PART B Flashcards
Describe the evolution of the EU from 1948 to 2007
1948- Marshall plan: the US offered financial assistance if the countries agreed on joint program
After the World War II - the countries were destroyed from the war and there were serious conflicts between them because there were losers and winners
1950- European community for steal and coal - it was an idea of common market of these 2 types of materials that are high in production and consumption.
1957: Treaty of Rome :European economic community as a custom union = remove all barriers and tariffs between them and they implemented a common external tariff.
Sign from 6: Italy, France, Germany, Belgium,Luxembourg and Netherlands.
Common agricultural policy!
1968: All tariffs removed
1973: First enlargement - UK, Ireland and Denmark joined
1980: Greece
1987: Spain and Portugal
1987: Single market program- free movement of goods, services, workers and capitals
1993: EU sets the Copenhagen criteria for accessing the CEECs
1995: Austria
2004: Cyprus and Malta after the completion of Copenhagen criteria
1992: Maastricht treaty for monetary union by 1999 - single currency by 2002
2007: Lisbon Treaty (reform treaty)
Treaty of Rome (date and what happened?)
Treaty of Rome (1957) : European economic community as a custom union = remove all barriers and tariffs between them and they implemented a common external tariff.
Sign from 6: Italy, France, Germany, Belgium,Luxembourg and Netherlands.
Copenhagen Criteria (when and what are they?)
1993 Copenhagen Criteria = Criteria that all countries must satisfy to become members
1. Political stability that guarantee democracy, human rights, rule of law, respect and protect minorities
2. Functioning market that can be able to handle the competition and the market forces of the Union
3. Acceptance of EU law and the obligations of membership
Maastricht Treaty ( when and what is it?)
1992 - Monetary Union by 1999 and single currency by 2002
Principles:
1. Price stability
2. Central bank independence
Fiscal discipline
The 5 big Institutions in EU and what is doing the each of it
- European Council (highest political level body in EU)
Provide political guidance
All major EU strategic choices made by EU council
No formal role in EU law-making
Take decisions by consensus - Council of European Union
MAIN decision- making body
EVERY piece of legislation is subject to its approval
Responsibilities:
A) pass EU law (jointly with parliament)
B) approves EU budget (jointly with parliament)
C) coordinate the general economic policies of member states
D) pass final judgment on international agreements between the EU and other countries2 main decision making rules
Unanimity
Qualified majority voting - European Commission
Executive Body
Propose legislation
Implements EU policies
Provide surveillance and enforcement of EU law, with coordination with EU court
Represent EU at some international negotiations (WTO)
Commissioners selected by the governments and approved by parliament
Commissioners power most obvious in competition policy
Commission usually has its actions approved from Council and Parliament - EU Parliament
-Sharing legislate powers with the council of Ministers and Commission
-overseeing EU institutions - EU court
European budget and where the moneys goes?
European budget is 1% of EU GDP and coming from:
13% tariffs and custom duties
11% VAT: paid by the consumer
65%: contribution in proportion of countries GDP
11%: other revenues like fines
Money goes:
1/3 sustainable growth and natural resources ( agricultural policies)
1/3 economic, social, territorial cohesion (cohesion policy gives money to region and countries that hanging behind to development)
1/3 research and innovation policy
2% security and citizenship (ERASMUS)
Redistributive policies
Are the policies that they are using the most of the money:
1. Agricultural policy
2. Cohesion policy (Integrate more the different countries of the EU within the system)
3. Research and Innovation policy
Regulatory policies
Vey important for economic perspective because they set the rules of the game, also they are not using a lot of money.
1. Preferential trade agreement
2. Trade policy
3. Competition policy
4. Movement of workers and firms in the EU
Competition policy (2 main ideas + 4 principles)
Individual countries have their own individual purposes, but if we want the EU market to work as one market we need the same rules for competition:
-increase competitors by eliminating barriers between countries
-expand market size in terms of buyers and suppliers
The idea of competition policy is to balance the effect of single market, expanding market size and not giving a lot of power in the firms.
Main principles of the competition policy:
1. Prohibits abuse of markers power by firms that have dominant position
2. No cartels and agreements
3. Regulate mergers and acquisitions
4. No state aid with unfair advantage that distorts competition
Exceptions relate to social policy, natural disaster, economic development aid to regions
European regional policy
Reducing regional inequalities-> reducing disparities (ανισότητες) between the levels of development of various regions and backwardness of the least favored regions
Common Commercial policy
- Trade in services
- Foreign investment development (FDI)
- Aspects of intellectual properties
EURO (principles, benefits of a common currency and costs)
Principles:
1. Price stability
2. Central bank interdependence
3. Fiscal discipline
Benefits of a common currency:
1. Elimination of transaction/ exchange costs
2. Elimination of exchange rates uncertainty
3. Price transparency
4. More trade
5. Better monetary policy
Costs of a common currency:
Diversity in a currency area is costly because a common currency make it impossible to react to each and every local particularity
Criteria for optimum currency area
3 economic:
1. Openness and integration (good prices in countries that are very open to trade. YES
2. Differentiated economy (strong asymmetric shocks are bound to be rare if all countries produce a wide and similar range of goods) YES
3. Labor mobility (movement of people) SO-SO
3 political:
1. Insurance through transfers: NO
2. Homogeneous preferences: ?
3. Solidarity: when a country suffers from serious shock and cannot respond with an exchange rate change, it often in the collective interest of the other countries members to rescue in various ways. ??
Maastricht Treaty - 5 entry conditions
Conditions in entering to EURO
1) Inflation: now exceed by more 1.5% points the average of the 3 lowest rates among EU
2) long term nominal interest rate: not exceed the average interest rate in the 3 lowest inflation countries by more than 2%
3) Fixed exchange rate of their currency at least 2 years
4) Budget deficit: deficit less than 3% of GDP
5) Public debt: debt less than 60% of GDP
Effects of economic integration (aggregation forces and dispersion forces) ; Cohesion policy
Aggregation forces = 1. Market size that will tend to pull firms together because they will move where are the more consumers
2. Economies of scale at industry level, firms will move where they re closer to what they need for example suppliers.
Dispersion Forces = 1. Competition will counterbalance economies of scale, since push down prices and make difficult to sell at different prices than competitors
2. Congestion(συμφόρηση) that the market cost will rise for the industry- rent, land etc.
The dispersion forces they are higher than the aggregation one
