Andrs RodrguezPose

1
THE EUROPEAN UNION ECONOMY, SOCIETY, AND POLITY

• by
• Andrés Rodríguez-Pose
• London School of Economics
• Oxford University Press
• ISBN 0-19-874286-X

2
Part I
ECONOMY
3
Chapter 1
Competitiveness
4
The stages of economic integration

• Free trade areas
• Free trade between members, different external
  tariffs
• Little or no institutional co-ordination
• Customs union
• Free trade between members and common external
  trade restriction
• Common regulatory bodies
• Common (or single) markets
• Removal of all barriers to free factor mobility
• Free mobility of goods, capital, labour, and
  services
• Greater level of regulation and strong
  institutions to monitor decisions adopted by
  member states

5
The stages of economic integration (II)

• Economic union
• Harmonisation of economic policies (generally
  monetary or fiscal policy)
• Members give up powers. Strong central
  institutions which dictate common economic policy
• Complete economic integration
• All economic policy areas are harmonised
• The capacity of states to implement independent
  policies disappears
• Central institutions become the centres of
  economic decision-making

6
The stages of economic integration in the EU
7
Economic integration to achieve competitiveness

• Why did a customs union (the EC) decide to
  increase the pace of economic integration during
  the 1980s and 1990s?
• Increasing globalisation of the world economy
  (increased competition, especially from the US,
  Japan, and the NICs)
• More sophisticated systems to dodge trade
  barriers (multinational corporations)
• Belief that market fragmentation (nationally
  divided markets) was reducing economies of scale

8
GDP per capita (2000) in Europe, the US and Japan
9
The limits of European competitiveness

• The costs of the non-Europe (Cecchini, 1991)
• Physical barriers Intra-European stoppages,
  controls at border checkpoints, red-tape,
  different currencies
• Technical barriers Different national product
  standards and technical regulations across Member
  States
• Fiscal barriers Lack of fiscal harmonisation

10
Physical barriers

• Custom related costs
• Customs controls, border stoppages
• Paperwork and red-tape
• Exchange of low-value added perishable goods
  suffered as a result
• High administrative costs and regulatory hassles
  
• Higher cost of red-tape of SMEs (higher
  proportion of their business volume, and lack of
  expertise and human resources)

11
Physical barriers (II)

• Protected markets (II)
• Fear of foreign dependence leads to protection of
  national strategic sectors
• Many sectors fall under this umbrella
  petrochemical industries, shipbuilding, iron and
  steel, tobacco, car manufacturing,
  telecommunications, air transport,...
• Formation of monopolies (BT, Deutsche Telekom,
  SIP, Air France, Iberia,...) or oligopolies
• Cost of protection born by the consumer
• Lack of competition and underperforming
  industries
• And companies
• Higher prices for services than their competitors

12
Physical barriers (III)

• Different currencies
• Transaction costs of changing currencies
• Higher costs of holding higher international
  reserves
• Costs associated to exchange rate volatility
• Higher interest rates in many countries

13
Technical barriers

• Different product standards and technical
  regulations
• Problems and additional costs for consumers
• Cost for firms which had to adapt their products
  to different national standards
• Cost premium for SMEs
• Protected public-sector procurement
• Government supply and construction contrast
  restricted to national firms
• Or technical regulations discriminating against
  foreign bidders

14
Fiscal barriers

• Different fiscal regimes
• Different regimes for companies
• Different VAT rates
• Different national accounting standards
• Duplication or multiplication of accounting
  standards for multinational companies
• Fiscal suspicion by national authorities in
  order to prevent tax evasion
• Premium for SMEs

15
The expected benefits of economic integration

• Cecchini report (1988). Cost saving effects
• Static trade effect benefits reaped from
  allowing public authorities to buy from the
  cheapest suppliers
• Competition effect Downward pressure on prices
  as a result of greater competition
• Restructuring effect Reorganisation of
  industrial sectors and individual companies as a
  result of greater competition
• Other possible benefits
• Benefits on investment, innovation
  (rationalisation of RD expenditure) and growth
• Savings for the public sector (lower government
  subsidies for inefficient firms

16
The expected benefits of economic integration (II)

• Combination of cost saving effects results in two
  kinds of benefits
• Direct benefits from the eradication of economic
  borders
• Indirect benefits from economic restructuring,
  increases in trade and competition and greater
  economies of scale
• Result
• The emergence of virtuous cycles of innovation
  and competition
• Lowering of prices for consumers
• Greater job creation

17
Estimation of benefits

• Cecchini (1988) 4 to 7 of Europes GDP
• Baldwin

18
The expected benefits of monetary union

• For all Member States adopting the Euro
• Price transparency across borders, inducing a
  greater competition effect
• Elimination of transaction costs of changing
  currencies
• Savings through holding lower international
  reserves
• Reduction of uncertainty caused by exchange rate
  volatility
• Specific benefits for peripheral economies
• Image premium and credibility in international
  markets
• Monetary and macroeconomic stability (lower
  inflation, deficit, debt, and interest rates)

19
The possible impact of monetary union

• Possible impact
• Large benefits expected
• But Commission reluctant to issue estimates (as
  was the case of with the Single Market)

20
The impact of economic integration

• Is European economic integration delivering the
  benefits predicted by its supporters?
• Has the EU experienced the increases in trade,
  the more efficient allocation of resources, and
  the greater growth and welfare gains expected?
• Have European economies become more competitive?

21
Trade

• Sizeable increase in trade across the EU
• Greater expansion in absolute terms than in other
  developed areas of the world
• But not in relative terms, where the US has
  expanded more (but not Japan)
• This means that in a world context the evolution
  of European trade has been rather disappointing,
  especially in comparison with countries like
  Canada or Mexico, which have undergone milder
  processes of integration

22
Exports of goods and services as a share of GDP
23
Trade at a national level

• Several countries have experienced significant
  increases
• Countries with relatively open economies Ireland
• Countries which were relatively closed Finland,
  Sweden, Spain, or Italy
• The trend is far from universal
• Germany, Greece, and Portugal have seen their
  exports as a share of GDP decline
• Luxembourg, Greece, and Portugal have seen a
  decline in their import share
• The lack of a clear pattern in the evolution of
  trade suggests that no greater territorial
  specialization is evident

24
Changes in trade patterns

• Increase in intra-industry trade
• But, stability of inter-industry trade
• This has prevented a further concentration of
  capital intensive industries in core countries to
  the detriment of the periphery
• Former lagging countries such as Ireland and
  Spain have profited from integration to expand
  trade and attract capital intensive industries
• Portugal and Greece have been less successful
• The level of intra-industry trade suggests that
  the expected specialization may be starting to
  happen

25
Foreign direct investment

• Early stages of integration seem to have had a
  lower impact on FDI than on trade
• Net inflows of FDI oscillate with economic cycles
  
• Flows of FDI reached their peak around 1990
• After the implementation of the Single Market
  they followed a downward trend
• In international comparisons the EU does not
  score favourably
• When compared to the US, net inflows of FDI into
  the EU have declined with respect to the period
  before 1993.
• FDI flows among the member states have lost some
  importance...
• But, outflows to the rest of the world have
  increased.

26
FDI net inflows
27
Economies of scale

• Ex-ante reports highlighted that economic
  integration was to bring about a more efficient
  concentration of resources
• And a restructuring of companies
• Number of mergers and acquisitions has increased
  by more than two and a half times between 1987
  and 1998
• The bulk of this happened in anticipation of the
  Single Market
• Transnational MAs have taken off after the
  Single Market and in anticipation of EMU.

28
Economies of scale (II)

• Three stages in the process
• National MAs started to take place during the
  late 1980s in anticipation of the Single Market
• European MAs the percentage of MA involving at
  least one foreign company almost doubled between
  1990 and 1998.
• Trans-national MAs Increasingly MAs are
  global. In 1998 one third of all MAs involved at
  least one non-EU partner.
• During the 1990s there has been an important
  increase in the volume of the deals.
• The total volume of deals has been multiplied by
  six between 1991 and 1998
• Greater expansion in outward MAs

29
Mergers and acquisitions (1987-98)
30
Economies of scale (III)

• European companies have become more ambitious and
  aggressive
• Probably in connection to the launch of the Euro
• But also as a result of the emergence of new TNCs
  in Europe resulting from previous mergers
• New mergers increasingly involve companies from
  two different European countries
• Orange and Mannesman
• Vodafone and Mannesman
• And also truly global MAs
• Daimler-Chriysler
• Terra Lycos
• Repsol-YPF

31
Volume of cross-border MA's (Billion US)
32
Volume of cross-border MA's ()
33
Economies of scale (IV)

• But have EU companies become the leading actors
  in international MAs?
• Despite the increase in numbers and size, EU
  companies have lagged behind the US...
• And during much of the 1990s also behind Japan
  and the Asian Dragons
• Only the Asian crisis of 1997/98 changed the tide
• And a diminishing number of European companies
  can be found among the top 50 in the world

34
Location of the world's largest 50 corporations
35
Productivity

• European labour productivity has been reducing
  the gap with the US in the post-war decades
• Convergence came to an end in the second half of
  the 1980s
• Increasing technology gap between the US and the
  EU
• Permanence of fragmented markets in Europe
  (monopolies which prevented access to new
  technologies)
• Rigidity of European labour markets (which kept
  the young out of work)
• Productivity has grown faster in the US in the
  1990s
• Some encouraging signs for EU (advantage in
  mobiles)

36
Labour Productivity Growth
37
Productivity in selected EU countries
Source World Bank World Development Indicators
(2000).
38
Growth

• On average, the EU has had slightly greater
  growth than the US and lower than Japan during
  the post-war decades
• Precisely at the time of European economic
  integration, the roles have been reversed
• Greater growth in the US (double that of the EMU
  area)
• Lower in Japan
• Strong internal divergence in growth patterns in
  the EU
• Extremely high growth in Ireland and Luxembourg
• Moderate in Austria, Denmark, the Netherlands and
  Portugal
• Low elsewhere in the EU

39
Average growth in the EU, US, and Japan
(1960-2000)
40
Conclusion

• The impact of economic integration on the
  economic performance of the EU has not been as
  spectacular and immediate as predicted by ex-ante
  studies
• The gap between the EU and the US has increased
  in many areas (growth, productivity, trade, MAs)
• Different economic cycles may have a lot to say
  about diverging economic performances
• However, economic integration may be setting the
  bases for a quicker adaptation by the EU in the
  future to new economic challenges

41
Chapter 2
Cohesion
42
Introduction

• Have the alleged benefits of economic integration
  been evenly distributed?
• How is uneven development within the EU likely to
  affect the competitiveness and further economic
  and political integration in the EU?

43
National disparities in the EU

• The EU is one of the most developed spaces in the
  World
• GDP per capita below that of the USA and Japan...
• But well above any other large area of the world
• However, wealth is and has been unevenly
  distributed across the EU
• Until recently a core/periphery was visible
• The core Austria, Belgium, Denmark, Finland,
  France, Germany, Luxembourg, the Netherlands,
  Sweden, the UK, and Northern Italy
• The periphery Greece, Ireland, Portugal, Spain,
  and Southern Italy

44
National disparities in the EU (II)

• Recent changes have led to a blurring of the
  distinction between core and periphery
• Poor economic performance of some of the
  countries of the core (Finland, Sweden and the
  UK)
• High growth in the periphery (Ireland)

45
National disparities in GDP per capita and
unemployment
46
Regional disparities in the EU

• Strong national contrasts hide even greater
  regional contrasts
• In 1998, the GDP per capita of Luxembourg was
  3.8 times greater than that of Portugal
• Hamburgs GDP was 6.7 times higher than that of
  Ipeiros (Greece)
• Andalusia and Extremadura had unemployment rates
  of 32.4 and 30.2, whereas Salzburg or Belluno
  had a mere 2.2 and 2.3 respectively.
• Internal economic disparities are evident in
  almost every single country in the EU
• Italy (GDP Lombardy 132.5 .... Calabria 59.2)
  (Unemployment Trentino 3.8 .... Campania 25)

47
Regional disparities in the EU (II)

• Strong regional contrasts also in
• Portugal (Lisbon and the North vs. the South and
  Centre)
• France (Paris vs. the rest)
• Spain (Northeast and Madrid vs. South and West)
• UK (South vs. North)
• Germany (South vs. North)
• Sweden (South vs. North)
• Belgium (North vs. South)
• No regional contrasts in
• The Netherlands

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Factors behind the existence of territorial
disparities

• Factor endowment
• Inherited economic situation GDP per capita
• Quality and quantity of human capital Skilled
  labour, matching skills with labour demands
• Accessibility Infrastructure endowment
• Innovation Generation and assimilation of
  innovation. Investment in RD
• Sectoral structure

50
The need for intervention

• Do territorial differences in factor endowment
  justify the implementation of European
  development policies?
• Is a development policy really necessary?

51
The economic debate

• Endogenous growth theory and new economic
  geography
• Greater accessibility, higher skills, and greater
  capacity to generate and assimilate innovation
  will lead to the concentration of economic
  activity
• A development policy is needed in order to
  counterbalance this tendency
• Classical Ricardian trade theory
• Factor endowment is less important
• Integration leads to a rearrangement of economic
  activity
• Investment and innovation will flow to low cost
  areas
• Labour will flow to high cost areas
• Disparities will even out and policies are not
  needed

52
The economic debate (II)

• Neoclassical growth theories
• Decreasing returns to scale will lead to
  convergence
• Even without economic integration
• No need for development policies
• Economic theory is inconclusive about the
  territorial impact of economic integration

53
The political debate

• Economic integration is likely to enhance
  territorial disparities
• A development policy is needed in order to
  achieve greater economic and social cohesion
• This has been the dominating view since the
  Single European Act
• Each additional step towards economic integration
  has been accompanied by cohesion policies
• Single European Market Þ Reform of Structural
  Funds
• EMU Þ Cohesion Fund

54
The history of EU development policies

• Disregard for supra-national development policies
  in the 1960s
• High levels of economic growth (ca. 6 per annum)
• Regional convergence
• Strong national development policies
• Establishment of an early regional policy in the
  1970s (ERDF)
• Change of the political orientation of European
  governments
• British membership
• Power struggle between the Commission and the
  states

55
The impact of the early regional policy

• The early European regional policy failed to
  correct economic disparities
• Disparities did not shrink, they expanded during
  the late 1970s and early 1980s
• The reasons for the failure
• Lack of financial resources Modest amount of
  funds
• Lack of continuity of regional actions Five
  different stages between 1975 and 1989
• Excessive extent of the range of operations and
  investments Projects funded in almost every
  region
• Absence of a clearly defined structure and of a
  system of priorities 41,051 projects funded

56
The principles of the reform of the Structural
Funds

• The principle of concentration
• 3 objectives
• Objective 1 Promoting the development and
  structural adjustment of regions whose
  development is lagging behind (for regions below
  the 75 threshold of the EU GDP per capita)
• Objective 2 Supporting the economic and social
  conversion of areas facing structural
  difficulties (Industrial and rural areas with
  high-long term unemployment and or high poverty
  levels)
• Objective 3 Adapting and modernizing policies
  and systems of education, training, and employment

57
The principles of the reform of the Structural
Funds (II)

• The principle of programming
• Individual projects should be included within a
  development plan
• Much greater emphasis of the design and
  implementation of coherent development strategies
  through multi-annual programming
• Stages
• Regional development plans
• Community Support Framework
• Operations programmes
• The principle of partnership
• Involving as many actors as possible in the
  process
• Aim to achieve close co-operation between the
  Commission and national, regional, and local
  institutions

58
The principles of the reform of the Structural
Funds (III)

• The principle of additionality
• In order to prevent European development policies
  from becoming mere substitutes of national
  development efforts
• The principle of efficiency
• To guarantee the correct management and to
  monitor the efficiency of the implementation of
  European development actions

59
The Cohesion Fund

• Political belief that EMU is likely to lead to a
  concentration of economic activity
• Cohesion Fund established to provide financial
  contribution to projects in the fields of
  environment and trans-European networks
• Four beneficiaries countries whose GNP per
  capita is below 90 of the EU average
• Ireland
• Greece
• Portugal
• Spain

60
The efficiency of EU development policies

• Development policies are, behind the CAP, the
  second most important set of policies in the EU
• One third to 36 of the EU budget 0.38 of EU GDP
• Has this effort paid off?
• Have the reform of the Structural Funds and the
  introduction of a Cohesion Fund led to greater
  territorial cohesion?

61
The efficiency of EU development policies

• Before the Reform, little or no catch-up in the
  cohesion countries
• No convergence in Greece or Spain
• Slow convergence in Ireland and Portugal
• Since the Reform, the four Cohesion countries
  have converged to the EU average
• Greatest convergence in Ireland
• Lowest convergence in Spain
• Convergence has also been fuelled by slow
  economic growth in the core
• Especially in Finland, Germany, Italy, and Sweden

62
Evolution of GDP per capita in the Cohesion
countries
63
The efficiency of EU development policies (II)

• The catch-up since the Reform of the Structural
  Funds has led some authors to claim that regional
  intervention in the EU has been a success
• The picture is, however, not as simple
• A closer look at development within the Cohesion
  countries reveals a more complex pattern
• The higher growth has taken place in some of the
  most advanced regions (Madrid, Catalonia, Dublin,
  Lisbon)
• Large concentration of company headquarters, RD
  centres, financial , insurance, and real estate
• In contrast, many Objective 1 regions have lagged
  behind

64
European convergence
But divergence within states
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Greece
150
100
between 1980 and 1986
Mean annual growth
50
50
100
150
GDP per capita in 1980
Greece
150
100
Mean annual growth
between 1986 and 1993
50
50
100
150
GDP per capita in 1986
Greece
150
100
between 1993 and 1998
Mean annual growth
50
50
100
150
GDP per capita in 1993

67
The efficiency of EU development policies (III)

• Many assisted regions have not performed
  particularly well
• Growth in parts of Southern Italy has been
  sluggish
• Tendency towards greater polarization in many
  European countries
• Since the implementation of the Reform, mixture
  of national convergence and regional divergence
• Inequalities across States have fallen by 25,
  but regional inequalities within states have
  risen by 10

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The efficiency of EU development policies (IV)

• Over time, there has been no change in the
  Cohesion States
• The number of regions qualifying for Objective 1
  has remained stable
• If anything, the number has increased
• Many regions of core countries (Merseyside, South
  Yorkshire, Burgenland) have been incorporated..
• But few peripheral regions (only Abruzzo, with
  parts of Ireland and Lisbon among others
  being phased out)
• The analysis of unemployment trends highlights
  divergence
• Greater polarization in unemployment rates

70
Conclusion

• European development policies have evolved from a
  minor and rather haphazard policy in the 1980s to
  the second most important policy of the EU
• Achieving economic cohesion is, however, proven
  more elusive than expected
• National convergence...
• But regional divergence
• There are voices starting to question this degree
  of intervention, since it may lead to the
  formation of sheltered economies

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Chapter 3
Ageing
72
Introduction

• Western Europe is ageing
• As a consequence of
• Higher life expectancy
• Falling birth and fertility rates
• Ageing is likely to become a serious economic,
  social, and political problem once the baby
  boomers start retiring
• Pressure on the already well-developed European
  welfare systems
• Consequences for the economic potential of the EU
• Countries are setting policies in motion in order
  to curb ageing

73
Demographic change in the EU (I)

• The EU is still the most populous among the major
  world economic powers.
• 375 million vs 278 in the US and 117 in Japan
• But the US has been catching up rapidly with the
  EU (57 of the population in 1960, 74 in 2000)
• Low rates of population growth during the second
  half of the 20th century
• Since 1960 the population of Europe never rose by
  more than 1 in a single year
• In contrast, this rate was achieved 18 times in
  the US and 8 in Japan
• Population growth in Europe has been declining
  steadily

74
Average annual population growth in the EU,
Japan and the USA
75
Demographic change in the EU (II)

• Prospects are bleak
• According to the UN report on Replacement
  Migration will peak in 2005
• By 2050 the EU will have 44 million less than in
  2000 (a loss of 12)
• It will have 18 million less than the US
• Twelve out of the fifteen current member states
  will lose population (exceptions Ireland,
  Luxembourg, and France)
• Population loss in Italy, Spain, and Greece will
  be in excess of 20

76
The decline in birth rates (I)

• The second demographic transition
• Fall in birth rates
• Lower number of marriages and marriages later in
  life
• Unstable marriages and growing divorce rates
• Increase in cohabitation
• Increase in the number of children born out of
  wedlock

77
The decline in birth rates (II)

• Three types of demographic patterns
• Population growth (France, the Netherlands,
  Ireland, US)
• Early decline in birth rates, but births have
  stabilized and remain above the number of deaths
• Still natural growth
• Early zero growth (Austria, Denmark, Sweden,
  UK)
• Early decline in birth rates without
  stabilization
• Negative growth rates which caused a reaction and
  a rebound of birth rates
• Late zero growth (Italy, Greece, Spain,
  Portugal, Japan)
• Late, but sharp decline in birth rates
• Zero growth since the early 1990s

78
Evolution of birth and death rates in selected
European countries, the US, and Japan 1960-97
79
The decline in birth rates (III)

• National demographic patterns hide important
  intranational differences
• Significant internal contrasts in birth rates in
• Italy (North/South division)
• Germany (East/West division)
• and, to a lesser extent, in other EU countries

80
Regional crude birth rate in the EU, 1997
81
The decline in fertility rates

• Women (and families) are deciding to have less
  children than ever before
• Total fertility rates in the EU are the lowest in
  the world, bar some countries in Eastern Europe
  and Japan
• Fertility decline started in the mid 1960s
• Early declines in the North (Denmark, Finland,
  Germany, Luxembourg and Sweden) Demographic
  core/periphery divide
• Subsequent and more dramatic decline in the
  Mediterranean countries (Italy and Spain now with
  some of the lowest TFR in the world)
• Short-lived rebound of fertility rates in Sweden
  and other Scandinavian countries in the early
  1990s

82
Evolution of fertility rates
83
Evolution of total fertility rates in selected
European countries
84
The ageing of the EUs population (I)

• The decline in birth and fertility rates is
  profoundly altering Europes age structure
• Younger population cohorts are becoming smaller
  than older ones
• The population cohort of those aged between 30
  and 34 is 50 larger than those aged between 0
  and 4
• There are more 55 to 59 year olds than children
  between 0 and 4
• Life expectancy is increasing
• Women in most countries of the EU can now expect
  to live until the age of 80
• Male life expectancy in all countries bar
  Portugal above 72

85
Life expectancy at birth, 1970-1997
Source World Bank World Development Indicators
(2000).
86
The ageing of the EUs population (II)

• Europe is ageing
• There are now 41.5 people million more over 70
  than in 1980 (an increase of 40)
• The percentage of the elderly has risen
  considerably everywhere, bar Ireland
• In Greece, Finland and Portugal the percentage of
  the population aged 65 and above doubled between
  1960 and 1997
• Italy and Spain were not far behind
• Population projections predict that the process
  of ageing is far from over
• According to the UN the over 65 will rise to 95.6
  million in 2050 (29 of the population)

87
Population aged 65 and above ( of total)
88
Predicted evolution of the total and elderly
population in selected European countries, the
EU and the US 2000-50
Source Own elaboration with United Nations
Population Division data. Medium variant.
89
Regional share of senior citizens, 1998
90
The factors behind the ageing process (I)

• Causes for higher life expectancy
• Advancement of medicine and health
• Eradication of many infectious and contagious
  diseases
• Advancement in the treatment of degenerative
  diseases
• Nutritional and health improvements
• Social factors
• Relative wealth of European societies
• Reduction in the number of hours worked during
  life

91
The factors behind the ageing process (II)

• Causes behind the decline in fertility
• Advances and greater availability of
  contraceptive methods (M. Murphy) (although for
  some this is not a cause)
• Economic factors
• Pecuniary and time cost of having children
• Children cannot longer be regarded as sources for
  future family support
• Opportunity costs of having children in societies
  with a high female participation in the labour
  market. This has become more evident recently
• Decline in job stability in Europe (relying on
  one salary is not enough!)

92
The factors behind the ageing process (III)

• Sociological factors
• The gap in educational attainment between men and
  women in western Europe has disappeared
• Female employment has increased dramatically
• Female employment is regarded as the main
  determinant in the fall of fertility rates
• The opportunity cost of having a child increases
• Especially, and despite some changes in male
  attitudes, since the burden of child-bearing
  still greatly falls on women
• The opportunity cost of having a child increases
  as womens wages rise
• However this argument is found wanting when we
  notice that the countries with the lowest
  fertility rates also have the lowest female
  employment

93
Evolution of female employment, 1970-1997
Source World Bank World Development Indicators
(2000).
94
Family policies (I)

• European governments have adopted different
  policies to tackle declining fertility
• Very high support in Sweden (and Denmark and
  Finland)
• Generous child benefit package
• Generous public childcare provision
• Lengthy maternity and paternity leaves
• Austria and Germany
• Generous policies
• Greatest support for mothers who stay at home to
  look after children

95
Family policies (II)

• France (and Belgium and Luxembourg)
• Horizontal and vertical redistribution of
  resources to families with children (especially
  for families with three children)
• UK
• Means testing and tackling child policy
• Low-income mothers benefit the most from support
  meassures
• Lower support in the Netherlands, Ireland, and
  Mediterranean countries

96
Family policies (III)

• Have family policies contributed to redress the
  decline in fertility?
• Some claim that the impact has been weak
  (Gauthier Hoem)
• Others suggest that family policies have had an
  impact
• The actual evidence is inconclusive
• Lack of adequate family policies may have
  contributed to the decline in fertility in
  southern Europe
• Some countries with more generous family policies
  (Sweden, Finland, Denmark, France, the UK) tend
  to have slightly higher fertility rates
• But countries with similar family policy regimes
  differ in their fertility rates

97
Social policies for old age

• The process of ageing is putting European social
  services under considerable stress
• Social policies for old age have become one of
  the most important areas of public policy
• Old age expenditure (as a of GDP) has risen
  significantly since the 1980s and remained stable
  during much of the 1990s
• Old age expenditure represents two fifths of all
  social expenditure (highest incidence in Italy,
  Greece, and Spain)

98
Old age expenditure in the EU
99
Conclusion

• Ageing poses a serious challenge for the future
  of European societies
• Society may become more conservative and
  risk-averse, less open to innovation and foreign
  influences, and less dynamic and able to compete
• Ageing represents a challenge for public finances
• More and better targeted policies may be needed
• Even if the perception of an aged society as a
  less dynamic society may be rather reductionist.

100
Chapter 4
Migration and xenophobia
101
Introduction

• While Europe ages, neighbouring countries have
  young and dynamic populations who find few
  outlets in their local labour markets
• Result development of large migration flows
  towards Europe
• Many see this trend as a solution for population
  ageing and to ease social and economic pressure
  in the country of origin of migrants
• Many others see migration as a threat, leading to
  xenophobia and the emergence of racist attitudes
  and parties
• European legislation has been tightened in order
  to restrict migration into Europe

102
Migration and its forms (I)

• Definition of migration
• The movement or displacement of a person or a
  number of persons from one place to another.
• Forms of migration
• Individual or group migration
• Regional, inter-regional, international or
  intercontinental
• Temporary or permanent
• Legal and illegal

103
Migration and its forms (II)

• Forms of migration (II)
• Economic migration when people move in search of
  jobs and/or a better life
• Types of economic migration
• Migrant or employer-initiated
• Economic migration is closely linked to long-term
  economic cycles
• Non-economic migration Causes
• Natural disaster (the destruction of the island
  of Montserrat by a volcanic eruption, floods,
  earthquakes, droughts)
• War
• Political and/or social persecution (political
  and religious beliefs, race, ethnicity, gender)
• Division between political refugees and asylum
  seekers

104
Mass migration in post-war Europe (I)

• In modern times migration out of Europe has
  predominated
• America, Australia and South Africa as the main
  destinations
• At the beginning of the 20th century more than a
  million Europeans a year were leaving the
  Continent
• The second half of the 20th century has seen a
  reversal of this trend
• Outward migration has been replaced by migration
  within and into Western Europe
• First, 25 million refugees back to their places
  of origin (mainly flow east-west, including 12
  million Germans)
• Then migration from former Communist regimes to
  the West (3.8 million East Germans until the
  erection of the Berlin Wall)

105
Mass migration in post-war Europe (II)

• Since the 1950s emergence of South/North economic
  migration
• Basically in low-skilled and poorly paid sectors
  (rejected by the local workforce)
• Several waves and destination
• 1950s Italians moving to Germany, Switzerland,
  and France
• Late 1950s and 1960s Spaniards and Portuguese
  (same destinations)
• 1960s Turks and Yugoslavs (to Germany) and
  workers from the Maghreb (to France)
• Irish to Britain and Finns to Sweden
• Migration very often employer-initiated and
  state-managed
• Large volumes of migration
• Migrants represented 5 of the pop. of the
  Netherlands 5 to 10 of France, Germany and
  Sweden 10 of Belgium 15 of Switzerland and
  25 of Luxembourg.

106
Mass migration in post-war Europe (III)

• Jobs for migrants varied
• West Germany Jobs in manufacturing (15 in
  construction)
• France 30 in construction. Smaller proportion
  as health workers and manufacturing
• UK West Indians as civil servants, South Asians
  in textiles
• As did the formal rights of immigrants
• Germany, Austria and Switzerland Gastarbeiters
  (high levels of job security but low protection
  without job contract)
• UK, France and the Netherlands Rights of
  immigrants to stay, generally more developed
  (possibility to apply for citizenship after a
  period living in the country)
• The crisis of the 1970s brought South/North
  migration in Europe almost to a halt
• Stock of migrants fell by 1 million (or 22 of
  stock)
• Return migration by European workers
• Return migration less evident for non-EU citizens

107
The renewal of migration in the 1990s

• Several factors have led to a renewal of
  migration in the 1990s
• Economic and social factors
• The economic bonanza of the second half of the
  1990s
• The reduction of unemployment rates associated to
  the introduction a labour market flexibility
• The higher level of qualification of local
  workers
• The demographic boom in neighbouring areas of the
  world
• Political factors
• The fall of the Berlin Wall
• The implementation of the principle of free
  movement of people after the Single Market.

108
Foreign or foreign-born population
109
Differences between migration in the 1950s and
1990s (I)

• The traditional North/South division has been
  completely slashed
• Finland, Greece, Ireland, Italy, Portugal and
  Spain are no longer sources of emigrants, but
  have positive migration balances (in the case of
  Italy since as early as 1972)
• Intra-EU migration is no longer South/North but
  occurs in both directions (case of Ireland,
  Sun-belt phenomena)
• The Mediterranean sea (and the former Iron
  Curtain) are becoming the new Rio Grande of Europe

110
Differences between migration in the 1950s and
1990s (II)

• Employer initiated migration has almost become a
  thing of the past
• In contrast to more common practices in the US,
  Canada, or Australia.
• European employers and governments are more
  reluctant to initiate migration.
• Some exceptions Attempt by the German government
  in 2000 to recruit IT experts in India
• Migration has become almost exclusively
  migrant-initiated

111
Differences between migration in the 1950s and
1990s (III)

• Increase of clandestine and illegal immigration
• As a result of the tightening of national and
  European immigration legislation
• More migrants decide to come and stay in Europe
  illegally
• Flourishing of mafias, racketeers and organised
  crime syndicates trying to smuggle immigrants
  into Europe
• Diversification of immigrant groups
• Highly qualified migrants
• Low-skilled economic migrants and clandestines
• Refugees and asylum seekers

112
Migration of the highly qualified (I)

• Migration of the highly qualified has flourished
  during the 1990s
• Basically in sectors such as finance, banks,
  insurance, and business services
• But increasingly also in fashion, design and RD
• The main beneficiaries has been the financial
  centres and large urban areas of the Continent
  (London, Paris, Frankfurt, Berlin, Madrid, Milan,
  Amsterdam)
• Increasing importance of airport hubs
• Recruitment in many of these sectors is
  increasingly happening at a European, if not
  global, level

113
Migration of the highly qualified (II)

• One of the triggers of the increased mobility has
  been the implementation of the principle of free
  mobility of labour in the SEM.
• No longer are work or residence permits needed
  for EU nationals who live abroad
• Cultural and linguistic barriers are now less
  important for these groups
• Better prepared and better travelled generations
• Mutual recognition of qualifications
• But also process of globalization

114
Migration of the highly qualified (III)

• Process of globalization
• Restructuring of large companies (international
  MAs)
• Radical change in the profile of the European
  migrant
• In contrast to the low-skilled worker from
  Southern Europe
• We now have highly qualified young professionals
• This migration is however tiny in numbers (5.5
  million EU nationals living outside their
  country, in comparison with 12 million in the
  early 1970s)

115
Migration of the low-skilled and clandestines (I)

• Migration at the lower end of the scale has been
  taken over by people from outside the EU
• Immigrants escaping poverty to the East and South
  of the EU and hoping to find Eldorado Europe
• In comparison, the migration of the European low
  skilled has been negligible
• Main destination is low-value added service jobs
• Pay in these sectors is often so low that
  European workers cannot or do not compete for
  these jobs with immigrants from outside the EU

116
Migration of the low-skilled and clandestines (II)

• Migration is becoming a truly global phenomenon
• Not only is western Europe receiving more
  immigrants from outside the EU than in the 1980s
• But the regions of origin of the migrants are
  increasingly diversified
• Several waves
• Fall of the Berlin Wall Eastern Europeans
• First wave Poles, Czechs, and Hungarians into
  Germany and other European destinations
• Followed by former-Yugoslavs, Albanians,
  Romanians, Bulgarians, Ukranians, and Russians

117
Migration of the low-skilled and clandestines
(III)

• Several waves (II)
• South/North flows increasing since 1995
• Northern and Sub-Saharan Africans
• Latin Americans
• Central and South East Asians
• Chinese
• Situation similar to that of the US
• Although European borders are more difficult to
  police
• Most migration is likely to be illegal
• Overstaying visas
• Entering the EU through its Eastern Border
• Making perilous Mediterranean sea crossings
• Illegal immigration increasingly in the hands of
  gangs and crime syndicates

118
Migration of the low-skilled and clandestines (IV)

• Sectors benefited by migration
• Low-value added services cleaners, waiters,
  hotel, and chamber maids
• Construction
• Labour-intensive agriculture
• The frequent use of clandestines make them easy
  prey for exploitation
• Informal sector
• From working as street sellers
• to criminal activities.

119
Refugees and asylum seekers (I)

• Boom of refugees and asylum seekers since the end
  of the 1980s
• As a result of increasing conflict and of
  political persecution elsewhere in the world
• But also, some claim, as a result of the
  increasing differences in wealth
• Countries of destination
• Germany at first (more than 100,000 asylum
  applications per year at the beginning of the
  1990s)
• The UK since (more than 100,000 applications in
  the year 2000)
• Belgium, Ireland, and the Netherlands with the
  highest relative weight

120
Refugees and asylum seekers (II)

• The inclusion of restrictive legislation across
  Europe have contributed to stem the flow
• Extension (and co-ordination) of visa requirement
  to a large number of countries (Schengen)
• Restriction of asylum rights to national of
  countries which have not signed the United
  Nations Conventions on Refugees and on Human
  Rights
• Co-ordination of asylum applications across
  Europe

121
Asylum applications in selected EU countries
122
The European response to migration (I)

• Which has been the reaction of the EU to the
  renewal of migration across Europe?
• Two positions
• Free mobility of labour for EU nationals
• Increasingly restrictive and co-ordinated
  policies for non-EU citizens
• Free mobility of labour for EU nationals
• Abolition of red-tape
• Equivalence of qualifications
• Social security and welfare recognition
• Removal of physical border controls
• Right of vote to non-nationals in local and
  European elections

123
The European response to migration (II)

• Restrictive policies for non-EU citizens
• Implementation of harsher national legislative
  frameworks both on immigration and asylum
• Greater co-ordination of European policies
• Several stages
• Ad hoc groups Trevi, Ad Hoc Group on
  Immigration, the Police Working Group on
  Terrorism
• Schengen Group
• Treaty of the European Union Introduction of the
  Third Pillar on Justice and Home Affairs
• Treaty of Amsterdam partial Europeanization of
  the Third Pillar

124
The European response to migration (III)

• Features of a co-ordinated migration policy
• Asylum seekers are entitled to have their cases
  reviewed only by one country
• Creation of EURODAC
• Homogenization of the EU external borders
• Tougher controls
• Common visa policy
• Creation of databases containing information on
  immigrants
• Police co-ordination (Europol)
• The emergence of a Fortress Europe

125
Migration and xenophobia in the EU (I)

• Why this tightening of European laws towards
  migration?
• Some claim is the result of increasing demands by
  the population
• Increasing xenophobia and racist attitudes
• Negative perception of migration by the
  population in surveys and opinion polls
• Immigrants as criminals
• Immigrants responsible for unemployment
• Immigrants as welfare claimants
• Immigrants as a threat to national culture
• Emergence of xenophobic and racist parties
  (France, Belgium, Austria, Germany, Italy)
• Increase in the acts of violence against
  immigrants (attacks on refugee hostels in
  Germany, razzias virtually everywhere else)

126
Attitudes towards foreigners in the EU
127
Migration and xenophobia in the EU (II)

• Emergence of xenophobic and racist parties
• Front National in France
• Freedom party in Austria
• Vlaams Blok in Belgium
• Neo-nazi groups in Germany
• To a lesser extent, the Northern League in Italy
• Increase in the acts of violence against
  immigrants or their descendants
• Attacks on refugee hostels in Germany (and what
  has been considered a lenient attitude by the
  Courts on those crimes until recently
• Racial riots in Northern England
• Razzias against immigrants virtually everywhere
  else (eg. El Ejido in Spain)

128
Migration and xenophobia in the EU (III)

• But it my be also spurred by the securitization
  of migration
• Negative portrayal of immigrants in European
  legislation.
• Immigration as a security issue
• Immigration as a cost for European societies
• Immigration as something to be restricted
• Xenophobic discourses by fundamentally right-wing
  (but not only right-wing) politicians
• General portrayal of immigration as a burden,
  rather than as an asset

129
Conclusion

• Renewal of mass migration in and towards the EU
  since the 1990s
• Qualified migration within EU
• Unskilled migration from outside the EU towards
  it.
• Effects of the new migration wave
• Western Europe becoming more diverse and
  cosmopolitan
• But also generating rejection
• Negative attitude towards migrants and their
  descendants in most EU countries
• Restrictive migration and asylum laws across the
  EU
• Migration being driven underground

130
Chapter 5
Unemployment and social polarization
131
Introduction

• The post-war economic boom brought about nearly
  full employment across most of Western Europe
• However the oil crisis, socio-economic
  restructuring, and globalization have provoked a
  radical change in the panorama
• Greater participation of women in the labour
  market...
• But a significant rise in the levels of
  str