Trabajo economia europea.

1. EUROPEAN ECONOMY Alicia de VillalongaZaforteza Cristina Picón Sánchez

2. INDEX: Whatwerethereasonsforthefounding of the EU?................................................................................................................3 Causes of the crisis…………………………........................................................…..6 Colapse of worldgrowth………………………………………………………………………....9 Actionagainst crisis………………………………………………………………………………10 Publicdeficit……………………………………………………………………………………….….11 Taking mesures……………………………………………………………………………………….14 Differentsaspects of the crisis in spain………………………………………………….15 Taking mesures in Spain………………………………………………………………………....16 Extreme case: Greece……………………………………………………………………………..17 Europeansolution…………………………………………………………………………………..19

3. INDEX: Impact of EU alternatives……………………………………………………………………..20 ComparingGreece and Spain……………………………………………………………...21 Europeafterthe crisis…………………………………………………………………………..23

4. WHAT WERE THE REASONS FOR THE FOUNDING OF THE EU? The EU is a community born right policy to encourage and accommodate the integration and joint governance of the peoples and states of Europe. The phases of integration are: 1951- European coal and steel community (signatory countries: Germany, Belgium, France, Luxemburg and Netherlands). 1957-Traties of Rome (signatory countries: Germany, France, Luxemburg, Belgium and Neederlands) 1967-Merger Treaty, establishing a Single Council and a Single Commission of the European Communities. 1973- Denmark, Ireland and United Kingdom join the EU. 1986- Spain , Portugal and Greece join The EU. 1993- Maastricht treaty. 1995- Sweden , Finland and Austria join the EU.

5. WHAT WERE THE REASONS FOR THE FOUNDING OF THE EU? 1999-Amsterdam Treaty 2003- Treaty of Nice. 2004-Cyprus, Malta, Slovenia, Estonia, Latvia, Lithuania, Poland, Hungary, CzechRepublic, jointhe EU. 2007-Romania and HungaryjointheEU. 2009- Lisbon Treaty.

6. WHAT WERE THE REASONS FOR THE FOUNDING OF THE EU? The main reasons for the founding of the EU are: Peace-keeping. Membership of a community of values. Increasingeconomicprosperity. A common foreign security policy. Prospect of greater success in solving transnational problems, such as environmental protection. Strengtheningneighborhoodrelations.

7. CAUSES OF THE CRISIS Subprimemortgage crisis Credit modality of USA`s financial market, is characterized by a higher default risk than the average of the rest of the credits. Most of them are secured by mortgages on properties. Why are notregulated? EDF regulates the proportion in the banks of these credits in theirs portfolio Titling: MBS mortagebackedsecurities CDO, collateralizeddebitobligations Sale CDS, credit default swaps

8. CAUSES OF THE CRISIS KEY POINT: On September 15, 2008 the U.S. government chooses to let go bankrupt Lehman Brothers (investment bank suffered losses 54 000 million in subprime and its shares fell 95%) The government preferred to assist with warranties 85,000 million to the global insurer AIG, which was nationalized by 80%.

9. CAUSES OF THE CRISIS Boom of thepropertybubble Increase the price of raw materials Oil (147$/barrel) Food Rising prices for industrial materials copper (8940 $/Ton) Rising prices for construction materials sulfuric acid and caustic soda (600%) Decrease competitiveness, hard to maintain the welfare state.

11. ACTION AGAINST CRISIS A) Use of automatic stabilizers triggered by the crisis itself: Lower economic activity resulting from the crisis decreases the government revenue raised by taxation and increases public costs associated with social benefits and unemployment. Consecuence: Impact of public deficits and the corresponding increase in public debt to the overcoming of the crisis.

12. PUBLIC DEFICIT (in % of GDP) COUNTRIES 2008 2009 2010 Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . –0,1 –3,9 –5,9 Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . –3,8 –8,6 –9,8 France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . –3,4 –6,6 –7,0 Italy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . –2,7 –4,5 –4,8 UnitedKingdom . . . . . . . . . . . . . . . . . . . . . . –5,5 –11,5 –13,8 UnitedStates . . . . . . . . . . . . . . . . . . . . . . . . .. –5,9 –12,1 –14,2 Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . –2,9 –6,7 –8,7

13. ACTION AGAINST CRISIS B) Rescue measures taken to prevent the collapse of the financial system and provide liquidity to economics traders. Public performances: -Liquidityinjections -Ad hoc interventions to save banks or financial institutions -Bank stock purchase -Granting of credits to banks and financial institutions -Acquisition of toxicassets -Guaranteesforbankliabilities -Protectionforassets -Asset swap -Depositinsurer -Restrictions on wages and salaries of executives of financial institutions

14. ACTION AGAINST CRISIS C) Financing mobilized To prevent the failure of industrial and services enterprises, boost the real economy and in particular, some economic sectors deemed strategic (automotive sector and alternative energy) -Increase spending on market policies: subsidies for hiring new workers -Reduction of taxes and social security contributions -Aid business access to financing, state aid and export subsidies -Increasepublic investment in infrastructure, environmental improvement, energyefficiencyimprovements -To support the improvement of the purchasing power of families, purchase of vehicles, energetic consumption, access to housing and decrease VAT

15. TAKING MEASURES IN SPAIN Review labor market Decrease in firingcosts Decentralization of wage fixing methods Pension reform, Increasing the retirement age to 67 years Construction: remove incentives for homeownership, encourage rent Reduced restrictions on retail and professional services Accelerate the restructuring of the financial system Reduce the overcapacity Decrease the risk of “savings banks”

16. DIFFERENCIAL ASPECTS OF THE CRISIS OF SPAIN Zero growth in real average wages in 18 years ( 0.7%) The debts of families has duplicate Low productivity and low added value High levels of latent unemployment ( 8%- 10%) Lowrates of formation Low percentage of GDP spent on technology and energy Suntourism

17. TAKING MEASURES IN SPAIN OBJECTIVE: reduce the public deficit FORECASTS FOR 2010 AND 2011 Reduction salaries of public officials (2400 mill in 2010, 4800 mill en 2011) Review medicine prices (1000 mill) Babycheckelimination (1250 mill) Budget cut in autonomous communities and city councils (1200 mill) Suspension of pensionincreases Elimination of the partial retirement (1150 mill) Elimination of the retroactive in application of dependency Reduction of the budget for development aid (600 mill) Cuts in the government itself (15%)

18. EXTREME CASE: GREECE Greece economic data in the period of the crisis: GDP growth: -1.1% Inflation: 1.30% Unemploymentrate: 9.2% (Data for the third quarter 2009) Fiscal deficit : -12.7% Publicdebt : 113% (in% of GDP)

19. EXTREME CASE: GREECE Explanation of the crisis: Successive Greek governments mask their accounts, to be admitted to the European currency. The Greek economy is not competitive and is heavily indebted. Wages and prices, according to Eurostat, increasing more than in richer countries and the EU competitive. Heavy reliance on foreign investment.

20. EUROPEAN SOLUTION The EU has made a salvation plan for Greece, which Greece is committed to undertake the following measures: Controllingthe fiscal crisis. A package of measures worth 4.8 billion euros, with a distribution: half will be for public spending cuts and the other for the tax increase . Increaseby 21% VAT. 30% cut in subsidies for public sector wages. Pensions will be frozen for one year the public sector.

21. IMPACT OF EU ALTERNATIVES If these alternative measures are not taken across Europe would be threatened, so they take hard decisions and courageous. These measures, want to avoid contagion to other countries like Portugal and Spain, and increase international confidence."

22. COMPARING GREECE AND SPAIN Greece GDP: 241.119 (EUR million) GDP GROWTH : -1.1% INFLATION: 1.3% UNEMPLOYMENT RATE: 9.2% FISCAL DEFICIT: -12,7% PUBLIC DEBT: 113% ( in % of GDP) Spain GDP: 1.049.316 ( EUR million) GDP GROWTH:-3.6% INFLATION: -0.3% UNEMPLOYMENT RATE: 18.1% FISCAL DEFICIT: -11.7% PUBLIC DEBT:55.2% ( in % of GDP)

23. COMPARING GREECE AND SPAIN Explanation of the comparation of the two countries: The public deficit has very high levels in the two economies, it makes the two are now dependent on international funding. The deficit is cyclical in Spain, while Greece is structural Greece's public debt due soon, and have no solutions for pay, while the debt is the strongest Spanish Moody's Regarding the funding Greece has a problem accessing finance because markets do not want to buy their debt, while that of Spain is a matter of price Unemployment in Spain is very high, more than Greece (18% in Spain, 9% in Greece). Experts believe that it is not a priority problem in the financial market, what they care about is the solvency

24. EUROPE AFTER THE CRISIS Objective: to reduce thepublicdebtwithoutcompromisinggrowth. Weneed: Closerinternationalcooperation Strengthening of fiscal institutions European Council of systematic risk and the European system of financial supervisors Benefit reform of health and pension systems Deficit countries: increase intern savings and increase exports Countries with surplus: increase domestic demand and promote consumption Improveproductivity Increase labor marketflexibility Fightagainsttaxhavens