EuroZone's New Pact

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The presentation showcases the new pact of the coordination policy among the members of the Eurozone and its impact on the other members of the EU

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EuroZone's New Pact

  1. 1. Pact For The Euro The Euro-Zone Stability and Growth Pact Talib Ankoud March 14th 2011 INTL5331J-Regional Analysis
  2. 2. Agenda <ul><li>Overview </li></ul><ul><li>The new agreement </li></ul><ul><li>Pros and cons </li></ul><ul><li>Division </li></ul><ul><li>Merkel’s position to division </li></ul><ul><li>Recap </li></ul>
  3. 3. Overview ( PIIGS crisis ) <ul><li>High levels of debt in some European countries (Portugal, Greec, Ireland) </li></ul><ul><li>Higher spending and lower taxation of other countries (Spain) </li></ul><ul><li>Most disciplined members do not want to pay for the most reckless </li></ul>
  4. 4. The New Agreement <ul><li>Safeguard the euro </li></ul><ul><li>Deficits below 3% of GDP => Germany's desire </li></ul><ul><li>Debt limit of 60% of GDP. </li></ul><ul><li>Lower labour taxes </li></ul><ul><li>Common corporate tax base </li></ul><ul><li>Indexing retirement age to life expectancy. </li></ul><ul><li>“ Euro area member states commit to translating EU fiscal rules as set out in the Stability and Growth Pact into national legislation” </li></ul>
  5. 5. Pros and cons <ul><li>Pros: Germany and France </li></ul><ul><li>Argument: Differences in taxation and spending between Eurozone members are key factors in creating the debt crisis. </li></ul><ul><li>Cons: Ireland </li></ul><ul><li>Argument: Has the lowest corporation tax rates in the EU (12.5% ) and attracts the lion's share of EU FDI, has already ruled out making any changes to that. </li></ul>
  6. 6. Division (Ins and Outs) <ul><li>“ WHY are you trying to show divisions? Are we getting in your way? You are humiliating us.” </li></ul>Donald Tusk, the Polish prime minister
  7. 7. Division (Ins and Outs) <ul><li>Exclusion of some of the most open and competitive European economies </li></ul><ul><ul><li>Britain, Poland, Sweden, Denmark and the Czech Republic </li></ul></ul><ul><li>Risk of a two-speed EU </li></ul><ul><ul><li>Creation of a club within the club </li></ul></ul><ul><ul><li>The Ins are less liberal than the Outs </li></ul></ul><ul><li>The new pact could fiddle the single market in favour to the Euro-Zone </li></ul>
  8. 8. Merkel’s position to division <ul><li>“ The unity of Europe is not something we want just for its own sake, It is a great good. ” Angela Merkel. </li></ul><ul><li>Mrs Merkel would deny the pact if induct division </li></ul>
  9. 9. Recap <ul><li>An « economic government » was a French Idea as a counterweight the ECB </li></ul><ul><ul><li>German opposition </li></ul></ul><ul><li>The new pact aims to remove the overlap between competitive economies and the laggards that threaten the survival of the euro </li></ul><ul><li>Would be dismissed if overall division </li></ul>
  10. 10. Sources <ul><li>The eurozone ‘agrees in principal’ on the policy coordination </li></ul><ul><ul><li>http://www.bbc.co.uk/news/business-12711183 </li></ul></ul><ul><li>The diviseness pact </li></ul><ul><ul><li>http://www.economist.com/node/18330371 </li></ul></ul><ul><li>Outs and ins </li></ul><ul><ul><li>http://www.economist.com/node/18333103 </li></ul></ul><ul><li>OCan Angel Merkel hold Europe together? </li></ul><ul><ul><li>http://www.economist.com/node/18332786 </li></ul></ul>
  11. 11. <ul><li>Thank You </li></ul>
  12. 12. Discussion <ul><li>Could this new pact be successful? </li></ul><ul><li>Do you think that this new pact would push some outs to go IN? </li></ul><ul><li>What about Britain's skepticism? </li></ul>

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