In what ways and to what extent are the establishment of the Single Market and the Euro changing the ways in which the European Union and its member states are governed?

Essay 2006 10 Pages

Politics - International Politics - Topic: European Union



Module Code/Title: PO-220, After Democracy: The EU and the Governance of Europe

Student Number: 401351

Home Department: German (Exchange Student) Word count: 2383 words


In what ways and to what extent are the establishment of the Single Market and the Euro changing the ways in which the European Union and its member states are governed?


Since the beginnings of the European Community, economic integration has led the way in the process of European integration as a whole. From its first outline in the 1957 Treaty of Rome to its final implementation into the first pillar of the European Union in the Maastricht Treaty of 1992, the creation of a single market and eventually a single currency has been central to the idea of creating a unified Europe and significantly shaped the European communities’ institutions and ways of governance. The coming into effect of the Single European Market (SEM) in 1993 and establishment of the Economic and Monetary Union (EMU) in 1999 have probably been the most far-reaching and incisive steps on the way to the economic and following political integration of Europe. In this essay, I will first discuss the impact of the SEM on the governance of the EU’s institutions and its member states, especially with regards to the process of setting common rules and regulations and their subsequent implementation into national law. In a second step, I will analyse the significance of EMU for the economic governance of the EU’s member states and its further implications for national sovereignty in this field. Finally, I will summarise the results of this essay and discuss the advantages as well as the political and economic problems that exist or might arise out of SEM and EMU in the future.

Implications of the Single Market for European Governance

As first outlined in the EC White Paper Completing the Internal Market , SEM comprises the ‘four freedoms’ of free movement of goods, services, capital, and people between EU member states in order to increase economic efficiency and eventually raise the living standard for European citizens.1 This project of market-building is carried out in two different ways. The first one is ‘negative integration’, meaning the removing of existing barriers like tariffs, national monopolies or different national standards and currencies (see section two) in order to facilitate cross-border transactions.2 The second one is ‘positive integration’, meaning the regulation of the new market through the establishment of common jurisdiction and policies to ensure that the emerging single market will operate smoothly and efficiently. A multinational single market obviously needs supranational supervision and intervention. Indeed, the EU does claim ‘exclusive competence’ in many economic policies and (within the Euro Zone) in monetary policy.3 In these areas, EU law stands above national law and often pre-empts national policies.

The key policy actors in the regulation of the single market are primarily the European Commission, the Council of Ministers, and especially the European Court of Justice (ECJ). The other two EU-institutions, the European Council and the European Parliament, have less influence on the policy-making process. The Council determines the systemic character of the EU, but it is not directly involved in the routine policies of SEM, and the Parliament still has only restricted legislative powers in comparison to its national counterparts.4 The most common forms of EU legislation are directives, which set the aims to be achieved but leave it to the member states to choose the way for achieving them, and regulations, which are binding in their entirety to all member states.

The European Commission acts mainly as initiator of policies and legislations and as a ‘guardian of the treaties’ and ‘supranational conscience’ concerning the adherence to EU law.5 One of the most important economic areas the Commission has been concerned with is competition policy, comprising the supervision of mergers and acquisitions, the fighting of cartels, monopolies and the privileging of national producers, as well as encouraging competition among firms. The Council of Ministers, including its diverse sub-groups, acts as a forum in which much of SEM-politics is bargained and negotiated. However, it must be seen as a ‘two-faced institution’ in its role in SEM since it inevitably involves a tension between collective solutions and the vested national interests of its representatives.6

The ECJ is of particular importance to the functioning of SEM since it is the instance which ensures the transposition of and adherence to EU directives and regulations by states, firms and individuals. For example, the ECJ has the power to enforce market liberalisation against national governments, as has already been the case in telecommunications and aviation.7 As a result of its superiority, as Armstrong and Bulmer argue, national courts are being transformed into community courts by the ECJ, while national parliaments have lost part of their sovereignty as legislative bodies and are now restricted to enacting laws that are compatible with EU law.8

Apparently, this transfer of power means a loss of control for national governments and a loss of democracy for the policy-making process at large as it is taken out of the hands of directly elected bodies and transferred to non-elected supranational institutions. However, such an assumption partly misses the point. The EU rather constitutes what Giandomenico Majone has labelled a ‘regulatory federation’ that exercises its power by creating a framework of common laws, rules and policies that sets rules for the behaviour of actors in the European economy instead of intervening directly.9 Armstrong and Bulmer argue that this form of regulatory state is exactly what differs modern governance from traditional national government.10


1 Commission of the European Communities. Completing the Internal Market - White Paper from the Commission to the European Council . Brussels: COM, 1985, (http://www.europa.eu.int/comm/off/pdf/1985_0310_f_en.pdf, April 5,.2006).

2 Alberta Sbragia, “Key Policies” in Elizabeth Bomberg and Alexander Stubb, eds., The European Union: How Does It Work? (Oxford: Oxford University Press, 2003), 119-20.

3 Sbragia, “Key Policies”, 120.

4 K. Armstrong and S. Bulmer The Governance of the Single European Market (Manchester: Manchester University Press, 1998), 76-9.

5 Armstrong and Bulmer, Governance , 74-5.

6 Armstrong and Bulmer, Governance , 76.

7 Sbragia, “Key Policies”, 133.

8 Armstrong and Bulmer, Governance , 263.

9 Giandomenico Majone, “The Rise of the Regulatory State in Europe” in West European Politics , 17 (3) 1994, 77-101.

10 Armstrong and Bulmer, Governance, 255.


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Title: In what ways and to what extent are the establishment of the Single Market and the Euro changing the ways in which the European Union and its member states are governed?