VII. Fill in the blanks with articles if needed.

This is sure to do something nasty to … economy, which is already weak. One bank, Goldman Sachs, guesses that … government's plans for … banks would shave … full 1.5% off economic growth and put more than 300,000 people out of work. So … central bank, … Bank of Japan, stands ready with … third economic initiative: easier money. This could involve … cutting interest rates, driving the yen lower, or buying … government bonds, land or other assets.

One reason for … multiplicity of … measures is … traditional desire for … consensual approach. It means that … policies emerge messily in public rather than being put together neatly in private. Decisions take too long, especially on … urgent problems such as … banks and … economy, which has weakened dramatically in … past few weeks.

VIII. Summarise the text, using the words and phrases given below:

to shrink; to put Japan back into recession; to overstate growth; to spur the economy;

to take some of the strain off fiscal policy; to press on with restructuring; to focus on return on capital; to spur price competition.

IX. Translate into English:

1. Бесспорно, структурные проблемы японской экономики остаются чрезвычайно серьезными.

2. Страна обладает огромным потенциалом для повышения эффективности производства и производительности труда.

3. 60-процентное повышение цен на акции говорит о том, что инвесторы считают происходящие в стране изменения весьма значительными.

4. Похоже, что восстановление экономики возобновится в этом году.

5. В некотором смысле современная Япония похожа на Америку 90-х: в сфере бизнеса происходят болезненные перемены, реальные доходы работающего населения падают.

X. Supply details to prove the following:

1. Contrary to what some claim, big changes in Japan's economy are under way.

2. Below the surface, however, there are reasons to believe that Japan's economy is on the mend.

XI. Comment on the following statements from the text:

1. Eventually the changes will create new investment opportunities and boost growth.

2. Although Japan's economy is officially in recession again, it is stronger than it looks.

XII. Work as two groups. Discuss the following:

Because of political problems, the government seems to be backtracking on some structural reforms.

Text 5.

Switzerland and the Euro

Switzerland is a paradox. Here is a small country surrounded by members of the European Union. Its citizens speak three main languages, none of them (at least as written) specifically Swiss. Of its 7m people, one-fifth come from outside. It lives off cross-border commerce, selling chemicals, machinery and precision instruments to the world, welcoming tourists and bank depositors from it. Swiss companies include such giant multinationals as Nestle, Ciba-Geigy and ABB, itself born of a big cross-border merger. Many international bodies are headquartered in Switzerland: the Red Cross, sports bodies, bits of the United Nations. Yet the Swiss, traditionally neutral in war, have kept out of even the main peaceable cross-frontier organizations as well. They belong to the International Monetary Fund and the World Trade Organisation, for instance, but not yet to the UN. That may change after a referendum in 2002. But as for the far more restrictive bonds of the EU, no way: on Sunday, in a referendum calling for an immediate start to negotiations on EU membership, almost 77% of those who voted said no.

The call for a vote at all came only from dedicated Swiss Europhiles. The government and most politicians were against it, and so even were businessmen, essentially because they did not want a referendum which they knew would be lost. The government has been planning to start talks on membership at some (steadily receding) date from 2004, and wanted time to prepare Swiss institutions and practices - and, above all, public opinion. A premature vote could only hurt its plans, and has. Even the Europhiles did not really expect to win. But they did want to keep the issue on the front-burner. In the event, they were not just beaten but smashed, and the issue is off the stove itself.

Why? Why defy what look like solid economic arguments for getting inside the EU? After all, Switzerland already enjoys trade with the EU that is more or less free. The Swiss voted only last year in favour of a package of deals with the EU on various quite weighty matters. Over 70% of their trade is with EU countries, nearly all of them ones that will soon be using its new currency, the euro. Would it not be better to be on the inside of such a grouping, able to influence its decisions, rather than haggle with it, a small economic power with a huge one, from outside? And, equally, inside the euro-zone, and the European Central Bank? One could well think so.

One could, but the Swiss did not. There were short-term, immediate reasons, but the basic one is centuries old: the Swiss have forged and fought for their identity and independence since 1291, and they do not want to give up. Not for nothing is their national myth-figure William Tell, a man who preferred to risk his son's life rather than accept foreign rule.

Text-study

I. Learn the following words.

qualms - беспокойство, тревожное состояние

merger - слияние (двух компаний)

haggle - торговаться, спорить (о цене товара)

umpteen - бесчисленный, многочисленный, множественный

constraint - принуждение; давление

II Answer the following questions:

1. What factors allow the author to call Switzerland a paradox?

2. Why were the government and most politicians against a referendum calling for an immediate start to negotiations on EU membership?

3. What does the author say about the relations between Switzerland and the EU countries?

4. What is, in the author's view, the main reason for the Swiss to reject the EU membership?

5. What does the author mean when he says that the story does not stop at Switzerland?

III. Complete the sentences with suitable words from the box.

marginal economic arguments; a cross-border merger; the far more restrictive bonds of the UN; dedicated Swiss Europhiles; they have no voice in Brussels; tribalism; paradox

1. In rejecting membership of the European Union, the Swiss have shown that political qualms can count for more than … .

2. Switzerland is a … .

3. It lives off cross-border commerce, selling chemicals, machinery and precision instruments to the world, welcoming tourists and bank depositors from it. Swiss companies include such giant multinationals as Nestle, Ciba-Geigy and ABB, itself born of a big ….

4. As for the far more …. it’s a question of debate.

5. The call for a vote at all came only from … .

6. They … , but they reckon they have not suffered unduly by bargaining from the outside.

7. It is no good denouncing national feelings as mere … .

IV. Fill in the blanks with the articles if needed

In any event, today's Swiss reckon that … economic case is less than compelling. They need … free trade, but they can get it without being members of the EU, as … past 45 prosperous years have shown. They have no voice Brussels, but they reckon they have not suffered unduly by bargaining from … outside. As for the euro, of course it is convenient to share … currency with your customers, but … Swiss have traded in umpteen foreign currencies since … gold standard. They can survive next-door to but outside … euro-zone, with no voice in its central bank, just as they have next-door to Germany's D-mark mark and with no voice in its Bundesbank: under … pressure from a mighty currency, but still with some freedom to manage their own. In sum, they have most of … economic benefits of EU membership already, but none of … formal political constraints. The economic gains of joining would, at best, be modest; the psychological loss could be great.

V. Fill in the blanks with suitable prepositions.

The story does not stop at Switzerland. Canada has lived for 160 years next to a far larger economy, with a different currency. Possibly Canadians would be richer if they were all Americans. Certainly they would carry more weight in Washington: think, … comparison, of California. Yet they prefer to be what they are, just as Irish republicans chose to cut loose … Britain in the 1920s, or as Norwegians voted against EU membership in 1994. And as most Britons, for similar reasons, would vote … euro membership today. The risks for Britain may be greater: it depends more than Switzerland does … foreign investors, and they might prefer to set up inside the euro-zone. But it is no good denouncing national feelings as mere tribalism. Such feelings may seem old-fashioned to some. But if people or nations feel that way, so be it. There is little evidence that most of them suffer thereby.

VI. Give Russian equivalents for the following words and phrases used in the text:

political qualms; cross-border commerce; precision instruments; bank depositors; cross-border merger; cross-frontier organisations;

solid economic arguments; a package of deals with the EU; short-term, immediate reasons; political constraints

VII. Translate the following sentences from the text into Russian:

1. Many international bodies are headquartered in Switzerland: the Red Cross, sports bodies, bits of the United Nations.

2. The government has been planning to start talks on membership at some (steadily receding) date from 2004, and wanted time to prepare Swiss institutions and practices - and, above all, public opinion.

3. Would it not be better to be on the inside of such a grouping, able to influence its decisions, rather than haggle with it, a small economic power with a huge one, from outside?

4. In any event, today's Swiss reckon that the economic case is less than compelling.

5. As for the Euro, of course it is convenient to share a currency with your customers, but the Swiss have traded in umpteen foreign currencies since the gold standard.

6. They have no voice in Brussels, but they reckon they have not suffered unduly by bargaining from the outside.

VIII. Summarise the text, using the words and phrases given below:

to reject membership of the European Union; to live off cross-border commerce; to keep out of any cross-frontier organizations; to call for smth; to keep the issue on the front-burner; to be off the stove; to enjoy trade with EU; to cut loose from smb/smth.

IX. Translate the text into English:

1. Швейцария является членом МВФ и ВТО, но пока не входит в ООН.

2. Преждевременный референдум может расстроить планы правительства.

3. Более 70% торгового оборота Швейцарии приходится на страны - члены ЕС, большинство из которых в скором времени перейдет на единую европейскую валюту.

4. Швейцария может спокойно существовать рядом со странами европейской зоны и не иметь голоса в Европейском Центральном Банке.

5. Швейцария, по сути, уже имеет все экономические преимущества страны - члена ЕС и в то же время она свободна от политических ограничений, которые накладывает членство в ЕС.

X. Provide details to prove the following:

1. Switzerland is a paradox.

2. Switzerland already enjoys trade with the EU that is more or less free.

3. The Swiss need free trade, but they can get it without being member of the EU.

XI. Give a thorough consideration to the possible economic gains of Switzerland's joining the EU.

Unit 1.5. The Importance of EU Economic and Social Issues

Text 1

Promoting Integration

Pre-reading tasks

1. Suggest a purpose for reading the text

2. What can the text be about?

3. Do you agree that economic management will be more difficult if there is greater specialization in particular industries?

If EMU encourages greater specialization in particular industries, economic management will be more difficult.

The economic case for the euro rests largely on the idea that it will hasten economic integration. This in turn will promote competition, leading to higher productivity and incomes. The case against rests largely on the idea that "asymmetric shocks" - disturbances that affect some countries much more than others - will be harder to deal with in the absence of national monetary policies. But what if it turns out that the more successful the euro is in promoting integration, the more susceptible the single-currency area becomes to asymmetric shocks?

At first sight, this seems unlikely. In a more integrated Europe, surely countries will be more alike. Maybe not. There are reasons for thinking that integration across a region makes sub-regions more specialised - that is, less alike. If this turns out to be true for Europe, the gains from integration in good times may be great, but the risks in bad times will be bigger too.

Economic theory suggests several connections between integration and regional specialization. In standard "neoclassical" growth theory, integration makes countries more similar: once capital and labour are free to move, the mix in which the two are used tends to converge internationally. Traditional trade theory complements this finding. It argues that a country's incomes and industrial structure reflect its endowment of labour, capital and other resources. As countries become richer, the accumulation of physical and human capital comes to outweigh resources such as land and climate: endowments become more similar, and so do patterns of output.

More modern theories emphasize different links. "New" growth theory is interested in externalities. The return to a unit of extra investment may be higher in a country that already has a lot of capital: the existing stock confers an external benefit on the new addition. If this effect is powerful, integration may promote divergence rather than convergence: investment will move all the faster to areas that already have lots of capital. "New" trade theory complements this finding (just as traditional trade theory sat happily alongside traditional growth theory). Externalities in production will cause high-technology, high-wage industries to form clusters. The more integrated these areas are through trade, one with another, the greater the tendency for clustering to take place. Again, integration makes economies less alike.

The evidence on all this is fiercely contested. There is no consensus on whether the new theories of trade and growth are closer to being true than are the current versions of their predecessors. So far as specialization is concerned, it is not even clear exactly what the term means, let alone how it should be measured. A lot depends on the level of magnification - that is, on whether you compare broad sectors (manufacturing, fanning) or sub-sectors, or even particular industries.

It would be hard to deny, though, that the economy of the United States is more regionally specialized than the euro zone. Big industries do seem to have clustered in certain areas: classically, car making in Detroit, software in Silicon Valley, movies in Hollywood. Europe has clusters here and there, but they are less pronounced. In America, asymmetric shocks have often pushed regional economic cycles out of synch, but fiscal transfers and labour mobility have eased the adjustment. Europe may find that integration causes sharper regional cycles - but since its central budget is small and its labour mobility low, its ability to cope may be poorer.

Text-study

I. Learn the following words

disturbance – нарушение, беспокойство, тревога

susceptible - восприимчивый

endowment - вклад, дар, пожертвование

externality - вид

magnification - увеличение

fanning - веерность

cluster - объединение

II. Complete the sentences with suitable words from the box.

Economic integration; regional specialization; neoclassical growth theory; traditional trade theory; externalities in production; magnification; competition; national monetary policies; clusters

1. The economic case for the euro rests largely on the idea that it will hasten ….

2. This in turn will promote …, leading to higher productivity and incomes.

3. The case against rests largely on the idea that "asymmetric shocks" - disturbances that affect some countries much more than others - will be harder to deal with in the absence of….

4. Economic theory suggests several connections between integration….

5. In standard …, integration makes countries more similar: once capital and labour are free to move, the mix in which the two are used tends to converge internationally.

6. … complements this finding.

7. … will cause high technology, high-wage industries to form … .

8. A lot depends on the level of … .

III. Answer the following questions:

1. What idea does the economic case for the euro rest on?

2. What idea is the case against based on?

3. What does the author mean by "asymmetric shocks"?

4. What are the reasons for thinking that in a more integrated Europe countries will be more alike?

5. What connections between integration and regional specialisation are suggested by economic theory?

6. How is the problem viewed by modern economic theories?

7. What is the role of externalities, according to new growth theory?

IV. Fill in the blanks with suitable prepositions.

A recent study by the OECD reports some further evidence. First, it looks at a measure … output divergence (which asks, in effect, what proportion … each country's output would need to switch sectors … the country's pattern of GDP to conform to the euro-area average). The results suggest that specialization has increased since 1980 in most of the countries examined. But the findings are inconclusive. Using a similar measure, but looking at 60 sub-national regions within the euro area rather than … countries, and using employment… place … output, the researchers find the opposite: specialization has been falling, albeit gently, since the mid-1980s.

It is possible, indeed likely, that "new" and "neoclassical” effects are going on at the same time. A paper cited by the OECD shows that specialization … America has traced a bell-curve over time. Regional specialization increased during the 19th and early 20th centuries as manufacturing, prone, … the "new" view, to form clusters, gained ground … agriculture. Later, this trend reversed and specialization fell - notwithstanding the fact that America is today more specialized than Europe.

V. Fill in the blanks with articles if needed

"Neoclassical" factors - trade and comparative advantage – caused … long-term shift in industrial structure: … economy moved from manufacturing to services. Many services have to be produced where they are consumed, which means less regional specialization. This was enough to outweigh any tendency within manufacturing for specialization to increase. Europe can draw comfort from this. Its shift from manufacturing to services lags far behind America's. Integration, other things equal, will speed it up. This should mitigate any tendency towards … clustering. For now at least, service economies look more alike than … manufacturing economies, and should prove less susceptible to … shocking developments.

VI. Translate the following sentences into Russian in writing:

1. The case against the euro rests largely on the idea that "asymmetric shocks" - disturbances that affect some countries much more than others - will be harder to deal with in the absence of national monetary policies.

2. As countries become richer, the accumulation of physical and human capital comes to outweigh resources such as land and climate: endowments become more similar, and so do patterns of output.

3. "New" growth theory is interested in externalities. The return to a unit of extra investment may be higher in a country that already has a lot of capital: the existing stock confers an external benefit on the new addition.

4. It would be hard to deny, though, that the economy of the United States is more regionally specialised than the euro zone.

5. A paper cited by the OECD shows that specialisation in America has traced a bell-curve over time.

VII. Translate the sentences into English:

1. Согласно экономической теории, существует несколько причин, позволяющих говорить о взаимосвязи интеграции и региональной специализации.

2. В «новой» теории роста особое внимание обращается на внешние экономические факторы.

3. Так называемые «неоклассические факторы» - торговля и сравнительное преимущество - произвели в промышленной структуре долговременный сдвиг: от сферы производства - к сфере обслуживания.

4. Многие услуги потребляются там же, где производятся, что означает меньшую степень региональной специализации.

VIII. Give Russian equivalents for the following words and phrases used in the text:

service economies; manufacturing economies; the single-currency area; sub-regions; the gains from integration; endowment of labour and capital; accumulation of physical and human capital; patterns of output; externalities; divergence/ convergence; fiscal transfers; labour mobility; a bell-curve; a long-term shift in industrial structure.

IX. Summarise the text, using the words and phrases given below:

the case for…; the case against; at first sight; to suggest; to promote competition; to emphasize; to complement; to be fiercely contested;

to deny; to report; inconclusive; to cite; to cause.

X. Work in several groups. Supply details to prove the following assumptions:

1. ...the economy of the United States is more regionally specialised than the euro-zone;

2. ... Italy is the most "European" economy, and Belgium the least.

3. the gains from integration in good times may be great, but the risks in bad times will be bigger too;

3. externalities in production will cause high-technology, high-wage industries to form clusters.

XI. Work as one group. Argue for or against the following debating themes:

1. Integration makes economies less alike.

2. For now, at least, service economies look more alike than manufacturing economies, and should prove less susceptible to shocking developments.

Text 2

Eastern European Securities

Pre-reading tasks

1. Suggest a purpose for reading the text.

2. What can the text be about? Give your own predictions.

3. Do you agree that a big smoothly functioning market for capital needs protecting investors from mischief?

If you want a big, smoothly functioning market for capital, you have to protect investors from mischief. For any emerging economy trying to turn foreign and domestic savings into productive assets, that ought to be an obvious conclusion.

Anybody who doubted the lesson could consult a stack of papers from a research team led by Harvard University's Andrei Shleifer and the University of Chicago's Robert Vishny. Over the past five years, the two have studied the link between investor protection - notably, measures to entrench the rights of minority shareholders, or to require disclosure of corporate information – and growth in financial markets. The numbers make it plain there is indeed a link, but did effective regulation promote financial development, or was it the other way round?

To establish the direction of causation, the researchers needed to find something that affects the extent of investor protection but that is not affected by big, deep capital markets. They settled on legal tradition. Countries with regulatory codes descended from English common law tend to have stronger investor protection than countries with civil-law traditions founded on Roman law; presumably, on the other hand, the extent of modern financial development cannot have affected the historical legal tradition. So the share of investor protection that can be traced to a country's legal tradition - and it is usually a big share - is likely to be a cause of financial growth.

These investigations shed an interesting light on recent changes in Eastern Europe's regulatory regimes. Most of the transitional economies had French- and German-inspired legal systems before communism. When the iron curtain fell, they had a chance to make a fresh start. The most ambitious reformers began to adopt American-style regulations derived from English common law. That process has culminated in Poland's new company law, which came into effect at the beginning of this year.

One of the new law's important provisions is that each share in a public company may carry only one vote. Under the old commercial code of 1934, which remained in force under communism, preferred shares carried up to five votes. Small groups of investors could control firms in which they owned just small stakes; cross-dealings between firms controlled this way could be used to siphon off the wealth of minority shareholders.

Poland's reforms have spawned a derivatives market that last year traded more index futures than Finland, Norway or Portugal. Russia is trying to get into the act by reforming its own derivatives trading, with America's Commodities Futures Trading Commission (the Securities and Exchange Commission's little sister) as an adviser and model. Even in Eastern Europe's most promising regulatory systems, enforcement remains a problem. The courts move ponderously, and judges often lack a sure grasp of the new laws. As a result, legal protection of investors does not yet always mean effective protection of investors

Text-study