Europe Saint John’s International School

Short Run:Recession Falling Output Unemployment Deflation Bigger Government Deficit A decrease in Wealth Low Consumer Confidence Short RunLong Run

Questions What should the European Union do to increase its economic competitiveness? Is the EU an innovative economy? Is aging and demographic changes a serious challenge for prosperity in Europe? Which policies should be considered as priorities?

Question 1: What should the European Union do in order to increase economic competitiveness?

Competition: Why it Matters? Lower prices Better quality More choice Innovation Lower prices Better quality More choice Innovation

Competition: Challenges Keep policies intact during crisis Focus on markets and consumer benefits Dynamic efficiencies Market definition based on supply side substitutability Global governance

Competition: Proposed Solutions Focus on consumer benefits Take into account efficiencies in merger control Strengthen supply side factors in market definition in antitrust evaluation Promote global competition governance Enforce state aid rules during crisis

Financial Services: Successes Financial Integration Economic and Monetary Union Competition Policy (banks) Financial Services Action Plan  Impact: -London major international centre -Growth central and eastern European countries -Better financial services

Financial Services: Failures Major cross- border banking failures Lack of crisis management framework Lack of regulatory oversight

Financial Services: Challenges Stability Transparency Efficiency Integration

Financial Services: Proposed Solutions Establishment of a supervisory body Enforcing banks to formulate a “bankruptcy will” Higher capital reserve standards Allowing companies easy access to capital Keeping banking fees low

Single Market:Challenges Upholding existing single market laws. Driving through the Services Directive properly. Pushing through EU global regulatory standard-setting.

Single Market: Recommended Solutions Keep member countries under constant review and encourage surveillance on each other. Set a timetable in which member countries must comply with Develop regulatory conversation with outside countries and institutions. Coordinate European efforts to create a global standard-setting approach for the EU.

Trade:WHAT TO LOOK OUT FOR A 10% drop in global trade according to the WTO The future of the WTO after the Doha Round The EU’s role with respect to Preferential Trade Agreements

Trade: CHALLENGE #1 Single undertaking policy QUAD versus BRICs Future of the WTO Climate change policies ROLE OF DEVELOPING COUNTRIES WITHIN THE WTO

Trade: SOLUTION #1  EU’s position of the role of the WTO after the completion of the Doha Development Agenda  Creation of new climate change policies

Trade: CHALLENGE #2 Tangled web of PTA’s Threat of regional trading blocs THE EU’S CONTRIBUTION TO PREFERENTIAL TRADE AGREEMENTS

Trade:SOLUTION #2 AWARENESS OF THE SHORT TERM BENEFITS AND LONG TERM COSTS OF PREFERENTIAL TRADE AGREEMENTS THE ESTABLISHMENT OF THE EU’S POSITION WITH REGARD TO PTAs

1. To remember to favor multilateral trade and to ensure that new policies are encouraging of this 2. To realize its role as a large economy and thereby be an advocator of multilateral trade, allowing trading partners to follow suit 3. To realize that trade policy is important for the EU to ensure competitiveness and thus it should encourage greater transparency within these policies With regard to all these solutions, the EU must keep in mind several points:

Question 2: Is the EU an innovative economy?

The EU Non-innovative Economy: Challenges To meet the Lisbon Strategy Target Improved research central co-ordination Unify tertiary education systems Need for ERA and central knowledge market

Solutions to Improve Innovation Negotiate for new spending targets with the European Council Improve the size, effectiveness and attractiveness of research funding under the EU’s framework program Achieve progress towards ERA through excellence based policies More attractive tertiary education

Question 3: How can we foster entrepreneurship in Europe?

Challenges Avoiding ‘Zombification’ of firms in the EU economy Maintaining competition while surviving the recession

Solutions Encourage innovation and success Reduce barriers to success Restructure industries hurt by the crisis Show the public the necessity for restructuring Gain fiscal control of industries for Commissioner of Industrial Affairs Control each industry individually using skilled task forces

Question 4: Is aging and demographic change a serious challenge for prosperity in Europe?

Causes of Cyclical Unemployment Decline in demand for labor in all sections Real Wage Unemployment –Minimum wage restrictions –Union power Too high unemployment benefits Flexicurity in the short term

Unemployment: Potential Solutions Reallocate finances from unemployment benefits to subsidizing firms strictly to increase employment Decrease or eliminate legal minimum wages Re-adjust retirement policy Encourage immigration into Europe

Question 5: What policies should be considered as priorities?

Conclusion Have clear policies that are universally understood Enforce the rules that are set Advance the services directive Continue with the Single Market Push the Lisbon Treaty