Western European Politics - Exam 4

Front 1

Macroeconomic Policies

Back 1

policies designed to control/manipulate macroeconomic conditions (2 types)
- expansionary: "stimulate" while in a recession
- contractionary: "depress" while in a boom

Front 2

Fiscal Policies

Back 2

control gov't budgets
- expansionary: increasing gov't expenditure &/or
decreasing taxes
- contractionary: decreasing gov't expenditure &/or
increasing taxes

Front 3

Monetary Policies

Back 3

control interest & exchange rates
- expansionary: decreasing the interest rate
- contractionary: increasing the interest rate

Front 4

Phillips Curve

Back 4

historical inverse relationship between rate of unemployment & the rate of inflation in an economy
- ex: UK Study - unemployment high, wages inc. slowly
unemployment low, wages inc. rapidly

Front 5

Tax Smoothing Theory

Back 5

optimal tax policy involves the gov't smoothing tax rates over time
- tax rates are inflexible but business cycle is flexible
- deficits in recessions (low revenue)
- surplus in booms (high revenue)

Front 6

Fiscal Illusion

Back 6

voters don't understand the intertemporal budget constraint of the gov't & overestimate benefits of current expenditures while underestimating the future tax burden
politicians take advantage by spending more

Front 7

Intergenerational Redistribution

Back 7

current generation leaves burden of debt to future generations (generated by public debt)

the social choice leads to debt

Front 8

Common Pool Problem

Back 8

individual politicians (parties) want to spend more on their constituencies or 'programs' & underestimate fiscal burden they give to the total gov't budget

Front 9

"Tying the Hands" Argument

Back 9

current gov't ties the hands of the next gov't & leads to deficits because it gives the new gov't a debt legacy
- party A likes defense, party B likes welfare
- party A is in gov't but knows party B will be there soon
- party A leaves deficits/debt to Party B and they can't
run the welfare program anymore

Front 10

European Monetary Cooperation Fund (1973-1994)

Back 10

institution and fund established by members of the European Exchange Rate Mechanism (ERM) to stabilize exchange rates
- succeeded by European Monetary Institute

Front 11

European Monetary Institute (1994-1997)

Back 11

key monetary institution of the 2nd phase of European monetary integration

encouraged cooperation between national banks of member states and laid foundation for the euro

Front 12

Euro

Back 12

launched as medium of exchange (via electronic transfer) in 1999

began physical circulation of currency in 2002

Front 13

Impossible Trinity

Back 13

All 3 goals of monetary policies cannot be achieved at the same time
(1) fixed exchange rate
(2) free capital movement
(3) independent monetary policy

Front 14

Asymmetric Shock

Back 14

different supply/demand shocks between countries
- fluctuations between them which are "asymmetric"
- ex: demand for chicken inc. in A and dec. in B

occurs interstate in the EU

Front 15

Theory of Optimum Currency Area

Back 15

would maximize economic efficiency to have an entire region share a single currency (rationale for euro)
- 4 criteria for success:
1. labor mobility
2. capital mobility & price/wage flexibility
3. risk sharing system (redistribution scheme)
4. countries have similar business cycles

Front 16

Bank Recapitalization

Back 16

reforming the capital structure of banks assisted by a deposit insurance fund
- ex: selling off "toxic assets"

Front 17

Austerity Bailout Package

Back 17

policy of deficit cutting, lower spending, & reduction in amount of benefits and public services provided

sometimes coupled w/ tax increase to pay back creditors to reduce debt

Front 18

Functionalism

Back 18

integration should focus on functional and practical aspects (economy), not ideological/principle aspects (politics)
- began w/ economic cooperation

Front 19

Neo-Functionalism

Back 19

economic integration is supposed to "spill over" into political and other realms (snowball effect)

Front 20

European Coal & Steel Community (ECSC) (1951)

Back 20

to coordinate and oversee the coal & steel industries of France and Germany (key economic industries)
- served as cornerstone for EU
- members: France, Germany, Italy, Belgium,
Netherlands, & Luxembourg

Front 21

Treaty of Rome (1957)

Back 21

expanded early integration efforts w/ goal of common market and an "ever closer union" of countries

Front 22

EURATOM (1957)
"European Atomic Energy Community"

Back 22

cooperation to develop peaceful uses of nuclear energy and established by the European Economic Community (EEC)
- France, Netherlands, Belgium, Luxembourg, Italy,
& West Germany

Front 23

European Economic Community (EEC)

Back 23

- wanted common market (goods, services, labor, capital)
- lowered trade barriers, shared common trade policy
- harmonized tax rates
- harmonized gov't regulations and standards

Front 24

European Communities (EC) (1967)

Back 24

- merger of the ECSC, EURATOM, & EEC
- removed some internal tariffs, formed custom union
- created European Exchange Rate Mechanism (ERM)
- expanded and created Regional Development Fund

Front 25

Regional Development Fund

Back 25

established to assist economic development of a united Europe w/ expectation of further participation
- like welfare for countries

Front 26

Council of Europe's Assembly

Back 26

- intergovernmental consultative body
- members drawn from national parliaments
- renamed to --> European Parliament (1962)

Front 27

Single European Act (SEA) (1986)

Back 27

put forth a timetable to remove all barriers to trade and create a common market by 1992
expanded powers of the European Community to new areas such as the environment

Front 28

Maastricht Treaty (1991)

Back 28

formally created the EU and expanded the scope of European integration including:
- creation of the euro
- creation of Common Foreign & Security Policy

Front 29

Lisbon Treaty (2007)

Back 29

reform treaty that changes voting rules w/in the EU and creates a de facto EU "president" & "foreign minister"

- came into force in 2009

Front 30

European Commission

Back 30

executive body of EU charged w/ drafting legislation and directives and overseeing implementation of policy
- has much power over national gov'ts
- can take dissidents to ECJ for punishment
- consists of 27 commissioners

Front 31

Directorate Generals (DGs)

Back 31

departments w/in the European Commission similar to executive departments/ministries in a national gov't
- about 37 of them
- overseen by an EU commissioner

Front 32

Commissioners

Back 32

each country receives 1 commissioner and some of the 27 commissioners oversee more than one DG
- serve 5 yr. terms and take oath of loyalty to EU
- can accept no national instructions on EU policy
- divided up on basis of country's interest
- 7 commissioners serve as VP's

Front 33

Council of the European Union

Back 33

intergovernmental body made up of national-level ministers that reviews/approves the Commission proposals
- has 6 mo. rotating presidency
- aka "Council of Ministers"

Front 34

Double Majority Rule

Back 34

voting procedure for the Council of the EU established by Lisbon Treaty and will come into effect in 2014
- requires 55% of states representing 65% of population
in order to pass proposals
- will replace QMV (Qualified-Majority Voting)

Front 35

European Parliament (EP)

Back 35

popularly-elected legislature of the EU which shares much decision-making power w/ the Council of the EU
- only EU body elected by voters
- functions more as a supranational institution
- elected every 5 yrs. via proportional representation
- formerly Council of Europe's Assembly
- first direct election held in 1979

Front 36

Democratic Deficit

Back 36

idea that EU suffers from a lack of democracy and connections to its citizens

Front 37

European Council

Back 37

EU body comprised of leaders of member states that sets broad goals for the EU
- headed by president of the European Council
- appoints individual to serve 2.5 yr. term
- most powerful

Front 38

Co-Decision

Back 38

increasingly used mechanism in which EU actions and proposals must be approved both by the EP and the Council of the EU

Front 39

Qualified-Majority Voting (QMV)

Back 39

procedure used in the Council of the EU based upon weighted votes for each country
- supermajority (75%) of votes req'd to pass legislation
- will be phased out under Lisbon Treaty

Front 40

European Integration

Back 40

sustained and institutionalized interaction among states and social actors to foster a harmonization of policies
- rests on creation of international organization (EU)