Once passed by the Council of Ministers, the Commission oversees implementa-
tion of directives. However, the EU has its own court, the European Court of Justice,
which is the final arbiter in terms of interpretation of an EU statute. Cases have been
brought—and won—by private individuals who think that a member state has incor-
rectly applied European law, as well as by the Commission itself. In the past, the
Commission has obtained judgment against Germany over its application of the
Fourth Company Law Directive.
The EU governmental machinery is financed partly by a complex system of pay-
ments that differentiate between member states’ economic capacities, and partly by
the direct transfer of part of the product of the national value-added tax (VAT) rate.
Opponents of European integration, known as “Euroskeptics”, make much of what
they describe as the fat Brussels bureaucracy, but in fact the Commission has fewer
staff than many municipalities, and in the accounting area, for example, uses people
seconded free of charge from the private sector to supplement its own officials.
(c) Evolution of the EU. The EU has gone through many stages since its creation
with six members in 1957. Currently, it has 15 members, and it is widely expected
that Poland, Hungary, the Czech Republic, and seven other countries will be admit-
ted within the next five years. Views about Europe are usually sharply divided within
each member state, without there being any pattern which correlates to the traditional
political spectrum. Consequently, the input from individual states can vary in quality
substantially every time there is a change of government. Currently, there is still a de-
bate between those who wish to see the EU concentrate on improving integration
within its existing borders, as opposed to those who wish to see it take on new mem-
bers. This links to a debate about the extent to which power should be centralized or
left in the hands of member state governments. Euroskeptic politicians frequently
make emotional appeals about loss of sovereignty, while Europhiles query the extent
of national autonomy in a global economy. This lack of agreement has led to what is
called a “variable geometry” EU in which not all member states are participating, for
example, in the single currency. This means that institutions related to the euro ex-
clude some EU member states.
Historically, the integration process continued fairly strongly through the 1960s
but started to lose momentum thereafter. It was revived by the “single-market” ini-
tiative which, through the Single European Act of 1986 placed emphasis on creating
a “level playing field” for business and gave a new focus to harmonization. However,
by the beginning of the 1990s, a new watershed had been reached which was marked
by the Maastricht Treaty of 1992. This set in train a new political momentum but also
recognized that there was no longer any political appetite for harmonization for har-
monization’s sake, even if the rhetoric perhaps suggested otherwise. This can be re-
garded as the beginning of the end for the first accounting harmonization program,
even if this also set in train the process of movement towards a single currency, lead-
ing eventually to new emphasis on a single financial market and the second account-
ing harmonization program.
17.3 ACCOUNTING HARMONIZATION
(a) History. In the 1960s, the European Commission launched a program of har-
monization of accounting. The basic process was to commission a technical report
dealing with the subject area, then proceed to draft a statute, called a directive, which,
once approved by the Council of Ministers, would have to be adopted by individual
17.3 ACCOUNTING HARMONIZATION 17 • 3