The European Union (EU) is an economic and political union of 27 member states united together to meet challenges of the world. The visionary leadership of the past made the idea to form the European Union to create a more peaceful, business oriented and economically stable region. Therefore, the EU was created to ensure fast economic growth and to compete with the other main economies in the world. The founder members were Belgium, France, Germany, Italy, and Luxembourg and the Netherlands. The famous treaty of Rome gave birth to the European Economic Community created a common market for the member states (European Union 2013).
Despite all precautions taken and guidelines laid down to join the union, the EU is not only facing a financial threat to its very existence instead has posed a threat to the world's financial markets as well. This essay will attempt to find the causes which led to the financial crisis and what direction the crisis may take in future.
There are many advantages of being a member of the European Union; such as, free movement of citizens, more jobs, more money for development, protection for workers and also a loud international voice. However the disadvantages can be such as; too many rules and regulations; less voice of its citizens to be heard; too much concentration of power; too much of integration would affect the sovereignty of individual states (Helpme. com 2013).
To join the EU a candidate country is required to achieve democracy, ensure human rights and rule of law. On the economic front, the country must have market economy and clearer EU's political, economic judicial and monetary objectives (Geography. about. com 2013).
European Debt Crisis
The European debt crisis begun at the end of the year 2009 and became more serious in 2010. The EU debt crisis intensified when the EU countries such as Greece, Portugal, Ireland, Italy, and Spain struggled to pay their debts.
It has been found that there are five main causes for European debt crisis (icn. com 2013):
1) Violation to EU rules - Countries like Greece did not give their real current debt level and economic situation, and the EU still accepted high budget deficit and debt level countries.
2) Banking Sector Problems Banks are in a weak position because they now have to use their money in government's budget deficit, rather than lending it to householders and businesses.
3) Rating Agencies The downgrading of banks and other financial institutions has hit customer confidence. This has reflected in the bond sales the same has created trouble in raising money by various governments.
4) Political Conflict - European decision makers and other rich nations were against letting taxpayers pay for crisis however on the other hand peripheral nations were asking for more flexibility.
5) Slow action from European officials Slow or no reaction from Brussels to identify and react to a financial crisis worsened the financial scenario....