Introduction

Not long ago, the British announced its vote to depart the European Union (EU). This act has begun taking an economic as well as a political tall on the continent of Europe. This is not an unusual thing for Europe given the already existing division between north and south. However, the study shows that the preparation for Britain to exit the union will further separate these countries with north fearing that this departure will influence the southern struggling states. In his case, the paper will look at the differences between the north and south countries within EU, through the lens of barriers arising from Italy’s debt among other issues. In relation to the obstacles, potential solutions that may positively impact the connection between the two parties will be suggested.

The differences between the countries of the “ north” and those of the “south” within the European Union

Europe’s economic crisis is evident to have thrown a relief into the economic disparity between its northern half “richer” and the southern half “poorer.”  One reason behind the differences is Italy’s indebted Banks which are as a result of sluggish economic growth, lack of reforms and the rising rate of unemployment. Research shows that Italian banks hold approximately 360 billion euros which is equivalent to $ 398 billion loans that is possibly never going to be repaid in full. These loans roughly represent 17% of the total loans the country has compared to the 6% average of the EU. Recently, the Italian government developed a special fund aimed at buying bad debt form those banks in distress. However, the 4 billion euros are not still enough to create a sustainable solution for the country’s foundering banking sector. In the last quarter, Italian’s economy was evident to have gone down by 0.2%. While this is happening, France which seems to have the same problems as Italy registered an increase in its economy by 0.3%.  However, the Italian government asserts that the problems arise from abroad where net trade was favorable for Q2 while countries like France and Spain were solid at +0.7% and +0.3% respectively. Moreover, the gap between that of the Eurozone and the Italian GDP growth has kept widening due to the possibility of the adverse market reactions as well as lack of confidence.A further evident to the problems Italy is facing is due to the British referendum.

Deficits in Spain and Portugal

Northern Europe has announced a similar stance on the high deficits the south is facing.  For instance, on 7^th July, the European Commission announced a recommendation on the imposition of sanctions on countries such as Portugal and Spain for having failed to take effective actions that could have possibly shrank their deficits. For instance, in 2015, the deficit for Spain was around 5.1% of the GDP while that of Portugal ranging at 4.4% above the commission’s target of 3% and 4.2%. However, the imposition of sanctions will depend on the EU members.  This is not the first time for such an action. Deficit-related sanctions have long been raising questions in the EU. For instance, since the onset of financial crisis in the Eurozone, “north” nations like Germany, Finland, and the Netherlands have tried becoming lenient with the southern counterparts since they feared the incentive which could undertake structural reforms. However with the issue of the British referendum seemingly has added to the complexity of the issue. The “north” has become aware of the loss of Britain that has been market friendly. And so its departure will imply a shift in the power balance in economies between the north and the south. Southern nations, on the other hand, believe that the EU has a role of showing a higher level of empathy for their plight in case the EU hopes to put an end to the rising Euroscepticism.

Obstacles in Overcoming these barriers

Europe’s economic crisis has led to the economic disparity between the “north” which is considered richer and the “ south” considered poorer. The barriers to this difference can be eliminated if only obstacles such industrial makeup, a human capital potential in every nation, as well as demographic profile, can be solved. In other words, the imbalances in the economy, development, and infrastructure are major obstacles. For instance, transport infrastructure like the highways and even rail networks in Northern Europe ( Germany, France, and Netherland) are more developed here than in the “south.” Southern Europe characterized by nations such as Spain, Greece, Italy, Portugal and Balkan encounter higher costs of trade because they lack natural or human-madeinfrastructures given the mountainous geography that separates them from the “north” core. Another obstacle is that the “north” is blessed with the natural transport networks while the “south” is not. Europe’s waterways flow through the northwest. The Rhine connects Germany, France, and Switzerland while river Maas and its waterways linking Luxembourg, Belgium, and northern France. Despite the fact that interconnection is vital, the Southern part of Europe lacks the dense waterways making it difficult to reach its internal markets without spending much of its resources in constructing infrastructure networks.

Potential solutions

Given the history of the EU it is evident that despite the many efforts to curb the crisis, a lot still needs to be done through the commission, the EU Central Bank and even the individual governments. In this case. The policy where the commission can be given greater power can play a vital role in the issue. This is so since through the powers, the commission can effectively monitor the deficit spending of state members and as a result, admonishing nations that fail to abide by the set rules.

Creating a full banking union to be regulated by the European Central Bank (ECB) can bring about the differences in the crisis. The ECB can ensure that the member states are willing to effectively squeeze their annual deficits below 3% of the GDP and as a result, introduce the German-style reforms that are evident in deregulating labor markets as well as enhancing competition. Also, creating a transfer union to ensure the redistribution of gains or profits from the richer north to the poorer south. However, this can only be possible if the EU governments launch suitable coordinated actions that will bring together its members as well as boost growth. By so doing, the large scale social conflict between the north and the south will have been eradicated, thus creating harmony. Arguably, through measures that strengthen European identity, it will be easy to construct a reliable and significant sense of European cohesion.

Conclusion

For decades, the EU has been on the frontline in ensuring there exists peace as well as prosperity in Europe. However, the case is today different given the problems between the north and the south. The response to this crisis had negatively impacted on the economy and political factors. Arguably, the decision to adequately subsidize the debt for the southern part in return for austerity has slowed down the economic growth in this region. Although most of the European elites have come out to offer support on the need for deeper integration, the crisis remains unsolved. The problem is worse since the fiscal union has threatened to intensify the issue of technocracy. In this case, the EU can survive only if there exist reforms mentioned above to consolidate economic growth that can revive the south.

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