An analysis of the evolution of the EMU and its future

1973 – UK, Demark and Ireland join EC. Norway rejects membership in national referendum. UK referendum I 1975 supports entry 2:1.

1981 – Greece joins EC 1986 – Spain and Portugal join EC 1987 – European Single Act signed 1988 – Regional Aid doubled. The expansion of

structural funds to poorer regions and countries 1993 – Maastricht Treaty ratified 1995 – Borders come down as result of Schengen

Agreement. UK does not join and Norway rejects membership of EU in second referendum

1998 – Talks start for major enlargement

Croatia – quite soon Bosnia – Herzegovina – early next decade Macedonia – 2012 or possibly before Montenegro – again within the next 4 to 6

years Serbia – probably early next decade,

depends on both economic and political issues

Albania – 2015? Turkey – 2015?

Europe continues to enjoy economic growth, solidarity, the spread of democratic forces in countries once under dictatorship

Also – job creation, safer products, lower prices, greater choice in such sectors as telecommunications, banking and travel

The EU is NOT just about wealth it has values – peace, prosperity, freedom and social justice

Stabilisation and Association Agreements Work towards acquis – the 35 chapters of

The EU Regular progress reports Inflows of funds – since 1991 Western

Balkans have received Euro 20 billion in assistance. Funds now simplified into Instrument of Pre-Accession Assistance (IPA)

The EU considers itself to be dynamic and as David Milliband said in Bruges last year it should expand further

Though EU = 7% of world population it = 20% of world trade

Risk is a major deciding factor of the way in which a is treated - public health, the environment and consumer protection dictate the rules that govern its trade, so chemicals are more closely regulated than pasta

The high risk products are more harmonised than the low risk – countries can restrict trade under certain situations e.g. British beef

Approximately 50% of all intra trade is covered by harmonised legislation

Has the internal market had benefits – 2.5m -3.5m extra jobs, 900 billion Euros of wealth, which is equivalent to 6000 Euros per family.

This should increase with the introduction of services agreement

Next stage is internal market for capital – make funds is available as in US?

How have the ‘new’ members faired since 2004 - 2010 and the largest single enlargement since the founding of the EU?

How have the ‘older’ members adjusted since the arrival of the new members?

Will deeper or wider integration be the way forward?

New members trade with other EU countries Czech Rep = 79% Estonia = 73% Cyprus = 60% Latvia = 77% Lithuania = 58% Hungary = 72% Malta = 60% Poland = 75% Slovenia = 72% Slovakia = 80% UK = 57%

Belgium 75% Denmark 72% Germany 85% (highest) France 70% Ireland 65% Italy 62% Spain 72% Luxembourg 59% Netherlands 68% Austria 78% Portugal 80% Finland 54% Sweden 65%

Euro billionChinaExport 483Imports 436EUExports 883Imports 941 JapanExports 499Imports 405USExports 765Imports 1380

Bulgaria 5.5 Cyprus 3.7 Czech Republic 6.1 Estonia 9.8 Hungary 4.1 Latvia 10.2 Lithuania 7.6 Malta 2.5   Poland 3.4 Romania 8.5 Slovakia 6.1 Slovenia4.0

Austria 2.0 Belgium 1.5 Denmark 3.2 Finland 2.9 France 1.2 Germany 0.9 Greece 3.7 Republic of Ireland 5.5 Italy 0.0  Luxembourg 4.0 Netherlands 1.5 Portugal 0.4 Spain 3.4  Sweden 2.7 United Kingdom 2.25

Does the centralised state lose authority as more decisions are taken in Brussels? If so, can European Social Democracy adapt or will less government intervention styled politics emerge?

How have the once members of the Warsaw Pact adapted? Were the wrongs of Yalta put right?

Are some of the new members more Atlanticist in approach and so easier for UK to get on with?

The US likes EU expansion – why? Does the introduction of new laws mean a

real change in attitude – e.g. gypsies? Will there actually be a unified foreign and

defence policy – if there had been might US have stalled with invasion of Iraq?

What of the relations with Russia post enlargement?

Kaliningrad Shift in Russian focus to Asia and China and EU-

Russia relations are now at best ‘cool’ Flex of economic might in recent energy

problems However, it’s not all good news for US – look at

problems of basing missiles in Czech Republic and Poland

Will the problems of recent expansion cause Turkish entry to be delayed – will social and cultural compatibility be added to the list of human rights, power of military etc?

Is it best to resolve these issues at national or Pan-European level?

500 million and set to rise By global standards – high earners Standardised tastes Credit facilities Few barriers Trans national networks Benefits to AD Benefits to AS

What you must show before entering the Euro Zone   Price stability, measured according to the rate of inflation in

the three best performing Member States; Long-term interest rates close to the rates in the countries

with the best inflation results; An annual budget deficit which does not exceed 3% of

gross domestic product (GDP) and total government debt which does not exceed 60% of GDP or which is falling steadily towards that figure;

Stability in the exchange rate of the national currency on exchange markets The exchange-rate mechanism of the European Monetary System requires this stability to be demonstrated and sustained for two years.

Stability and international recognition Price transparency/comparisons/one

catalogue/bank account/potentially lower interest rates – EU wide capital market?

Disadvantages – we probably know these Cyprus and Malta to join in 2008 Baltic States moving towards criteria Possible Hungary and Slovakia EU thinks all new members in by early

next decade – out Denmark(?), Sweden – may be a new referendum and UK

Regional/Cohesion Policies Converging economies Economic independence ECB transparency Stability of Euro Foreign Reserve holdings Will it survive the current crisis?

Taken as a single entity, the European Union has the largest economy in the world, with an estimated nominal GDP of €11.6 ($14.5) trillion in 2006 accounting for 35% of world GDP (the second largest economy is USA, with a GDP of $13.2 trillion).

It appears that the EU has attained the capacity for higher growth that is historically due to the EU's new member states potential to expand at a higher rate than traditional industrial powers of Europe.Possibility for a twin speed Europe?

Differences between member states are also significant. GDP per capita is often 10% to 25% higher than the EU average in the "older" western member states, but only comprises one-third to two-thirds of the EU average in most eastern member states, as well as in potential membership candidates such as Croatia, the former Yugoslav Republic of Macedonia and Turkey

By comparison, United States GDP per capita is 35% higher than the EU average: Japanese GDP per capita is approximately 15% higher

The EU currently imports 82% of its oil and 57% of its gas, making it the world's leading importer of these fuels

So, there is someway to go!

After growing almost 3% as a whole in 2006 the EU economy is predicted to stay robust well into 2008 with average growth over those two years averaging over 2.5% growth. Many economists agree the EU has attained the capacity for higher growth than historically due to the EU's new member states potential to expand at a higher rate than traditional industrial powers of Europe.

But some countries are more poorer – what should be done about this?

Three new objectives Convergence (like old Obj 1: greater scope) RED

on MAP Competitiveness (old Obj 2&3, tie to Lisbon)

BLUE ON MAP Territorial co-operation (former Interreg) (and

REC)

A method based on what works: Programming, Partnership and Decentralised management

Trying things out: then main streaming Loans for the first time in the regulations

Making Europe and its regions a more attractive place to invest and work

expand and improve transport infrastructures improve the environmental contribution to

growth and jobs address the intensive use of traditional

energy sourcesII) Knowledge and innovation for growth increase and improve investment in RTD facilitate innovation and promote

entrepreneurship promote the information society for all improve access to finance

III) More and better jobs attract and retain more people in

employment and modernise social protection systems

improve adaptability of workers and enterprises and the flexibility of the labour market

increase investment in human capital through better education and skills

administrative capacity health and the labour force

6.6

32.1

47.4

0.9

6.5 5.6

35.7

9.9

40.4

6.4

1.5

6.1

0

5

10

15

20

25

30

35

40

45

50

1A Competitiveness 1B Cohesion 2 Natural resources 3 Justice 4 Global role 5 Administration

2006

2013

Does it work?◦ across Member States yes◦ within Member States less

What will enlargement do (Poland 40 million, Spain 40 million)◦ from 15 to 27 Member States and may be 30 soon◦ new Member States are much poorer◦ pressure on budget

Causes friction between member-states◦ Poor vs. rich◦ South vs. North◦ East vs. West

Think the future of UK in the global economy

Changes in P5 membership Emergence of BRIC countries + Indonesia Greater integration – probably wider and

not deeper Will UK ever join Euro How many more members could EU

absorb? Any questions?