Transcript U.K. and the Eurozone

The European Union
By
Jack Duong
Julia Inoue
Nancy Phong
What is the European Union?
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A supranational & intergovernmental
union of nation-states in Europe.
Established in 1992 by the Treaty on
European Union (EU).
Currently has 27 member countries.
Largest political & economic entity in
Europe w/ 493 million people.
GDP of €10.5 trillion.
About the European Union
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Has its own currency (the euro)
adopted by 13 countries.
Citizens of EU directly elect the
European Parliament, once every 5
yrs.
They are allowed to live, travel,
work, & invest in other member
countries.
History of the European Union
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Evolved from a western European trade
body.
After WWII, cooperation formed between
countries determined to rebuild Europe &
eliminate the possibility of another WW.
May 9, 1950 Robert Schuman proposed
joint management of France & West
Germany’s coal & steel industries, a.k.a.
the “Schuman Declaration”.
Robert Schuman’s “Schuman
Declaration”
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Lead to “the first
concrete step
towards a
European
federation”.
Was considered the
beginning of the
creation of the EU.
Robert Schuman
Why did the European Union form?
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Formed because of WWII.
The EU idea was born because
Europeans were determined to
prevent such killing & destruction
from ever happening again.
Earlier years, cooperation was
between 6 countries & mainly about
trade & the economy.
Reasons for Starting the European
Union
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To deal w/ a wide range of issues of direct
importance for our everyday life.
To defend the shared values of Europe
such as democracy, freedom, & social
justice.
To promote unity & ensure that decisions
are taken as close as possible to citizens.
To preserve diversity.
Reasons for Starting the European
Union
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Encourages every
European citizen to
work together from
other countries in a
spirit of curiosity,
openness &
solidarity.
EU Flag
Britain joining the Eurozone
(ICM polls for the Guardian and the News of the World)
Reasons
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National pride.
The U.K. Treasury
pride.
Strength of the
sterling.
Key Points for Joining
1.
2.
3.
4.
A single currency would be of benefit in
terms of trade, transparency costs and
currency stability.
Membership is in the national interest and
there is popular consent.
Treasury's comprehensive and rigorous
assessment of the five economic tests.
Whenever the decision to enter is taken
by the British government, it should be
put to a referendum of the British people.
The 5 Tests
1.
2.
3.
4.
5.
Are business cycles and economic structures
compatible so that we and others could live
comfortably with euro interest rates on a
permanent basis?
If problems emerge, is there sufficient flexibility
to deal with them?
Would joining EMU create better conditions for
firms making long-term decisions to invest in
Britain?
What impact would entry into EMU have on the
competitive position of the UK's financial
services industry, particularly the City's
wholesale markets?
Will joining EMU promote higher growth,
stability and a lasting increase in jobs?
Advantages and Disadvantages
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Advantages
Currency is more useful the wider
the acceptability.
Rise in Trade.
Disadvantages
One size does not fit all.
Loss of ability to adjust for
idiosyncratic shocks.
New Developments
1.
2.
3.
4.
Doubts about the exchange rates as
shock absorbers.
Monetary Union => Increased Trade
=> Decline in Idiosyncratic Shocks.
Removing exchange rate risk,
stimulates the financial integration of
the area, facilitating risk-sharing.
Countries may wish to join (leave) a
monetary union if that union offers a
superior (inferior) policy framework.
Critics of the EU
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Critics argued that there is
corruption & fraud in the EU
• Resulted in some European Union
Officials to resign in mass
• With a new group, there were still some
criticism regarding accounting policies
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Europe as a whole is not a democracy, but
a bureaucracy
Critics of the EU
France, Austria, Germany, Italy are some
that argue against the Euro.
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Some European
citizens have argue
that the Euro has
damage their
economies
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United States of Europe
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European Union Today
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Largest Exporter in
the world and is
the second largest
importer
GDP (PPP) per capita (2006)
██ >$30,000
██ >$20,000
██ >$10,000
██ >$25,000
██ >$15,000
Au
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Fr
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Hu
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Li
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Po
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Sl
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European Union Today
European Union
2004 % GDP Growth
2005 % GDP Growth
12
10
8
6
4
2
0
Conclusion
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For some countries, the EU have
been beneficial while for other, the
EU has taken a toll on them. But
despite the many challenges it faces
along with the advantages and
disadvantages, the EU stands as one
of the largest exporters and
importers in this globalize world.