The present-day economic situation on the European market is complicated by the recent events and specific tendencies stemming from a failure of interconnected systems. In other words, the principal challenges in this regard are the condition of the European Union (EU) after Brexit and the gradually deteriorating position of the euro in the world (Lagarde, 2019; Badiani, 2019). These issues complement each other in creating an unfavorable environment and are more difficult to resolve when combined. Meanwhile, this task is essential for all the EU governments since their well-being significantly depends on these two factors. Therefore, this paper aims to assess the reasoning behind the creation of the euro currency and the dangers of Brexit for the global economy to trace the trends and increase the understanding of the problems.
The history of the eurocurrency market can be considered through the lens of the motivation of participating countries for its creation. It started in 1999 when nineteen members of the prospective system decided to bring prosperity to the region by uniting their economies (Lagarde, 2019). This process was guided by their vision of interconnectedness and diversity, ensuring fast development (Lagarde, 2019).
Meanwhile, as can be seen from the present state of the currency, which was intended to unlock the union’s potential, their activity’s outcome happened to be less positive than expected. At present, the so-called euro area evokes concerns of its citizens regarding their future, and the proposed project turned into a financial meltdown (Lagarde, 2019). It can be explained by the fact that global economic recessions over the past few years led to the emergence of disparity between its members (Lagarde, 2019). Therefore, the idea to unite the marketplace and thereby raise people’s living standards was inapplicable to reality in the context of crisis conditions.
In brief, the reasoning behind the creation of such a union and the central place of the euro currency in it can be attributed to several circumstances. They are the governments’ desire to promote their global progress by combining efforts and their leaders’ emphasis on the importance of the shared vision (Lagarde, 2019). However, the recent experience had shown that this basis was not solid enough. At the moment, the number of young people at risk of poverty is rapidly increasing, and the populist movements questioning the feasibility of economic integration in its present state are rising (Lagarde, 2019). From this perspective, it can be concluded that the anticipated benefits were impossible to gain due to the lack of flexibility, and the rationale behind the system’s establishment was insufficient for addressing participants’ needs.
Dangers of Brexit for the Global Economy
The main obstacle to implementing the plan for promoting the European countries’ prosperity was Brexit resulting in the emergence of particular risks for the region’s growth and the global economy. They are connected to the fact that conducting a soft change in the Union membership happened to be impossible (Badiani, 2019). In turn, this outcome caused the lack of certainty for the businesses affected by this shift and the disorder deriving from the collapse, which was not compensated by adequate measures (Badiani, 2019).
Hence, the main threat to the world’s development in this respect is conditional upon the inability of smaller entities to continue performing their regular operations with the required degree of efficiency. Put another way, the companies faced a crisis, which they were incapable of overcoming, and it adversely influenced the environment and worsened the overall situation.
Another aspect of the challenge evoked by Brexit is the dangers corresponding to the ongoing process of differentiated disintegration. It means that the selective reduction in the scopes of activity aimed at bringing together the locations presented by this event led to the limited cooperation of the United Kingdom (UK) with other European economies (Leruth, Gänzle, & Trondal, 2019). In the long run, this policy might trigger the total loss of connection between the union members and the UK in the case of any slight disagreements (Leruth et al., 2019).
Even though the possibility of such an extreme scenario is relatively low, it is important to admit that the current state of their relationships has only a temporary nature under the conditions of continuing cooperation. Consequently, the global market is safe until the first conflict appears between the countries, which is difficult to predict and, therefore, impossible to prevent.
To summarize, the recent changes in the European Union economy are conditional upon the currency’s failure to address the needs of citizens and enterprises due to its instability. The subsequent Brexit as a response to the emerging issues added to the complexity of the situation and further aggravated the participants’ position on a global scale. The initial reasons for the creation of the euro marketplace were the intention to combine efforts to increase both profits and influence and the fulfillment of the countries’ potential. Meanwhile, this plan’s failure resulted in rising concerns and disintegration, which pose a threat to the global economy by undermining business activity and impairing relationships between the EU members.
Badiani, R. (2019). Outlook on UK-EU Brexit negotiations and possible economic risks. International Economics and Economic Policy, 16(1), 5-16. Web.
Lagarde, C. (2019). The euro area: Creating a stronger economic ecosystem. SUERF Policy Note 63, 1-6. Web.
Leruth, B., Gänzle, S., & Trondal, J. (2019). Differentiated integration and disintegration in the EU after Brexit: Risks versus opportunities. JCMS: Journal of Common Market Studies, 57(6), 1383-1394. Web.