united states of europe The old Europe as we use to know has become the European Union with 27 members and over 500 million citizens. An economical juggernaut that seemed to challenge the supremacy of the United States at every economical aspect we came to believe as sole domain of the United States. What has happened that we did not realize is that across the Atlantic Ocean, a quiet revolution, slow but steady, transforming Europe from a loose steel and coal community (Ecsc) in 1950 to the European Union as we know today.
The European Union grew from the original six countries to twenty seven today and represents nearly 500 million people and a collective Gross National Product in the range from fourteen to fifteen trillion dollars. After the Second World War, Europe was completely devastated and relegated to second place in the international arena due to the rising power of the United States and the Soviet Union. In view of the growing rivalry between the two superpowers, several western European leaders came to the conclusion that lasting peace could be guaranteed only if their nations were to come together in both political and economic terms.
Cooperation between states was seen as the best means to prevent armed conflicts. In 1950, the French foreign minister put forward the idea of a European Coal and Steel Community (ECSC). At that time, coal and steel production were the main war industries. Pooling these industries would prevent any new war between European neighbors. The ECSC was founded in 1951 by six countries: Belgium, France, Germany, Italy, Luxembourg and the Netherlands. Decision-making power was entrusted to the High Authority. With the visionary Jean Monnet at the helm, it thus became the first independent supranational authority in Europe.
Even before the Second World War ended, Jean Monet had been giving speeches in Britain arguing that “a European entity, encompassing a common economic unit” was essential to create a cooperative atmosphere and avoid future mass slaughter on the continent. (p38) In 1955, the foreign ministers of the initial six states acknowledged that the internal logic of the enterprise started in 1950 was commanding an expansion of the economic integration into other sectors. In 1957, “the Six” established the European Atomic Energy Community (EAEC or EURATOM) and the European Economic Community (EEC).
In this way, the Member States dismantled the trade barriers that separated them and formed a ‘common market’. In 1967, the institutions of the three European Communities merged. From then on, there was only one Commission, one Council of Ministers and the Assembly (European Parliament). Attracted by its success, the European Communities were joined by Denmark, Ireland and the United Kingdom in 1973, followed by Greece in 1981, Spain and Portugal in 1986, Austria, Finland and Sweden in 1995. In May 2004, the European Union celebrated a historic event with its expansion into Central and Eastern Europe.
Ten new countries joined the EU: Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia. Bulgaria and Romania joined in 2007, while Croatia and Turkey are also candidates. These 27 nations represent a demographic that outpaces the United States in economic power and regulatory power as well in foreign aid but not in military power and intentionally so. The last 50 years, Europe is taken for a ride on the NATO gravy train, meaning European nations have relied on American soldiers, American armory, and America’s superior military technology as its first line of defense.
This has translated into huge savings in the European military budgets, the mottos was save on tanks / ships and airplanes and spend it on schools, health care and pensions. The new European army does not break this pattern, because it amounts to self-defense on the cheap. Europe is not interested in becoming a military superpower, but they’re interested in becoming a superpower in all other aspects. Europeans, rather spend the money on foreign aid than on military expenditures. In 2003, the European community spent $36. billion in foreign aid compare to $13. 3 billion by the US who have roughly the same wealth. Military expenditures in 2005 were 2% of the GDP in Europe, versus 4% in the United States. American’s carry the stick, Europeans carry the carrot. So if this makes it for the Europeans a lot easier to make friends than it is for the United States, however I believe, somebody needs to carry the stick in order to ensure world peace. Maybe the stick should be wielded with a more gentle hand. One aspect of Europe’s new power is the Euro or the Undollar as T. R.
Reid likes to call it, the new common currency that has been used in 12 European states since January 2002 to replace their national currencies. Slovenia (2007), Cyprus, Malta (2008) and Slovakia (2009) have since adopted the euro. All EU Member States form part of Economic and Monetary Union (EMU), which can be described as an advanced stage of economic integration based on a single market. It involves close co-ordination of economic and fiscal policies and, for those countries fulfilling certain conditions, a single monetary policy and a single currency – the euro.
The process of economic and monetary integration in the EU parallels the history of the Union itself. When the EU was founded in 1957, the Member States concentrated on building a ‘common market’. However, over time it became clear that closer economic and monetary co-operation was desirable for the internal market to develop and flourish further. But the goal of achieving full EMU and a single currency was not enshrined until the 1992 Maastricht Treaty (Treaty on European Union), which set out the ground rules for its introduction.
It set the objectives of EMU, the responsible of each Member State, and the conditions the Member States must meet in order to adopt the euro. These conditions are known as the ‘convergence criteria’ (or ‘Maastricht criteria’) and include low and stable inflation, exchange rate stability and sound public finances. The Euro is also used, either formally as legal tender or for practical purposes, by a whole array of other countries such as close neighbors and former colonies. It is therefore not surprising that the euro has rapidly become the second most important international currency after the dollar, and in some respects (e. . the value of cash in circulation) has even taken over. Most American financial advisers initially belittled the new currency and advised their client to stay away from the euro, a huge mistake in retrospect. The euro became the darling of currency speculators everywhere and seemed to be a strong competitor for the US dollar’s status as the worlds prefer reserve currency. Initially, the euro was traded one euro equals 86 American cent, two years later; a euro was valued at $1. 30 for 50% gain in value against the US dollar. at the time this paper is written the euro value is at 1. 29 to one US dollar. )What makes the euro as attractive to its investors, compared to the US dollar is the United States fiscal policy, the government’s budget deficit, which reaches nearly 10% to GDP and the nations balance of trade deficit, which is nearly as large, and still growing. On the other hand, the Europeans, made sure that they established a very stringent fiscal policy, the before mentioned ‘Maastricht criteria’, states that no member nation is llowed to rake up a national debt of no more than 3% of the GDP. To hold to this level is not always easy, France and Germany had skirted the 3% level for years, but the current economical crisis with Greece, Portugal and Spain is putting the euro and the European central bank to its first real worlds test. (@@@ see sidebar on the end of paper) If the preferred status of the US dollar as a reserve currency should change in the eye’s of the world, that poses quite a threat as to the US economy, and its import and it’s borrowing pattern of consumption.
The United States can only sustain the steady outflow of money, because the rest of the world is willing to reinvest the US dollars we spend to buy foreign goods. Foreign investments are buying American stocks, government bonds, etc. T. R. Reid has the fear that if the European bonds are seen as more reliable as dollar bonds that foreign investors may decide to lend their money to the European Union instead of the United States. This would cause the US treasury to raise interest rates on bonds to attract foreign loans.
At a time when our deficit is skyrocketing we would have to pay much more money to finance our deficit. This would have a severe impact on the stock market, taxes would have to be raised, and in general our economy would go into a steep decline. I personally have to hope that this will not happen since many foreign countries have huge amounts of money invested in the US and in the US economy, and it would be against the interests of these investors to abandon the US currency altogether.
However, I hope that Washington is waking up to today’s realities and try to counter our ruinous fiscal policy. The European Union has also started flexing their regulatory muscle and not necessarily in a negative sense. This has developed standards for mobile communications that make it a lot easier and cheaper for the technological development of new cell phones. In the US we have up to six different cell phone standards, which make it more costly to develop new technologies. The ones held monopoly by Motorola has been lost to European companies a long time ago.
Most European countries have more cell phone users per capita than in the United States since services are more competitive and offer a wider choice to the consumers. The European Community is also developing a new standard for satellite positioning systems, which should be a great challenge for the current GPS system used and developed in the United States. Since Europe is geographically such a small area with more than 500 million citizens, they have developed also a more protective stance in regards to the environment, their attitude toward food and drug safety and their industrial safety standards.
Because Europe is such a huge market, it has allowed the European regulators to set higher standards in all these areas, which have to be followed by anyone doing business with the European Union and made it more economical from a production standpoint to adopt the standards for worldwide production and distribution, instead of fighting these standards. Many non-European countries have recognized the benefits of these policies and have adopted these standards as their own.
Of course, some of the regulations, like the antitrust regulations could be seen as intrusion into the sovereignty of the United States, however, the US would have done the same thing when their roles have been reversed. As we have seen it played out with General Electric’s failed attempt to buy Honeywell as Jack Welch learned the hard way that the European Union is a force to be reckoned with and its law’s to be obeyed. In October of 2000 Jack Welch the Chairman of GE was asked what he thought about a breaking report that United Technologies might buy Honeywell.
This was the first time that Welch had heard the news and it came to a complete surprise to him. Jack Welch and GE had entertained ideas of acquiring Honeywell in the early 2000. It seemed like a good fit and produce revenues of $25 billion to GE. Jack Welch scrambled his team together to work on a possible acquisition of Honeywell. After discussions with his associates and advisors, it was concluded that GE could outbid UTC for Honeywell. Jack Welch compared the Honeywell deal to the RCA deal. Mr. Welch expected the deal to be done by February 2001.
In January of 2001 Mr. Welch flew to Brussels for a meeting with European Commissioner Mario Monti. Earlier in the month, Welch and GE had heard news that European Competitors were back again lobbying the commission to press for all kinds of Honeywell divestitures. Welch was worried that competitors would try to extort Honeywell assets during the whole European review process. Commissioner Monti assured Welch that rivals would not affect the deal. After the meeting Jack Welch and Commissioner Monti had a long lunch. Commissioner Monti was a very formal person.
Jack Welch had requested that Monti call him ‘Jack’ but Monti refused and preferred ‘Mr. Welch. In February 2001 Jack Welch returned to Brussels after learning that the deal was going to take longer than expected because the task force was going to investigate the deal further. Mr. Welch went back to Brussels to argue his case for a quicker resolution to the deal and offered nondivestiture remedies to address any problems the European commissioner had, Commissioner Monti returned stating that they hadn’t changed their views and that they were going to continue on with the investigation.
Many concerns were brought up by competitor companies in Europe and the U. S. (United Technologies) that had to be further investigated and would delay any decision on the deal. In March of 2001 the U. S. Justice Department approved the deal after GE agreed to sell Honeywell’s military helicopter engine business and open up servicing business on small jet engines and auxiliary power units. At the same time Jack Welch and his team went in front of the European Commission to argue their case.
They brought in economists, customers, and their own legal team to prove that the Commission’s arguments against the deal were flawed. The next day, competitors showed up to argue their case. In June 2007 Jack Welch flew to Brussels to address the European Commission. Jack Welch had heard during the flight that the Commission’s demands were increasing. Welch’s team put together a submission that raised the offer to make $1. 3 billion in divestitures and included some critical avionics products. They meet with Monti‘s Commission and Jack Welch and his team put the $1. billion divestiture proposal on the table. The commission rejected the $1. 3 billion divestiture proposal. Again Jack Welch goes to meet with the Commissioner Monti and the European Commission. Commissioner Monti read a statement thanking Welch’s team for his efforts and that the offer was inadequate. He continued and read a list of demands and suggestions on Honeywell divestitures. The divestitures added up to $5 – $6 billion and basically took the merger between GE and Honeywell off the table. Welch then tells the commission that he is unable to meet these demands.
GE and Honeywell increase divestitures to an agreed upon $2. 2 billion, but Monti showed no interest in the offer. Later on that day, Monti and Welch spoke on the phone. “Now that the deal is over,” Monti said, “I can say to you, ‘Goodbye, Jack. ’” Jack Welch and GE have learned a hard lesson like later Microsoft had to learn to deal with the European regulatory boards. The European Union has done away with borders and custom tariffs within the boundaries of the EU, which made it so much more cost effective for traveling and the transferring of goods from one EU state to the other.
Eliminating the borders and modernizing infrastructure to such a degree that the Europeans have the most sophisticated and fastest trains in the world, the best road network and the river Rhine has been dredged, straightened and connected by channels to the Rhone, that the Rhine delta at Rotterdam has become the world’s busiest freighter port. Combine all this with the use of the euro, which makes business transactions easier without exchange rates of the various currencies, it is obvious that a lot of big expenses of doing business in the old Europe have been eliminated and make for a more cost effective market place.
This of course is not only to the advantage of the European business community but also to US companies who do business in Europe. Envision a market of 500 million consumers, who is wide open to American businesses. American goods can be shipped anywhere within the European Union without a cent of tariff or import duty and on top of that earn the euros the world’s strongest currency for American investors. Look around when you ever come to Dublin, its suburbs filled with warehouses and manufacturing facilities owned by American companies who take advantage of this new market and all it benefits.
Let’s look at Tommy Hilfiger Brand and its European success story. By 1998 the Tommy Hilfiger had hit a low in the stock market due to overexposure in the United States and the company was losing steadily market share to competitors. The strangest thing about Mr. Hilfiger’s trouble was that his business overseas was just heating up, and new sales in Europe were making up for the loss of business in the United States. It would ultimately mean a second chance for the brand. It was one of Mr.
Hilfiger’s business partners who had sensed an opportunity in the European Market. After seeing the collection’s rise in the United States, a former executive for Ralph Lauren had started a new company in 1997 as the Hilfiger licensee for Europe. The company was founded to still the European hunger for anything American, an oxymoron if there is one, since Europeans love to hate America. With its open borders, Tommy Hilfiger sold in more than 4,000 small stores from Spain to Germany, grew to more than $1 billion, at the same time sales in the United States were falling.
Tommy Hilfiger in Europe was positioned much as the label had originally been in America, with bright, preppy clothes and premium prices, but none of the hype. While stricter regulatory standards do pose increasing dangers, American businesses are poised to benefit from several developments in the European Union. Beginning in 1998, the airline, telecommunications, natural gas and postal service sectors were deregulated. Opportunities also exist in automotive, environment, franchising, medical and pharmaceutical, and travel and tourism sectors.
In the public sector, there are sizeable opportunities for US firms to participate in partnerships, concessions, and/or investments in major infrastructure projects in the EU. An EU directive in this area requires open, objective bidding procedures, a benefit for US firms. Private, sector-specific opportunities are also abundant. For example, new EU environmental, waste management and recycling policies are now creating wide-ranging opportunities for US firms. In the same way, the EU move to increase competition in the telecom sector has opened telephone markets across Europe, providing tremendous opportunities for US companies.
The list is extensive, and every day important new opportunities arise for US companies in the EU, driven by the way and pace of regulatory change. When comparing the United States with the European Union, their healthcare system and their social networks are very impressive. Europeans don’t pay for health insurance, or if so, then it is heavily subsidized by the government. Colleges and universities are free or as in Great Britain, a token sum ? 3000 a year. The same thing goes for unemployment insurance; people who lose their job can receive up to 90% of the previous earnings depending on the country they live in.
All this is paid for by the value added tax, which can be anywhere from 16% to 25% again depending on the country. In America this seems overly generous and the taxes outrageous, however, Health insurance and unemployment benefits represent a safety net that helps people when they need it most, also healthy people represent a more productive workforce, which in turn is able to produce more at a faster rate. In the European Union poverty rates of 6-8% are much lower than they are in the United States which is about 20%. Here in the United States we do not include health insurance into the GDP.
But it still belongs to the regular household expenditures, which costs us 20% or more, where in Europe this is included into the GDP. Combined this with a better educated workforce due to free schooling in the European Union, and it makes from an economical standpoint more sense than our antiquated welfare system. We should try to adopt some of these social measures in the United States but combine it with our more aggressive hiring and firing policies. In conclusion, the United States of Europe has developed itself into a major competitor for the United States of America.
But we should not see this necessarily as a bad thing, but it should give us a wake-up call to change some of our economical and fiscal policies. The 21st-century will have to be a turning point for the way America does business, and Europe should be a template for us, but we should not necessarily become a carbon copy of the European Union in its economic development. Yes, the strife to get our fiscal house in order should be the main priority for the 21st-century, but not necessarily at the expense of our way of life. @@@New York Times May 1st 2010
Athens2010: In the wealthy, northern suburbs of Athens, where summer temperatures often hit the high 90s, just 324 residents checked the box on their tax returns admitting that they owned pools. So tax investigators studied satellite photos of the area — a sprawling collection of expensive villas tucked behind tall gates — and came back with a decidedly different number: 16,974 pools. That kind of wholesale lying about assets, and other eye-popping cases that are surfacing in the news media here, points to the staggering breadth of tax dodging that has long been a way of life here.
Such evasion has played a significant role in Greece’s debt crisis, and as the country struggles to get its financial house in order, it is going after tax cheats as never before. Various studies, including one by the Federation of Greek Industries last year, have estimated that the government may be losing as much as $30 billion a year to tax evasion — a figure that would have gone a long way to solving its debt problems. There is great resistance by the German government who are one of the major players in the European Central bank in supporting the loans to the Greek Government.
This unwillingness sends stock markets into turmoil. This resistance to help the Greek and its government stems not in small part from the widespread tax evasion the Greeks are known for, a total anathema for Germans where cheating on taxes or any other kind of none paid debt is unheard off (debt in German is called “schulden” and schulden comes from “schulding” which in turn means guilty) so stories like the one published in the New York Times about tax evasion in Greece were rampart in Germany and Angela Merkel party was facing a upcoming election and Ms.
Merkel was not willing to commit billions of Euro to the bailout of the Greek government. In the end the international monetary fund had to step in and push the European central bank and its members to guarantee loans to the Greek government and also include guarantees of the backing of loans to Spain and Portugal in order of 500-700 billion Euros to calm the stock markets, much much more then the initial 50 to100 billion required. During this period of indecisiveness the Euro took a beating and went from a rate of 1. 36 to the US dollar to a low of 1. 24, countless billions of monetary loss.