European Union Signature Assignment
Table of Contents
Overview of the European Union
Economic reforms from a historical perspective
Effects of the 2007/2008 fiscal crisis on EU
The comparative advantage of Germany
Economic projection and growth of German by 2030
Recommendations
References
The Overview of the European Union
The European Union is an economic bloc with about 28 countries with more than 500 million people and around $ 16 220 billion. It is among the most integrated and oldest regional agreements. The establishment of the EU assisted in putting an end to the war that occurred many years ago. Also, it integrated the countries whose historical ties had already been cut in Western Europe. There are many challenges that the EU has encountered while trying to deepen and widen its ties with other nations. Since the formation of the EU, it has grown to increase its responsibilities and border (Malik, 2018). At first, the EU was known as the European economic community, which only included six states, and the economic ties did not go beyond the formation of the free trade area. In the 1960s, it became a customs union, and by the year 1970, it began to add new members. It later engaged in eliminating the exchange rates in the designed system to eliminate wide changes among the currencies. In 1980 it added three members who brought the total to 12 members. Later the countries signed the SEA, which paved the way for the common market. In 1992 the nations signed the treaty on the European Union, which altered the name of the European community to the European Union, which culminated in the development of a single currency, the Euro.
Conducting those changes can create very many great difficulties. The issues of a single currency can threaten to unravel many of the economic and political gains . as part of implementing the changes in the European Union, which made the countries force themselves to act according to the laws of the European Union.
Impact of 2007/2008 crisis in the European Union.
The financial crisis began in the year 2007, which is without precedent in the post-war economic history. The economic crisis was preceded by a long period of credit, low-risk premia, abundant liquidity, and real estate developments. The overstretched financial institutions are incredibly vulnerable to the corrections of the asset markets. As a result, the countries engage in a great depression. The depression can be appropriate to consider the great depression to act as the benchmarks in terms of the financial triggers, which has served as a great lesson. From 2007/2008, the government has learned the importance of creating and setting the best policies that do not affect how banks operate. It also demonstrates the importance of the European Union coordination (Tang, 2015).
The European Union was highly affected by the 2007/2008 crisis, and the aftermath was worse than the United States. New members who had joined the union faced a significantly worse economic crisis, which found them trying to implement the EU policies. The problem indicates that the EU had not formulated the policies that could help the member states buffer against the economic shocks such as those witnessed in those errors. It acts as a benchmark of what the union should learn and formulate the policies that can prevent the future crisis from happening and affecting the members significantly worse. After the problem, the countries needed to recover, and some nations had poor economic policies, which made the process of recovery difficult. With the EU formulating the guidelines, the member countries only implement them, and as such, it became difficult to create the policies that would help to buffer against the shocks, and this made more political issues among the countries (Marciacq & Jaramillo, 2015). The impact continued to affect the countries differently as small ones even lost their values completely. Also, with the economic recession and no means of economic growth, some countries decided to opt for borrowing. A high level of debt can also hurt the economy because they increase inflation and make the crisis even worse as it may not be easy to recover the economy. Also, other member countries had low investments, and they lacked creditworthiness. Countries endured different effects of the crisis because the states that had already joined the EU had significantly stabilized economies that did not suffer from much of the problem. Despite the high level of recession, those countries continued with some investments and routine business activities. Some of the countries had invested in the neighboring states around the European Union, and they enjoyed the benefits of economies of scale as they produced more to sell to the neighboring states. Such created an increase in the level of economic growth. As a result, the countries stabilized their economies and recovered successfully from the crisis.
The EU also experienced a contraction of the economy, which had not been witnessed before. The contraction was too high, making the recovery process slower as the economies were depressed, hence experiencing shallow demands of the goods. The countries had obsolete stocks, which made the recovery process to be complex. The increased risk aversion made the process of research and development as well as capital formation slower. The damages of the crisis affected the output that could not be recovered entirely. The reversal in the financial structure had a significant impact in weakening the financial system. The EU had succeeded in containing the Unemployment problems; however, the recession brought about more issues in the rise of unemployment. Some countries had put in place some reforms in labor markets which could help them sustain recession issues; however, the countries that were joining the union suffered an increase in unemployment severely. These sectors did not recover soon enough because of the weak unemployment responses.
The crisis created more financial debts and deficits. As a result, the tax baes for countries shrank. The public finances of the major nations were affected. The crisis resulted in more debts that created a financial crisis episode.
Germany comparative Advantage
Germany is among the advanced country and has a significant share in manufacturing, it manufactures many technological products and is strong in the manufacture of middle technological products. However, despite the comparative advantage that is enjoyed by the countries such as Germany they are experiencing some decline because of the threat that is created by the developing nations hence taking a significant share of the market. China and the Republic of Korea are among the threats in the technological sector and they threaten the success of Germany. Over the years, while ranking the countries based on their GDP we find that China has increased in the ranking while Creating threatens in the relative costs (Borshchevska, 2016). Germany has been outperforming the countries in the European Union after the economic crisis of 2007/2008. Germany’s economic growth rate was negative in the period of an economic crisis in 2007 and the Euro crisis. However, the country has to revive and recover its economy which enabled its GDP to grow at a high rate. The comparative advantage of countries is influenced by various factors. The natural resources affect the companies’ comparative advantage and the countries can specialize in the production and manufacture of raw endowments. The geographical location where countries situated near the sea can specialize in logistics among others. Labor where countries that have abundant labor can focus on the manufacture of textile and others that are labor-intensive.
According to the HO model, a country has a comparative advantage on the products that it has numerous factor endowments and natural resources. When the country has many factor endowments it can produce the goods at cheaper prices compared to others. That describes the reason for trade among different countries. One of the products that Germany has a comparative advantage in the production is cars. Since it is capital intensive and has skilled labor Germany can produce high-tech cars and sell them at cheaper prices to other countries.
Impacts on wages and jobs. Since Germany can produce more cars that are competitive in the global many countries it can sell more and gain more benefits from trade. When the country benefits more it can create the sources of employment to the home country. The country can use the proceed to develop the industry more. Since the country develops high-quality cars, it sells more in international markets, and that is reflected in their jobs and wages. Also, the proceeds from the sale of the cars can help improve the wages of the workers. Also, the industry other than creating jobs it helps increase the employees’ salaries and improve the living standards. The country experiences more demand both domestically and internationally creating the need for more labor that creates the stabilization of the employment levels (Gogoll, Heinen, & Schlieszus, 2019).
Regional issues and the impact of such issues
When the country engages in the high production of specialized car products it can also face different regional issues which might impact on trade of the care products. There are issues such as the labor standards, human rights, and environmental standards which are regulated by the trade agreements such as those that are set by the European Union. The countries in the European Union are supposed to formulate the measures that protect the interests of the society the conflicts and other trade rules and provide some minimum standards with varying degrees of enforceability in dispute settlement proceedings. The EU has set the standards that regulate trade and environmental standards which are supposed to be adhered to by all the countries that engage in trade. As a member of the EU, Germany is supposed to create cars that do not emit gases that can have serious damaging impacts on the atmosphere. Also, it has to lower the barriers of trade and such benefits can make it difficult to protect the domestic industries from competition or benefit highly from trade. The EU sets the policies of trade that sometimes make it difficult for the country to operate efficiently and effectively.
Internal economies of scale
Germany experiences an increase in the production of cars because of highly skilled labor that increases efficiencies. It has created an automation system that makes the process of car manufacturing to be efficient. Due to the production of many cars, Germany can create many cars at using low cost compared to other countries. The production becomes efficient because of the cheap manufacture of the care products. With such, it can offer its products at competitive prices in the international markets and still manage to get substantial profits (Marciacq & Jaramillo, 2015).
External economies of scale.
Germany encounters efficient production of its cars and this is still witnessed in other countries that it has conducted investments. Since it has goods that are of high quality and has attracted more consumers. Even though other countries such as China have grown in the Manufacturing industry Germany still enjoys the external economies of scale. Its products are still purchased even if the competitors sell their products at reduced costs. The country has many customers and increased consumer demand which makes it enjoy high external economies of scale.
Economic forecasts of the European Union by 2030.
The economic growth of the European Union in the year 2000 was about 0.38 percent. The growth rate of the country is expected to grow by an additional 0.12% between the period 2020 to 2030. The European Union is expected to witness a decline in the strength of population as they are aging and that can make the country have a low labor force. The aging population can create more stress on the systems. Also, low economic growth can create havoc on the economy and deter economic growth. Combining such factors can make the GDP have a very low GDP
When the economy experiences a low GDP due to weak labor that can make it difficult to adjust and manage the public finances and slow especially in places that experience a high level of public debt. Some of the countries that experienced low economic growth after the crisis will also witness low economic growth because of a less productive population that insert more pressure on the system. If the trend continues the public debt will still be high. The weaknesses of the European growth will not allow a sufficient rate of job creation. Also, employment will grow in the European Union which will lower the unemployment rate in the region. The decrease in unemployment will only result from the decrease in the number of people that have the capability of working. Some of the countries will still have high levels of unemployment.
Some of the countries in the EU have witnessed a high growth rate due to globalization and the trade agreements that facilitate the growth of the member states. Most of the countries are using the new technology in the manufacture and production processes. Such has led to the creation of high-quality products which can survive competition even in the global markets. Globalization has provided opportunities to increase and enhance growth. With such favorable factors, the European Union is expected to witness a constant growth rate up to the year 2030. High investments in trade can act as a catalyst factor that facilitates economic growth.
The European Union underwent the crisis of 2007 and the Euro crisis which badly affected. The economic growth stagnated because of much pressure that was exerted on the economy. The crisis indicated the need for policy changes to revive the economy and boost trade. Because of the policy changes especially in those that facilitate trade. Such policies while still in place have the highest chances of facilitating trade. The benchmark from the previous crisis has enabled the EU to formulate policies that can stabilize the banks and avoid the crisis that has been experienced. As a result in the future, the economies will grow because of better policies.
There are countries in the EU that had already established policies of stabilization. As such, they did not experience more negative impacts from the crisis. As others were recovering from the recession, those countries engaged in the activities of expanding their economies. By the year 2030, it is expected to continue growing and stabilizing its economies. Also, most of the economies while following the policies of the EU can make member countries experience a high growth rate. Also, the economic growth rate can help improve the living standards and encourage the wage increase of the people in those countries. Besides, the economic growth rate in the countries can help in boosting the gross domestic products (Schnabl, 2019).
Since the European Union will have a stabilized economy, it will have very strong power in terms of the world economy. When the large economies can engage in trade they are likely to have the power to set the policies that affect the entire world economy. They can set the rules and policies which can impact trade. The growth of the Union presents many opportunities for taking over the world economy.
Conclusions and recommendations
The European Union has created ways that enhance the stabilization of their economies over the years to help lower the chances of recessions in the future. However, despite these, the countries have to create new policies that can create more stabilization of the economies. The crisis of the EU and the Euro, crisis can act as the best benchmark for the European Union to help formulate policies that do not affect how the banks operate. Also, the European Union encourages widening and deepening and it has to develop policies that ensure a great harmonization of policies and support the member countries’ states. Also, because of widening and deepening the European Union experiences various challenges that require good policies that support growth. The European Union has to set the policies while ensuring that they take care of the emerging nations and the technological factors which might strengthen the competitors and make the growth of the EU to be difficult. The developing economies are experiencing high research and development together with foreign direct investment and the EU should therefore develop ways that can help them in such circumstances since the EU will no longer dominate the world due to high competition. The growth of economies such as China can also create high effects on the policies of the EU and therefore they might change their policies.
References
Borshchevska, Y. (2016). Putting a competitive advantage at stake? Energiewende in the discursive practices of German industrial actors. Journal of International Studies; Szczecin, 9 (3).
Gogoll, N., Heinen, N., & Schlieszus, F. (2019). Fusionsberatung Made in Germany als Wettbewerbsvorteil: Relevanz und Perspektiven. Wirtschaftsdienst; Heidelberg , 99 (9), 656-662.
Malik, S. (2018). Post-Brexit Scenario: The European Union under Threat. Strategic Studies; 38 (4).
Marciacq, F. 1., & Jaramillo, N. S. (2015). When the European Union speaks on behalf of non-European Union states a critical appraisal of the European Union’s alignment mechanism in multilateral fora. European Security; Abingdon, 24 (2), 203-220.
Pishchik, V. 1., Kuznetsov, A. 1., & Alekseev, P. 1. (2019). European Economic and Monetary Union: 20 Years After. Mirovai︠a︡ Ėkonomika i Mezhdunarodnye Otnoshenii︠a︡; , 63 (9).
Schnabl, G. 1. (2019). THE 1948 GERMAN CURRENCY AND ECONOMIC REFORM: LESSONS FOR EUROPEAN MONETARY POLICY. Cato Journal; 39 (3), 607-634.
Tang, D. 1. (2015). Has the European monetary union influenced the European Union bank lending flows to the EU countries from Central and Eastern Europe? Journal of Financial Economic Policy; 11 (2), 263-282.