After the second world war, unification attempts shifted from the power of the gun to the power of the currency. European powers along with the USA worked on a strong economic integration to prevent another world war.
The first move was initiated in 1951 by a group of 6 countries - France, West Germany, Belgium, Netherlands, Luxembourg and Italy. These continental powers saw most of the action both the world wars. Thus, the economic integration started from there. The West European countries were next to each other, similar in their development and incomes and thus the integration was quite successful.
However, in 1981 Greece was admitted into EU. This was unusual as Greece was way behind Western Europe in development. Greece was comparable to other eastern European countries and none of Eastern Europe was admitted into EU.
The first move was initiated in 1951 by a group of 6 countries - France, West Germany, Belgium, Netherlands, Luxembourg and Italy. These continental powers saw most of the action both the world wars. Thus, the economic integration started from there. The West European countries were next to each other, similar in their development and incomes and thus the integration was quite successful.
However, in 1981 Greece was admitted into EU. This was unusual as Greece was way behind Western Europe in development. Greece was comparable to other eastern European countries and none of Eastern Europe was admitted into EU.
Troubles with the Greek Economy
Free trade areas and economic integration often makes sense among comparable economies. However, Greece and rest of EU were quite dissimilar. Greek companies could not withstand the competition, while the wages of Greek employees were rapidly rising to level with rest of EU.
The result was that unlike every other EU power who enjoyed economic gains by being a part of the EU, Greece receded. Its economy declined
Free trade areas and economic integration often makes sense among comparable economies. However, Greece and rest of EU were quite dissimilar. Greek companies could not withstand the competition, while the wages of Greek employees were rapidly rising to level with rest of EU.
The result was that unlike every other EU power who enjoyed economic gains by being a part of the EU, Greece receded. Its economy declined
Impact on India-
1. Greece was admitted to EU and later became a part of the Euro. Trouble there will affect India's exports. India exports nearly $40 billion every year to EU [Rs. 2.4 lakh crores]
2. World financial markets are closely linked. Just as kids in a class catch cold if just one kid gets it, financial markets get screwed if one market goes down. Investors in US and elsewhere would pull money out of India and other "foreign" stocks for the losses in Greece [basic human psychology is that if we get into trouble with one person, we avoid everyone similar to them]. When investors pull money away, Indian stock markets will crash. That will affect Indian companies.
3.When world bond markets get into a problem, Indian government would find it tougher to borrow money and that would affect domestic investments & growth. It would also push down the currency [meaning imports will go up] and cause inflation.
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