Учебное пособие: Oral conversational topics on business English language

2. Why do sales forecasts play a key role in the budgeting process?

3. What are the components of the budgeting process?

4. How many kinds of budgets do you know? What are they?

5. Describe the two principle means providing flexibility: variable budgeting and moving budgeting.

6. Is there any difference between a budget and a financial plan?

7. What is the importance of making a budget?

to destock – to cut or use stocks to annualize – to calculate over a period of year to shrink – to become smaller in amount, size, or value to slide into recession – to gradually start to experience decrease in economy and employment economic slowdown – time or period when economic development gets slow

PROBLEMS OF EUROPEAN UNION

Almost single-handed, French consumers, who in the third quarter of this year spent an annualised 5% more than in the previous three months, kept the euro area's economy afloat. Among the three largest economies, which account for 70% of euro-area GDP, only France looked healthy, growing by 0.5%. Italy managed just 0.2%; Germany's economy, poorly for a year, actually shrank. As a whole, the euro area grew by a mere 0.1%.

Do not expect the French to keep it up, though. Consumption fell by 0.4% in October, and rising unemployment will probably keep spending in check. Nor is anybody else likely to take up the running. The European Commission reckons that, of the ten euro-area economies for which it forecasts quarterly GDP, only Spain and Finland will grow by more than 0.25% in the fourth quarter. The odd two out, Greece and Luxembourg, may well do better, but all four together make up less than one-seventh of the euro area's GDP.

The three biggest economies, and with them the euro area as a whole, are probably now shrinking, along with America and Japan. Whether the euro area's contraction will last for more than one quarter is unclear. Yet even optimists expect only slow growth in early 2002.

The best hope for revival lies in a reversal of the forces that have aggravated the euro area's slowdown. Rising prices, first of oil and then of food, ate into real incomes and depressed spending. The prices of oil and other commodities have since fallen fast, and the effects of foot-and-mouth disease and BSE are due to drop out of the inflation figures. Some economists think that inflation, now 2.4%, will fall to 1% or less in 2002. As well as boosting real incomes, falling inflation (or the expectation of it) ought to create more room for the European Central Bank (ECB) to cut interest rates below today's 3.25%.

In both France and Germany, inventories were run down in the third quarter, so there is not much more destocking to be done. Germany's construction industry, in decline for two years and a huge drag on growth at the start of 2001, almost stopped shrinking in the third quarter. The euro's weakness against the dollar and the yen should help exports.

That's the good news. Much else is amiss, notably America's slide into recession. This has hurt exports, but it has not reduced the euro area's trade surplus, since imports have been squeezed just as hard. Indeed, says Dieter Wermuth of Tokai Bank in Frankfurt, Germany is seeing a "trade miracle": exports actually rose in the third quarter, while imports fell. The trade balance had a big positive effect on Germany's GDP figure; feeble domestic demand clobbered the total.

America's recession is feeding through to GDP in other ways. Weakening exports are knocking domestic demand, through lower orders to suppliers and cuts in investment. Second, European companies have become more exposed to America through foreign direct investment: the American affiliates of European multinationals doubled their sales in the 1990s, which are now equivalent to almost 9% of euro-area GDP. An American slowdown means less profit, less investment and lower employment—in Europe as well as in the United States.

Third, America's troubles are sapping Europe's confidence. That has been much clearer since September 11th: Germany's IFO index of business confidence dipped again in October, after plummeting in September. The link between spirits in the two big economic regions is more than a couple of months old. The European Commission says that, between 1995 and 2001, the correlation between confidence indices in the euro area and America has been almost 0.9, with America just eight or nine months ahead. Where American businesses and consumers lead, Europeans seem to follow closely behind.

On top of this, there are domestic weaknesses to worry about. Unemployment, which kept falling in the early stages of the downturn, is now expected to rise. The ECB has so far been slow to cut interest rates, and may remain slow in future. The scope for loosening fiscal policy, especially in Germany, is small: next year's deficit will probably be close to the limits set by the euro area's stability and growth pact, which Germany's finance minister is determined not to violate. Salvation in an American recovery, then? Not only. If rising inflation dragged Europe down, falling inflation should help pull it up. With luck, the fourth quarter will be as bad as it gets for the old continent. But don't bet on it; and expect a slow climb back up.

QUESTIONS

1. What is the annual growth rate of the euro-area?

2. Which are the three biggest economies of the euro-area?

3. What dynamics of inflation is expected in the current year?

4. Are European companies becoming more exposed to America? In what way?

5. What are domestic weaknesses of the major European economies?

BRITAIN AND THE EURO

JUST as public opinion is apparently warming to the idea of joining the euro, relations between Gordon Brown and the European Commission have soured. The cause of the dispute is a ticking-off from Brussels about the chancellor's fiscal plans. This is no ordinary disagreement. It goes to the heart of whether Britain can both join the euro and maintain the drive to improve public services.

At first sight, the row between Mr Brown and the commission looks more theatrical than real. The commission says that Britain is failing to meet the rules of the stability pact by planning to run a budget deficit. This runs counter to the pact's stipulation that member states—both in and out of the euro area—should keep their budgets "close to balance or surplus over the medium term". For the moment, that does not much matter, since fines can be levied only on euro members.

But if Britain were to join the euro, say in 2004, the stability pact would become

highly relevant. Up till now the main focus of debate on whether Britain could make a success of euro membership has been about monetary policy. The principal question that the chancellor's five tests seek to answer is whether Britain could live with interest rates set by the European Central Bank. Underlying this is the worry that the British economy differs so much from the rest of the European Union (EU)-for example, through a housing market especially responsive to changes in interest rates that a one-size-fits-all monetary policy will prove harmful.

The latest row, however, highlights a different question—whether a one-size-fits-all fiscal policy set in Brussels will prove damaging. One criticism of the pact is that it makes little sense for countries to limit their fiscal freedom now that they have surrendered control over interest rates and exchange rates within the euro area. That applies to any euro member state. But there are two particular reasons why Europe's stability pact could prove especially problematic for Britain.