The Negative Effects of Economic Integration within the European Union
Economic integration is a process that involves coherence of the policies applied in integrated countries. For the European Union, economic integration implies free flow of capital, people, money, and goods and services across national borders of member countries. In essence, such situation creates a single market where economic agents do not experience any limitations of their movement as well as trade. In order to achieve
such high level of economic integration as a single market, European countries abolished a number of legislative, bureaucratic and technological barriers (Goel & Goel). As for tax systems, they were adjusted accordingly, however fractional tax systems remain, which is considered as a limitation to further single market development. Despite the advantages of economic integration within the European Union, there are crucial negative effects of this process that require review.
On the one hand, economic integration results in a variety of benefits. According to Goel and Goel, regional economic integration generally tends to stimulate economic growth in member countries and provide additional benefits from free trade beyond international agreements. In particular, economic integration and single market increases competition and influences pricing of products, allowing customers have wider choice. In addition, economic integration triggers foreign investment and innovation, which tend to stimulate economic growth through increased productivity. On the other hand, there is a range of negative effects that economic integration results in, including uneven economic development of member countries, increase of national debt, social and economic downturns.
Let us review each issue in detail in order to evaluate the scope of negative effects of economic integration within the European Union. In terms of uneven economic development, it is important to review the data provided by European Commission about real GDP growth rate in member countries of the European Union. Despite a range of limitations, GDP is considered to be an indicator of economic development and country’s
wellbeing. On the map (see fig.1) highlighting member countries of the European Union marked by real GDP growth rate (Eurostat), we can see that the discrepancies are considerable:
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Figure 1. Map of the European Union countries by real GDP growth rate in 2016, %
The countries with the highest rate of economic growth are Ireland, Malta and Sweden, while the counties with the slowest rate of GDP growth include Greece, Italy and Finland. Despite that Goel and Goel (2014) state
that regional economic integration tends to generally improve economic growth through intensification of trade and investment processes, evidence from the European Union suggests that counties with weaker economies tend to have considerably lower GDP growth than nations with initially strong economies. Balcerowicz admits that “The aggregate picture masks large variations in GDP growth across EU countries” (28). The author notes that specific features of national economies, such as the …
