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EUROPEAN ECONOMY

Dr. Marielle GOTO

CONTENTS
Part I- European Union basics Part II- European monetary Policy

Part III- Policy mix


Part IV- Enlargement

Part V- European policies and firms


Part VI-Presentations
Dr. Marielle GOTO

PART I- EUROPEAN UNION BASICS

Dr. Marielle GOTO

Contents
I. A quick glance at the European Union
II. Historical steps of the European integration III. European Institutions IV. European economic outlook
Dr. Marielle GOTO

I. A QUICK GLANCE AT THE EUROPEAN UNION


Continuing evolving process of integration and enlargement since the 1950s
27 different countries at the moment (GDP, size, language, mainland, outermost regions) Analysis of the economic strengthes and weaknesses of the European Union A complex and ongoing process
Dr. Marielle GOTO

European Union Countries

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Some figures
500 million inhabitants 4.2 million km (9.6 for China and the United States) At the moment 27 countries First GDP in the world (a quarter of it); 40% of the world trade

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How rich is the EU compared to the rest of the world?


38 700

27 800 25 100

12 508

9819 4 400 3 329 1 326 468


Japan Russia United States EU China Japan

12 200

EU

China

Russia

United States

Size of economy: 2008 gross domestic product in billion of euros

Wealth per person: 2008 gross domestic product per person

271

Luxembourg 137 Ireland Netherlands Austria Sweden Denmark United Kingdom Germany Finland Belgium France Spain Italy EU-27 Cyprus 101 100 135 123 122 118 117 116 115 114 107 103

95 94 91

Greece
Slovenia Czech Republic Malta Portugal Slovakia Estonia Hungary

2008 GDP per inhabitant

80 76 76

Index where the average of the 27 EU-countries is 100

72 68 63

61 58

Lithuania
Poland Latvia 46 40 Romania Bulgaria

GDP per inhabitant: the spread of wealth

56

GDP per Capita

Source: Eurostat

Source: Eurostat
Dr. Marielle GOTO

60 years of history

II-Historical steps of the European integration

A deepening integration
Complex and eventful process Important enlargement (a fourfold rise in the number of member countries in 60 years)

Dr. Marielle GOTO

1950

Speech of Robert SCHUMAN based on the ideas of Jean Monnet Proposal of a pool of coal and steel sources by France and Germany

1951

Signature of the treaty establishing the European Coal and Steel Community (ECSC) by 6 countries: Belgium, the Federal Republic of Germany, France, Italy, Luxembourg and the Netherlands The same six countries sign the treaties of Rome related to: the European Economic Community(EEC) the European Atomic Energy Community (Euratom) the Stockholm Convention establishes the European Free Trade Association (EFTA) with countries outside the EEC like the United Kingdom, Iceland , Norway, Switzerland Merger of the ECSC, EEC and Euratom Creation of a single Council and a single Commission.

1957

1960

1965

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1968

Establishment of a Common External Tariff (CET) and custom duties, between member countries, are abolished on industrial goods

1973

Denmark, Ireland and United Kingdom join the European communities. It is the first enlargement.

1979

The first direct elections to the 410-seat European Parliament

1981

Greece is the new member of the European Communities

1985

The Schengen Agreement is signed in order to suppress checks at the borders between member states of the European Communities (free movment of persons)
Dr. Marielle GOTO

Spain and Portugal join the European Communities club 1986

The European Single Act is signed in Luxembourg and the Hague


1986 The Treaty on European Union is signed at Maastricht. One of the aim is the creation of an economic and monetary union with a single currency

1992

The single market is implemented

1993

Austria, Finland and Sweden become part of the European Union


1995

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1997

The Amsterdam Treaty is signed

1999

The Euro is adopted by 11 countries and used on their financial markets for non-cash transactions The European Central Bank (ECB) takes charge of the common monetary policy for all th emembers of the European Monetary Union (EMU)

2001

Signature of the Treaty of Nice The aim is to allow enlargement thanks to a change in the decison making process
Euro-notes and coins are implemented in the Euro area. This area comprises 12 countries: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Portugal, Spain and The Netherlands

2002

2004

Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia join the European Union.

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2004

The European Constitution is adopted in Rome but was to be ratified by member states

2005

Rejection of the European Constitutions by voters in France and the Netherlands as a result of referendums

2007

Bulgaria and Romania join the European Union Slovenia adopts the Euro

The Lisbon Treaty (a modifed version of the European Constitution) is signed


2007

2008

Malta and Cyprus adopt the Euro

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2009

Slovakia adopts the Euro

The Lisbon Treaty has been implemented


2009

2011

Estonia has joined the Euro area

Greece has benefited from a financial assistance package of EUR110 billion Measures package of 750 billion to create a safety net with the creation of the European Financial Stability Facility (EFSF), the European Financial Stability Mechanism and May 2010 International Monetary Fund financing

21 July 2011

New rules for the European Financial Stability Facility and new package bailout of 109 billion for Greece with the assistance of the private sector (banks)

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A focus on European treaties

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Main European Treaties


Treaty of Rome(1957): Creation of a common market for goods and services Maastricht Treaty (1992): Creation of an economic and monetary union Implementation of convergence criteria to become a member of the monetary union Amsterdam Treaty (1997) New fiscal criteria commitments added to the convergence criteria Technical treaty that renumbered articles from the EU and the EC treaties
Dr. Marielle GOTO

Treaty of Nice (2003): Preparation of the important enlargements of 2004 and 2007 with mostly countries for the Eastern Europe
Lisbon Treaty (2007): A strengthened role for the European parliament Qualified majority: From 2014 a double majority: a decision is taken by 55% of the Member States representing at least 65% of the Unions population
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The function of President of the European Council is created. This president is elected for 2 and a half years. At the moment, Herman Van Rompuy.

A high representative of the Union for Foreign Affairs and Security function is created. At the moment, Catherine Ashton.

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III. European Institutions


Regulation, recommandations and directives are taken by the European Union institutions The EU institutions rules are modified by the different treaties The three main institutions are the European Council, the European Commission and the European Parliament
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Difference between regulations, directives, decisions, recommendations and opinions


To exercise the Union's competences, the institutions shall adopt regulations, directives, decisions, recommendations and opinions

A regulation shall have general application. It shall be binding in its entirety and directly applicable in all Member States

A directive shall be binding, as to the result to be achieved, upon each Member State to which it is addressed, but shall leave to the national authorities the choice of form and methods A decision shall be binding in its entirety upon those to whom it is addressed
Recommendations and opinions shall have no binding force

Dr. Marielle GOTO

The EU institutions

Institutions

European Council
(Head of States)
European Parliament

(direct election of the members)

Council of Ministers (Council of the European Union) Economic and Social Committee

European Commission (the common interest) Committee of the Regions European Central Bank

Court of Justice

Court of Auditors

European Investment Bank

Agencies

The Council of the European union


Present presidency of the Council of the European Union: Poland
Council of Ministers (Council of the European Union)

The high representative of the Union for Foreign Affairs and Security is the permanent chairperson for the foreign affairs ministers council
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How EU laws are made

How European Laws are established

Citizens, interest groups, experts: discuss, consult

Commission: makes formal proposal

Parliament and Council of Ministers: decide jointly

National or local authorities: implement

Commission and Court of Justice: monitor implementation

IV. European Economic Outlook


Before the crisis Different economic situations Different economic profiles
From 2009 GDP growth rates are not high enough to solve sovereign debt issues Labour market still weak with high unemployment
Dr. Marielle GOTO

The differences among European Union countries


Difference in trade openness
Difference in financial exposure Difference in competitiveness Questions of fiscal sustainability A rise in the countries differences
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European GDP real growth rate 2000-2010 (%)

Source: Eurostat
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INFLATION RATE

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Inflation rate 2010

Source: Eurostat

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Unemployment rate July 2011

Source: Eurostat

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Conclusion
A long, ongoing and complex history of economic integration European integration is mostly a political process Increasing economic differences with the successive enlargements The rules of the monetary integration process are put to the test since the 2008 global crisis
Dr. Marielle GOTO

Additional references
Benassy-Quere A., Coeure B., Jacquet P. and Pisani-Ferry J., 2004, Politique conomique, de boeck El-Agraa A.,2001, The European Union Economics and policies, Financial Times, Prentice Hall Hallwood C.& MacDonald R., 2000, International Money and Finance, Blackwell publishers Henning C., 1998, Systemic conflict and regional monetary integration: the case of Europe , in International organization, vol.52, n3, Cambridge University Press Mongelli F., 2008, European Economic and Monetary integration and the Optimum Currency Area , European Economy n302

Dr. Marielle GOTO

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