A few weeks ago, the European Commission released a report on GDP guidance for the coming year. The report said that the region’s economy will ease from a ten-year high of 2.4% in 2017 to 2.1% in 2018. In 2019 and 2020, the GDP will ease further to 1.9% and 1.7% respectively. The report said that the reason for this slowdown in growth will be because of the complex global business environment, which is clouded with uncertainty.
The European Union was formed more than 50 years ago after the second world war ended. The goal of the union was to create a political and economic region that would be able to compete with the United States. By removing borders and trade barriers, EU leaders believed that they would help bridge the gap and be able to match the US. To some extent, the EU has been able to achieve this especially on a geopolitical issues. This is because the region is represented when major decisions are made. If they were separate countries, many of them would not be represented because they are tiny countries.
However, on other issues, the European Union continues to be left behind. The 27 countries that make the EU have a combined GDP of $18 billion. This is slightly lower than the GDP of the United States, which currently stands at $19.39 billion. The GDP per capita for the European Union is at $38,000, which is lower than the US $59,400.
The disparities in the European Union have led to some countries to consider exiting the union. The first country to take the step is the United Kingdom, which joined the union in 1973. The pro-Brexit leaders argued that the union had helped curtail the country’s growth. One of the reason for this was that it was impossible for UK leaders to go out and negotiate on business deals. These deals are left to the European Union leaders, who are viewed as unelected elites in Brussels. A good example of this happened when Donald Trump held a meeting with Angela Merkel and asked for a deal between the two countries.
The second reason was the over-regulation of the EU. Just this year, the region passed the MIFID II regulations that have helped curtail the financial industry. This is despite the fact that the regulations were created with the aim of helping stabilize the financial markets and help it compete with Wall Street.
European Union countries are not equal. For example, the unemployment rate in Czech Republic is at 2.3% while that of Spain is at 15.3% and that of Greece is at almost 20%.
Even with the problems that have faced the EU, many analysts have been hopeful on its leaders. However, this too is developing some problems. Angela Merkel, who is viewed as the de-facto leader of the union has announced that she won’t vie again. This is after she lost power in the past election. Emmanuel Macron was then viewed as the next leader. In the campaign, he announced that he would help reform the union. Today, his approval rating has declined to 25% from the 50% in the same time a year ago. This presents a risk when the country goes to an election in 2022. Remember, in the past election, right wing activist Marin Le Pen had 34% of the votes. At the same time, Spain and Italy have continued to experience a rise in populism.
All these factors led to the Nobel winning economis Joseph Stiglitz to say the following about the EU:
Italy has been performing poorly since the euro’s launch. Its real (inflation-adjusted) GDP in 2016 was the same as it was in 2001. But the eurozone as a whole has not been doing well, either. From 2008 to 2016, its real GDP increased by just 3% in total. In 2000, a year after the euro was introduced, the US economy was only 13% larger than the eurozone; by 2016 it was 26% larger. After real growth of around 2.4% in 2017 – not enough to reverse the damage of a decade of malaise – the eurozone economy is faltering again.
The post What is the Future of the European Union? appeared first on Forex.Info.
DOWNLOAD THE APP