European Economic Integration and Financial Frameworks
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Economic Index Numbers and Variable Comparison
Longitudinal Indexes and Growth Rates
Longitudinal indexes show changes of a variable across time related to its specific value at a reference year (base year).
- Growth rates of indexes calculated in this way accurately reflect the changes in the original variables.
Cross-Sectional Index Numbers
A cross-sectional index number relates the value of a variable for one country (i) with the value for a reference country or area (j), making it easier to comprehend the differences.
Comparing Economic Variables
Comparison in Different Currencies
- Use Exchange Rates (ER).
Comparison with Different Price Levels
- Use Purchasing Power Parities (PPP). PPP is an exchange rate which compares the cost in national currency of a homogeneous basket of goods and services in a country to the cost in a reference country.
The Multiannual Financial Framework (MFF)
The MFF is governed by Article 312 of the Treaty on the Functioning of the European Union (TFEU):
“The multiannual financial framework shall ensure that Union expenditure develops in an orderly manner and within the limits of its own resources.”
- It is established for a minimum of 5 years (normally 7) and must be respected in the annual budget.
- It sets the amounts and limits for yearly maximum commitment appropriations and the yearly maximum for credits for payments.
- The MFF has to be unanimously adopted by the Council after its approval by the European Parliament.
Levels of Economic Integration
| Type of Integration | Barriers Affected | Markets Affected by Free Movement | Policies Affected |
|---|---|---|---|
| Preferential Agreement | Tariff and quota reductions | Goods | — |
| Free Trade Zone | Removes tariffs and internal quotas | Goods | Rules of origin |
| Customs Union | Removes tariffs and internal quotas | Goods | Trade policy |
| Common Market | Tariffs, quotas, technical barriers, and subsidies | Goods, services, and factors | Trade and competition policies |
| Economic Union | Common Market barriers plus economic policies | Goods, services, and factors | Some policies, except monetary and exchange |
| Economic and Monetary Integration | Economic Union barriers plus exchange policies | Goods, services, and factors | Monetary, fiscal, foreign, educational, social policies |
Key European Community Institutions
The primary institutions of the European Union are:
- The European Parliament
- The European Council
- The Council (Council of Ministers)
- The European Commission (often referred to as “the Commission”)
- The Court of Justice of the European Union
- The European Central Bank (ECB)
- The European Court of Auditors
Advisory Committees and Bodies
To ease institutional relations between the European institutions and the Member States (MS), or to offer support in decision-making, a series of advisory committees and bodies exist, including:
- Committee of Permanent Representatives (COREPER)
- Economic and Social Committee (ESC)
- Committee of the Regions (CoR)