Posts Tagged ‘European Union’

The European Union is…

Friday, June 3rd, 2011

The European Union is a political and economic organization made up of 27 countries in Europe. It’s not a country by itself, but in some ways it acts as a high-level governing organization for its member nations. Being part of the Union means that citizens, goods, and services are allowed to move freely between affiliated nations, without having to deal with things like visas or trade restrictions. Members of the EU also use the same currency, called the Euro.

Basically, being part of the European Union is like being in a club whose members are from all over Europe and who have decided that many of the same rules will govern every member – despite their differences in nationality. But not every European nation is a member of the EU (Switzerland, for example), and some member nations have not yet adopted the official currency (the United Kingdom still uses the Great British Pound).

Will The EU Save One Of Its Own?

Wednesday, February 10th, 2010

The European Union hasn’t been faced with the possibility of default by one of its member countries before. The world is watching as the relatively new eurozone figures out how to deal with the bad times as well as the good.

  • Greece (a member of the European Union) may not be able to meet all of its debt obligations, so the European Central Bank is meeting to consider what to do to protect the stability and credibility of the euro.
  • While there is no official bailout plan in place, certain countries within the eurozone (the group of EU countries that have adopted the euro as their currency) are piecing together aid plans that would transfer some of Greece’s debt burden to taxpayers in their own nations.
  • The EU’s rules require eurozone countries to keep their debt below a certain level, which Greece has repeatedly failed to meet. But the rules also state that the European Central Bank and central national banks cannot bail out countries, so Greek recovery may be left up to the will of individual eurozone countries.

Facts & Figures

  • The EU’s limit on debt ratios for eurozone nations is 3% of GDP.
  • Greece is expected to show a 13% budget deficit this year.
  • Greece owes a total of $303 billion to foreign banks.

Best Quote

“As long as it is very clear that any support only comes with very, very stringent conditions attached, it would not affect the moral-hazard question. It is a choice between two evils.” – Fabian Zuleeg, Chief Economist at the European Policy Centre

Belgium but not Britain? Doesn’t Euro mean Europe?

Tuesday, October 27th, 2009

If you traveled through Europe before 2002, you probably had a lot of fun juggling the different currencies and their crazy exchange rates. You could spend 20 francs on a coffee in Paris and then in Italy it would cost 5000 lira – a bit confusing. But today, you’ll pay for that coffee in Italy and in France with the same bill: the euro.

Even though it’s called the euro after (you guessed it) Europe, its name is a little misleading. There are 45 countries in Europe but only 27 of them have joined the European Union. Out of those 27, only 16 use the euro as their official currency. That’s means only about 1/3 of Europe actually uses the euro! Why so few though?

There are several reasons why:

  1. You have to be a member of the European Union to adopt the euro as your currency. There are 18 countries who don’t belong, including Switzerland (which geographically is the center of Europe).
  2. You must follow strict financial guidelines to be allowed to have the euro; some countries (like Poland) have yet to meet them.
  3. Lastly, you have to want it. Some countries like Britain, Denmark, and Sweden don’t want the euro as their official currency. (If Mexico wanted us to jointly adopt the same currency, we probably would say no as well because of the effect Mexico’s weaker economy would have on our own.)

As Europe continues to loosen the national borders that divide it, the Euro will continue to be adopted by more and more countries. Probably soon, you won’t remember what it was like to carry 20 different currencies in your pocket while visiting only one continent.

What’s The Worst-Case Scenario For The Financial Crisis?

Saturday, April 25th, 2009

It could just start with “Sale” signs at your favorite stores. Unfortunately, Spain is getting a glimpse…

  • Several European nations – most notably Spain – are facing deflation in the wake of the global financial crisis.
  • As consumer demand continues to drop, Spanish merchants are cutting prices, salaries, and employees just to keep afloat.
  • Because Spain’s currency (the Euro) is now governed by the European Union, there is very little the Spanish government can do to control potential deflation (such as slash interest rates or devalue the national currency).

Facts & Figures

  • Spain’s unemployment rate is currently 15.5% and could reach 20% in the near future. Among workers under 25, the rate rises to 31.8%.  In comparison, the unemployment rate in the US is under 9%.
  • La Casa de la Caridad (Valencia’s main soup kitchen) expects to serve 12,000 meals to needy residents in April – three times as many as last year.
  • Since last year, wholesale prices in Japan dropped 2.2% and 8% in Germany; in the U.S., the Consumer Price Index dropped for the first time since 1955.

Best Quote

“Alarm bells are going off.  Economies can recover from deceleration, but it’s harder to recover from a deflationary situation. This could be a catastrophe for the Spanish economy.” – Lorenzo Amor, President of the Association of Autonomous Workers

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