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Economics 2 (Subject) / asda (Lesson)
- European Union Began with treate of rome in 1958 Objective: harmonize national laws & regulations so that goods, services, people and money can freely flow across national borders 1999 introduction of CB and single currency € 28 countries 450 mil people 15€ trillion GDP Price transparency no customs at national borders
- Stability and Growth pact as a framework for fiscal policy: Two fiscal criteria Budget debt / GDP * 100% <= 3% Government debt / GDP * 100 <= 60% The commission writes a report when a member state does not fulfil the criteria.
- Public debt problem crowing out effect Amount of public debt is influenced by current economic development in case of economic downturn --> tax revenues decline, transfer expenditures increase in phases of economic weakness--> public spending and thus budget deficit increases If government borrows money --> Y = C+I+G(+)+(Ex-IM) this can lead to an interest increase in capital market this leads to a push back in private demand (crowing out effect) --> Y(-) = C(-)+I(-)+G+(Ex-IM)
- Effects of over indebtedness of a state debt service (interest payments, repayments) is high, money is missing for other tasks creditworthiness of state is falling and risk for lenders is rising falling creditworthiness and rising credit risk lead to higher interst rates In extreme cases, no further credits can be raised If a state is over-indebted, this tends to lead to a devaluation of its own currency. This is good for exports and bad for imports
- Basics of the EU: Economic integration Areas of integration Integration of economic constitution Basic legal regulations for free movement of goods and production factors Integration of micro economically relevant areas of economic policy taxes, market regulations, social systems Integration of macro economically relevant areas of economic policy financial and monetary policy
- Four freedoms Free movement of : Goods Services Persons Capital
- EU comission / fair competition Competition is essential for the functioning of a market EU comission monitors competition Tasks of EU comission -evaluation of restrictions to competition affecting trade between member states -European merger control -monitoring of governmental subsidies Companies can challenge comission decision before the ECJ
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