Challenges to the Economic Union

The challenges facing the EU include the fact it is a political union, an economic union and its effect on sovereignty. Brexit is also a challenge for the EU

Political Union

• The EU's strength lies in its political union, requiring member states to work together on shared policies in areas like environment, defence, and international affairs, which often leads to disagreements due to varying national interests.
• The creation of a European army has been discussed but faced resistance; for example, Ireland rejected the Lisbon Treaty initially due to concerns over mandatory military service and only accepted it after securing a guarantee against conscription.
• Differences in political agendas were evident during the 2015 migrant crisis when Germany welcomed refugees, while Hungary and other Eastern European countries opposed this, causing a rift within the union.
• The EU's attempt to establish a constitution was rejected by member states in 2005, highlighting difficulties in achieving deeper political integration. The Treaty of Lisbon later replaced this initiative but retained many of the proposed changes.
• The potential inclusion of Turkey in the EU raises concerns due to Turkey's ongoing issues with human rights and its longstanding conflict with Cyprus, which could undermine the political stability of the union.
• Some member states, like the UK, have resisted further political integration, leading to events like Brexit, which showed the difficulties of maintaining unity in the face of national sovereignty concerns.
• The EU has struggled to maintain a cohesive foreign policy due to the differing global priorities of its member states, which weakens its ability to act as a unified force on the world stage.

*Issues with the political union led the Britiain voting to leave the EU in 2016 *

Economic Union

• The EU's economic union relies on the free movement of goods, services, people, and capital across member states, but this has been challenging to manage, particularly after the inclusion of less-developed countries like Estonia and Hungary in 2004.
• The 2004 enlargement of the EU, which cost €25 billion, brought in 10 new members with weaker economies, raising concerns among older members about the financial burden of supporting these countries.
• Enlargement has also provided benefits, such as expanding the labour market and increasing the availability of raw materials, which have boosted the EU's overall economic growth and competitiveness.
• Some regions within the EU, such as Germany, face challenges related to an ageing population, which could slow economic growth, while new member states have younger populations that can support economic expansion.
• Migration within the EU has created economic imbalances, with countries like Latvia losing a significant portion of their workforce to wealthier states, leading to brain drain and a strain on their own economic development.
• The EU's Common Agricultural Policy (CAP) has been crucial in supporting the agricultural sector in newer member states, helping modernise farming practices and ensure food security, but it also represents a significant financial burden.

*The European Central Bank is situated in Frankfurt am Main, Germany *

Sovereignty

• National sovereignty within the EU is the right of individual member states to govern themselves, but increasing political union often requires states to cede some control to EU institutions, leading to tensions over loss of autonomy.
• All member states have had to give up some level of sovereignty to participate in the EU, particularly in areas like trade, agriculture, and environmental regulation, where EU laws take precedence over national laws.
• The European Commission, which proposes new laws for the EU, has 27 commissioners, one from each member state, but smaller states fear their influence will diminish if the number of commissioners is reduced.
• The European Parliament, where democratic debate takes place, has seen its role increase in recent years, but the distribution of seats is based on population size, leading to concerns from smaller states about underrepresentation.
• The euro crisis exposed the limits of sovereignty for countries like Greece and Ireland, which had to implement austerity measures dictated by the EU and IMF, sparking debates about the trade-off between economic stability and national control.
• The increasing centralisation of power in the EU, with decisions being made in Brussels, has led to fears among smaller states that their needs may be overlooked, potentially leading to more resistance against further integration in the future.

Brexit

• On 23 June 2016, the United Kingdom voted to leave the European Union (EU) in a referendum, with a narrow majority of 52% in favour of Brexit.
• The referendum saw a high voter turnout of 72%, reflecting the significance of the decision. The close result highlighted deep divisions within the UK on the issue.
• The decision to leave the EU led to political turmoil, including the resignation of Prime Minister David Cameron, who was succeeded by Theresa May, the leader of the Conservative Party.
• Following the Brexit vote, the value of the British pound dropped by 10% the next day, marking its lowest value since the 1980s, which indicated immediate economic uncertainty.
• The UK's vote for Brexit was driven by concerns over increasing EU control, particularly regarding economic policies and the political union that allowed for the free movement of people, which many voters felt was against their national interests.