MT92: defined plans for the EU(pillars)

• European Community

• Common foreign & security policy

• Cooperation in justice & home affairs

The Maastricht Convergence Criteria:

Inflation:

In the previous year max 1.5% > than in member states the lowest inflation (CPI)

Fiscal discipline:

Budget deficit/GDP

Exchange rate stability:

Don’t devalue its currency’s bilateral central rate against other members currency for 2 years

Long-term interest rates

Nominal LT interest rates in the previous year; max 2% - the average 3 member states with the lowest rates of LT government bonds

Growth & stability Fact:

To avoid excessive budget deficits. Outside the euro zone (12-17): UK, Sweden, Denmark

34.The place of the EU in the world economy. What countries constitute the economic backbone of the EU economy?

(i) Since the mid-1990s, there has been a major redistribution of market share between emerging and developed countries and among developed countries themselves. In this highly competitive environment, the EU1 has managed to maintain its world market share at 19.5%for merchandise trade (excluding energy), losing only 1.3 percentage points over the period.

(ii) Market share losses are much greater in the case of the US and Japan, falling by 4.4 and4.1 percentage points respectively. The US and Japan now respectively account for 13.0% and9.5% of the world market.

(iii) Thanks to some of its key assets such as chemicals, pharmacy products, motor vehicles and non-electrical machinery, the European Union's trade balance for manufactured products is improving greatly, reaching a surplus of €162bn in 2007. The jump of €105bn since 2000 has helped to partially offset the rise in the energy bill, for which the deficit increased by€137bn over the same period.

(iv) In the meanwhile, developing countries have generally reinforced their position as global exporters. China is by far the most remarkable performer: it has almost doubled its overall market share since 1995, reaching 14.1% to overtake the US.

(v) The EU’s good performance compared to the United States or Japan is due to an upgrading of the quality of its products, combined with the ability of EU companies to sell products at premium price because of quality, branding and related services. These“upmarket” products now account for a third of world demand and represent half of EUexports, not only in luxury consumer goods, but across the whole range of products, including intermediary goods, machinery and transport equipment. Building on this ability to sell products at premium price is the only way to uphold EU levels of social protection,employment and wages.

(vi) With 18.5% of the world market for high-tech products, the EU has become the principal exporter ahead of the US and Japan. The EU's performance is, however, disappointing in that its market share for this type of products is slightly lower than its overall market share. Given its level of development, the EU should do much better with high-tech products than for the rest of its exports. This raises concerns about the EU's capacity in the future to keep its products at the cutting edge of quality and innovation.

(vii) The EU’s export performance is uneven, varying significantly between destinationmarkets over the reference period. Worrying signs come from the fact that the EU has lostsignificant market share on some of the fast-growing emerging markets, particularly in Asia.In the long run, this underperformance on some of the most promising markets couldundermine overall the EU's position in international trade.

(viii) Two thirds of EU extra-EU imports are incorporated as inputs in the production process.This very high share of inputs in total EU imports, even when energy products are excluded,demonstrates very clearly that the EU as a whole relies heavily on global sources for inputs incorporated in its production process.

(ix) In the field of exchange of services, the EU is the leading exporter with 26.9% of the world market against 19.7% for the US and 6.1% for Japan. Moreover, the EU has expanded its share of world trade in most broad service categories except transport services, in contrast to developments in the US.

(x) With regard to foreign investments, the European Union is the world's biggest investor and the principal host. When intra-EU stocks are excluded, the EU owns 33% and hosts 29%of world investment stocks.

(xi) The EU has higher ratios of inward and outward investments to GDP than the US and most other developed countries, which means that the EU is comparatively more open to foreign investments and more willing to invest abroad than countries of a similar level of development and in particular the US.

The European Union is composed of 27 sovereign Member States: Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom