EU expansion; eurozone crisis

21st Century · 2000 – present

The European Union grew from six founding states in the 1950s to 27 members today. Its largest single enlargement came on 1 May 2004, when ten countries joined, most of them in Central and Eastern Europe that had been under communist rule until 1989. Bulgaria and Romania followed in 2007 and Croatia in 2013. The enlargement reunited much of a continent divided by the Cold War and extended a single market and shared rules to hundreds of millions more people.

The euro, the common currency, began as an accounting unit in 1999 and as notes and coins in 2002. After the global financial crisis of 2007 to 2008, several euro members, notably Greece, Ireland, Portugal, Spain and Cyprus, faced banking and debt emergencies from late 2009. The eurozone crisis lasted into the mid-2010s, led to loans with strict conditions, and brought new European institutions and deep political argument about austerity, solidarity and the design of the currency.

Things happened, and the rest is history

The Copenhagen criteria and the road to enlargement
Event
What happened
After the fall of communist governments in 1989 and 1991, Central and Eastern European states apply to join the European Community. In June 1993 the European Council meeting at Copenhagen agrees that associated countries may join once they meet political, economic and legal conditions. These become known as the Copenhagen criteria. Accession negotiations with a first group open in 1998, and a larger group follows in 2000.
The rest is history
The criteria required stable democratic institutions, a functioning market economy and the ability to adopt the whole body of EU law. Candidates spent years rewriting laws and reforming administrations under the Commission's monitoring. At the Copenhagen summit of December 2002 the EU concluded talks with ten states. Treaties of accession were signed in Athens in April 2003, and the countries joined on 1 May 2004.
Sources
1. PrimaryEuropean Council in Copenhagen, 21-22 June 1993: Conclusions of the Presidency. Council of the European Communities, 1993.
2. BookVachudova, Milada Anna. Europe Undivided: Democracy, Leverage, and Integration after Communism. Oxford: Oxford University Press, 2005.
The Maastricht Treaty and the creation of the euro
Event
What happened
The Treaty on European Union is signed at Maastricht in February 1992 and enters into force in 1993. It sets a path to a single currency with convergence criteria on inflation, deficits, debt and interest rates. The European Central Bank is created in 1998. On 1 January 1999 eleven states fix their exchange rates and adopt the euro, and notes and coins enter circulation in 2002.
The rest is history
The monetary union had a single central bank but no common treasury, and governments kept control of taxes and spending. A Stability and Growth Pact of 1997 tried to limit deficits, but it was weakly enforced, and France and Germany breached its limits in the early 2000s. Many economists had warned that such a design would be fragile in a severe downturn. Greece joined in 2001, and the eurozone reached 20 members with Croatia in 2023.
Sources
1. PrimaryTreaty on European Union (Maastricht Treaty). Signed at Maastricht, 7 February 1992. Official Journal of the European Communities C 191, 1992.
2. BookJames, Harold. Making the European Monetary Union. Cambridge, MA: Harvard University Press, 2012.
The 2004 enlargement
Event
What happened
On 1 May 2004 the Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia join the European Union. Referendums in most of these countries had approved membership in 2003. It is the largest enlargement in the Union's history by number of states, adding about 75 million people.
The rest is history
The new members gained access to the single market and substantial EU funds, and their economies grew faster than the older members for much of the following decade. Many citizens moved west to work, which became a political issue in some older states. Bulgaria and Romania joined in 2007, though with continued monitoring of judicial reform and corruption. Croatia became the 28th member in 2013, and later disputes over the rule of law in Hungary and Poland showed that joining did not settle questions of democratic standards.
Sources
1. PrimaryTreaty of Accession 2003. Signed at Athens, 16 April 2003. Official Journal of the European Union L 236, 2003.
2. BookGrabbe, Heather. The EU's Transformative Power: Europeanization through Conditionality in Central and Eastern Europe. Basingstoke: Palgrave Macmillan, 2006.
The failed Constitutional Treaty and the Lisbon Treaty
Event
What happened
A Treaty establishing a Constitution for Europe is signed in October 2004 to streamline the enlarged Union. French voters reject it in a referendum on 29 May 2005, and Dutch voters follow on 1 June. The text is dropped and replaced by the Lisbon Treaty, signed in December 2007.
The rest is history
Lisbon kept most of the institutional reforms, including a permanent President of the European Council, a High Representative for foreign policy and wider use of majority voting. Irish voters rejected it in June 2008 but approved it in a second vote in October 2009. It came into force on 1 December 2009, just as the Greek debt crisis was breaking. The episode showed how hard it was to reform the Union through treaties that required unanimous approval.
Sources
1. PrimaryTreaty of Lisbon amending the Treaty on European Union and the Treaty establishing the European Community. Signed 13 December 2007. Official Journal of the European Union C 306, 2007.
2. BookDinan, Desmond. Ever Closer Union: An Introduction to European Integration. 4th ed. Basingstoke: Palgrave Macmillan, 2010.
The global financial crisis reaches Europe
Event
What happened
After the collapse of Lehman Brothers in September 2008, European banks suffer heavy losses and several need rescue. Ireland guarantees its banks' debts in September 2008, and Spain's property boom ends. Cheap borrowing since the euro's start had fuelled lending and large trade imbalances between northern and southern members.
The rest is history
Rescuing banks moved private debts onto governments. Ireland's public deficit rose sharply, and Spanish banks later needed European aid. Investors began to doubt that weaker members could repay, and borrowing costs diverged across the eurozone. Because members no longer had their own currencies, they could not devalue, and the central bank's role as lender to governments was limited. This set the stage for the Greek crisis.
Sources
1. BookTooze, Adam. Crashed: How a Decade of Financial Crises Changed the World. London: Allen Lane, 2018.
2. BookLane, Philip R. The European Sovereign Debt Crisis. Journal of Economic Perspectives, 2012.
The Greek crisis and the first bailouts
Event
What happened
In October 2009 a new Greek government reveals that the budget deficit is far larger than previously reported. Borrowing costs soar, and in May 2010 the eurozone states and the International Monetary Fund agree a first loan package of 110 billion euros tied to spending cuts and reforms. Further packages follow in 2012 and 2015. Ireland, Portugal and Cyprus also receive programmes.
The rest is history
Greece's economy shrank by roughly a quarter between 2008 and 2013, and unemployment passed 25 percent. Protests and political upheaval followed, including the rise of the Syriza party. In July 2015 Greek voters rejected a creditors' proposal in a referendum, yet the government accepted a third programme soon after. Greece left its last programme in August 2018. Debate continues over whether the austerity conditions were too harsh or necessary.
Sources
1. PrimaryEuro Area Loan Facility Act and Memorandum of Understanding on Specific Economic Policy Conditionality (Greece). Euro area governments and European Commission, May 2010.
2. BookLynn, Matthew. Bust: Greece, the Euro and the Sovereign Debt Crisis. Hoboken: Wiley, 2011.
Creating the bailout funds and banking union
Event
What happened
In 2010 the eurozone sets up a temporary rescue fund, which becomes the permanent European Stability Mechanism in 2012. In 2012 Mario Draghi, president of the European Central Bank, says it will do 'whatever it takes' to preserve the euro, and the bank announces a bond-buying scheme. A banking union begins with a single supervisor in 2014.
The rest is history
Bond yields for Italy and Spain fell after Draghi's July 2012 speech, even though the bond-buying scheme was never used. Governments also signed a fiscal compact in 2012 tightening budget rules. A common resolution mechanism for failing banks followed, but a shared deposit insurance scheme has still not been agreed. In 2020 the Union later agreed a joint recovery borrowing programme during the pandemic, which some saw as a step towards more shared fiscal tools.
Sources
1. PrimaryDraghi, Mario. Speech at the Global Investment Conference, London, 26 July 2012. European Central Bank. (opens in a new tab)
2. BookBrunnermeier, Markus K., Harold James, and Jean-Pierre Landau. The Euro and the Battle of Ideas. Princeton: Princeton University Press, 2016.
The 2007 and 2013 enlargements and the Western Balkans
Event
What happened
Bulgaria and Romania join on 1 January 2007, and Croatia on 1 July 2013 after a 2011 accession treaty. At the Thessaloniki summit in June 2003 the EU had declared that the Western Balkan states had a future inside the Union. Several, including Serbia, Montenegro, North Macedonia and Albania, have since become candidates.
The rest is history
Enlargement slowed after the eurozone crisis, as governments and voters grew wary of further expansion. Bulgaria and Romania were kept under a special monitoring mechanism until 2023. Candidate status was also granted to Ukraine and Moldova in 2022, giving the policy new urgency. Accession talks with Turkey, a candidate since 1999, have been effectively stalled for years.
Sources
1. PrimaryThessaloniki European Council, 19-20 June 2003: Presidency Conclusions. Council of the European Union, 2003.
2. BookSchimmelfennig, Frank, and Ulrich Sedelmeier, eds. The Europeanization of Central and Eastern Europe. Ithaca: Cornell University Press, 2005.
The euro as a cause of rising prices
Popular belief
The legend
Many people in countries that adopted the euro say that the changeover in 2002 caused prices to jump, with shops rounding up and everyday goods costing far more than before.
The rest is history
Consumers did notice price rises in some everyday items such as cafe drinks and services, which were often rounded up. Eurostat and national statistics offices found that the overall effect on inflation was small, perhaps a few tenths of a percentage point. The gap between measured inflation and public perception arose partly because frequently bought goods rose more than the average basket. Eurostat studies of the changeover documented this difference.
Sources
1. PrimaryEurostat. Euro Changeover and Inflation: Eurostat Report on Price Effects. Luxembourg: Eurostat, 2003.
2. ArticleAucremanne, Luc, and David Cornille. "Attractive Prices and Euro Rounding Effects on Inflation." National Bank of Belgium Working Paper no. 17 (2001).
Polish plumbers and the flood of eastern workers
Popular belief
The legend
Before the 2004 enlargement, commentators in Western Europe warn that millions of workers from the new member states, symbolised by the 'Polish plumber', will flood in and take local jobs and welfare benefits.
The rest is history
The 'Polish plumber' image was used in the 2005 French referendum campaign against the Constitutional Treaty. Only the UK, Ireland and Sweden opened their labour markets in 2004, while most others used transition periods of up to seven years. Migration was large, especially from Poland and later Romania, but studies found little negative effect on native wages and employment overall. Research also found that migrants paid more in taxes than they received in benefits.
Sources
1. ArticleKahanec, Martin, and Klaus F. Zimmermann, eds. EU Labor Markets After Post-Enlargement Migration. Berlin: Springer, 2010.
The EU as a superstate that bans bendy bananas
Popular belief
The legend
A widely repeated claim says Brussels bureaucrats ban curved bananas and cucumbers, or dictate tiny details of daily life, as proof of an overreaching European superstate.
The rest is history
A 1994 Commission regulation did set quality classes for bananas, including a minimum size and 'free from abnormal curvature'. It did not ban curved fruit, and the rules sought to set common trade standards across the single market. A 1988 cucumber standard likewise classified rather than banned. The EU repealed many fruit and vegetable marketing standards in 2009, though it kept some. Such myths fed political arguments that grew during the enlargement and crisis years.
Sources
1. PrimaryCommission Regulation (EC) No 2257/94 laying down quality standards for bananas. Official Journal of the European Communities L 245, 1994.
Germany paid for the southern bailouts
Popular belief
The legend
In many northern countries it is told that the eurozone crisis meant hard-working taxpayers simply handed over gifts to Greece and other southern states. In the south it is said the reverse, that the money only went to German banks.
The rest is history
The bailouts were loans, not gifts, and most have been repaid or carry long maturities, though Greece received substantial debt relief on repayment terms. Much of the first Greek loans went to repay existing creditors, including French and German banks, which reduced their exposure. The costs and benefits were therefore shared in complicated ways, and economists still debate who gained most. Germany also benefited from low borrowing costs during the crisis.
Sources
1. BookBlyth, Mark. Austerity: The History of a Dangerous Idea. Oxford: Oxford University Press, 2013.

← Back to the outline

Things happened, and the rest is history

The Copenhagen criteria and the road to enlargement

The Maastricht Treaty and the creation of the euro

The 2004 enlargement

The failed Constitutional Treaty and the Lisbon Treaty

The global financial crisis reaches Europe

The Greek crisis and the first bailouts

Creating the bailout funds and banking union

The 2007 and 2013 enlargements and the Western Balkans

The euro as a cause of rising prices

Polish plumbers and the flood of eastern workers

The EU as a superstate that bans bendy bananas

Germany paid for the southern bailouts