Page 96 - Introduction to Business

70 PART 1 The Nature of Contemporary Business

Bank for Reconstruction and Development) was established in 1944 to help stabi-
lize European economies. The ultimate objective of all these initiatives was to cre-
ate a strong, independent, and united Europe based on free market principles and
economic cooperation.
The origins of the EU can be traced to the creation of the European Coal and Steel
Community (ECSC) in 1952 which established a common market in coal, steel, and
iron ore and included the six nations of France, West Germany, Italy, Belgium, the
Netherlands, and Luxembourg. The second big step was their approval of the Treaty of
Rome in 1957 establishing the European Economic Community (EEC). In 1960, the
European Free Trade Association (EFTA) was formed by the United Kingdom, Den-
mark, Sweden, Finland, Switzerland, Austria, and Portugal. Although the United King-
dom, Ireland, and Denmark applied to join the EEC in August 1961, these countries
were allowed to enter the EEC only in 1973 (bringing its membership to nine) prima-
rily because of French president Charles de Gaulle’s resistance to the United King-
dom’s joining the EEC. Greece joined the EEC in 1981 followed by Spain and Portugal
in 1986, bringing its membership to 12. Until then, the focus of the EEC was the estab-
lishment of a common market with free movement of goods, labor, and capital, that is,
the factors of production. However, by 1992, the European Economic Community
decided to become a full economic union, the European Union (EU), by incorporat-
ing (harmonization and unification) the fiscal, monetary, and social policies of its
member countries. In January 1995 Austria, Sweden, and Finland joined the European
Union, bringing its membership to 15. In May 2004, 10 new countries (eight from the
former Soviet block, and Cyprus and Malta)–the Accession Candidates—were admit-
ted to the EU, bringing the EU membership to the present 25 (see Exhibit 2.5). The
case of three “candidate” countries, that is, Bulgaria, Romania and Turkey is to be con-
sidered in 2007.
The introduction of the euro, the EU’s common (or single) currency that is cur-
rently used in 12 (excluding Denmark, Sweden, and the United Kingdom which
have opted to stay out of the euro area till a later date) of the 15 eligible original EU
member countries, is considered by many as the crowning success of the EU’s plans
to integrate the economies of Europe. The focus of the EU currently is to deepen
(strengthen) institutional (economic, political, social, and defense) linkages; this

EXHIBIT 2.5
Original EU members FINLAND
The European Union
New members
SWEDEN ESTONIA
LATVIA
DENMARK
LITHUANIA
NETHERLANDS
UNITED
IRELAND KINGDOM
POLAND
GERMANY
BELGIUM
CZECH
REPUPLIC
LUXEMBOURG SLOVAK REPUPLIC
ATLANTIC AUSTRIA HUNGARY
OCEAN FRANCE SLOVANIA
ITALY Black Sea

SPAIN
PORTUGAL
GREECE
Mediterranean Sea
MALTA
CYPRUS

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