European Union

European Union

The European Union was created in 1958 providing interregional trade barriers, a common external tariff against other countries, a Common Agricultural Policy and guarantees of free movement of labor and capital. The EU is formerly called the European Community, and became known as the EU in January of 1994. The EU currently consist of 15 countries (Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, UK) that all have adopted the same currency known as the Euro. The near future of the EU shows expansion by adding countries from Southern and Eastern European Countries.

The advantages and disadvantages of joining the EU are very interesting, and seem to benefit countries more than harm most of them. The first advantage of joining the EU would is that each member has their own financials systems, but share the same currency, the Euro. With a single currency price comparisons do not exists, resulting in fewer market segmentation (Tavlas, Benefits and Costs of Entering the Eurozone). A single currency allows for buyers to engage "comparison shopping" which may produce one disadvantage, more competition. Another advantage of a single currency is the more widely a currency is used, the more useful it becomes in trade because often having different currencies can act as a barrier in trade.

With more trade options for countries there may also come some other obstacles, but as a result of more trade, usually comes better economies. In such economies as Greece, Spain, and Portugal improvements of macroeconomic conditions and emerging new markets have changed the patterns and behaviors of the business communities, as interest rates for investment loans declined enormously and new markets for capital became available (Bartzokas, Investing in Southern Europe).

Finally for the members of the EU the fear of recession usually exists, but the Maastricht Treaty provides these countries with a safety net. Members often free that they be unable to devalue in order to boost exports, to borrow more to boost job creation or to cut taxes when they see fit, because of the other countries that a part of the EU, but the Maastricht theory allows for aid packages for euro members whose economy has run into financial troubles.

As for the other side of entering the EU come some disadvantages to citizen's lives personally, and their business lives. The first disadvantage is that interest rates are standard throughout the EU, which by some is viewed as an advantage. But for example if the UK economy is currently growing reasonably well, while Germany is having problems economically, the policy of a single interest rate will prevent the EU from setting the rates at the appropriate for each country. The only way a country like Germany could have a independent interest rate would be if had a free floating currency such as England does; the pound. Also by setting a standard interest rates, some of flocculating rates outside of the EU can be lower, causing loss of monies in trade.

Another disadvantage that comes with a membership in the European Union is the language difficulties, and ethical backgrounds. Experts suggest that such unions can only be successful if the whole area is covered by a single currency and has the same legal framework, as in the United States where a common language and laws consists