towards more homogeneous conditions with respect to inflation and interest
rates, and the fixed exchange rate co-operation of the EMS, and later on the
euro project, have been determining factors towards this end. With respect to
synchronisation of the business cycles, unemployment levels, and standards of
living, there are still differences between the countries, and it is questionable
whether integration really has progressed in these dimensions. The evidence
points to the conclusion that increased mobility of goods, services, persons and
capital is no guarantee for a process of equalisation of living standards. As
stated in the neo-classical economic theory. As outlined in the theories of the
“new” economic geography (e.g. Krugman, 1991) removal of barriers may
stimulate centrifugal processes leading to divergence and a centre-periphery
structure of economic activity.
And finally, as pointed out by Rodrik (2000) the speed of the international
process of economic integration is somewhat over evaluated. Often the size of
“transaction costs” - in broad terms not only referring to pure economic costs
alone - is underestimated. Especially Rodrik refers to the problems of contract
enforcement. Could economies really become more integrated without a
simultaneous process of international political integration.3
3. Prospects for the European Union in the years ahead
In the following, we will look at current development trends in the EU co-
operation as well as at the perspectives for the development in the long run.
Integration often in its self creates a need for further integration. This
perception of integration as a politically dynamic process is the fundamental
idea of neo-functionalist political integration theory (Laursen, 1995).
There are several examples in the history of EU integration, which support such
a perception. The removal of the visible trade barriers, like tariffs and quotas,
by the creation of the EU customs union led to an increase in various forms of
invisible trade barriers, such as discriminatory public procurements, national
technical standards, and abuse of the tax systems for national protectionism.
This created a need for further integration, which in turn led to the creation of
the Single Market. Unstable exchange rates are incompatible with the Common
3 “If the depth of markets is limited by the reach of jurisdictional boundaries, does it not follow
that national sovereignty imposes serious constraints on international economic integration?
Can markets become international while politics remains local?”; Rodrik (2000:180).
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