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The aim of this essay is to explore the process of European integration with reference to the formation of the Single European Market. To evaluate the process of integration and the interests of member state governments I will use two examples: the liberalisation of the banking sector in Spain and the liberalisation of the electricity market in Germany. A significant reform is occurring in the world economy.

We are swiftly moving away from a world in which national economies were fairly self-contained entities, detached from each other by cross-border and investment barriers; by distance, time zones, language, culture and government regulation. We are presently moving toward a world in which barriers are falling, advances in transportation and telecommunications technology is shrinking perceived distance and national economies are converging into an interconnected global economic system. This process of globalisation is rapidly changing the world in which we live and transforming it into a ‘global village’.

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There are two main theories of European integration. Intergovernmentalism is when the state and national government are the main actors in European integration and only integrate to pursue their national interests (security, economic, etc). Integration will occur when the nation states have an interest in transferring sovereignty to a supra-national body. The concept of intergovernmentalism supports the statement ‘European integration only proceeds when and as far as it is in the interests of member state governments’.

Prescriptive intergovermentalism suggests that member states should be the dominant players within the European Union, and descriptive intergovenmentalism simply states that the member states are, for good or bad, the dominant actors within the Union. The contrasting integration theory is that of Neofunctionalism. This states that the evolution of integration is partly driven by European dynamics and that political integration will occur as a long-term consequence of primarily limited economic integration. Integration will have spillover effects in to different areas not only political, for example functional.

The European Union is being seen as an emerging economic and political superpower of the same status as the United States and Japan. The desire of the nations of Europe for long lasting peace and control over political and economic stages are the main two factors which lead to the formation of the European Union. Not surprisingly many of the governments of Europe realised the benefits of closer integration amongst the countries. The European Union is expanding day by day, with a population of 350 million and a GDP greater than that of the United States.

The European Union is a complex structure consisting of five main institutions. The Commission is responsible for proposing, implementing and monitoring compliance with laws by member states. Commissioners are appointed by national governments but are not to act in their own national interest. The Commission can ensure that member nations are not exploiting the process of integration for their own personal benefits, to a certain extent only. The Council of Ministers and European Council are the main decision-making bodies and the most powerful of European Union institutions.

The European Parliament has an important legislative role that aims to settle disagreements between member states and find a compromise. This body is very significant because it can minimise the extent to which a nation acts purely in its own interests. The European Court of Justice ensures that each member country interprets and applies Community law and this institution can levy financial penalties. The member states delegate sovereignty for certain matters to independent institutions, which represent the interests of the Union as a whole, its member countries and citizens.

The Commission traditionally upholds the interests of the Union, while each national government is represented within the Council, and the European Parliament is directly elected by citizens. Although there are various institutions involved in regulating the process of integration, some member states still manage to act purely in their own interests. The Single European Act agreed at Luxembourg by the European Council in 1985 committed the member nations of the European Community towards establishing an economic union or a Single European Market.

The Treaty of Rome provided for the creation of this common market. Article three of the Treaty set out the main objectives of the new community, calling for the elimination of internal trade barriers and the formation of a common external tariff and required member states to eliminate obstacles to the free movement of goods, services, financial capital and people among the members. The Single Market seeks to encourage the free movement of goods, services, labour and capital, otherwise known as the four freedoms. This is seen as the basis for future prosperity of the European Community.

The market is an attempt to generate structural changes in the European Union by reducing barriers to market access throughout member countries. The overall aim is to increase the long-term economic growth of Europe. Major benefits include increased competition, increased employment, higher investment, reductions in costs thus reduction in prices, economies of scale, labour mobility and more cross-frontier mergers and acquisitions. One of the Commission’s objectives was to promote a more effective Single Market for the electricity market.

The liberalisation of the German electricity market resulted in a fundamental reform to the national economy of Germany. Germany is Europe’s largest generator of electricity and is also the largest consumer of electricity. Electricity demand is very stable in Germany and generator companies used to enjoy a regional monopoly where they charged higher prices to consumers and this had an effect on the international competitiveness of the German industry. The market was dominated by six large systems operators, which supplied an estimated 65% of the total electricity production in 2001.

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