Issue 184 of SOCIALIST REVIEW
Published March 1995
Copyright © Socialist Review
The European Union (EU) is made up of 15 states, of which the most populous are Germany (79.8 million), Britain
(57.6 million), Italy (57.1 million) and France (57.1 million). These four states alone account for two thirds of the total population of the ELI (around 366.4 million), which now includes the small states of Austria, Finland and Sweden. Norway scuppered its government's agreement to join in a referendum. Turkey has applied for membership. Many eastern European countries are in the queue.
This enlargement of the EU follows the collapse of the strong Nordic economies in the late 1980s (soaring unemployment, flight of capital) and their inability to survive in a purely free trade area. Finland and Sweden have been forced to find a place at the EU bargaining table.
In 1992 the European Community (now the EU) had a greater gross domestic product ($6.9 billion) than either the US ($5.9 billion) or Japan ($3.7 billion). The value of its exports ($565 billion) to the rest of the world was also greater than those two economies ($448 billion and $330 billion respectively).
Although its combined active armed forces (estimated at 2.2 million in 1992) is greater than those of the US (1.9 million), the EU possesses no armed forces of its own.
The EU budget amounts to no more than 2 percent of the total sum of the budgets of all the member states. In 1994 each EU citizen paid an average of £158 to the Union. It has been estimated that he or she probably paid 50 times that amount to their own country. The EU raises the vast bulk of its revenue from the contributions made by its member states. This is based on each country's share of the EU's total gross national product. The size of this contribution is limited to what would bring the total revenue of the EU to a maximum of 1.2 percent of the EU's gross national product in 1993 and 1994.
In 1993 Britain was asked to contribute just under $6.1 billion--as against Germany (£15 billion), France (£9.4 billion) and Italy (8.7 billion).
In 1994 the EU spent £57.8 billion. This represented 1.2 percent of the member states' gross domestic product and 2.4 percent of their public sector expenditure. Of this just over 1.5 percent went to pay the costs of its employees. The EU employs the same number of people as a good sized English county council like Kent.
The biggest element in the EU budget goes to subsidising agricultural and fisheries products. In 1994 something like £29 billion (just under half of the approximately £55 billion raised from member states) went to meet the cost of the common agricultural policy(CAP). In 1973, the first year in which Britain was a member, agriculture and fisheries absorbed just over 80 percent of the Community's budget. For 1999 the amount devoted to CAP is due to fall to 45 percent of total expenditure.
The Maastricht Treaty laid down strict convergence criteria for the creation of a common currency. These involve inflation rates below 3 percent and a budget deficit at less than 3 percent of gross domestic product. Each government's public sector debt must also be brought down to less than 60 percent of gross domestic product. Currently there is only one member state (tiny Luxembourg, with a population of 400,000) which fulfils these criteria.
These convergence criteria can only be achieved with great difficulty. Britain has managed to get within the required public sector borrowing requirement in only seven of the last 21 years. Big cuts in social expenditure will be required, such as the Italian government's attempt to restructure its pension schemes. The government backed down in the face of massive mobilisations by workers but will be forced to attack again if Italy is to be part of the European Monetary System.
The EU's competitiveness has fallen. Its share of world markets is 20 percent less than it was in 1980. Productivity in manufacturing has scarcely improved. The Confederation of British Industry reported that between 1979 and 1990 it rose by only 2.5 percent in the EU--as against 4.6 percent in Japan and 3.5 percent in the US.
Unemployment in the EU stands at 11 percent of the combined workforce. At around 18 million this is the equivalent of the combined populations of Denmark, Ireland and Portugal. The jobless are the invisible, unrepresented sixteenth 'state' in the EU.
Higher rates of unemployment in the EU than in Japan and America are being used to argue that labour costs need to be cheaper to reduce production costs and attract capital investment. German labour costs are the highest in the world. Volkswagen is investing massively in the Czech Republic where the skilled workforce is one sixth as cheap as that inside Germany.
European social policy is seen by some as an antidote to the social costs of the free market. There is no evidence that the EU leaders share the view that it exists to protect workers' rights and bring social justice. At the heads of government summit in Essen in December 1994 Jacques Delors congratulated John Major on his government's employment policy. EU white papers praise labour market flexibility and talk of the need to reduce the costs of hiring the low paid. They also argue for greater productivity from those at work and urge a decrease in wages in the name of social solidarity.
Britain invests three times as much in America as does Japan. A survey last year asked British businessmen whether the EU helped their international strategy. Only 22 percent replied that it did.
Popular support for the EU has fallen. Maastricht was initially rejected by the Danish voters and it received a paper thin majority in France. In 1993 a poll showed only two out of every five Europeans in favour of the treaty. Between 1990 and 1993 the response to the question as to whether EU membership was a good thing fell from over 70 percent to 60 percent. Only just over 45 percent of Europeans felt that they benefited from membership--a drop of 10 percent.
Return to Contents page:
Return to Socialist Review Index Home page