Economic Integration within the EU - Essay Example

Topic: Discuss the Extent to Which Economic Integration within the EU Has Been Subordinated to the Achievement of Political Objectives Answer: Economic incorporation within the EU has got an inferior attention to the accomplishment of Political Objectives of the Union. Growth pact amongst European Union (EU member states to underpin the introduction of a single currency and a "single market" within the EU has emphasised, more than political agendas. The alternative debates embrace a number of new aspects of integration within the EU which entails a number of insights. These include a different analysis from that of "new monetarism" (see Arestis and Sawyer, 1998), new objectives for economic policy to include employment and growth, and new institutions to reduce various kinds of disparities across the EU. (Arestis, P. et al 1999) DG ECFIN economists are playing vital role in the ongoing forward-looking review of the European Union single market that the European Commission is chalking out. The barriers still exist in the internal market of the Union. Which indicates that many benefits have yet to be realised The potential of the single market is to be contributed to a more dynamic, innovative and competitive EU From the economic perspective of the single market review, DG ECFIN analysts advised that it is time to move towards a more economics-based and results-oriented approach using the targeted monitoring of selected markets and sectors. It would bring real improvements to the operations of the single market. The objective is to realize the four freedoms enshrined in the treaty. . At present, this vision is a successful reality in many spheres. The individuals can live, work, study or retire in any EU country. The Consumers would have an extensive choice of products and services at lower prices. The businesses would have lower costs and more opportunities to flourish in a Europe of close to 500 million customers without internal boundaries. The expected gains for the EU economy from the single market inducts an extra 2.2% on GDP and more than 2.75 million jobs created between 1992 and 2006. The single market may be deemed as a natural coefficient of economic and monetary union (EMU). The euro is not only substitutes the single market by removing the costs and inconveniences of multiple currencies, but it is also the concrete expression of the willingness of the euro-area Member States to work together within EMU. This is a strong, united and sustainable EU economy that can defend Europe's citizens against global catastrophe and turbulence. Many policies for a single market Using a constitutional political economy approach, this paper attempts to demonstrate that both the "principle of integrity" and the "principle of efficiency" of collective action appear to be violated by the European economic constitution. This occurs, respectively, because its provisions are not neutral, nor revisable, and because they do not sufficiently allow for the possibility of cooperative collective decision (leading to convergence in welfare) in a more than ever numerous and heterogeneous EU. Essential argument in this respect regards the implications of the structurally different economic performances and incentives of small and large countries under the European economic constitution. (Laurent, E., and Cacheux, J. L. (2005), From the very beginning, the single market mechanism was more important than an economic policy decision. The ongoing crucial negotiations on an EU patent to defend European innovations; and a common trade policy. It would gives flawless access to the single market for our global trade partners while promoting EU exports and our social and environmental standards globally. It was expected to launch a more dynamic, innovative and competitive EU economy. This has not materialized: economic growth in the EU, determined by GDP per capita, has been below that of the US over the last ten years. Fabienne Ilzkovitz, one of the report's authors, who clarifies the economic perspective of the review; "The single market is not static, it is dynamic and operates in a constantly evolving global economy. From this point of view, it will never be finalized but must always become accustomed to new realities. In our analysis, we raised three questions: first, how is the situation in which the single market runs different today from when it was first launched in the late 1980s; second, what confirmation is there for the economic impact of the single market; and last, why it has failed to survive to expectations" EMU and the single market: The progressive European Union expansion, demographic change and globalization were all recognized by DG ECFIN analysts as playing vital role to the continuously evolving environment of the single market. . IIzkovitz says "While the euro complements the single market by reducing costs and increasing transparency and thus increasing integration and competition, the converse, although less obvious, is also true - the single market complements EMU, and in particular its ability to adjust smoothly to external shocks." The capability of prices and wages is to respond quickly. The people and capital to move easily within the internal market is essential because this allows rapid adjustments to economic shocks. This is avoiding boom-to-bust cycles in the economy. The 21st century is a well-functioning and flexible internal market with rapid, market-based adjustment mechanisms that can correct asymmetric shocks, such as changes in supply. Intra trade in manufactured products (intra exports as % of GDP) Firstly, it laid emphasis on internal markets for services and knowledge for productivity growth. It indicates that a more integrated, competitive and flexible internal market can play vital role in the smooth operation of EMU by strengthening its capability to adjust rapidly to economic shocks. The more common approaches are to corporate taxation and immigration. It also indicates that the internal market is in a global perspective. The specific parts of production processes become easier. The industrial and trade policies should enhance the efficiency of EU businesses. The well-designed internal market and external trade policies are mutually supportive. It is enabling EU standards to be spread beyond its borders while allowing external competition and investment from abroad to launch innovation and productivity at home. As far as the mechanism to market integration is connected, the report raises the issue of adjustment costs. The reforms such as launching the services sector to more competition can have short-term costs for some groups. The benefits may materialize in the longer term. The suggestion is that by monitoring markets. We can better understand how they function: what are their characteristics, what the obstacles are, and where the bottlenecks are. Understanding this view, we can then define better policies to make these particular markets more efficient, and more competitive. In this way we go ahead more closely targeted and result-oriented approach. The key element is that we determine those sectors that are vital for the future growth and adjustment capability of the EU economy. We make the best use of resources to achieve the most beneficial impacts. Selective targeting The inter-service faction is prioritizing on existing expertise on market monitoring within the Commission and in the Member States. Where there is already a practical experience. Depending on this, they put forward proposal on a two-stage approach: first, viewing of sectors based on: their economic importance, their importance for adjustment ability and the diffusion of innovations, and signs of market malfunctioning from the context of consumers and businesses. Second, the investigation of selected markets including economic policy issues is conducted to identify whether further the action is needed. The vital principles that emerged from this study were published in an Occasional Paper in June 2007 (Guiding principles for product market and sector monitoring). Jointly, there are nine selected sectors account for 30.5% of employment and 22.9% of added value in the EU. The results-oriented approach is that it would also be more decentralized, requiring close co-operation with national authorities in monitoring and selecting sectors requiring intervention. In this manner, the market monitoring could contribute to explain the reform agenda for the years ahead in a way and it would instigate the internal market's full potential by allowing more effective policy instruments for more open, competitive and innovative markets. The economic impacts of the single market: To better be aware of where further achievement might be made in deepening the internal market. This pervades both microeconomic effects, such as on prices, trade flows and the level of competition and innovation; and macroeconomic impacts, such as how the single market and liberalization of the network industries have role to play for higher GDP and employment. The explanation shows that intra-EU trade, cross-border investments and competition. It is contributing to higher market integration and thus to higher productivity and competitiveness in EU businesses. Severe competition has also contributed to downward pressure on prices of benefit both to consumers and businesses and price convergence between the Member States. There is obviously scope for further trade integration and for price convergence especially in the service sectors. The euro banknotes have replaced the different sets of banknotes in the previous national currencies. The European Central Bank is liable for the overall approval of euro banknote issues. The practical aspects of putting these notes into circulation are performed by the national central banks of the member states having adopted the euro. There are myriad numbers of denominations in the current euro banknote series, ranging from the 5 to the 500 note. The plan and designs of the notes are the same throughout the euro area. The feature windows and gateways (on the front) and bridges (on the reverse) are depicted from different periods in Europe's architectural history. The euro is one of the potential assets and concrete achievements of the European integration process. It is a European icon, being the single currency of 13 European countries. It is playing a vital role in the daily lives of over 300 million Europeans living in the euro area. With many countries preparing for the introduction of the euro, the communication and dissemination of authentic information is on the single currency. Globalization- The Economic impact of Migration: The Council laid emphasis on economic and financial dimension of migration. The migration has a vital role to play to increase growth potential and facilitate adjustment. The immigration has contributed to the strong employment growth in many EU. The member states over the last decade to enhancing potential output growth. In a myriad number of countries, immigration has contributed to dealing with bottlenecks in labor markets, helping to contain inflationary pressures and improving competitiveness. The immigration can accelerate overall labor mobility. The impact on labor productivity can also be positive, although it is difficult to measure. The migration has become a vital factor in population growth in the EU and is the most dynamic source of population. On this basis, the Council considers that: a) The economic policy dimension of migration is of vital importance in the broader Analysis of the issue. The effect of migration on growth potential and employment growth, Labour markets, adjustment capacity, productivity, competitiveness and public finances can be important and should not be neglected. b) The highly-skilled and lower-skilled migration can contribute positively to the dynamism in the economy. It is depending on the specific situation and needs of the recipient countries. An effective immigration policy should be formulated with skills related to labor market requirements. c) The achievement of successful integration of migrants, especially in the labor market, should not diminish. The member states efforts in the implementation of reforms. The potential contribution of migration to growth depends in particular on the continuation of labor market reforms in many Member States, including reforms aimed at improving flexibility, hiring conditions to rapidly fill labor shortages, and incentives to work. Why new rules In 2007 the European Union is chalking out a new set of programmes: up to 975 billion over a seven-year period. These new funds will be used for more transparent and better accounted for than in the past thanks to the reform of the EU financial management rules. The new rules introduce provision to publish the lists of beneficiaries who receive EU money through governments in Member States. These measures will increase the effectiveness of EU policies and help protect taxpayers' interests. The achievement of the new funding period 2007-2013 is a challenge for all those involved: first of all, the beneficiaries themselves, who will use the funds to carry out their projects. The European Parliament who gave its crucial support to the process of modernization of the financial management rules. The member state actually manages almost 80% of the EU funds. The European Commission holds the ultimate responsibility for how these funds are spent. The new rules will ensure better, simpler and more practical solutions for all those working with EU funds, while ensuring effective control over public spending. The stability and growth Pact is depend on a political agreement reached at the Amsterdam European Council in June 1997. It has encouraged sustained and durable convergence of the economies of the member states belonging to the euro area. Against the backdrop of the difficulties and inadequacies identified in recent years in implementing the pact, the basic provisions were updated in 2005 to enable to introduce consistently in all countries. The changes were made to the pact's preventive arm; introducing the possibility of differentiating the medium-term budgetary objectives according to the level of debt and the potential for growth. The amendments were made to the corrective arm of the pact in order to reflect more accurately the realities of an enlarged European Union of 25 Member States. In February session (1) the European Economic and Social Committee had taken the view that, since reform of the pact was still not complete, guidelines were needed on strengthening European economic governance. Similarly, in a resolution adopted on 17 May, the European Parliament expressed concern at the difficulties in implementing the pact. At its spring session, the European Council indicated that 12 Member States were in excessive deficit (the Council had judged the United Kingdom's deficit to be excessive in January) and that the debt levels were above 60 % of GDP in several Member States. On 29 November the Commission recommended that the Council close the excessive deficit procedure opened in respect of France in view of the improvement of its public deficit. On the other hand, on 14 March the Council adopted a decision giving Germany official notice to bring its public deficit as quickly as possible in 2007 at the latest below the threshold of 3 % of gross domestic product laid down in the Treaty. On 10 October the Council issued for the third year running a recommendation to Hungary concerning the worsening of its budgetary deficit and the general deterioration of its public finances. On 28 November the Council noted the failure of Poland to take effective measures to reduce its deficit. In view of its inability to comply with the Council's previous recommendations, it had been given until the end of 2007 to introduce corrections and Poland will be set a new deadline. The specific role of the Commission in the process of European integration Within the frame work of institutional of the European integration process; the original treaties gave the Commission specific functions. It is notably as an advocate of the common interests of the Member States. The question of representation of the euro area vis--vis third countries and within international organisations such as the IMF has become caught up in a struggle between different concepts of European integration. At present, some member States are trying to maintain their national influence in the international field by treating the external aspects of EMU. The European Commission is the best watchdog for safeguarding their common interests. It wants the Commission to negotiate and represent the Union's common position within the international legal framework. Where the Union's trade negotiations (Article 133 EC) are prepared in a special committee in which representatives of the member states and the commission exchange their information and views for finally giving a mandate for negotiation to the Commission. An efficient coordination procedure for economic and monetary affairs is needed Unfortunately, neither the Convention nor the Intergovernmental Conference of June 2004 succeeded in formulating a more efficient decision-making procedure, neither with view to the external representation of EMU within the competent international organizations (like the IMF, World Bank, OECD), nor within the constraints of the Stability and Growth Pact (SGP) Bi biography: Arestis, P., McCauley, K., and Sawyer, M. (1999), An Alternative Stability Pact for the European Union, Working Paper No. 296, available at: < http://www.levy.org/pubs/wp/296.pdf > [accessed on 07/12/2007] Arestis, P and Sawyer, M. (1998), Keynesian Policies for the New Millennium, Economic Journal, vol. 108. Arestis, P., and Sawyer, M. (1998b), "New Labour, New Monetarism", Soundings , no. 9, pp. 24-42; reprinted in European Labour Forum , vol. 20. Arestis, P., (1997), Money, Pricing, Distribution and Economic Integration, London: Macmillan. Artis, M & Winkler, B. (1998), The Stability Pact: safeguarding the credibility of the European Central Bank, National Institute Economic Review, January, 1998. Bank of England (1999), The Transmission Mechanism of Monetary Policy, London: Bank of England. Bayoumi, T & Eichengreen, B. (1995), Restraining You: The Implications of Fiscal Rules for Economic Stabilisation, Staff Papers, International Monetary Fund, vol. 42. Begg, I. and Green, D. (1998), The Political Economy Of The Central Bank, Ch. 8 in P. Arestis and M.C. Sawyer (eds.). Bovenberg, A. L. & Jong A.H.M. (1998), The Road to Economic and Monetary Union, Kyklos, vol. 50. Buti, M., Franco, D. and Ongena, H. (1997), Budgetary Policies during Recessions: Retrospective Application of the 'Stability and Growth Pact' to the Post-War Period, Brussels: European Commission. Christina, P. W., (1999), Europe and Turkey: A Relationship Under Fire, in Mediterranean Quarterly, Winter 1999, Duke University Press 1999 Vol. 10, #1. Church, K. B. et al. (1997), Comparative performance of models of the UK economy. Dierkes, M., (2002), Europe in Transition, Can its Institutions Adapt UC Berkeley. Evans, M. C., (2006), Royal Navy, European Union Expansion: The Case for the Admission of Turkey, Strategic Review, Vol. 26, #4, Boston, MA Eichengreen, B. (1997), European Monetary Unification: Theory, Practice and Analysis, Cambridge Mass.: MIT Press. Eichengreen, B. & Wyplosz, C. (1998), The Stability Pact: more than a minor nuisance in D. Begg, J. von Hagen, C. Wyplosz and K.F. Zimmermann (eds.), EMU: Prospects and Challenges for the Euro, Oxford: Blackwell Publishers. European Commission (EC), (1998), EURO 1999, Convergence Report, Brussels: The European Commission. European Commission (MacDougall Report) (1977), Report of the Study Group on the Role of Public Finance in European Integration. Brussels: European Commission Europa (2007), European Union - Delegation of the European Commission to the United States; available, at: < http://www.eurunion.org/delegati/ppd/interns.htm > [accessed on 12-09-2007] Fatas, A. (1998), Does EMU need a fiscal federation Economic Policy, no.26. Hahn, H. (1991), The European central bank: key to European monetary union or target" Common Market Law Review, vol. 28. Hagen, V. J. & Eichengreen, B. (1996), Federalism Fiscal Restraints, and European Monetary Union, American Economic Review , AEA Papers and Proceeding, vol. 86, no. 2. Herdegen, M. (1998), Price Stability and Budgetary Restraints in The Economic And Monetary Union: The Law As Guardian Of Economic Wisdom, Common Market Law Review, and vol. 35. Honohan, P. (1995), The public policy role of the European Investment Bank within the EU, Journal of Common Market Studies, vol. 33, no.3. Krugman, P. (1989), The Case For Stabilizing Exchange Rates, Oxford Review of Economic Policy, vol. 5. Laurent, E., and Cacheux, J. L. (2005), Integrity and Efficiency in the EU: The Case Against the European Economic Constitution, available at: < http://www.people.fas.harvard.edu/ces/publications/docs/pdfs/Laurent_LeCacheux.pdf > [accessed on 07/12/2007] Lamfalussy, A. (1997), Securing the benefits of EMU, In Deutsche Bundesbank: Auszuge and Presseartikeln, no. 14. Myrdal, G. (1957), Economic Theory and Underdeveloped Regions, London: Duckworth, OECD (1998), Economic Outlook, December, 1998, Paris: OECD Onis, Z., (1999), Turkey, Europe, and the Paradoxes of Identity: Perspectives on the International Context of Democratization, Mediterranean Quarterly, Vol. 10,#3 Ozen, C. (1998), Neo-Functionalism and the Change in the Dynamics of Turkey-EU Relations, Perceptions, Sept-Nov. Vol. 3, #3. Rogoff, K. (1996), The Purchasing Power Parity Puzzle, Journal of Economic Literature, vol. 34 (2). Sawyer, M. (1999), Aggregate Demand, Investment and NAIRU, Discussion Paper, University of Leeds. Snyder, F. (1998), EMU Revisited: Are we Making a Constitution What Constitution are we making European University Institute Working Paper Law No. 98/6 Vassilev, G. (2003), Europe at the Margin: Political and Economic Ramifications of EU Expansion, available at: < http://home.uchicago.edu/georgevass/George_Vassilev__UC_Berkeley__Europe_at_the_Margin%20for%20POLITICA.pdf > [accessed on 07/12/2007] Read More