European Economic Centre Content •A. History of the European integration •B. European institutions •C. EMU - EURO •D. Selected problems of the EU History of the european integration A. History of the integration •old idea •1929 Briand plan Pan European Union •real forms after WW2 - reasons: • USA • fight against own nationalism and political disputes (X war) … the biggest success • X USSR • economic – larger markets = •mass production -> economies of scale •deeper specialization •increasing competitive pressure History – ECSC •European Coal and Steel Community - 1951 •based on Schuman plan (1950) • to integrate Eur mining companies under one supranational authority •goal – common coal and steel market •signatories - FR, DE, IT, NL, BE and LU •reasons: • coal and steel inevitable for military prodcution ð mutual control (to control DE) • concretely - control of the Ruhr area •FR dependent on coal from Ruhr area •1870 – 1945 3x abused for military purposes [USEMAP] • History – Treates of Rome •1957 • establishment of European Economic Community (EEC) and European Atomic Energy Community (EAEC or EURATOM) • ð existence of three individual org ECSC, EEC and EURATOM •common market • elimination of tariff barriers and quantitative restrictions on EX and IM •X FR •ð concessions FR – list of problem commodities + trade with colonies •common external tariff policy •elimination of barriers to free movement of persons History – 1960s l1960 European Free Trade Association (EFTA) • counterweight to EEC • signatories: DK, NO, PT, AT, SE, CH and GB • •1961 GB attempt to join EEC • reasons: •decolonization •USA •balancing power • 1963 officially rejected (de Gaulle) History – 1960s and 1970s •1963 treaty between France and Germany • “axis of cooperation“ •1967 Merger Treaty EEC, ECSC and EUROATOM è EC • + customs union since 1.6.1968 •1972 FTA - EC with FI, ISL, PT, AT, SE and CH •1973 admission of GB, IE, DK – Norway NOT •in 1970s Lomé Conventions • EC elimination of barriers on IM from former colonies [USEMAP] GDP p.c. in the Eurozone as % of GDP p.c. in the USA (according to the purchasing power parity) Source: Deppler, Beyond Integration, 2004 [USEMAP] History – 1980s •1981 Greece •1986 Spain and Portugal •1995 Austria, Finland and Sweden • in Norway accession rejected in referendum • •BUT slow integration process inside EC during 1970s and 1980s = eurosclerosis • inability to reach consensus due to different opinions of member states ð … History – Single European Act •in 1970s stagflation + eurosclerosis •+ beginning of 1980s ð deregulation in USA (Reagan) and GB (Thatcher) • attempt to create better functioning markets + to stimulate competition • ð Europe under pressure to follow them ð initiative to create a single market History •1987 Single European Act •goals = to eliminate remaining barriers of common market • material barriers at borders • differences in technical norms • differences in tax rates • ð deadline for establishing a common European market (31.12.1992) •+ to strengthen institutions •+ extension of interventions to new areas •+ greater cooperation in foreign policy History – Maastricht Treaty •officially „Treaty on European Union“ •reaction on German reunification ??? •approved in December 1991 BUT ratification •DENMARK, … •main points: • agreement on establishing a monetary union • granting right to accession to EU • common social policy • changes in the European institutions History - AGENDA 2000 •adopted in 1995 •political priorities for 1996 – 2000 •content: • adoption of common currency • to prepare and to commence negotiations with associated countries •transformation of EU – reform of voting + institutional changes, etc. History – Amsterdam Treaty •1997 ð ratification ð in force since 1.5.1999 •new treaty on EU- Maastricht II. •goals: •a. to eliminate remaining barriers to free movement inside of the EU ð important part - Schengen Agreement •b. employment and civil rights •c. stronger Eur in international relations – to strengthen military structure •d. institutional changes ð more effective structure of the EU– to strengthen EP, clause of flexibility, … Lisbon Strategy 2000 •attempt to liberalize – Summit in Lisbon 2000 •goal: „until 2010 the most dynamic and competitive economy“ •electricity market, post offices, … • slow implementation •2005 officially abandoned b/c unrealistic goals Further enlargement •2004 10 countries at the same time • Czech Republic, Hungary, Poland, Slovakia, Slovenia, Latvia, Lithuania, Estonia, Cyprus and Malta •2007 Bulgaria and Romania •2013 Croatia •further countries: Turkey, Ukraine, …? •… need of institutional changes – Lisbon Treaty Copenhagen Criteria •1993 – European Council = criteria for joining the EU: • political = democracy + rule of law+ protection of minorities + respect for human rights • economic = functioning market economy • other = adherence to aims of political, economic and monetary union + adopting of acquis communautaire = > 80 000 pages of laws • ð screening = comparison of legal systems GDP p.c. at current market prices, 2003 and 2013 (EU-28 = 100; based on PPS per inhabitant) Source: http://ec.europa.eu/eurostat/statistics-explained/index.php/National_accounts_and_GDP, 2016 For more results see: http://ec.europa.eu/COMMFrontOffice/PublicOpinion/index.cfm/Chart/getChart/themeKy/3/groupKy/3 European institutions B. EU Institutions •European Council •Council of the European Union •European Parliament •European Commission •European Court of Auditors (ECA) •European Investment Bank (EIB) •European Central Bank (ECB) • European Economic and Social Committee (EESC) •Court of Justice of the European Union (CJEU) • •enough to know their main tasks – e.g. which one is the main executive body + chairman of the EU Commission •see e.g.: http://europa.eu/about-eu/institutions-bodies/ EMU - EURO • C. Monetary Union •1970 Werner Report = 1st project of monetary union •after the collapse of Bretton-Woods system – effort to increase stability è EMS •… •the most important part of the Maastricht Treaty = European Monetary Union EMU - Stages •I. stage: 1990 – end of 1993 • elimination of barriers in free movement of capital •II. stage: from 1994 to 1998 • establishment of European Monetary Institute • convergence criteria •III. stage: since 1999 • introduction of single currency • to fix exchange rates • European system of Central Banks •IV. stage: since 1.1.2002 – physical money Single currency - Advantages • + elimination of exchange rate risks • + CBs not forced to hold foreign currency reserves • + no fluctuations of exchange rates • + end of speculations with national currencies • + lower inflation • + strong EURO = world reserve currency • + euro + common market ð ñ competition ðñeffectivity Single currency - Disadvantages •- impossibility to use exchange rate as a tool of EP -different phases of business cycle •- ECB´s behaviour ? •- SR costs •- very difficult return to national currency Convergence criteria •aim of quality currency è criteria for adoption of euro: • government deficit < 3% GDP • national debt < 60% HDP • inflation < average of 3 lowest + 1,5% • LR interest rates higher by max. 2% then the average of 3 lowest •stability of exchange rates ±15% and 2 years without devaluation •Stability and Growth Pact • = sanctions for non-fulfilment of budget deficit criterion • ð limits on the use of fiscal policy • reforms in 2005 Convergence Criteria •problems with fulfillment – all countries except LU •May 1998 – finally 11 countries •1st round not joined by: •GB – against –> no formal membership in EMS •Sweden – more or less against -> no membership in EMS •Denmark - against •Greece – did not fulfill the criteria •2000 Greece – criteria fulfilled ð euro since 2001 •2007 Slovenia •2008 Malta and Cyprus •2009 Slovakia •DÁN unsuccessful referendum • economically disadvantageous (r > than in Euro Zone) • ð referendums in SE and GB postponed •2011 Estonia •2014 Latvia Public support of monetary union in July 1997 -80 -60 -40 -20 0 20 40 60 80 -50 -40 -30 -20 -10 0 10 20 30 40 50 60 Against For Difference Results •exchange rate to $ • initially •performance of EU x USA economy •flexibility of US economy •ð high confidence in $ • last years •trade deficits of USA •$ still the primary reserve currency • Selected problems of the EU • D. The most serious problems of the EU a.lagging behind in economic performance b.unemployment c.Common agricultural policy d.financing e.internal disputes f.liberalization - reform a. lagging behind in economic performance •low labour productivity X USA •low economic growth X USA – see figure Source: Ševčík, Ševčíková, Lisabonská strategie, 2005; poslední období poslední období - IMF: World Economic Outlook Database, http://www.imf.org/external/pubs/ft/weo/2009/03/data/index.aspx (9. 3. 2009) • GDP p.c. in the Eurozone as % of GDP p.c. in the USA (according to the purchasing power parity) Source: Deppler, Beyond Integration, 2004 b. unemployment •permanent and serious problem •mainly internal causes: • regulation • social conveniences • high dismissal costs • high taxes è INV to abroad • high costs on social insurance • high benefits provided by social security system •+ e.g. attempt to decrease working hours, … •improvement in recent years • deregulation of economy • liberalization of labour markets • institutionally – summit in Lisbon • •BUT unemployment rate over a long period 8% in EU X 5% in USA •Dec. 2015: 9% U in EU • Unemployment rate in the USA and the EU, 1988 - 2008 (%) Source: Economic Report of the President 2007, 2007, IMF: World Economic Outlook Database, http://www.imf.org/external/pubs/ft/weo/2008/02/data/index.aspx (15. 3. 2009) Long-term unemployment Unemployment rates by duration in 2014 (%) c. agricultural policy •Common Agricultural Policy = CAP •50% of EU expenditures •benefits for agriculture higher then somewhere else •problems already at the time od introduction •different agricultural policies – finally the FR model •+ problems in GATT negotiations and still problems with WTO + problems with DC Goals of CAP •already in Treaties of Rome •a. to increase productivity in agriculture •b. fair living standard for farmers •c. to stabilize market with agricultural commodities •d. measures for food security •e. to secure food supply at acceptable prices contradictory CAP policies •intervention prices and buy-ups •tariffs •export subsidies •production quotas Arguments in favour of CAP •arguments for CAP: • at the origin X repeat of war famine • to maintain nature of country and cultural heritage • ecological INV • X monopolization of agriculture • X loss of jobs Arguments against CAP •reality: • empirically • support of large and effective X small •support of chemistry X ecology • huge overproduction è wastage • “mistakes“ in financing • inefficiency • higher taxes • high prices (impossibility to purchase cheap IM) Sugar in EU •pruducers in EU get 4x world price ð surplus of 4000000 tons ð surpluses are exported to world markets and subsidized by 1 mld € - which comes to small group of producers ð Europe is the world’s second largest producer of sugar without having comparative advantage in the area ð ò world price about 1/3 ð loss for developing countries Why? What next? •very powerful agricultural lobby •BUT: •Uruguay Round of GATT •2001 agriculture as part of next round of negotiations of WTO in Doha (Qatar) •enlargement – new countries (Poland) •big losses – estimates around 1 - 7% of GDP EU Need of reforms d. financing •permanent problem •side of revenues • contributions = secret information • revenues unequally distributed •GB •Germany •side of expenditures • large part – agriculture and structural funds • accession of new members e. internal disputes •partial disputes • British beef • definition of chocolate •access to WTO negotiations •conceptual • ever closer Union (FR …) • X two-speed Europe (GB, DE, …) •disputes in international policy •e.g. relation to China… f. liberalization - reform •Summit in Lisbon 2000 •+ need of reforms • financing • CAP • market with services Good bye!