greatest integration has always been in the economic sphere: goods, capital, and labor move freely between Member States (with some exceptions), businesses in all Member States are increasingly subject to common basic rules, and twelve of the 25 Member States use a common currency, the euro. The twelve euro-area countries share a common monetary policy administered by the European Central Bank in Frankfurt, Germany. The EU strives to eliminate internal barriers to the free flow of goods, services, labor, and capital, and to promote the overall convergence of living standards. Internationally, the EU aims to strengthen Europe’s trade position and capitalize on the political and economic leverage that a large, unified market brings.  

The institutions of the European Union were originally created to oversee the operation of the several economic communities that later became the Single European Market. Even as the EU’s political integration has continued, the area of greatest integration has always been in the economic sphere: goods, capital, and labor move freely between Member States (with some exceptions), businesses in all Member States are increasingly subject to common basic rules, and twelve of the 25 Member States use a common currency, the euro. The twelve Euro-area countries share a common monetary policy administered by the European Central Bank in Frankfurt, Germany. The EU strives to eliminate internal barriers to the free flow of goods, services, labor, and capital, and to promote the overall convergence of living standards. Internationally, the EU aims to strengthen Europe’s trade position and capitalize on the political and economic leverage that a large, unified market brings.  

===Growth===

===Growth===

The EU is the world’s largest economic area (the U.S. is second) with a 2004 GDP of $12.1 trillion; however, growth in many of the EU’s Member States in the recent past has been slow. Between 2001 and 2003, the overall growth rate dropped from 1.8 percent to 1.0 percent. The EU economy staged a modest, short-lived recovery in 2004, but forecasters expect growth to remain below two percent in 2005 and 2006. Within the euro area, growth varies as much as 4.5 percentage points between the fastest and slowest-growing economies. In 2005, many of the EU’s largest economies, including Germany, France and Italy, will grow by less than two percent. Outside the euro area, 2005 growth is forecast to remain strong, particularly in the Central and Eastern European countries that joined the EU in May 2004.  

The EU is the world’s largest economic area (the U.S. is second) with a 2004 GDP of $12.1 trillion; however, growth in many of the EU’s Member States in the recent past has been slow. Between 2001 and 2003, the overall growth rate dropped from 1.8 percent to 1.0 percent. The EU economy staged a modest, short-lived recovery in 2004, but forecasters expect growth to remain below two percent in 2005 and 2006. Within the Euro area, growth varies as much as 4.5 percentage points between the fastest and slowest-growing economies. In 2005, many of the EU’s largest economies, including Germany, France and Italy, will grow by less than two percent. Outside the Euro area, 2005 growth is forecast to remain strong, particularly in the Central and Eastern European countries that joined the EU in May 2004.  

In spring 2000, the EU committed to a ten-year strategic goal of transforming the EU into a more competitive, knowledge-based economy capable of sustaining higher levels of growth. Focusing on labor market reform, macroeconomic and fiscal policy, and promotion of e-commerce and entrepreneurship, the EU’s "Lisbon Agenda" was an attempt to stimulate growth while remaining committed to the EU social model. Some suggest that it has so far failed to achieve its goals in large part because national governments (which retain authority over employment policy, immigration, large public sector workforces, entitlement programs and pensions) have not completed the necessary reforms. With euro area unemployment at 8.6 percent, generous social programs continue to strain national economies. The European Commission re-launched the Lisbon Agenda in March 2005, promising three percent growth and six million new jobs by 2010. The revamped strategy focuses on developing political consensus within Member States to make the changes necessary to complete elimination of barriers in the internal market, reduce the regulatory burden on business, improve labor market flexibility, provide incentives to work and increase investment in human capital.  

In spring 2000, the EU committed to a ten-year strategic goal of transforming the EU into a more competitive, knowledge-based economy capable of sustaining higher levels of growth. Focusing on labor market reform, macroeconomic and fiscal policy, and promotion of e-commerce and entrepreneurship, the EU’s "Lisbon Agenda" was an attempt to stimulate growth while remaining committed to the EU social model. Some suggest that it has so far failed to achieve its goals in large part because national governments (which retain authority over employment policy, immigration, large public sector workforces, entitlement programs and pensions) have not completed the necessary reforms. With Euro area unemployment at 8.6 percent, generous social programs continue to strain national economies. The European Commission re-launched the Lisbon Agenda in March 2005, promising three percent growth and six million new jobs by 2010. The revamped strategy focuses on developing political consensus within Member States to make the changes necessary to complete elimination of barriers in the internal market, reduce the regulatory burden on business, improve labor market flexibility, provide incentives to work and increase investment in human capital.  

===Fiscal and Monetary Policy===

===Fiscal and Monetary Policy===

Introduced in 1999, the euro is currently the official currency of twelve of the 25 EU Member States. United Kingdom, Denmark and Sweden chose to retain their national currencies, and newer EU members have yet to adopt the euro. Prior to the euro’s launch in 1999, national currency exchange rates of countries intending to join the euro were fixed within an Exchange Rate Mechanism. Following the January 2002 introduction of euro notes and coins into general circulation, national currencies were removed from circulation. Each of the euro area countries agreed to abide by a shared fiscal policy rule book known as the Stability and Growth Pact (SGP). This agreement generally obliges national governments to limit government budget deficits to 3 percent of GDP and established a target debt-to-GDP ratio of below sixty percent. Although enforcement actions have been forgiving – France and Germany, for example, avoided sanctions despite missing SGP targets – countries violating the SGP are technically subject to sanctions by the European Commission. As of March 2005, national governments have been granted budget leeway to achieve structural reforms and to combat prolonged stagnation, negative growth or other factors, such as the cost of German reunification or state pensions. The revised standards still require deficits to remain close to the targets; they may only temporarily exceed the three percent limit. The ten Member States that joined the EU in May 2004 may adopt the euro after complying with the SGP targets and meeting other applicable criteria.  

Introduced in 1999, the Euro is currently the official currency of twelve of the 25 EU Member States. United Kingdom, Denmark and Sweden chose to retain their national currencies, and newer EU members have yet to adopt the Euro. Prior to the Euro's launch in 1999, national currency exchange rates of countries intending to join the Euro were fixed within an Exchange Rate Mechanism. Following the January 2002 introduction of Euro notes and coins into general circulation, national currencies were removed from circulation. Each of the Euro area countries agreed to abide by a shared fiscal policy rule book known as the Stability and Growth Pact (SGP). This agreement generally obliges national governments to limit government budget deficits to 3 percent of GDP and established a target debt-to-GDP ratio of below sixty percent. Although enforcement actions have been forgiving – France and Germany, for example, avoided sanctions despite missing SGP targets – countries violating the SGP are technically subject to sanctions by the European Commission. As of March 2005, national governments have been granted budget leeway to achieve structural reforms and to combat prolonged stagnation, negative growth or other factors, such as the cost of German reunification or state pensions. The revised standards still require deficits to remain close to the targets; they may only temporarily exceed the three percent limit. The ten Member States that joined the EU in May 2004 may adopt the Euro after complying with the SGP targets and meeting other applicable criteria.  

The euro area’s monetary policy is set by the European Central Bank (ECB), which must devise a monetary policy to accommodate a wide range of domestic policies and economic conditions within euro area Member States. The Treaties require that the ECB’s primary objective be to maintain price stability (i.e., to keep inflation low). Euro-area national governments have sometimes criticized the ECB for guarding against inflation at the expense of interest rate flexibility that could enable struggling economies to gain traction. The ECB’s consistent overnight interest rate of two percent has been credited with creating favorable conditions for growth in Spain and Ireland, but has been blamed for hindering growth in France, Germany, Italy, and Portugal.  

The Euro area’s monetary policy is set by the European Central Bank (ECB), which must devise a monetary policy to accommodate a wide range of domestic policies and economic conditions within Euro area Member States. The Treaties require that the ECB’s primary objective be to maintain price stability (i.e., to keep inflation low). Euro-area national governments have sometimes criticized the ECB for guarding against inflation at the expense of interest rate flexibility that could enable struggling economies to gain traction. The ECB’s consistent overnight interest rate of two percent has been credited with creating favorable conditions for growth in Spain and Ireland, but has been blamed for hindering growth in France, Germany, Italy, and Portugal.  

===Trade===

===Trade===

The EU is the world’s largest exporter of goods and services. In 2003, the then-fifteen EU members exported $987 billion worth of goods to non-EU countries. The EU’s exports grew rapidly between 1996 and 2000 but have grown more slowly since. Except for 2002, the EU as a whole has posted a trade deficit every year since 1999; it was $62 billion in 2004. The EU is a major exporter of chemicals, transport equipment, and industrial machinery. The EU has large trade deficits in raw materials and energy, and a small deficit in food and drink.  

The EU is the world’s largest exporter of goods and services. In 2003, the then-fifteen EU members exported $987 billion worth of goods to non-EU countries. The EU’s exports grew rapidly between 1996 and 2000 but have grown more slowly since. Except for 2002, the EU as a whole has posted a trade deficit every year since 1999; it was $62 billion in 2004. The EU is a major exporter of chemicals, transport equipment, and industrial machinery. The EU has large trade deficits in raw materials and energy, and a small deficit in food and drink.  

The U.S. is the EU’s main trading partner by a wide margin. U.S. goods and services exports to the EU reached $283 billion in 2004, while U.S. goods and services imports from the EU totaled $388 billion. Asian economies such as Japan and China, however, account for an increasingly important share of EU trade. The EU’s two-way merchandise trade with China grew to $223 million in 2004, while merchandise trade with Japan was $149 million. Internal trade between euro area and non-euro area countries was down one percent in the first quarter of 2005, but the EU's external trade was up four percent, particularly with Russia and Norway.  

The U.S. is the EU’s main trading partner by a wide margin. U.S. goods and services exports to the EU reached $283 billion in 2004, while U.S. goods and services imports from the EU totaled $388 billion. Asian economies such as Japan and China, however, account for an increasingly important share of EU trade. The EU’s two-way merchandise trade with China grew to $223 million in 2004, while merchandise trade with Japan was $149 million. Internal trade between Euro area and non-Euro area countries was down one percent in the first quarter of 2005, but the EU's external trade was up four percent, particularly with Russia and Norway.  

Member States have given almost exclusive authority to the EU to negotiate trade treaties that bind the Member States. The European Community (EC) is a full member of the World Trade Organization and plays an active role in the Doha Development Round to foster international trade in services and agricultural products. Bilaterally, the EC maintains framework agreements to facilitate trade flows with thirty-five countries worldwide, mostly elsewhere in Europe, in North Africa, and in the Middle East.  

Member States have given almost exclusive authority to the EU to negotiate trade treaties that bind the Member States. The European Community (EC) is a full member of the World Trade Organization and plays an active role in the Doha Development Round to foster international trade in services and agricultural products. Bilaterally, the EC maintains framework agreements to facilitate trade flows with thirty-five countries worldwide, mostly elsewhere in Europe, in North Africa, and in the Middle East.  

The pattern of foreign investment by European firms reflects deep commercial ties with the United States. U.S. and EU businesses invest heavily and operate profitably on both sides of the Atlantic. U.S. affiliates in Europe accounted for 56 percent of the aggregate output of U.S. affiliates worldwide. European firms were the largest foreign investors in 44 U.S. states and the second largest foreign investor in the remaining six. Sales by U.S. affiliates in Europe totaled $1.5 trillion in 2002, more than double those of U.S. affiliates in the Asia/Pacific region. European affiliate sales in the U.S. were $1.2 trillion in 2002, more than three times the value of U.S. imports from Europe.  

The pattern of foreign investment by European firms reflects deep commercial ties with the United States. U.S. and EU businesses invest heavily and operate profitably on both sides of the Atlantic. U.S. affiliates in Europe accounted for 56 percent of the aggregate output of U.S. affiliates worldwide. European firms were the largest foreign investors in 44 U.S. states and the second largest foreign investor in the remaining six. Sales by U.S. affiliates in Europe totaled $1.5 trillion in 2002, more than double those of U.S. affiliates in the Asia/Pacific region. European affiliate sales in the U.S. were $1.2 trillion in 2002, more than three times the value of U.S. imports from Europe.  

Intra-firm trade involving foreign affiliates is particularly important to the transatlantic trade and investment relationship. Approximately 58 percent of U.S. imports from the EU in 2004 involved trade between related parties, as did 30 percent of U.S. exports to Europe in 2003. This high level of intra-firm trade has contributed to the persistence of the U.S. trade deficit with Europe even as the dollar has lost value against the euro since 2002.  

Intra-firm trade involving foreign affiliates is particularly important to the transatlantic trade and investment relationship. Approximately 58 percent of U.S. imports from the EU in 2004 involved trade between related parties, as did 30 percent of U.S. exports to Europe in 2003. This high level of intra-firm trade has contributed to the persistence of the U.S. trade deficit with Europe even as the dollar has lost value against the Euro since 2002.  

===Budget===

===Budget===

==Criticism==

==Criticism==

A significant number of Europeans on the political right of centre are opposed to the EU on the grounds that it undermines national sovereignty and identity. Such people are known in British English as "Eurosceptics", and they include such people as the former British Prime Minister [[Margaret Thatcher]] (although, while in power, she committed Britain to the 1986 [[Single European Act]], a major integrationist measure) and the members of the [[UK Independence Party]]. They also, however, include less well-respected politicians belonging to far right or [[nationalism|nationalist]] parties, such as France's [[Jean-Marie Le Pen]]. There are also extreme left-wing opponents of the European Union, such as ''Die Linke'' in Germany, who regard it as constituting an anti-progressive "Fortress Europe", and claim that EU membership impedes countries from following socialist policies.{{fact}}

A significant number of Europeans on the political right of center are opposed to the EU on the grounds that it undermines national sovereignty and identity. Such people are known in British English as "Eurosceptics", and they include such people as the former British Prime Minister [[Margaret Thatcher]] (although, while in power, she committed Britain to the 1986 [[Single European Act]], a major integrationist measure) and the members of the [[UK Independence Party]]. They also, however, include less well-respected politicians belonging to far right or [[nationalism|nationalist]] parties, such as France's [[Jean-Marie Le Pen]]. There are also extreme left-wing opponents of the European Union, such as ''Die Linke'' in Germany, who regard it as constituting an anti-progressive "Fortress Europe", and claim that EU membership impedes countries from following socialist policies.{{fact}}

==History==

==History==

Signed in 1997 and entering into force on May 1, 1999, the Amsterdam Treaty partially streamlined the EU institutional structure. Its most significant effects were: (1) to transfer aspects of Justice and Home Affairs policy to the Community Pillar, enabling the Commission to propose decisions to be taken by the EU Council by qualified majority voting instead of by consensus, and (2) to establish a High Representative for the CFSP (who also serves as Secretary-General of the Council Secretariat). Ten countries in Central and Eastern Europe and Cyprus began accession procedures in 1997, followed by Malta. The prospect of eastward enlargement raised significant resource concerns and prompted the adoption in March 1999 of the "Agenda 2000" package, which covered amendments to the CAP and EU structural policies, as well as a budgetary framework through 2006.  

Signed in 1997 and entering into force on May 1, 1999, the Amsterdam Treaty partially streamlined the EU institutional structure. Its most significant effects were: (1) to transfer aspects of Justice and Home Affairs policy to the Community Pillar, enabling the Commission to propose decisions to be taken by the EU Council by qualified majority voting instead of by consensus, and (2) to establish a High Representative for the CFSP (who also serves as Secretary-General of the Council Secretariat). Ten countries in Central and Eastern Europe and Cyprus began accession procedures in 1997, followed by Malta. The prospect of eastward enlargement raised significant resource concerns and prompted the adoption in March 1999 of the "Agenda 2000" package, which covered amendments to the CAP and EU structural policies, as well as a budgetary framework through 2006.  

In May 1998, EU heads of government officially designated eleven Member States eligible to adopt a single currency. Greece initially did not qualify, and Sweden, the UK and Denmark "opted out." On January 1, 1999, the euro became the official currency of the EU, and the European Central Bank (ECB) put euro notes and coins into circulation on January 1, 2002. Today, twelve countries use the euro: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.  

In May 1998, EU heads of government officially designated eleven Member States eligible to adopt a single currency. Greece initially did not qualify, and Sweden, the UK and Denmark "opted out." On January 1, 1999, the Euro became the official currency of the EU, and the European Central Bank (ECB) put euro notes and coins into circulation on January 1, 2002. Today, twelve countries use the euro: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.  

Streamlining the size and procedures of EU institutions to make the expanded EU more efficient was also an aim of the 2003 Treaty of Nice. A year later, in May 2004, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia joined the EU, bringing total membership to 25. Candidate countries currently include Bulgaria and Romania (scheduled to accede to the EU on January 1, 2007), as well as Turkey and Croatia.  

Streamlining the size and procedures of EU institutions to make the expanded EU more efficient was also an aim of the 2003 Treaty of Nice. A year later, in May 2004, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia joined the EU, bringing total membership to 25. Candidate countries currently include Bulgaria and Romania (scheduled to accede to the EU on January 1, 2007), as well as Turkey and Croatia.  

In October 2004, Member States signed an EU Constitutional Treaty in Rome, intending that it take effect on November 1, 2006. French and Dutch voters rejected the treaty through referenda in 2005, thereby suspending the ratification process.  

In October 2004, Member States signed an EU Constitutional Treaty in Rome, intending that it take effect on November 1, 2006. French and Dutch voters rejected the treaty through referendums in 2005, thereby suspending the ratification process.  

==Candidates for membership==

==Candidates for membership==