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Short Run:Recession
•Falling Output
•Unemployment
•Deflation
•Bigger Government Deficit•A decrease in Wealth•Low Consumer Confidence
Short Run Long 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?
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: 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:
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?
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?
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?
Question 5: What policies should be
considered as priorities?