The European Single Market Crisis - Essay Example

The European single Market Crisis Table of Contents Table of Contents Introduction 2 The crisis in the formation of single markets 3 Possible solutions to the single market crisis 6 Conclusion 16 Bibliography 17 Introduction The European economy reigned in propulsion since the 1980s until 2008-2009 when it suffered from adverse recession, and increased unemployment. It had dwindling rate of economic growth following this period globalization. However, the country intensified in propulsion of relevant aspects that would capacitate it to recover from the economic situation that also affects the balance of payment (Pinder and Usherwood, 2007: 57). This essay entails of the factors that the Europe focuses to use in making positive changes stimulate economic growth. It outlines the various approaches that the country seeks to use in economic recovery process, asserting relative data sources and the theoretical perspective on the data’s view. The country’s policies propelled tremendous economic growth since the year 2009, with a relative increase in GDP. The highest marginal implication on the GDP was an overall increase by 3% throughout the years of 2009-2011. This was possible despite the many challenges that the state suffered after implementing the single market, which affected economic integrations. B Balassa encouraged the implementation of single markets with arguments that it would help the country achieve monetary union in the globe. They argued that single markets would help eliminate most of the barriers though this was not possible with the free movement of goods, services, people, and even capital (Baldwin and Wyplosz, 2009: 256). As the European states aim at improving on their financial capacities, some of the main objectives laid down help in strategizing plans for the progress of the economy (Nello, 2009: 219). The stability of the euro is necessary to help build confidence to other states in trade transactions. The issue of maintaining the tax rates for enabling the prices of commodities to suit the consumer financial ability. Tax increase results to an increase in production costs and thereby increasing the commodities cost. This in return increases the living costs and demands for increases in salaries by the consumers. Another issue lies on creating an internal market for local commodities by laying import regulations within the region. This helps solve the cross border conflicts and increases efficiency of financial institutions between the regions (Piggott and Cook, 2006: 76). The crisis in the formation of single markets Through the integration of European countries, after periods of World War II between America and Europe has helped calm the economic crisis. Many economic treaties enacted helped improve on economic performance and to strengthen competition between the regions to help increase the quality competence of products from the two regions (Craig and Elliott, 2009: 209). The European Union also passed several acts in their agreement and gave directions on financial expenditures towards developing the rural areas and developing reliable energy production, which would majorly boost on the emergence of new industries increasing the economic activities in the region. Through the cohesion between the two regions, the internal market developed competence in the global market and thereby this ensured that the economy was strong even after the crisis (Cini and Borraga, 2010: 164). The European single market was at efforts to pursue single currency for all the member states and aimed at getting involved in international trades as one joint unit. They believed that such effort would help increase the trade area, reduce operational costs, and implement similar economic policies across al the union states. They had similar tariffs and quota systems with outside states but free trade within member states. They faced challenges on standardization of qualities and regulations and specifications for production. The lag by the union states in building competition at the international scene was poor and thereby the union did not achieve its planned goal. This resulted to the Euro crisis; where the value of the euro in the international market significantly declined affecting the economy (Feenstra and Taylor, 2012: 359). The increased decline in the euro value at the international market has raised the need to borrow finances from other states, and this has resulted to increase of the debt crisis within states in the European Union. This has persevered effects on the functioning of financial institutions and hence to correct the trend there is a need for regulations on the lending rates to help the euro retain back its value (Nello, 2009: 216). The debt crisis has affected most 16-member states in the union since they use the euro as their national currency. This hinders them from making decisions separately, and hence this brings a dilemma to the member states on whether to remain in the union or to dissolve the union. This further affects the labour market and raises the need for implementations fast enough to cover the labour costs and expenses to ensure that the pricing of commodities within the European zone is not affected further. Housing boom as an effect of the euro crisis worsened the financial capacities of the public due to unemployment resulting to further crisis of social security. Increased insecurity affects the functioning of the market declining the outcomes and hence this devalues the dollar further (Pinder and Usherwood, 2007: 60). To people who are still under the educational systems, the devalued euro makes it hard for them to access educational systems since it gets expensive and decreases the purchasing ability of the learners. The resolution to most of the scholars under such circumstances they resolve for dropping out, and this significantly results to a significant decline in the literacy levels affecting the professionalism in the labour markets. This affects the level of development of innovations altering development in the region. The single market strategy was characterized by loss of jobs by most of the individuals in Europe and hence increased the dependency rates. This resulted to low gross economic development, and hence there was a need for complete elimination of poverty from the society. The reforms aimed at poverty elimination in Europe would go beyond economic, social, and political borders and thereby giving the neglected opportunity to serve in the societal activities. Such a resolution helped provide for the opportunity for all individuals in the sectors have the ability to earn incomes, increasing income per every head and increasing the possibility for the creation of more investments projects, which with time reflects in the economic progress. Based on the argument that the crisis was driven by political personalities who acted as incoherent, shortsighted, it did not help solve the Euro crisis. This crisis offered an opportunity to some other states. The decline of one block led to the rise of another. The main actors blamed it on Greece government, and it had to bear the losses on behalf of the other European governments (Cini and Borraga, 2010: 167). With the continued effects of the crisis, this has pushed some economists declaring that the crisis is insoluble, but it creates risks to political and economic further disaster if not resolved. All efforts made towards resolving the euro crisis and bringing it to stabilization are subjugated by the many political challenges. Policy implementation focused on the long-term goal achievement, with plausible goals and clear strategies hoped to create an impact in the future. An effort aimed at maintaining the euro zone solidarity and avoid divisions has also been there. The priorities set for Europe for the year 2020, created territorial cohesion through the open job opportunities, which facilitated for the globalization of technologies. The development of faster and more reliable digital equipments has facilitated reliable production strategies. This has enabled fast access to internet sources and information creating vast understandings. The digital globalized equipments help build on business performance and generation of new business ideas (Feenstra and Taylor, 2012: 370). The European economy can overcome the single market crisis by creation of open jobs to international clients; this increases the demand for highly academically qualified personnel who can be trusted in production. The control and monitoring strategy created by Europe on its member states ensured proper handling of the crisis effects to ensure they did not spread. Mobilization of its member states to focus on the most effective reforms helped them gather tools for action in creating an environment free of constraints (Suder, 2008: 95). Possible solutions to the single market crisis For any single market economy to survive the market pressures there is a need for building and establishing pillars and strict regulations between the member states and to the general market. For regaining back competition in the international market, there is a need for administering regulations for improvement in quality of products (Hill, 2011: 205). This is also maintainable by ensuring that individuals in the market stick by the legal requirements and thereby enhancing the security of consumers. The likely of language barriers in economic transactions hinders the possible internalization of economic visions and results to separation of member states with each working for its own benefit. The vision of developing a single currency is also no attainable without integrations with the other economic super powers in the globe (Somers, 2010: 325). Europe needs to set an approach to the economic issues and establish fiscal policies to stimulate growth, control amount of money in supply, dictate inflationary rates and of the dollar, and subsequently reduce the unemployment levels. The government should be certain of the factors that would help it achieve economic stability to the desired level (Salvatore, 2010: 32). Europe should be observant on the whether the factors will positively or negatively affect the country at the long run. It engages in diverse economic prospectus criteria, ranging from macro to micro variables of forecasting for economic propulsion. It observes on the psychological impacts that a given policy would reflect from the economy (Somers, 2010: 318). Therefore, the economy practices scientific theoretical approaches on the immediate factors of production, for example, the demand and supply variables, interests, and capital basis of the economy and labor. The European states showed an exemplary positive approach to economic factors. Upon the various approaches, it could adapts to leading economic indicators to prospect positive changes in the future, the retail sales approach to depict future consumer demand aspects, and the factory order approach to ascertain future growth in output. The country could further embark on the consumer confidence index to establish the possible future purchase model, and trade deficit factor approach (Baldwin and Wyplosz, 2009: 260). Among the other factors to consider, in its short-term strategy towards economic prosperity, was to promote efficient growth through creating efficient market conditions that give the opportunity for quality improvements, and creation of more jobs. Through the involvement of many states, this has made it possible for the globalization of jobs, education, and economic enterprises (Pinder and Usherwood, 2007: 62). To help improve and regain back the economic strategy, the government strategized a plan, which would lead Europe towards achieving its goals without dissolving its social and economic collaborations with other states in the globe. The new strategy aimed at achieving its goal by the year 2020 by improving on human knowledge, enhancing the environment for implementation of new ideas. Some of the main aims in the strategy included improving the standard and percentage of employed population to at least 75% to persons between the age of 20 and 64 years (Craig and Elliott, 2009: 210). This would help reduce on the dependency rates and thereby increasing the gross domestic product and income per capita to the countries in the European Union. Climatic conditions being a vital factor in strengthening the country’s base by enhancing agricultural productivity for purposes of maintaining a healthy population part of the goals in the Europe priorities for the year 2020. Economists argue that the approaches coincide with diverse market variables that resulted inflation thus; the country should observe the prevailing policies in accordance to the perceived future changes and in relevance to the economic approaches that it strategized in its union with American States (Salvatore, 2010: 33). To enhance its structure in the short periods, the attempt for productivity to align with the demand in the market needs regulations. It is achievable with that, the supply may not increase during an increase in the level of demand, but may instead remain constant thus leading to an increase in prices, which consequently results to high costs of living, demand for salary increments, increased unemployment, and subsequent increase in inflation. Through such strategies then it becomes easy to achieve economic development. The barriers in the single European market are removable by creating a harmonized economic strategy and through common economic policies. Other rules that can be implemented to help resolve on the market crisis in Europe was by creating a larger market by involving many clients which would also increase the business opportunities during the crisis. For a favorable environment, it would be possible through eliminating the many rules that create barriers to the free involvement of clients in the market. By enabling public procurement then it would be possible to increase economic transactions (Pinder and Usherwood, 2007: 65). Europe could adapts to leading economic indicators to prospect positive changes in the future, the retail sales approach to help depict future consumer demand aspects. Another aspect is the factory order approach to ascertain future growth in output (Piggott and Cook, 2006: 75). The country could further embark on the consumer confidence index to establish the possible future purchase model, and trade deficit factor approach. Economists argue that the approaches coincide with diverse market variables that resulted inflation thus; the country should observe the prevailing policies in accordance to the perceived future changes and in relevance to the economic approaches. This is what triggered Europe to developing a strategy for the year 2020. After the evolution of the conditions in the European markets, the management of institutions has significantly changed, the tactics used, and the routine behavior carried out. The uncertain conditions of the market create fear to business operators who are not ready to incur losses. The need to create a sustainable environment in ensuring that individual business vulnerabilities are protected has attracted government effort (Hill, 2011: 207). It is possible by putting constraints on partner’s involvement into the European Union association. For businesses to overcome the market crisis there needs to be change on the management structure to favor the market at both international and local levels., statistics imply that, Europe would experience increased growth in the foreign revenue due to the demand of exports. Foreign markets readily accept the Euro since Europeans liberalization policy, which makes the currency available in the global transactions, and bearing this in mind, the Euro will imply positively in the foreign exchange value in the global market (Nello, 2009: 218). The country’s economy could be dwindling because of war investments, and this factor drains the per capita income of the population. Economists observe that, when the authorities deviates from focus on the war and focuses on the economic variables, growth rate is likely to depict an abnormal rate of increase (Somers, 2010: 326). With the practice of the fiscal and monetary policies, the country would further fuel more monetary incentives into the economy to fuel demand. Economists observe that, when the demand of goods will increase due to a reduction of prices, thus the administration should offer subsidies. On increased demand for products, productivity and supply will gradually increase, and the levels of employment will increase accordingly. This focus will propel the economy past perceived annual rates in the GDP. Europe should target to propel savings rate among the citizens from the current rates to at least higher ones, and this would increase the consumer power to access mortgages and purchase durables. Therefore, shift to the purchase of durable commodities will maintain a point of equilibrium in the purchase model of other products thus; the threat of inflation eventually erases (Suder, 2008: 96). The European states suffered economic crisis and eventually this resulted to the poor exchange value of the Euro against other currencies in the world. The lowered value did not affect the European states alone, but also other trading partners who exchanged imports and exports within the European region (Pinder and Usherwood, 2007: 66). There are also limitations and barriers up to date on the free movement of goods allover the states. The main cause is the lack of consumer education, and this exposes the consumers to risks in the market. The free market crisis also restricts the movement of people in terms that free movement results to less labour for the union states. Individuals within the region are allowed to get jobs from any region within the European Union. The restrictions on movement and employment apply to immigrants. However, to some extent, the restrictions are placed on Europeans, and hence this raised the need for proper implementation of the Legislations (Feenstra and Taylor, 2012: 372). Much of the trade in the European Union generates income, which reflects in the country through improvements in production systems hence improving the production process and by the quality improvement, this helps create a base market for the goods at the international level. Despite all these, goods from the third world countries create obstacles and affect the movement of goods through the markets (Salvatore, 2010: 34). The increased costs of production due to high technical levels increasing the prices of commodities and hence this fails the supply of commodities in the world market. This irregularity can be corrected by ensuring that all states involve similar levels of technicality to bring a balance in the pricing of different products. The different levels of government involvement also results to creating the difference. The different taxation rates and creation of subsidies by the governments in the single market bring out the differences in pricing and thereby the need to bring neutrality (Craig and Elliott, 2009: 212). Despite the euro- crisis the member states of the European Union go through, they enjoy privileges like protection of consumer rights and employee rights through the implementation of guidelines and regulations to govern the activities in the markets. The protection of employees from exploitation brings about trust and encourages labour mobility within the member states. Through such restrictions, the manufacturing and other relevant industries get easy access to labour and thereby helping maintain the pricing of commodities for the affordability by the consumers (Baldwin and Wyplosz, 2009: 256). Citizens within the member states have more capacity to acquire employment within the regions and acquire education from any region of choice. Joint decisions by member states ensure that the right decisions are reached for the common good and with a common financial control unit; the euro through the European Central Bank. The countries earn profits at the expense of their sovereignty and law making ability. The operation of single markets over different nations and states have the problem of joining together the different values, morals, and cultures, and hence there is a need for unifying factors to help retain solidarity of the member states to the achievement of common goals (Somers, 2010: 327). Operation of single markets needs similar cultures values and goals for efficiency in market operations. The single market should remove all barriers between the different regions and they should all operate as one with common educational systems, financial currency, and a common financial control institution. The governments should also forgo their sovereignty, their defined boundaries, and a population to rule. All such should be efficiently placed under the control of a common ruling system. The worst effect that would happen to the states would be dissolution of the union withdrawing from the single authority and monetary control. Some states like Greece were highly affected by the debt crisis and hence resolved to quit the union (Cini and Borraga, 2010: 165). The government gave offer to Greece to bail them out of the financial debt, which they would have never paid off without the involvement into further debts, and therefore this would only over burden the state with external debts to clear. This raised suspicions on the possibility of throwing other states out of the union. This showed utterly torn up union since this would fragment the union and affecting the single markets in Europe. The governments made such efforts ensure that the union remained solid despite the storms they were going through as a single market. The single market would not prosper without integrating other economies like Greece, Italy, Ireland, and Portugal. Nevertheless, with the effects that would come along with the break up, all efforts made to ensure that the European block remained compact (Hill, 2011: 208). The integration of the European states gets admiration by other states in the globe, and as a result, some countries have made efforts to form such compacts. The block has significant influence on the world trade and other successful emerging markets (Salvatore, 2010: 36). Some of the economies fail to follow European advice with the argument that during the crisis, they were unable to resolve their economies and this creates hardships in joining multi national enterprises and at times even negotiating in trade agreements. Other states may also fear getting into business deals with Europe with the fear that the plans may fall out. Through the making of policies that regulate on policies, it has made it easier for Europe to join other states for economic deals safeguarding the interest of the single markets (Pinder and Usherwood, 2007: 67). Europe could adapt to leading economic indicators to prospect positive changes in the future to ascertain future growth in output. The country could further embark on the approaches to establish the possible future purchase model, and trade deficit factor approach. Economists argue that the approaches coincide with diverse market variables that resulted inflation thus; the country should observe the prevailing policies in accordance to the perceived future changes and in relevance to the economic approaches (Feenstra and Taylor, 2012: 375). The future of the European nations was determined by the present business dealings that the Europe would join for future benefits to revive its economic system. As the European states aim at improving on their financial capacities, some of the main objectives laid down help in strategizing plans for the progress of the economy (Nello, 2009: 219). The stability of the euro is necessary to help build confidence to other states in trade transactions. The issue of maintaining the tax rates for enabling the prices of commodities to suit the consumer financial ability. Tax increase results to an increase in production costs and thereby increasing the commodities cost. This in return increases the living costs and demands for increases in salaries by the consumers. Another issue lies on creating an internal market for local commodities by laying import regulations within the region. This helps solve the cross border conflicts and increases efficiency of financial institutions between the regions (Piggott and Cook, 2006: 76). Some other strategies applicable to help the matter the European states avoid further effects of a second crisis or adverse effects of the single markets include strict adherence to the regulations set in the union agreement. Regulations on the financial institutions help control the money flowing through the economy and hence in a way helping the euro get back its value in the global market (Craig and Elliott, 2009: 212). Ensuring that the institutions adhere to legal requirements this may help remove the existing impediments that hinder finance flow in the economy. The issue of member states maintaining their boundaries and tariffs should be resolved by enabling a common educational plan for all regions. Bringing the financial institutions together to form a binding resolution for all to be under one authority was considered a strategic manner of recovery from the crisis effects. However, the solving of the euro crisis make take heightened time to resolve, there is the need to settle the matter to avoid further spillover effects on other states in the globe. To help the matter, the international Monetary Fund gave bail outs to Greece to help them out of the financial crisis. With the reduced confidence in the dollar value, the IMF helped reduce the advanced economic slump. The impact of funding by the IMF is that it reduced the default that Greece caused on the other states in the union. The Greece devaluation would bring would help reduce the risk of investors into the country (Piggott and Cook, 2006: 78). Some economists, they determined the exit of Greece to be a formidable challenge due to the possibility of further dissolutions while others took it that by Greece exiting the union this would help reduce the investor risks for investing in the European region (Hill, 2011: 210). The exit of Greece would most possibly risk its citizens to high inflations due to the busting of Greek businesses. The issue of immigration was also another aspect, which affected the flow of labour in and out of the block, and this was encouraged by the high wages. Investors in the region hoped that through control by the European central bank would help them towards stability and reducing the risks they face in the markets. Only 14% of the total investors in the trading blocks were pessimistic about the progress in their economic transactions (Nello, 2009: 220). Europe could adapt to leading economic indicators to prospect positive changes in the future to ascertain future growth in output. The country could further embark on the approaches to establish the possible future purchase model, and trade deficit factor approach. Economists argue that the approaches coincide with diverse market variables that resulted inflation thus; the country should observe the prevailing policies in accordance to the perceived future changes and in relevance to the economic approaches (Feenstra and Taylor, 2012: 375). The future of the European nations was determined by the present business dealings that the Europe would join for future benefits to revive its economic system. Conclusion The implementation of necessary policies is necessary in economic conflicts control as the policies serve to enhance the performance of economic variables. Therefore, the European economy is gradually improving and pacing to an excellent economy through the harmonious economic policies that shaped demand, supply, incomes per head, and a higher balance of payment from the improved export trade (Somers, 2010: 329). The European crisis faced political challenges, which affected its economic dealings affecting the value of the euro. This has raised attention for resolution to avoiding altering the already build economic foundation by states in the Euro zone. With the changing times, investors in the region have more hope for a positive move towards the position of the euro in the inter block trade. Bibliography Baldwin, R., & Wyplosz, C. 2009. The Economics of European Integration, 3rd edition. McGraw-Hill. Cini, M,. & Borraga, N. 2010. European Union Politics, 3rd edition. Oxford University Press. Craig, D,. & Elliott, M. 2009. The Great European Rip-Off: How the Corrupt, Wasteful EU is Taking Control of Our Lives. New York: Random House books. Feenstra, R,. & Taylor, A. 2012. International Economics, 2nd edition. London: Worth Palgrave Macmillan. Hill, C. 2011. International Business: Competing in the Global Market Place, 8th edition. New York: McGraw Hill. Neal, L. 2007. The Economics of Europe and the European Union. London: Cambridge University Press. Nello, S. 2009. The European Union: Economics, Policies and History, 2nd edition. New York: McGraw-Hill. Piggott, J., & Cook, M. 2006. International Business Economics: A European Perspective. London: Palgrave MacMillan. Pinder, J,. & Usherwood, S. 2007. The European Union: A Very Short Introduction, 2nd edition. Oxford: Oxford University Press. Salvatore, D. 2010. Introduction to International Economics, 2nd edition. New York: John Wiley & Sons. Somers, F. 2010. European Business Environment: Doing Business in the EU. Noordhoff Uitgevers Groningen/Houten. Suder, G. 2008. Doing Business in Europe. New York: Sage. Read More