common currency. The Delors Plan of how to
achieve a monetary union, endorsed by the leaders
of the Community in 1989, gestated for a decade
before becoming a reality on 1 January 1999. The
barriers set up to prevent any member that did not
meet certain criteria from being eligible to join
were an essential aspect. Of especial importance
was the Stability and Growth Pact (1997) which
threatened penalties if any member exceeded a
deficit limit of 3 per cent on its annual budget.
The Germans especially did not want to exchange
their stable mark for a euro that could be devalued
by the reckless state expenditure of one country.
A European Central Bank has administered and
decides on the interest rate common to all its
members. With the turbulence of the world econ-
omy and the slow growth rates it did not look as
if the necessary convergence would be achieved to
allow monetary union to go ahead on time. Was
the hurdle set too high? It was typical of the his-
tory of the European Community which, since
1992, had become the European Union, that dif-
ficult goals were achieved often as time threatened
to run out. On 1 January 1999 the Monetary
Union became a reality. Greece was not consid-
ered to have met the criteria; Britain, Denmark
and Sweden decided not to join; the other eleven
members, Austria, Belgium, France, Finland,
Germany, Ireland, Italy, Luxembourg, the
Netherlands, Portugal and Spain became the
founding members; and in 2000 Greece was
admitted. The early years in the new century
revealed difficulties. The same interest rate proved
too high for some and too low for others. The
euro lost value on the international exchange, but
the devaluation was beneficial at a time of sluggish
economic growth. The Stability and Growth Pact
insisted on by the Germans proved a handicap in
managing economies in difficult periods and is too
crude in its operation. Consequently, observance
of it has been fudged especially by the two largest
economies of Germany and France who breached
the 3 per cent budget deficit. But judged overall,
the euro has been a success, binding the European
Union more closely together though Britain,
Sweden and Denmark in 2004 still remained out-
side the Monetary Union.
The second most important development in the
later 1990s and the early twenty-first century has
been the enlargement, to expand the European
Union by admitting in May 2004 ten new mem-
bers: Poland, Czech Republic, Slovakia, Hungary,
Slovenia, Malta, Cyprus, Estonia, Lithuania and
Latvia. The negotiations have been long and
tough. The new members will not secure equal
benefits of membership before 2006. In particular,
they will receive only a quarter of the farm subsi-
dies paid to the older fifteen. Their markets after
transitional agreements run out will be thrown
open to competition which will benefit the more
efficient and bankrupt the less competitive.
Farmers are most likely to suffer. In the long term,
however, to be an integral part of the European
Union is likely to prove as beneficial as it did for
the once less developed members, Spain, Portugal
and Ireland. Bulgaria and Romania are not in the
party but have crossed the first threshold and
Turkey, the biggest problem, is knocking on the
portals.
Ever closer union has proved a difficult path to
pursue. The institutions of the European Union
are still developing. The Commission in Brussels
has come under particular criticism for its ineffec-
tual control of funds handed out to member
states. Fraud was endemic and annually criticised
by the auditors. A crisis point was reached in 1999
when the European Parliament flexed its muscles
and the whole Commission resigned. Promises of
effective reform under its new president Romano
Prodi still remain to be fulfilled in 2004. Another
problem is to achieve more democratic control
over decision-making.
The European Parliament has gained more
influence under the treaties of Amsterdam (1997)
and Nice (2000), but this clashes with the deter-
mination of the leaders of the member states to
retain ultimate control of crucial decisions in the
Council of Ministers.884 WESTERN EUROPE GATHERS STRENGTH: AFTER 1968
Greece, Cyprus, Spain and Portugal, 2000Population GDP per head,
(millions) Purchasing Power
Parity (US$)
Greece 10.6 16,900
Cyprus 0.8 20,800
Spain 39.9 19,300
Portugal 10.0 17,000