Economy of the European Union
The economy of the European Union
is the joint economy of the member states of the European Union
(EU). It is the third largest economy in the world in nominal terms
, after the United States
, and the third one in purchasing power parity (PPP)
terms, after China and the United States. The European Union's GDP was estimated to be around $15 trillion (nominal) in 2020,
representing around 1/6 of the global economy.
the European Union
GNI per capita of EU
The European Union economy consists of an internal market
of mixed economies
based on free market
and advanced social models
. For instance, it includes an internal single market with free movement of goods, services, capital, and labor.
The GDP per capita (PPP)
was $43,188 in 2018,
compared to $62,869 in the United States, $44,246 Japan
and $18,116 in China.
There are significant disparities in GDP per capita (PPP) between member states ranging from $106,372 in Luxembourg
to $23,169 in Bulgaria
With a low Gini coefficient
of 31, the European Union has a more egalitarian
distribution of income than the world average.
EU's investments in foreign countries total $9.1 trillion, while the foreign investments
made in the European Union total $5.1 trillion in 2012, by far the highest foreign and domestic investments in the world. Euronext
is the main stock exchange of the Eurozone and the world's sixth largest
by market capitalisation
The European Union's largest trading partners
are the United States
, the United Kingdom
, South Korea
, and Canada
Since the beginning of the public debt crisis
in 2009, opposite economic situations have emerged between Southern Europe
on one hand, and Central
and Northern Europe
on the other hand: a higher unemployment rate
and public debt in the Mediterranean countries with the exception of Malta
, and a lower unemployment rate with higher GDP growth rate
in the Eastern and in Northern member countries. In 2018, public debt in the European Union was 80% of GDP, with disparities between the lowest rate, Estonia
with 8.4%, and the highest, Greece
or euro area (dark blue) represents 343 million people. The euro is the second-largest reserve currency in the world.
Beginning in the year 1999 with some EU member states
, now 19 out of 27 EU states use the euro
as official currency in a currency union. The remaining 8 states continued to use their own currency with the possibility to join the euro later. The euro is also the most widely used currency in the EU.
Denmark is not a part of the eurozone due to its special opt-outs concerning the later joining of the euro. In contrast, Sweden can effectively opt out by choosing when or whether to join the European Exchange Rate Mechanism
, which is the preliminary step towards joining. The remaining states are committed to join the euro through their Treaties of Accession.
Starting with Greece
in 2009, five of the 19 eurozone states
have been struggling with a sovereign debt crisis, by many called the European debt crisis
. All these states started reforms and got bailout packages (Greece
). As of 2015, all countries but Greece have recovered from their debt crisis. Other non-eurozone states also experienced a debt crisis and also went through successful bailout programmes, i.e. Hungary
(the latter before it joined the eurozone).
The overall budget for the period 2021-2027 is of €1.8 trillion combining the MFF of €1,074.3 billion with an extraordinary recovery fund of €750 billion, known as Next Generation EU
, to support member states hit by the COVID-19 pandemic
sector is by far the most important sector in the European Union, making up 74.7% of GDP, compared to the manufacturing industry
with 23.8% of GDP and agriculture with only 1.5% of GDP.
The agricultural sector
is supported by subsidies
from the European Union in the form of the Common Agricultural Policy
(CAP). In 2013 this represented approximately €45billion (less than 33% of the overall budget of €148billion) of the EU's total spending.
It was used originally to guarantee a minimum price
in the EU. This is criticised as a form of protectionism
, inhibiting trade, and damaging developing countries
; one of the most vocal opponents was the UK, the second largest economy within the bloc until its withdrawal
in January 2020, which repeatedly refused to give up the annual UK rebate
unless the CAP should undergo significant reform; France, the biggest beneficiary of the CAP and the bloc's third largest (now its second-largest) economy, is its most vocal proponent. The CAP is however witnessing substantial reform. In 1985, around 70% of the EU budget was spent on agriculture. In 2011, direct aid to farmers and market-related expenditure amount to just 30% of the budget, and rural development spending to 11%. By 2011, 90% of direct support had become non-trade-distorting (not linked to production) as reforms have continued to be made to the CAP, its funding and its design.
The European Union is a major tourist destination
, attracting visitors from outside of the Union and citizens travelling inside it. Internal tourism is made more convenient by the Schengen treaty
and the euro. All citizens of the European Union are entitled to travel to any member state without the need of a visa
France is the world's number one
tourist destination for international visitors, followed by Spain, Italy, and Germany. It is worth noting, however, that a significant proportion of international visitors to EU countries are from other member states.
The European Union has uranium, coal, oil
, and natural gas reserves
. There are six oil producers
in the European Union, primarily in North Sea oilfields
. The United Kingdom, whilst it was a member of the European Union was by far the largest producer; Denmark, Germany, Italy, Romania and the Netherlands all produce oil. If it is treated as a single unit, which is not conventional in the oil markets, the European Union is the 19th largest producer of oil
in the world, producing 1,241,370 (2013) barrels
a day.
It is the world's second largest consumer of oil
, consuming much more than it can produce, at 12,790,000 (2013) barrels a day. Much of the difference comes from Russia and the Caspian Sea
basin. All countries in the EU have committed to the Kyoto Protocol
, and the European Union is one of its biggest proponents. The European Commission published proposals for the first comprehensive EU energy policy
on 10 January 2007.
The European Union's member states are the birthplace of many of the world's largest leading multinational companies
, and home to its global headquarters. Among these are distinguished companies ranked first in the world within their industry/sector, like Allianz
, which is the largest financial service provider in the world by revenue; WPP plc
which is the world's largest advertising agency by revenue; Amorim
, which is the world's largest cork
-processing and cork producer company; ArcelorMittal
, which is the largest steel company in the world; Inditex
which is the biggest fashion group in the world; Groupe Danone
, which has the world leadership in the dairy products
Many other European companies rank among the world's largest companies in terms of turnover, profit, market share, number of employees or other major indicators. A considerable number of EU-based companies are ranked among the world's top-ten within their sector of activity. Europe is also home to many prestigious car companies such as Aston Martin
, Land Rover
, as well as volume manufacturers such as Automobile Dacia
The following is a list of the largest EU based stock market listed companies
in 2016. The ordered by revenue
in millions of US Dollars and is based on the Fortune Global 500
Fortune top 9 E.U. corporations by revenue (2016)
Economies of member states
European and bordering nations by GDP
(PPP) per capita in 2019
The twelve new member states of the European Union have enjoyed a higher average percentage growth rate than their elder members of the EU. Slovakia
has the highest GDP growth in the period 2005–2015 among all countries of the European Union (See Tatra Tiger
). Notably the Baltic states
have achieved high GDP growth, with Latvia
topping 11%, close to China, the world leader at 9% on average for the past 25 years (though these gains have been in great part cancelled by the late-2000s recession
Reasons for this growth include government commitments to stable monetary policy
, export-oriented trade policies, low flat-tax
rates and the utilisation of relatively cheap labour. In 2015 Ireland
had the highest GDP growth of all the states in EU (25.1%). The current map of EU growth is one of huge regional variation, with the larger economies suffering from stagnant growth and the new nations enjoying sustained, robust economic growth.
Although EU27 GDP is rising, the percentage of gross world product
is decreasing because of the emergence of economies such as China, India and Brazil.
Population and GDP per capita of European countries (2010)
In the tables below, colours indicate best and worst performer of the year concerned.
EU member states by real GDP growth rates
EU member states by GDP (nominal) in billions of €
EU member states by GDP (nominal) per capita in €
Unemployment rate by country in the EEA in March 2019.
The EU seasonally adjusted unemployment rate was 6.7% in September 2018.
The euro area unemployment rate was 8.1%.
Among the member states, the lowest unemployment rates were recorded in the Czech Republic (2.3%), Germany and Poland (both 3.4%), and the highest in Spain (14.9%) and Greece (19.0 in July 2018).
The following table shows the history of the unemployment rate for all European Union member states:
Unemployment rate by country (base month is March of each year)
There are two views of the relations between economic freedom and the European Union: In Europe membership of the European Union comes with increased economic freedom which reduces national regulations, while in the UK the withdrawal of the European Union is perceived as a possibility to achieve a level of economic freedom not availalable in the European Union.
Unemployment rates in selected European countries and in the EU28 between 01/2004 and 04/2014.
Public finance (with limits according to the Maastricht criterion)
The European Union is the largest exporter in the world
and as of 2008 the largest importer of goods and services.
Internal trade between the member states is aided by the removal of barriers to trade such as tariffs
and border controls
. In the eurozone
, trade is helped by not having any currency differences to deal with amongst most members.
The European Union Association Agreement
does something similar for a much larger range of countries, partly as a so-called soft approach ('a carrot instead of a stick') to influence the politics in those countries. The European Union represents all its members at the World Trade Organization
(WTO), and acts on behalf of member states in any disputes. When the EU negotiates trade related agreement outside the WTO framework, the subsequent agreement must be approved by each individual EU member state government.
10 largest trading partners (2016, UK included in the EU before Brexit)
Main trading partners (2016)
Trade with partner country groupings (2012)
Main trading partners 2008–2011
Trade balance, EU28 (as of 2018 before Brexit
Sources: Eurostat [ext_lt_intertrd]
Trade balance, EU27 (as of 2020 post Brexit
Sources: Eurostat, December 2019
Euro area international trade in goods surplus €23.1 bn €23.4 bn surplus for EU27
Comparing the richest areas of the EU can be a difficult task. This is because the NUTS
1 & 2 regions are not homogenous, some of them being very large regions, such as NUTS-1 Hesse
) or NUTS-1 Île-de-France
), whilst other NUTS regions are much smaller, for example NUTS-1 Hamburg
). An extreme example is Finland, which is divided for historical reasons into mainland Finland with 5.3 million inhabitants and Åland
, an autonomous archipelago with a population of 27,000, or about the population of a small Finnish city.
One problem with this data is that some areas are subject to a large number of commuters
coming into the area, thereby artificially inflating the figures. It has the effect of raising GDP but not altering the number of people living in the area, inflating the GDP per capita figure. Similar problems can be produced by a large number of tourists visiting the area. The data is used to define regions that are supported with financial aid in programs such as the European Regional Development Fund
. The decision to delineate a Nomenclature of Territorial Units for Statistics
(NUTS) region is to a large extent arbitrary (i.e. not based on objective and uniform criteria across Europe), and is decided at European level (See also: Regions of the European Union
NUTS-1 and NUTS-2 regions
The 10 NUTS-1
and NUTS-2 regions with the highest GDP per capita are almost all, except one, in the first fifteen-member states: Prague
is the only one in the 13 new member states
that joined in May 2004, January 2007 and July 2013. The leading regions in the ranking of NUTS-2 regional GDP per inhabitant in 2019 were the Grand Duchy of Luxembourg (260%), Southern Ireland
(240%), and Prague Czech Republic
(205%). Figures for these three regions, however, were artificially inflated by the commuters who do not reside in these regions ("Net commuter inflows in these regions push up production to a level that could not be achieved by the resident active population on its own. The result is that GDP per inhabitant appears to be overestimated in these regions and underestimated in regions with commuter outflows.".
Another example of artificial inflation is Groningen. The calculated GDP per capita is very high because of the large natural gas reserves in this region, but Groningen is one of the poorest parts in the Netherlands.
Among the 14 NUTS-2 regions exceeding the 160% level, two were in each Ireland and Germany and one each in Belgium, the Czech Republic, Denmark, France, the Netherlands, Poland, Romania, Slovakia and Sweden, as well as in the single region Grand Duchy of Luxembourg.
The NUTS Regulation lays down a minimum population size of 3 million and a maximum size of 7 million for the average NUTS-1 region, whereas a minimum of 800,000 and a maximum of 3 million for NUTS-2 regions.
This definition, however, is not respected by Eurostat. E.g.: the région
, with 11.6 million inhabitants, is treated as a NUTS-2 region, while the state Free Hanseatic City of Bremen
, with only 664,000 inhabitants, is treated as a NUTS-1 region.
Among the lowest regions in the ranking in 2019 most were in Bulgaria, with the lowest figure recorded in Severozapaden
. Among the 14 regions below the 50% level, five were in Bulgaria, four in Greece, two each in France and Hungary and one in Romania.
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The following links are used for the GDP growth and GDP totals (IMF
Last edited on 28 July 2021, at 10:25
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