European Community (EC)

Definition

The European Community (EC) refers to a former organization established by the Treaty of Rome in 1957 to promote economic integration and democratic principles among member states. It was the first pillar of the European Union (EU), focusing primarily on economic policy. In 2009, the EC was absorbed into the EU and ceased to exist as a separate entity.

Phonetic

The phonetics of “European Community (EC)” are:European: /jʊəˈrəʊpi:ən/ or “yoor-oh-pee-uhn”Community: /kəˈmju:nɪti/ or “kuh-myoo-ni-tee”EC: /ˈi: ˈsi:/ or “ee see”

Key Takeaways

Establishment: The European Community was established to promote peace, prosperity, and stability after World War II, laying the foundation for a unified Europe. It was initially formed by six countries under the Treaties of Rome in 1957 and over time expanded its membership to include 28 countries by 2013.
Single Market and Currency: The EC established the Single Market, which allowed free movement of goods, services, people and capital among member states, boosting trade and economic growth. Moreover, it introduced a single currency, the Euro, used by 19 of the 28 countries, facilitating seamless financial transactions across these nations.
European Integration and Governance: The EC was a major step towards deeper integration among European countries. It created a system of supranational governance, with institutions like the European Commission, European Parliament, and the Court of Justice of the EU, influencing laws and policies in a wide range of areas, from environment and health to foreign policy and security.

Importance

The European Community (EC) is a significant term in business and finance due to its influence on economic interaction among European nations. As one of the three pillars of the European Union (EU), it set the foundation for the creation of a single market across its member countries, facilitating the free movement of goods, services, capital, and people. This allowed easier trade and financial activities among member nations, thereby promoting economic growth and development. Additionally, the standardized set of rules and regulations established by the EC also ensured fair competition and provided a stable business environment. Hence, understanding the concept of the EC is crucial for business and finance leaders operating or looking to expand in European markets.

Explanation

The European Community (EC) was primarily established to encourage peace, prosperity, and stability throughout Europe by integrating its national economies. Its purpose was vital in the post-war era to prevent further conflict and foster economic interdependence among European nations. With a unified market for trade and a system for creating collective regulations, the EC functioned to reduce trade barriers such as tariffs and quotas, ensuring free movement of goods, services, capital, and labour. This led to economic cooperation and growth, creating an environment of increased competition, lower prices, and wider ranges of selection for consumers across the member states.Additionally, the EC was used as an instrument to harmonize national policies and laws related to several areas such as agriculture, fisheries, and regional development which would contribute to its competitiveness on the global market scale. It was also a path towards a common currency, the euro, with the establishment of European Monetary Union. Centralized decision-making institutions were created to govern these shared policies and laws, thus further fostering unity among member states. Therefore, the EC proved instrumental in shaping modern Europe, spreading shared values, ensuring economic stability and prosperity, and enhancing Europe’s influence on the global stage.

Examples

1. Single Market: Established by the EC, the Single Market eliminated tariffs among member countries, making the European Union a free-trade zone. This initiative encourages cross-country business partnerships and activities. One example is a French company importing German machinery without paying additional tariffs. 2. Common Agricultural Policy (CAP): This is one of the EC’s most significant policy areas. The CAP, implemented to support farmers in member states, ensures a stabilizing supply of agricultural products throughout the EU. An example is the subsidies received by an Italian olive farmer which level the competition with farmers from other member countries who may have lower production costs.3. The Euro: The EC was a precursor to the European Union, which later established the Economic and Monetary Union and introduced a common currency, the Euro, in 1999. An example of this is a Spanish business that no longer needed to deal with currency conversion costs in conducting business with other Eurozone countries, reducing transaction costs and financial uncertainties.

Frequently Asked Questions(FAQ)

What is the European Community (EC)?

The European Community (EC) was an economic association formed by six European countries in 1957, setting the groundwork for the formation of the contemporary European Union. It was established with the goal of creating a common economic market in Europe and developing common policies.

Who were the founding members of the European Community (EC)?

The European Community was originally formed by six nations: Belgium, Germany, France, Italy, Luxembourg, and the Netherlands.

When was the European Community (EC) established?

The EC was established on January 1, 1958, following the Treaty of Rome that was signed in 1957.

What were the main objectives of the EC?

The main objectives of the European Community were to establish a common market, a custom union, and policies for agriculture, transport, and trade among its members with the intention of promoting economic integration.

How did the European Community (EC) evolve into the European Union (EU)?

The Maastricht Treaty, signed in 1992, modified the EC structure and resulted in the creation of the European Union, encompassing more policy areas, such as foreign and security policy and justice and home affairs.

What are the main differences between the European Community (EC) and the European Union (EU)?

While the EC primarily focused on economic integration through the establishment of a common market and a customs union, the EU expanded its scope to include policy areas such as judicial cooperation, common foreign and security policy, and the establishment of a single currency, the Euro.

Was the EC successful in achieving economic integration among its member states?

Yes, the EC was successful in eliminating trade barriers and creating a single economic market among its members, creating a highly integrated European economy.

Is the EC still in existence today?

The EC is no longer a separate entity. It was incorporated into the European Union (EU) framework in 2009 with the Treaty of Lisbon. The EU continues to pursue the goals of economic integration as laid out by the EC.

Related Finance Terms

European Economic Community (EEC)
Maastricht Treaty
Common Agricultural Policy (CAP)
Single European Act
European Union (EU)

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