Economic interdependence between European countries

As with exchanging goods and service, the reason people traded is something they had wanted. The first consequences of trade occurred when global crises of 2008 illustrated the importance of interdependency between countries when it caused the volume of international trade to fall by almost a quarter which then adversely affected even the countries with a sound financial system. This was the first time ever efficiently use of scarce resources and trade culture increased between European countries. Further, this helps the micro or mini business to obtain a competitive advantage and access to the international market in order to boost the economy.

Most of the European countries have high GDP per capita distinguish exceptionally to developed economies for instances Germany, Netherlands, France, etc. In Fact, a report published 2018 by International Monetary fund placed uttermost countries of Europe in the advanced economies’ category whether it is in final domestic demand, stock building, or foreign balance. It is pointed out that most of these countries developed post-communism mainly with countries like Hungry and Latvia. According to Grzegorz Ekiert (2012) political and economic accomplishments of these countries have been in a stark in contrast to debacle occur in other communist states.

Economic interdependence and its importance-

Progress can’t attain by being an alone or restricting approach to the preferred areas. It should be surpassed to globally as well as economically. In the dynamic international market where globalization puts its marks to development, economic interdependence plays a significant role to develop good relations among countries. The aforementioned fact that it is not only international trade that influences the countries’ economies but also other economic factors such as the flow of labor, easing of trade regulations or even financial tie-up. Thus international trade appears supported by the globalization which in turn spread the market beyond the home country. Needless to say, this really does synchronize with efficiently allocating scarce resources too.

Reasons for European countries being economically interdependent:

Having nearness in geographical boundaries, it is an easier and quicker process for European countries to attain maximum trade benefits and competitive edge in the international market. When countries propose to group together in order to accomplish economic development they generally wind up establishing an alliance/trading bloc. Let’s take an instance of Europe’s case a regional trading bloc (European Union) was formed which ultimately was a huge impact on their economic and political environment. This proved to be highly apposite in order to maintain peace and diplomatic ties. Notwithstanding countries assisted each other economies with regard to exchanging resources for promoting growth and get even higher trade. This enabled the member countries to contribute to union financially in return union invested in countries economy accordingly. The European Union, known to be one of the most powerful economic integration has availed its member in the areas like capital accumulation, and technical progress over the years. Progressively it also maintained standardized policies for trade as authenticated by the European Commission (2018) itself the EU making one of its main aims to become economically interdependent and avoid any future conflicts between its members. As stated by the European Commission (2018) its adopted aim is to invest about EUR 160, 113.52M in several areas including sustainable growth, competitiveness for growth and security amongst European member. Countries like Germany, Spain, and France who were at war near centuries now work in agreement to share achievements together.   The most compelling benefit, however, is provided by being single currencies adoption by European Union that eliminated the hurdle like transaction cost rate, reduction in price discrimination and the stability of the foreign exchange rate during a trade. That is how global interdependence has grown exponentially in the span of a generation.

Threats of Economic Interdependence-

As suggested by Baldwin and Crescenzi, economic interdependence may be modeled as functions of potential economic exist, that may deter, motivate or fail to affect the economic conflict. While distinguishing critical feature of European countries having to be economically dependent, there is a ray of limitations that it brings with it. One limitation is a 5% decrease in intra union EU trading during 2000- 2014. Other is Europe internal crisis in 2015 that was triggered by the euro crisis a few years prior, not giving the right to make independent political decisions without undermining their relationships with a majority of their trading partners. It took just one differing country to intimidate a powerful alliance like EU as Greece tried to in 2015 against EU sanctions placed on Russia.

   

In short note, it can derive as the process of economic integration in Europe has always been incremental and mold in crisis. As soon as the main aim is meeting members will mutually be benefited but these objectives can be changed with respect to crisis and economic challenges. There are effectively more pros and cons with economic interdependence. No doubt trading blocs are an integral part of economic integration and political reasoning might also be a huge element in deriving its existence.  However as long as collective economies carry on flourishing by depending on each other economy or engaged together with the European Union, the exits of economic interdependence will not exceed the benefit of it.