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Sunday, February 28, 2010

The Financial Crisis: Impact on and Response by The European Union

James K. Jackson
Specialist in International Trade and Finance

The EU and the United States have taken unusual and extraordinary steps to resolve the financial crisis while stimulating domestic demand to stem the economic downturn. These efforts appear to have been successful, although the economic recovery remains tepid. The economic recession and the financial crisis became reinforcing events, causing EU governments to forge policy responses to both crises. In addition, both the United States and the EU have confronted the prospect of growing economic and political instability in Eastern Europe and elsewhere over the impact of the economic recession on restive populations. In the long run, the United States and the EU likely will search for a financial regulatory scheme that provides for greater stability while not inadvertently offering advantages to any one country or group. Throughout the crisis, the European Central Bank and other central banks assumed a critical role as the primary institutions with the necessary political and economic clout to respond effectively. Within Europe, national governments, private firms, and international organizations varied their responses to the financial crisis, reflecting differing views over the proper policy course to pursue and the unequal effects of the financial crisis and the economic downturn. Initially, some EU members preferred to address the crisis on a case-by-case basis. As the crisis has persisted, however, leaders have begun looking for a systemic approach that ultimately may affect the drive within Europe toward greater economic integration. 

Within the United States, Congress appropriated funds to help recapitalize financial institutions, and adopted several economic stimulus measures. In addition, Congress has been involved in efforts to reshape institutions and frameworks for international cooperation and coordination in financial markets. European governments also adopted fiscal measures to stimulate their economies and wrestled with failing banks. The financial crisis has demonstrated that financial markets are highly interdependent and that extensive networks link financial markets across national borders, which has pressed EU governments to work together to find a mutually reinforcing solution. Unlike the United States, however, where the federal government can legislate policies that are consistent across all 50 States, the EU process gives each EU member a great deal of discretion to decide how they will regulate and supervise financial markets within their borders. The limits of this system have been tested as the EU and others have searched for a regulatory framework that spans a broad number of national markets. Governments that have expended considerable resources utilizing fiscal and monetary policy tools to stabilize the financial system and to provided a boost to their economies may be required to be increasingly more inventive in providing yet more stimulus to their economies and face political unrest in domestic populations. Attention likely will also focus on those governments that are viewed as not expending economic resources commensurate with the size of their economies to stimulate economic growth.


Date of Report: February 8, 2010
Number of Pages: 39
Order Number: R40415
Price: $29.95

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The Berne Union: An Overview

James K. Jackson
Specialist in International Trade and Finance


The Berne Union, or the International Union of Credit and Investment Insurers, is an international organization comprised of more than 70 public and private sector members that represent both public and private segments of the export credit and investment insurance industry. Members range from highly developed economies to emerging markets, from diverse geographical locations, and from a spectrum of viewpoints about approaches to export credit financing and investment insurance. Within the Berne Union, the United States is represented by the U.S. Export-Import Bank (Eximbank) and the Overseas Private Investment Corporation (OPIC) and four private-sector firms and by one observer. The main role of the Berne Union and its affiliated group, the Prague Club, is to: work to facilitate cross-border trade by helping exporters mitigate risks through promoting internationally acceptable principles of export credit financing, strengthen the global financial structure, and facilitate foreign investments. Over the past decade, the growth and increased importance of global trade and financing have altered the agenda of the Berne Union from focusing primarily on concerns over country-specific political risk to concerns about global trade, international finance, global and regional security, and questions of business organization, civil society, transparency, and corporate responsibility. Congress, through its oversight of Eximbank and OPIC, as well as international trade and finance, has interests in the functioning of the Berne Union. .


Date of Report: February 8, 2010
Number of Pages: 8
Order Number: RS22319
Price: $29.95

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The European Union’s Reform Process: The Lisbon Treaty

Kristin Archick
Specialist in European Affairs

Derek E. Mix
Analyst in European Affairs

The Lisbon Treaty, the latest institutional reform treaty of the European Union (EU), went into effect on December 1, 2009. The document was signed by the heads of state or government of the 27 EU member countries in December 2007. The process of completing ratification by each individual member country lasted nearly two years, concluding with ratification by the Czech Republic on November 3, 2009. The Lisbon Treaty reforms the EU's governing institutions and decision-making process to enable the EU to operate more effectively. The treaty grew out of the proposed "constitutional treaty" that foundered after French and Dutch voters rejected it in referendums in 2005. 

The Lisbon Treaty seeks to give the EU a stronger and more coherent voice with the creation of a new position, President of the European Council. The first holder of this office will be former Belgian Prime Minister Herman Van Rompuy. He will chair the activities of the 27 EU heads of state or government, working to facilitate consensus, coordinate the activities of the Council, and ensure policy continuity. Additionally, the Lisbon Treaty creates the new position of High Representative of the Union for Foreign Affairs and Security Policy, a de facto EU foreign minister who may increase the weight and visibility of the EU on the world stage. The "foreign minister" will be supported by a new EU diplomatic service. Catherine Ashton (from the United Kingdom), formerly European Commissioner for Trade, was chosen for this position. 

The treaty also makes changes to the EU's internal decision-making mechanisms. These changes have been designed to streamline the process and make it less susceptible to gridlock or blockage. Additional reforms attempt to address concerns about democratic accountability and transparency in EU policy-making by granting a greater role to the directly elected European Parliament, national parliaments, and citizens' initiatives. 

Experts assert that the Lisbon Treaty could have positive implications for U.S.-EU relations. Some observers believe that it could allow the EU to move past its recent preoccupation with distracting internal questions and take on a more active and effective role as a U.S. partner in tackling global challenges. There are indications that adoption of the Lisbon Treaty could make the EU more amenable to future enlargement, including to the Balkans and perhaps Turkey, which the United States supports. On the other hand, some observers doubt how much of an impact the Lisbon Treaty will have, and some skeptics maintain that a stronger EU poses a potentially detrimental rival to NATO and the United States. 

This report provides information on the Lisbon Treaty and possible U.S.-EU implications that may be of interest to the 111th Congress. Also see CRS Report RS21372, The European Union: Questions and Answers, by Kristin Archick and Derek E. Mix. 
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Date of Report: February 22, 2010
Number of Pages: 10
Order Number: RS21618
Price: $29.95

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Wednesday, February 24, 2010

Agricultural Biotechnology: Background and Recent Issues

Tadlock Cowan
Analyst in Natural Resources and Rural Development

Geoffrey S. Becker
Specialist in Agricultural Policy

U.S. soybean, cotton, and corn farmers have rapidly adopted genetically engineered (GE) varieties of these crops since their commercialization in the mid-1990s. Over the last decade, GE varieties in the United States have increased from 3.6 million acres to 143 million acres. Worldwide, 25 countries planted GE crops on approximately 309 million acres in 2008. GE varieties now dominate soybean, cotton, and corn production in the United States, and they continue to expand rapidly in other countries. As adoption has spread, policy debates have continued over the costs and benefits of GE products. 

Ongoing concerns include the impacts of GE crops on the environment and food safety, and whether GE foods should be specially labeled. Underlying these issues is the question of whether U.S. regulation and oversight of biotechnology—with responsibilities spread primarily among the U.S. Department of Agriculture (USDA), the Food and Drug Administration (FDA), and the Environmental Protection Agency (EPA)—are adequate, particularly as newer applications, for example, biopharmaceuticals (drugs manufactured with the use of GE crops or animals) or stacked GE traits in single organisms, emerge that did not exist when the current regulatory regime was established. 

Regulatory noncompliance incidents most pointedly raise concerns about the adequacy of existing U.S. regulatory structures. About 16 major events have occurred since 1995, according to USDA's Animal and Plant Health Inspection Service (APHIS). Another recurring concern has been the adequacy of APHIS's environmental assessments for deregulating GE plants. In 2006, a U.S. District Court held that USDA's environmental analysis for a variety of GE alfalfa was inadequate and ordered further planting to cease until an environmental impact analysis was completed. A similar case involves GE sugar beets. In 2005, trace amounts of an unapproved GE rice were found in samples of the 2005 crop of U.S. long grain rice. 

In October 2008, APHIS announced the first revision of its biotechnology regulations since their promulgation in 1987. Proposed changes include a multi-tiered permitting system, new risk categorizations for assessing environmental releases of GE organisms, regulation of GE plants that produce pharmaceutical and industrial compounds, and new standards for low-level presence of regulated GE products. A final rule on the proposed changes has not yet been published. Other recent issuances include FDA's January 2009 final guidance on regulation of GE animals and products. APHIS is now seeking public comment and data concerning ongoing and future research on GE animals. In a ruling in January 2008, APHIS published its final guidance on the safety of meat and milk from cloned animals. 

Some U.S. agricultural export markets, notably the European Union (EU), have taken a more restrictive approach to regulating agricultural biotechnology than the United States, presenting obstacles for U.S. farm exports. In 2006, a World Trade Organization (WTO) dispute panel ruled against the EU's de facto moratorium on approvals of new GE crops from 1998 to 2004. The parties (Canada and the United States) subsequently agreed to extend the time for EU compliance with the ruling to January 11, 2008. Positive action from the EU remains slow. U.S. agricultural interests remain concerned that stricter EU rules for labeling and tracing GE products will continue to discriminate against U.S. exports. Congress generally has been supportive of GE agricultural products, although some Members have expressed wariness about their adoption and regulation. Legislative activity in the 110th Congress was modest. There has been no legislative activity to date in the 111th Congress on agricultural genetic engineering. 
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Date of Report: January 28, 2010
Number of Pages: 38
Order Number: RL32809
Price: $29.95

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Monday, February 22, 2010

The United States and Europe: Current Issues

Derek E. Mix
Analyst in European Affairs

Common values, overlapping interests, and shared goals give the United States and Europe what some observers consider to be the world's most complete partnership. In terms of security and prosperity, analysts assert that the two sides have grown increasingly interdependent. Transatlantic relations during the Bush Administration were marked by tensions over the invasion of Iraq and disagreements on a number of other issues, although the Administration's second term featured a substantial improvement in the relationship compared to the first four years. The majority of Europeans warmly welcomed President Barack Obama to office, and his popularity suggested opportunities for the United States and Europe to address the common set of global challenges they face. At the same time, observers note that an improved transatlantic political atmosphere does not necessarily translate into tangible foreign policy results. Transatlantic cooperation is strong on many key issues, but some divisions and tensions also exist. 

A number of shared foreign-policy challenges involve the wider Middle East region. In Afghanistan, governance and security conditions remain serious concerns. President Obama has shifted U.S. focus to Afghanistan, and Europe's commitment to the stabilization and reconstruction mission there will continue to be an important tone setter in transatlantic relations. With a nuclear Iran deemed an unacceptable danger to regional stability by many officials and analysts, the United States and the European Union (EU) continue to seek a way to halt Iran's uranium enrichment activities in the wake of that country's disputed election. The United States and the EU have attempted to renew their attention to the Israeli-Palestinian conflict, and both advocate the negotiation of a "two-state" political settlement. Many experts, however, observe that current circumstances do not easily lend themselves to a revived peace process. 

A range of other issues also rank high on the transatlantic agenda. With the world economy center stage, the global financial crisis has posed difficult challenges to both sides and has raised concerns about the adoption of protectionist policies. While some transatlantic trade disputes persist, efforts are ongoing to reduce non-tariff barriers and increase regulatory convergence. Europe has set ambitious standards in climate change policy. Despite disappointment with the failure of the December 2009 Copenhagen conference to produce a successor treaty to the Kyoto Protocol, many Europeans hope that the United States will adopt new climate change legislation that could contain binding greenhouse gas emissions targets. U.S.-EU counterterrorism cooperation has been strong since the terrorist attacks of 9/11, although some Europeans have objected to aspects of U.S. policies. The planned closure of the Guantánamo Bay detention facility has been applauded in Europe, although U.S. requests to accept released detainees raised questions and debate, and the process of sorting through the difficulties has been slow. The decision to admit additional EU countries to the U.S. Visa Waiver Program in late 2008 helped defuse European discontent over visa reciprocity issues. Lastly, relations between the West and Russia have grown increasingly tense in recent years. While the Obama Administration's "re-set" approach appears to have contributed to an improved atmosphere, common approaches to Russia—among U.S. policymakers, within Europe, and across the Atlantic—have proven difficult to formulate. 

This report examines the current state of the transatlantic relationship and discusses the key issues outlined above, which may have implications for U.S. interests during the second session of the 111th Congress. 



Date of Report: February 1, 2010
Number of Pages: 17
Order Number: RS22163
Price: $29.95 

Climate Change: EU and Proposed U.S. Approaches to Carbon Leakage and WTO Implications

Larry Parker
Specialist in Energy and Environmental Policy

Jeanne J. Grimmett
Legislative Attorney

The United States has proposed, and the European Union (EU) developed, policies to mitigate the potential economic and environmental (i.e., "carbon leakage") impacts of carbon policies on energy- or greenhouse gas-intensive, trade-exposed industries. While studies have found little effect of carbon policies on EU competitiveness in the present, the EU decision to move toward auctioning of allowances in the future has spurred development of criteria to extend potential availability of free allowances to exposed industries to 2020. In a December 2009 decision, the European Commission (EC) listed 164 industrial sectors and subsectors deemed exposed sectors under appropriate European Parliament and Council directives. 

H.R. 2454, which passed the House on June 26, 2009, includes two strategies to address these concerns: (1) free allocation of allowances (similar to that of the EU), and (2) an international reserve allowance (IRA) scheme. Studies have suggested that a free allowance scheme appears effective in mitigating the trade-related impact of the carbon program on energy-intensive, tradeexposed industries. However, production cost for those industries (along with other industries) could increase because of the potential pass-through of compliance-related costs by upstream producers of various inputs into their manufacturing processes. Whether these costs would become significant would depend on the ability of upstream suppliers to pass on the costs, and the ability of the downstream industries to respond by increasing the efficiency of their operations or by substituting other, less-costly inputs into their processes. There are questions about whether the allowances provided by H.R. 2454's allocation scheme are sufficient. If the Environmental Protection Agency's estimates are correct, the allocation would appear sufficient. If industry estimates are correct, or if individual showings of eligibility prove significant, the pool of allowances provided by the bill would appear inadequate under the assumptions used here. Also, the data and administrative resources necessary to implement the program would be substantial. 

Although H.R. 2454 as passed would require EPA to establish an IRA program consistent with U.S. international agreements, questions may be raised as to whether proposed Part IV and its application would fully comply with U.S. international trade obligations. The distribution of free allowances may constitute actionable subsidies for purposes of the World Trade Organization (WTO) Agreement on Subsidies and Countervailing Measures by possibly qualifying as "foregone revenue" when auctioning of allowances would also be permitted. In addition, the requirement that importers purchase IRAs to accompany particular imports might be found to constitute a prohibited import surcharge or, if the product may not otherwise enter the United States, a prohibited quantitative restriction under the General Agreement on Tariffs and Trade (GATT) 1994. While the IRA program might be provisionally justified under GATT general exceptions for health protection or resource conservation, the GATT also requires that it not be applied "in a manner that would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade." Whether an IRA program can be applied consistently with these requirements may depend on the type of program that may be crafted by EPA under the proposed legislation—that is, on the elements that would be required under the bill and the administrative possibilities inherent in its discretionary authorities. Absent an international consensus on the types of trade-related measures that may be applied as part of a domestic climate change regime, adversely affected countries may seek to challenge these measures under WTO dispute settlement provisions. Since neither the distribution of emission allowances nor border restrictions imposed as part of a domestic greenhouse gas-reduction program have yet come before WTO dispute settlement panels, WTO obligations and exceptions remain untested in this complex regulatory environment.


Date of Report: January 28, 2010
Number of Pages: 71
Order Number: R40914
Price: $29.95 

Friday, February 19, 2010

Financial Market Supervision: European Perspectives

James K. Jackson
Specialist in International Trade and Finance


The global financial crisis has sparked a debate over the cause and impact of the crisis. Academics and policymakers are searching for changes in the financial system that can correct any perceived weaknesses in the structure of regulation, the content of regulations, and the coverage of financial instruments and activities. Since the onset of the crisis, numerous proposals have been advanced to reform or amend the current financial system to help restore economic growth. In the United States, the Obama Administration has proposed a plan to overhaul supervision of the U.S. financial services sector. The proposal would give new authority to the Federal Reserve, create a new Financial Services Oversight Council, create a Consumer Financial Protection Agency, and create a new National Bank Supervisor to replace the Office of the Comptroller of the Currency and the Office of Thrift Supervision. In contrast, Senator Collins introduced S. 664, the Financial System Stabilization and Reform Act of 2009, with a companion measure, H.R. 1754, that was introduced by Representative Castle in the House of Representatives. The measures would create a Financial Stability Council and grant the Federal Reserve the authority to examine the soundness and safety of the financial system posed by bank holding companies. Other measures include: S. 1682 (Senator Cantwell), the Derivatives Market Manipulation Prevention Act of 2009; S. 1803 (Senator Merkley), the Federal Reserve Accountability Act of 2009; S. 2756 (Senator Warner) the Financial Services Systemic Risk Oversight Council Act of 2009; H.R. 3795 (Representative Frank), the Over-the-Counter Derivatives Markets Acts of 2009; H.R. 3968 (Representative Ellison), to amend the Bank Holding Company Act; and H.R. 3996 (Frank), to improve financial stability. The crisis has underscored the fact that national and international financial markets have become highly integrated, and problems in one market can trigger contagion that can spread both among countries and into economic sectors to affect businesses, employment, and household well being. 

Similarly, governments in Europe are considering what, if any, changes they should make to their national financial systems. Along with the United States and other countries, European countries also are considering changes to the international systems of financial supervision and regulation in order to ensure prosperity through the smooth operation of domestic and international financial systems. This process may include reconsidering the roles and responsibility of the central banks in the post-financial crisis era. Various organizations and groups are advancing a large number of recommendations and prescriptions. Some goals for any such adjustments may include providing an institutional structure for oversight and regulation that is robust, comprehensive, flexible, and politically feasible while providing appropriate incentive structures to preclude excessive risktaking. Of course, there are no guarantees that amending the current system or employing a different regulatory and supervisory structure will preclude a repeat of the most recent financial crisis given that financial markets and institutions are continually growing, innovating, and responding to government- and market-imposed constraints. 

This report addresses the European perspectives on a number of proposals that are being advanced for financial oversight and regulation in Europe. The European experience may be instructive because financial markets in Europe are well developed, European firms often are competitors of U.S. firms, and European governments have faced severe problems of integration and consistency across the various financial structures that exist in Europe. 



Date of Report: February 4, 2010
Number of Pages: 28
Order Number: R40788
Price: $29.95

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Tuesday, February 16, 2010

Chemical Regulation in the European Union: Registration, Evaluation, and Authorization of Chemicals

Linda-Jo Schierow
Specialist in Environmental Policy

On June 1, 2007, the European Union (EU) began to implement a new law governing chemicals in EU commerce, Registration, Evaluation, Authorization, and Restriction of Chemicals (REACH). It is intended to protect human health and the environment from hazardous chemicals while at the same time protecting the competitiveness of European industry. REACH evolved over eight years and reflects compromises reached among EU stakeholders. The final regulation reduces and coordinates EU regulatory requirements for chemicals new to the EU market and increases collection of such information for chemicals already in the EU market, thus potentially removing disincentives to innovation that existed under the former law. It also shifts responsibility for safety assessments from government to industry and encourages substitution of less toxic for more toxic chemicals in various chemical applications. U.S. chemical industry representatives believe that REACH is "impractical." In contrast, some public-interest groups are urging U.S. legislators to adopt a similar legislative approach.

Depending on one's point of view, new chemicals legislation in the European Union (EU) is likely to vastly improve environmental and public health protections and serve as a model for future U.S. law, or it might unnecessarily burden commercial enterprises with regulations and interfere with international trade. The subject of such conjecture is a new EU law for Registration, Evaluation, Authorization, and Restriction of Chemicals (REACH) in EU commerce, which went into force June 1, 2007.


Date of Report: February 2, 2010
Number of Pages: 6
Order Number: RS22673
Price: $7.95

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Thursday, February 11, 2010

Comparing U.S. and EU Program Support for Farm Commodities and Conservation

Renée Johnson
Specialist in Agricultural Policy

Charles E. Hanrahan
Senior Specialist in Agricultural Policy

Randy Schnepf
Specialist in Agricultural Policy

The European Union (EU) is one of the United States' chief agricultural trading partners and also a major competitor in world food markets. Both the United States and the EU provide significant government support for their agricultural sectors. In the United States, a large share of support is concentrated on wheat, feed grains, cotton, oilseeds, sugar, and dairy. The EU provides more extensive support to a broader range of farm and food products, including grains, cotton, rice, oilseeds, peanuts, dairy, and sugar, but also fresh and processed fruits and vegetables, and livestock products. In addition, starting in the 1980s, both the United States and the EU introduced policies and programs expanding the type and amount of support for agricultural conservation and so-called "agri-environment" practices on-farm. Compared to support for commodity production, however, support for agricultural conservation still constitutes a very small share of total farm-level support within both the EU and the United States. 

According to the Organization for Economic Cooperation and Development (OECD), the EU and the United States together account for more than 60% of all government support to agriculture among the major developed economies. In terms of total spending, EU agricultural support generally is much higher than in the United States, and the EU alone accounts for 50% of the OECD's total estimate. However, comparisons are complicated by significant structural differences between the U.S. and EU farm sectors. The United States has roughly twice the farmland base of the European Union, while the EU has six to seven times the number of farm operators spread across each of its 27 member countries. The EU program also supports a broader range of farm commodities as compared to the United States. 

Three general sources of quantitative data and information compare agricultural program support between the United States and the European Union. These include (1) the OECD's annual Producer Support Estimate (PSE); (2) estimates of the Aggregate Measurement of Support (AMS) for agricultural programs, as compiled by individual World Trade Organization (WTO) member countries and notified to the WTO as part of their membership obligations; and (3) annual budget expenditures for agricultural programs, as reported by individual countries. 

These data sources are useful in comparing farm program support across countries. The data indicate that, since the mid-1980s, total farm support in the United States and EU has declined as a share of total gross farm receipts. In general, support for commodity programs has decreased, whereas the support for non-commodity programs, such as farmland conservation and certain types of rural development programs, has increased. However, support for non-commodity programs still accounts for a small share (less than 1%) of farm receipts. As a share of overall farm receipts, support for such programs is slightly greater in the United States, where support for non-commodity programs accounts for less than 0.7% of receipts, than in the EU, where it accounts for less than 0.3% of receipts annually. In terms of total spending, however, the data show that the EU provides more support, in aggregate, than does the United States for both production-based programs and non-commodity programs, such as farmland conservation and agri-environmental programs. 
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Date of Report: January 26, 2010
Number of Pages: 21
Order Number: R40539
Price: $29.95

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Wednesday, February 10, 2010

The German Economy and U.S.-German Economic Relations

Raymond J. Ahearn
Specialist in International Trade and Finance

Paul Belkin
Analyst in European Affairs

Germany is the world's fifth largest economy and the largest in Europe, accounting for about onefifth of the European Union's (EU) GDP. Germany is also the largest European trade and investment partner of the United States. Mutually profitable and growing U.S.-German commercial ties historically have been facilitated by a strong German economy. The health and functioning of the German economy, as well as its approaches to international economic policy issues, thus, are of considerable importance to the United States as well as to the rest of Europe. 

By most standards, post-war West Germany registered impressive economic performance in the first decades of its existence. But beginning in the mid-1990s, the German economy has been on a much lower growth path, averaging about 1.5% of GDP per year. Unemployment has also risen steadily. These trends, which have been exacerbated by a steep 5% decline in German GDP growth in 2009, raise questions about the long-term vitality and strength of the German economy. 

A number of factors help explain Germany's declining growth rate. One factor has been the high cost associated with integrating the formerly communist East German economy into the Federal Republic since reunification in 1990. A second has been the growing cost of Germany's generous social security and welfare programs and associated regulations which some believe may undercut incentives for work and entrepreneurship. A third is an economy that is more geared towards exporting than domestic investment and consumption. 

With few exceptions, German governments have generally been reluctant to advance what many economists consider necessary but unpopular economic policy reforms, including cut-backs in welfare programs and labor market protections. Some believe that Chancellor Angela Merkel's September 2009 reelection in coalition with the pro-business Free Democratic Party (FDP) could increase the likelihood of market-friendly reforms being enacted, but any radical restructuring of Germany's social market economy is considered unlikely. 

With declining economic growth and rising expenditures on social protections, Germany faces significant budgetary and resource constraints. This resource crunch could limit Germany's flexibility in pursuing domestic and international policy goals, arguably making Germany less capable of compromise on matters of potential economic advantage. In this regard, Germany's domestic economic challenges could limit its policymaking flexibility. This has affected not only the economic and trade leadership role Germany has traditionally played in Europe, but also its position on issues that directly affect U.S. interests such as the global economic downturn and economic sanctions. 

A prosperous German state remains critical to both the U.S. and European economies. Difficulties Germany may have in regaining a stronger economic position are important concerns, affecting the U.S.-German partnership's ability to mutually address and manage a range of bilateral, regional, and global challenges. This report elaborates on these themes in three parts: the first section examines Germany's economic performance in historical perspective and assesses some of the domestic factors that may be contributing to Germany's less than optimal performance; the second discusses the reform challenges facing Germany's political leaders; and the third section evaluates a few salient U.S.-German economic policy differences and strains that seem to be influenced by Germany's weakened economic situation. 



Date of Report: January 27, 2010
Number of Pages: 25
Order Number: R40961
Price: $29.95

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The European Parliament

Kristin Archick
Specialist in European Affairs

Derek E. Mix
Analyst in European Affairs

The European Parliament (EP) is one of the three key institutions of the 27-member European Union (EU), and the only EU institution whose members are directly elected. The current EP has 736 members. The most recent EP elections were held on June 4-7, 2009. Members of the European Parliament (MEPs) serve five-year terms. 

Once limited to being a consultative assembly, the EP has accumulated more power over time. It performs important functions in the EU's legislative and budgeting processes, and exercises a degree of supervision over the two other main EU institutions, the Council of the European Union (Council of Ministers) and the European Commission. Although the EP does not formally initiate EU legislation, it shares "co-decision" power with the Council of Ministers in many policy areas, giving it the right to amend or reject proposed EU legislation. The recently ratified Lisbon Treaty increases the EP's role further, giving it amendment and veto authority over the vast majority of EU legislation (with some exceptions, such as tax matters and foreign policy). Moreover, supporters argue, as the only directly elected EU institution, the EP increasingly plays an important checks-and-balances role on behalf of Europe's citizens. 

Members of the European Parliament caucus according to transnational groups based on political affiliation, rather than by nationality. No single group has ever held an absolute majority in the European Parliament, making compromise and coalition-building important elements of the legislative process. Following the June 2009 election, the center-right Group of the European People's Party (EPP) and the re-named center-left Group of the Progressive Alliance of Socialists and Democrats in Europe (S&D) remain the two largest political groups. Every two-and-a-half years (twice per parliamentary term), MEPs vote to elect a President of the European Parliament to lead and oversee its work and to represent the EP externally. The EP has 20 standing committees that are key actors in the adoption of EU legislation and 36 delegations that maintain international parliament-to-parliament relations. 

Although supporters point to the EP's growing institutional significance, the European Parliament faces several challenges of public perception. Some skeptics contend that the EP lacks the legitimacy of national parliaments and exercises little real power. Other analysts observe that the complexity of the EU legislative process contributes to limited public interest and understanding of the EP's role, leading in turn to a trend of declining turnout in European Parliament elections. Another issue is whether MEPs reflect national or European interests—many MEPs tend to campaign on national rather than European issues and many voters view EP elections as a national mid-term election. Criticism has also been directed at the costs incurred by what many consider duplicate facilities—while much of the work of the EP takes place in Brussels, monthly plenary meetings are held in Strasbourg, France, and administrative sections of the EP Secretariat are based in Luxembourg. 

Ties between the EP and the U.S. Congress are long-standing, and the Transatlantic Legislators' Dialogue—the formal mechanism for EP-Congressional exchanges—is expected to continue its activities during the second session of the 111th Congress. Also see CRS Report RS21372, The European Union: Questions and Answers, by Kristin Archick and Derek E. Mix.


Date of Report: January 26, 2010
Number of Pages: 13
Order Number: RS21998
Price: $29.95

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