European Union

The common internal market has caused trade within the EU to flourish. The free movement of people, goods, services and capital has afforded the EU’s citizens an enviable standard of living. Despite being the largest net contributor to the EU budget, Germany benefits from the community, too, with two thirds of its exports going to EU countries.

There are, however, huge economic gaps between the member states. While in central and eastern Europe per capita economic output, adjusted for purchasing power differences, barely reaches 60% of the EU average, Luxembourg achieves two and a half times that average. Lest the gap become too great, the EU supports poorer regions with annual sums running into the billions – a policy known as ‘cohesion’.

The euro, introduced in 1999, is supposed to strengthen cohesion, too. At the time of its introduction, the euro countries committed themselves to pursuing sound financial policies with the aim of keeping the common currency stable. Some states, however, have not met their responsibilities. Now their enormous budget problems pose a threat to the other EU countries. For this reason, the Union should supplement its regulatory framework with a set of rules covering cases of insolvency, ensuring that creditors contribute to the rescue package. Despite all these difficulties, though, the euro has been a success. Since its introduction the inflation rate in the euro countries has been a little over 2 percent. As late as the nineteen-eighties prices in many of these countries were rising at an annual rate several times this figure.