The European Union

After World War II Europe was left completely devastated economically, politically, and
militarily. European leaders theorized that cooperation was the key to maintaining peace and
stability in Europe. This premise is what the European Union was founded on. The goal of the
EU is to bring all European countries together to form one supranational state, both economically
and politically. In the 1957 the Treaty of Rome was signed creating the European Economic
Community, or the EEC, with France, West Germany, Italy, Belgium, Netherlands, and
Luxembourg as the original six members. The first step is to create a common economic market
to promote trade between member countries by reducing tariffs to zero on intermember trade.
Then move on, if successful to touchy areas like politics. Since it has began the EU has faced
many hardships associated with integrating peoples with different languages and cultures. The
purpose of this paper is to examine recent economic statistics with past years to show how
successful the EUís economy has become, to show how the EU is converting to the Euro and it
ramifications, and examine possible problems in the future and what is being done about to
correct them.
The European Union has been very successful in its goal to make the economy stronger.
Together the EU represents an economic market the size of the US, making it a formidable world
trade competitor. It is important to examine national growth and GDP of EU and compared it to
the US. All numbers are expressed in millions of euros unless otherwise stated. The EUís GDP
has grown from 5,199,161 in 1995 to 5,778,467 in 1998. This shows that the EU is experiencing
a stable 2.6% economic growth especially when compared to the USís 3.8% increase. Deficit
spending is reduced from 251,131 or 4.8% in 1995 to 123,440 or 2.1% in 1998 cutting it by more
then half. It is important to the success of the EU that its member countries stabilize their
economies. Several countries are making great progress most notably Italy and Ireland. Italy has
cut its government deficit by more then two thirds from 63,404 in 1995 (7.7% of its GDP) to
27,953 (2.7%) in 1998. Ireland has gone from a deficit of 1,102 (2.1%) to a surplus 1,793
(2.3%) in 1998 (Eurostat). Another big problem is getting a handle on the unemployment
problem. The EU as a whole has an alarmingly high unemployment rate of 10.7% verses the USís
low 4.9%, but is a huge improvement over previous years when figures were as high as15 and 20
percent. Inflation rates in europe range from 2.5% in Austria to as high as 6.75% in Ireland.
Interest rates range between 2.5% and 4.5%. The EU has a strong presence in the World Market.
The EU imports 756.8 billion US dollars and exports 814.1 billion dollars. This gives them a $56
billion trade surplus. While the US imports are 898.6 billion dollars and exports are 687.5 billion
dollars resulting in a 211.8 billion dollar trade deficit. The EUís biggest market is the US. The
US imports 154.8 billion dollars worth of European products, representing 20.5% percent of its
GDP. The EU imports 159.6 billion dollars worth of US goods, representing 19.6% of the EUís
GDP(Eurounion). The EU is making a slow but steady recovery helped by increase in GDP,
lowered unemployment rate, lower budget deficits, and trade surpluses.
Changing Europe over to a single currency is vital to the success of the EU. The economic
rationale for euro is rooted in the desire to promote trade between the EU members, enabling the
free flow of products, services, capital, and people across borders. European leaders believe that
merging economically is needed to rejuvenate their economies and strengthen their nations'
competitiveness. No one country was large enough to match the economic power of US and
Japan. Therefore Europe needed to achieve more efficient production, lower costs, and create a
single market. According to the European Economic and Monetary Union there are five areas
that the introduction of the Euro will dramatically change Europe. The first is business. Initially
companies will have to deal with the cost of converting systems to accept the euro, estimated to
cost as much as $100 billion. But these costs will be off set because companies will no longer
have to convert between national currencies. Also, finding their way into new markets will benefit
small and medium size businesses. Second, consumers will benefit. Consumers will be able to
purchase from all over