Download EU is an intergovernmental and supranational

International Economic Organizations
Professor Moon Hiwhoa
European Union (EU)
Siyuan Chen
Rie Domon
Martina Olund
Joe Phillips
Kensie Kim
Sul Woojung
2006. 05. 24
Overview of European Union
• EU is an intergovernmental and supranational institution with
25 democratic member states on the European continent.
• Since 1952, EU has grown from 6 to 25 members. Founding
members: Belgium, Germany, France, Italy, Luxembourg, and
the Netherlands.
-1981:
-1986:
-1995:
-2004:
Greece
Spain and Portugal
Austria, Finland, and Sweden
Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary,
Malta, Poland, Slovakia, and Slovenia
-2007: Romania and Bulgaria ???
Overview Cont.
• Europe day : 9th May
• Europe motto : United in Diversity
• Europe flag :
EU Objective
• The overall objective is economic integration that
generates jobs and sustainable growth.
Customs Union, 1968
Single market, 19861992
Economic
Integration
Economic and Monetary
Union, 1990-99
The Euro
• The currency for 12 EU countries.
• Maastricht criteria.
• Efficient and convenient trade and travel.
• Reserve currency.
Governing Institutions
Council of Ministers
• EU laws and budget
• Presidency shifts between members every six month
• Secretary General – Javier Solana, Spain
The European Parliament
• The world’s only international elected assembly, 732 representatives
• Monitors the Commission and decides on EU laws and budget
• President – Josep Borrell Fontelies, Spain
European Commission
• Largest EU institution, 25 commissioners
• Propose and implement new law
• President – José Manuel Barroso, Portugal
Economic Institutions
The European Central Bank (ECB)
• EU’s monetary policy including the Euro
• Primary role pruchasing power of the Euro and price stability (2%)
• Set interest rates
• President – Jean-Claude Trichet, France
The European Investment Bank (EIB)
• Financing capital investments for Europe’s economic integration
• EU states provide the capital
• President – Philippe Maystadt, Belgium
The European Investment Fund (EIF)
• Provides capital and guarantees for the development of SME’s within the
EU and candidate countries
Priority Issues
EU Objectives
As outlined in Article 2 of Treaty on
European Union
High level of employment.
Sustainable and non-inflationary growth.
Lisbon Strategy
Refocused agenda March 2004  “Growth and
Jobs”
•
Targets:
• overall employment rate of 70% by 2010
• employment rate for women of over 60%
• employment rate of 50% among older workers
• annual economic growth of around 3%
Growth & Jobs Methodology
• an effective internal market
• free & fair trade
• better regulation
• improvement in European infrastructure
• investment in R&D
• more innovation
• a strong industrial base
• more and better jobs
• an adaptable workforce
• better education and skills
Sustainable Development
Overarching concept of EU.
In tandem with Lisbon Strategy and all EU policies.
Key challenges (2005)
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climate change and clean energy
public health threats
social exclusion
demography and migration
management of natural resources
sustainable transport
global poverty and development
ECB objectives
Primary objective: to maintain price stability.
Other objectives:
•
•
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Setting benchmark interest rate
Managing the Euro area’s foreign exchange reserves
Ensuring smooth movement of payments across all EU border (as opposed
to only within the Euro area)
•
Managing TARGET (the real-time network for large payments transactions,
to help the financial markets work efficiently)
Single Euro Payment Area 2010
SEPA: system where all forms of cross-border
Euro payments charged only as much as
domestic payments  cross-border payments
and transfers become faster, cheaper, more
efficient.
ie. previous limit for credit transfers treated like
domestic payments €12,500 expanded to
€50,000 on January 1, 2006.
Evaluation of the Euro
From its first stage, the euro has been criticized
that the unified currency would bring the structural
problem.
Because the EU has composed of nation states
which have different economic, social and
political systems.
The current concerns
The unitary financial policies are determined by
the European Central Bank.
1. each country can not introduce the active economic policies which
meet its domestic economic or social systems.
2. High social standards has prevented those nations from developing
c.f. the backward nations have got more benefits rather than the
advanced nations.
3. Inflation and deflation are occurred at the same time.
The EU’s Common Agricultural policies
The initial objectives of the CAP :
1. Providing farmers with a reasonable standard of living.
2. Consumers with safe and quality food at fair prices.
3 Making a unified-stable market.
4. Increasing productivities in the member countries.
The CAP’s three principle mechanisms
Import tariffs towards non-member’s countries.
Internal intervention price.
Agricultural subsidies.
Criticism of the CAP’s policies
Artificially high food prices
Disproportionate benefits among EU nations
New members with large agricultural sectors
These results are against the initial aims.
European Central Bank
Conservative Monetary Policy
Article 2 Mandate
(Treaty of European Union)
- Price stability highest priority
Inflation rate = below, but near 2%
European Central Bank
Conservative Monetary Policy
Criticism: “Excessive”
focus on price stability
-Exclusion of growth and
employment considerations.
Economic growth =
approximately 2% a year
- Relatively high unemployment = above 8%
European Central Bank
Conservative Monetary Policy
Single central bank = appropriate monetary policy
for increasingly varied region?
• More developed members need monetary stimulus.
• Others have property “bubbles”.
• Less developed members combating inflation.
• Expansion increasing economic variance.
European Central Bank
Independence
• No direction from EU governing
bodies or member governments.
• Governors five year terms.
• Executive board members 8-year
terms (non-renewable).
• Capital from the euro area banks.
European Central Bank
Independence
Accountability to a democratic society?
- Connected to human rights/environment?
ECB secretive?
- Internal meetings not public.
- Comments on proposed decisions not invited, not published.
- No direct citizen comments after decisions and actions.
Service Directive
Movement of Labor
Service = 60%-70% of EU’s economy
- 60% of jobs
EU commission proposed the service directive
- Open trade in service economy.
- “Country of origin” rule = Service providers temporarily
operate in other markets under laws of provider’s home country.
- Must justify all regulations: necessary, proportional and
nondiscriminatory.
Service Directive
Movement of Labor
Opposition
- Weaken individual state protections.
- “Race to the bottom”.
-Companies relocate to lower cost,
less regulated eastern European members.
Service Directive
Movement of Labor
Final version = some liberalism
-“Economic needs” tests eliminated.
•
Foreign providers not required to prove would not destabilize local economy.
- Business: no particular legal form.
- Business: no particular language.
-Complete formalities for cross-border business on- line/single
contact point.
- Authorization schemes = transparent and clear.
Service Directive
Movement of Labor
Final version = some liberalism removed
- “Country of origin” principle removed.
•
Host countries can impose requirements on foreign firms to protect public
policy, security, health, environment and to enforce rules for employment
conditions.
• European Court of Justice will develop the field.
-Excludes temporary work agencies, healthcare, taxation,
security and social services relating to housing, childcare and
support for families.
Service Directive
Movement of Labor
Portent of future?
Britain: may not open its labor market to
Bulgarian/Romanian worker.
- Poll: 76% of British = must be annual limit on immigrants.
Czech Republic: might restrict access by
Bulgarian and Romanian workers.
Service Directive
Movement of Labor
• Barriers fully maintained: Austria, Germany.
• Subject to restrictions: Czech Republic, Estonia, Hungary, Latvia,
Lithuania, Poland, Slovakia and Slovenia.
• Barriers lifted: Finland, Greece, Ireland, Portugal, Spain, Sweden
and UK
“Economic Patriotism”
Movement of Capital
EU’s goal = few or no barriers to investment.
Utility industries
- Direct competition difficult.
- So, competition through takeovers.
- But, “Patriotic investment” inhibiting capital’s flow?
“Economic Patriotism”
Movement of Capital
French government
- Right to veto cross-border deals in “strategic sectors”.
- Permitted merger between two French utilities = Discouraged
takeover by Italian company.
- Allowed French companies to repel takeovers by diluting capital.
- Opposed Netherlands-based Mittal Steel’s takeover of
Luxembourg’s Arcelor.
“Economic Patriotism”
Movement of Capital
Spain
- Laws protect national electricity champion, Endesa
Britain
- Considering changing merger law.
- Prevent takeover of major gas supplier, Centrica, by the Russian
state gas monopoly, Gazprom
• Gazprom threatened to shift gas supplies.
“Economic Patriotism”
Movement of Capital
Austria
-Austrian region prevented takeover of regional bank by Ukrainian
consortium.
Poland
- Blocked takeover of local bank by Italy’s UniCredit.
“Economic Patriotism”
Movement of Capital
Finance minister Kari-Heinz Grasser of Austria:
- “Continuing protectionism is one of the reasons for the
current levels of unemployment in our countries”
Conclusion
EU: Path & Obstacles to Integration
Unprecedented – Unequaled economic integration.
Bore peace and prosperity.
Integration reaching limits?
Union fracturing?
Thank you !