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European Integration Explained | Simulation
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European Integration Explained | Simulation

Introduction to the European Union

The European Union is a diverse group of 28 member countries with over 500 million people. The common currency used by some EU countries is the euro, which was introduced in 2002.

Integration and Peace

  • European integration began in the 1950s with the coal and steel union, aimed at promoting peace and security.
  • The EU evolved into a common market for trade, leading to increased prosperity through specialization and economies of scale.
  • One of the central achievements of the EU has been binding countries together in a way that makes war unimaginable.

Currency Integration Challenges

  • Currency integration presupposes that economies are managed similarly. Countries running big budget deficits or allowing wages to rise too fast can become uncompetitive with more disciplined members.
  • Greece found itself unable to export almost anything to its partners in the EU because it allowed wages to go up too much. Other countries like Spain, Italy, and Portugal faced similar issues.
  • Borrowing money from rich countries like Germany and Holland was possible for a decade but became unsustainable when creditors grew fed up with lending without being sure they would be paid back.

Labor Market Deregulation

  • Labor market deregulation is an ongoing challenge for some continental European countries like Spain, Italy, and France due to excessive regulation around hiring practices.
  • Germany provides a template for success through microeconomic reform such as freeing up labor markets and investment rules resulting in manufacturing success.

Geopolitical Importance

  • Stronger growth in Europe would benefit not only exports but also geopolitical cooperation on foreign policy challenges such as climate change, cybersecurity threats, and Ebola.
Video description

Sebastian Mallaby, Paul A. Volcker senior fellow for international economics at the Council on Foreign Relations, describes the history, context, and current challenges of European integration for CFR Education’s “Economic Crisis in Europe” case study. Today’s European Union (EU), Mallaby notes, comprises twenty-eight countries and is home to some five hundred million people. In addition, nineteen of these countries use a common currency, the euro. Mallaby explains how this integration began after World War II with efforts to prevent renewed conflict. European countries later built a common market for trade, which has fueled the continent’s prosperity. Mallaby describes the EU’s achievements—peace and general prosperity—while noting some of its challenges, such as currency integration. This provides the backdrop for the economic crisis that has afflicted many European countries in recent years. Labor market regulation is another policy challenge, Mallaby explains. He concludes by noting the high stakes of European economic success for the United States, which not only trades with Europe but also counts European countries among its most important partners in addressing international challenges. Sign up for the CFR Education Newsletter to receive global affairs resources like this straight to your inbox: https://link.cfr.org/join/66n/hp-cfr-... Subscribe to our channel for more videos that cover the issues, trends, and concepts you need to know to navigate our complicated world: https://link.cfr.org/join/66n/hp-cfr-education-youtube CFR Education, from the Council on Foreign Relations, aims to close the global literacy gap in our country by providing accessible, accurate, and authoritative resources that build the knowledge, skills, and perspective high school and higher education students need to understand and engage with today’s most pressing global issues. Visit our website: https://education.cfr.org/ Follow us on social media: Facebook: https://www.facebook.com/CFR_Education Twitter: https://twitter.com/CFR_Education #teaching #europeanunion #eu #europe #modeldiplomacy