General policies of the European Union

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Agriculture

On 30 June 1960, the European Commission tabled proposals for the creation of a common agricultural policy (CAP). CAP is built upon the three pivotal principles: market unity, Community preference, and financial solidarity.

What are the objectives of the CAP?

to increase productivity,

to ensure a fair standard of living for the agricultural Community,

to stabilize markets,

to assure food supplies,

to provide consumers with food at reasonable prices,

It recognises the need to take account of the social structure of agriculture and of the structural and natural disparities between the various agricultural regions and to effect the appropriate adjustments by degrees.

Economic and monetary policy

The economies of the EU's Member States are becoming extraordinarily intertwined thanks to the single market. More than 60% of their trade is with each other, their companies are linked by a myriad of joint ventures, common ownerships and cooperation agreements, their banks, insurance companies and accountancy firms can operate freely across national borders and ordinary citizens can open bank accounts in any Member State and move capital around the Union as they wish.

But the full benefits of economic integration - faster economic growth, better job creation and wider choice for consumers - are still not being delivered to citizens as well as they should be. Part of the reason is the existence of 15 different currencies. Despite the success of the European Monetary System in promoting currency stability since 1979, events in 1992 and 1993 demonstrated that currencies are always vulnerable to sudden and disruptive movements.

Instability discourages investment partly because currency markets tend to 'overshoot' and fix values either higher or lower than is justified by real economic circumstances. Europe's many currencies tend to increase the costs of travel and tourism and are a financial burden to companies which operate in more than one Member State. Nor is it easy to make a comparison between prices in these countries which means that the consumer is not greatly encouraged to buy in the cheapest market.

These are some of the reasons why the Union is aiming for economic and monetary union (EMU) by 1999. The original Rome Treaty had very little to say about money because stable currencies were largely taken for granted, thanks to the Bretton Woods system which had erected the US dollar as the dominant monetary standard.

During the Community's first 35 years, coordination was more virtual than real; the Commission analysed the economic situation and produced its policy recommendations, but each Member State was entirely free to determine its own priorities.

Now, they are steering their economies towards common objectives, partly because that is the best way to prepare for EMU and partly because they know that financial markets punish countries whose policies are not particularly sound. Currencies are driven downwards and interest rates upwards - penalties which can damage prospects for lasting economic growth and job creation.

Economic policies coordination

Financial integration

Laws and procedures

Economic policies coordination

The Treaty now requires Member States to regard their economic policies 'as a matter of common concern' and to coordinate them within the Council of Ministers. The policy framework is established at the highest political level of the Union - the Heads of State or Government meeting as the European Council.

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