Introduction

When the crisis on the financial markets hit Europe in late 2008, this was generally seen as a grave test for the European Union. Would it be able to respond in the face of crisis? Would member state governments be able to overcome their longstanding differences of opinion on economic and financial policy in finding new solutions? And would the EU's institutional framework of budgetary and free-trade rules be able to withstand the flurry of national support measures and calls for economic protectionism that occurred throughout the member states? The situation became even more serious when the Euro itself came under attack from financial markets after fears had arisen that Greece, and possibly a number of other member states, would be forced to default on their (fast-rising) government debts.

As it turned out, the financial crisis proved a tremendous impetus for European cooperation. Even though member state governments took an unprecedented number of far-reaching measures (nationalizing banks, letting government debt rise in order to stimulate their economies), the lapse into protectionism and unilateralism did not occur. Instead, in most cases member state governments closely consulted on the steps to take and tried to find solutions that would keep up existing EU rules while taking account of the special circumstances.

The lead in all this was taken by the European Council. When fears of a Greek default mounted and interest rates for the Greek government soared, the other member states agreed to give financial support in order to prevent a collapse. The Greek government, in return, committed to rigorous spending cuts even in the face of strong domestic political resistance. At later stages, financial support was also given to Ireland, Portugal, Spain and Cyprus, and a permanent European Stability Mechanism was set up.

In addition, as we saw in Chapter 8, a number of proposals that had been too controversial before suddenly became realistic options. The Council and the EP reached agreement on the creation of a set of EU financial market authorities and the European Central Bank was made responsible for the supervision of banks in the European Union.

Introduction

When you work in a factory, EU law is everywhere. To begin with, the European Union has set a wide range of standards in the field of working conditions. For instance, an EU directive specifies the safety standards for the equipment you work with. Another directive regulates safety and health signs at work. Depending on the type of industry and the type of work you do, you are protected by specific legislation relating to dangerous chemicals and exposure to noise or radiation. Your maximum number of hours at work is covered by the Working Time Directive. Moreover, if your company goes bankrupt, or if it is taken over by another company, your rights as an employee are protected by EU law.

At the same time, the EU's role in this field is largely confined to adopting legislation and setting standards. To begin with, the actual implementation of the policies is left to member state governments. Moreover, although the EU is very active in the field of regulatory policy (promulgating norms and standards), it is much less involved in distributive policies (financing facilities) and redistributive policies (affecting the distribution of income and wealth). EU legislation may protect safety at work, but if an accident occurs and you become disabled, your entitlement to a disability benefit is determined by national law. The EU plays no role in determining the eligibility criteria or the height and duration of the benefits. And if you receive a benefit, it is funded by the government or an insurance scheme in your country, not the EU.

Occupational health and safety is just one of many areas in which the EU is active. Yet, as we saw above, there are also areas in which the EU plays a much smaller role. This chapter seeks to sketch the broader picture within which the subsequent chapters on agenda-setting, decision-making and implementation of EU policies can be placed. After reading this chapter, you should know what types of policy the EU makes, in which areas it is important and in which areas it plays a smaller role, and how the role of the EU in policy-making has evolved over the past decade.

Introduction

In the spring of 2007 the Italian city of Naples experienced an acute breakdown of its rubbish collection system. Because waste landfills were full, rubbish collection became impossible and piles of trash quickly built up in the streets of Naples. Although the region of Campania had been struggling with its waste management system for years, the situation proved to be especially urgent this time. Residents started burning the rubbish in order to alleviate the smell of rotting material, transforming the city's streets into a grim scene with dark clouds of smoke and pedestrians covering their faces to avoid the smell. The crisis not only made headlines in the world news but also incited action on the part of the European Commission, which accused Italy of not living up to the terms of the Waste Framework Directive. A month later the Commission sent a formal warning to Italy because it had ‘failed to fulfil its obligations under the directive by not putting in place an appropriate network of disposal facilities ensuring a high level of protection for the environment and public health in the Campania region’.

Although the Italian government succeeded in addressing the most urgent problems – for example, by sending its waste by train to waste incineration facilities in the German city of Hamburg – the Commission later that year still considered Italy to be in violation of the terms of the Directive. After a final warning in January 2008 the Commission started a case against Italy before the Court of Justice, because it had not provided a satisfactory plan for the disposal of its waste nor presented a timetable for putting in place such facilities. In March 2010 the Court of Justice issued a ruling in which it concluded that Italy had indeed failed to fulfil its obligations. Although the Italian authorities responded to this ruling by making progress in their waste management, the Commission felt that it was still not complying fully with the Directive. The Commission therefore started a new court case in June 2013: this time it asked the Court to impose a daily fine of no less than €256,819 for every day the Italian Republic would not comply with the original ruling of the Court.

The story of Italy's waste problem illustrates how difficult it can be to put EU legislation into practice, a process called implementation.

Introduction

On 8 February 2013, after twenty-four hours of negotiations, the European Council agreed to the EU's Multiannual Financial Framework (MFF) for the period 2014–20. The Financial Perspectives lay down the size of the EU budget for each year as well as the contribution of each member state and the distribution across major spending categories. This forms the framework within which annual budgets are adopted.

Finding a compromise had been a difficult process because the Financial Perspectives had to reconcile a number of highly diverging interests. To begin with, all member states had had to cut their budgets in the wake of the financial crisis. At the same time, unemployment levels had risen across the EU, leading to a search for ways to stimulate economic growth and, thereby, employment. The ideas about how to do that varied markedly.

In its initial draft, published in June 2011, the European Commission had proposed a rise of the EU budget to 1.08% of the EU's Gross National Income (GNI). The extra money would be spent on research as well as increased investments in infrastructure in the fields of telecom, energy and transport.

The response by the member states followed the lines that were familiar from previous negotiations on the budget. On one side, a group of member states named ‘Friends of Better Spending’ argued for cuts in the overall EU budget and a reduction of spending on agriculture and cohesion policy to the benefit of policies they deemed important for innovation. This group included most member states that were net contributors to the EU budget (see Table 8.3 in Chapter 8). Even before the first Commission proposal, in December 2010, Finland, France, Germany, the Netherlands and the United Kingdom had already sent an open letter to the Commission demanding a reduced budget.

On the other side was a group called ‘Friends of Cohesion’, which included some fifteen member states that benefited from the cohesion funds. They argued that cohesion policy was crucial for economic growth and employment and should therefore not be cut in the new MFF. During the course of 2012, this group issued several statements to this effect and made it their priority during the negotiations.

This Part analyses the Union as an institutional “creature”, and it equally considers the creation of European (secondary) law. It starts in Chapter 1 with an overview of the four major Union institutions: the European Parliament, the Council, the Commission, and the European Court. Chapter 2 investigates how these institutions cooperate in the creation of European legislation. The Union cannot legislate in all areas of social life; and Chapters 3 and 4 look at two constitutional limits to Union legislation. Based on the principle of conferral, the Union must act within the scope of competences conferred upon it by the Member States. The scope of these competences – and their nature – will be discussed in Chapter 3. Chapter 4 analyses a second constitutional limit to the exercise of Union competences: European fundamental rights. These rights first emerged as general principles of Union law, but have now been codified in the Union's Charter of Fundamental Rights.

This final Part analyses the substantive heart of European law. When the Union was founded, its central aim was the creation of a “common” or “internal” market between the Member States. Such an internal market was to go well beyond a free trade area or a customs union. Its aim was to create an area without internal frontiers to the free movement of goods, persons, services, and capital. To guarantee these four fundamental freedoms, the EU Treaties pursue a dual strategy: negative and positive integration. Negative integration refers to the removal of illegal national barriers to trade, whereas positive integration means Union legislation that “harmonizes” national laws. Chapters 9 and 10 will explore both strategies in the context of the free movement of goods. Chapter 11 then analyses the free movement of persons. Finally, Chapter 12 wishes to offer an “introduction” to EU competition law. The latter is traditionally seen as a functional complement to the internal market.

Introduction

The creation of governmental institutions is the central task of all constitutions. Each political community needs institutions to govern its society; as each society needs common rules and a method for their making, execution, and adjudication. The European Treaties establish a number of European institutions to make, execute, and adjudicate European law. The Union's institutions and their core tasks are defined in Title III of the Treaty on European Union (TEU). The central provision here is Article 13 TEU:

The provision lists seven governmental institutions of the European Union. They constitute the core “players” in the Union legal order. What strikes the attentive eye first is the number of institutions: unlike a tripartite institutional structure, the Union offers more than twice that number. The two institutions that do not – at first sight – seem to directly correspond to “national” institutions are the (European) Council and the Commission. The name “Council” represents a reminder of the “international” origins of the European Union, but the institution can equally be found in the governmental structure of Federal States. It will be harder to find the name “Commission” among the public institutions of States, where the executive is typically referred to as the “government”. By contrast, central banks and courts of auditors exist in many national legal orders.

Introduction

How could the Union create a “single” market out of “diverse” national markets? To create an internal market, the EU Treaties pursue a dual strategy: negative and positive integration. The Union is first charged to “free” the internal market from national barriers to trade in goods. And in order to do so, the Treaties contain a number of constitutional prohibitions “negating” illegitimate obstacles to intra-Union trade. This strategy of negative integration is complemented by a – second – strategy of positive integration. The Union is here charged to adopt positive legislation to harmonize the diverse national laws. For that purpose, the Treaties confer a number of “harmonization” competences to the Union. The most famous provision here is Article 114, which entitles the Union to adopt harmonization measures that “have as their object the establishment and functioning of the internal market”. This Chapter explores the Union's negative integration tools in the context of the free movement of goods, while the next Chapter investigates the Union harmonization competences.

What is the “negative integration” regime governing goods? In order to create an internal market in goods, the Union legal order insists that illegal barriers to intra-Union trade must be removed. Its constitutional regime is however split over two sites within Part III of the TFEU. It finds its principal place in Title II governing the free movement of goods, and is complemented by a chapter on “Tax Provisions” within Title VII. Within these two sites, we find three constitutional prohibitions. Section 1 examines the prohibition on customs duties. These are fiscal duties charged when goods cross national borders. Section 2 moves to the second type of fiscal charge: discriminatory taxes imposed on foreign goods. Section 3 then investigates the legality of regulatory restrictions to the free movement of goods. Regulatory restrictions are not, unlike fiscal duties, pecuniary charges. They simply “regulate” access to the national market by – for example – establishing product or labelling requirements. Finally, Section 4 will look at possible justifications for regulatory restrictions to trade in goods.