Gordon H. Dash, Jr., PhDwww.GHDash.net

College of Business Administration, URI

Date: April 17 2013

Is Europe Back?

From Crisis Region to Transatlantic Free

Trade Area

•OutlineWhy it is Important for Europe to “come back”

There is a measurable and significant linkage between the economic fortunes of Europe and the transatlantic region which includes the United States

Relations between the European Union (EU) and the United States are referred to the Bilateral relations between EU and the US

Economics

Bilateral

ImpactComplications arise in global economic reform because, until recently, the EU does not have a common agreed upon position (eg: The divided position of the EU on support the Iraq War).

• 1949: Berlin Crisis and the beginning of the Cold War

• 1957: Treaty of Rome, which created the European Economic Community

• 1971: End of Bretton Woods System (excluded Western European leaders)

• 1973: Yom Kippur War – caused serious rift between Americans and Europeans

• 2003: Invasion of Iraq – brought US-Euro division out into the open.

• 2010: A weakened NATO has pushed US-Euro relations ahead under Pres. Obama

• 2011: At EU-U.S. Summit meeting, leaders directed the Transatlantic Economic Council (TEC) to establish a High Level Working Group on Jobs and Growth.

•List of Key Events in the Evolving Euro-US Relations

•Size of the Economic Relationship

Bursting of the property bubble in the US.Resulting contamination of the balance sheets of financial institutions around the world

Impacted connections within the financial system itself (systemic)

Global world trade collapsed

•The European Crisis

2012 – ECB moves to protect Euro at all costTrade ProtectionMeasures to reduce labor market participation

Delay entry of younger workers

Using disability or early retirement schemes

Reduce contractual retirement benefits

Introduce risky and highly unpopular fiscal policies -- policies which lead to higher taxes

•Policies to Mitigate the European Crisis

1. Consolidate national budgets and improve competitiveness – a process somewhat derailed in 2012

2. Ensure a lasting correction of imbalances and sound public finances by monitoring excessive credit growth or housing price bubbles – resisted by public, enforced by Germans

3. Actions to address the fragmentation of financial markets by purchasing secondary sovereign-bonds subject to a macroeconomic adjustment program with strict and effective conditionality – bond prices driven down thereby reducing sovereign valuation. DISINTEGRATION THREAT

•Current 5 Strategies Europe is Responding with Five Building Blocks

4. Create effective financial backstops to support countries under intense market pressure. The European Financial Stability Facility (E.F.S.F.) and the European Stability Mechanism (E.S.M.) are the euro zone’s crisis resolution funds, with a combined firepower of €700 billion.

5. The European Investment Bank (E.I.B.), the E.U.’s public bank, will significantly increase its lending activities

•Current 5 Strategies , cont’dEurope is Responding…

• Countries under assistance are improving their fiscal situation and regaining competitiveness

• Banks across E.U. countries participated in a €10 billion capital increase, which will mobilize additional investments by the E.I.B. of about €60 billion. E.I.B. will increase public and private investments of up to €180 billion over the next three years

• Under ECB Europe is working toward a banking union to further strengthen euro zone bank supervision and provide genuinely integrated tools for crisis resolution

•Response to the crisis has delivered resultsBanking and Public Finance

GDP: a measure of the value of a nation’s total output

The International Monetary Fund (IMF) is an intergovernmental organization that oversees the global financial system by taking part in the macroeconomic policies of its established members. The organization's stated objectives are to stabilize international exchange rates and facilitate development through the influence of economic policies in other countries as a condition of loans, debt relief, and aid. The IMF’s relatively high influence in world affairs and development has drawn heavy criticism from some sources

http://youtu.be/mEVqeaFHsHE

•Greek Debt Crisis Explained in Four Minutes (4:00)

The World Bank is an international financial institution that provides loans[2] to developing countries for capital programs. The World Bank's official goal is the reduction of poverty; hence its decisions must be guided by a commitment to promote foreign investment, international trade and facilitate capital investment

The “controversy” as expressed as anger and skepticism on the role of the IMF

http://youtu.be/yQpSq8dkzfg

•The Truth Behind the Greek Economic Crisis (2:03)

Germany has been called on to lead the Greek and EU “bailout”

What is missing in the EU: A Central Authority and a Central Will

How Wall Street capitalizes in a way that is out-of-reach for the average person

http://youtu.be/32Lor1YfCGM

•The Coming Euro Collapse–BBC Special (6:03)