Question

What are the main challenges facing the EU?

Answer 1

European Union encompasses the second largest economy in the world both in nominal and PPP terms with a GDP of almost $20 trillion. Its currency, the Euro is also the second largest reserve currency and the second largest traded currency of the world. The European Union also has an internal market structure that incorporates free movement of goods and services along with capital and labour. Since it is a group of more than 20 nations, there are many challenges that are being faced by the European Union in the economic scenario. The following are the main challenges that are being faced by the economy of European Union

· A wide variety of economic disparity occurs in the Southern Europe and the Central and Northern Europe with the Southern Europe facing higher unemployment rates compared to the other part. With the ongoing disparity, it is difficult to determine the economic challenges of the European Union as a whole

· The public debt is about 80% of the GDP which makes it prone to economic instabilities

· With different economic policies implemented by different nations of the European Union, it is difficult to represent the economy as a single identity when it comes to international markets.

· The top 20% of the population with highest national net disposable income accounts for about one third of the total income while the lowest 20% accounts for about one tenth of the total income

· With the Covid-19 crisis being largely hit on the European countries, the economy is expected to slow down at least for a year and the GDP estimates are likely to decline in the coming year.

· The climate change has a wider impact among those nations and more care are being provided to tackle the challenges of climate change. Thus, about one fifth of the budget are being allocated to tackle the climate change effects

· Ageing population and rising unemployment is always a challenge to the European economy

· The challenges imposed by increased levels of migration are always a threat to the labour potential of the European Union and thus has a negative impact on the economy of the European Union.