The European Union was formed after World War II in order to prevent war from occurring again. The idea was that if countries could become economically interdependent they would be more likely to avoid conflict.
However, the EU has struggled to maintain unity in recent years. It is now facing a number of major challenges that threaten its stability.
The Eurozone Crisis
The Eurozone Crisis has laid bare the fault lines of the European Union. It has resulted in the EU being unable to deliver on its promises of peace and prosperity.
The underlying cause of the crisis is an imbalance that began developing in the Eurozone during the 2000s. During this time, nations like Greece, Ireland, Portugal, and Spain ran large and growing current account deficits. These were financed, in part, by foreign borrowing and lending.
From a macroeconomic perspective, this imbalance constituted a public debt vortex that had to be stopped. The only way to do that was through a bailout or default.
What made this particularly difficult was that all the nations that eventually ended up in bailout programmes – Greece, Ireland, Portugal and Spain – were largely net lenders to other Eurozone members during the decade before the crisis.
During this period, they had massive capital flows to other countries in the Eurozone (especially Germany, France, and Netherlands). This money was invested in non-traded sectors – government services and consumption. This was a huge mistake. It meant that there was no incentive for the receivers to create assets in those sectors that would allow them to pay back the borrowing and financing.
It also meant that there was no opportunity for them to increase exports. This resulted in a rapid and severe contraction of their economies.
As a result, they faced the prospect of being forced to cut spending on key social sectors such as healthcare and education. This resulted in economic and employment losses and a dramatic increase in unemployment.
The crisis also highlighted the importance of a strong central government and its ability to provide support for its citizens. In the case of Greece, this support came from a combination of loans from the European Union and the International Monetary Fund.
Despite this external support, Greece was still unable to meet its fiscal obligations. This led to the emergence of the sovereign debt crisis in Greece.
The crisis was exacerbated in 2012 by a sudden stop of intra-Eurozone capital flows and an extremely tightening of financial conditions for governments, banks, companies and households. This situation, combined with the fact that Eurozone member states had to accept painful austerity measures, caused a sharp slowdown in growth and a rise in risk premiums.
The Greek Debt Crisis
The Greek Debt Crisis began in 2010, when Greece joined the European Monetary Union (EMU). EMU was a new type of supranational economic union, and it was designed to make economies more efficient. It also made monetary policy more depoliticised, with decisions on monetary policy taken collectively by the new European institutions.
As a result of its failure to adapt to the new rules, Greece incurred a number of negative consequences, including structural distortions and low competitiveness. At the same time, it had a high level of public debt and an overvalued currency.
After joining EMU, Greece had to implement a set of austerity measures, including tax hikes and reductions in benefits. These were imposed as part of the EU-IMF bailout, and they became a major source of anger in Greece.
In early 2015, a left-wing government led by former Syriza leader Alexis Tsipras won parliamentary approval for a new bailout agreement. This included a new round of draconian reforms, including a cut in public sector salaries, pensions, and healthcare.
However, the troika, a committee of international creditors that oversees Greek economic policies, objected to these reforms. They called them a form of “socialized medicine.”
To prevent another Greek default, the troika agreed to give Greece’s creditors some debt relief in exchange for more austerity measures. This was controversial among Greeks and creditors alike.
At the same time, Greece’s debt burden grew to a record-high of 180 percent of GDP. Its economy was in recession and a huge percentage of Greeks were living on the edge, unable to pay their bills.
By the time of its bailout in 2015, Greece owed the EU and IMF roughly 290 billion euros ($330 billion). The country committed to run a budget surplus through 2060, accepted continued financial supervision by the EU, and imposed additional austerity measures.
Despite the tough conditions, Greece’s economy has since improved and unemployment has fallen, although it remains the highest in Europe. But incomes are still at a dangerously low level, especially for the middle class.
As a result, many people are worried about the future of Europe. They fear that a Greek default will lead to another Eurozone crisis, and that the European Union may eventually collapse.
The Migration Crisis
The European Union is currently facing one of the largest migration crises in its history. It is a crisis that is not only affecting Europe but the entire world as well, with governments across the globe coping with huge numbers of migrants and refugees who are fleeing their countries of origin for safer and more prosperous destinations.
A number of factors have contributed to the migrant crisis, including the economic and political crises in Europe itself. These include a lack of jobs, high unemployment rates, the rise of neoliberal policies that have weakened public services, and the increasing pressure on welfare systems.
EU member states have a responsibility to respond to the migrant crisis in a humane and rights-based way, while the international community has an important role to play. However, gaps in protection among the member states and the unequal sharing of responsibility for arriving migrants and asylum seekers prevent an effective response. This is particularly true when it comes to the Mediterranean route, where the EU has largely failed to follow the principles of international law in responding to the migrant crisis.
To combat this, EU countries should be prepared to take in more people and address the root causes of migration, such as poverty and discrimination. This can be achieved through a range of approaches, including improving the protection of vulnerable migrants and providing aid to help them return to their countries of origin.
The EU should also adopt more robust and comprehensive rules to protect those seeking refugee status in Europe, as well as implement measures to tackle migrant smuggling. These are necessary to improve the management of migration flows, especially in the face of high migrant arrivals and deaths at sea.
In addition, the EU should provide more assistance to the countries that host large numbers of migrants and refugees, including through more generous refugee resettlement schemes. This would provide more support to vulnerable populations and improve the resilience of communities.
The EU has a number of legal and regulatory frameworks that govern legal migration flows. These are designed to address different types of migrants, including highly skilled workers and students, seasonal labour, family reunification, and people seeking to escape violence or persecution.
The Political Crisis
Europe is a continent of nation states, whose political systems are constantly changing and evolving. It also includes a large number of international organizations, some of which are economic, while others are political.
One of the main reasons why the European Union is currently collapsing is because of a political crisis within the continent itself. This crisis is caused by a lack of understanding among the people of Europe about how much their livelihoods depend on decisions taken in other countries and about the unrealistic expectations that an “ourselves alone” policy can bring.
This crisis has been made worse by a series of unpalatable bailout programs that forced reluctant national governments to pay for loans that could not be paid back. These loans have had negative consequences for economic growth in the southern EU nations of Spain, Portugal, Ireland, and Greece, as well as for living standards and life horizons throughout the continent.
The political leadership in the southern EU nations have reacted to these difficulties by focusing on austerity as the solution to the problem of slow growth and unemployment, without giving any thought to how this will affect their peoples. These policies have had devastating consequences for living standards and have widened income gaps in the region.
As a result, people in the EU are beginning to question whether it is still possible to create a thriving society on this continent and have started asking questions about the future of the European Union. Moreover, they are beginning to wonder if the European Union is actually worth all of its efforts and whether it should continue to be part of the world community.
While the majority of the population in the EU is happy to stay in the union, there are many who do not think so. These include far-right parties such as the Front National and the Brothers of Italy.
These groups have tried to moderate their extremist tendencies and become more mainstream, but their influence remains strong. It is this threat that has led to a rise in Eurosceptic politics and a general decline in support for the European Union.