EUROPEAN UNION

Dr. Rinkoo Shantnu

Associate Professor & Head, Department of Business Economics,
Pillai College of Arts, Commerce & Science (Autonomous), New Panvel
Introduction
 The European Union (EU) is a political and economic union, consisting of 27 member states that are
subject to the obligations and the privileges of the membership.
 Population 513 million- 7.3% population of the world.
 Originally confined to western Europe, the EU undertook a robust expansion into central and
eastern Europe in the early 21st century.
 The EU’s members are Austria, Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Denmark,
Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg,
Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, and Sweden.
 The United Kingdom, which had been a founding member of the EU, left the organization in 2020.
https://www.britannica.com/topic/European-Union
History of EU
 In 1950, the European Coal and Steel Community was established with six member countries - Belgium, France,
Italy, Luxembourg, the Netherlands, and West Germany. .
 In 1957, the Treaty of Rome created the European Economic Community (EEC) or the ‘Common Market’. This
brought a good period for the economy, as the EU countries stopped charging customs duties when trading with
each other.
 In 1973, Denmark, Ireland, and the United Kingdom formally decided to join the European Union, becoming nine
member states altogether.
 Later, in 1986 the Single European Act was signed, which also created the ‘Single Market’. In 1993, the ‘Single
Market’ was completed with the four freedoms.
 The 1990s were also a decade of treaties: the ‘Maastricht’ Treaty on the European Union in 1993 and the treaty of
Amsterdam in 1999.
 In 1995, the EU further enlarged with three more members joining: Austria, Finland, and Sweden.
 During the 1990s, a small village in Luxembourg gave its name to the ‘Schengen’ agreements that would gradually
allow people to travel without having their passports checked at the borders within the area.

 In the 2000s, the euro became the new currency for many Europeans, and during the following decade, more
countries adopted the euro (€).
 History of EU
 The political divisions, during the 2000s, between the east and west Europe finally healed and 10
more new countries joined the EU in 2004, followed by Bulgaria and Romania which joined in 2007.
 In 2008, a financial crisis hits the global economy. Therefore, the Treaty of Lisbon entered into force
in 2009, providing the EU with modern institutions and more efficient working methods.
 In 2013, Croatia became the 28th member to enter the EU.
 In June 2016, the United Kingdom held a referendum, letting the people decide whether they want to
leave or remain in the European Union, after a few years of political debate on the topic. 33,577,342
people participated in the referendum, a turnout of 72.2%. The referendum resulted with 52%
opting to leave while 48% to remain.
 On January 31, 2020, the United Kingdom officially left the European Union, starting the 11-month
transition period.
 https://www.youtube.com/watch?v=XgnXwrsMBUs
 https://www.youtube.com/watch?v=GfN05WB_rYw
 Free
movement
of goods

Four
Free freedoms Free
movement of ‘Single movement
of people Market’ of of capital
EU

Freedom to
establish
and provide
services
Eurozone Crisis
 The crisis started in 2009 when the world first realized that Greece could default on its debt. In three

years, it escalated into the potential for sovereign debt defaults from Portugal, Italy, Ireland, and Spain.

 The European Union, led by Germany and France, struggled to support these members. They initiated
bailouts from the European Central Bank (ECB) and the International Monetary Fund, but these
measures didn't keep many from questioning the viability of the euro itself.

 Some of the contributing causes included the financial crisis of 2007 to 2008, and the Great Recession
of 2008 through 2012.

 The crisis peaked between 2010 and 2012 and led to a loss of confidence in European businesses and
economies.
Eurozone Crisis
 The Greek debt crisis is the dangerous amount of sovereign debt Greece owed the European Union between 2008
and 2018. In 2010, Greece said it might default on its debt, threatening the viability of the eurozone itself.

 To avoid default, the EU loaned Greece enough to continue making payments.

 Since the debt crisis began in 2010, the various European authorities and private investors have loaned Greece
nearly 320 billion euros.

 It was the biggest financial rescue of a bankrupt country in history. As of January 2019, Greece has only repaid 41.6
billion euros. It has scheduled debt payments beyond 2060.

 In return for the loan, the EU required Greece to adopt austerity measures. These reforms were intended to
strengthen the Greek government and financial structures. They did that, but they also mired Greece in a recession
that didn’t end until 2017.

 The crisis triggered the eurozone debt crisis, creating fears that it would spread into a global financial crisis. It
warned of the fate of other heavily indebted EU members.
https://www.thebalance.com/what-is-the-greece-debt-crisis-3305525
Brexit
 Brexit is an abbreviation used to denote Britain’s exit from 28-nation
European Union (EU), the world’s biggest trading bloc.
 The shocking announcement was made in June, 2016, after a referendum in
which 52% of people chose to leave the EU.
 The UK government invoked Article 50 of the Treaty on European Union,
which officially withdraw UK from the EU, in March 2017.
 As soon as Article 50 is triggered, the UK had 2 years to negotiate its
withdrawal. For the time being UK is still part of the EU.
 In the aftermath of the referendum British PM David Cameron, who was
continuously opposing Brexit, resigned and was immediately succeeded by
Theresa May. The Sterling pound also reached a 30-year low.
 Theresa May has set up a government department, headed by MP David
Davis, to take responsibility for Brexit. https://www.business-standard.com/about/what-is-
brexit
 As of November 28th the British government faced legal challenge over
whether Brexit would trigger a departure from the EU single market, which
is a trade route allowing the free movement of goods, services, money and
people within the European Union.
 Loss of
sovereignty

EU Reasons for Immigration

contribution
Brexit

Economic
opportunity
The Hard Brexit
 Hard Brexit means that the British government ceases to be a part of the European Union. This means that the
United Kingdom will no longer have access to the single market, which allows free movement of goods, services,
and people from the member countries.

 Hard Brexit would also mean that Britain would no longer be part of the single customs union. In the customs
union, member nations of the European Union do not charge import duty to each other. Also, instead of
individual countries signing trade deals with the rest of the world, the European Union signs trade deals as a
group. If Britain chooses a hard Brexit, then it will have to sign its own trade deals.
The Hard Brexit
 A Hard Brexit would allow Britain to maintain its political sovereignty. However, there are considerable
economic impacts. The foremost impact will be that British goods that flow into other European Union countries
would attract a 10% tax. This would increase their price in these markets. As a result, the sales of these
products will decline. This will lead to a fall in production and a recession in the United Kingdom. However,
proponents of Hard Brexit argue that Britain was one of the founding members of the World Trade Organization.
It has the economic clout necessary to negotiate deals with other nations which will allow them to make up for
the loss faced due to Hard Brexit.

 Another major problem with the Hard Brexit is that it is likely to affect the British pound in an extremely negative
manner. Since the EU has more trading partners than the United Kingdom, many companies, as well as
countries, will sell the pound and buy the Euro. This will help them trade with the European Union later on.
However, this exchange is likely to bring the pound to record low. The mere announcement of Brexit had caused
mayhem in the currency markets. If the government decides to continue with a Hard Brexit, the British pound
might see an unprecedented fall.
The Soft Brexit
 The Soft Brexit is actually a mid-way between leaving the European Union and staying in it. Britain will be
entitled to some of the privileges that other EU members have. Britain is not the first country that will be trying
this model. Countries like Iceland, Norway, and Liechtenstein are already using this model. As per this model,
Britain will officially not be a part of the European Union. This means that they will have no political
representation at the EU. However, they can continue to have access to the single free market as well as the single
customs that other EU countries enjoy. This also means that the goods being sent to Europe from EU and vice
versa will be subject to fewer border checks.

 The biggest benefit of this arrangement is that Britain can continue with the free movement of goods and services.
At the same time, they can restrict the movement of people. Hence, Britain can ensure that they control
immigration and secure their borders. At the same time, they can also ensure that their fledgling financial
services industry continues to flourish. Since the service sector will not be affected, London can continue as the
financial capital of the entire European region.
The Soft Brexit
 The problem with this arrangement is that Britain will have to pay a fee to the European Union to continue using
these privileges. The question now arises whether the fee will be worth the price or whether Britain would be
better off paying 10% duty on its exports. The answer depends upon the amount that the EU is likely to charge
Britain. Many analysts believe that the EU will give Britain a concessional rate at first. However, since many
European countries are on the verge of bankruptcy, the EU may try to hike these rates later in order to increase
their revenues.

 The conclusion is that hard and soft Brexit are options that Britain is thinking about. The stand of the European
Union is not really clear. However, it is likely that they will make it difficult for Britain to leave in order to set an
example for the other countries. This decision is strategic in nature. Any decision taken will have ramifications
on the economic future of both parties as well as the economic future of the rest of the world.
Brexit on 31 January 2020
 The UK voted to leave the EU in 2016 and officially left the trading bloc - it's nearest and biggest trading partner
- on 31 January 2020.

 However, both sides agreed to keep many things the same until 31 December 2020, to allow enough time to
agree to the terms of a new trade deal.

 It was a complex, sometimes bitter negotiation, but they finally agreed a deal on 24 December 2020.

What is Brexit deal?

 Freedom to work and live between the UK and the EU also comes to an end, and in 2021, UK nationals will need a
visa if they want to stay in the EU more than 90 days in a 180-day period.

 Northern Ireland will continue to follow many of the EU's rules in order to avoid a hardening of its border with
the Republic of Ireland. This will mean however that new checks will be introduced on goods entering Northern
Ireland from the rest of the UK.

 Now that it's no longer in the EU, the UK is free to set its own trade policy and can negotiate deals with other
countries.
Thank You