EU Economic Policy Under Neo-functionalism: An Analytical Essay

This essay delves into the economic policy of the European Union, primarily analyzing it through the lens of neo-functionalism, a theory of regional integration. The paper explores how the EU's economic policy has evolved, emphasizing the integration of individual sectors to achieve spillover effects. It discusses the role of neo-functionalism in the context of growing economic interdependence, the replacement of national regulatory regimes, and the establishment of international legal frameworks. Furthermore, the essay contrasts neo-functionalism with intergovernmentalism, highlighting their differing perspectives on the integration process, and also incorporates the theories of multi-level governance and constructivism to provide a comprehensive understanding. The essay examines the key policy areas, including the free movement of goods, people, capital, and services within the EU's single market, and addresses the impact of Brexit on the EU's economic policy. The paper also explores the role of social policy, security, external affairs, and monetary union within the context of EU economic integration. In conclusion, the essay underscores the significance of neo-functionalism in understanding the EU's economic policy and its impact on the growth, development, and integration of the region.

Running head: EU ECONOMIC POLICY UNDER NEO-FUNCTIONALISM
EU Economic Policy under Neo-functionalism
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1EU ECONOMIC POLICY UNDER NEO-FUNCTIONALISM
Introduction
There are several theories under which economic policies can be analysed in order to
examine the process of development of any economic policies. This paper mainly taken into
consideration the theory of regional integration such as neo-functionalism. The chosen policy for
this paper is economic policy of EU (Ecb.europa.eu 2020). Therefore, this paper discusses the
process of development of EU economic policy on the basis of neo-functionalist explanations. In
addition, to assess the development of the EU economic policy minutely, it is essential to focus
on other theories. As there is contribution of other theories as well on the development of the
policy. It helps to represent a different point of view to make the analysis fruitful. In this regard,
the policy is discussed with the help of the theories of intergovernmentalism. Other theories that
is illustrated in this paper include multi-level governance and constructivism.
Theories
Theories help to analyse the economic policies. There exists various theories, which
represents an opposite view (Europa.eu. 2020). The economic policy can be examined on the
basis of that policies as well. Here, the theory of regional integration neo-functionalism is used.
To represent the opposite view the theory of intergovernmentalism is implemented. On the other
hand, the application of theory of constructivism helps to examine the EU economic policy in a
better way.
Policy Areas
The economic and political union that consists of 28 member states of Europe is known
as the Europe Union (EU). The primary location for all member states of the EU is Europe. Thus,
there was an internal single market formed by the EU for all the EU member states that runs by a

2EU ECONOMIC POLICY UNDER NEO-FUNCTIONALISM
standardised system of laws. It is only applied in those areas where all the member states are
willing work together. This is how the economic policy of the EU had devolved. The main
objective of the policy is to ensure the free movement of the goods, people, capital and services
within the internal single market of the EU (Ec.europa.eu 2020). In addition, the legislation also
enacted in order to maintain internal affairs and justice. It also formulates common policies on
agriculture, regional development, trade and fisheries. In 1999, a monetary union for the EU
member states came into existence, which started its operation in 2002. The common currency
such as euro is used by all 19 member states of the monetary union. There were a wide range of
recent developments in EU economic policy. One of the vital member states of the EU, United
Kingdom (UK) planned to leave the single market of the EU. The deal of quitting single market
of EU is called Brexit. Therefore, Brexit brings many amendments in economic policy of EU.
Neo-functionalism
A theory of regional integration that emphasizes on the territory and does not consider the
globalization is known as neo-functionalism. The theory of neo-functionalism is applied in case
of the integration of Europe. The main aim of the European integration was to integrate all the
individual sectors in order to achieve the effects of spillover, which helps in further integration
(Niemann and Ioannou 2015). There are three main factors on which neo-functionalism based on
include growing economic interdependence between nations, the national regulatory regimes are
replaced by the supranational market and organizational capacity to construct international legal
regimes and to resolve disputes. Under neo-functionalism theory, the importance of the nation
state and nationalism decreases. There exists three mechanisms that drives the integration such as
the transfer of domestic allegiances, positive spillover and technocratic automaticity.
Economic Policy

3EU ECONOMIC POLICY UNDER NEO-FUNCTIONALISM
The EU economic policy works in favour of removing barriers to competition by
increasing free flow of labour, goods and capital. Thus, it induces the flexibility of the market
that are vital for the smooth functioning of the EU member states (Schmitter and Lefkofridi
2016). All the EU members are operated under Economic and Monetary Union (EMU).
Economic reforms under economic policy of EU raises employment and productivity in the EU.
Hence, it supports the long term growth potential of the region.
Intergovernmentalism
The primary actors in the integration process such as national and state governments
under the intergovernmentalism. The role of intergovernmentalism is pivotal in the integration
process of EU. Intergovernmentalism with the help of periods of inertia and converging
preferences of government able to explain the two periods of radical change in the EU. It
establishes the importance of the institutionalism in the international politics (Bickerton, Hodson
and Puetter 2015). Thus, it can be distinguished from the neo-functionalism. Therefore, the
economic policy of the EU can be explained on the basis of this theory due to its emphasis on
political and economic intergovernmental system. The operation of EU runs with the help of
supranational independent institutions.
Social Policy
The policy that operates under the political or governmental setting is called social
policy. The study of the social services and welfare state comes under the social policy. The
main behind the development of the social policy is to upgrade human welfare by involving
legislation, guidelines, principles and activities under the social structure (Schimmelfennig
2018). It helps to improve the quality of life. The main objective behind the economic policy of

4EU ECONOMIC POLICY UNDER NEO-FUNCTIONALISM
the EU was same. It developed in order to maintain the potential growth and welfare of the EU
member states. Thus, it applied legislation, principles, activities and guidelines with the help of
intergovernmental system in the region.
Constructivism
Constructivism is one of the most important aspect in the international relation.
Therefore, it is important to analyse the EU economic policy on the basis of constructivism.
According to the constructivism, international relation is constructed socially and historically
(Ramalho et al. 2015). There is no role of various characteristics of world politics or human
nature in the international relation. Likewise, the international relation grown under EU policy
also constructed socially and historically. Here, constructivism helps in smooth functioning of
the process. Hence, the social policy of EU operates with the help of constructivism.
Security
Security is one of the key aspect of any economic policy. It provides resilience against
any potential harm in the international market (Lauridsen and Higginbottom 2014). In addition, it
gives freedom from the potential threat. Therefore, one of the vital step in the economic
integration is to ensure the security of the intergovernmental system. Therefore, the neo-
functionalism provides the security in the area of internal affairs and justice. It is useful in
protecting the purpose of the EU integration. Hence, the security of the EU economic integration
is checked by the neo-functionalism through intergovernmental system.
Multi-Level Governance
The way power is spread horizontally and vertically is known as multi-level governance.
Horizontally power is spread between various non-governmental organizations and quasi

5EU ECONOMIC POLICY UNDER NEO-FUNCTIONALISM
governments. On the other hand, vertically power is spread among multi levels of government
(Schakel, Hooghe and Marks 2015). There are various levels of governments such as state,
regional, national, local in many countries. Likewise, the operation of EU integration is based on
international governance. Here, governments from all member states participate in order to
formulate any economic policy. Therefore, the coordination of EU economic integration
smoothens with the help of multi-level governance. In addition, all the economic policy
decisions are taken by combined opinion of all member states. Thus, the multi-level governance
also plays a pivotal role here as well. Multi-level of governance helps to operate the
intergovernmental system of the EU economic policy and monetary union.
External Affairs
External affairs deals with the external relations of the country with other countries
around the world. External relation is important for strengthening the connection with other
countries. It helps to boost the trade and free flow of capital, goods and labour, which is essential
for the progress of the country (Jones, Kelemen and Meunier 2016). In order to take any
common international decision, external affairs plays a vital role. It ensues the smooth relation
with other countries. Here economic integration under EU helps to maintain external affairs of
the all member states with rest of the world. The intergovernmental system of the EU takes
major role in formulation of foreign policies and external affairs of the member states.
Conclusion
This paper mainly focuses on economic policy adopted by the EU member countries. The
contribution of the EU economic policy is significant in the growth and development of the
region. In addition, it also ensures the integration of the region. The economic integration of the

6EU ECONOMIC POLICY UNDER NEO-FUNCTIONALISM
region maintained with the help of EU economic policy. Here, neo-functionalism acts as a major
factor for the economic integration of the EU. EU economic policy operates under the neo-
functionalism (Bickerton, Hodson and Puetter 2015). On the contrary, the theory of
intergovernmentalism contradicts with the regional integration theory of neo-functionalism.
Intergovernmentalism gives importance to the institutionalism in the international relation. The
security of the EU economic integration maintained with the help of neo-functionalism.
Furthermore, constructivism theory deals with the international relation. The external affairs of
the EU member countries also runs with the help of neo-functionalism. Therefore, the theory of
neo-functionalism helps to assess the economic policy of the EU.

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