SPANISH ECO Unit 3

Spain in the European Union

Main consequences of joining the EEC ( Trade Policies)

EU trade policies replace development or foreign policy / use of anti dumping policy / effects of trade creation and trade diversion

What was one of the biggest problem for spain’s entry into the Eu

This was due to the Common Agricultural Policy ( Spain had high percentage of labor in agriculture so recieved more european funds (france against)

What was requirment to join EEC?

7 year period where spain would reduce tariffs on its agricultural products ( Dairy,wheat or beef) until completely gone / was done to avoid the shock the common market could have on the spanish primary sector / for other products in which spain was competitive like fruit and veg the period would be 4 years / additionally quotas were imposed on olive oil, milk , sugar and wine to avoid surplus which would compromise the community budget

What is the European Union at a global level

A net trade-creating customs union

When did Spain sign the schengen agreement?

IN 1991 / The agreement guarenteed the freedom of movement of citizens of the EU

In which industry did Spain lose influence as a result of joining the EU

The fishing industry

Why is there real convergence of spain with its european partners

because of the structural and cohesion funds

Full Employment

All members of working age (Working Population) of a society and WHO WISH TO WORK can do so

How does unemployement exist?

When all members of the working population want to and can work.

Conjunctural Unemployment

Unemployement that obeys a certain recessive phase of the economic cycle

Structural Unemployment

Unemployment that exists regardless of the economic cycle

Frictional Unemployment

Unemployment in the period of time where a person leaves a job and until he joins his new job.

Can unemployment ever reach 0%

No

Most direct instrument to combat unemployment?

Fiscal Policy / Monetary is less effective due to transmission mechanisms

Do reductions in interest rate encourage invesment?

yes depending on expectations and stimulate production and unemployment

Does spain have high unemployment

Span has structurally a higher unemployment than the rest of Europe ( ATH 7.9%)

What kind of business cycle does spain have?

a amplified procyclical trend

How was spain more competitive in 2008?

an internal devaluation pushed down wages (Impossible to devalue spanish currency) , this made spain more competitive but this is not sustainable over time.

Productivity grows fast or slow?

Productivity grows at slow rates which does not favor sustained growth in wages

what also influences the slow growth of wages?

High temporality since it contributes to inequalities and strengthening of a dual labor market

What kind of policies were being carried out before the crisis?

Pro-cyclical polices / Real Interest rates became negative as a consequence of the low interest rates applied by the ECB

what kind of policies are being applied at the start of the crisis?

Pro-cyclical

In order to comply with the convergence criteria, what is applied?

an Economic austerity program / made things worse

Even though interest rates were low, what did fiscal policy do?

depressed an economy that had already entered a deep recession

What was the cost of economic recovery?

Increase in inequality / middle class destroyed and medioum and low income went to the high

Does inequality increase in economic crisis>?

Yes but it corrects as recovery takes place

in the 2008 financial crisis why did it take so long for inequality to correct ?

due to the depth of the great recession / job insecurity

Japanization

long-term stagnation and deflation. Symptoms include high unemployment, weak economic activity, interest rates near zero, quantitative easing and population aging