European Union

1. European Union By Flora Wang Travis Pierce

2. European Union The most integrated economy today Founded upon numerous treaties and has undergone several expansions Grow from 6 member states to 27 Generates 30% of the nominal gross world product 16/27 member states use the same currency – the euro

3. History of Formation • 1951 – Treaty of Paris forms the European Coal and Steel Community (ECSC) • Regulate European industry & improve commerce, after WWII • Six founding states: Belgium Italy France Luxembourg Germany Netherlands

4. History of Formation contd. • 1957 – Treaty of Rome forms: • The European Economic Community (EEC) • The European Atomic Energy Community • Common Market • Abolition of internal tariff barriers was achieved in 1968 • Original six founding members • Worked concurrently with ECSC

5. History of Formation contd. • Enlargement Acceded • 1973: United Kingdom, Denmark, and Ireland • 1981: Greece • 1986: Spain and Portugal

6. History of Formation contd. • Enlargement Did Not Accede • 1973: Norway applied & accepted • Government lost on national referendum • 1987: Morocco and Turkey applied • Morocco – turned down – not considered European • Turkey – accepted • Received candidate status in 2000 • Began officially membership negotiations in 2004

7. History of Formation contd. • 1992 – Maastricht Treaty Signed • 1993 – European Union (EU) formed out of the old EEC • Later Enlargement • 1995 – Finland, Sweden, and Austria • 2004 – Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia • 2007 – Romania and Bulgaria

8. EU in Economic Integration • Preferential Trading Area • Free Trade Area • Customs Union • Common Market European Union • Economic and Monetary Union • Complete Economic Integration

9. Euro • Eurozone – currency union of 16 EU states • Adopted the euro as the sole legal tender Austria France Italy Portugal Belgium Germany Luxembourg Slovakia Cyprus Greece Malta Slovenia Finland Ireland Netherlands Spain

10. Euro contd. • Euro used in other countries • With Formal Agreement • Use euro as official currency and mint coins • Monaco • San Marino • Vatican • Without Formal Agreement • Andorra • Montenegro • Kosovo

11. European Central Bank Responsible for monetary policy covering the 16 member states of the Eurozone No common representation, governance, or fiscal policy for the currency union

12. European Central Bank contd. • Only one primary objective • Maintain price stability within the Eurozone • (inflation of below, but close to 2%) • Exclusive right to authorize the issuance of euro banknotes • Member States can issue euro coins but the amount must be authorized by ECB

13. European Central Bank contd. • Key tasks • Define & implement the monetary policy • Conduct foreign exchange operations • Take care of the foreign reserves of the European System of Central Banks • Promote smooth operation of the money market infrastructure

14. Who Runs the European Union • The EU is run by the European Commission • The European commission is responsible for: • proposing legislation, • implementing decisions, • upholding the Union’s treaties • and the general day-to-day running of the Union.

15. Who Runs the European Commission • The president of the European Commission is José Manuel Barroso • The commission has 27 Commissioners, one for each member state • President Barroso is one of the 27 commissioners and started his term in 2004 and is serving a five year term

16. The State of EU Commission President José Manuel Barroso has outlined ways for the EU to survive the economic crisis. “Today we are asking EU leaders to agree on a comprehensive action plan. To do everything possible to protect our citizens from unemployment. To clean up financial markets on the basis of the de Larosière Report. And to pave the way for Europe to lead by example and by persuasion as we approach the G20 summit in London."

17. The Banking System • The commission has urged the European banks to restore confidence to promote lending to start flowing again • One of the major recommendations is to have the banks remove the impaired assists from the banks balance sheets

18. Financial regulation and supervision • the key principles are set by the de Larosière Group • The Larosiere Group is run by Jacques De Larosiere, who is the Chairman of the High Level Group on cross – boarder financial supervision • They would be responsible for the regulation of the EU’s financial regulation and supervision • bring forward initiatives already in the pipeline on hedge funds, private equity and remuneration structures • Outline new supervisory framework and on issues including: liquidity risk and excessive leverage; further reinforcing protection for depositors and policy holders; and effective sanctions against wrongdoing

19. The Real Economy • Expect an overall GDP of 3.3% for the 2009 – 2010 period • This is attributed to the European Recovery Plan • The goal is to build on a low carbon economy and with returning to sustainable public finances as soon as possible. • The EU has targeted an investment of €5 billion euros in energy interconnections and broadband.

20. Employment • The Unemployment rate is estimated to be 10% by 2010 • Member states should implement measures such as financial support for temporary working-time arrangements, boosting income support for unemployed people, lowering non-wage costs for employers and boosting investment in skills and retraining. • rapid approval of its proposal of €1.8 billion in advance payments under the European Social Fund is needed

21. Promoting global recovery • The EU should make a united push to focus on: • better transparency and accountability; appropriate regulation of all financial actors • tackling difficulties caused by uncooperative jurisdictions • boosting international supervisory cooperation; and reforming the IMF, Financial Stability Forum and World Bank.

22. Concerns • The EU has failed to consolidate and strengthen its political union • They also have not taken adequate action to alleviate the “democratic deficit” • The EU has grown to fast and has not updated its decision-making structure • There is no constitution which makes even simple decisions tough

23. Cont • The economic union has intensified and they have become enormously integrated with one another • The EU has created a single market but in the process of creating this single market they did not create a governing system to regulate the market • Because of the current economic situation this has become a glaring weakness

24. Cont • Many believe the biggest problem is that the citizens in the EU don’t understand the importance of the EU and don’t care much about what the EU is doing • Public support in many countries has soured and given way to people supporting there own countries and not the Union • This has lead to some countries citizens to call for protectionism for there goods and services

25. Gideon Rachman • A British EU skeptic who in 2001 warned of potential problems with the growth of the EU: • He believed people would be more loyal to their home lands then the Union in times of turmoil • He believed in a crisis, nationalist instincts would come to the forefront • He also expected the euro could run into trouble

26. Rachman • Many of Rachman’s insights are coming true • The strain of the economic crisis has opened up divisions with in the union thus causing the EU to call an emergency meeting to combat protectionism • Several new members of the union are facing banking crisis and old members of the union have refused to bail them out

27. Fears • The fear is that all of the unrest will cause the union to start rolling back the four freedoms already established by the EU: • Free movement of goods: • People • Services • Capital • Many fear that a restriction in any of these freedoms would cause panic amongst the EU members thus creating a more unsettled economic situation

28. Cont. • The fears of the EU collapsing are legitimate but not likely • The EU still provides a free and peaceful way of life • It also offers “the right to live and work anywhere in Europe; the right to make a business deal without the government stopping you; the right to hop on a train to Paris or a plane to Madrid with out being hassled at immigration” (Rachman)

29. Conclusion • It is up to the European Commission to hold the Union together • The EU will have to fight off the panic of the more established nations who will fight for protectionism and nationalism to gain favor with their citizens • If they can do this the EU stands a good chance to survive and learn from its past misgivings

30. Resources • http://europa.eu/rapid/pressReleasesAction.do?reference=IP/09/351&format=HTML&aged=0&language=EN&guiLanguage=en • http://ec.europa.eu/publications/booklets/eu_glance/66/en.pdf • http://en.wikipedia.org/wiki/European_Commission • http://en.wikipedia.org/wiki/European_Union • http://en.wikipedia.org/wiki/Enlargement_of_the_European_Union • http://en.wikipedia.org/wiki/Eurozone • http://en.wikipedia.org/wiki/European_Central_Bank • http://www.epp-ed.eu/Press/showpr.asp?PRControlDocTypeID=1&PRControlID=8349&PRContentID=14494&PRContentLG=en • http://www.huffingtonpost.com/max-bergmann/the-eus-political-deficit_b_171959.html • http://www.ft.com/cms/s/0/ca981568-075b-11de-9294-000077b07658.html