Notes from Week 3
Notes from Week 3 403-2B
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This 6 page Class Notes was uploaded by Dora Notetaker on Thursday September 10, 2015. The Class Notes belongs to 403-2B at University of Alabama at Birmingham taught by Nikolaos Zahariadis in Summer 2015. Since its upload, it has received 53 views. For similar materials see International Relations Seminar in Public Relations at University of Alabama at Birmingham.
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Date Created: 09/10/15
PSC 403 Seminar in International Studies Dr Zahariadis Notes Set 3 Week of Sept 7 Tue Sept 8 Recap o The financial crisis of the 1980s made European countries integrate more 0 The EMU European Monetary Union came into existence in 1999 through the Treaty of Maastricht European Union 0 So now in 1999 there was a change in name they called it the European Union 0 In which countries gave up sovereignty over their currency to the European Central Bank European Central Bank ECB o It has committees in which each country is represented 0 And an executive committee which has a little more power it decides interest rates 0 Interest Rates are important because they can regulate growth 0 You lower your interest rate making it easier for people to borrow people will have more money to spend which will then boost the economy 0 Unlike the Federal Reserve which has 2 goals 0 1 To protect monetary assets from inflation o 2 To ensure few market fluctuations o The ECB has 1 main goal 1 To tame inflation Why Because it is modelled after the German Central Bank Because of historical reasons The interwar period in Germany and the high inflation and depression in Ger at the time 0000 2000 s 0 Everyone in the Eurozone had lower interest rates making it easy for them to borrow 0 Previously 0 Countries with weak currencies would have to pay higher interest rates 0 Countries with hard currencies would have to pay lower interest rates 0 Weak currency One whose value fluctuates over time 0 Hard Currency One whose value stays mostly the same over time 0 But now they were mixed and they all had the same interest rates 0 Those with terrible credit got to borrow just as easily as those with good credit 0 Weak currency countries went on a spending binge now they had money O O 0 But did not think of repaying loans So borrowed more to pay back loans Eventually it caught up with them the Euro crisis Euro Crisis 0 O O 0 These countries couldn t borrow anymore And the market was flooded with toxic assets from the US Banks went bankrupt Investments in government bonds were not considered safe anymore in some countries like Greece So investors took their money from these countries and put them in relatively safer countries like Germany and the US 2009 now economy was doing be eo It exposed the problems of the EMU which are No common fiscal policy 1 a The European Central Bank regulates currency but each country gets to spend as much as they want b It means they can have very large budget deficits c The original rule was you can t have a budget deficit that is more than 3 of your GDP d Greece had 15 of GDP e Ireland 30 of GDP 2 No bailouts a The treaty that defined the EMU said member states don t have the obligation to assume the debt of other member states b But here s the problem i Those who borrow little money the crisis is their problem ii Those who borrow lots of money it becomes the bank s problem c Because banks will have to work with those who borrowed millions d So smaller people felt the implications of this policy more They ran into what is called a moral hazard meaning I undertake actions that encourage your bad behavior 0 Like with children if you forgive them and don t show the consequences of their actions you are in fact encouraging bad behavior How to alleviate problem Elevate EMU to PU Political Union A PU translates into some form of federal states system In a federal system states can go bankrupt and the federal government comes in to help But states have to give up sovereignty which European countries don t want to do It would mean Germans would have to take over some Greek government functions So there is talk of a PU but it is unlikely to happen Because of SOVEREIGNTY 0 And now it looks like they are heading backward toward less integration and more independence 0 Europe is weighing the costs and benefits Enlargement o The enlargement of the EU during its early developing stages 0 The sign of a successful club is one that everyone wants to join 0 The sign of an unsuccessful club is one that accepts everybody 0 France and Germany realized they needed more members when they established the ECSC European Community in Coal and Steel 0 So that other countries wouldn t feel left out 0 And to reduce antagonism 0 They invited western European countries that fit the criteria they had to be coal and steel producers 1960 France Germany Italy and Benelux joined 0 UK was invited didn t want to they were Euroskeptics o By 1961 they wanted to join 0 Applied 3 times until Charles de Gaulle died and they were allowed in Major things that made Great Britian want to join 1 Cities a They wanted the free movement of capital it means more money for them 2 lndustrialists a GB became a small market compared to newly forming market on the continent b They would have had to pay tariffs Ones who resisted common market in GB 1 Small shop owners 2 Labor They were afraid of losing to competition that would come in with new market 1974 First wave of enlargement o UK Ireland Denmarkjoined O Thurs Sept 10 2015 Cont Enlargement process 0 The enlargement process Each country and each EU institution had to agree to add the country that was applying lfjust 1 country didn t agree couldn t admit the applicant country 1st wave in 1973 GB lreland Denmark Nonvay Before this there was no process of enlargement Process EU Commission recommends a country for entry into European Community at the time the heads of state discuss it acquis communautaire 0 Means that applicant countries must accept the spirit and legislation of the European Community 0 Legislation is more important because it means that member countries must accept the primacy of EU law 0 So if there is a conflict between national and EU law EU always wins Prior to joining 0 Each country must go through every single legislation they have and change it so they will harmonize more with EU laws o It means an automatic and voluntary absolution of sovereignty Political implication 0 Means that countries are no longer completely sovereign 0 And voters are not asked 0 Someone other than the people s elected representatives are making the laws that people must now abide by o This means that EU has a serious democratic de cit Steps of enlargement 1973 European Community as the time 1 Commission makes the recommendation that a country join 2 Each member country says yes 3 Agreement is made with the applicant country 4 That country now has to ratify this decision Ratification 0 Different for each country c NonNay 0 put it to a referendum and the people voted it down 0 So NonNay did notjoin in 1973 0 Ireland 0 Constitution mandates that everything that affects functions of the state must be put to a referendum 0 Great Britain 0 Put it to a referendum people voted for it 0 France 0 Party in power can pass any vote so they voted on it in parliament 1970 s 0 Other countries wanted to join 0 Economic reasons to be competitive 1981 Greece 0 Greece has new reason to join political reasons 0 Said they wanted to join because EU facilitates democracy and they had been under a military dictatorship from 1967 1974 0 But Greece was not as industrial and economically competitive 0 Commission recommended that Greece NOT join 0 But Greece worked out a deal with the French president so they joined anyway 1981 Portugal and Spain 0 Same reasons also run by military wanted democracy 1986 became known as the Mediterranean Expansion and it was the 2nd wave of enlargement 1989 Fall of the Berlin Wall 0 Europhoria 0 Peace Dividend o This refers to the possibility that war is now unlikely and Europe can now start cutting back on military expenditures 0 Former Communist satellite nations wanted to join too 0 No more division between Eastern and Western Europe 0 Former victorious allies had an identity crisis 0 specifically NATO 0 Because their purpose was to repel the Soviets Communism and now that threat was gone 0 But kept NATO anyway as security alliance Eastern Europe wants to join 0 Argument They wanted democracy too and Communists may come back to power if they aren t allowed in 0 And said they were always culturally part of Europe so now they were just going back to their roots Europe said no 0 Eastern European countries didn t have the economic capabilities to join 0 By mid 1990 s EU told them they will be admitted if they fulfill some requirements 0 And they were periodically assessed 0 Did this in waves 1995 Austria Finland Sweden Norwayjoined 0 These were former politically neutral countries 0 Meaning that they were not part of the East or the West and not part of NATO or the Eastern Alliance 0 But now they wanted to anchor themselves to the West 0 These were welldeveloped industrial countries 0 Had fear that they would be left out of Fortress Europe 0 ldea that Europe would create protective barriers and everyone outside would be left at a disadvantage o This never really materialized but it was a fear 2004 Poland Hungary Czech Republic Slovakia Slovenia Malta Cyprus Estonia Latvia 2007 Romania Bulgaria 2013 Croatia Success of EU had consequences 0 They needed to revise decisionmaking roles 0 Previously each member state had veto power So had to limit the number of decisionmakers Problem they faced What to do with the remaining countries in the periphery 0 Didn t know where to draw the line Controversial Ukraine 0 Ukraine wanted to join but Russia was not happy about this Also Turkey 0 Greeks didn t want them in the 1990 s 0 Now Germans don t want them 0 So they made a deal with Turkey I They made a special treaty with Turkey but no membership