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World GDP
2005, current prices
EU 27
30%
US
28%
India
2%Japan
11%China
4%
Russia
2%
Brazil
2%
Rest of world
21%
Source: IMF
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Source: IMF
World GDP
2011, current prices
EU 27
25%
US21%
Rest of world
26%
Brazil
4%
Russia
3%
China
10%
Japan
8%
India
3%
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World GDP
2011, current prices
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
20,000,000
EU 27 United States China Japan Germany France Brazil United
Kingdom
Italy Rus sian
Federation
India
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World GDP
2040, current prices
GDP in 2040
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
50,000,000
CH USA IN BR RU JP MX DE UK FR ID SK CN IT
GDP in 2040
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
50,000,000
CH EU USA IN BR RU JP MX ID SK CN
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The European Union vs. the rest of the World
The European Union represents today around 7% of the world population but
between 25 to 30% of world GDP (current prices), w.r. to some 24% represented bythe US and some than 10% each by China and Japan
As of 2010 (last available data), it also represents between 20 to 25% of world trade
flows (not including intra-EU trade, in which case the number increases to 35%)
Through its single currency, the Euro, the EU financial markets are about 120% of
the US financial markets, with 50% of world bank assets
Hence, the EU is nowadays, notwithstanding the financial crisis, the largest
integrated market of the world, the largest trade partner of the world, and a key
player in financial markets
Surviving the crisis is fundamental not only for the welfare of the EU
citizens, but also for the entire world economy
Once the crisis is over, how to preserve the EU position in the world, i.e.
how to maintain competitiveness ?
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1. The Unions aim is to promote peace, its values and the well-being of its peoples.
2. The Union shall offer its citizens an area of freedom, security and justice without internal frontiers, in whichthe free movement of persons is ensured in conjunction with appropriate measures with respect to external
border controls, asylum, immigration and the prevention and combating of crime.
3. The Union shall establish an internal market. It shall work for the sustainable development of Europe based
on balanced economic growth and price stability, a highly competitive social market economy, aiming at full
employment and social progress, and a high level of protection and improvement of the quality of the
environment. It shall promote scientific and technological advance.
It shall combat social exclusion and discrimination, and shall promote social justice and protection, equalitybetween women and men, solidarity between generations and protection of the rights of the child.
It shall promote economic, social and territorial cohesion, and solidarity among Member States.
It shall respect its rich cultural and linguistic diversity, and shall ensure that Europes cultural heritage is
safeguarded and enhanced.
4. The Union shall establish an economic and monetary union whose currency is the euro.
5. In its relations with the wider world, the Union shall uphold and promote its values and interests andcontribute to the protection of its citizens. It shall contribute to peace, security, the sustainable development of
the Earth, solidarity and mutual respect among peoples, free and fair trade, eradication of poverty and the
protection of human rights, in particular the rights of the child, as well as to the strict observance and the
development of international law, including respect for the principles of the United Nations Charter.
6. The Union shall pursue its objectives by appropriate means commensurate with the competences which are
conferred upon it in the Treaties.
Objectives
GrowthStabilityCohesion + Peace & Security
Tools
The European Union goals and objectives
TEU art. 3
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GROWTH
GDP Growth rate forecast
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GROWTH: Real GDP growth EU vs. US
Real GDP growth, period averages
0.0
0.5
1.0
1.52.0
2.5
3.0
3.5
4.0
1970-1980
1980-1990
1991-1995
1995-2000
2000-2005
2005-2010
EU-GDP US-GDP
Source: Eurostat and OECD Productivity Dataset
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GROWTH
GDP per capita in PPS for EU-15, EU-25 and Japan, 1950-2009
(US=100)
Source: Updated from Altomonte and Nava (2005), Chapter 5 on the basis of Sapir et al. (2004) and Eurostat data.
10
30
50
70
90
19 50 19 55 19 60 1 965 1 970 1 975 1 980 1985 1990 1995 1997 2000 200 3 200 4 200 5 200 6 200 7 20 08 20 09
EU-15 EU-25 Japan US
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COHESION: Regional disparities in EU-27
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Regional disparities in the world
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STABILITY: inflation
ECB inflation target: lower than, but closeto, 2%
Refi rates by the ECB are set accordingly
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STABILITY: public deficit & public debt
EU Treaties target for public debt: equal to, or converging at, 60% of GDP andpublic deficit lower than 3% of GDP
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0
2
4
6
8
10
12
14
16
18
20
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
EL
IE
IT
ES
FR
DE
On 2 May 1998 the European
Council unanimously decided
that 11 Member States had
fulfilled the conditions necessary
for the participation in the third
stage of EMU and the adoption
of the single currency on 1 Jan
1999. Greece (the 12th) adopted
it on 1 Jan 2001.
The Greek crisis
explodes in the EMU
STABILITY: spread of interest rates
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The EU Enlargement
Carlo ALTOMONTE
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Enlargement and EU goals
The European Union has become the largest market in the world, with remarkable
levels of economic and social cohesion.
It has achieved this status through the development of some tools (policies) that
have contributed in deepening the process of economic integration
The Single Market through the free circulation of goods, services, capital and
people has contributed to economic growth(although we can score better here)
The EMU has succeeded in ensuring to the EU a remarkable level of stability
but has to cope with the consequences of the economic crisis
The EU regional policy developed within the EU budget has succeeded in
increasing cohesionwithin the EU
At the same time, the European Union has achieved its current status also bywidening its policies to an increasingly larger set of participating countries or
Member States: from six founding members in 1951/57 (D, F, I, BeNeLux) to 27 as
of 2007. The latter has profound implications on the working of the EU.
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1957
1973
1986
1981
1995
Luxembourg
Group
Helsinki Group
2004EU25
2007 EU27
Turkey
(?)
The EU enlargements
2012 ?
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We can identify three main reasons behind the wideningof the EU, in particular
to the Central and Eastern European Countries (CEECs):
History - geography - culture:the division of the second half of the
last century has been an artificial caesura in what has been a shared
path of evolution for centuries.
Politics and security: given the prosperity of the EU, to deny
membership would have posed a serious problem of security at the EU
borders, let alone this being contrary to the spirit of the EU Treaty;
Economics: market integration clearly anticipated the political process
Why the enlargement ?
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The enlargement of the EU is commonly referred to as one of the most
successful cases of economic development in history.
How was that possible?
- definition of a clear legal framework => Europe Agreements
- definition of clear criteria for membership => Copenhagen criteria
- aid in the implementation of the criteria => Reinforced pre-accession strategy
How to ensure a successful enlargement ?
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Country
Signature of
Association
Agreement
Accession
Application
date
Closed
Chapters
(Tot. 31)
Bulgaria 1-3-1993 14-12-1995 23
Cyprus 19-12-1972 3-07-1990 31Czech Rep. 6-10-1993 17-1-1996 31
Estonia 12-6-1995 24-11-1995 31
Hungary 16-12-1991 31-3-1994 31
Latvia 12-6-1995 13-10-1995 31
Lithuania 12-6-1995 8-12-1995 31
Malta 5-12-1970 3-7-1990 31
Poland 16-12-1991 5-4-1994 31
Romania 8-2-1993 22-6-1995 16
Slovakia 6-10-1993 27-6-1995 31
Slovenia 10-6-1996 10-6-1996 31
Turkey 12-9-1973 14-4-1987 -
Situation at end of 2003
Accession clause
Membership
Accession TreatyDrafted by the European Commission, voted by EU Council and EU Parliament
Ratified by all the Member States + the Candidate Country
Incorporation of the
Community acquis
Bilateral National Programmes for the Adoption of the Acquis: priorities for
each country and highlight the main instruments and financial resources available
to close the chaptersof the accession negotiations effectively.
Pre-accession Assistance: Phare - SAPARD - ISPA
Copenhagen criteria
I and II
Association Agreements
The Accession Strategy
Accession country
Candidate country
political: stable institutions guaranteeing
democracy, rule of law, human rights, minorities;
economic: a functioning market economy
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Accession negotiations: state of play, December 2003
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Pre-Accession Assistance
Phare
- finances Institution Building measuresacross all sectors and investment in
fields not covered by the other two
instruments, including integrated
regional development programmes
- has an annual budget of1,560 million
ISPA
- finances major environmental and
transport infrastructure projects
- has an annual budget of1,040 million
SAPARD
- finances agricultural and rural
development
- has an annual budget of520 million
Phare commitments 1990-1999
Yearly pre-accession commitments since 2000
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Post 2004: the incorporation of the Community acquis
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Post 2004 financial transfers
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Chronology of Eastern Enlargement
December 1991: Europe agreementswith Poland, Hungary and the Czech Republic
June 1993: The Copenhagen European Council I states the the associated countries of Central and Eastern
Europe (CEECs) can become EU Members provided that they fulfil three criteria: political, economic, and fullintegration of the acquis communautaire
December 1997: the Luxembourg European Council states that the enlargement process affects all the ten
CEECs plus Malta and Cyprus; it calls for the opening of bilateral negotiations between the EU and those
countries which the Commission judges ready to enter in the negotiation phase
30 March 1998: On the basis of this Commission evaluation, the process of formal accession starts for 5 CEECs
(Estonia, Poland, Czech Rep., Slovenia, Hungary) and Cyprus
December 1999: The formal accession process is extended by the Helsinki European Councilto the remaining
CEECs (Lithuania, Latvia, Bulgaria, Romania, Slovakia) and Malta. Turkey gains the status of candidate country,
but no negotiations are started
December 2000: The ICG for institutional reforms is closed with a draft Treatyapproved in Nice. The Treaty
enters into forceon the 1st of February 2003.
9 October 2002: the Commission states that eight CEECs (the Luxembourg group + Lithuania, Latvia, Slovakia
and Malta) will meet the Copenhagen criteria by the end of 2002, and formally recommends to the EuropeanCouncil the closureof the accession negotiationsand the subsequent signatureof the accession Treaties.
25 October 2002: a special European Councilheld in Brusselsendorses the Commission proposal.
12 - 13 December 2002: the Copenhagen European Council IIofficially close the accession negotiations with
eight CEECs + Malta and Cyprus; a financial packageis agreed for each of the years 2004-2005-2006.
16 April 2003: the Accession Treatiesfor the new Member States are signedin Athens.
May 2004: ten new Member States willjoin the European Union.
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State of play of enlargement negotiations
http://ec.europa.eu/enlargement/countries/check-current-status/index_en.htm -
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Because of the non fulfilment of the first, and partly the second, Copenhagen criteria,Turkeywas
granted the status of candidate country in 1999 at the Helsinki European Council, but
negotiations did not start. After that date, there have been some progresses: abolishment of the death penalty in Turkey (July 2002)
presence of a Kurdish party at the last elections
normalisation of the Greek-Turkish diplomatic relationships.
As a result, following a Commission proposal, in December 2004 the European Council approved
(unanimously) to start negotiationsin October 2005. The major issuesat stake are:
Political: Turkey is a NATO member and a potential model of a moderate Islamic society
Demographic: Turkey would be the 2nd largest EU member state, and by 2015 the first
Immigration: there are roughly 2.5M of regular Turkish immigrants in Germany, potentially
gaining active electoral status as they become EU citizens
Financial: the EU budget is not capable of granting the same level of aids to Turkey within itscurrent revenue system (the regional policy alone would imply an expenditure for Turkey of
more than 100Blnfor each programming period, i.e. 1/3 of the current total)
Religion isnot an issue: the EU (Copenhagen criterion I) forbids any discrimination on the
basis of religion. Moreover, even without Turkey, there will be some 30M Muslims in EU in the
next 10 years
The case of Turkey
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Regional disparities in Turkey
For reference, the Turkish average p.c. GDP is equal to 47% of the EU one.
Istanbul, the richest region in Turkey, has a per capita GDP roughly equal to the
one of Slovenia (85% of EU average)
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State of play of EU-Turkey accession negotiations
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Long run asymmetric implications of the crisis
The long-run impact of the crisis on potential growth seems to have been larger forEastern European countries, with the ensuing consequences in terms of overall EU-
27 growth and cohesion
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