EU Deindustrialization and Globalization

Deindustrialization in the EU

• Deindustrialization refers to the decline of manufacturing industries, accompanied by the growth of the service sector.
• Driven by globalization, which moves production to lower-cost countries, and technological advances that reduce the need for manual labor.
• Impact includes job losses in traditional manufacturing sectors and challenges for regions heavily dependent on these industries.
• Opens opportunities for innovation and growth in high-tech and service industries.
• Policy responses include investing in education, retraining programs, and supporting emerging industries to mitigate negative effects.

Benefits of Joining the Eurozone

• Countries join the eurozone to benefit from a single currency, eliminating exchange rate fluctuations, reducing transaction costs, and simplifying trade and investment within the zone.
• The euro fosters economic integration and stability, making it easier to compare prices and conduct cross-border business.
• Enhances a country's economic credibility and attracts foreign investment.
• However, it also requires adherence to strict fiscal and economic criteria, limiting national economic policy flexibility.

EU GDP Composition

• Service sector accounts for about 70% of total output.
• Industry, including manufacturing, contributes roughly 25%, reflecting the EU's strong industrial base in countries like Germany and Italy.
• Agriculture contributes around 5% to the GDP.
• Highlights the advanced and diversified nature of the EU economy, with a significant emphasis on high-value services.

Structure of the EU Budget

• Financed mainly through contributions from member states based on their gross national income, customs duties on imports from outside the EU, and a share of value-added tax (VAT) revenues.
• Focuses on several key areas: cohesion policy, Common Agricultural Policy, and research and innovation to drive economic growth.
• The multiannual financial framework sets long-term priorities and ensures stable funding for various programs.

Impact of COVID-19 on the EU Economy

• Severely impacted the EU economy, causing a sharp contraction in GDP due to lockdowns, supply chain disruptions, and decreased consumer spending.
• Unemployment rose, and many businesses faced financial distress, particularly in sectors like tourism and hospitality.
• In response, the EU launched significant fiscal support measures, including the €750 billion Next Generation EU recovery fund to support economic recovery and resilience.
• Accelerated digital transformation and highlighted the need for robust healthcare systems and social safety nets.

Impact of the Russian Invasion of Ukraine on the EU Economy

• Significant economic repercussions, including energy supply disruptions due to reliance on Russian oil and gas.
• Increased energy prices and prompted a shift towards alternative energy sources and accelerated the green transition.
• Economic sanctions against Russia have affected trade and financial markets, while increased defense spending has put additional pressure on national budgets.
• Led to increased migration and humanitarian challenges within the EU.