Economic developments in Germany and their impact on the EU economy Essay

Economic developments in Germany and their impact on the EU economy - Essay Example This paper demonstrates the main two economic pillars behind the unification were the theories of ‘Regional Trading Block’ and ‘Optimum Currency Area’. The former deals with a free trade area with a two-tier tariff system i.e. zero tariffs within the union members and some positive rate of tariff for the non union-members. (Robson 1999: 109-110) The latter deals with the introduction of a unique currency; it would enable the member states to enjoy the benefit of a fixed exchange rate system with the facility of full currency convertibility. (Krugman and Obstfeld, 1997: 631-33) The simultaneous functioning of a trading block and the optimum currency area was the main theoretical standpoint of the European Union and economic integration was the result of that. Economic integration is desired for the transfer of the benefit of economic development of one country to another. (Czinkota, Rivoli, Ronkainen 1989: 14-16) Let us consider the economic development of Germany and its influence on the European Union. Here our analysis would be concentrated on the economic development of Germany after the establishment of EU. German economy marks itself as a social market economy as the government undertakes a wide array of social services. As German economy is highly export oriented it advocated for European economic integration. After unification German commercial policies have been highly centred towards union. The social reform policies adopted by Germany for the welfare of the society and the structural industrial reform enhanced the performance of the economy and its global competitiveness. (US Dept of State 2008)