miércoles, mayo 12, 2010

The History of European Integration

The integration of Europe and the crisis in Greece
An unexpected event

Alfredo Ascanio

Economic integration began in 1953 on a sectored basis with the setting up of the European Coal and Steel Community. From this starting point, many had thought that it would spread to other branches of activity, such as the other sectors of energy, transport, agriculture and a few industries. But this road was definitively abandoned when the European Economic Community was born in 1958,in favor of an integration, which embraces all industries.

The main objective of integration, the international division of labor, was actively pursued. The progressive implementation of the customs union was indeed more rapid than one had thought when the EEC treaty was drafted, and it passed without delay (but not without difficult negotiations) to the second stage of the transition period.

On the other hand, only minor steps have been taken so far in the common pursuit of other objectives. The economic union-which implies a common economic policy – is indeed limited at present to the objectives of agricultural protection and promotion of internal competition. This delay is not surprising however: the economic union is to be established by the end of the transition period only; and the authors of the treaty have avoided to issue precise provisions in every field because they thought that the policy-makers would see their problems more clearly after some experience of cooperation: a long period of harmonization is thus necessary.

The European Union (EU) replaces the old European Economic Community (EEC), established in 1957. The block, formalized in 1992 by the Maastricht Treaty (signed in December 1991), is truly a unique internal treaty, with its own currency (the Euro), which came into force in 1999, and a common financial and banking system. The main bodies of the EU are: the European Commission (executive body), the Council of Ministers (legislative branch) and the European Parliament (consultant and supervisory organ of the laws and the budget.

The financial crisis in Greece started in 2007 as a result of the crisis in the USA. 

Greece was surprised at the high indebtedness or 300.000 million Euros. 

It is necessary that we remember that the Euro zone are the following 27 countries: Germany, Austria, Belgium, Cyprus, Slovakia, Slovenia, Spain, Finland, France, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands Portugal, Bulgaria, Romania, Hungary, Latvia, Estonia, Lithuania, Poland, the Czech Republic, Cyprus, Denmark, Sweden and the United Kingdom. Montenegro and Turkey expected to join EU.

The impact of the Greek problem impacts on these countries and also weakens the Trade of Maastricht. 

All countries distrust of the ability to pay in Greece, but it offers an aid to that country millions 110 thousand Euros and the government of George Papandreou announced severe austerity measures with a savings plan of 4,500 million Euros, cuts wages and social pensions and higher taxes. Appears social explosion. 

The worst fears have use see if Greece suspends payments. But the Euro group suggested that Greece went down its fiscal deficit from 14% of GDP to 3% in a period of four years. 

Countries that have most impacted are Spain and Portugal and if the euro becomes unbalanced block the impact will in the world economy, because a lower euro against the dollar impacts the purchases made in Europe to the USA, or purchases be more costly and Obama's plan to export more goods and services to Europe will have problems and would be questioned. 

One solution is that the Euro group to create an Emergency Fund to preserve financial stability in Europe.

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