Professional Documents
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UNION
PRESENTED:-
AVICK BISWAS.
ISB&M ,
BANGALORE.
ABOUT EUROPEAN UNION
• The European Union (EU) is an economic and political union of 27 member states, located primarily in Europe.
•
• The EU was established by the Treaty of Maastricht on 1 November 1993.
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• The EU combined generates an estimated 30% share (US$18.4 trillion in 2008) of the nominal gross world
product and about 22% of the PPP gross world product.
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• The EU has developed a single market through a standardized system of laws which apply in all member states,
ensuring the free movement of people, goods, services, and capital.
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• It maintains common policies on trade and the member states have adopted a common currency, the EURO,
constituting the Eurozone.
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• For 2007-2013 the rate proposed for Austria is 0.225%, and Germany 0.15%, the
Netherlands and Sweden 0.1%.
•
• 3. Gross national income (GNI) based own resources –
• GNI based own resources currently forms the largest contribution to EU funding.
• Revenue is currently capped at 1.24% of GNI for the EU as a whole.
•
• 4. Other Revenue –
• Other Revenue makes up approximately 1% of the EU budget
• This includes: interest on deposits or late payments,
• payments from non-EU organizations,
• underspent funding from community programs,
• any other surplus from the previous budget.
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EXPENDITURE
• In the 2006 budget, the largest single expenditure item was agriculture.
•
•
• Administration accounted for around 6.3%.
•
•
• External actions, the pre-accession strategy, compensations and reserves brought up
the rear with approximately 4.9%, 2.1%, 1% and 0.1% respectively.
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REVENUE & EXPENDITURE
INFLATION
• Inflation is an increase in the price of a basket of goods and services that is representative
of the economy as a whole.
• Inflation is caused by a combination of four factors:
• The supply of money goes up.
• The supply of other goods goes down.
• Demand for money goes down.
• Demand for other goods goes up.
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• Current inflation rate is -0.10%
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• Since calculating inflation is euro zone is more complex compare to single country so there
individual country inflation calculation is called HICPs (Harmonized indices consumer
prices)
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• The combine inflation rate is called “the monetary union index of consumer prices.
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Harmonized Index of Consumer Prices
• The Harmonized Index of Consumer Prices (HICP) is an indicator of inflation and price
stability for the European Central Bank (ECB). It is a consumer price index which is
compiled according to a methodology that has been harmonized across EU countries.
•
• The euro area HICP is a weighted average of price indices of member states who have
adopted the euro.
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• The primary goal of the ECB is to maintain price stability, defined as keeping the HICP
below but close to 2% for the medium term.
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• HICP attempts to incorporate rural consumers into the sample while the CPI maintains a
survey strictly based on the urban population.
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• HICP does not fully incorporate rural consumers since it only uses rural samples for creating
weights; prices are often only collected in urban areas.
INFLATION RATE
CONTROL OF INFLATION
• A Contractionary Policy results in increasing interest rates to combat
inflation.
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• An Economy growing in an uninhibited manner leads to inflation
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• Hence increasing interest rates increase the cost of credit thereby making
people borrow less.
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• Due to lesser borrowing the amount of money in the system reduces which in turn
brings down inflation.
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• A Contractionary Policy is also known as TIGHT POLICY as it tightens the flow
of money in order to contain Inflationary forces.
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CPI INDEX OF EUROPEAN UNION
• The part of the budget to receive the biggest boost in
spending (in line with the EU’s seven-year financial
programming) will be projects to fight crime, terrorism and
manage migration flows.
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FISCAL POLICY
• FRAMEWORK FOR FISCAL POLICIES:
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• The framework for fiscal policies of EU Member States is primarily intended to
monitor and supervise the deficits and debts of each member country. The aim is
to achieve balanced budgetary positions over the economic cycle. The
Commission is the institution responsible for the monitoring.
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• OBJECTIVES
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• TO SECURE SOUND PUBLIC FINANCES
• TO MAKE A COMMON FRAMEWORK FOR ALL EU NATIONS
• TO AVOID ANY IMBALANCE FROM ONE MEMBER NATION TO OTHER.
• TO MAINTAIN THE DEFICITS AND DEBTS OF ALL MEMBER NATIONS.
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PROBLEMS
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• Has not innovated on fiscal policy.
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• Has even reduced the EU-budget powers of the European Parliament
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• Europe’s fiscal Constitution is not optimal:
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• The bulk of spending is through national budgets.
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• EU budget only 1% of GDP.
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18
SOLUTION
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19
The European Union
1951
Founding
Members
Belgium
France
Germany
Italy
Luxembourg
Netherlands
1973
Denmark
Ireland
United Kingdom
1981
Greece
1986
Portugal
Spain
November
1989
Fall of the
Berlin Wall
sets the
stage for
unifying
Europe and
EU
enlargement
1995
Austria
Finland
Sweden
2004
Cyprus
Czech Republic
Estonia
Hungary
Latvia
Lithuania
Malta
Poland
Slovakia
Slovenia
2007
Bulgaria
Romania
Candidate Countries
Croatia
Former Yugoslav
Republic of Macedonia
Turkey
Potential
Candidate Countries
Albania
Bosnia & Herzegovina
Montenegro
Serbia including Kosovo
under UN Security Council
Resolution 1244
Monetary Policy
Monetary policy is the process by which
the government, central bank, or
monetary authority of a country controls:
1 Supply of money,
2 Availability of money
3 Cost of money or rate of interest, in
order to attain a set of objectives
oriented towards the growth and
stability of the economy.
Objective
§ To achieve price stability by
controlling inflation and
deflation .
• Inflation is ultimately a monetary phenomenon
•
• Monetary policy influences with the so-called transmission process the price level
• - Actions of the central bank are transmitted through the
• economy and, ultimately, to prices
• - The process is in essence complex
•
• The central bank is the sole issuer of banknotes and bank reserves.
•
• By virtue of this monopoly, the central bank is able to influence money market conditions
and steer short term interest rates.
How Monetary Policy Controls Inflation?
CENTRAL BANK
CASH
CURITIES AND TRESURY BILLS CASH RESERVE RATIO
STATUTORY LIQUID RATIO
BANK RATE
CRR SE IN
LE
INC ING
SO
ND
%
LD
RE RAT
REA
AS
INC
E E
COMMERCIAL BANKS
REDUCE LIQUIDITY
REDUCED BORROWING OF IN MARKET
LOANS
CORPORATES INDIVIDUALS
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•Causes
•Current situation
•Green shoots?
•EU policy response
•Critique – what needs to be done.
Causes – not just a financial crisis
• Sharp rise in commodity prices.
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• Sharp appreciation of the euro.
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• Lagged effect of past interest-rate rises.
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• Imbalances and (housing) booms in some EU countries.
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• US consumer retrenchment.
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• Toxic assets held by EU banks.
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• Emerging markets and world trade hit.
RECESSION
The global financial crisis, that began in 2007/2008, the Euro zone entered
its first official recession in the third quarter of 2008, official figures
confirmed in January 2009.
Euro zone's unemployment rate hike
Inflation dropped to 3.2%, down 0.5 percentage points . A 2.9% monthly
reduction in energy costs was the main reason for the fall.
Severe lagged impact on (un)employment
Con…
• “As a result of the global turmoil, capital flows to Eastern Europe have
been declined. Western European banks are no longer providing new
funding to their local subsidiaries, and private sector credit growth has
slowed, in many countries to near zero.”.
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• “At the same time, demand for Eastern Europe’s exports has shrunk, as
its principal trading partners are in recession. With both exports and
domestic demand shrinking, GDP in the region is declining”.
ACTION PLAN
• It is important that the West European countries resist the temptation of
protectionism. For many of the new member-states, exports account
for 80-90 per cent of GDP. By far the biggest market for all of them is
the euro zone, which is now in recession. Any signs of protectionism
in Western Europe would make the situation in Central and Eastern
Europe a lot worse.
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THE FUTURE OF THE
EUROPEAN UNION:
OPPORTUNITIES AND
CHALLENGES
• The EU:
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• accounts for one eighth of the world’s states
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• has a population, and therefore also an internal market, of 450
million
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• has a GDP almost as large as the US (EU-9 trillion USD, US-10 trillion)
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• ‘Europe’ and ‘the EU’ are becoming increasingly co-terminus.
•THANK YOU !
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