European Union

Question 1

Institutions

Answer 1

European Parliament
Council of EU Ministers
European Commission
Court of Justice
Court of Auditors

Question 2

Advantages of EU Integration

Answer 2

Trade creation among member countries
Economies of Scale with access to larger markets
Reduced import prices
Improvements brought about by increased competition

Question 3

The Maastricht Treaty

Answer 3

Common foreign defence policy
Established economic and monetary union to create a single currency
Grant citizens right to live and work within EC

Question 4

Implications to Non-Members

Answer 4

• Fortress Europe
• -Non-EU companies are worried that EU regulations will favour european firms and may impose unfavourable terms to non-EU countries who wanna do business in EU.
• Opportunities of larger market, reduced trade tariffs, greater labour and capital mobility for companies operating in Europe
• Abide to rules of EU (exporting firms)
• Adjust corporate strategies to compete more effectively
• MNC treat EU as 1 marketplace

Question 5

Euro

Answer 5

Official currency of 17/27 EU member states

Question 6

Rules for adopting Euro

Answer 6

• Price stability, measured by consumer price inflation rate
• Sound public finances, measured by government deficit as % of GDP
• Sustainable public finances, measured by government debt as % of GDP
• Durability of convergence, measured by long term interest rates
• Exchange rate stability, measured by deviation from a central rate

Question 7

Benefits of Euro

Answer 7

• Elimination of exchange rate fluctuations
• Elimination of various transaction costs and exchange rate
• Price transparency
• Broader and more efficient financial market
• Practical benefits for citizens
• Saves effort in collections and credit management

Question 8

Concerns & Risk of Euro

Answer 8

• Elimination of foreign exchange activity will have negative impact on most European banks
• European stability will be key determinant of success of EMU

Question 9

Impact of Euro on Asia

Answer 9

• Euro could erode the region’s heavy reliance on US dollar and become the new global trade currency.
• Stiffer competition in the long run if Europe grows to be more productive.
• If Euro gains strength, Asian companies may move away from Western to Eastern europe in search for lower labour and production costs.

Question 10

Impact of Euro on Asia (2)

Answer 10

• In finance, Europe becomes more attractive destination for portfolio investment.
• Possibility of doing more business in Europe to enjoy economy of scale.
• Treat EU as one marketplace.