Impossible Trinity and EU
1. Impossible Trinity
The theory of impossible trinity is a very simple theory that helps us understand international political economy.
2. History of Europe
Germany, which caused World War I and II, is a powerful nation in Europe.
The source of its national power is its strong industry.
In other words, it's modern industrial capacity.
Specifically, the Ruhr industrial area was one of the most important centers of German heavy industry.
In the modern era of highly developed heavy industry, steel and energy sources such as coal and oil are of great importance.
Peace and solidarity in Europe truly began with the European Coal and Steel Community.
3. Optimum Currency Area
Today Europe integrated not only steel and energy, but even currencies, which are the foundation of national economies.
Think by the theory of impossible trinity.
In free-market countries, capital moves freely, and the finance ministries and central banks of each country determine fiscal and monetary policies as exchange rates move to reflect the conditions in the international economy.
Each country's currency appreciates or depreciates in a moving exchange rate, reflecting each country's respective economic conditions.
In the midst of this vortex, governments make fiscal and monetary policy decisions, taking into account the conditions of their national economies.
The international economy can be thought of as a complex interaction of the economies and policies of countries around the world.
4. Situation in Europe
Germany is a powerful country in Europe.
Within the EU, there are a number of countries with relatively smaller economies than Germany.
If Germany were a single country, its currency would appreciate and would be adjusted in the international economy, but thanks to the rest of the EU, it can benefit from a weaker currency.
Countries with smaller economic power can't benefit from depreciation of their currencies, which would otherwise be adjusted in the international economy.
When countries with large differences in economic capacity form a single currency area, there will be countries whose currencies will depreciate and others whose currencies will appreciate.
This is shared by economists as one of the essentials of the EU economy problems.