The European Union faces several challenges, including sluggish economic growth, high youth unemployment, and the Eurozone debt crisis. The adoption of austerity policies to address budget shortfalls have slowed growth and increased unemployment in some countries. Rising populism and nationalism have increased opposition to EU policies and threatened the stability of the bloc. Events like the Greek debt crisis, Brexit referendum, and the migration crisis have further divided member states and weakened the EU. How the EU addresses these issues will impact its future as both an economic and political union.

1. The European Union
Challenges and Opportunities
A lecture prepared for delivery at Mini University,
Indiana University, Bloomington, Indiana, on June 14, 2015
Jeffrey A. Hart, Emeritus Professor
of Political Science

2. The European Union
 1951 Formation of the European Coal and Steel Community
 1957 Treaty of Rome created the European Economic
Community (6 members)
 Creation of the Unified Market under the Maastricht Treaty of
1992
 1985 Passports abolished under the Schengen agreement
 Creation of the Euro in 1999

3. 28 Members of the EU
1952 Belgium, France, Germany, Italy,
Luxembourg, Netherlands
1973 Denmark, Ireland, United Kingdom
1981 Greece
1986 Portugal, Spain
1995 Austria, Finland, Sweden
2004 Cyprus, Czech Republic, Estonia,
Hungary, Latvia, Lithuania, Malta, Poland,
Slovakia, Slovenia
2007 Bulgaria, Romania
2013 Croatia

4. 4

5. EU dominated by Larger Countries
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6. Challenges
 Addressing the Causes of Sluggish Growth
 Managing the Euro Zone debt crisis
 Reducing youth unemployment levels
 Increasing global competitiveness of less
competitive regions
 Preventing potential departures from EU or
Euro Zone
 Grexit
 Brexit
 Coping with the Rise of Populism,
Nationalism, and Racism
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7. Real GDP Growth Rates
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8. Unemployment in Europe 8

9. Causes of Sluggish Growth
 Major contraction following the financial crisis of 2007-8
 Major increases in deficit spending financed by public debt to
maintain pre-crisis levels of growth and employment
 Increased debt leads to increased interest rates in weaker
economies
 Adoption of austerity policies to deal with budget shortfalls
 Delayed restructuring of sectors that continue to drag down
the overall economy
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10. Interest Rate Spreads in EU Bonds
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11. A Single Currency (Euro) without
an Integrated Monetary Policy
 Considered by many economists to be a key flaw in the
adoption of the Euro by the Euro Zone countries
 Key difficulty is the inability to use currency exchange rates
to adjust for changes in competitiveness over time
 The main beneficiaries of the system have been countries
like Germany and Belgium that have experienced increases
in international competitiveness
 Other countries have tried to provide the same social
guarantees as Northern Europe without the underlying
economic strength
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12. Government Debt
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13. Austerity Policies
 Reduced spending
 Health, education, and welfare
 Scaled back pensions
 Increased taxes
 Higher VAT
 Wealth taxes
 Labor Market Reforms (wage reductions)
13

14. Changes in Wage Rates
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15. Budget Deficit in Greece
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16. Crisis in Greece
 23 April 2010 EU 45 Billion Euro bailout loan to Greece
 Greek bond rating slashed to “junk” status
 1 May 2010 Government announces austerity measures
 October 2011 Second bailout loan from EU of 130 Billion
Euros
 Papandreou government falls in November 2011
 Interim government adopts new austerity measures
 Late 2014 new Syriza-led government under Prime Minister
Alexis Tzipras and Yanis Varoufakis as Finance Minister
 July 2015 referendum rejecting new austerity measures fails,
Varoufakis resigns
16

17. Impact of Austerity Policies on
Greece
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18. Opposition to Austerity
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19. EU Angry Birds
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20. The PIIGS
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21. Grexit or Brexit (or both)?
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22. Brexit: For and Against
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Boris Johnson David CameronBoth Tories
Jeremy Corbyn,
Labour Party

23. Public Opinion on Brexit
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24. Brexit Referendum: June 23
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25. The European Migration Crisis
 Began in 2015
 Rising numbers seeking asylum: espec. Syrians, Afghanis,
and Iraqis
 Largest number of asylum application in Germany but large
numbers of asylum seekers in Greece and Turkey
 Turkey has 2 million Syrian refugees now
 EU-Turkey deal in March 2016 to send Greek asylum
seekers to Turkey in exchange for a big aid package and
accelerated negotiations for membership in the EU
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26. Migration Routes
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27. Rise of Rightwing Euroskeptic
Parties
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28. Conclusions
 EU still recovering from the financial crisis
 Growing inequality between rich and poor countries and
between young and old workers
 Threat of EU debt defaults and exits is affecting the global
economy
 The Syrian migration issue is further dividing the countries of
the region
 The Obama administration has lobbied for keeping the EU
intact and generally opposes the rise of rightwing forces
 How do you think U.S. interests should be defined?
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