What is the likely economic impact?

It depends on how long it takes for Congress to thrash out an agreement on the budget.

The US government has experienced 18 shutdowns in the past 30 years, with the latest one lasting 21 days under US President Bill Clinton in 1995, costing the economy over $1bn.

If the Democrats and Republicans reach a deal on the budget within a day or two, the negative effect on the recovery of the US economy will be fairly limited.

However, the daily impact of the economic shutdown may accelerate if it affects confidence and consumer spending, especially with hundreds of thousands of workers left unpaid.

Over the past three years, the debt ceiling has been used as a negotiation point for House Republicans who have sought to extract budget concessions from Mr Obama.

What's next? How will it be resolved?

There are a few ways out of the shutdown: Congress could pass a bill on the budget that does not tamper with the Affordable Healthcare Act, the Senate and Democrats could accept changes in the health law, or a compromise could be reached.

Congress will need to meet a crucial deadline on 17 October to raise the government's $16.7 trillion debt ceiling – the limit at which it can borrow money to pay its bills.

I.Vocabulary:

government shutdown – прекращение работы федерального правительства

partial shutdown – частичное прекращение работы правительства

approve a budget – одобрить, принять бюджет

pass

delay funding – отложить финансирование

eliminate – отменить

stand off – противостояние

put the fragile US economic – поставить под угрозу хрупкое

recovery at risk восстановление экономики США

political wrangling – ожесточенные политические споры

fiscal year – финансовый год

cede control – уступить контроль

Patient Protection and Affordable Care Act¹

non-essential staff – вспомогательный состав

thrash out – прорабатывать, детально обсуждать

affect confidence and consumer spending – отрицательно сказаться на доверии и потребительских расходах

seek to extract concessions – добиваться уступок

tamper with – вмешиваться, трогать

reach a compromise – достичь компромисса

meet a critical deadline – уложиться в крайне важный предельный срок

II. Answer the following questions using as many vocabulary

items as possible:

1. What is a shutdown?

2. Why did it happen?

3. Who is affected?

4. What is its likely economic impact?

5. How can it be resolved?

III. Give a short talk on the reasons and consequences of the 2013 US government shutdown. Has a long term solution been found?

_____________________

¹ see p.66

PROFILE: EUROPEAN UNION

The European Union, or EU, describes itself as a family of democratic European countries, committed to working together for peace and prosperity.

The organisation oversees co-operation among its members in diverse areas, including trade, the environment, transport and employment.

On 1 May 2004 the EU took in 10 new members in a huge step along the road towards dismantling the post-World War II division of Europe.

The new joiners were the Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia.

However, plans to introduce a constitution - intended to ensure the smooth running of the enlarged EU - faltered repeatedly at various national referendums until the revised "Lisbon" reform treaty was adopted. It came into force in December 2009.

History

Over half a century earlier, it was the devastation caused in Europe by World War II which underlay the imperative to build international relationships to guard against any such catastrophe recurring.

French statesmen Jean Monnet and Robert Schuman are regarded as the architects of the principle that the best way to start the European bonding process was by developing economic ties.

This philosophy was the foundation for the Treaty of Paris which was signed in 1951. It established the European Coal and Steel Community (ECSC) which was joined by France, Germany, Italy, the Netherlands, Belgium and Luxembourg.

Under the Treaty of Rome which came into force in 1958, these six countries founded the European Economic Community and the European Atomic Energy Community to work alongside the ECSC.

In 1967 the three communities merged to become collectively known as the European Communities (EC) whose main focus was on cooperation in economic and agricultural affairs.

Denmark, Ireland and the UK became full EC members in 1973, Greece joined in 1981, Portugal and Spain in 1986, Austria, Finland and Sweden in 1995.

Maastricht and beyond

The Treaty on European Union, signed at Maastricht in 1991, formally established the European Union as the successor to the EC.

At the same time Maastricht expanded the concept of European union into new areas. It introduced a Common Foreign and Security Policy and moved towards an EU coordinating policy on asylum, immigration, drugs and terrorism.

EU citizenship was brought into being for the first time, allowing people from member countries to move freely between member states. The treaty included a Social Chapter, from which the UK opted out, laying down EU policies on workers' rights and other social issues.

Crucially, Maastricht established the timetable for economic and monetary union and specified the economic and budgetary criteria which would determine when countries were ready to join.

The subsequent Stability and Growth Pact tightened up the approach to these criteria, stressing that strict fiscal discipline and coordination would be vital to the success of economic and monetary union. It also laid down penalties for members failing to control budget deficits.

Monetary travails

The single European currency, the euro, was officially adopted by 11 member states in 1999. Greece, which took longer to meet convergence criteria, joined two years later. Denmark, Sweden and the UK chose not to join.

The failure of many eurozone countries to stick to the self-imposed rules on government debt triggered a major financial crisis in 2009. By the end of that year Greece was burdened with debt amounting to 113% of GDP - nearly double the eurozone limit of 60%.

Following a 110bn-euro bailout package for Greece agreed in May 2010 by other eurozone members and the IMF, other heavily-indebted EU member states - notably Ireland, Portugal and Spain - started to come under close scrutiny.

In November 2010, an EU/IMF bailout package totalling 85bn euros was agreed on for Ireland, and in May 2011 a 78bn-euro bailout was approved for Portugal. By the end of the summer the indebtedness of Spain, Italy and Cyprus was also becoming a cause for concern.

Signs that the debt contagion was spreading beyond the periphery of the eurozone gave rise to a clamour of calls for urgent action, and at an emergency summit in October 2011, Europe's leaders agreed on a package of measures that included boosting the eurozone's main bailout fund to 1tn euros.

This, however, failed both to address a continuing crisis of confidence in the currency and to heal rifts among the major European Union economies on how to deal with it. France and Germany sought eurozone tax harmonisation, while Britain demanded safeguards for its own financial sector.

The year 2012 saw the debt crisis worsen in Greece and Spain, while the election of a Socialist government in France left Germany isolated as the chief advocate of austerity within the eurozone.

Sensing a need for leadership, in June 2012 the European Union authorities unveiled their own vision for a future that gave them much greater power, including a European treasury with control over national budgets.

European Commission President Jose Manuel Barroso said this "defining moment for European integration" was designed to strengthen the eurozone and prevent future crises over a ten-year period, but critics saw little in it to address pressing debt problems.

Mr Barroso went further in September 2012, calling for an eventual "federation of European nation-states" in a speech that also sought to deal with bank debts by establishing a supervisory mechanism for all eurozone banks.

However, internal divisions were highlighted in November 2012, when a summit meeting in Brussels failed to reach agreement on the EU's next seven-year budget.

Other key issues

Supporters of the 2004 influx of new member states saw enlargement as the best way of building economic and political bonds between the peoples of Europe in order to end the divisions of the past.

They looked forward to sharing the world's largest single market and so to expanding and consolidating stability and prosperity.

Critics highlighted the fact that average GDP per head for the new member states was 40% of the average for existing EU countries, making them an economic burden.

Some also argued that the EU decision-making process would become bogged down as the number of countries round the table increased.

Fears were expressed in some quarters that established EU members would see a huge influx of immigrants seeking better job and benefit prospects.

Reform treaty

Expansion is almost certain to continue. Bulgaria and Romania joined in January 2007 and Croatia became the EU's 28th member state in July 2013, and in 2009 Serbia submitted a formal application to join. Talks over Turkey's possible accession began in October 2005.

With the first big wave of enlargement approaching, a convention was established in 2002 to draft a constitution for the EU intended to streamline and replace the complex array of treaties and agreements which then governed it, and to define the powers of the body.

After intensive negotiation, the final text of the constitution was approved at a meeting of the 25 EU heads of state in Brussels in June 2004.

However, every EU country had to ratify the constitution - through national parliament or public referendum - before it could take effect. The charter was dealt a severe blow in May and June 2005 when it was spurned by French and Dutch voters.

The constitution was put on hold, but with Germany's assumption of the EU presidency in January 2007 it was placed firmly back on the agenda.

Negotiations on a new Reform Treaty took place throughout 2007, and what has become known as the Lisbon Treaty was signed in the Portuguese capital on 13 December.

Most European leaders acknowledged that the main substance of the constitution would be preserved, but they argued that Lisbon simply amended previous European treaties, rather than marking any fundamental new shift in powers.

All 27 EU countries were expected to ratify the Treaty in 2008 with a view to it coming into force in 2009. However, it was thrown into turmoil in June 2008 after voters in Ireland - the only country to hold a referendum on it - delivered a resounding "no" vote.

European Commission President Jose Manuel Barroso urged other countries to continue ratifying the Treaty, and Ireland approved it in a second referendum in October 2009.

The ratification process was completed the following month when the eurosceptic Czech President Vaclav Klaus finally signed it.

New presidency

In November 2009 the Council of Ministers approved Belgian Prime Minister Herman Van Rompuy as the first president of the European Council. Mr Van Rompuy took office in January 2010.

The European Union Trade Commissioner, Britain's Baroness Ashton, was appointed High Representative for Foreign Affairs at the same time. She took office when the Lisbon Treaty came into force in December 2009.

Under Baroness Ashton's chairmanship, EU foreign ministers have taken a more concerted line on issues in the Middle East, in particular sanctions against Iran's nuclear programme. In January 2012 they banned imports of Iranian oil in a major step against the Tehran authorities.

EUROPEAN COUNCIL

The European Council is an institution of the European Union. It comprises the heads of state or government of the EU member states, along with the President of the European Commission and the President of the European Council. The High Representative for Foreign Affairs, currently Catherine Ashton, takes part in its meetings.

While the European Council has no formal legislative power, it is charged under the Treaty of Lisbon with defining "the general political directions and priorities" of the Union. It is thus the Union's strategic (and crisis solving) body, acting as the collective presidency of the EU.

The meetings of the European Council, commonly referred to as EU summits, are chaired by its president and take place at least twice every six months.

The European Council was established as an informal body in 1975; it became an official EU institution in 2009 when the Treaty of Lisbon entered into force.

EUROPEAN COMMISSION

The European Commission (EC) is the executive body of the European Union responsible for proposing legislation, implementing decisions, upholding the Union's treaties and day-to-day running of the EU.

The Commission operates as a cabinet government, with 28 members of the Commission (informally known as "commissioners"). There is one member per member state, though members are bound to represent the interests of the EU as a whole rather than their home state. One of the 28 is the Commission President proposed by the European Council and elected by the European Parliament. The Council then appoints the other 27 members of the Commission in agreement with the nominated President, and then the 28 members as a single body are subject to a vote of approval by the European Parliament.

EUROPEAN PARLIAMENT

The European Parliament is the directly elected parliamentary institution of the European Union. Together with the Council of the European Union and the European Commission, it exercises the legislative function of the EU and it has been described as one of the most powerful legislatures in the world. The Parliament is currently composed of 766 members.

It has been directly elected every five years by universal suffrage since 1979.

Although the European Parliament has legislative power that the Council and Commission do not possess, it does not formally possess legislative initiative, as most national parliaments of European Union member states do. Parliament is the "first institution" of the EU (mentioned first in the treaties, having ceremonial precedence over all authority at European level), and shares equal legislative and budgetary powers with the Council. It likewise has equal control over the EU budget. Finally, the European Commission, the executive body of the EU, is accountable to Parliament. In particular, Parliament elects the President of the Commission, and approves (or rejects) the appointment of the Commission as a whole. It can subsequently force the Commission as a body to resign by adopting a motion of censure.

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