Economy of Europe. Single European currency area

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:40

Europe is one of the most important cultural centers in human history. This is the first region of the world within which the successful integration of countries into a single union was carried out. European integration was carried out by mutual agreement of the parties, lasted a whole century and, moreover, continues to this day. At the moment, the European Union is one of the strongest integration groups on the planet. It is also the most complex political system, without which the existence of an association of this magnitude is simply impossible. The economy of Europe, or rather the countries that are members of the union, is independent and quite competitive.

History of economic and political development

The European Union as an association of European states, emerged only in the middle of the 20th century and consisted of only six states. The reason for the beginning of integration was the Second World War, as a result of which most European countries lay in ruins. A ruined economy, a massive reduction in the working population, the need to prevent another war and pacifythe aggressor in the person of Germany led to the idea that it would be easier to exist within the framework of the union.

The first associations were purely economic and commercial in nature. In 1951, the Benelux countries, France, Italy and Germany signed an agreement on the creation of the ECSC - an association under which Luxembourg controlled prices for coal and steel. A little later, in 1957, these countries took the initiative to create Euratom, which de alt with atomic energy issues.

What was before the EEC

The most important moment in the history of European integration is the date of the formation of the European Economic Community, designed to remove customs barriers between countries and promote the development of the European economy as a whole within the framework of the common market. Formed in 1957 by France, Italy, Germany and the Benelux countries, it existed until 1993. And in 1973, the union was replenished with Great Britain, Ireland and Denmark.

In 1992, as a result of the merger of the EFTA and the EEC, the Single Economic Community was formed. A year later, the EEC was renamed the EU (European Community), thus becoming one of the most important pillars of the European Union. On its basis, the agreement on the creation of the eurozone in 1999 came into force, where the single European currency, the euro, began to operate.

European Economic Growth Retrospective

Talking about the economy of Europe, about the development of European countries within the framework of various associations, it is worth starting from the period of the emergence of the integration process, namely from the post-war period. After World War IIEurope lay in ruins during the war, large industrial centers and residential areas were wiped off the face of the Earth. During the hostilities, a significant proportion of the able-bodied population perished. The decline in production rates and colossal external debts forced the governments of Western European countries to switch to a policy of nationalization. Under the full power of the state passed the industry and the banking sector. Cards were introduced for many consumer goods.

However, the end of the 50s - the beginning of the 60s of the last century in the history of Europe is rightfully called the golden time. How, against the backdrop of such unpopular measures and devastation, did the states manage not only to return to pre-war production rates, but also to surpass their economic indicators by several times? So, in just over 30 years, by 1979, Germany's GDP increased 3.4 times, and France and Italy - 3 times. A number of reasons contributed to this.

Firstly, the development of the economy in Europe was largely accompanied by low prices for raw materials and energy carriers, mainly for hydrocarbons. Secondly, the influx of unskilled and cheap labor to Western Europe from Asia, Africa, and some countries of Latin America helped. Thirdly, the financial and material assistance of the United States to the states of Europe, which has been provided since 1948 under the Marshall Plan, has played a special role.

Economic crises in Europe

Despite the active growth of production and consumption, already in the mid-1970s, trends of economic crisis were observed in Europe. Excessive state involvement and imposed bureaucracy hinderedprivate business development. The sharp rise in prices for oil, which is a necessary resource, in the early 80s had an extremely negative effect on the industrial sector. The Keynesian economic model has clearly outlived itself. Then neo-conservatives came to power in the late 80s: R. Reagan, M. Thatcher, J. Chirac. The adopted policy of neo-conservatism and the information revolution, caused by the advent of the first personal computers and the Internet, were able to bring European countries out of the crisis.

However, the crisis phenomena were observed later. In the early 2000s, the level of consumption was so high that it did not match the real pace of economic development. Since 2002, the credit financial bubble gradually began to inflate. In the same year, the single European currency was introduced. How much was the euro at that time? In relation to the ruble, 1 euro cost about 32.5 Russian rubles. The inflation of the financial bubble has made its own adjustments to currency quotes. And its collapse in Europe led to the severe economic crisis of 2008.

Territorial division of Europe

As part of the study of Europe, it must be understood that this vast territory is represented not only by the European Union or the Eurozone. Europe is not exclusively the European Union. In accordance with various variations of the division (from the UN, the CIA during the Cold War), in Europe there are four parts according to the UN classification: northern, western, southern and eastern. The main representatives of the north are Great Britain, the Scandinavian countries; west - France and Germany;south - Spain, Italy, Greece; East - Poland, Ukraine, Belarus, Romania.

Within Europe, various integration groups are also distinguished. The most important of them is the European Union, which includes 28 countries with the most developed economies. This is an economic and political association with an extremely intricate internal structure. There is also the United Nations Organization (UN) and the NATO military bloc, the purpose of which is to ensure all kinds of security for their countries. Most European countries are members of the WTO - a global economic association dealing with trade issues.

The European Union is a key association on European territory

The process of integration of European states began in the middle of the 20th century and continues to this day. At the moment, this is the only association in the world that has moved to the fourth stage of integration, namely, to the stage of economic union. Further, only the full integration of the policies and economies of states. The union includes 28 countries from all parts of Europe. The last major expansion was in 2004 and Croatia joined the EU in 2013.

510 million people live in the European Union. Since 1999, the currency of the European Union has been the euro. There is constant communication between the countries that have joined the union due to the absence of trade duties, passport control, that is, everything that in any way restricts the freedom of movement of people and products across state borders. EU isan extremely complex system managed and controlled by many institutions: the European Council, Commission, Audit Chamber, Parliament and others.

Eurozone and single currency

The eurozone, unlike the European Union, includes only 19 European countries. It is a monetary union created in 1999 and expanding to this day. Thus, the latest participating countries at the moment were Latvia and Lithuania in 2014 and 2015, respectively. Denmark, Poland, the Czech Republic and Bulgaria are expected to join soon. The nuance is that, according to the rules of the eurozone, the state, before joining the monetary union, must take part in a two-year process of setting exchange rates.

Accordingly, the currency of the eurozone is the euro, which is used in its monetary policy. The direct circulation of banknotes and coins on the territory of the countries that entered the union began in 2002. At the same time, all financial functions from the banks of national states are transferred to the European Central Bank.

Economy of the single European currency zone

The growth rates of the economies of the 19 countries that make up the eurozone, as of 2018, have decreased, but not significantly. II quarter showed less successful results than I. The level of total GDP increased by 1.4%, in contrast to the previous mark of 1.5%. The growth rate of the level of imports in the II quarter exceeded the level of exports by 0.5%, which was reflected in the negative trade balance. The index of consumer confidence in the economy also fell in countries:from 111.6 points to 110.9.

The eurozone economy in 2018 is supported not by trade, but by domestic consumption and business investment, which increased by 1.2% in the second quarter. On a positive note, the unemployment rate fell to its highest level since 2008 in September. Now it is 8.1%, which is a good result compared to 2013 (12.1%). The lowest unemployment rate was registered in the Czech Republic (2.5%), and the highest - in Greece (19.1%).

Western European economies

As already mentioned, Western Europe is mostly represented by the strongest regions - France and Germany. The basis of the economy of Western Europe is the service sector, and not industry and agriculture, which speaks of the post-industrial era of development. For example, in France, 75% of the working population is employed in the service sector.

Germany has the most stable economy in Europe, which ranks third in the world in terms of GDP (3.7 trillion dollars with an annual growth rate of 2.2%). GDP per capita is 45 thousand dollars. In 2016, the country exported $1.25 trillion worth of goods and services, making it the third largest export economy in the world. Imports amounted to 973 billion dollars, which resulted in a positive trade balance. Main export items: cars and spare parts for them, medicines, aircraft. Imports: spare parts, medicines, crude oil. EconomyGermany, including low unemployment rates, is heavily dependent on trade: exports provide one in four jobs, and industry one in two.

France also plays a significant role in the economy of developed European countries. With a GDP of $3.1 trillion, the country consistently ranks second in Europe in terms of economic size. In 2016, it exported products worth almost $500 billion. However, the trade balance has been negative since 2001. In 2016, France bought 50 billion more than it sold. Due to the lack of profit from trade, the country is forced to stimulate domestic consumption with the help of cheap loans. France's main exports are aircraft, medicines, automobiles and spare parts, iron and steel. Imports: cars, machinery, various raw materials (crude oil, gas), chemical industry products. A distinctive feature of the French economy is the significant participation of the state in it (up to 60%).

Economics of Eastern Europe

Unlike Western countries, Eastern Europe cannot be said to have a strong economy. Often, within the framework of the EU, the countries of Eastern Europe turn out to be subsidized regions that need external support. As part of the financial aid, there is a link to how much the euro is worth. Let's take two characteristic representatives - Poland and Romania - to consider cases with the economy in the East of Europe.

In 2017, Poland's economy was moved from developing to developed. It is the eighth strongest economy in the EU, with quiterapid GDP growth - 3.3% per year. It amounted to $615 billion in 2018 ($31.5 thousand per capita). Exports in 2016 exceeded imports by $2 million: $177 million against $175. Exports are mainly cars and spare parts, furniture, and computers. For import: cars, crude oil, medicines. The main trading partners of Poland are: Germany, Czech Republic, Great Britain, France. Trade is carried out for the most part within the European Union. The country is characterized by rather low levels of inflation and unemployment - 2 and 5% respectively.

Romania is one of the poorest countries in the European Union, based on the index of social exclusion and the risk of poverty. The standard of living of the population in Europe, namely, in its eastern part, is generally much lower than in the western part. The country's GDP is quite high and amounts to 197 million dollars (11th place in the EU). Its growth rates are also significant - 5.6% per year. The image of a poor country is partly consistent with the level of GDP per capita, which is expressed in only 9 thousand dollars. Romania is characterized by a negative trade balance: $65 million in exports against $72 million in imports. The country mainly exports cars and spare parts, tires, and wheat. Auto parts, medicines and crude oil are imported. Romania's main trading partners: Germany, Italy and Bulgaria.

General conclusion

Europe's economy is a multifaceted phenomenon. In many ways, its formation was influenced by the creation of various trade and economic unions since the middle of the 20th century. Gradual integration and a course towards creationthe common economic space eventually led to the creation of the European Union, the UN and other associations in Europe, within which there is a large-scale cooperation between countries. The European Union has become the only grouping that has reached the fourth stage of integration out of five possible.

In general terms, we can say that Western Europe, represented by France and Germany, is the leitmotif of European integration and contains the strongest EU economies. Southern and Eastern Europe are much poorer. Thus, Romania and Bulgaria are the poorest countries. However, the GDP of all European countries is growing steadily. In Eastern Europe, this is happening many times faster than in Western Europe, due to developing rather than developed economies.