Absorption Capacity of The European Union: Budgetary Burden of Turkey’s Membership on The European Union

Abstract

This paper puts the spotlight on the absorption capacity of the European Union, which was always kept in mind of the EU during the historical evolution of the Community in every enlargement period even not with the same wording, and re-emerged especially when it came to Turkey’s membership in the early 2000s. The term has political, institutional and economic dimensions. For Turkey, the budgetary impact of the membership was highlighted and tried to show the fears of the member states of the EU with concrete numerical evidences. If Turkey were a European Union member, some countries like Germany, France (as being the net payer of the EU budget) and Spain, Cyprus (as being the net beneficiary of the EU budget and the future net payers with the Turkish membership) were mostly affected.

Keywords: Absorption capacity, Turkey, EU budget, net payer, net beneficiary

1. Evolution of the term “absorption capacity”

The term “absorption capacity” was at first not located in any official documents of the European Union. However, the notion behind the term was always in the minds of the Union’s ‘big guns’.

“The prospect of further enlargement at a time when the full consequences of the preceding one have not yet been absorbed must give rise to concern. The Commission considers therefore that any further enlargement must be accompanied by a substantial improvement in the efficiency of the Community’s decision-making processes and strengthening of its common institutions.”

The statements above were the response to Greek membership application in 1976. The wording may seem familiar. Whenever it comes to the Turkey’s membership, these words are mentioned. Enlargement is one of the most powerful policy tools of the EU. The fifth enlargement of the European Union was followed the accession of ten new members on 1st May 2004. These new EU countries were ex-communist countries and had different economic and political structures than of the EU. Enlargement policy is defined by Article 49 of the Treaty on European Union, which states that any European State, which respects the EU’s fundamental democratic principles, may apply to become a member of the Union.

In Copenhagen summit, the term was first seen in official texts in the conclusions:

“The Union's capacity to absorb new members, while maintaining the momentum of European integration, is also an important consideration in the general interest of both the Union and the candidate countries.”

After the big enlargement of the EU with ten new, ex-communist countries, and the rejection of the draft Constitution by France and the Netherlands in 2005, the term was reactivated. This is because of the prospects for further enlargement, especially for the largest candidate, Turkey. The rejection of the referenda in France and the Netherlands mostly based on the perception of the public of these countries that the European project was malfunctioned. The term took an official characteristic with the Enlargement Strategy Paper of the European Commission:

“The pace of enlargement has to take into consideration the EU’s absorption capacity. Enlargement is about sharing a project based on common principles, policies and institutions. The Union has to ensure it can maintain its capacity to act and decide according to a fair balance within its institutions; respect budgetary limits; and implement common policies that function well and achieve their objectives.”

In February 2006 upon the Commission’s enlargement strategy paper, the European Parliament highlighted the importance of the absorption capacity concept and wanted the Commission to prepare a report by 31 December 2006 that sets out the principles about the concept.

In June 2006 European Council Summit, Austria, Germany, the Netherlands and especially France forced this term to take place in the conclusions and be an additional criteria for for membership. However, the opposition of the UK, Spain, Italy and the new member states beat the forcing countries and the term finally did not become an additional criteria.

In 2006, the term took place in the conclusions of the European Council Summit as follows:

“The European Union reaffirmed that it will honor its exiting commitments and emphasized that every effort should be made to protect the cohesion and effectiveness of the Union. It will be important to ensure in future that the Union is able to function politically, financially and institutionally as it enlarges, and to further deepen the Europe’s common project. Therefore the European Council will, at its meeting in December 2006, have a debate on all aspects of further enlargements, including the Union’s capacity to absorb new members and further ways of improving the quality of the enlargement process on the basis of the positive experiences so far. It recalls in this connection that the pace of enlargement must take the Union’s absorption capacity into account. The Commission is invited to provide a special report on all relevant aspects pertaining to the Union’s absorption capacity, at the same time as it presents its annual progress reports on enlargement and pre-accession process. This specific analysis should also cover the issue of present and future perception of enlargement by citizens and should take into account the need to explain the enlargement process adequately to the public within the Union.”

The definition of the absorption capacity by the European Commission was as ‘whether the EU can take in new members while continuing to function effectively’. European Parliament adopted a resolution by a large majority, defining the absorption capacity as a criterion for accepting the accession of new countries and fundamental to understanding the concept of absorption capacity.

2. Dimensions of absorption capacity

The membership criteria (known as Copenhagen criteria) set by European Council Summit in Copenhagen in 1993 set forth the conditions for membership of the European Union. According to the conclusions of this summit:

“Membership requires that the candidate country has achieved stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities, the existence of a functioning market economy as well as the capacity to cope with competitive pressure and market forces within the Union.”

On the contrary, the absorption capacity has no official definition. The following classification can make clear the term to some extent when the EU’s objectives are taken into consideration:

· Capacity of the goods and service markets to absorb new member states

· Capacity of the labor market to absorb new member states

· Capacity of the EU’s budget to absorb new member states

· Capacity of the EU institutions to function with new member states

· Capacity of society to absorb new member states

· Capacity of the EU to assure its strategic security

Beside, during the summit in 2006, the French President Jacques Chirac who initiated the debate by highlighting that enlargement ‘should only continue in a process that is controlled and better understood’. He also defined the ‘absorption capacity’ of the EU as an institutional, financial and political capacity.

Institutional Dimension

Regarding to its high population of approximately 75 millions, the membership of Turkey will create a challenge in the decision making process of the European Union. After the institutional reforms in Amsterdam (1997) and Nice (2000), Turkey with its population of 73 millions in 2003, and as foreseen 85 millions in 2015, will have 99 MEPs and dominant place in the decision making process. This situation may cause crisis in the Union.

Political Dimension

Turkey’s membership has also political implications. Turkey has important geopolitical and geostrategic position in the world, as well as much more specific impacts on EU institutions, policies and internal political dynamics. Some of these impacts can be qualified now and some in the future. It depends on how Turkey and the EU will evolve in next 10-20 years.

Some have suggested that Turkey should be a ‘buffer area’ outside the EU, but not only is Turkey unwilling to accept and play such a role, Turkey may not be either stable or a cooperative EU partner if it remains outside the Union in the long run. The EU can influence Turkey’s external and internal security policies and foreign policies if it is a member, but will have much smaller influence otherwise.

In the EU-28, Turkey and Germany have both approx. 14,5% vote each.

Economic Dimension

Being a big, poor country with its large population and small economy, Turkey’s membership has various potential political and economic implications. Opponents to Turkish accession suggest that Turkey will be both too powerful and too costly in budget terms to join the EU. Size per se is not a criterion for EU membership but potential impact of size on the Union is an important and relevant factor in managing accession.

Table 3 sets out data for gross domestic product (GDP) at market prices and purchasing power parity for Turkey and a selection of EU member states and candidates. Although Turkey’s population of 70 million almost equals that of the ten new member states at 75 million, it is poorer. The new ten member states account for 16% of EU-25 population and 4.6% of EU GDP, while Turkey’s GDP in 2002 is only 1.9% of that of the EU-25. Turkey’s GDP per head (in purchasing power parity terms) is slightly below that of Romania, and is only 27% of the EU average.

An opposition for Turkey’s EU membership came from an Austrian leader, Wolfgang Schüssel, who was the President of the EU in 2005. He argued: “Turkey's EU accession would cost as much as the recent accession of all ten new members. Before saying there is full membership for Turkey, someone has to explain to me how to finance that. We have to keep the absorption capacity of the EU in mind. This is what we owe to the anxieties and worries of our citizens.”

3. European Union Budget

The budget of the EU is made up from a system of own resources. Import customs duties, agricultural levies or duties, part of Valued Added Tax (VAT) and revenue based on the gross national income (GNI) of the member countries constitute these “own resources” as they are known. The maximum amount to which member countries can contribute in own resources is limited to 1.27% of GNI of the EU. Among own resources there are some other less important sources of revenue that are classified into a group known as other revenue. The revenue of the EU budget is divided into the following:

- Customs duties – customs and other duties that are collected according to the Common Customs Tariff on the import of products of countries outside the EU;

- Agricultural duties, among which there are customs duties on the import of farm products and levies for sugar and glucose. These levies are collected during trading with extra-EU countries, as part of the CAP and of the production and storage of sugar and glucose.

- Revenue accruing from VAT. This revenue is established for each country by the application of a single rate on the harmonized tax base, which is established according to certain EU rules. From 1999, this base has not been allowed to exceed 50% of the GNI of the member states, and a reduction of the single rate year after year is anticipated (in 2002 it came to 0.75%, in 2004, 0.5%).

- Revenue as a percentage of the GNI of the member states. This revenue is calculated in such a way that a certain rate is applied to the difference between the GNI of every member state and the harmonized VAT base.

- Other sources of revenue consist of income tax and fees that are paid by the personnel of EU institutions, revenue from interest and guarantees, revenue from fines and other revenues.

The largest part of the EU budget is reserved for sustainable growth, in which the cohesion funds play an important role.

4. Tradeoff for Turkey in the EU Budget

The numbers calculated above in the table represent the maximum that would be achieved only after a considerable transition period, as in the case of the new member countries from Central and Eastern Europe, assuming current rules. The immediate post-membership transfers would be much lower, as in the case of all new member countries.

If Turkey were a member country in 2004, it could count on Structural Funds allocations, which would be capped at 4% of its GDP as decided at the Berlin European Council. Given that Turkey’s GDP has averaged around €200 billion in recent years, this implies immediately that its allocation would be around €8 billion annually. It has also been calculated that extending the current CAP to Turkey (with per hectare payments based on current yields) would cost around €9 billion. This implies that the total receipts of a hypothetical Turkish EU member today might be slightly less than €20 billion (Turkey would also receive funding under other programs). Turkey would then also have to contribute as all other member states to the EU budget. With a current contribution rate of around 1% of GNP (the ceiling for the EU budget is 1.25% of GDP, but the EU spends just slightly above 1% of GDP at present), this would mean around €2 billion annually, leading to a net financial benefit of around €16 billion annually. In 2015, the net benefit of Turkey from the EU budget will increase to the 0,20 % of EU GDP.

Table 6 shows the net payer member state in EU-27, EU-33 (EU-27 plus Albania, Croatia, Bosnia- Herzegovina, Macedonia, Serbia and Montenegro) and EU-34 (EU-33 plus Turkey). Accession of Turkey would bring burden for EU more than the sum of the six West Balkan countries.

Table 7 shows the net beneficiary member states of the EU-27 and changes in their situations with the forthcoming enlargements. The most outstanding is about the changes in the situations of Spain and Cyprus. They become net payers with the accession of Turkey while they are net beneficiaries in EU-27 and EU-33.

5. Conclusion

The discourse on the absorption capacity of the EU has been perceived as an alibi to turn backs to Turkey. The timing and the frequent reference to the case of Turkey throughout the debate have not been very helpful in that sense either. However, the fact that these are not entirely fictive concerns to sever ties with Turkey as a prospective member and that at least some of them are true. Turkey is indeed a major challenge for its counterparts due to its size, economic circumstances. In the same vein, the road to membership will also pose challenges for Turkey.

The figures in the range of 0.15% to at most 0.20% of EU GDP may seem to be small numbers but compared to national government expenditure, which is usually around 40-50% of GDP, they are negligible. However, a figure of 0.17% of EU GDP would not be negligible compared to the EU-budget ceiling of 1.25% of GDP. Net transfers in the €9-12 billion range in the first years of the membership and of about €15 to €20 billion in the 2020s would constitute an important amount for Turkey and a significant amount for the EU budget. But it is doubtful whether they will be negligible compared to the total of national budgets or the overall EU economy.

References

Derviş, Kemal; Gros, Daniel; Öztrak, Faik; Işık, Yusuf and Bayar, Fırat: “Turkey and the EU Budget, Prospects and Issues”, Center for European Studies, EU-Turkey Working Papers, No.6/August 2004.

Emerson, Michael; Aydın, Senem; De Clerck-Sachsse, Julia and Noutcheva, Gergana: “Just What is This ‘Absorption Capacity’ of The European Union?”, CEPS Policy Brief, No.113, September 2006.

Esen Toksabay, Aslı: “Absorption Capacity of the EU and Turkish Accession: Definitions and Comments”, TEPAV Policy Brief, 9 May 2007.

European Commission, 2005 Enlargement Strategy Paper, COM (2005) 561 final, Brussels 9.11.2005, p. 3.

European Council Meeting in Copenhagen, 21-22 June 1993, SN 180/1/93, p. 13, 14.

European Council, Presidency Conclusions, 15-16 June 2006, p. 18.

European Parliament (2006), Report on the Commission’s 2005 Enlargement Strategy Paper, 3.3.2006, A6-0025/2006.

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http://eiop.or.at/eiop/pdf/2005-006.pdf (20.06.2010)

http://ec.europa.eu/budget/budget_detail/current_year_en.htm (21.06.2010)

http://news.bbc.co.uk/2/hi/europe/5094938.stm (21.06.2010)

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http://www.uni-muenster.de/Politikwissenschaft/Doppeldiplom/docs/Turkey.pdf (21.06.2010)

Portugal in Trouble...

PORTUGAL IN TROUBLE:
AN INWARD LOOK ONTO THE PROBLEMS

Beginning with late 2008, the global economic crisis firstly seen in the USA hit also the countries of Eurozone. Along with Greece, Spain, Italy and Ireland, Portugal was also the Eurozone country which was affected from the global crisis mostly. This article investigates the possible root causes of the crisis in Portugal, and the determinants of competitive disinflation and whether the crisis stemmed from the entry of Portugal into EMU. Multiple regression analysis was used for the period between 1999 and 2009. The results of the empirical analysis show that the monetary policy of the ECB (interest rate) and the entry into EMU (productivity, inflation) have negative effects on the current account imbalance of
Portugal.

Keywords: Current Account Deficit, ECB Interest Rate, Productivity, Competitive
Disinflation

1. Introduction
Originating from USA subprime loan crisis as of 2007, the current global economic crisis has affected the world economy. In the USA, the underestimation of subprime asset risks and securitization problems mainly led to this crisis. As globalized financial institutions have been tied to each other even stronger, the contagion possibility of the crisis effects has increased.

The crisis in the USA was firstly seen in Europe and then other emerging countries in the world (Blanchard, 2009). Although the annual report on Euro area says that euro prevented the countries in the crisis and the Euro area countries became more attractive (Annual Report, 2009), the fact is different. Many countries in Euro area (the so-called PIIGS) are suffering from the crisis (Chorafas, 2009). Recently, Greece case draw the urgent attention of the European institutions and for this country, some measures have taken by the European Council (Brussels, 2010). Portugal and some other EU countries were subjected to Excessive Deficit Procedure (Brussels, 2009) and recommended to take required actions. The reasons behind the pains of
the countries differ from each other.

In Portugal’s case, the current account deficit seems to be the most problematic issue in its economy (Shelburne, 2008). Along with the global economic crisis which affected emerging and low income countries through declining demand for exports (IMF, 2009), being a member of EU increases the current account deficit as percentage of GDP (Shelburne, 2008) and with being even a member of Eurozone, the current account deficit increased more (Blanchard and Glavazzi, 2002).

In academic field, Portugal economy was analyzed in various studies. Blanchard and Glavazzi (2002) give a historical perspective of Portugal deficits (current account and budget) with reasons and policy actions taken to counteract the deficit. Blanchard (2004) analyzed the overall economic status of Eurozone and particularly Portugal and Spain. Again, Blanchard (2006a) and Blanchard (2006b) told the problems of country’s economy with reference to European Economic and Monetary Union. Shelburne (2008) investigated the current account deficit in European emerging markets like Portugal, Spain and Greece. Abreu (2006) developed an analytic approach to Portugal’s boom and bust. Andini (2008) gives some insights on the relationship between competitive loss and unemployment. The names above are some of the analysts mostly referred and on whom the implications in the paper mostly depended.

In this paper, Portugal economy is analyzed in the light of some macroeconomic indicators. The economic history of approximately two decades are explained and then some major determinants of the current account deficit are tried to be explained with the help of an econometric model.

2. Portugal Economy in the Light of The History
When it is assessed, two peaks in the Portugal economy stand out; 1995-2001 and 2001-2005. In the second half of the 1990s, Portugal economy started to grow rapidly in order to catch up with other EU economies and take place in the Economic and Monetary Union of Europe. With these expectations to participate in the euro, growth rates became higher (Blanchard, 2006a).

After the EU membership, Portugal’s GDP increased until the ERM crisis in 1993. After
1993, growth rate was increased again expecting to be a member of European Economic and Monetary Union. Between the periods 1995-2001 and 2001-2005 there exists a clear
difference. The growth rate of GDP became even lower. In 2008 and 2009, growth rate was below the ones of Eurozone (ECOFIN, 2009) and in 2009 it became even negative with the effects of the crisis.

Expactations to join the euro brought also confidence and decreased the country risk. These were the main reasons behind the rapid growth of economy.

At the end of the first peak in 2000s, unemployment rate was at lowest levels and even below the rates of EA-15. By reaching the low employment levels, nominal wages increased more than the productivity growth level.

Besides the wage growth, the unit labor cost also increased even higher than EA-15.

The nominal wage growth and unit labor cost increase brought competitive disinflation for Portugal economy (Andini, 2008). That means, domestic producers stand in a disadvantaged position against the exporting countries to Portugal (Martins and Opromolla, 2010).

Sharp decrease in interest rates before the EMU membership in 1999 enhanced credit
possibilities of banks. However, the deposits were below the level of credits (Constâncio, 2004). As a result, the current account deficit increased.

It was seen that with raised expectations and a boom in credit and consumptions, current account of Portugal got imbalanced sharply till early 2000s. During 2000 and 2003, there was a slight improvement in imbalanced position due to slight decrease in unit labor cost and relatively sharper decrease in nominal wage growth.

There have been some adjustment mechanisms for countries in order to balance the current account status and gain competitiveness. The current account can be balanced again by increasing the exports or the value of exports faster than imports.
Lowering the nominal wages until the unit labor costs decreased can be a way of gaining competitiveness. EMU has brought both costs and benefits to participating countries by bringing a single currency and reducing exchange rate volatility. International trade volume increase can take into account as benefits of joining an economic and monetary union as single currency reduces the transaction cost. To fulfill the objective of synchronization of business cycles, the same interest rate determined by European Central Bank (ECB) is used (Rose, 2000). Along with the single currency, countries cannot devaluate/revaluate its national currency. A single
interest rate and the prohibition of devaluation/revaluation aimed at avoiding the participating countries from using policies in favor of their national market and therefore deteriorating the functioning of the European Single Market. However the suitability of single interest rate determined by ECB is questionable. In his mostly referred work, Taylor (1993) has made a formulation in order to determine the appropriate interest rate for a country.

According to Molodtsova, Rzhevskyy, and Papell (2009), the difference between the natural rate of unemployment and unemployment can be used instead of output gap, but in the graph below, output gaps were used. The desired interest rate of Portugal according to Taylor rule and the interest rate applied by ECB is calculated.

The interest rate applied by ECB is approx. 3,5 % below the desired interest rate for Portugal. This difference is quite big. As seen in other graphs above, the basic tools of a country for adjusting the competitive disadvantages are in the hands of ECB, not of the country itself. So, a crash like the current global crisis needs to be compensated by a supranational institution. In Portugal’s case, it is
surely ECB.

2. Empirical Analysis

2.1. Objective
In year, third stage of European Economic and Monetary Union has started, and the countries joining EMU have transferred their monetary sovereignty to European Central Bank. Interest rate used in the countries has been determined by ECB as of 1999. Therewith, for different scaled economies there has been used now just one interest rate, which may be disadvantageous for some countries, like Portugal. The current account imbalance (deficit for Portugal) is one of the most important and urgent issues of Portuguese economy. The main objective of this empirical analysis is to show how the current account deficit as percentage of GDP of Portugal has been effected by chosen independent variables as of 1999.

2.2. Methodology and Dataset

The annual data between 1999 and 2009 is used for Portugal. The start year is taken as 1999 with entry of the country into EMU. The data is collected from OECD, ECB and AMECO databases.
The independent variables are ECB interest rate (absolute value), inflation (harmonised index of consumer prices) and productivity growth (percentage change) whereas the dependent variable is current account deficit as percentage of GDP.

The paper employs OLS and Multiple Regression Model. The empirical analysis is conducted using the program EViews 5.

Multiple Regression Model
Estimated Econometric Model:
CADPOR = β1 + β2*ECBINTERESTRATE + β3*LINF + β4*LPRODUCTIVITYPOR
CADPOR: Current Account Deficit to GDP ratio (%)
ECBINTERESTRATE: Interest rate determined by Eurpean Central Bank (%)
LINF: Logarithmic Inflation Rate (%)
LPRODUCTIVITYPOR: Logarithmic Productivity Growth (%)

Hypothesis:
Ho: β=0 (independent variables have no effect on the current account deficit of Portugal)
H1: β≠ 0
The significance level was taken as 5% (0,05).
Dependent Variable: CADPOR
Method: Least Squares
Date: 04/11/10 Time: 04:24
Sample (adjusted): 1999 2009
Included observations: 13 after adjustments
Variable Coefficient Std. Error t-Statistic Prob.
C -10.44539 1.121832 -9.311010 0.0000
ECBINTERESTRATE -1.607414 0.291255 -5.518933 0.0003
LINF 4.863633 0.772765 6.293806 0.0001
LPRODUCTIVITYPOR 1.098111 0.341750 3.213195 0.0093
R-squared 0.931031 Mean dependent var -6.635714
Adjusted R-squared 0.910340 S.D. dependent var 3.579989
S.E. of regression 1.071967 Akaike info criterion 3.211824
Sum squared resid 11.49113 Schwarz criterion 3.394412
Log likelihood -18.48277 F-statistic 44.99732
Durbin-Watson stat 2.316320 Prob(F-statistic) 0.000004
Table 1: Estimation Output

CADPOR = -10.44539275 - 1.607414466*ECBINTERESTRATE + 4.863633374*LINF +
(-9.311010) (-5.518933) (6.293806)
1.098110809*LPRODUCTIVITYPOR
(3.213195)
R2=0,93 and Durbin-Watson stat=2.316320
⎯R2=0,91 each variable added to the model have an increase effect of coefficient of
determination, so⎯R2 shows the real effect.

The values in brackets are t-statistics and⎯R2 shows the interpretation power of the model.

3. Findings
In this paper, ECB interest rate, Inflation rate and Productivity growth are employed together as regressors of Current Account Deficit of Portugal.

Null hypothesis was rejected since the probability values in brackets are lower than 5% significance level. Multiple regression model is able to explain 91% of real relationship between the dependent and independent variables. Durbin-Watson statistics are 2.316320 and higher than 2. The probability value of F statistics is lower than 5% significance level and the Multiple Regression Model is generally significant.

The regression shows that LINF and LPRODUCTIVITYPOR have positive effect and
ECBINTERESTRATE has negative effect on current account deficit of Portugal. It means
that an increase in the inflation and productivity also increases the current account deficit, and an increase in ECB interest rate decreases the current account deficit of Portugal. The results obtained are also consistent with the theoretical basis.

4. Conclusion
As of early 1990s to 2001, Portugal economy has experienced a boom mainly due to the
expectations to join the European Economic and Monetary Union. This is called a catching up period. Expansionary fiscal policies during the boom and easy access to cheaper credits increased the demand for housing by households. Unemployment rates decreased, wages increased. But the productivity growth level remained under the growth rate level of nominal wages. That was the beginning point of Portugal competitive disinflation.

Higher production costs led customer to import goods, and Portuguese firms couldn’t compete with cheap importers. Devaluation might be an adjustment tool, but it is prohibited since it might deteriorate the functioning of the European Single Market.
The result of all disadvantaged positions is high current account deficit. As seen in the multiple regression analysis, inflation that is affected by the unemployment rates and productivity growth have negative effects (an increase in these parameters also increases the current account deficit) and an increase in ECB interest rate has positive effect on current account deficit.

What Portugal needs now is emergent adjustment to the loss of competitiveness. Since it cannot do this by using monetary policy tools, labor market may be an exit way. Depending on the labor market rigidity, Portugal can lower the wages and unit labor costs until the productivity growth level be over the nominal wage growth, and at the end until it gain its competitiveness against importers again.

References
Abreu, O. (2006): Portugal's boom and bust: lessons for euro newcomers, ECFIN Country
Focus, Volume 3, Issue 16, p. 1-6.

Andini, C. (2008): Portugal and the competitive disinflation: let the data speak, Economics Bulletin, Vol. 6, No. 25, p. 1-11.

Blanchard, O. and Glavazzi, F. (2002): Current Account Deficits in the Euro Area. The End of the Feldstein-Horioka Puzzle?, Brooking Paper on Economic Activity, No. 2, Washington DC, 2. p. 147-209.

Blanchard, O. (2004): A macroeconomic survey of Europe. December, 2004. Available at:
http://www.eabcn.org/research/documents/blanchard.pdf (06.04.2010)

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Blanchard, O. (2006b). Portugal, Italy, Spain, and Germany. The implications of a
suboptimal currency area. WEL-MIT Meeting, NYC, April 2006.

Blanchard, O., (2009). The Crisis: Basic Mechanisms, and Appropriate Policies. IMF
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Chorafas, D. N. (2009). Globalization’s Limits, Conflicting National Interests in Trade and Finance. Gower. 19.

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Council of The European Union. 3003rd Council Meeting. Economic and Financial Affairs. Press Release. Brussels, 16 March 2010.

European Commission, Economic and Financial Affairs, (2009). Annual Report on the Euro Area 2009. European Economy 6/2009. 3.

European Commission, Economic and Financial Affairs, (2009). Economic Crisis in Europe: Causes, Consequences and Responses. European Economy 7/2009. 27.

International Monetary Fund (IMF). The Implications of the Global Financial Crisis for Low-Income Countries. March 2009. 2.

Martins, P. S. and Opromolla, L. D. (2010). Exports, Imports and Wages: Evidence from
Matched Firm-Worker-Product Panels. Working Paper, Economics and Research Department, Banco de Portugal.

Molodtsova, T., Rzhevskyy, A. N. and Papell, D. H. (2009): Taylor Rules and the Euro, 29 January 2009, Available at: http://www.uh.edu/~dpapell/Taylor%20Euro.pdf (07.04.2010)

Rose, A.K. (2000): One Money, One Market: Estimating the Effect of Common Currencies on Trade, Economic Policy, 30: 9-45.

Shelburne, R. C. (2008). Current Account Deficits in European Emerging Markets. United Nations Discussion Paper Series. June 2008. 2, 4.

Taylor, J. (1993): Discretion versus Policy Rules in Practice, Carnegie-Rochester Conference Series on Public Policy, 39: 195-214.