Economic Interdependence between European countries

stinting Interdependence between European countriesWhy is economical interdependency necessary?When we talk close to economic interdependence between countries the first and foremost factor that comes to mind is the exchange of goods and operate then the flow of labour, capital, technology, and finally the flow of funds. Helpman (2011) describes the economic fortunes of a country be intertwined via trade, foreign direct investment, and monetary capital flows. Helpman also talks almost how the global crises of 2008 illustrated the importance of this interdependency between countries when it caused the volume of international trade to pass along by almost a quarter which then adversely influenced even the countries with a sound financial system. Coming to the first aspect of the exchange for goods and services (trade) it is indeed, essential to trade in order to derive maximum benefit from the efficient use of scarce resources available and as economic development and profici ency takes place resultantly because of globalisation, international trade is becoming increasingly popular particularly when it comes to European countries. Piggott and Cook (2006) talk about the need for international trade preferably comprehensively exports and imports stomach smooth drive fluctuations in the domestic economy, and growth via exports could increase competition at home. Therefore basically trade allows firms to escape the termination of the domestic market, so reducing costs, improving quality and hopefully leading to higher sales and profits. Furthermore, this leads to the countries then helping even their businesses or organisations capture a competitive advantage through specialisation and giving them access to international markets which in turn helps boost the economy even more. Europes global economic positionMost of the countries in Europe stir a significantly high GDP per capita and ar considered to have extremely create economies when it comes to t he Global market examples of which include Ger some, France, Netherlands, and so on. In fact, the International monetary fund in its latest report in 2018 places most of the European countries in the advanced economies category whether it is in final domestic demand, stock building, or foreign balance. It is especially impressive that most of these countries progressed themselves post communism particularly with European countries like Hungary and Latvia undergoing financial crises as Grzegorz Ekiert (2012) puts it these countries policy-making and economic achievements have been in stark contrast to the failures seen in other post-communist states.The most important role in economic development however, has to beacknowledged as well which is the economic interdependence between these Europeancountries. Economic interdependence and its importanceEconomic interdependence is occurring due to specialization ofcountries, as they are dependent on others in the purchase of products which are non manufactured nationwide. (Surugiu, 2015)It should be of a common understanding that progress cannot be achievedby being alone or confining to a limited way of approaching desired economicobjectives and it proves to be true in the global economy as well. As morecountries pool in their share of different scarce resources and bring aboutextra demand as well from their economies they do in fact help in reducing thewastage of resources. Needless to say, this really does synchronise withefficiently allocating these available resources too. When we talk about globalisationand economic interdependence the most critical element to have are goodinternational relationships between countries due to the aforementioned factthat it is not only international trade that influences the countrieseconomies but also other economic factors such as the flow of labour, easing oftrade regulations or even financial tie-ups. These relationships are usuallyquite diplomatic and do involve a collabora tion from both sides, it could evenbe argued that this relationship in itself is an exchange in order to achievemutually favourable growth thus, these can also be the difference between importanttaining peace and economic well-being. Paul Wilkinson(2007) talks about howparamount these can be in his book some of themajor problems and challenges of international relations reveals that we live ina very dangerous world, and that many of the most serious threats to our peace,security, and economic and social well-being are the result of human actions.How and why European countries are economically interdependent Being geographically close such as the countries within Europe givesthem an advantage to not only make trading easier and quicker but it alsoprovides them with a strategic advantage of achieving their political missionsand their businesses with a competitive edge in the international markets. Whencountries do intend to come together in order to achieve economic progressionthey us ually end up forming an alliance/trading bloc or in Europes case mostprominently a regional trading bloc (European Union) which overtime proved tobe of immense significance to their economicand political environment. This proved to be extremely pertinent in making surethat the countries involved not only maintained peace and excellent diplomaticties but also that they assisted individually others economies with regards to growthand exchanging of resources allowing them to specialise more distinctively andget an even higher trade advantage. This enabled the member countries tocontribute to the marrow financially and in return the union invested in itsmembers economies accordingly. As stated by European accusation (2018) the EUadopted budget aims to invest (in its member countries) about EUR 160, 113.52Min several areas including sustainable growth, competitiveness for growth andsecurity amongst others. The European Union could arguably be one of the mostpowerful economic integrati ons. Over the years, it has not only helped its membersin areas like capital accumulation, and technical progress but it has alsomaintained common and standardised policies for trade and as attested byEuropean commission(2018) itself the EU making one of its main aims to becomeeconomically interdependent and avoid any future conflicts between its members.Consequently, countries such as Germany, Spain and France who were at war forcenturies have now ensured that they now work in harmony to attain mutualbenefit (Mankiw, 2016, p.528). Some other examples of European economicintegrations include the European Economic Area (EEA) with around 32 members,European Union Customs Union (EUCU) with 28 of the EU and 3 non-EU members(Turkey, Andorra, and San Marino), and European Free Trade Association (EFTA)with before long 4 members. The most compelling benefit however, is provided bythere being a single currencies adoption by the European Union members whichbrings with it the convenience of e liminating motion costs, reduction inprice discrimination and the stability of the foreign exchange rate (Mankiw et al, 2016, pp.531).Threats economic interdependence presentsWhile recognising the pivotal aspects of European countries having to beeconomically reliant on each other we must also look at the limitations itbrings with it. Some of these limitations include a 5% decrease in intra EUtrading during 2000-2014, Europes internal crises in 2015 which was triggeredby the euro crises a few years prior, not giving the countries involved to make self-sustaining political decisions without undermining their relationships with amajority of their trading partners, and it taking just one opposing country tothreaten a powerful alliance like EU as Greece tried to in 2015 against EUsanctions placed on Russia (The German Marshall Fund of the United States,2016).This can also cause a free rider problem as well which Mankiw, Et al (2016) explains by giving theexample of the Greek recession where the government borrowed more than theycould pay back and eventually the EU had to bail them out. Most impactfulthough, are the difficulties that arise because of there being a singlecurrency (Euro) adoption within the selected EU countries these are includingbut not limited to fiscal federalism (Mankiw et al, 2016) describes it as the fiscal policy in the currencyunion working like that of a single economy, they also give up their right tohave an individualistic monetary policy, and finally the macroeconomicadjustment generating from the external value of their currencies also known asautomatic stabilisers (Investopedia, 2018).In conclusion, it can be said as Monnet (1978) suggests the process of economic integration in Europe has always beenincremental in nature, and often forged in crises. The main aims of theseintegrations also keep changing with respect to the challenges the economicenvironment brings with it and that being said, as long as these aims are metand all count ries feel like they are benefiting mutually they will alwaysunderstand that there are more pros than cons of economic interdependence forthem, if not then they can always choose to surrender like the UK did with the EUin June 2016. It goes without saying that trading blocs are an integral part ofeconomic integration and political reasoning might also be a huge element inderiving its existence. However, as long as the collective European economiescontinue to prosper by depending on each other economically and theconsequences of abandoning this interdependence do not surpass the benefits ofremaining it would not make any sense for a country to be an independenteconomy.Reference ListEuropean Free TradeAssociation (2018) About EFTA TheEuropean Free Trade Association functional from http//www.efta.int/about-efta/european-free-trade-associationAccessed 21 April 2018European Commission (2018) BudgetAnnual budget. for sale from http//ec.europa.eu/budget/annual/index_en.cfmAccessed 19 Apr il 2018European Commission (2018) The EUin brief From Economic to Political Union Available from https//europa.eu/european-union/about-eu/eu-in-brief_enAccessed 21 April 2018European Commission (2018) Taxationand Customs Union Customs Union Available from https//ec.europa.eu/taxation_customs/business/calculation-customs-duties/rules-origin/customs-unions_enAccessed 21 April 2018Helpman, Elhanan. 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