Gordon H. Dash, Jr., PhD GHDash

1. Is Europe Back? From Crisis Region to Transatlantic Free Trade Area Gordon H. Dash, Jr., PhDwww.GHDash.net College of Business Administration, URI Date: April 17 2013

2. Outline Economics Bilateral Why it is Important for Europe to “come back” There is a measurable and significant linkage between the economic fortunes of Europe and the transatlantic region which includes the United States Relations between the European Union (EU) and the United States are referred to the Bilateral relations between EU and the US Complications arise in global economic reform because, until recently, the EU does not have a common agreed upon position (eg: The divided position of the EU on support the Iraq War). Impact

3. List of Key Events in the Evolving Euro-US Relations • 1949: Berlin Crisis and the beginning of the Cold War • 1957: Treaty of Rome, which created the European Economic Community • 1971: End of Bretton Woods System (excluded Western European leaders) • 1973: Yom Kippur War – caused serious rift between Americans and Europeans • 2003: Invasion of Iraq – brought US-Euro division out into the open. • 2010: A weakened NATO has pushed US-Euro relations ahead under Pres. Obama • 2011: At EU-U.S. Summit meeting, leaders directed the Transatlantic Economic Council (TEC) to establish a High Level Working Group on Jobs and Growth.

4. Size of the Economic Relationship

5. The European Crisis • Bursting of the property bubble in the US. • Resulting contamination of the balance sheets of financial institutions around the world • Impacted connections within the financial system itself (systemic) • Global world trade collapsed

6. Policies to Mitigate the European Crisis • 2012 – ECB moves to protect Euro at all cost • Trade Protection • Measures to reduce labor market participation • Delay entry of younger workers • Using disability or early retirement schemes • Reduce contractual retirement benefits • Introduce risky and highly unpopular fiscal policies -- policies which lead to higher taxes

7. Current 5 Strategies Europe is Responding with Five Building Blocks • Consolidate national budgets and improve competitiveness – a process somewhat derailed in 2012 • Ensure a lasting correction of imbalances and sound public finances by monitoring excessive credit growth or housing price bubbles – resisted by public, enforced by Germans • Actions to address the fragmentation of financial markets by purchasing secondary sovereign-bonds subject to a macroeconomic adjustment program with strict and effective conditionality – bond prices driven down thereby reducing sovereign valuation. DISINTEGRATION THREAT

8. Current 5 Strategies , cont’d Europe is Responding… • Create effective financial backstops to support countries under intense market pressure. The European Financial Stability Facility (E.F.S.F.) and the European Stability Mechanism (E.S.M.) are the euro zone’s crisis resolution funds, with a combined firepower of €700 billion. • The European Investment Bank (E.I.B.), the E.U.’s public bank, will significantly increase its lending activities

9. Response to the crisis has delivered results Banking and Public Finance • Countries under assistance are improving their fiscal situation and regaining competitiveness • Banks across E.U. countries participated in a €10 billion capital increase, which will mobilize additional investments by the E.I.B. of about €60 billion. E.I.B. will increase public and private investments of up to €180 billion over the next three years • Under ECB Europe is working toward a banking union to further strengthen euro zone bank supervision and provide genuinely integrated tools for crisis resolution

10. Greek Debt Crisis Explained in Four Minutes (4:00) • GDP: a measure of the value of a nation’s total output • The International Monetary Fund (IMF) is an intergovernmental organization that oversees the global financial system by taking part in the macroeconomic policies of its established members. The organization's stated objectives are to stabilize international exchange rates and facilitate development through the influence of economic policies in other countries as a condition of loans, debt relief, and aid. The IMF’s relatively high influence in world affairs and development has drawn heavy criticism from some sources • http://youtu.be/mEVqeaFHsHE

11. The Truth Behind the Greek Economic Crisis (2:03) • The World Bank is an international financial institution that provides loans[2] to developing countries for capital programs. The World Bank's official goal is the reduction of poverty; hence its decisions must be guided by a commitment to promote foreign investment, international trade and facilitate capital investment • The “controversy” as expressed as anger and skepticism on the role of the IMF • http://youtu.be/yQpSq8dkzfg

12. The Coming Euro Collapse–BBC Special (6:03) • Germany has been called on to lead the Greek and EU “bailout” • What is missing in the EU: A Central Authority and a Central Will • How Wall Street capitalizes in a way that is out-of-reach for the average person • http://youtu.be/32Lor1YfCGM