1. Economic and Monetary Union
Managing EMU
Two-tier system
ERM II between participating and non-participating countries (15% margin)
Sustainability
Stability and Growth Pact
International exchange rates
Selection of ECB president
Poor economic performance in Germany

2. Participation in Euro-zone
Britain, Denmark opt-out
Greece joins one year later
All NMS have to adopt euro upon fulfillment of conditions.
Sweden uses legal loophole to remain out
5 new members: Slovenia, Cyprus, Malta, Slovakia, Estonia
ERM II members:
Latvia, Lithuania, Denmark
EU member currency pegged to euro
Bulgaria
Non-EU member currency pegged to euro
Montenegro, Kosovo

3. Economic and Monetary Union
ECB
Political control
Legitimacy
Enlargement
EMU and economic growth
Economic coordination
Broad Economic Policy Guidelines
Excessive deficit procedure
Ireland
Portugal
France and Germany
Reforming the Stability and Growth Pact

4. European Union and Global Financial Crisis
EU real GDP contracts by 4% in Sharpest decline in history.
Global and European dimensions
Global:
US-EU financial integration
European:
Close connection between banks and industry
Adoption of euro spread low interest rates and cheap credit to Spain, Portugal, Ireland, Italy, Greece.
Aggressive bank lending to Baltic states, Balkans, and Eastern Europe
Member state responses
Injecting liquidity into financial system, guarantees for interbank loans

5. European Union and Global Financial Crisis
EU-level responses:
Financial and banking sectors regulated at the member state level
France and Italy recommend a Europe wide bailout but Germany and Britain against.
Coordination of member state responses
1 March 2009: Extraordinary meeting of European Council
Preserve single market, reject protectionism
EU-level supervision of financial system
European Commission
Flexible application of Stability and Growth Pact
Rules and standards for state aid. State aid to protect employment
European Economic recovery plan: fiscal stimulus of 2%.
Capital requirements of financial institutions,
regulation of credit rating agencies,

6. European Union and Global Financial Crisis
EU level responses (cont.)
European Central Bank –Eurozone. Reduction of interest rates despite low inflation.
Balance-of-payments assistance jointly with IMF
Role in galvanizing the international community into action
G-20 summit in November 2008
New member states:
Worst affected: Latvia, Hungary
In good shape: Poland, Czech republic, Slovakia, Slovenia
In Eurozone: Slovenia, Slovakia

7. EU and the European Sovereign Debt Crisis
European Financial Stability Facility (May 2010):
Set up by members of eurozone
Providing assistance to eurozone member states in financial difficulty
European Financial Stabilization Mechanism (Jan 2011)
All EU members
Using EU budget as collateral
Bail-outs
May 2010: Eurozone countries and IMF agree to 110 billion euros loan to Greece conditional on the implementation of austerity measures
November 2010: (with IMF) 85 billion euros bail-out of Ireland
Portugal asks for assistance in April 2011.

8. Revision to Lisbon Treaty (December 2010)
The Member States whose currency is the euro may establish a stability mechanism to be activated if indispensable to safeguard the stability of the euro as a whole.
The granting of any required financial assistance under the mechanism will be made subject to strict conditionality.
European Stability Mechanism to replace EFSF and EFSM in 2013

9. External Relations –Cooperation Agreements with Third Countries
Differentiated approach
European Economic Area
EU and Iceland, Lichtenstein, and Norway
Single market and competition
Highly institutionalized
Switzerland
Bilateral agreements
EU- Switzerland summits

10. External Relations –Cooperation Agreements with Third Countries
Southeastern Europe
Stabilization and Association Process
Development assistance
Membership perspective
Mediterranean and Middle East
No membership perspective
1995 Barcelona Declaration
Bilateral association agreements
Regional forum
Dominance of security considerations
Israel-Palestinian conflict