1. European Economic and Monetary Union The Eurosceptic perspective >

2. The EU Economy

3. The Development of the European Economic System 1957: Treaty of Rome, aimed to create a single European market1957: Treaty of Rome, aimed to create a single European market 1968: Creation of a customs union for a single market for goods1968: Creation of a customs union for a single market for goods 1986: Single European Act signed, removing barriers to trade and creating the four economic freedoms of the single market1986: Single European Act signed, removing barriers to trade and creating the four economic freedoms of the single market 1992: Target date for the full completion of the single market (yet is it complete?)1992: Target date for the full completion of the single market (yet is it complete?) 1999: EMU launched1999: EMU launched 2002: Euro notes and coins issued2002: Euro notes and coins issued

4. The Gradient of European Economic Integration 1.The European Single Market. 2.Economic and Monetary Union.

5. 1. A country has full economic and monetary sovereignty. Step 1. The country must lose a degree of economic sovereignty over trade The Progression to the Single Market 2. The country joins a trade bloc or single market, e.g. the EU

6. The Process of Joining the Single Market All countries that join the EU have access to the single market and input into how it is run. Three processes must take place for a country to join the EU: 1.Stabilisation and Association Agreement 2.Application and negotiation. 3.Accession Treaty. Countries in the EEA (Iceland, Liechtenstein and Norway) have access to some aspects of the single market, but have no input into how it is run.

7. Four Fundamental Economic Freedoms: Free movement of: 1.Goods (customs union) 2.People 3.Services 4.Capital How does the EU single market work?

8. The Benefits of the Single Market Increased trade Increased trade Greater consumer choice Greater consumer choice Jobs across Europe Jobs across Europe Economic growth Economic growth Economies of scale Economies of scaleHowever... Price differences still high in Europe. Price differences still high in Europe. Single market in many areas not complete. Single market in many areas not complete. Successes could be down to other factors e.g. Globalisation. Successes could be down to other factors e.g. Globalisation.

9. The Costs of the Single Market Some people have lost jobs as businesses have moved abroad. Some people have lost jobs as businesses have moved abroad. There has been tension over immigration and the free movement of people. There has been tension over immigration and the free movement of people. Some countries have struggled to compete with others which have benefitted more from the single market. Some countries have struggled to compete with others which have benefitted more from the single market.

10. Step 2. To move from being part of a single market to being part of an EMU, further monetary powers must be transferred from the national level to the supranational level 3. The country becomes a member of EMU The Progression to Economic and Monetary Union The Progression to Economic and Monetary Union 2. A country is a member of a trade bloc or single market, e.g. The EU

11. How does a country join EMU? 1. Become a member of the EU 2.Meet the Convergence Criteria 3.Hand control of national monetary policy to the ECB 4.Abide by the Stability and Growth Pact There are currently 17 countries in the Eurozone.

12. How does the European Economic and Monetary Union work? Introduction of EMU saw the ECB take over the monetary powers previously held by national central banks. The ECB: 1.Sets a common interest rate. 2.Controls the growth of the money supply.

13. The Benefits of Being Part of EMU 1.End to exchange rate fluctuations and costs. 2.Same interest rates across EMU encourages investment. 3.Shields weaker countries from domestic political shocks. 4.End of speculation and competitive devaluations.

14. The Costs of Being Part of EMU 1.Loss of devaluation power. 2.Loss of power to control interest rates. It is difficult to assess the pros and cons of being in EMU without looking at how it works in a particular situation.

15. The EMU: a good or bad thing for Europe? 1.Moral Hazard Problem -implicit guarantee. 2.Different microeconomic and macroeconomic policies in different countries. 3.Trade imbalances – some grow at expense of others. Some argue that these problems led to the current Eurozone crisis Bad

16. Bad – Some Evidence Country Trade balance, 1998 (% of GDP) (% of GDP) Trade balance, 2008 (% of GDP) Change Germany-1.36.7+5.4 Spain-2.9-9.7-6.8 Greece-3.6-14.6-11.0 Ireland-0.6-5.2-4.6 Portugal-7.2-12.0-4.8 These statistics suggest that some countries have seen a great increase in their trade deficit since before joining EMU

17. Bad – Some Evidence Country Competitiveness position 2001 Competitiveness position 2011 Change Germany45 Spain2342-19 Greece4383-40 Ireland2229-7 Portugal3146-15 Source: Global Competitiveness Index compiled by the World Economic Forum These statistics suggest that some countries have seen a significant drop in competitiveness since the beginning of the EMU

18. The Eurozone Crisis A number of Eurozone states were particularly badly hit by the global economic downturn which started in 2007.A number of Eurozone states were particularly badly hit by the global economic downturn which started in 2007. Resulting effects included:Resulting effects included: –increasing levels of government debt –unprecedented levels of unemployment –the introduction of significant austerity measures which led to strikes and protests. The crisis has led to financial bailouts for Greece, Ireland and Portugal, with Italy, Spain and Cyprus also falling into dangerous economic territory.The crisis has led to financial bailouts for Greece, Ireland and Portugal, with Italy, Spain and Cyprus also falling into dangerous economic territory.

19. The Eurozone Crisis - Greece 2001: Greece joined the Eurozone2001: Greece joined the Eurozone 2009: budget deficit: 12.7% of GDP2009: budget deficit: 12.7% of GDP 2010: public debt: 142.8% of GDP2010: public debt: 142.8% of GDP 2010: tough austerity measures announced2010: tough austerity measures announced April 2010: credit rating downgraded to just above junk statusApril 2010: credit rating downgraded to just above junk status May 2010: three killed in violent protests during general strikes in AthensMay 2010: three killed in violent protests during general strikes in Athens May 2010: Eurozone leaders agree to a 110 billion bailout for GreeceMay 2010: Eurozone leaders agree to a 110 billion bailout for Greece July 2011: Eurozone leaders agree to a second bailout for Greece, amounting to an additional 109 billionJuly 2011: Eurozone leaders agree to a second bailout for Greece, amounting to an additional 109 billion

20. The Eurozone Crisis - Ireland 1999: Ireland joins the Eurozone1999: Ireland joins the Eurozone July 2010: Irish banks pass stress testsJuly 2010: Irish banks pass stress tests September 2010: Irelands budget deficit increases from an alarming 12% of GDP to a terrifying 32%.September 2010: Irelands budget deficit increases from an alarming 12% of GDP to a terrifying 32%. September 2010: the Irish Government announces extreme austerity measuresSeptember 2010: the Irish Government announces extreme austerity measures November 2010: Eurozone leaders agree to an 85 billion bailout for IrelandNovember 2010: Eurozone leaders agree to an 85 billion bailout for Ireland July 2011: Irelands credit rating downgraded to junk statusJuly 2011: Irelands credit rating downgraded to junk status

21. The Eurozone Crisis - Portugal 1999: Portugal joins the Eurozone1999: Portugal joins the Eurozone 2010: Portuguese debt reaches 93% of GDP2010: Portuguese debt reaches 93% of GDP 2010: The Portuguese Government announces strict austerity measures in the annual budget2010: The Portuguese Government announces strict austerity measures in the annual budget Nov 2010: EU leaders deny that Portugal is in line for a bailoutNov 2010: EU leaders deny that Portugal is in line for a bailout March 2011: Opposition parties in Portuguese parliament defeat austerity measures as too severeMarch 2011: Opposition parties in Portuguese parliament defeat austerity measures as too severe April 2011: Portugal asks the EU for financial helpApril 2011: Portugal asks the EU for financial help May 2011: Eurozone leaders agree to a 78billion bailout for PortugalMay 2011: Eurozone leaders agree to a 78billion bailout for Portugal

22. The Eurozone Crisis – Spain, Italy and Cyprus SPAINITALYCYPRUS The last of the EUs major economies to be in recession. 2010: government deficit comparatively low at 60.1% of GDP 2011: unemployment rate reaches 21.0% August 2011: ECB recommences purchasing bonds from Spain and Italy to increase flow of money around Eurozone. Third largest economy in the EU 2010: government deficit at 119.0% of GDP August 2011: Italy deemed likely to default on its debts; crisis talks of Eurozone leaders commence. Prime Minister Silvio Berlusconi denies that Italy is facing an economic crisis. 2008: Cyprus joins the Euro July 2011: a hoard of confiscated ammunition explodes The explosion is estimated to reduce Cypriot GDP by 14-17% in 2011 July 2011: The Cypriot Government resigns amid the economic troubles: the countrys credit rating is downgraded

23. Good – Some evidence 1. Stable interest rates and low inflation. 2. Benefits for weaker economies, greater access to large market. 3. Euro currency stability and strength 4. Growth in trade?

24. Who is right? The failings of EMU countries in terms of growth, competitiveness, and deficits is down to other factors. The failings of EMU countries in terms of growth, competitiveness, and deficits is down to other factors. Moreover the EMU can provide a good safety net and the appropriate conditions for further economic reforms. Moreover the EMU can provide a good safety net and the appropriate conditions for further economic reforms. BAD The EMU is the cause of the problems of reduced competitiveness, trade deficits, public debt and poor growth. The EMU is the cause of the problems of reduced competitiveness, trade deficits, public debt and poor growth. The experiment that has been EMU is in the process of failing due to the Eurozone crisis. The experiment that has been EMU is in the process of failing due to the Eurozone crisis. GOOD

25. The Political Angle Perhaps the European EMU was driven by politics: 1.Political bargaining between countries. 2.Countries think that disbanding it would be politically embarrassing. 3.The EMU as a political symbol.

26. What does the public think?

29. Optimism about the Eurozone Crisis

30. What do the Public Think about the EUs Response to the Crisis? In spring 2011: 22% of EU citizens consider the European Union to be the best organisation to take effective action against the effects of the economic crisis, with 20% answering that their national government would be best.22% of EU citizens consider the European Union to be the best organisation to take effective action against the effects of the economic crisis, with 20% answering that their national government would be best. More than 70% of EU citizens feel that the measures proposed by the EU to tackle the Eurozone crisis would be effective.More than 70% of EU citizens feel that the measures proposed by the EU to tackle the Eurozone crisis would be effective. 79% believe that stronger economic cooperation between all EU member states would be an effective way of tackling the Eurozone crisis.79% believe that stronger economic cooperation between all EU member states would be an effective way of tackling the Eurozone crisis. 45% of EU citizens believe the EU did not act effectively to combat the crisis up until now.45% of EU citizens believe the EU did not act effectively to combat the crisis up until now.

31. Conclusions EMU was an ambitious experiment in taking the Single Market one step further – but is it a step too far?EMU was an ambitious experiment in taking the Single Market one step further – but is it a step too far? The Eurozone crisis has highlighted the limitations of EMU across so many economically and politically diverse countries – could it be doomed to failure?The Eurozone crisis has highlighted the limitations of EMU across so many economically and politically diverse countries – could it be doomed to failure?