Fletcher School of Law and Diplomacy, Tufts University

The Economics of the European Union

Professor George Alogoskoufis

Apple hit with €13bn EU tax penalty over illegal Irish aid

From the Financial Times, August 30, 2016

Brussels has opened the door for European and US revenue authorities to claim a share of its €13bn recovery order from Apple after declaring the company’s Irish tax scheme unlawful.

The European Commission ordered Ireland to claw back a record-breaking tax bill after finding the US tech group enjoyed a quarter of a century of illegal state support — prompting a furious response from Apple and Washington.

Margrethe Vestager, competition commissioner, accused the world’s biggest company by market value of sidestepping taxes by channelling most of its non-US sales and profits through artificial corporate entities not required to pay tax anywhere. …

For the full story go to

https://www.ft.com

Google parent company Alphabet weighed down by EU fine

From the Financial Times, July 24, 2017

Alphabet executives were forced to defend the way businesses in its portfolio, such as YouTube, Maps and Android, are bundled together, as analysts quizzed them on the impact of a record-breaking €2.4bn EU fine.

Ruth Porat, Alphabet’s chief financial officer, told investors on Monday that the company was “reviewing our options” after the EU ruled that Google had abused its dominance in web search to give “illegal advantage” to its own shopping service in its results.

Google has said it will consider an appeal against the fine by the European Commission but, in the meantime, its parent company reported net income for the three months ending in June fell 28 per cent to $3.5bn as a result. The drop was the biggest decline in the internet group’s net income since 2008.

For the full story go to

https://www.ft.com

Brexit Negotiators Trade Barbs, Eyeing Deadlines

From the New York Times, August 30, 2017

British and European Union negotiators exchanged recriminations on Wednesday over a lack of progress in the latest round of talks on Britain's withdrawal, with both sides demanding change to meet looming deadlines.

Ahead of a planned Thursday morning news conference with his British counterpart David Davis, chief EU negotiator Michel Barnier rejected complaints that his team was too rigidly tied by laboriously agreed guidelines from the member states to find compromises with Britain's demands for close new relations.

For their part, British officials hotly denied accusations they were too short on ideas and preparation to make progress the EU wants to see on the divorce settlement before the other 27 leaders will agree to launch talks on a future trade pact. …

For the full story go to

http://www.nytimes.com

European Central Bank Chief Says Monetary Policy Must Stay ‘Very Patient’

From the New York Times, August 25, 2017

Mario Draghi, the president of the European Central Bank, said Friday that monetary policy must remain “very patient” even as an economic recovery finally takes hold in Europe.

“A significant degree of monetary accommodation is still warranted,” he said.

Mr. Draghi made the remarks here at the end of a speech devoted to the longer-term prospects of developed nations. He argued that the developed world must remain committed to globalization, which he described as critical to future prosperity.

The importance of trade “may actually be growing” because developed nations must rely on innovation as a source of growth, Mr. Draghi said, particularly given the burdens of aging work forces and high levels of public debt. He highlighted research that shows openness to trade keeps national economies closer to the technological frontier.

“To foster a dynamic global economy, we need to resist protectionist urges,” he said.

For the full story go to

https://www.nytimes.com

Nobel Laureate Joseph Stiglitz Says the Euro Needs Big Reform

From the New York Times, August 16, 2016

The nasty headlines from across the Atlantic — Brexit, terrorism, debt crises — almost make us forget that these were supposed to be Europe’s salad days. With a common currency and increasing integration, Europe was, finally, bidding adieu to cross-border conflict and economic crisis. Turmoil and strife were so very 20th century; the future was to be only digital apps and polyglot cafes.

Well, they still have Chartres, and they still have Goethe. They also have millions of migrants, rising nationalism, recurrent recessions and plummeting birthrates. What went wrong?

Joseph E. Stiglitz, the former chief economist of the World Bank and winner of the Nobel in economic science, proposes a simple answer. In “The Euro: How a Common Currency Threatens the Future of Europe,” he argues that the chief source of Europe’s malaise is its 17-year-old currency experiment. “While there are many factors contributing to Europe’s travails,” he writes, “there is one underlying mistake: the creation of the single currency, the euro.” …

For the full story go to

http://www.nytimes.com

George Alogoskoufis, The Economics of the European Union

Fletcher School, Tufts University

Purpose of the Course

To analyze the evolution and current state of the European Union, its institutional set up, it main policies with regard to the European economy, problem areas, and its role in the global economy.

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George Alogoskoufis, The Economics of the European Union

Principal Learning ObjectivesBy the end of the course you will be an expert on most of the

❖ micro-economic, macro-economic and governance aspects of the European Union,

❖ the European Union policies to support a single market and a single currency among sovereign states, in a context of social cohesion,

❖ the European Union problem areas,

❖ the economic effects and interactions of the European Union with the rest of the world.

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George Alogoskoufis, The Economics of the European Union

Prerequisites

❖ No prerequisites, although basic knowledge of microeconomics, macroeconomics and quantitative methods would be useful.

❖ Most of the analytical tools required will be taught in the context of the course

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George Alogoskoufis, The Economics of the European Union

Course StructureThe course is in two parts:

1. The first half of the course focuses on microeconomics. It examines the effects of economic integration on the structure of European product, labor and financial markets, the European economic and business context, growth in the EU, the Common Agricultural Policy (CAP), regional policy, EU competition and state aid policy and EU international trade policy, including trade relations between Europe and the USA and the current negotiations for a bilateral trade deal.

2. The second half focuses on macroeconomics. It examines the process of European monetary integration, the evolution from the European Monetary System to the creation of the Euro, European economic and monetary institutions such as the EU Commission, the ECOFIN Council, the Eurogroup and the Stability and Growth Pact, and the European Central Bank (ECB). This part of the course provides a detailed assessment of current European macroeconomic developments and policies before and after the crisis of 2010, the role of European financial integration, and monetary and fiscal interactions between Europe and the USA.

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George Alogoskoufis, The Economics of the European Union

Reading Material

The basic textbook for the course is, Baldwin R. and Wyplosz C. (2012), The Economics of European Integration, New York, McGraw Hill (henceforth BW).

In addition, a lot of information can be found in the website of the European Union, at https://europa.eu/european-union/index_en

The web site for this course is https://e251fletcher.wordpress.com.

The lecture slides, assignments, exercises and most of the additional readings and supplementary material will be available through the course site.

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George Alogoskoufis, The Economics of the European Union

The Economics of European IntegrationRichard Baldwin and Charles Wyplosz

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George Alogoskoufis, The Economics of the European Union

Assessment

❖ Course Work 50%, Final Exam 50%

❖ Course work consists of two team essays and presentations on each part of the course, plus two 50 question multiple choice class assessments.

❖ The final exam consists of an 100 question multiple choice exam and one 1500 word essay, on a topic selected from two alternatives.

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George Alogoskoufis, The Economics of the European Union

Part 1: The Microeconomics of the European Union

1. The Creation, Enlargement and Deepening of the European Union

2. Governance of the European Union

3. The European Union as a Customs Union and EU Trade Policy

4. Labour Markets and Migration

5. The Common Agricultural Policy and its International Impact

6. The Single Market and Competition and State Aid Policies

7. Regional and Social Policies

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George Alogoskoufis, The Economics of the European Union

Part 2: The Macroeconomics of the European Union

1. The European Union as an Optimal Currency Area

2. From the European Monetary System to the Euro

3. Coordination of Fiscal Policies and the Stability and Growth Pact

4. The Euro, Financial Markets and the European Central Bank

5. The Crisis in the Eurozone: Causes and Consequences

6. Prospects of the European Union and the Euro Area

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