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Sciences Po Stras exams > The EU and the World Economy > Flashcards

The EU and the World Economy Flashcards

1
Q

The question after WWII was “How can Europe avoid a new war”, so how could this be avoided?

Additionally, what could be said of Europe a few years after the War?

A

could be avoided by European integration
in Europe there was large amounts of poverty til the mid 1950’s—politically Western Europe struggled democratically, hunger and refugee camps were common

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2
Q

What was the question European countries were faced with–post WWII and at the beginning of reconstruction?

A

Capitalism or not?

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3
Q

What was the “driver” of economic integration?

A

the Cold War

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4
Q

What can be said of the Marshall plan?

A
  • one part of the plan the OEEC (organization for European Economic Cooperation) created in 1948
  • it divided financial aid among members to promote economic integration–reduce intra-European trade barriers
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5
Q

How much did the Marshall Plan entail to European reconstruction?

A
  • $12 billion USD
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6
Q

What was the intergovernmentalist vision of European economic integration?

A
  • nation states should be sovereign to make policy decisions
  • cooperation and coordination b/w Euro states both fiscal and monetary policies
  • everyone must agree
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7
Q

What did the Schuman Plan do for economic integration?

A
  • created the European Coal and Steel community
  • France and Germany would place both their coal and steel sectors under control of a supranational authority
    – so that a war between France and Germany would be impossible
  • it implied pricing, imports, exports and production of all national coal and steel were placed in hands of the ECSC’s high authority
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8
Q

Who were the 4 other countries that joined the ECSC/Treaty of Paris after France and Germany?

A
  • Belgium
  • Luxembourg
  • Italy
  • Netherlands
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9
Q

What did the Treaty of Rome do in 1957?

A
  • created the EEC (European Economic community)
    – idea was to expand the economic integration from coal and steel only to the whole economy
  • as well as form a customs union and a common market b/w 6 members of the EEC
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10
Q

What was the objective of the Treaty of Rome?

A
  • a common market in Europe with free trade b/w 6 members–free mobility of workers, and money liberalization
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11
Q

What did the common customs union do?

A
  • remove tariffs and quotas b/w members of the EEC but have common tariff policy for non-members
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12
Q

What did the Bretton Woods System do for economic integration?

A
  • ensured fixed exchange rates against the USD($) and a fixed $ price of Gold
  • the creation of the IMF, and World Bank
  • now the world-wide monetary stability fully depended on the $ and on U.S. monetary policy
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13
Q

What was a problem with the idea that the World-wide monetary system post WWII depended on U.S. monetary policy?

A
  • the U.S. monetary policy became too expansionary and the price of Gold decreased
  • led to a gradual breakdown of Global fixed exchange rates based on Bretton Woods Agreement between 1971 and 1973
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14
Q

What was the standard price of USD/oz of Gold that was the exchange rate for early integration?

A
  • $35/1 oz of Gold
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15
Q

What happened to the exchange rate in the 1960’s?

A
  • very high inflationary policy from U.S. central bank for Vietnam War–the USD depreciated
    –the reactions were that German, French, and other central banks converted their $ into Gold
  • this led to high instability with the exchange rates
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16
Q

Who brought forward the “solution” for the problems with exchange rate instability?

A
  • Pierre Werner-created the Werner Plan (adopted in 1971) to create an Economic and Monetary Union by 1980
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17
Q

What happened to the Werner Plan?

A
  • it failed to create a monetary union
    – fixed exchange rates b/w member states’ currency
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18
Q

What did the 2 oil shocks of the ‘70’s do?

A
  • the shocks in 1973, and 1979 created stagflation–high inflation and decreasing incomes
    –so a series of exchange crises followed
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19
Q

What is stagflation?

A
  • low growth rates (stagnation) + increasing inflation
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20
Q

What was true about Germany’s monetary position early ‘60’s?

A
  • the Germans were able to keep inflation rates low–very competitive, but France and Italy were loosing competitiveness
  • their currencies were losing value compared to the Deutschmarks
  • German central bank-price stability kept the currency strong
    –it was appreciating compared to other Euro currencies (Francs, Lira-Italy)
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21
Q

What is the idea “European snake”?

A
  • connect currencies together
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22
Q

What are some details about the European Monetary system?

A
  • created in 1979–revived the idea of closer cooperation on monetary policy b/w the central banks of the EEC countries
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23
Q

What was the aim of the EMS (European monetary system)?

A
  • to establish the Exchange Rate Mechanism (ERM) with European Currency Unit (ECU)
    to reduce exchange rate variability and achieve monetary stability within the EEC
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24
Q

What was the ECU?

A
  • the European currency unit–combined 8 member states currencies in the ERM
  • the U.K. didn’t participate
    **it’s a fictitious currency
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25
Q

What could be said of the second half of the 1980’s?

A
  • stability of Euro currency
  • Jacque Delors-president of European Commission suggested complete internal market
    • single market program
    • policy published in 1985, by ‘87 all member states had ratified
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26
Q

What did the Single European Act do?

A
  • reinforce 4 freedoms of the Treaty of Rome
  • free trade of goods and services, free mobility of workers
  • focused on capital mobility–financial liberalization

– it threw out all restrictions on capital movement by 1988

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27
Q

What was one aspect of the monetary integration tricky for some member states?

A
  • if countries adopted a fix rate exchange, they had to switch to the common EU monetary policy
    – no longer a national monetary policy
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28
Q

What could be said of the Maastricht treaty in relation to economic integration?

A
  • Jacque Delors proposed creating a monetary union with the fall of the Soviet Union
  • a single currency would lead to economic integration, political, and cultural integration
  • signed in 1992 transformed the European Economic Community into the European Union
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29
Q

When was the Euro created?

A

1999

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30
Q

Who decided to move the EU towards a monetary union?

A
  • French President François Mitterand, and German Chancellor Helmut Kohl
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31
Q

What are some other things to note about the Maastricht treaty’s influence?

A
  • created the EU citizenship
  • strengthened EU cooperation in Defense and Security Policy as well
  • Maastricht Law is part of every member’s national law
    • votes by parliament
    • or referendums: votes by population in country
  • ratification of the treaty took place in November 1993
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32
Q

When did Euros begin circulating?

A
  • 2002 coins, banknotes began replacing national currencies
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33
Q

How many member countries of the Eurozone are there?

A

20 member states

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34
Q

What can be said of the 2004 enlargement?

A

it was the largest enlargement with Cyprus, Czech Republic, Poland, and many others
- an enlargement to the east
- very difficult enlargement because of the troubles with each countries currencies
- because of the troubles with enlargement the Lisbon treaty needed to be adapted in December 2009

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35
Q

What is true about exiting the Euro zone?

A
  • to leave the Euro zone you have to leave the EU
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36
Q

What exists based on Economic integration of European countries?

A
  • free trade of goods, services, mobility of workers
  • common trade policy with the rest of the world
  • macroeconomic coordination–single currency and fiscal coordination
  • common policy on agriculture
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37
Q

How much global trade does the EU account for? (%)

A

30%

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38
Q

When was the Customs Union created, and what did it help with?

A
  • created in 1957
  • was a first big step of Political coordination–the Treaty of Rome granted power to the EU
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39
Q

What is the EU’s common commercial policy?

A
  • Nations cannot conclude trade agreements with other international member states
    – it would undermine other international member states–and undermine the common market
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40
Q

What did the Lisbon treaty do to Commercial policy?

A
  • the common commercial policy expanded to include trades in service to regulate capital movements
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41
Q

Who are the biggest EU trading partners?

A
  • other non EU countries in Europe
  • U.S.
  • U.K.
  • China
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42
Q

What is the EU’s tariff policy?

A
  • Common External Tariffs (CET)
  • dairy products are the highest %
  • the average tax rate is 5%
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43
Q

What is true about the EU commissioner and anti-competitive practices by firms?

A
  • the Commissioner regulates the policies of restructuring firms in case of anti competitive practices
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44
Q

What is a cartel?

A
  • an organization formed by a group of producers who consult each other in order to reach a formal agreement-usually on illegal prices
    – they raise prices generally 20% higher and decide on a price floor for producers
  • cartels don’t increase efficiency
  • it is a “zero-sum” game
  • undercut other firms via creating secret agreements
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45
Q

What is an Oligopoly?

A
  • there are many firms on the market
  • profit is lower than when it is a monopoly situation
    – monopolies have fewer firms but have higher profit
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46
Q

What is the correlation between an Oligopoly and a cartel?

A
  • cartels/firms. get together in an oligopoly situation but set price like if it was a monopoly situation-to increase profit
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47
Q

What is consumer surplus?

A
  • what consumers are ready to pay –(minus) the price they have to pay
  • a fictitious gain
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48
Q

What is producer surplus?

A
  • market price – (minus) production costs
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49
Q

What is the market cost for a cartel?

A
  • the production costs
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50
Q

Are cartels harmful to market efficiency?

A
  • Yes
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51
Q

What do cartel participants agree on?

A
  • joint fixing of a price floor (most common)
  • geographical market division–exclusive territories
  • eliminating a potential competitor
  • production quota for each cartel participant
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52
Q

What is considered a “dominant position”?

A
  • firms with largest market share
53
Q

What are some examples of “abuse of a dominant position”?

A
  • bundling sales
  • exclusivity agreements
  • rebates
  • denigration of competitors
  • refuse to supply-give competitors access to an essential input (margin squeeze)
  • excessive prices
  • price discrimination
54
Q

What is an exclusivity agreement?

A
  • contractual agreement b/w producers and consumers to buy a certain amount of sales/goods/services from 1 particular producer
55
Q

What is a rebate?

A
  • price reduction for consumer to only be able to buy from that producer
  • “price reduction”
  • normal
  • beneficial to consumers
56
Q

What is denigration of competitors?

A
  • discriminate products of new competitors
  • pharmaceutical companies
    • original drug producers vs new producers
57
Q

What is the definition of price discrimination?

A
  • apply dissimilar conditions to equivalent transactions with other trading parties
    – placing them at competitive disadvantages
58
Q

What is true of mergers and acquisitions?

A
  • a firm with a technology gap can benefit from the advance of its new partners
  • M&A likely to generate some dynamic efficiency most common argument is the existence of economies of scale
  • producing more can be done by merging with another company or buying it outright
59
Q

What is economies of scale?

A
  • reduce unit cost of production by increasing production
60
Q

What are the costs of mergers and acquisitions?

A
  • main cost is likely to increase market concentration and reduce competition in the market
  • the short term=problematic for consumers, because they bear a higher price
61
Q

What is true about State aid within the EU?

A
  • subsidies provided by the national gov’ts to companies is forbidden in EU law–and can be seen as distorting competition
  • gov’t’s seeking to prevent job losses, bankruptcies–seen as industrial restructuring=not good for workers/consumers
  • tax payers pay the costs of subsidies, and state aid
    Subsidies create Market distortion
62
Q

Who enforces the EU Competition rules (Article 101-109 of the Treaty on the Functioning of the EU (TFEU)
–the New Treaty of Rome?

A
  • the European Commission with national competitive authorities
63
Q

What can the commission do when enforcing the EU competition rules?

A
  • power to prohibit anti-competitive practices
  • use injunctions to seize/stop abusing practices
    –can impose fines
64
Q

What is the recourse if firms/states don’t follow the European Commission?

A
  • they can be taking to the European Court of Justice
65
Q

What do the horizontal agreements in Article 101 of the Treaty on the functioning of the EU say?

A
  • agreements b/w firms that produce the exact same good
66
Q

What can be said about the vertical agreements in the Article 101 of the Treaty of the functioning of the EU?

A
  • agreements b/w firms of different stages of production process
67
Q

What is the “European Union Merger Regulation”?

A
  • came into force in 1990 aims to control mergers and acquisitions
    • defines anti-competitive behavior-concentration-significantly impede effective competition in common market or in a substantial part of it
68
Q

What is predatory pricing?

A
  • a company sets a price too low (below the unit cost of production)
69
Q

What can be said about the COVID crisis and state aid?

A
  • states were allowed to provide aid to help businesses
70
Q

What are some facts about the Common Agriculture Policy (CAP)?

A
  • could be said it was the “first European Policy” (common policy)
  • created in 1962
  • first policy in terms of budget
  • accounts for 40% of budget
  • has a federating rule
  • allowed Europe to become the World’s agriculture power
  • increased farmers incomes post WWII
71
Q

What can be said about the CAP, in terms of policy, relations intra-EU?

A
  • the enlargement in 2004 has exacerbated conflicts between EU member states
  • the costs for the program has only grown since its inception
  • the CAP is intended to support farmers/producers and not consumers
72
Q

How has the CAP become controversial?

A
  • agricultures’ share of the EU member states’ GDP has decreased, and its’ share of employment
  • food security, terms of supply, production of healthy food for consumers
  • quantities vary a lot
73
Q

What can be said about Gregory Kings Law?

A
  • demand for agriculture goods-relatively stable; insufficient or excess supply produces price variation
  • supply is very volatile, and uncertain
74
Q

How can the continuous deterioration of farm incomes be explained by?

A
  • it’s the 2nd specificity
  • fixity of the production factors obliging farmers to produce a lot
  • low income elasticity of demand translates to a very small increase in demand for ag products in long run
  • excess supply of ag products leads to a fall in price of agricultural products over time–leads to decline in farm incomes
75
Q

What are the stated objectives of the CAP?

A
  • stabilizing agricultural markets
  • ensuring a fair standard of living for the farmers
  • ensuring security of supply-guarantees food independence for food producers
  • ensuring reasonable prices for consumers
  • increasing agricultural productivity–introducing technical progress and specialization-while preserving family farms
76
Q

What are extra-economic reasons for the CAP?

A
  • political reasons:
    • supporting agriculture well regarded by the population
    • farm income support has electoral motives
  • strategic reasons:
    • search for food independence
    • commercial argument
      • promote exports
77
Q

What did the Stresa Conference of 1962 do?

A
  • unicity of markets–one large Europe Ag market
  • community preference (protectionist argument) (preference of European goods, than foreign goods)
  • financial solidarity
    • common community budget
78
Q

What is the CAP’s main policy instrument (or the EU’s economic instrument)?

A
  • the price floor
    • set a price level for farmers which is above the world market price
    • it is a real guaranteed price for farmers which supports EU producers and markets from world markets
  • the price floor is 50-100% above world market prices
    – it can be said the farmers are guaranteed to sell all their production at this price floor
79
Q

How can the EU intervene in the CAP–or direct market intervention?

A
  • they can intervene in case of production shortages
  • over production
    – in this case EU authorities buy the extra product at the price floor then resells at the World market price to foreign countries
80
Q

What can be said about European countries (and the European community) shortly after WWII?

A
  • they were an importing “country”
81
Q

What can be said about the EU from the ‘70’s and ‘80’s onwards?

A
  • they became an exporting country
    • may not necessarily be a good thing
      – created a budget problem-so not the best thing
82
Q

How did EU countries become an exporting bloc in the 1980’s?

A
  • as a result of guaranteed prices
  • due to an increase in domestic supply of agricultural products resulting from high guaranteed prices
  • no more uncertainty about prices and incomes
  • technology increases
83
Q

What is the substitution phenomenon?

A
  • substitute domestic products with high prices with other products
84
Q

What can be said about the CAP reform in the 1980’s?

A
  • several objectives set out in the Treaty of Rome had been achieved
  • food self sufficiency
  • the European supply rate increased
  • strong development of intra trade in 1960’s
  • from 1973 to 1990 prices were still ~20% higher than the U.S. so price stabilization was sought
  • technology improvements led to productivity increases while increasing unemployment of farms/farmers
85
Q

Was self sufficiency the main problem of the CAP? If so why?

A
  • yes, it can be said when self sufficiency was achieved there became a problem of overproduction
  • overproduction came from too high of price floors and the community began exporting the large amounts of surplus
86
Q

How did the CAP distort competition?

A
  • penalizing for consumers: loss of surplus de to the transfer of resources from consumers to producers
  • there was criticism at the International level–EU agriculture became excluded from the trade negotiations
87
Q

At the international level how was the CAP, and EU criticized?

A
  • during the renegotiations of the GATT Uruguay round (1986-1994) the U.S. called for elimination of support measures for European agriculture by 2000 and the opening of European markets to foreign producers
88
Q

What was the “Cains group”?

A
  • U.S., Australia, New Zealand, Canada, Argentina, Brazil, Chile, Indonesia, Thailand
89
Q

What is true about the CAP’s guaranteed financial assistance?

A
  • more beneficial to large firms
  • only 20% of the firms receive 80% of the funds
90
Q

True or False, the CAP increases the risk of environmental abuses?

A

true

91
Q

What did the Mac Sherry reform do (1992)?

A
  • EU trade partners discussed reform during GATT Uruguay round
    • introduced early retirement
    • European prices moved closer to world prices
    • rather favorable trend in farm incomes
      **the Mac Sherry reform only effective til 1999
92
Q

What did the Agenda 2000 reform do?

A
  • deepened the reforms/measures from 1992
  • aimed to prep for enlargement of the EU to the Central Eastern Euro Countries (increased the budget of the CAP)
  • new pillar of CAP created: rural development
  • subsidiarity–decentralizing the CAP
    – countries to contribute more financially to their farmers and rely on less public intervention
93
Q

What are the 2 pillars of the CAP?

A
  • first pillar: direct payment to famers
    • conditional on adaption of sustainable farming practices, and wildlife protection
  • second pillar: rural development
    • encourage innovation, boost competitiveness, encourage development of low-carbon economy and Econ development in rural areas
94
Q

What are the main challenges to the CAP?

A
  • farmers only get about half of the CAPS support, rest goes to non-farming landowners and to agro-chemical firms
  • relative decline in farm incomes
  • society’s expectation of the non market functions of agriculture–more pressing on environmental, and health issues
95
Q

What can be said now that food security exists?

A
  • a shift from quantity to quality
    ** quality>quantity
96
Q

What’s the definition of an economic and monetary union?

A
  • an agreement between 2 or 3 more states based on 3 elements:
    • irrevocable fixation of the exchange rate
    • full capital mobility
    • a common monetary policy
97
Q

What is the “impossible trinity” that Robert Mendel talked about?

A
  • sovereign national monetary policy
  • free capital mobility
  • fixed exchange rates
98
Q

Explain what Mendel meant by the impossible trinity?

A
  • with national sovereignty, monetary policies, different interest rates existed–different demands of currencies
99
Q

What could be said about the Bretton Woods system (facts, ideas)?

A
  • Bretton Woods conference 1944 led to establishment of international monetary system with the dollar as the “anchor” with its value connected to gold
  • all other international currencies defined in “dollars”
  • 1960’s U.S. inflation led to the dollar devaluing
  • 1971 Nixon ended the gold reserve system
  • 1973 the fixed exchange rate system with the dollar as an anchor was abandoned
100
Q

What is the European Snake?

A
  • in response to the Bretton woods collapse and dollar devaluing, Europe sought to limit fluctuations in intraeuropean exchange rates
  • European countries decided to limit the fluctuation range of bilateral exchange rates within a “common fluctuation band” of +/- 2.25%
101
Q

What happened to the European Snake?

A
  • due to the oil shock in 1973 European national central banks reacted differently
  • it failed and was abandoned in 1978
102
Q

Who led the creation of the European Monetary system?

A
  • German chancellor Helmut Schmidt, and French president Valery Giscard
103
Q

What can be said of the European monetary system after its inception?

A
  • at its center were jointly managed fixed adjustable exchange rates
  • all ERM currencies tied to one another-band of fluctuation of +/- 2.25% defined against newly defined common policy - The European Currency Unit (ECU)
104
Q

Why was the ECU strong?

A
  • appreciated against other currencies because it was fixed to the Deutschmark
105
Q

What could be said about the years from 1979-1985 economically?

A
  • inflation rates varied differently
  • Germany wasn’t competitive during this time
  • uncompetitiveness existed due to inflationary pressures between different national monetary policies
  • some countries had to implement restrictive monetary policies to bring down high prices-and inflation rates to around 2%
106
Q

What were the 3 sparks which led to the EMS crisis of 1992-93?

A
  • German reunification had economic consequences: this created inflationary pressures in other countries
    • inflation was above 5%–the Bundesbank increased restrictive policy
  • Denmark referendum to the Maastricht treaty
    • with the Maastricht treaty came the monetary union
    • due to internal problems Denmark voted against the monetary union
      • but Europe ignored Denmarks decision
  • there were speculative attacks against other currencies
    – some too strong for operations to continue in medium/long term
    — some currencies needed to be developed up like Ireland, Portugal
107
Q

When was a floating exchange rate system adopted in Europe?

A
  • around 1993
  • to uphold the ERM principles monetary authorities adopted new ultra large bands of fluctuation +/- 15%
  • to end the speculative attacks
108
Q

What is the entry criteria into the Maastricht treaty?

A
  • inflation rates shouldn’t exceed an average of 3 lowest inflation rates achieved by EU member states by more than 1.5%
  • long term nominal interest rte shouldn’t exceed by more than 2% the average rates observed in 3 lowest inflation rate countries
  • the country must have taken part in the ERM for at least 2 years without having to devalue its currencies
  • budget deficits shouldn’t exceed 3% of GDP
  • public debt shouldn’t exceed 60% of GDP
109
Q

What can be said about the criteria for the Maastricht treaty?

A
  • the first 3 criteria try to deal with inflation
  • the last 2 criteria try to decrease incentives for high inflation
  • and the last criteria about GDP public debt not exceeding 60% of GDP was changed to say “moving towards 60% of GDP
110
Q

What are principles of the European monetary union?

A
  • Germany feared the new currency wouldn’t be strong
  • a priority was given to price stability
  • Central bank independence
  • fiscal discipline
111
Q

What is the European Central Bank’s definition of price stability?

A
  • year on year increase in the harmonized index of Consumer Price (HICP) for the eurozone of close to 2%
112
Q

What is true about restrictive monetary policy?

A
  • raises interest rates to decrease demand
113
Q

What is expansionary monetary policy?

A
  • lower interest rates, print more money
114
Q

Is the European Central Bank independent?

A
  • Yes
  • however 20 gov’ts can have pressure on it
115
Q

What did the ECB do during the sovereign debt crisis?

A
  • they caved in to pressure from the gov’t’s specifically Greece and printed money–because governments can’t borrow money because rates are too high
    – so inflation results in the short term, demand increases so does inflationary pressures
116
Q

What are the functions of the Eurosystem?

A
  • implementation of the monetary policy
  • management of the official foreign exchange reserves
  • supervision of the payment system
  • prudential supervision of credit institutions and the financial system
117
Q

What’s the difference between the European system, and the Eurosystem?

A
  • the European system: the ECB and the 27 national banks
  • the eurosystem: ECB and 20 national central banks of the eurozone
118
Q

What are the organizations of the ECB?

A
  • Governing counci (RUNS THE EUROSYSTEM) l: comprised of executive board, and Governors of NCB’s of EMU countries
  • Executive board: comprised of the President and Vice President, and four experts
  • General Council: comprised of Governors of NCB (national central banks of non-EMU countries), the President and VP of the ECB, and Governors of NCB’s of EMU countries
119
Q

Describe the General council of the ECB

A
  • 27 governors of national central banks of the European Union members
  • plays a “linking role” b/w those who haven’t joined the Eurozone and the ECB
120
Q

What do governors do?

A
  • make decisions as it pertains to the eurozone situation–not their own national interests
121
Q

What is the Eurosystems main characteristic? How does it obtain this? And what is the eurosystems main policy objective?

A

main characteristic: independence
- independence based on:
- the status of their officials
- policy objectives and investments
- financial independence
- main policy objective: price stability-inflation rate in euro area close to 2%

122
Q

What is the Eurosystems main monetary policy instrument?

A
  • open market operations are the Eurosystems main instrument
  • usually weekly auctions–the “main refinancing operations” the means by which the Eurosystem provides liquidity to the commercial banks on interbank market
123
Q

What can be said about the Eurosystems main refinancing interest rate from 1999-2024?

A
  • the first 2 years of the ECB:
    • tightening–contractionary policy, at first high rates
  • 2006: decided to normalize interest rates ~2%
    • increased interest rates applying expansionary policy
124
Q

If the interest rate is zero what does the ECB do?

A
  • implement nonconventional policies
    • normalize interest rates–increase interest rates to protect against global crisis
      — reaction to the 2007/08 global crisis–the eurosystem decided to decrease interest rates
      – 2022 Russia’s invasion of Ukraine
    • led to inflationary pressures
    • at 0% interest rate–have to pursue quantitative easing
125
Q

What can be said about national fiscal policies and their relationship to the European Monetary union?

A
  • fiscal policies–decentralized-are important for stabilizing shocks–smoothing national output and employment fluctuations
  • a gov’t can’t decide to change its fiscal policy when it deems necessary
  • monetary policy are easier to implement by NCB’s and are more efficient in neutralizing shocks
126
Q

In what ways does the fiscal policy of the ECB work?

A
  • automatic stabilizers: doesn’t require decisions by the gov’t or any approval by parliament
    – negative shocks: individual incomes decline & fiscal revenues
  • discretionary fiscal policy on contrary requires explicit action by government to change taxes or spending
    ***fiscal policies are automatically expansionary during crises
127
Q

What are the “fiscal spill overs in a monetary union”?

A
  • intra EMU trade:
    • reducing taxes to pursue expansionary policy leads to increased demand-higher exports to country affected
  • threat of a gov’t defaulting on public debt
    • undermines credibility of a monetary union-in fight against inflation and viability
128
Q

What can be said about the EU’s next Generation EU plan?

A
  • July 2020 800 billion Euros
    • recovery for COVID crisis
    • member states share similar debt–fiscal solidarity

Sciences Po Stras exams (3 decks)

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