CLASE 1

European integration
Federalism (Fed.)  sovereignity is given to supranational institutions.
or Intergovernmentalism (Interg.).  the single nation state retains all sovereignty.
 Six European countries - European Coal and Steel Community (ECSC) -
European Economic Community (EEC)  customs union: removing all
tariffs and quotas on intra-EEC trade and adopting a common tariff on
import from non-member nations, free movement of labour, services and
capital and other common policies such as Common Agricultural Policies.
 Other European countries - intergovernmental approach with European
Free Trade Area (EFTA): external trade policies did not have to be
decided in common
Domino Effect: members were put under competitive pressure, enlargement, ‘force for
inclusion’, Deeper integration
Economic and Monetary Union: Maastricht Treaty - monetary union
Rise of populism and Euroscepticism
Brexit, Covid, Ukraine war

EU INSTITUTIONS
i) European Parliament (EP),
ii) European Council ,
iii) Council of Ministers,
iv) European Commission (EC),
v) Court of Justice of the EU,
vi) European Central Bank (ECB),
vii) Court of Auditors

CLASE 2: Economic Integration and the Economics of

Preferential Liberalization
1. Economic Integration and Single Market
Treaties for Economic Integration: 1.Treaty of Rome (ToR), 2. Maastricht treaty
2. Economics of Preferential Liberalization
The Preferential Trade Agreement (PTA) Diagram: MD and MS diagram

The import demand curve:

From nation supply and demand curve to import demand curve
Imported and domestic goods: perfect substitutes
Imported price fix (P’) the domestic price, both are equal– the impact of P’ on
consumption, production and imports.
Excess in demand over productions is met by imports
The export supply curve:
From nation supply and demand curve to export supply curve
Excess in production will be exported
Price for foreign exports rose, foreign will supply more: price incentives more
production, foreign consumers will buy less

Formation of a preferential trade agreement such as the EEC`s customs union tend to
lower domestic prices and raise imports overall - discriminatory effects of these
liberalizations also produces supply switching.
Welfare effects are characterized by trade volume effects and border price effects. The
welfare impact is ambiguous for the liberalizing nations. The impact on excluded nations
is always negative
The significant gains of welfare are highly unevenly distributed among many large
OECD economies

CLASE 3:
1. European Budget
2. The Common Agricultural Policy
3. Structural Funds
CLASE 4:

Deeper European Economic Integration has put European manufacturing and service
sector firms under a great deal of pressure - Under such a competitive framework
pressure of ‘collude and subsidize’ would arise  Anti-Competitive Behavior: Perfect
Collusion Partial Collusion

CLASE 5: OPTIMUM CURRENCY AREAS (OCA)

 Less transactions costs: Decreases or eliminates cost: exchanging currency
 The six OCA Criteria are only partially fulfilled - labour mobility is not fulfilled
 The long-run success of the Eurozone depends on the continuing process of
political unification.
 An important prerequisite for a deeper political union is currently given: Strong
support for the euro among EA citizens.
CLASE 6: EMU, the Role of the ECB and the Euro
ECB’s primary objective is to keep inflation at 2%
CLASE 7: Fiscal Policy and the Stability Growth Pact
If there is no centralized budget and social security system to tackle asymmetric shocks
The optimum currency area view is overoptimistic about the possibility of national
budgetary authorities using budget deficits as instruments to absorb shocks
Fiscal Union with a European government issuing joint Eurobonds is needed in order to
secure longterm sustainability of EMU and the Euro
The EU Recovery Program and SURE are first small steps towards a fiscal union.
CLASE 8: Economic Growth
In order to close the labor productivity growth gap vis-à-vis the US it would be important
for European Economies:
i) to increase the invest in ICT (e.g. software) and complementary (Non-R&D) Intangible
Capital by firms (e.g. training and organizational capital) in particular in its market
service sectors,
ii) ameliorate the Quantity and Quality of Human Capital (Higher Education),
iii) reform its labour and product markets, as well invest sufficiently in its Social (rule of
law, government effectiveness, trust, social cohesion, ect.) and public infrastructure
(high speed internet as e.g. fiber optics, 5G, ect., highways, ect.).
CLASE 9
Educational and Innovational Policies