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EU Enlargement 2011

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  • 1. Geoff Riley (tutor2u) ‐ Europe an Ever Larger  February 2011Union An Ever Larger Union Enlargement of the EU Single Market A2 Economics: Global and European Context Issues (Geoff Riley, February 2011) The Map of Europe The EU is now the  largest integrated  economic area in  the world,  accounting for  more than 30% of  world GDP and  more than 17% of  world tradewww.tutor2u.net 1
  • 2. Geoff Riley (tutor2u) ‐ Europe an Ever Larger  February 2011Union Expanding the Single Market • First Expansion – 1973: UK, Ireland and Denmark • Mediterranean Spirit – 1981: Greece – 1986: Portugal and Spain • Entry of the Neutrals – 1995: Austria, Finland and Sweden • The Big Bang – 2004: Latvia, Lithuania, Cyprus, Malta, Slovenia,  Slovakia, Estonia, Hungary, Czech Republic, Poland – 2007: Bulgaria and Romania Backward agrarian sectors?www.tutor2u.net 2
  • 3. Geoff Riley (tutor2u) ‐ Europe an Ever Larger  February 2011Union Or countries and cities of deep cultural  and political interest Many new EU countries offer surpriseswww.tutor2u.net 3
  • 4. Geoff Riley (tutor2u) ‐ Europe an Ever Larger  February 2011Union And lead the way towards a low  carbon economy Benefits of EU Membership Trade and Investment • Free trade access to richer EU markets • Attract inward capital investment EU funding • Structural funds for transport & environment • Farm support (but at lower rate than ‘Old EU’) Macroeconomic stability • Commitment towards joining single currency • Must be fully‐fledged market economies to joinwww.tutor2u.net 4
  • 5. Geoff Riley (tutor2u) ‐ Europe an Ever Larger  February 2011Union How have “New Europe” nations  performed since EU entry ? • There are many indicators we can look at: 1. Volume /balance of trade within the EU 2. Economic growth rates and cyclical volatility 3. Relative productivity levels 4. Relative per capita incomes 5. Unemployment rates 6. Consumer price inflation 7. External trade and investment balances Slovakian Exports to the UK 2.5 Dining at the Rich Man’s Table Exports of goods and services, annual value Euro billions 2.5 2.0 2.0 1.5 1.5 EUR (billions) billions 1.0 1.0 0.5 0.5 0.0 0.0 99 00 01 02 03 04 05 06 07 08 09 Source: EuroStatwww.tutor2u.net 5
  • 6. Geoff Riley (tutor2u) ‐ Europe an Ever Larger  February 2011Union Exports of goods and services as a share of GDP 140 Exports as a share of GDP Per cent 140 130 130 120 120 110 110 100 100 90 90 80 80 % 70 70 60 60 50 50 40 40 30 30 20 20 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 United Kingdom Slovenia Poland Slovak Republic Czech Republic Source: Reuters EcoWin Trade Balance in Goods and Services 10 Trade Balance as share of GDP Balance of Trade as a share of GDP 10 5 5 0 0 -5 -5 -10 -10 % -15 -15 -20 -20 -25 -25 -30 -30 00 01 02 03 04 05 06 07 08 09 Slovak Republic Czech Republic Estonia United Kingdom Source: Reuters EcoWinwww.tutor2u.net 6
  • 7. Geoff Riley (tutor2u) ‐ Europe an Ever Larger  February 2011Union Comparing Economic Growth Rates 7 Out‐Pacing the UK on Growth Constant Prices, Gross domestic product at market prices, 2000=100, Index 7 6 6 5 5 4 4 3 3 2 2 Percent 1 1 0 0 -1 -1 -2 -2 -3 -3 -4 -4 -5 -5 04 05 06 07 08 09 10 11 12 Poland [c.o.p 1 year] Czech Republic [c.o.p 1 year] United Kingdom [c.o.p 1 year] Source: EuroStat Volatile Economic Cycles for the Baltic States 15 Baltic States have been volatile Annual % change in Real Gross Domestic Product 15 Latvia 10 10 Lithuania Estonia 5 5 0 0 Percent -5 -5 -10 -10 -15 -15 -20 -20 04 05 06 07 08 09 10 Estonia [ar 4 quarters] Latvia [ar 4 quarters] Lithuania [ar 4 quarters]www.tutor2u.net 7
  • 8. Geoff Riley (tutor2u) ‐ Europe an Ever Larger  February 2011Union Increased investment has supported growth 45.0 Investment ratios Capital Investment at Constant Prices, measured as a % of GDP 45.0 40.0 40.0 35.0 35.0 30.0 30.0 % 25.0 25.0 20.0 20.0 15.0 15.0 00 01 02 03 04 05 06 07 08 09 Czech Republic Poland Bulgaria United Kingdom Source: Reuters EcoWin Fiat in Polandwww.tutor2u.net 8
  • 9. Geoff Riley (tutor2u) ‐ Europe an Ever Larger  February 2011Union New Europe – a magnet for FDI Growing  Low  markets Labour  Low land  Highly  costs prices literate  population Low  business  taxes Central  Success  European  of early  Location projects Strong FDIwww.tutor2u.net 9
  • 10. Geoff Riley (tutor2u) ‐ Europe an Ever Larger  February 2011Union Transport Infrastructure - Total Length of Motorways 1000 Motorways  1000 900 900 800 800 700 700 KM 600 600 500 500 400 400 300 300 200 200 00 01 02 03 04 05 06 07 08 09 Poland Hungary Slovak Republic Slovenia Source: EuroStat Labour Productivity per Person Employed 90 Improvements in Productivity Index of productivity as % of the EU27 average 90 80 Slovenia 80 70 70 Czech Republic EU27=100 60 60 Hungary 50 50 Estonia Poland 40 40 30 30 Romania Bulgaria 20 20 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 Czech Republic Poland Hungary Estonia Romania Slovenia Bulgaria Source: Reuters EcoWinwww.tutor2u.net 10
  • 11. Geoff Riley (tutor2u) ‐ Europe an Ever Larger  February 2011Union Growth and Living Standards Rising per  Faster  Higher  Increased  capita  growth productivity wages incomes Estimated Trend Economic Growth Rates 5.5 Estimated Trend Growth Potential GDP, percentage change per year 5.5 5.0 5.0 4.5 4.5 4.0 4.0 3.5 3.5 Percent 3.0 3.0 2.5 2.5 2.0 2.0 1.5 1.5 1.0 1.0 0.5 0.5 0.0 0.0 04 05 06 07 08 09 10 11 12 Euro Zone Poland Czech Republic United Kingdom Source: OECD World Economic Outlookwww.tutor2u.net 11
  • 12. Geoff Riley (tutor2u) ‐ Europe an Ever Larger  February 2011Union Income convergence for ten new EU members 100 Relative Per Capita Incomes Index of GDP per head, purchasing power standard, EU=100 100 90 90 80 80 70 70 EU25=100 60 60 50 50 40 40 30 30 20 20 00 01 02 03 04 05 06 07 08 09 10 Czech Republic Estonia Latvia Hungary Slovak Republic Romania Poland Bulgaria Slovenia Lithuania Source: Reuters EcoWin Catching Up and Overtaking! 100 Catching up and taking over GDP per Capita, purchasing power standard, EU25average = 100 100 95 95 90 90 85 85 80 80 EU25=100 75 75 70 70 65 65 60 60 55 55 50 50 00 01 02 03 04 05 06 07 08 09 10 Czech Republic Portugal Greece Slovenia Source: EuroStatwww.tutor2u.net 12
  • 13. Geoff Riley (tutor2u) ‐ Europe an Ever Larger  February 2011Union Unemployment in selected New Member States 22.0 The Picture on Jobs Percentage of the labour force, annual average, source: Eurostat 22.0 20.0 20.0 18.0 18.0 16.0 16.0 14.0 14.0 Percent 12.0 12.0 10.0 10.0 8.0 8.0 6.0 6.0 4.0 4.0 2.0 2.0 0.0 0.0 03 04 05 06 07 08 09 10 Poland Czech Republic Hungary Slovenia Source: Reuters EcoWinwww.tutor2u.net 13
  • 14. Geoff Riley (tutor2u) ‐ Europe an Ever Larger  February 2011Union Unemployment Rates 22.0 Unemployment in the EU Unemployment - % of labour force, seasonally adjusted 22.0 20.0 A third of the Euro Zones  20.0 15.8 million unemployed  18.0 18.0 are in Spain 16.0 16.0 14.0 14.0 Percent 12.0 12.0 10.0 10.0 8.0 8.0 6.0 6.0 4.0 4.0 2.0 2.0 0.0 0.0 05 06 07 08 09 10 UK Spain Ireland Germany Poland Source: Reuters EcoWin Inflation Rates for Selected new EU States 20.0 Inflation Annual % change in consumer prices (all items) 20.0 15.0 15.0 10.0 10.0 Percent 5.0 5.0 0.0 0.0 -5.0 -5.0 04 05 06 07 08 09 10 Hungary Czech Republic Poland Latvia Euro Zone Source: Reuters EcoWinwww.tutor2u.net 14
  • 15. Geoff Riley (tutor2u) ‐ Europe an Ever Larger  February 2011Union EU Enlargement and the UK economy Trade  Labour  FDI Flows Flows Migration UK Exports to some new EU States 4.5 Trade Exports of goods and services, annual data, current prices, £ billion 4.5 4.0 4.0 3.5 3.5 3.0 3.0 GBP (billions) 2.5 2.5 billions 2.0 2.0 1.5 1.5 1.0 1.0 0.5 0.5 0.0 0.0 00 01 02 03 04 05 06 07 08 09 Poland Hungary Slovakia Czech Republicwww.tutor2u.net 15
  • 16. Geoff Riley (tutor2u) ‐ Europe an Ever Larger  February 2011Union UK Trade in Goods and Services with Poland 6.0 UK Trade with Poland Annual value of trade, £ billion 6.0 5.5 5.5 5.0 5.0 4.5 4.5 4.0 4.0 GBP (billions) billions 3.5 3.5 3.0 3.0 2.5 2.5 2.0 2.0 1.5 1.5 1.0 1.0 00 01 02 03 04 05 06 07 08 09 Imports from Poland Exports to Poland Source: Reuters EcoWin UK Trade in Goods and Services with Poland 6.0 UK Trade with Poland Annual value of trade, £ billion 6.0 5.5 5.5 5.0 Poland now takes  5.0 4.5 as many exports  4.5 4.0 from the UK as  4.0 GBP (billions) billions 3.5 China does 3.5 3.0 3.0 2.5 2.5 2.0 2.0 1.5 1.5 1.0 1.0 00 01 02 03 04 05 06 07 08 09 Imports from Poland Exports to Poland Source: Reuters EcoWinwww.tutor2u.net 16
  • 17. Geoff Riley (tutor2u) ‐ Europe an Ever Larger  February 2011Union Migration – Push and Pull Factors Wages Jobs Welfare Language Travelwww.tutor2u.net 17
  • 18. Geoff Riley (tutor2u) ‐ Europe an Ever Larger  February 2011Union The Migration Stats Long Term Migrationwww.tutor2u.net 18
  • 19. Geoff Riley (tutor2u) ‐ Europe an Ever Larger  February 2011Union Supporters of Inward Migration • Fresh skills and boost to innovation – Twenty‐two of Britains 114 Nobel laureates were born abroad – Tesco, Marks & Spencer, Easy Jet, Google, Yahoo!, eBay, YouTube  all founded or co‐founded by immigrants or their families • Migration is a form of trade and there are gains from trade – If you go to France for an operation, it is classified as trade; if a  French surgeon comes here, it is migration – Reduces labour shortages • Remittances add to GNP of new Europe • Net contribution to government tax revenues • Multiplier and accelerator effects • May contribute to higher trend growth • Justified on grounds of freedom, justice and human rights Opponents of unrestricted migration • Extra welfare burden • Downward pressure on real wages and jobs  for domestic workers • Social pressures and tensions • Pressure on property prices and housing rents • Some reports question the size of the  macroeconomic benefit of migrationwww.tutor2u.net 19
  • 20. Geoff Riley (tutor2u) ‐ Europe an Ever Larger  February 2011Union Decisions on the Euro • Entry into the EU involves a commitment to  join the single currency at some point • But the timing is flexible • 5 new EU states have joined since 2004 • Slovenia, Malta, Cyprus, Slovakia and Estonia • Some have a pegged currency against the Euro • Others favour a floating exchange rate Pegging to the Euro - Estonia and Latvia Some have pegged to the Euro Local exchange rates to the Euro, daily value 15.660 15.660 15.650 15.650 EUR/EEK 15.640 15.640 15.630 15.630 15.620 15.620 Latvian currency 0.700 0.700 0.650 0.650 EUR/LVL 0.600 0.600 0.550 0.550 0.500 0.500 00 01 02 03 04 05 06 07 08 09 10 11 Source: Reuters EcoWinwww.tutor2u.net 20
  • 21. Geoff Riley (tutor2u) ‐ Europe an Ever Larger  February 2011Union Poland - Growth of Real GDP and the Exchange Rate Top Pane: Real GDP Bottom Pane: Effective Exchange Rate Index 7 6 Poland – currency depreciation 7 6 5 5 Percent 4 4 3 3 2 2 1 1 0 0 130 130 125 125 120 120 115 115 Index 110 110 105 105 100 100 95 95 90 90 85 85 Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct 06 07 08 09 10 Poland, Real GDP, precentage change from previous period, Constant Prices Effective Exchange Rate Index Source: Reuters EcoWin An ever wider Europe? Or risks of  enlargement fatigue? • Iceland • Croatia • Macedonia and  Montenegro • Bosnia and  Herzegovina • Serbia • Kosovo • Turkey • Ukraine, Georgia  or Tunisia?www.tutor2u.net 21
  • 22. Geoff Riley (tutor2u) ‐ Europe an Ever Larger  February 2011Union Enlargement – A Work in Progress • Enlargement ‐ one of EU’s greatest successes • New Europe was vulnerable to the global and  European financial crisis • But many countries have outperformed old Europe  since 2007 on a variety of indicators • They have provided fresh dynamism into the EU • Europe needs it! Since 2005, Britains economy has  grown by 2%, the Euro Zones by 4%, Brazils by 25%,  Indias by 47% and Chinas by 69% • The political significance of enlargement cannot be  underestimated More  resources  on the EU  from the  Tutor2u  blogwww.tutor2u.net 22