74570 - Europe in The Global Economy

Learning outcomes

The course offers an overview of Europe's model of economic integration and explores how this model responds to the challenges of a more competitive global market place. The key question - and the course's overall theme - is whether the euro crisis and the subsequent sluggish economic growth have seriously undermined confidence in the European single market's ability to deliver prosperity for all. In particular, the course assesses how the monetary union, both in terms of institutional design and of macroeconomics dynamics, is critical to the future of the European Union. If “EMU remains a milestone of EU integration (European Commission, EMU@10, 2008), it could also be the cause of its disintegration.

The course will unfold over seven weeks, during which students will acquire notions as well as analytical tools to analyze recent events and to assess the development of the current debate on Europe's economic future.  

Course contents

1.  Setting the context: Europe's model of regional integration

a.  from the the Treaty of Rome to the Lisbon Treaty

b.  the institutional framework

c.   creating Europe's single market and common currency

d.  expansion and inclusion: the new member states

e.   convergence and divergence: a two-tier Europe?

 

2.    Europe and the changing dynamics of the world economy

a.  trade integration: multilateralism v bilateral agreements

b.  foreign direct investment and regional supply chains

c.   financial globalization and the risk of unfettered capital movements

d.  a global labour market: migration and offshoring

e.  a multipolar world economy

 

3.    Europe and the others

a.  the US and transatlantic relations

b.  the rise of China

c.   the other BRICs

d.  Japan's secular stagnation

e.  emerging markets and developing countries

 

4.  Europe on the brink

a.  the global financial crisis

b.  the impact on Europe

c.   from a banking crisis to a sovereign debt crisis

d.  backstopping the system: the role of the ECB

e.   the issue of coordinating policies

f.   Mario Draghi and “whatever it takes”

 

5.  Europe in the post-crisis years

a.  demographics, migration and productivity growth

b.  competitiveness (the real exchange rate) and the intra-EU (and intra-EMU) dynamics

c.   long term GDP growth: secular stagnation or the mediocre normal?

d.  low inflation and deflation: the issue of monetary policy

e.   sluggish domestic demand, high unemployment and the constraints of fiscal policy

 

6.  Europe and economic governance

a.  EMU institutional design and lessons from the euro crisis

b.  addressing the demand for the EU institutional reforms

c.   the EU and the reform of the Bretton Woods institutions (IMF and WB)

d.  sovereign states, domestic interests and international markets

e.   the euro and the international monetary system

 

7.  Europe and the future

a.  completing the single market

b.  sharing the risks: the Banking Union and the new resolution regime

c.   integration financial markets

d.  reforming the social model

e.   should EMU have a common fiscal policy?

f.   is the EU (and EMU) still fit for purpose?

Readings/Bibliography

Week 1: 12 February

A tour of the world: Handouts + Blanchard, ch.2

 

Week 2 - from 17 to 19 February

 

R. Baldwin, Towards an Integrated Europe (London: Centre for European Policy Research, 2004).

 

Fraser Cameron, The European Union as a Model for Regional Integration, (New York: Council on Foreign Relations Press, 2010).

 

Ralph Dahrendorf, Why Europe matters. A personal view (London: Centre for European Reform, 1996).

 

Rudiger Dornbush, ‘Euro fantasies: Common Currency as Panacea’, Foreign Affairs, 75 (5), pp. 110-24.

 

Mario Draghi, Speech to the Global Investment Conference, London, 26 July 2012.

 

(The) Economist, ‘Maastricht follies’, 9 April 1998.

 

David Marsh, The euro; the battle for the new global currency (New Haven and London: Yale University Press, 2011, new edition.

 

Jürgen Stark, ‘German prudence is not to blame for the eurozone’s ills’, Financial Times, 12 February 2015.

 

 

Week 3 - from 24 to 26 February

 

Review of Macroeconomic tools: Handouts + Blanchard ch.3-6.

Open economies and fiscal coordination: Handouts + Blanchard, ch.7

Global Fiscal Stimulus: IMF article http://www.imf.org/external/pubs/ft/survey /so/2008/INT122908A.htm

 

Week 4 - from 3 to 5 March

 

Jamil, Anderlini and Lucy Hornby (2014), “China overtakes US as world’s largest goods traderâ€, in Financial Times, 10 January 2014.

 

(The) Economist, ‘Europe’s textile war with China - and itself’, 1 September 2005.

 

Fredrik, Erixon,  Hosuk Lee-Makiyama, Matthias Bauer and Martina F. Ferracane, ‘Trans-pacific partnership: a challenge to Europe’, ECIPE Policy Brief, November 2014.

 

Paolo Guerrieri and Piero Esposito, 2012, ‘The internationalization of the Italian economy: a lost chance, an opportunity to seize’, Review of economic conditions in Italy, 2012, pp. 55-81.

 

Daniel S. Hamilton and Joseph P. Quinlan, eds., The Transatlantic Economy 2014. Vol. 1: Headline Trends (Washington DC: Centre for Transatlantic Relations, 2014).

IMF, ‘Competitiveness in the Southern euro area: France, Greece, Italy, Portugal and Spain’, Working Paper No.08/112.

 

Bill Lewis et al., US Productivity Growth, 1995-2000, McKinsey Global Institute, October 2001.

 

Josh Noble and Gabriel Wildau, ‘Fear of a deflationary spiral’, Financial Times, 1 December 2014.

 

Jim O’ Neill, The growth map. Economic opportunity in the BRICs and beyond (London: Portfolio  Penguin, 2011).

 

Pietra Rivoli, The travels of a T-shirt in the global economy. An economist examines the markets, power and politics of world trade (Hoboken NJ: Wiley, 2005).

 

Philip, Whyte, ‘Why has the Eurozone’s recovery been weaker than the US’s?’, in CER Bulletin, No. 90 (June/ July 2013), pp. 3-4.

Assessment methods

Daniela Iorio: Homework in team (3 students) submitted as pdf via email by April 12th. 2-3 pages of text, excluding the bibliography, and tables and figures in the appendix (Supplement: data series, their source, and legend). Topic: to be discussed with the instructor by March19th.

Paola Subacchi: The exam will be organised in two papers of no more than 1,000 words each, to be prepared and submitted by the end of April and the end of May respectively. The first paper will be on Europe's single market and single currency. The second paper will be on the economic interaction of Europe with the rest of the world - in particular, the US and China. Using material such as newspaper articles and data series - to be circulated together with the questions for the essay - the students need to write an essay on the assigned topic, showing a good understanding of such a topic as well as the ability to discuss it in a critical way. Course attendance and familiarity with the suggested reading list are essential for the preparation of these papers.

Office hours

See the website of Daniela Iorio

See the website of Paola Subacchi