Term Paper on "European Union or EU Is an Intergovernmental"

Term Paper 11 pages (3339 words) Sources: 1+

[EXCERPT] . . . .

European Union or EU is an intergovernmental organization of European countries, the most powerful regional organization at present (Wikipedia 2005). The EU has resembled a federation or confederation, where member states have transferred a degree of their sovereignty to the Union. These member states must first agree to transfer additional powers and maintain their own policies in major areas of national interest, like foreign relations and defense. The EU was established by the Treaty of European Union in 1992, although many aspects of the Union existed through predecessors since the 1950s. Its activities cover all policy areas, from health and economic policy to foreign affairs and defense. It functions as a federation as regards monetary matters or agricultural, trade and environmental policies; as a confederation as regards social and economic policies, consumer protection and internal affairs; and an international organization as regards foreign affairs. The chief activity of the EU covers the establishment and administration of a common single market, which consists of a customs union, a single currency called the euro, a common agricultural policy and a common fisheries policy. The treaties between member states constitute the legal base of the EU and these are subjected to a lot of amendments through the years. The first was the Treaty of Paris of 1951, which established the European Coal and Steel Community among the first member states, which later expired and superseded by the Treaty of Rome of 1957. This 1957 Treaty was substantially amended, notably by the Maastricht Treaty of 1992, which established the European Union and named it so. There are currently 25 member states of the Union, and among them are Portugal and Spain (Wikipedia).

The Republic of Portugal or Portugal is a democratic republic located west and southwest of the Iberian Peninsula in Southwestern extreme of continental Europe (Wikipedia 2005). It is bordered by Spain to the north and east and by the Atlantic Ocean to the west and south. It was a major economic, political and cultural world power during the 15th and 16th centuries and described as "beautiful port." In the 10 years before joining the EU, Portugal had a per capita gross domestic product equal to two-thirds of that of the four big Western European economies and continued to enjoy strong economic growth, decreasing interest rates and low unemployment levels. Its economy became increasingly service-based since it joined the European Union in 1986, a trend that began with the boom of the 1960s. Successive governments in the last decades privatized many of the state-controlled firms and liberalized key areas of the economy, such as the financial and telecommunications sectors. Portugal qualified for the Economic and Monetary Union or EMU in 1998 and was enjoying a comfortably low inflation rate of 2.4% when it joined the other countries in launching the euro on January 1, 1999 (Wikipedia).

The kingdom of Spain is located southwest of Europe and shares the Iberian Peninsula with Portugal, Gibraltar and Andorra (Wikipedia 2005). It borders France and the small principality of Andorra in the northeast and includes the Balearic Islands in the Mediterranean Sea, the Canary Islands in the Atlantic Ocean, the Ceuta and Malilla cities in the north of Africa. Its mixed capitalist economy supports a GDP per capita at 87% that of the four leading West Europe economies. Its center-right government of former President Aznar managed to gain admission into the group of countries that launched the single European currency, the euro, on January 1, 1999.

II Changes in General Performance and Structural Economy

Portugal. Its official development assistance/gross national product ratio stood at.26% and it ranked 16th out of 22 Development Assistance Committee member countries in 1999 and with the lowest per capita GNP (OECD 2001). Due to its colonial history, which ended in 1971, Portugal's aid program has been largely based on institutional and personal relationships, with the maintenance of historical, linguistic and cultural ties as underlying basis. Its bilateral ODA was exclusively directed at the five Portuguese-speaking countries of Angola, Cape Verde, Guinea-Bissau, Mozambique and Sao Tome and Principe. High-level public support recently went to East Timor as the largest recipient of bilateral aid to Portugal. The programme was also decentralized and spread among its 17 ministries and agencies, universities and municipalities. The Portuguese Institute of Cooperation of the Ministry of Foreign Affairs manages the entire program and conducts policy reviews and evaluation. The Portuguese Development Support Agency was created in 2000 to support social and economic infrastructure. Portugal's main achievements in exercising control over and enhancing coordination and integration within its decentralized programmed consisted of the creation of a Council of Ministers for Cooperation Affairs to approve an annual aid programme and an aid budget; the re-establishment of an inter-ministerial Committee for Cooperation to strengthen the cooperation policy among the ministries through regular meetings; and a database system, which consolidates all budgets and expenditures of development cooperation projects. Portugal also played a key role in responding to the East Timor crisis in August 1999 and established the Office of the Commissioner to Support the Transition in East Timor as well as increased its budgetary allocation to $68 million

Poverty reduction is a major goal in Portuguese cooperation, which has yet to be sufficiently addressed (OECD 2001). In tackling this goal, Portugal places top priority to education and health. Unfortunately, these allocations do not strictly target the poor and there has not been a focus on prominent sector-wide approaches. As to debt actions, Portugal has made higher payments at $126 million in 1999, which was 35% of the total ODA gross disbursements. The DAC average was only 4%. Most of its actions come from defaults on state guaranteed private export credits and loans. Its ICP's strategic role in coordination likewise remains insufficient in minimizing overlaps of aid programmes by the different ministries and other agencies. Operating tools and useful guidelines still have to be developed and evaluations undertaken in a comprehensive and effective way. In addition, the increase of ICP financing of non-governmental organizations has been slow in recent years. With limited resources, these organizations are unable to function properly as a political force or presence.

Spain. After World War II, Spain was one of the few surviving fascist regimes in Europe that was politically and economically isolated (Wikipedia 2005). It was kept out of the United Nations until it became important for the then U.S. President Dwight Eisenhower to establish a presence in the Iberian peninsula. This shift of attention to Spain was also accomplished through the anti-communism posture of Spain's Franco. Spain began to enjoy economic growth more than a decade later than other western European countries the 1960s. It gradually changed into a modern industrial economy with a vibrant tourism sector. It continued growing into the 1970s under the rule Franco, exerting great efforts to stave off the effects of the oil crisis. Upon his death, Franco was succeeded by Prince Juan Carlos as king and head-of-state, Juan Carlos led the country into becoming a modern democratic state, particularly in resisting a coup d'etat in 1981. The following year, it joined the NATO and the European Union in 1986 (Wikipedia).

II. Impact of the Euro on Portugal and Spain

Portugal. After a recession in 1993, the economy of Portugal grew at an average annual rate of 3.3.%, which was higher than the averages established by the EU (Wikipedia 2005). It agreed to cut its fiscal deficit and install structural reforms in order to qualify for entry into the Economic and Monetary Union or EMU. In return, the EMU stabilized Portugal's exchange rate and induced the fall of inflation and interest rates. Falling interest rates reduced cost of public debt and assisted the country in attaining fiscal targets. As a consequence, household debt rapidly expanded and the European Commission and the Organization for the Economic Cooperation and Development and others cautioned the Portuguese government to observe fiscal restraint. In 2001, Portugal's public debt went beyond 3% of the EU's imposed limit and opened Portugal to EU sanctions or restrictive financial supervision. Its overall growth rate slowed down in late 2001 to 2002 and made fiscal austerity more difficult and more painful.

The economy has been based on traditional industries, like textiles, clothing, footwear, cork and wood products, beverage, porcelain and earthenware, glass and glassware (Wikipedia 2005). It made a good showing in Europe's automotive sector and services, particularly tourism, have played a significant role in Portugal's economy. It managed to raise its standard of living to the level of its EU partners. Its GDP per capita on a purchasing power parity basis went up from 51% of the EU average in 1985 to 78% in early 2002 at $182 billion. Unemployment was fixed at 4.1% by the end of 2001, a figure that was comparatively low by EU averages. Real wages have been flexible, but high social costs and severance raise fixed labor costs and made new job creation hard. The economy contracted by 1.2% in the first quarter, according… READ MORE

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