The function of banks in national economy

Text 17

EUROPEAN UNION

Text 16

The European Economic Community (EEC) was established in 1958 by the Treaty of Rome in order to remove trade and economic barriers between member countries and to unify their economic policies. It changed its name and became the European Union (EU) after the Treaty of Maastricht was ratified on November 1, 1993. The Treaty of Rome contained the governing principles of this regional trading group. The treaty was signed by the original six nations of Belgium, France, West Germany, Italy, Luxembourg, and the Netherlands. Membership expanded by the entry of Denmark, Ireland, and Great Britain in 1973; Greece in 1981; Spain and Portugal in 1986; and Austria. Sweden, and Finland in 1995.

Four main institutions make up the formal structure of the EU. The first, the European Council, consists of the heads of state of the member countries. I he council sets broad policy guidelines tor the EU. The second, the European Commission, implements decisions of the council and initiates actions against individuals, companies, or member states that violate EU law. The third, the European Parliament, has an advisory legislative role with limited veto powers. The fourth, the European Court of Justice (ECJ), is the judicial arm of the EU. The courts of member states may refer cases involving questions on the EU treaty to the ECJ.

The Single European Act eliminated internal barriers to the free movement of goods, persons, services, and capital between EU countries. The Treaty on European Union, signed in Maastricht, Netherlands (the Maastricht Treaty), amended the Treaty of Rome with a focus on monetary and political union. It set goals for the EU of (1) single monetary and fiscal policies, (2) common foreign and security policies, and (3) cooperation in justice and home affairs.

To be able to understand the role and the work of banks properly, we must first say what the term 'national economy' means. It covers three principal fields: industry, commerce and direct services.

Industry provides energy, raw materials and goods. The extractive industry produces coal, oil, gas, iron ore and a number of other metals and minerals from the ground or seabed. These are needed by the manufacturing industry for the production of machines and all those goods, which the customers buy: the car, the TV set, furniture, the dishwasher in the kitchen etc.

However, we do not get these goods direct from the factory but buy them in a shop or a department store. They are transported there and delivered to our homes by railroad, sometimes by ship or air, especially if they have been imported.

This brings us to another field of economy, commerce, which can be divided into trade and the service industries.

Trade is the buying and selling of any commodity. It can be divided into home trade and foreign trade.

A television set is transported several times before we can switch it on in our living room. Transport is, of course, a service which industry, trade and the consumer make use of. But it is only one of the service industries.

If the television set is damaged or gets lost while being transported, the insurance pays for this. Insurance is a service industry that specialises in covering risks of all kinds: damage, loss, fire, accidents - to give just a few examples.

Industry and commerce depend on precise, up-to-date information, which could not be provided, if we did not have our highly developed communication services like the telephone, telex and the post.

You may have noticed that banks have not been mentioned yet. Where does banking link up with the other sectors of a national economy? The simple answer is everywhere.

Banking:

• collects money from its clients in small or large amounts

• provides efficient means and methods of payment for goods and services

• finances industry, commerce and direct services

• grants credits to consumers for the purchase of consumer goods

• sells foreign currencies

• has contacts with all important national and international money and capital markets, etc.

Дата добавления: 2015-06-30