|Type of paper:||Essay|
|Categories:||International relations Money Europe|
The introduction of a common currency in 1999 to the European region was the first creation of major global money without a state. The agreement of developed countries to join the union was a controversial debate that before the establishment of the European Economic and Monetary Union (EMU). Individuals in support of the Euro claimed that a common currency was a crucial step for political and economic integration, while opposes held that economic efficiency would be realty affected by the incompatible structural dissimilarities between European states (Carozza,). However, the two groups based their arguments on theoretical models because they could not prove the empirical events of the exceptional event. Currently, 15 out of the 27 member states use Euro as the medium of exchange while the rest maintain their local currencies, but base them on it. According to Clerk (2020), growth in GDP is one of the major impacts of the common currency, in 2018, Europe reported a nominal GDP of $23 trillion representing a quarter of the world. Other impacts include expanded market, low transaction costs, and improved balance of payments. Although the objective of the EU was to create jobs, boost trade and lower the prices, it has failed due to many regulations, making many members exit.
The euro was introduced to use as an official currency on January 1, 1999, but the ideas of the European Union existed long before. For instance, in 1969, the European Economic Community (EEC) was formed for the coordination of economic and monetary policies (Delivorias, 2015). The Warner Plan was established in 1970 with a new exchange rate system that reduced the instabilities of the currencies.
In 1970 the Werner Plan was published, introducing an exchange rate system in hopes of minimizing the volatility of European currencies. The national currencies of six original countries (France, Italy, West Germany, Belgium, Luxembourg, and the Netherlands) and later three additional ones (Denmark, Norway, and the United Kingdom) were pegged to each other as well as to the dollar and allowed to fluctuate within pre-established bands. Three years after the euro was virtually accepted, twelve-member nations adopted it as a single currency and banknotes were no longer legal tender. They included Italy, France, Austria, Norway, Portugal, Denmark, Greece, Luxembourg, Finland, Netherlands, Spain, Belgium, and the United Kingdom. The other members (Slovenia, Malta, Cyprus, Slovakia, Estonia, Latria, and Lithuania) continued to join from 2002 to 2015. Therefore the EU nations on the euro currency are nineteen while the seven are still committed to joining upon the fulfilments of the established conditions.
Gross Domestic Product
The EU economy comprises of mixed economies under an internal market that is ruled by social models and free markets. The internal market is associated with freedom of movement of capital, labor, goods, and services. The GDP per capita in 2018 was $43, 188, but differs among the member states. For instance, Bulgaria had GDP per capita of $ 23,169 while Luxembourg has GDP per capita of $106, 372.
In 2018, EU GDP was about 3.4 trillion Euros, and Germany is the leading country in GDP increase followed by Australia then Belgium. In 2008, Germany had a GDP of EUR2,546.490 that increased to EUR3,435.760 in 2019 (Clerk, 2020). In 2018, the countries had a GDP of EUR3,344.370, EUR385.712, and EUR459.820 respectively. The recent EU member nations have benefited greatly from the adoption of common economic policies. These states have recorded a larger average percentage growth rate than their elder members. For instance, in 2018, Ireland's GDP increased by 6.8%, and the following countries were Malta and Poland at 6.2% and 5.1% respectively (Clark, 2020). The countries that had a strong GDP when joining the EU, such as Denmark has been growing slowly compared with those that joined recently. The differences can be attributed to the stable monetary policy, cheap available labor, low flat-tax, and export-oriented trade policies.
Labor Markets and Unemployment
Eurostat (2020) demonstrates that the labor market has been expanding since 2000 when the countries formed the European Union. The rates of unemployment increased tremendously from 2009 to 2013 for instance, Greece rates were 9.1% in 2009, and 27.1% in 2013. In 2009, Spain had 17.4% and in 2013 the rate of employment rose to 26.3%. In 2016, Greece had the highest rate of employment (23%) while the Czech Republic recorded the lowest rate (4%). In 2018, the rate of unemployment in the EU was 8.1% where the lowest countries were the Czech Republic (2.3%), Poland, and Germany (both 3.4%). Greece recorded the highest (19%) and Spain (14%) (Eurostat, 2020).
The percentages indicate that although the rates of unemployment have reduced in the last eight years they remain high.
Exchange Rates Balance Of Payments
The EU is not a free-trade area but rather a customs union. The difference seems technical, but it goes to the heart of the decision faced by the members. Free-trade areas remove barriers between members and, the participants become wealthier than those in customs unions. By contrast, customs union erects a common tariff wall around their members and leaves them with no opportunity to strike individual trade deals. From the beginning, the EU prioritized politics over economics and opted for a customs union as the means to a political union. Britain being one of the best two countries out of 28 member countries that sell more to the rest of the world than to the EU has always been especially badly fined by the EU's Common External Tariff. Unlike countries such as Norway and Switzerland, which enjoys free trade with the EU and still strikes agreements with China and other growing economies, member countries must follow the EU policy and pay high penalties.
In conclusion, the fiscal and development projects budgeted in the EU makes long to complete and maybe what it's not necessary for Britain. The EU projects include infrastructure such as roads and bridges which have been developed by the UK government and therefore the country does not benefit from the funds contributed to the EU yearly. Their projects also take very long and therefore would be best for the country to support its resources and plan its budget. The EU does not maximize economic growth but rather concentrates on the political integration of the euro countries to maintain peace and stability among them. Europe has been lagging, and countries such as the United States and China have been growing rapidly. The EU does not come up with strategic economic plans to develop the members, and therefore Britain wants to deal with its economic development without depending on the EU.
Carozza, G. (2019). The European Economic and Monetary Union: Assessing the Impact of a Single Currency on the Member States. https://economics.nd.edu/assets/214436/the_european_economic_and_monetary_union_assessing_the_impact_of_a_single_currency_on_member_states.pdf
Clark, D. (Apr 1, 2020). Gross domestic product (GDP) of selected European countries in 2018. Statista. https://www.statista.com/statistics/685925/gdp-of-european-countries/Delivorias, Angelo. 2015. "A History of European Monetary Integration." European Parliamentary Research Service, Briefing.
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