The integration of regional economies has become increasingly regarded as inevitable. Protests against globalization never stop. None of them, however, can slow down the speed with which free trade agreements are signed. Countries are eager to form economic alliances to increase their strength. Globalization gained ground so quickly that people did not have the opportunity to examine the idea of a free trade zone- until the financial crisis happened. Can the Euro area, the biggest free trade zone in the world, survive this financial tsunami intact?
The formation and growth of the European Union was remarkably smooth. With 27 member states, a population of almost 500 million and a unified currency, the EU has achieved a success which could hardly have been imagined just a few decades ago. They have fufilled their remit to maintain the purchasing power of the euro. In 2008, the EU’s GDP reached $18.394 trillion accounting for 30% of gross world product. No other trading entities can rival them in scope. It is generally believed that the EU has worked fairly well so far. Nevertheless, their determination to unify was not fully examined before this year.
The financial crisis, without a doubt, is the biggest test to date for the Euro zone. It has reawakened worries about the imblance that has built up inside the Eurozone. Germany’s huge current-account surplus, matched by big deficits elsewhere, shows that they are suffering losses by using the Euro. Hidden protectionism is emerging everywhere, weakening people’s belief in free trading. Moreover, facing the biggest deficit in history, weaker countries in the Euro area are more likely to default than before, since the single currency removes the option of unilateral inflation.
It seems that the EU has survived well in the crisis so far. But it is just the beginning of the test. A sudden disaster may help people to unite even more closely. But the real test will come with the long-term fallout from huge deficits, economic stagnation and imbalance among countries. In the prosperous periods, people are willing to share benefit with each other. When the world faces an economic decline, can every country show the same level of willingness to partly sacrifice themselves for the benefit of the whole Union?
The world is paying close attention to what the EU’s next step will be. Will the crisis spur economic reform? Will the need for larger markets attract more countries to join? Or, conversely, will some of them start thinking about leaving? These questions all remain open.
The formation and growth of the European Union was remarkably smooth. With 27 member states, a population of almost 500 million and a unified currency, the EU has achieved a success which could hardly have been imagined just a few decades ago. They have fufilled their remit to maintain the purchasing power of the euro. In 2008, the EU’s GDP reached $18.394 trillion accounting for 30% of gross world product. No other trading entities can rival them in scope. It is generally believed that the EU has worked fairly well so far. Nevertheless, their determination to unify was not fully examined before this year.
The financial crisis, without a doubt, is the biggest test to date for the Euro zone. It has reawakened worries about the imblance that has built up inside the Eurozone. Germany’s huge current-account surplus, matched by big deficits elsewhere, shows that they are suffering losses by using the Euro. Hidden protectionism is emerging everywhere, weakening people’s belief in free trading. Moreover, facing the biggest deficit in history, weaker countries in the Euro area are more likely to default than before, since the single currency removes the option of unilateral inflation.
It seems that the EU has survived well in the crisis so far. But it is just the beginning of the test. A sudden disaster may help people to unite even more closely. But the real test will come with the long-term fallout from huge deficits, economic stagnation and imbalance among countries. In the prosperous periods, people are willing to share benefit with each other. When the world faces an economic decline, can every country show the same level of willingness to partly sacrifice themselves for the benefit of the whole Union?
The world is paying close attention to what the EU’s next step will be. Will the crisis spur economic reform? Will the need for larger markets attract more countries to join? Or, conversely, will some of them start thinking about leaving? These questions all remain open.
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