Updated research

Spring break caught me a bit off guard and put me a few days behind in my research, nevertheless the show must go on.

As mentioned in my previous post I have been working with some experts in the field of global currencies and international trade, I am still compiling the research and data from that. I will have an updated thesis statement reflecting the new research shortly.

Two important pieces of information I have come across:

1. At the creation of the European Union/Euro, there was financial regulation put in place to maintain economic conformity across the various member states called the "Stability and Growth Pact." This was put in place to make sure public and government debt didn't exceed a certain percentage of the GDP of that country. Thus far a majority of the member states are in violation of this pact with debt to GDP ratios EXCEEDING what they have outlined as "dangerous" levels, this has been the case for the past 2-3 years in several countries. What was warned to be dangerous is regards to debt levels is now common place and the result is continuing bailouts of various countries and the risk of further problems is spreading. (Recent news of Portugal needing EU assistance is only strengthening my case)

Sources used for this:

Kesner-Škreb, Marina:

Institute of Public Finance, Zagreb: "STABILITY AND GROWTH PACT"

"http://en.wikipedia.org/wiki/Stability_and_Growth_Pact" this is a list of countries that are currently in violation of the SGP and a further explanation of the regulation with several cited sources.

2. According to the European Commission of Financial Affairs, "implementation of the

single currency was not only an economic decision; it was also a political commitment

by the EU Member States to work together.." There is big debate on whether the problems with the EU are more political or economical, my research so far has found both to be of equal importance and equally problematic. The political problems and tension between the small and large countries in the EU seem to be causing Issues on both sides, hence it appears the political problems are causing the economical problems and exactly vice versa.

http://ec.europa.eu/economy_finance/euro/why/identity/index_en.htm

With some of the new information and research I've discovered my topic is getting more refined but there is a bit more to go. I am trying to focus on the goal of the Euro and what the outcome has been so far. From that I want to project said results onto a future path of the European Union and prove that one of two extreme changes will become necessary:

1. The European Union becomes a single country and combine all debt/assets/governments etc

2.Or The European Union must breaks apart.

I feel like I am on the right path so far but more research and more work to do yet.

The Latest...

I have chosen to spend this week discussing my research and topic with some experts in the field, I have some great research and I wanted to make sure that I was getting the most out of it. I am trying to clarify and nail down my thesis just a bit more which is why I decided to spend this time discussing aspects of my research with a few different people. I will have a more clarified thesis statement, that goes very well with my research, in another day or so. I just want to make sure I am using my resources to the fullest.

My current thesis is almost like two theses in one so I am working to narrow it down just slightly. I did some research this week, I will post a slightly revised thesis and additional research in the shortly.

Updated Thesis and Bibliography

The European Union is wrought with challenges including social, political, historical, economic and cultural issues. The question I would like to answer is can the Euro be enough of a uniting force to hold the European Union together?

The goal is to research the various countries and currency unions that have attempted this in the past and that are currently in a union and find out what has worked and what has not, including examples of the early American colonies. I will explore the social, political and economic differences of the various EU countries and pose the question of if the focal point (the Euro, IE MONEY) will be enough to keep these countries together. Can the EU buy their way out of this problem, will money/Euro be enough to unite these countries and cultures?

Annotated Bibliography:

Lynn, Matthew. "Bust: Greece, the Euro and Sovereign Debt Crisis." John Wiley & Sons Inc. 2011.

-There's much reading yet to do with Lynn's book but so far he brings up some good topics about current fiscal problems the EU is facing and some implications for the future of the EU/Euro.

Eichengreen, Barry. "Europe's Trojan Horse." http://relooney.fatcow.com/0_New_6768.pdf(accessed Feb 2011)

-this is a very interesting article that directly relates to and addresses some of my questions of the necessity for the European Union countries to unite completely or suffer further losses from the more troublesome countries. It also talks about how the stronger/higher producing EU countries might not like this/agree to it because of the financial burden of having to further carry the risky countries.

Roubin, Nouriel. "Teaching PIIGS to Fly." http://relooney.fatcow.com/0_New_6765.pdf(accessed Feb 2011)

-Roubin's article on the PIIGS counties is very interesting, he basically covers the troubles that lay ahead with the EU with the current debt crisis and what the EU might face if major changes are not applied.

Brown, Brenden. "Euro Crash: The Implications of Monetary Failure in Europe." Palgrave Mcmillan, 2010

-Brown's book further explores the path the EU is on with the Euro and increasingly weakening countries. The author also goes into further detail about what would likely happen to the EU should more defaults come as a result of the extensive bailouts possible needed.

McNamara, Kathleen. "The Currency of Ideas: Monetary Politics in the European Union (Cornell Studies in Political Economy)." Cornell University, 1998

-McNamara discusses in details some of the reasons that countries enter into currency unions and some of the major pitfalls of these relationships.

Masson, Paul: Taylor, Mark. "Policy Issues in the Operation of Currency Unions" University Press, Campbridge 1993

-Masson and Taylor discuss the functions of a currency union and get into great details about the inner workings and where they fall short but how political power pushes them on, NOT economic power.

Brash, Donald: Reserve Bank of New Zealand "The Pros and Cons of Currency Union: a Reserve Bank Perspective." http://www.rbnz.govt.nz/speeches/0091114.html (Accessed Feb 2011)

-Great article from the bank of New Zealand discussing the pro and cons of a currency union, reasons they would want to enter into a larger one, which countries would best benefit them in the union but also some of the major draw backs. He specifically discusses the aspect of losing monetary control of an individual country when a currency union is started.

List of Countries with Currency Unions, International Monetary Fund: http://www.imf.org/external/np/exr/facts/emu.htm (Accessed Feb 2011)

-According to the International Monetary Fund this is a list of countries that have and are currently in currency unions.

Additional List of Currency Unions: http://en.wikipedia.org/wiki/Single_currency (Accessed Feb 2011)

-Wikipedia's list of currency unions with their GDP numbers and rough populations.

List of external debt: "World Economic Outlook Database, April 2010, International Monetary Fund." (Accessed on Feb 2011)

-According to the IMF this is a list of the external debt on several countries including the EU countries, this debt refers to the money a country owes through the sale of bonds and treasuries to other countries.

Secondary List of External Debt for EU Counties:"http://en.wikipedia.org/wiki/List_of_countries_by_external_debt" (Accessed Feb 2011)

-Just a secondary list of external debt owed by one country to another.

Eichengreen, Barry: "Globalizing Capital: a History of the International Monetary System" Princeton University Press, 2008

-Eichengreen goes through the history of the monetary system and how it's changing and evolving and some of the fundamental aspects that are required for a successful monetary system to function properly.

Eichengreen, Barry. "European monetary unification: a tour d'horizon." http://people.exeter.ac.uk/tkirsano/eichengreen.pdf (Accessed Feb 2011)

-Eichengreen in this report praises the effort of the EU to make the currency union work and function but warns of the pit falls.

Pissarides, Christopher. "London School of Economics, The Labor Market and the Euro" http://www.new.ucy.ac.cy/data/ecorece/Full%20text_Pissarides.pdf (Accessed Feb 2011)

-Pissarides discusses the aspects of a currency union, the expectations but the sometimes overlooked detail of the work force through the various countries involved in the unions.

Sarkar, Salil "Will the Euro Survive?" http://www.english.rfi.fr/economy/20100628-will-euro-survive (Accessed Feb 23, 2011)

-Sarkar discusses the specific aspect of the lack of a central federal body to more tightly unify the countries as well as the heavy burden of debt each country holds.

Sarkar, Salil "Will Austerity Save Europe From Crisis" http://rfi.my/i9mCa2 (Accessed Feb 25 2011)

-Here Sarkar again reinforces the problems the EU is facing and if their attempts of a solution are really making enough of a difference.

A few Notes along the way

The research has been very lucrative this week, so much to read!!

One goal I had this week was to find sources and example of "currency unions" similar to the Euro and the EU. I found several actually, some of those examples are as follows:

1. Switzerland and the Swiss Franc, also included in this union is Liechtenstein

2. Russia and the Russian Ruble, included is South Ossetia and Abkhazia

3. New Zealand Dollar also includes Cook Islands, Niue, Pitcairn Islands

There are several other examples of currency unions that are currently in operation. One thing I noticed in common with all the examples is there's usually a large country with a large economy that is basically the "boss" of the union and smaller countries participate for reasons of keeping exchange rates stable so those smaller countries can easily do trade with the larger "mother ship." However one common theme amount these unions is that the smaller countries, in almost all the examples, are VERY small countries with populations of usually less than two million citizens and very nominal national production/GDP.

This was a strong theme in finding the big challenge with the Euro, the other unions are in essence helping the the smaller countries, while the Euro is trying to hold developed, highly populated countries under one umbrella. The European Union is full of countries with populations exceeding tens of millions, with GDP numbers exceeding a trillion dollars and debt in excess of 100% of the individual countries GDP.

The Euro/EU is truly one of a kind in examples, I will cite the sources in the next post. Great information.