The European Union is the second largest economy in the world in nominal terms and according to purchasing power parity (PPP). The European Union's GDP was estimated to be EUR15 trillion (nominal) in 2015, representing ~22% of global economy (nominal global GDP).
The euro, used by 19 of its 28 members, is the second largest reserve currency as well as the second most traded currency in the world after the United States dollar. The euro is the official currency in the eurozone and in six other European countries, officially or de facto.
The European Union (EU) economy consists of an internal market of mixed economies based on free market and advanced social models. The GDP per capita (PPP) was $37,800 in 2015, compared to $57,084 in the United States and $14,340 in China. With a low Gini coefficient of 31, the European Union has a more egalitarian repartition of incomes than the world average.
Euronext is the main stock exchange of the Eurozone and the 7th world largest by market capitalisation. Foreign investments made in the European Union total $5.1 trillion in 2012, while the EU's investments in foreign countries total $9.1 trillion, by far the highest domestic and foreign investments in the world.
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 exeption of Malta, and a lower unemployment rate with higher GDP growth rate in the Eastern and in Northern member countries. In 2015, public debt in the European Union was 85% of GDP, with disparities between the lowest rate, Estonia with 9.7%, and the highest, Greece with 176%.
The seven largest trading partners of the European Union are the United States, China, Switzerland, Russia, Japan, Turkey and Norway. The EU is represented as a unified entity in the World Trade Organization (WTO), the G-20 and G7, alongside with the EU's member countries participating.
Video Economy of the European Union
Currency
Beginning in the year 1999 with some EU member states, now 19 out of 28 EU states use the euro as official currency in a currency union. The remaining 9 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.
Since 1992 the Maastricht treaty sets out rigid economic and fiscal convergence criteria for the states joining the euro. Starting 1997, the Stability and Growth Pact has been started to ensure continuing economic and fiscal stability and convergence.
Denmark and the United Kingdom, not members of the eurozone, have special opt-outs concerning the later joining of the euro. Also, 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, Ireland, Portugal, Spain, Cyprus). 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, Romania and Latvia (the latter before it joined the eurozone).
Maps Economy of the European Union
Budget
The operation of the EU has an agreed budget of EUR141 billion for the year 2011, and EUR862 billion for the period 2007-2013, this represents around 1% of the EU's GDP.
Sectors
Services
The services 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.
Financial services are well developed within the Single Market of the Union. Companies have a greater reliance on bank lending than in the United States, although a shift towards companies raising more funding through capital markets is planned through the Capital Markets Union initiative. Many EU cities are financial centres, nonetheless financial institutions and companies located in the United Kingdom provide significant financial services to companies located within the EU. According to the Global Financial Centres Index, after the United Kingdom has left the EU in March 2019, the two largest financial centres in Europe, London and Zurich, will be outside the European Union. While the two largest centres within the EU will be Frankfurt and Luxembourg City. London is also a leading international centre for professional services which are sold to clients across the EU.
Agriculture
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 EUR45billion (less than 33% of the overall budget of EUR148billion) of the EU's total spending. It was used originally to guarantee a minimum price for farmers in the EU. This is criticised as a form of protectionism, inhibiting trade, and damaging developing countries; one of the most vocal opponents is the UK, the second largest economy within the bloc, which has repeatedly refused to give up the annual UK rebate unless the CAP undergoes significant reform; France, the biggest beneficiary of the CAP and the bloc's third 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.
Tourism
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, the United Kingdom and Germany. It is worth noting, however, that a significant proportion of international visitors to EU countries are from other member states.
London, the capital of the United Kingdom is also the world's most visited city (16.9 million visitors in 2012) and the highest in tourism receipts, shortly followed by Paris with 16 million visitors.
Energy
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 is 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.
Companies
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; Air France-KLM, which is the largest airline company in the world in terms of total operating revenues; 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 market.
Anheuser-Busch InBev is the largest beer company in the world; L'Oréal Group, which is the world's largest cosmetics and beauty company; LVMH, which is the world's largest luxury goods conglomerate; Nokia Corporation, which was the world's largest manufacturer of mobile telephones; Royal Dutch Shell, which is one of the largest energy corporations in the world; and Stora Enso, which is the world's largest pulp and paper manufacturer in terms of production capacity, in terms of banking and finance the EU has some of the worlds largest notably HSBC and Grupo Santander, the largest bank in Europe in terms of Market Capitalisation.
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 worlds' top-ten within their sector of activity. Europe is also home to many prestigious car companies such as BMW, Ferrari, Jaguar, Land Rover, Maserati, Mercedes, Porsche, as well as volume manufacturers such as Fiat, PSA group, Renault and Volkswagen.
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.
Economies of member states
Wealth
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 (26.3%). 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 EU28 GDP is on the increase, the percentage of gross world product is decreasing because of the emergence of economies such as China, India and Brazil.
Labour market
The EU seasonally adjusted unemployment rate was 7.8% in April 2017. The euro area unemployment rate was 9.3%. Among the member states, the lowest unemployment rates were recorded in the Czech Republic (3.2%), Germany (3.9%) and Malta (4.1%), and the highest in Spain (17.8%) and Greece (22.5% in March 2017).
The following table shows the history of the unemployment rate for all European Union member states :
Public finance
Trade
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.
Regional variation
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 (21,100 km²) or NUTS-1 Île-de-France (12,011 km²), whilst other NUTS regions are much smaller, for example NUTS-1 Hamburg (755 km²) or NUTS-1 Greater London (1,580 km²). 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, including Greater London, 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 two, in the first fifteen-member states: Prague and Bratislava are the only ones 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 2016 were Inner London-West in the United Kingdom (611% of the average), the Grand Duchy of Luxembourg (257%) and Southern and Eastern Ireland (217%). Figures for these three regions, however, are 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 19 NUTS-2 regions exceeding the 150% level, five were in Germany, three in the United Kingdom, two in Austria, one each in Belgium, the Czech republic, Denmark, France, Ireland, the Netherlands, 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.¹ This definition, however, is not respected by Eurostat. E.g.: the région of Île-de-France, 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.
Source: Eurostat
Among the ten lowest regions in the ranking in 2016 most were in Bulgaria, with the lowest figure recorded in Severozapaden. Among the 21 regions below the 50% level, five were in Bulgaria and Poland each, four in Hungary, three each in Romania and Greece, and one in France.
Source: Eurostat
See also
- Currencies of the European Union
- European Investment Bank
- European Union value added tax
- List of largest European companies by revenue
Notes
References
- ^ Cells shaded in green indicate forecast figure
- ^ One region may be classified by Eurostat as a NUTS-1, NUTS-2 as well as a NUTS-3 region. Several NUTS-1 regions are also classified as NUTS-2 regions such as Brussels-Capital or Ile-de-France. Many countries are only classified as a single NUTS-1 and a single NUTS-2 region such as Latvia, Lithuania, Luxemburg and (although over 3 million inhabitants) Denmark.
- "Euro-indicators News release" (PDF). June 2005 inflation data. Archived from the original (PDF) on 25 June 2006. Retrieved 18 July 2005.
- "Euro-indicators News release" (PDF). May 2005 unemployment data. Archived from the original (PDF) on 25 June 2006. Retrieved 18 July 2005.
- "World Bank". GNI data (July 2005). Retrieved 4 August 2005.
The following links are used for the GDP growth and GDP totals (IMF):
- Link to 10 new memberstates Growth Rates
- Link to Growth Rates for the Eurozone
- Link to non-Eurozone EU15 countries Growth Rates
External links
- European Commission - Economic and Financial Affairs
- Eurostat - Statistics Explained - All articles on economy and finance
Source of article : Wikipedia
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