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European Union Countries as Business Environments Report (Assessment)


Key events and development of the EU

Some of the major events characterizing the formation and development of the EU include the 1957 Rome Treaty that created the European Economic Community or EEC. This Treaty was established in order to foster economic unity between member states. It would be much later before the latter goal was established but at that point, it was focusing on customs union development. The second major event occurred in 1973 when three very influential nations joined the body and they were the United Kingdom, Denmark, and Ireland. At that point, the European Union had a total of nine members after this expansion. This was largely described as the first enlargement.

The Single European Act is the third major event that occurred in 1987 (Bainbridge, 2002). It was signed in order to facilitate trade through a single market. The fourth major event occurred in 1993 through the Maastricht Treaty which was created in order to facilitate the four freedoms of people, goods, services, and money. This Treaty enabled the creation of the European Union as we know it.

The Union now had three pillars identified as Police and judicial cooperation, foreign and security policy (which aimed at dealing with political issues), and the original European Community, Euratom, and ECSC. Many changes occurred in between but the year 2004 was definitely noteworthy owing to one of the largest enlargements in the EU. In that year, ten new members joined the EU in what is now known as the fourth enlargement. These were Balkan nations that caused EU membership to rise to 25 (The EC, 2010).

There are a number of reasons why the European Union was formed. At first, it was an attempt at forging peace in Europe especially after the horrors of the Second World War. However, member states were soon motivated by economic reasons. The European Community of the 1950s and early 60s was established in order to facilitate these goals (Mc Cormick, 2000). The establishment of a common market came to be an important motivating factor such that people, services, capital, and goods could flow freely within the Union.

This was especially because European based firms were performing poorly in the international arena. Furthermore, Europe could no longer rely on the world superpower at that time owing to a deteriorating relationship with it. Additionally, the monetary aims of creating a single currency also motivated the integration of European states. This has currently been achieved through the Euro. Lastly, the European Union was created in order to harmonize international relations such that the EU would act as one body internationally.

Effect of the rapid enlargement of the EU and the effect of future enlargement

The rapid enlargement of the EU that started in 2003 has brought on many benefits to affected countries. The new members experienced economic growth that they had not witnessed before. Most of them grew by an average of 1.75 percent annually between 2003 and 2008 (European Commission, 2009). This was made possible by the continual investment of older member states in these countries and also by the technology that entered those countries (Oakley & Atkins, 2009).

It is not just the new member states that benefitted; the older members also witnessed greater economic growth prior to the global recession. This was attributed to the expanded export market for these traditional EU members. Furthermore, both types of members benefited from cross border transfers of workers and efficient production through relocation of certain plants. On the other hand, this rapid expansion did lead to some problems. The first was seen after the global crisis when the economies of a number of countries started doing badly. The PIIGS problem was characterized by high unemployment as well as slow economic growth among the latter countries.

Monetary stability within the EU is under threat because of the economic conditions in the PIIGS (O’Leary, 2010). Consequently, some older member states are objecting to the issue of bailing out these so-called irresponsible nations because they feel as though they are paying the price for their lack of economic discipline. However, even before the global crisis, there were still certain problems imposed such as the prevalence of certain restrictions in member states concerning the establishment of businesses. Furthermore, these very member states have not harmonized the EU regulations as required (Hoskyns & Newman, 2000).

Future enlargement in the EU is likely to be unabated because this is already a step that the Union has chosen and it is unlikely to be eliminated. The acronym PIIGS has been used very negatively yet other traditional EU member countries may not be as far off from the latter economic states as they may imagine. Credit markets often operate through the domino effect because the loss of confidence in one bank will affect other banks in other countries and hence fuel the crisis.

The debt levels in the PIIGS are not that different from the situation in the United Kingdom. Greece (which is to receive a bailout from members of the Eurozone) had a gross debt of 125% of its GDP and an unemployment rate of 9.7% as of 2010. Ireland has a gross debt of 82.9% of its GDP and an unemployment rate of 13.3%. The UK which does not fall in this category has an unemployment rate of 7.8% and a gross debt of 80.3% in 2010.

This is a figure that is quite close to Ireland’s performance and it does not lag too far behind from Greece. Consequently, the PIIGS problem is not just exclusive to these countries; it could affect many more EU member states. Therefore unless the fundamentals that led to the economic problem in the Eurozone are addressed then further enlargement will only lead to the same pattern being witnessed currently.

STEEPLE Analysis of France and how a food retailer might adapt to business practices in France

A STEEPLE analysis of France illustrates that socially, French people generally do not take a keen interest in punctuality as they may arrive late for business functions. Culturally, the French are very refined in terms of the cuisine as well as their taste for clothes. However, it is expected that one should dress very conservatively in business (Priest, 2010). In terms of conversation, the French can appear to interrupt one’s conversation but this is often seen as a method of debate. This country is made up of a combination of cultures from various nations so it is quite ethnically rich. The birth rate in France has been ranked amongst the highest in (Western Europe Bureau of European and Eurasian Affairs, 2010).

Technologically speaking, many French citizens utilize information technology in their businesses. However, when compared to fellow EU countries, France appears to be lagging behind most European nations. Its people have not embraced the use of e-commerce as much as other individuals in the same arena. In fact, France is ranked ten amongst its peers with just twelve percent who use e-commerce. The French economy was affected by the global financial crisis because as of 2009 it recorded a percentage growth of negative two point five percent (CIA, 2010).

However, this was not as bad as in other European countries. The economy is composed of manufacturing-based companies that produce vehicle parts and other products, cosmetics, iron products, and wine. This was actually the reason why the economic effects of the global recession were not as intense in this country. France comes second only after Germany in terms of trade in goods within Western Europe. An environmental analysis demonstrates that the government has made many initiatives in order to ensure that the French businessmen and industries play by the environmental rules preset in the country’s laws.

In terms of the political environment, France is a democratic nation currently headed by a center-right leader President Sarkozy who was elected because of his promise to instate market reforms (Daniels et al., 2009). The government has made a lot of interventions in social security through its laws. The legal environment is conducive for business, however, one must possess local know-how in order to invest wisely here. Certain businesses are controlled tightly by the government so they possess additional restrictions. Lastly, the French are very strict about ethics in business, and issues concerning bribes are not that common.

A food retailer would have to speak and write the French language very well because most transactions, legal work, and the like are written in this language. The culture of the place would have to be taken into consideration since the French are very particular about their food so the retailer should familiarise himself with these requirements (Euromonitor International, 2005). He could focus on foods that attract the younger population since France has more of these.

If one comes from a non-EU country then one should make sure that one possesses a work permit (Kashkin, 2003). When carrying out business, French authorities tend to require registration amongst a number of parties so one must try and work with this bureaucracy. In terms of employing people, the French are very particular about the termination of employment so it would be difficult to let someone go in this respective country once he or she is hired.

A German citizen and the Greek economy

Many German citizens feel as though bailing out the Greeks is causing them an undue burden for the mistakes that the Greeks committed on their own. They believe that if a bailout is done then this would lead to great inflation within the EU thus harming every member state including the Germans (Willis, 2010). However, what these citizens have not considered is that the situation is already bad throughout Europe. There are high unemployment rates even in initially strong economies like the United Kingdom. Furthermore, production has substantially reduced amongst many nations and consumer purchasing power has really dwindled.

All these problems would have been reduced if the Greek problem would have been dealt with early. If I were a German national, I would stop worrying about inflation in the Eurozone and give a go-ahead to the bailing out of Greece. The risk of inflation is far less significant compared to the problems that would emanate if overall demand in the EU goes to extreme lows. Germany currently depends on its export sector for economic growth, especially its industrial sector.

If overall demand goes down in the EU then there would be no market for most of Germany’s export products and this would eventually lead to the transference of problems prevalent in the PIIGS to other countries of Europe like Germany itself. Therefore, it is in the interest of the Germans to bail out this ailing European nation called Greece. Furthermore, most people in Germany are resisting this rescue package because most of them are thinking of themselves as this rich relative that is helping a poor one (Auerback, 2010). However, this need not be the case. Nowadays, markets require individuals to demonstrate that they have the capacity to service loans.

In this case, Greece can be given room to grow and this will put in a better position to repay the richer nations for their help during the tough economic times that they are currently going through. Germany needs to look at the bailout as the small sacrifice that they will pay in order to facilitate a high economic growth rate in Greece and this could possibly lead to better economic performance that would eventually spread throughout the European Union. However, for this to be achieved then the excessive and tough bureaucratic rules tied to the rescue package need to be relaxed so that economic growth can be encouraged.

References

Hoskyns, C. & Newman, M. (2000). Democratizing the EU: Issues for the twenty-first century. Manchester: Manchester University press.

Oakley, D. & Atkins, R. (2009). Eurozone shows its strength in a crisis. Financial Times.

Willis, A. (2010). Eurozone leaders agree on Franco-German bail out the mechanism, EU Observer.

Kashkin, S. (2003). EU: Global studies encyclopedia, Raduga publishers.

European Commission. (2009). Five years of enlarged EU: Economic achievements and challenges. IMF press release.

Auerback, M. (2010). The PIIGS problem: Maginot line economics. Political economy.

O’Leary, N. (2010). PIIGS is unwelcome in the EU parlor. Cafe babel magazine.

Euromonitor International (2005). Changing the face of eating habits. Web.

Bureau of European and Eurasian Affairs (2010). France. Web.

CIA. (2010). France. Web.

Priest, M. (2010). France. Web.

Daniels, J., Radebaugh, L. & Sullivan, D. (2009). International business environments and operations. NJ: Prentice hall.

Bainbridge, T. (2002). The penguin companion to the EU. London: Penguin.

Mc Cormick, J. (2000). Understanding the EU. London: Palgrave.

The EU (2010). The creation of the European Community. Web.

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IvyPanda. 2021. "European Union Countries as Business Environments." February 12, 2021. https://ivypanda.com/essays/european-union-countries-as-business-environments/.

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IvyPanda. (2021) 'European Union Countries as Business Environments'. 12 February.

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