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Introduction

In 1957 The Treaty of Rome came into existence it declared a common European market as a European objective with the aim of increasing economic prosperity and contributing to "an ever closer union among the peoples of Europe". It established the European Economic Community (EEC). The goal of the EEC was to reduce trade barriers, streamline economic policies, coordinate transportation and agriculture policies, remove measures restricting free competition, and promote the mobility of labour and capital among member nations. It was very successful, but just as with the ECSC, it served more of a peacemaking role between the European nations than an economic role. At this time, the monetary exchange rate between countries was controlled by the Bretton Woods system, which connected currencies to the U.S. dollar, allowing for only a one-point fluctuation around designated values. This was referred to as the "pegged rate" and was based partly on the gold backing of the dollar. This system worked well for 20 years, helping to stabilize exchange rates and restore economic growth in the post-war period. By 1960, however, the system began to fail, and exchange-rate agreements became the prevalent topic among European political and economic leaders. By December 1969, Luxembourg's Prime Minister, Pierre Werner, was asked to write an EC (European Community) report covering the need for a complete monetary union among the European economies. The Werner Report came out in 1970 and specifically brought up the idea of a single European currency as part of a cooperative monetary effort. The report was the first to use the term Economic and Monetary Union. The next move toward a unified European economy came with the 1987 Single European Act. This act called for the systematic removal of barriers and restrictions that hampered trade between European countries. As a result, border checks, tariffs, customs, labour restrictions and other barriers to free trade were dismantled. The Single European Act (1986) ...read more.

Middle

Nowadays To overcome this volatility the average Harmonized Indices of Consumer Prices (HICPs) is used this measure is less sensitive to transient changes in prices. Inflation is relatively high in Spain, Portugal and Italy at 2.9 and is expectedly low for Germany at 0.8. The U.K. has is slightly changed at 1.4 as is the eurozone average of 1.9. THE EUROZONE - ECONOMIC GROWTH 2002 2003 Q3 Q4 Q1 Q2 Euro-zone 0.9 1.1 0.8 0.2 EU15 1.2 1.3 1 0.5 Belgium 0.9 1.7 1.4 0.8 Germany 0.4 0.5 0.1 -0.2 Greece 3.7 3.4 4.3 4.4 Spain 1.8 2.1 2.2 2.3 France 1.3 1.4 1 0 Ireland* 7.2 7.5 0.5 : Italy 0.4 0.9 0.7 0.3 Luxembourg : : : : Netherlands 0.4 0.3 0.1 -0.9 Austria 1.4 1.4 1 : Portugal -0.4 -1.3 -1.2 -2.3 Finland 2.8 3.2 1.9 0.8 Balance of payments euro-indicators for the euro-zone4 (EUR billions) Jan.-Dec. 2002 January 2002 January 2003 Credit Debit Net Credit Debit Net Credit Debit Net CURRENT ACCOUNT 1704.5 1642.5 62.0 141.5 141.6 -0.1 142.2 148.6 -6.4 Goods 1057.4 924.8 132.7 79.5 76.4 3.1 81.0 79.9 1.1 Services 326.3 313.0 13.3 24.0 26.4 -2.4 24.9 25.4 -0.5 Income 235.8 275.0 -39.2 20.4 26.8 -6.4 18.7 28.8 -10.1 Current transfers 84.9 129.8 -44.8 17.5 11.9 5.6 17.6 14.5 3.1 CAPITAL ACCOUNT 19.0 7.1 11.9 3.0 0.5 2.6 2.6 0.5 2.0 Assets Liabilities Balance Assets Liabilities Balance Assets Liabilities Balance FINANCIAL ACCOUNT2) -171.3 -49.5 -15.5 DIRECT INVESTMENT3) -151.0 129.9 -21.0 -8.5 8.5 0.0 -12.1 10.4 -1.8 Equity capital and reinvested earnings -129.6 82.6 -47.0 -9.4 3.0 -6.5 -6.7 8.1 1.5 Other capital, mostly intercom any loans -21.4 47.3 26.0 1.0 5.5 6.5 -5.5 2.2 -3.2 PORTFOLIO INVESTMENT -176.1 226.6 50.4 -26.9 -14.6 -41.5 -23.2 8.5 -14.7 Equity -37.1 76.2 39.1 -14.9 12.9 -2.0 2.1 12.2 14.3 Debt instruments -139.0 150.3 11.3 -12.0 -27.5 -39.5 -25.3 -3.7 -29.0 Bonds and notes -83.4 104.4 21.0 -2.4 -15.5 -17.9 -17.6 1.6 -16.0 Money market instruments -55.6 45.9 -9.7 -9.6 -12.0 -21.6 ...read more.

Conclusion

7.29 10.14 5.49 1.87 Public debt (% of GDP) 43.37 37.99 38.83 43.80 Recorded unemployment (%) 11.99 14.51 16.23 17.76 Current-account balance/GDP -7.46 -6.06 -3.91 -3.54 Poland has a higher rate of inflation than the euro zone this is due to the weakness of the polish currency in relation to its trading partners making their exports more expensive there causing domestic prices to rise and incurring inflation. After the initial entry inflation will continue to rise for Poland as it would for any economy moving towards a free market structure but in the long run perhaps after experiencing a wage price spiral the level will gradually fall and become stable acting as a great benefit for the poles. The growth is much higher simply because it is a developing economy this too in the long run will slow down and stabilise but joining the eurozone will help it rise as the labour markets will become more flexible and standard of living improve. The unemployment figures are much greater because of the lack of labour available. The main industry is agriculture and because of their lack of demand from their trading partners in Eastern Europe their exports will have suffered. As Spain, who has suffered for many years will high unemployment despite still having the worst record in the EU, has seen the employment figures ought to dramatically increase because of the new notion of mobility of labour across Europe. The current account deficit I s much higher but the forthcoming entry will have the most dramatic effect on this as changes in trade will be encouraged. However as we have seen with the US and to an extent the UK having a deficit does not necessarily mean a suffering economy. In conclusion Poland's entry to the EU and adopting the euro, unlike Britain, can be nothing but positive and ought to bring some hope to a politically ravaged country. The extension to Eastern Europe is long due and appreciated by people all over. ...read more.

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