Greece’s Issues from Entering the European Union and Adopting the Euro

Greece’s Issues from Entering the European Union and

Adopting the Euro

Katharine I. Ransom

Southern New Hampshire University

INT-610 Multinational Corporate Environment

Professor Danielle Camacho

Wednesday, July 1, 2015

The perfect example of how trading blocs can go very well, but can also go very wrong is the issue surrounding Greece and the European Union (EU). When the UK joined the European Common Market in the 1970s, the British imagined that they would be joining a prosperous trading bloc (Massai, 2014, p. 142). In the 1970s, the EEC counted for almost 40% of the world’s economic output (Massai, 2014, p. 142). Since the decision to become a political union, the EU only accounts for 25% of world trade (Massai, 2014, p. 142). In a decade, it is expected to be down to 15%. Lower tax levels, higher regulations, a rise in average unemployment are all issues that the UK is experiencing (Massai, 2014, p. 142). There are proponents that state the EU has not been helping the countries in its bloc to have an edge in international trade.

The Euro was officially introduced January 1, 1999 due to the trade issues from European countries having different currencies. The Euro did bring more trade freedom and a stronger currency to the EU, for about a decade. However, the Euro suffered from the 2008 financial crisis, as did other economies that were heavily involved in international trade. Greece took the biggest hit of all the EU member nations. They relied heavily on debt to finance their budget and could no longer export at the same level after the financial crisis. The country is now unable to pay the funds that were loaned to them by the International Monetary Fund (IMF), and they may have to leave the Euro-zone (Spiegel, 2015, p. 1).

The rest of the world does not seem to care if Greece stays in the EU or not. The country is not a significant exporter of goods and has caused the Euro to depreciate in value due to its economic issues. Trading blocs are supposed to help the member nations increase foreign direct investment, competition, economies of scale, market efficiency, and trade effects (Spiegel, 2015, p. 1). It can be seen in the current event with Greece that they have not experienced these benefits of a trading bloc. The downsides that Greece has experienced are loss of sovereignty, conceding to the will of the EU and IMF, and loss of interdependence (Spiegel, 2015, p. 1).

Some Grecian citizens are in favor of staying in the EU and some are in favor of leaving it. Greece has very little control over how it can function in the international marketplace due to all of the rules and restrictions that have been put in place after joining the EU, adopting the Euro, and taking a loan from the IMF (Spiegel, 2015, p. 1). It is important to note that any country in a debt crisis would be experiencing these issues, but the use of the Euro has made them worse. Greece does not have a currency that could appreciate or devalue according to its economic situation.