1. GLOBAL SGH European Economics

2. European Economic Issues

3. European Economics – European Economic Issues Institutional economics – what does it mean?Institutional economics – what does it mean? Introduction to the EU: Some descriptive data and first impressionsIntroduction to the EU: Some descriptive data and first impressions –Population –Income and Income per capita –GDP vs. GNP – does it matter –Size of the economics –EUs global trade pattern European Union budget – expenditure and revenuesEuropean Union budget – expenditure and revenues –The idea of net contribution – does it make any sense? Stages of economic integrationStages of economic integration The European economic integrationThe European economic integration

4. European Economics – European Economic Issues Institutional economics focuses on understanding the role of the evolutionary process and the role of institutions in shaping economic behavior. Institutional economics emphasizes a broader study of institutions and views markets as a result of the complex interaction of these various institutions (e.g. individuals, firms, states, social norms). Institutional economics focuses on learning, bounded rationality, and evolution (rather than assume stable preferences, rationality and equilibrium – like it is in classical and neo-classical models).

5. European Economics – European Economic Issues European Payment Union (EPU) as a key factor in helping European governments solve the problems with: –establishing their political legitimacy, –maintaining full employment –achieving sustained economic recovery and growth How to do that? Maintaining overvalued currencies!!!

6. European Economics – European Economic Issues The graphics are in turn drawn from the Eurostat data bases and up-to-date data can be accessed at http://epp.eurostat.ec.europa.eu/portal/page?_pageid=1090,3007 0682,1090_33076576&_dad=portal&_schema=PORTAL http://epp.eurostat.ec.europa.eu/portal/page?_pageid=1090,3007 0682,1090_33076576&_dad=portal&_schema=PORTAL

7. European Economics – European Economic Issues Data showing the population of European countries (members of the EU)

8. European Economics – European Economic Issues 6 big nations:6 big nations: –> 35 million (Germany, the UK, France, Italy, Spain and Poland). 2 mid sized:2 mid sized: –Romania 22 & Netherlands 16 million people. 8 small nations (size of a big city):8 small nations (size of a big city): –8 to 11 million: (Greece, Belgium, Portugal, Sweden, Austria, Czech Republic, Bulgaria and Hungary). 11 tiny nations:11 tiny nations: –(size of a moderate to small city) –together make up less than 5 per cent of EU27 population –(Slovak Republic, Denmark, Finland, Ireland, Lithuania, Latvia, Slovenia, Estonia, Cyprus, Luxembourg and Malta.)

9. European Economics – European Economic Issues Data showing the GDP per capita of European countries (members of the EU)

10. European Economics – European Economic Issues 11 high income – over 20,00011 high income – over 20,000 –Denmark, Ireland, Austria, Netherlands, Belgium, Finland, Italy, Germany, France, UK and Sweden. 9 medium income category – from 10,000 to 20,0009 medium income category – from 10,000 to 20,000 –Spain, Greece, Portugal, Cyprus, Hungary, Slovenia, the Czech Republic, Malta and the Slovak Republic. 6 low income nations, less than 10,0006 low income nations, less than 10,000 –Estonia, Poland, Lithuania, Latvia, Bulgaria, Romania. NB: Turkeys income is half that of the richest-of-the-poor, Estonia. NB: Turkeys income is half that of the richest-of-the-poor, Estonia. Luxembourg is in the super-high income category by itself.Luxembourg is in the super-high income category by itself. –per capita income is almost twice that of France –about 40% of Luxembourgers work so the average worker earns over 100,000 a year!

11. European Economics – European Economic Issues GDP vs. GNP: Does it matter For small countries it can: e.g. Ireland GDP>GNP Ireland199520042007 Gross National Product (nominal) 46,994124,250161208 Gross Domestic Product (nominal) 53147148556190601 Nominal GNP per capita 130493072637153 Nominal GDP per capita 147583673743927 GDP is more than GNP by: 13%20%18% Matters when have many migrant workers (sending money back) or foreign investors sending profits away. UK GDP is less than GNP by: 2% - so goes opposite way

12. European Economics – European Economic Issues Data showing the relative size of GDP of European countries (members of the EU)

13. European Economics – European Economic Issues Economic size distribution is VERY uneven.Economic size distribution is VERY uneven. Six nations (Germany, the UK, France, Italy, Spain and the Netherlands) account for more than 80% of EU25s economy.Six nations (Germany, the UK, France, Italy, Spain and the Netherlands) account for more than 80% of EU25s economy. Other nations are small, tiny or miniscule.Other nations are small, tiny or miniscule. Small is an economy that accounts for between 1% and 3% of the EU25s output:Small is an economy that accounts for between 1% and 3% of the EU25s output: –Sweden, Belgium, Austria, Denmark, Poland, Finland, Greece, Portugal and Ireland. Tiny is one that accounts for less than 1% of the total:Tiny is one that accounts for less than 1% of the total: –Czech Republic, Hungary, Slovak Republic, Bulgaria, Romania, Luxembourg, Slovenia, Lithuania, and Cyprus. Miniscule is one that accounts for less than one-tenth of 1%:Miniscule is one that accounts for less than one-tenth of 1%: –Latvia, Estonia and Malta.

14. European Economics – European Economic Issues Data showing the EU global trade pattern

15. European Economics – European Economic Issues The EU trades mainly with Europe, especially with itself:The EU trades mainly with Europe, especially with itself: – about two-thirds of EU exports and imports are to or from other Western European nations – the EUs exports to North America amount to only 10% of its exports – Asias share is only 8%. About 80% of EU exports consist of industrial goods (intra-industry trade).About 80% of EU exports consist of industrial goods (intra-industry trade).

16. European Economics – European Economic Issues Data showing the openness ratio of EU countries

17. European Economics – European Economic Issues EU27 members are all comparatively open economies when it comes to trade in goods:EU27 members are all comparatively open economies when it comes to trade in goods: –openness ratio for the EU15 ranges from 17% for Greece up to 75% for the Belgium-Luxembourg –figures for the 10 newcomers are higher than Greeces figures for Japan and the US are 10% and 8% respectively. figures for Japan and the US are 10% and 8% respectively. EU15 market is very important for all EU27:EU15 market is very important for all EU27: –share of exports going to the EU15 ranges between 50% to 80%.

18. European Economics – European Economic Issues Data showing EU Data showing EU Budget Expenditure

19. European Economics – European Economic Issues Data showing evolution of Spending Priorities of EU budget

20. European Economics – European Economic Issues Data showing Evolution of EU budget Spending, Level Data showing Evolution of EU budget Spending, Level part 1

21. European Economics – European Economic Issues Data showing Evolution of EU budget Spending, Level Data showing Evolution of EU budget Spending, Level part 2

22. European Economics – European Economic Issues EUs budget must balance every year. Financing sources: four main types: –Tariff revenue –Agricultural levies (tariffs on agricultural goods) –VAT resource (like a 1 per cent value added tax – reality is complex) –GNP based (tax paid by members based on their GNP). –new instrument from the 2014 (Tobin tax?)

23. European Economics – European Economic Issues Data showing Evolution of EU budget Founding Sources

24. European Economics – European Economic Issues Data showing net contribution to EU budget by member

25. European Economics – European Economic Issues Net Contribution by Member Percentage of GDP per member is approximately 1% regardless of per-capita income. EU contributions are not progressive, e.g. richest nation, (e.g. Luxembourg) pays less of its GDP than the poorest nation (e.g. Romania).

26. European Economics – European Economic Issues Defining economic integration One aspect of international economics A state of affairs or a process which involves the amalgamation of separate economies into larger free trading regions. Non-economic definition: increasing interdependence of nations

27. European Economics – European Economic Issues Characteristic of an economic bloc Discriminatory removal of trade barriers The establishment of some co-ordination - between at least two nations

28. European Economics – European Economic Issues Types of integration Negative integration Positive integration NOT sectorial co-operation, which can be WITHIN integration

29. European Economics – European Economic Issues Stages of economic integration Common Markets –Monetary Union Economic Union –Political Union Free Trade Areas Customs Unions

30. GLOBAL SGH European Economics