Question

Germany and the Euro: How has Germany benefited from the Euro- pean Union and the euro in particular? Explain.

Answer 1

Germany was one of the founding countries of European Union that was designed to ensure that the continent would never again be torn apart by war. The economy of Germany is dependent on the European Union continuing to function as it has since the late 1990s. Its membership has had a positive impact on the country's economy and gave several competitive benefits for foreign companies setting up a permanent presence in the country. The EU provided a lot of rights for them in a way that their governments can’t easily take them away. Germany’s benefits in competitiveness were immediately translated to benefits in trade, because the freedom of goods, services, persons and capital permitted German products to circulate quickly and freely throughout the European Union. It helped to raise the German real gross domestic product.

Germany has also benefited from the fixed exchange rate that the Euro effectively secures between the main European markets and itself. Thus Germany's export boom was not offset by an increase in its own currency. If Germany had been outside the Euro, the appreciation in the currency would have hurt Germany’s gains