Paul Mason continues his journey through some of the countries inside the EU facing an economic crisis. Portugal is in recession, construction has slumped and the government is introducing fiscal austerity measures but they are keenly aware that the sovereign debt crisis is yet to hit the economy with full force. A vivid and colourful report from one of the BBC’s top reporters.
One of the unintended consequences of the steep rise in the real price of cigarettes in the UK is the strong incentive to bring contraband cigarettes into the UK from elsewhere in the EU single market.
This Guardian article reports on the expected rise in smuggling as cigarette duties reach fresh highs in 2011. The average price of a pack of 20 cigarettes reached £6.29 in the UK last summer, compared with £2.80 in Spain and £1.57 in Poland.
I am teaching European and Global context for A2 macro this term and one of the key topics is the economics of EU enlargement. The opportunities to attract inflows of direct investment is one of the major attractions for new EU countries as they enter the single market. Here is a selection of videos promoting FDI into a selection of European nations.read more...»
With EU carbon emissions market has closed since the middle of January after hackers stole €30m of permits the economics of a EU wide carbon tax has been given fresh prominence in recent weeks. Charles Hart evaluates the arguments for and against a tax on emissions in this super applied micro essay. After the essay there are some links to recent blog posts and other resources on carbon trading and carbon taxation.read more...»
This is one of the longest running disputes in trade history. Europe and the US have been fighting for more than six years over each other’s subsidies for large passenger aircraft in the duopolistic battle between Boeing and Airbus. Now the World Trade Organisation has found that Boeing received at least $5bn (£3.1bn) in illegal subsidies and was only able to launch its 787 Dreamliner with such support. Airbus has als been found to be in breach of receiving illegal state aid. Reuters provides useful background here.
The Telegraph reports here that Mozilla’s Firefox has overtaken Internet Explorer as the preferred browser for internet users in Europe. And Google’s Chrome is fast gaining a strong foothold in this intensely competitive market. The market share data suggests an oligopoly but we know that despite the dominance of a small number of web browsers, the reality is that competition is fierce and millions of web users have their own quite strong preferences!
Lots to think about here in terms of economic efficiency - not least dynamic efficiency and innovation in the market.
And also the impact of competition policy in action .... as the article says at the end
“Since early 2010, Microsoft has offered millions of European customers that use its Windows software the option of using 12 different internet browsers. This followed an agreement in December 2009, when European Union regulators accepted Microsoft’s pledge to give consumers better access to rival browsers, ending a long antit-trust dispute.”
A hat tip to Ian Goff for spotting the article. If you want to keep an eye on what is happening to market share on a daily basis this is the link to the StatCounter site
Not all instances of collusive behaviour are deemed to be illegal by the European Union Competition Authorities. Practices are not prohibited if the respective agreements “contribute to improving the production or distribution of goods or to promoting technical progress in a market.”
• Development of improved industry standards of production and safety which benefit the consumer
• Information sharing designed to give better information to consumers
• Research joint-ventures and know-how agreements which seek to promote innovative and inventive behaviour in a market. The EU has introduced a “R&D Block Exemption Regulation” for this
In December 2010 the EU Competition Commission introduced new guidelines on the types of ‘horizontal cooperation’ that is allowed under EU laws. And here is a good recent example - the development of and agreement on joint industry standards in Europe for mobile phone chargers which means that mobile and smartphone users will soon be able to use a standardised charger.
The common charger will make life easier for consumers, reduce waste (good for the environment) and benefit businesses who dont have to spend as much on developing their own charger technologies.
Apple, Emblaze Mobile, Huawei Technologies, LGE, Motorola, NEC, Nokia, Qualcomm, RIM, Samsung, Sony Ericsson, TCT Mobile (Alcatel), and Texas Instruments have all signed up to the agreement.
I have put together a listing of suggested reading / articles on different aspects of the economics of the EU. This is available for download below as a pdf file.read more...»
The economic and financial affairs unit of the EU has produced this resource on inflation within the European Union. It covers the meaning and measurement of inflation, inflation expectations and some study notes on the consequences of inflation for people living inside the single market. It is available here.
A new law has come into force this week in Greece banning smoking in enclosed public spaces and tobacco advertising.
It is estimated that more than 40% of Greek adults smoke - well above the EU’s average of 29% - which is perhaps why at a time of fiscal austerity, it is surprising/impressive that the Greek government have pursued this policy. Cigarettes bring in a significant amount of tax revenue (either via indirect or corporation taxes) which will be lost. But then maybe it will save a lot more money via its health bill. (or maybe they are just hoping people will flaunt the rules and collect fines!).
Having said this, this latest attempt to stop smokers, is its 4th attempt in a decade - following a tobacco ban in public places on July 1 of this year too. The demand for habit-forming goods is too inelastic to go away overnight…
Revision notes on carbon taxation in an EU contextread more...»
As if having Greece going into meltdown was not enough for the euro currency to shoulder, Spain yesterday added to this burden… the Spanish government was forced to rescue one of its biggest regional banks: the central bank has taken operational control of Cajasur, which needs an urgent cash injection of €500m.
There has been a fresh bout of horizontal integrations announced in a bit to make their balance sheets more stable - Caja Mediterraneo, Grupo Cajastur, Caja Extremadura and Caja Cantabria want to form a bank with €135 billion in assets, to make it the country’s 5th largest lender.
This is all a time when the IMF has just delivered a bearish analysis on the Spanish economy:
“The challenges are severe: a dysfunctional labor market, the deflating property bubble, a large fiscal deficit, heavy private sector and external indebtedness,” the report said.
Do troubles for the euro know no end…?
1) Explain the circumstances in which an economy may see a rise in net inward migration of labour (15 marks)
2) Evaluate the view that free movement of labour within the European Union improves the efficiency of British businesses (25 marks)
A selection of key terms and acronyms that students may find useful when studying the economics of the EUread more...»
In recent times the European Union Competition Commission introduced maximum prices for the roaming charges made by mobile phone service providers. These are the rates charged by one operator to another to enable its customers to make calls while visiting another country.
Evaluate the view that a policy of price capping for European Union mobile phone operators will lead to an improvement in consumer and producer welfare (25 marks)read more...»
This informative interactive graphic from the FT shows the rapid rise in Greek government yields over the past year, resulting in yesterday’s downgrade to junk status.
When S&P warns holders of Greek debt that they only had an “average chance” of between 30% and 50% of getting their money back in the event of a debt restructuring or default, its going to have consequences…
One result of going junk (or sub-investment grade…) is that many financial institutions (including pension funds) are not allowed to hold such investment instruments, which will lead to a big sell-off of these, causing the yields to rise further.
As the fears of contagion spread, Portugal was also downgraded and the Vix index, a measure of “fear” in the US stock market, rose by more than 30 per cent, its biggest one-day jump since the height of the financial crisis in October 2008.
The moves highlighted the potential that the Greek crisis – the result of too large a debt load and expectations that it may default or have to restructure that debt – could spread and have knock-on effects on the global economy.
In this month’s edition of Economax, there is an in-depth article on Greece’s fiscal crisis.
Here is a free revision download for teachers and students who wish to update their understanding of key topics and issues in the European Union…read more...»
This revised and extended revision presentation examines the debate about Europe’s Single Currency.read more...»
The Telegraph website has a useful interactive guide to a selection of data on member countries inside the European Union. Our chart shows indices for GDP and there is also information the allocation of EU spending by country, population size and density.
World sugar prices are close to a 30 year high with values on the Chicago mercantile exchange hovering just under $30c per pound. For countries whose sugar exports account for a large proportion of their export earnings, the steep increase in world prices has brought about an improvement in their terms of trade and - because demand for many foodstuffs is price inelastic, a favourable change in their balance of trade. A good example of this is the African country of Mozambique, a nation almost destroyed by a long running civil war that eventually ended in the early 1990s but which has also been hit in recent years by severes drought hit many central and southern parts of the country, including previously flood-stricken areas. And where half of the population must survive on less than $1 a day.read more...»
Roy Hattersley makes a rare appearance in the economics blog today. He has an interesting piece in The Times on the relative prosperity of Norway - a country that lies outside the European Union but which has negotiated access to the EU single market. With very low unemployment (of less than 3% of the labour force, super high per capita incomes, a sovereign wealth fund worth more than £250bn and continued strong revenues from oil exports, Norway is unlikely to test the waters of EU membership anytime soon. A good piece for students of economic integration in the EU.
Croatian fans will be crying into their beers tonight with the news that they have failed to qualify for South Africa 2010. But their politicians seem to be making decent progress along the road to joining the European family of nations. The latest report on the progress made by countries seeking membership of the European Union suggests that Iceland and Croatia will be next in line to enter the EU single market. There is a report here from the Financial Times. And this article from the BBC reports the EU Enlargement Commissioner as saying that Croatia should complete entry talks next year.
Here are some links to previous blogs on EU enlargement
A ban on traditional lightbulbs imposed by Brussels last year and adopted by the UK for implementation in 2010 is to be extended to cover spotlights and downlighters, an read more...»
Rocked by a financial crisis which led to the collapse of its currency and banking system, Iceland’s parliament has voted narrowly in favour of seeking accession into the European Union. This process is likely to take around 18 months, the EU is keen to fast-track Iceland into the single market. One of the main stumbling blocks will be negotiations over fishing quota and catch rules for the EU fishing industry within Iceland’s territorial waters. Fish and seafood accounted for 37% of Iceland’s exports in 2008. Will Icelandic accession be a great catch for the European Union?
Guardian: Will Iceland make it into the EU?
Revision notes on aspects of the EU single marketread more...»
Wolfgang Munchau has an important comment article on the fragility of the EU single market in todays Financial Times.read more...»
BBC reporter Jonny Dymond is travelling through the European Union in advance of the elections next month gathering opinions and comment from people in different member states. Monday’s report from Poland makes interesting reading as it gives a positive view of the single market from the point of view of one of the newer member states, which could provide some useful points for evaluation in the AQA ECN4 paper.read more...»
Here is a free revision update guide for students preparing for A2 Economics exams this summer….read more...»
According to some measures, Norway has the strongest currency in the world. Outside of the EU but inside the single market, Norway is often held up as a example of a path that the UK might follow if relations with the rest of the ever broke down irrevocably. An unlikely scenario? Yes, and there are also big differences in the structure of the Norwegian economy compared to ours.read more...»
The front page headline in today’s Times looks at a new Iron Curtain splitting the EU’s rich and poor nations. Since the destruction of the Berlin Wall 20 years ago, and accession to the EU of most former members of the Soviet empire, there has been a ‘2-speed Europe’ with GDP growth in the new eastern states running much faster than in the old EU-15. However those ‘tiger’ economies are falling faster and further in the global recession than their western mentors.read more...»