How does Cyprus illustrate the challenge of globalization/immigration?

Why did we choose Cyrpus to illustrate this challenge

Follow-up questions on your recommendations…

What are the benefits and costs of the euro…

Why is monetary union helpful?

What is the main job the ECB… (price stability…why is it important)

Why is inflation a bad thing?

Why is deflation a bad thing?

What is the difference between fiscal and monetary policy?

http://www.sussex.ac.uk/migration/documents/mwp35.pdf

http://works.bepress.com/cgi/viewcontent.cgi?article=1006&context=nicos_trimikliniotis

globalization as it affects eu…

eu wide economic issues…

cyprus economic performance…

immigration as it affects eu…

cyprus immigration (first the challenges it has)…

possible policy suggestions…

end!!!

letter regarding policy conflicts

historical background/context piece

eu common immigration policy update

excerpt…

It is obviously beyond the immediate power of the EU to eradicate the root causes of all migration. But over time, if the EU wants to reduce migratory pressure, it will have to provide more development aid, debt relief, and fair trade, and it will need to be better equipped to prevent conflict and keep the peace in trouble spots around the world. These objectives lie at the heart of the EU’s common foreign and security policy. (The EU’s resolute position in the Kosovo crisis no doubt owed much to a fear of a mass exodus of Kosovan refugees.)

Kathleen:  Cyprus government official

Christina: EU Commission member (specialist in immigation issues)

James Moderator (local economics professor)

Arianna:  Cyprus business lobbyist

Jayme: random audience members (northern cypriot…among several others)

Here also are the sections we dividede up to start writing a rough draft of a script (remember, try to get a page and a half…this will give us enough to work with as a whole)

EU wide economic overview – Kathleen

Cyprus economic overview – Jayme

EU wide political issues (structure and lisbon treaty developments) – Arianna

Globalization/Immigration at EU level – LaFluer

Globalization/Immigration at cyrpus level – James

okay…so I forgot how to upload/attach separate files.  I will figure it out later, but don’t feel like it right now.  so last year’s whole script is just pasted in below.  It will look long, but it was about 6 1/2 pages (12 size font) in microsoft word.  look at it for ideas for your script sections drafts for this week.  I will post again soon with more details on what you should try and accomplish with your script section draft.

Joey: Welcome to our multi-part series – Tomorrow’s Economy: The Lisbon Strategy at Work

Hello. I’m Joey Timmerman. We have with us here tonight Ali Bullington, Economics Professor at the University of Florence; Stephanie Chin, professor of economics visiting from Harvard University; and Hillary Bunnelle, Economic Consultant for the European Women’s Lobby.

We are continuing our series tonight by focusing on Italy and examining the country’s key challenges to living out the spirit of the Lisbon agreements.

One guiding force behind the development of tomorrow’s European economy is the Lisbon strategy. Developed by the Euro Commission to spur competitiveness and increase the growth of the economy, The Lisbon Strategy is, in one sense, a natural outgrowth of the Eurozone’s cooperative spirit, going back to the original Rome Treaties in 1957.

Ali: The whole magic behind voluntary market exchange is that both parties benefit. If the size and scope of the market expands, the possible gains from trade expand also. This expansion of the Eurozone market has allowed for the free movement and exchange of goods, capital, persons, and services that were previously limited by country borders. (eu 16 map)

Joey: Well, since we’ve discussed the implications of the financial crisis in detail over the past several episodes, today we returning to our theme of looking at the long term prospects of the Eurozone economy. As we mentioned before, tonight we will be focusing our discussion on the country of Italy.   Italy’s economic performance has been lagging behind that of the general Eurozone for some time. Before we look at the specifics, we will have members of our panel give us a brief overview of general economic conditions in the Eurozone, focusing on some of the key structural indicators highlighted in the Lisbon strategy.

Ali: As I’m sure you all know, the world economy along with the European economy, has taken a turn for the worse. However, rather than merely lamenting the state of the economy, I think it would be more useful to look at some statistics and see what we can make of them. The EU’s average real GDP growth has essentially ground to a halt. In 2007, the average GDP was growing at a rate of 2.9%. However, in 2008, it’s predicated to have fallen to 1.4%, and in 2009, it is forecasted to drop as low as 0.2%. (gdp graph)

Hillary: One ray of hope is that inflation has been falling. Energy prices have dropped precipitously offering some potential for economic stimulus.

Stephanie: That’s true, but prices are also falling because demand has shriveled up. Consumer spending is anemic and companies are being forced to lower prices if they want to sell their products. The impact on corporate profits has in turn reduced investment spending. The effect of falling consumer spending and investment spending has been devastating to GDP.

Joey: Now we all know that when GDP falls, unemployment almost always rises in turn. Since less is being produced, fewer people are needed to make it. How bad is it getting? (unemployment rate graph)

Ali: The deepening economic crisis has caused unemployment rates to rise to over 7.4% across the EU. However, in 2007 rates varied greatly between regions, from 2.1% to 25.2%. These imbalances reflect a serious challenge for policy makers.

There is no clear consensus on how to tackle this crisis. EU leaders have underlined that no country will improve its economic situation by resorting to protectionism, and that a restructuring of the banking sector will be necessary before the end of 2009.

Joey: Ah yes, the banking and financial crisis. What’s the most current update on how the European financial system is weathering this crisis?

Stephanie: The global financial crisis that started in the United States has affected everyone. European banks were involved in the risky real estate loans and have been forced to take massive losses just like their American counterparts.

Hillary:  It appeared at first that the Eurozone financial system would weather the crisis better than the United States, but challenges continue to emerge that raise fresh doubts about any quick recovery.

Joey: Since preserving the soundness of the banking system is one of the most important functions of any central bank, let’s turn to Ms. Bullington for a more in depth look at what the European Central Bank is doing to address the crisis.

Ali: The overarching goal of the ECB is to promote price stability and a stable financial system.  Unstable prices make it difficult to accurately gauge the value of assets and thus make it harder to plan for the future. Uncertainty can reduce investment and in turn economic growth. (inflation slide)

Joey: Also, as we mentioned earlier, with the current falling prices, some are worried that average price levels could actually fall. This is called deflation and while it might sound initially attractive to consumers, it can prove to be devastating for an economy. If consumers feel prices will fall, they can put off consumption until those prices fall and increase their savings.

Stephanie:  If enough people do this, aggregate demand can plummet, deepening the current recession.

Hillary: To prevent this, the ECB recently reduced interest rates to a historic low in an attempt to boost demand and provide needed liquidity for the common market.

Joey: Interesting points. It’s important for us to remember the differences between the U.S. and European monetary unions when comparing their economies. Ms. Bunnelle, could you go into more detail on the current employment conditions?

Hillary: The employment rate of the Eurozone continues to grow, breaking 67%, substantially higher than the EU as a whole.  While there has been improvement, the rate of female employment in the Eurozone continues to lag that of the United States by over 8 percentage points.  It is the goal of the Lisbon European Council to reach as close as possible to a 70% total employment rate, and a 60% female employment rate by 2010. 

Stephanie: There have been comparatively rapid increases in employment rates since the year 2000, when the Lisbon Council first met. There is need for further measures to be taken, and the participation of the member states is essential to reaching these goals. Many member states have implemented reforms, but the intensity and pace of each state varies.

Ali: It is true that the intensity of reforms vary from country to country, but so do the structural and cultural obstacles. Each country has a unique historical situation from where it must operate. We must not simplistically compare the efforts of countries by merely looking at their results.

Hillary: I agree, but there must be accountability as well.

Joey: So, having looked at general conditions, let’s focus on what we specifically feel is Italy’s key challenge, raising their long term economic growth potential. Ms. Chin, would you care to give us an overview of what factors determine a country’s long term growth potential?  (potential gdp slide)

Stephanie: Sure. Often when we compare different economies we focus on current economic growth, like we did earlier when we talked about current economic conditions. While this is an important topic, it’s also necessary to consider long-term growth trends. The way we compare different economies and their long-term growth trends is through the concept of growth potential. The factors that affect growth potentials are more structural in nature and demand different policies than traditional short-term monetary and fiscal policy.

Joey: The way I see it, the growth potential is the “speed limit” of the economy. It measures the rate at which GDP can grow, without causing destabilizing consequences, such as inflation.

Ali: Growth potential estimates in the EU have historically lagged behind those of the United States. One of the primary focuses of the Lisbon Strategy is to address these long term constraints.

Joey: What are some of these ‘structural issues’ that you are talking about?

Stephanie: there are two primary factors, the size of the labor force and labor productivity.

Joey: What’s so important about these two factors?

Ali: They are key in determining what rate of growth your economy can sustain over time. If you have a large, growing labor force, but at that same time one that is comparatively unproductive, your overall performance will lag. Similarly, if you have a very efficient and productive work force, but one that is relatively small, this will also constrain your long term potential.

Hillary: Technically the employment rate is that percent of your working age population that is employed or is actively looking for a job. (show slide with definition and formula % Italy vs. euro averages) So, if that percentage increases, the overall numbers of workers who are available for production can dramatically increase.

Ali: Exactly…more workers equals more production. Pretty simple stuff really.

Stephanie: As discussed earlier by Ms. Bunnelle, employment rates in the Eurozone have lagged that of the United States and Italy continues to trail the Eurozone average by a substantial amount.  This has contributed to the comparatively lower growth potentials here.

Joey: So what about the role of productivity? In fact, what is productivity and how do we measure it?

Ali: Productivity simply measures how much output is produced by one input. When we speak of labor productivity we are essentially examining how much output is created with more unit of labor

Joey: So what types of things could enhance a country’s productivity?

Hillary: Well, there are many theories…everything from investments in education to infrastructure improvements. However, I feel, that perhaps the single most important step that can be taken is to increase competition within an economy. Increased incentives and competitive pressure is the single most powerful tool to enhance productivity because it empowers individual people and firms to work more efficiently by pursuing their own self-interest.

Stephanie: You sound like Adam Smith…

Hillary: Well he was one of our more influential European economists.  (1^st productivity slide)

Ali: The potential growth rate for the economy is lower in Italy than in the US, and is also one of the lowest in the Eurozone. The Lisbon Strategy has focused on trying to increase the potential growth rate by increasing employment rates. As we’ve seen, they’ve achieved moderate success in this. However, productivity rates have fallen as the employment rates increase.

Stephanie: She’s right. Recent data shows that productivity growth in the Eurozone economies has been steadily declining as of late. This decline in productivity is threatening to seriously hinder economic growth and living standards in the future.

Joey: This downward trend is particularly marked in countries such as Italy and Spain, where the average annual productivity growth was less than 1% between 2001 and 2006.

Ali: Policy makers have recently begun to heed the advice of economists who have called for a loosening of labor markets to stimulate their economies and boost overall employment. Over the past few years, countries such as Spain and Italy have increased part-time employment and have introduced measures that make it easier to hire and fire workers.

Joey: Is this growth in the employment rate possibly connected to the productivity slowdown?

Hillary: In part… These new reforms have dented overall productivity. For instance, short-term contracts give less incentive for companies to train their work force, resulting in less efficient workers.  It’s also possible workers that are newer to the system will take more time to gain experience and in turn become more productive.

Stephanie:: Excellent point. While that might explain a temporary slowdown as the economies adjust to the higher employment rates, if it were to persist, the long-term consequences of shrinking worker productivity are serious. Growth in productivity is essential for raising living standards.  Countries such as Italy, which have a shrinking work force and rising numbers of elderly, nonworking citizens, will need productivity growth to keep their standards of living from falling.

Joey: Yes. Look at the Italian numbers versus the rest of the Eurozone. Italy’s productivity has steadily declined over the last five years, while that of the eurozone has increased.  Why is this happening?  (2^nd productivity slide)

Ali: It could be partially due to the increases in the labor force as mentioned earlier, but I don’t think we can simply rely upon that argument. We must address job training and educational issues as well. In Italy only 16.9% of the Italian workforce received training from their employer, compared with 26.1 % of the Eurozone. This leaves a workforce that is somewhat unequipped to perform their jobs. To increase productivity, we also need to increase worker training and education.

Hillary: And guess who pursues more training as their careers progress? Why women of course! All jokes aside, the Lisbon strategy data clearly shows that women pursue more lifelong learning opportunities than men. Another reason why we simply must continue to increase labor participation rates for women. 

Stephanie:  That’s true.  Also look at this report from the Global Economic Forum ranking Italy’s labor market efficiency 126^th out of 134 countries.  They rate the inflexibility of hiring and firing practices as one of the key factors for their low rating.  This inflexibility is hindering Italian companies as they try and compete in the global economy.

Ali: Well, it’s true in Italy we must boost either our employment rates or labor productivity and preferably both.

Joey: Well, let’s discuss our policy proposals on how to address these issues and boost the potential for economic growth in Italy. Ms. Bullington? (productivity policy rec slide)

Ali: Our first recommendation for increasing productivity is to make employment conditions more flexible. If companies are locked into long term contracts, they will be less willing to hire new employees. Also, if companies are not able to hire and fire more freely, they will be unable to adapt to the constantly changing macroeconomic conditions that we now face.

Stephanie: Secondly, going back to our fundamental claim that competition is the single best way to increase productivity, European countries must resist protectionist impulses and keep their borders open to foreign goods. Although it is always tempting to resort to economic protections such as increased tariffs in difficult economic times, it is an impulse that Italy and the EU must resist.

Hillary: A case from last year is instructive. Courts in the EU ruled that certain classes of consumer technological goods could be redefined as goods that were not part of a WTO agreement. They were then able to keep higher tariffs, up to 14% higher, on these goods. This type of behavior can only result in other areas following suit. Lower tariffs will create lower prices, which will act to increase demand and create a more dynamic market for our own companies.

Joey: Yes, these two policies go hand in hand. We cannot continue to open our markets to more and more competition unless we free up our companies to compete more equitably with foreign firms. If we allow our companies more flexibility, they will be able to compete fully in the global marketplace. This competition is our best policy strategy for boosting productivity.

Hillary: In terms of boosting our employment rate in Italy, we want to focus on reducing our gap in female employment. We think one policy that holds great promise here is gender mainstreaming. The key of gender mainstreaming is to recognize the differences between men and women and bring those differences into the “mainstream” of society, informing all levels of policy making. (Slide: Definition of GM and policy recs)

Ali: These differences influence men’s and women’s needs in both the workplace and at home. By focusing on these needs, we can make policy adjustments to promote equality and opportunity for both sexes. Companies need to offer job options that do not make employees choose between work and family. This could entail increased child care facilities, flexible hours and a family friendly atmosphere.

Stephanie: Also, outside of the workplace, we need to consider how culture impacts female employment rates. For instance, some EU countries have addressed this issue by increasing the range of options young girls are given on how to spend their leisure time. This situation is in some ways analogous to Title XI which has expanded options for women’s collegiate sports in the United States. Many leisure activities, such as professional sports, are currently geared primarily towards men. By expanding coverage of other options within society, young women can be empowered to take a more active role in creating their future.

Joey: These cultural issues lie at the heart of Italy’s current gap in employment rates. Italy, the EU and in fact the entire world, cannot afford to view economic development as a choice between growth and retaining their culture. Societies will not abandon their cultural identity, nor should they. But we must all be willing to change and adapt to the new world in which we live.

Well that’s all the time we have here on Tomorrow’s Economy. I want to thank all our guests for coming tonight. I think the real message that out viewers should take away from this episode is that, despite the current financial crisis, the E.U. needs to stay focused on long-term growth by increasing its productivity and labor force participation rate. I’m Joey Timmerman, and I hope you enjoyed tonight’s episode of Tomorrow’s Economy: The Lisbon Strategy at Work

http://ec.europa.eu/economy_finance/eu/forecasts/article16051_en.htm

another short piece on eu wide economic predictions is here

next link is to the cyprus economic predictions article i gave you at school

cyrpus predictions

look in the comments section of this post for further directions!!!

overview of areas of eu immigration policy – we’ll have to narrow this down, but maybe look over different areas of concern for now and think through what fits best for cyprus