European Integration: Some stylised facts



Given this complexity of the concept integration the purpose of this paper is to
evaluate the present stage of integration in the EU on various areas. The analysis
will be based on stylised facts putting focus on trends of various indicators of
degree of unification of European economies. The paper furthermore aims to
discuss future prospects for the integration process in the next decades.

The paper is organised as follows. The integration experiences gained so far will
be summaries in Section 2 trying to answer the question of whether the EU still
consists of a club of economies or one fully integrated economy. Section 3 takes a
look into the future by examining recent initiatives and discussing the prospects
for further integration. Finally, section 4 concludes the paper.

2. Integration in Europe so far

2.1 The theory of optimum currency areas as a theory of integration

As it known from literature the process of economic and monetary integration
seems to be prosperous if the countries participating in such a process all together
by and large could be characterised as an optimum currency area. This concept,
originally formulated by Mundell (1961), gives some important criteria in
evaluating the successfulness of integration. These may be grouped under the
following headings: 1) policy preferences, 2) industrial structure, 3) openness of
the economy, 4) mobility of capital and labour, 5) wage and price flexibility, and
6) fiscal integration. To the extent that the countries in question are very similar in
all these mentioned respects, one would expect the process to become very
successful. The lesser the similarities the more troublesome and the less economic
prosperous the process of integration is expected to become.

Policy preferences: In order to obtain identical economic situations in individual
member countries with respect to various macroeconomic goals there need to be a
uniform perception of the preferable future economic develo pment. If this
precondition is not present; shocks (symmetrical as well as the more severe
asymmetrical one) will provoke desires to implement different economic policies
in different countries. It is therefore important to the participating countries to



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