Part Ⅰ

G-7 and EU Member States

Group of 7

The Group of Seven(G7)is a governmental forum of leading advanced economies in the world.The forum originated with a 1975 summit hosted by France that brought together representatives of six governments:France,West Germany,Italy,Japan,the United Kingdom,and the United States,thus leading to the name Group of Six or G6.The summit became known as the Group of Seven or G7 in 1976 with the addition of Canada.The G7 is composed of the seven wealthiest developed countries on earth(by national net wealth or by GDP).The G7 countries represent more than 64%of the net global wealth(＄263 trillion)according to the Credit Suisse Global Wealth Report October 2014.

Since 1975,the group meets annually on summit site to discuss economic policies;since 1987,the G7 finance ministers have met at least semi-annually,up to 4 times a year at standalone meetings.

In 1999,the G7 decided to get more directly involved in“managing the international monetary system”through the Financial Stability Forum,formed earlier in 1999 and the G-20,established following the summit,to“promote dialogue between major industrial and emerging market countries”.

In 2008 the G7 met twice in Washington D.C.to discuss the global financial crisis of 2007-2010 and in February 2009 in Rome.The group offinance ministers pledged to take“all necessary steps”to stem the crisis.

Russia was added to the group from 1998 to 2014,which then became known as the G8.The European Union was represented within the G8 since the 1980s but could not host or chair summits.

The G7 has influenced IMF and World Bank rules of crisis resolution and development,as well as WTO‘s rules of international trade.

EU Member States

The European Union is a politico-economic union of28 member states that are located primarily in Europe.It traces its origins from the European Coal and Steel Community(ECSC) and the European Economic Community(EEC),formed by the Inner Six countries in 1951 and 1958,respectively.In the intervening years,the community and its successors have grown in size by the accession of new member states.

The European Union(EU)was formally established when the Maastricht Treaty came into force on 1 November 1993.In 1957,Belgium,France,Italy,Luxembourg,the Netherlands,and West Germany signed the Treaty of Rome,which created the European Economic Community(EEC)and established a customs union.In 1973,the Communities enlarged to include Denmark,Ireland,and the United Kingdom.Greece joined in 1981;Portugal and Spain in 1986.In 1985,the Schengen Agreement led the way toward the creation of open borders without passport controls between most member states and some non-member states.In 1990,after the fall of the Eastern Bloc,the former East Germany became part of the Community as part of a reunited Germany.In 2004,the EU saw its biggest enlargement to date when Cyprus,the Czech Republic,Estonia,Hungary,Latvia,Lithuania,Malta,Poland,Slovakia,and Slovenia joined the Union.On 1 January 2007,Romania and Bulgaria became EU members.On 1 July 2013,Croatia became the 28th EU member.The EU operates through a system of supranational institutions and intergovernmental-negotiated decisions by the member states.

The European Union has seven institutions:the European Parliament,the Council of the European Union,the European Commission,the European Council,the European Central Bank,the Court ofJustice of the European Union and the European Court of Auditors.Competencies in scrutinizing and amending legislation are divided between the European Parliament and the Council of the European Union while executive tasks are carried out by the European Commission and in a limited capacity by the European Council.The monetary policy of the eurozone is governed by the European Central Bank.The interpretation and the application of EU law and the treaties are ensured by the Court ofJustice of the European Union.The EU budget is scrutinized by the European Court of Auditors.There are also a number of ancillary bodies which advise the EU or operate in a specific area.

Internal Market

The EU has developed a single market through a standardized system of laws that apply in all member states.The single market involves the free circulation of goods,capital,people,and services within the EU,and the customs union involves the application of a common external tariff on all goods entering the market.Once goods have been admitted into the market they cannot be subjected to customs duties,discriminatory taxes or import quotas,as they travel internally.The non-EU member states of Iceland,Norway,Liechtenstein and Switzerland participate in the single market but not in the customs union.Half the trade in the EU is covered by legislation harmonized by the EU.

Free movement of capital is intended to permit movement of investments such as property purchases and buying of shares between countries.

The free movement of capital is unique insofar as it is granted equally to non-member states.

The free movement of persons means that EU citizens can move freely between member states to live,work,study or retire in another country.

Within the Schengen Area,passport controls have been abolished.EU policies aim to ensure the free movement of people,goods,services,and capital,enact legislation in justice and home affairs,and maintain common policies on trade,agriculture,fisheries,and regional development.In 2012,the EU was awarded the Nobel Peace Prize.

Eurozone

The monetary union was established in 1999 and came into full force in 2002,the year when euro banknotes and coins replaced national currencies in 12 of the member states.Since then,the eurozone has increased to encompass 19 countries.

Through the Common Foreign and Security Policy,the EU has developed a role in external relations and defense.The union maintains permanent diplomatic missions throughout the world and represents itself at the United Nations,the WTO,the G8,and the G-20.

With a combined population of over 500 million inhabitants,or 7.3%of the world population,the EU in 2014 generated a nominalgross domestic product(GDP)of 18.495 trillion US dollars,constituting approximately 24%of global nominal GDP and 17%when measured in terms of purchasing power parity.As of 2014 the EU has the largest economy in the world,generating a GDP bigger than any other economic union or country.Of the top 500 largest corporations measured by revenue(Fortune Global 500 in 2010),161 have their headquarters in the EU.

Competition

The EU operates a competition policy intended to ensure undistorted competition within the single market.The Commission as the competition regulator for the single market is responsible for antitrust issues,approving mergers,breaking up cartels,working for economic liberalisation and preventing state aid.For example,in 2001 the Commission for the first time prevented a merger between two companies based in the United States(GE and Honeywell)which had already been approved by their national authority.Another high-profile case against Microsoft,resulted in the Commission fining Microsoft over 777 million following nine years of legal action.

Monetary Union

The creation of aEuropean single currency became an official objective of the European Economic Community in 1969.In 1992,after having negotiated the structure and procedures of a currency union,the member states signed the Maastricht Treaty and were legally bound to fulfill the agreed-on rules including the convergence criteria if they wanted to join the monetary union.The states wanting to participate had first to join the European Exchange Rate Mechanism.

In 1999 the currency union started,first as an accounting currency with eleven member states joining.In 2002,the currency was fully put into place,when euro notes and coins were issued and national currencies began to phase out in the eurozone,which by then consisted of 12 member states.The eurozone(constituted by the EU member states which have adopted the euro)has since grown to 19 countries,the most recent being Lithuania whichjoined on 1 January 2015.Denmark,the United Kingdom,and Sweden decided not to join the euro.

Since its launch the euro has become the second reserve currency in the world with a quarter offoreign exchanges reserves being in euro.The euro and the monetary policies of those who have adopted it in agreement with the EU,are under the control of the European Central Bank(ECB).

To prevent the joining states from getting into financial trouble or crisis after entering the monetary union,they were obliged in the Maastricht treaty to fulfill important financial obligations and procedures,especially to show budgetary discipline and a high degree of sustainable economic convergence,as well as to avoid excessive government deficits and limit the government debt to a sustainable level.

Some states joined the euro but violated these rules and contracts to an extent that they slid into adebt crisis and had to be financially supported with emergency rescue funds.These states were Greece,Ireland,Portugal,Cyprus and Spain.

Even though the Maastricht treaty forbids eurozone states to assume the debts of other states(“bailout”),various emergency rescue funds had been created by the members to support the debt crisis states to meet their financial obligations and buy time for reforms that those states can gain back their competitiveness.

European Economic Area

The European Economic Area(EEA)is a single market that provides for the free movement of persons,goods,services and capital through three of the four member states of the European Free Trade Association(EFTA)-Iceland,Liechtenstein and Norway-and all28 member states of the European Union(EU).Pending its ratification by all EEA countries,Croatia,the remaining and most recent EU member state,is applying the EEA Agreement provisionally.

The EEA was established on 1 January 1994 following an agreement between the member states and the EU‘s predecessor,the European Community.EFTA states which join the EEA are able to participate in the EU‘s single internal market without being EU members,adopting almost all the relevant EU legislation other than laws regarding agriculture and fisheries.The EEA‘s decision-shaping processes enable them to influence and contribute to new EEA policy and legislation from an early stage.

One EFTA member,Switzerland,has not joined the EEA but has a series of bilateral agreements with the EU,including a free trade agreement.

Brexit decision sparks EU crisis

As the first member to vote to leave the 28-member bloc,the UK‘s historical referendum has caused a chain reaction,not only in Britain but also in the EU and the international communities.The referendum,which held a 52 percent to 48 percent lead with more than 17 million votes cast for Leave and 16 million for Remain,is not binding but“advisory”.It does not automatically trigger exit from the EU,which must be confirmed by the British prime minister activating Article 50 of the Lisbon Treaty,beginning a years-long process of exit.

It is clear that this political earthquake will have after-shocks throughout the world.”

European stock markets saw sharply lower opens on Friday,falling by as much as 12 percent,and markets worldwide plunged as the vote counts trickled in Thursday night and Friday morning.The British pound fell to its lowest level since 1985,down more than 10 percent at one point against the US dollar,before staging what may be a temporary recovery.Gold and the Japanese yen went up.Most economists predict that the decision is likely to result in longterm economic damage to the UK,and possible recession. fP4d1/jSg5kcn4a9JSxuKqp1vbO6d9P0xGeJrYTKY+ckczqZLz2w9vKoAypeqSGH