European Union (EU)

A political and economic union of states located in Europe.

Author: Parul Gupta
Parul Gupta
Parul Gupta
Working as a Chief Editor, customer support, and content moderator at Wall Street Oasis.
Reviewed By: Hassan Saab
Hassan Saab
Hassan Saab
Investment Banking | Corporate Finance

Prior to becoming a Founder for Curiocity, Hassan worked for Houlihan Lokey as an Investment Banking Analyst focusing on sellside and buyside M&A, restructurings, financings and strategic advisory engagements across industry groups.

Hassan holds a BS from the University of Pennsylvania in Economics.

Last Updated:January 24, 2024

What Is the European Union (EU)?

The European Union is a political and economic union of states located in Europe. The association comprises twenty-seven member states and estimates a population of around 447 million.

The Union and EU citizenship were framed after the Maastricht Treaty was enacted in 1993. 

It originates from the treaties below: 

  • The Treaty of Paris established the European Coal and Steel Community in 1951 and 
  • The Treaty of Rome established the European Economic Community in 1957.

The six founding members, also known as the inner six, are Belgium, Italy, France, Luxembourg, West Germany, and the Netherlands. 

The United Kingdom withdrew from the European Union on January 31, 2020, and became the only sovereign country that has left the EU. This withdrawal was termed Brexit, meaning British Exit.

The member countries of the European Union with their year of joining are:

  1. Austria, 1995
  2. Belgium, 1958
  3. Bulgaria, 2007
  4. Croatia, 2013
  5. Republic of Cyprus, 2004
  6. Czechia, 2004
  7. Denmark, 1973
  8. Estonia, 2003
  9. Finland, 1995
  10. France, 1958
  11. Germany, 1958
  12. Greece, 1981
  13. Hungry, 2004
  14. Ireland, 1973
  15. Italy, 1958
  16. Lithuania, 2004
  17. Latvia, 2004
  18. Luxembourg, 1958
  19. Malta, 2004
  20. Netherlands, 1958
  21. Poland, 2004
  22. Portugal,1986
  23. Romania, 2007
  24. Spain, 1986 
  25. Sweden, 1995
  26. Slovakia, 2004
  27. Slovenia, 2004

History of the European Union

During the interwar period, the time between the end of World War I and starting of World War II was marked from November 11, 1918, till September 1, 1939.

The ultimate issue was that European markets were interdependent with the larger US market. European markets were seen as interdependent yet confrontational. It raised the need for economic integration. 

John Maynard Keynes advocated the formation of the European Economic Union in 1920 and expressed the need to establish a free trade union. He also suggested the imposition of no protectionist tariffs.

history of european union

Richard von Coudenhove-Kalegri founded the Pan-European Movement and made a massive impact on the Prime Minister of France of that time, Aristide Briand, resulting in a support speech being presented to him before the assembly.

Sir Winston Churchill in 1943 talked about the "restoration of Europe's true greatness" and the creation of the "Council of Europe" to build peace amongst the European nations and bring togetherness.

citizen of europe

After the Second World War, European integration was seen as a great solution to extreme nationalism. Winston Churchill 1946 also advocated the United States of Europe.

In 1948, the creation of the College of Europe and the European Movement International was a result of the Hague Congress, which ensured that the future leaders of Europe lived and studied together.

By 1949 significant step was made to bring the nations of Europe together by forming the Council of Europe with ten members. The council's main focus was on democracy and human rights.

In 1952, six out of ten members withdrew from the council and created the European Coal and Steel Company, which marked its importance by planning large amounts of Marshall Plan funds and economic integration.

The founders of the European Union are:

  1. Alcide de Gasperi from Italy
  2. Jean Monnet from France
  3. Robert Schuman from France
  4. Paul Henri Spaak from Belgium
  5. Konrad Adenauer from West Germany
  6. Joseph Bech from Luxembourg
  7. Johan Beyen from the Netherlands
  8. Winston Churchill from the United Kingdom
  9. Walter Hallstein from West Germany
  10. Cisco Manshott from the Netherlands
  11. Altiero Spinelli form Italy

The three main treaties signed were:

  1. The Treaty of Rome was signed in 1957 and passed in 1958. It lasted until 1992.
  2. Maastricht Treaty is the former establishment of the EU which came into force on November 1, 1993. The treaty was held from the period from 1992 to 2007.
  3. The Treaty of Lisbon runs from 2007 to the present.

Aims and Values Of The EU

The purposes of the European Union are:

  • It was formed to promote peace and ensure the values and well-being of the citizens.
  • It aimed at establishing an internal market independent or relatively lesser dependent on the US market.
  • It intended to offer security, freedom, and justice with no internal borders and take appropriate measures to regulate immigration and asylum and reduce or prevent crimes at external walls.
  • The key aim was to achieve sustainable development, which marked balanced economic growth, a highly competitive market economy, price stability, full employment, and social progress.
  • The other objectives were to protect and improve the quality of the environment, encourage technological and scientific progress, and combat discrimination and social exclusion.
  • Along with this, promoting social justice, equality between genders, protecting children's rights, and social protections were the areas of concern of the EU.
  • Apart from all this, the EU aimed to enhance economic, territorial, and social cohesion and solidarity among the countries in the Union.
  • They restored respect in terms of culture and language.
  • It also aimed to establish an economic and monetary union of the countries whose currency was the Euro.
  • In terms of the wider world, it is aimed at 
    • Upholding and promoting interests and values all around
    • Contributing to the world's peace and security 
    • Observance of international laws 
    • Making a significant contribution toward solidarity and a feeling of mutual respect among the citizens
    • Promoting free and fair trade
    • Eradication of poverty
    • Protection of human rights

The values on which the European Union was framed are discussed below:

  • Human dignity: It constitutes the fundamental basis of fundamental rights. It must always be protected and respected as it is inviolable as it is the recognition that human beings possess an exceptional value.
  • Freedom: The EU Charter of fundamental rights has set its aim for protecting individual freedom. It includes respect for private life, freedom of expression, freedom of religion, freedom of thought, freedom of information, and freedom of movement.
  • Democracy: The functioning was based on representative democracy leading to all European citizens' enjoyment of political rights. Adults were given the right to contest and vote in the elections of the European parliament.
  • Equality: It states that all citizens are equal before the law. The principle of equality is the basis of European integration. The focus on equal pay for similar work was a part of the Treaty of Rome.
  • The rule of law: Everything in this Union is set up on democratically agreed and voluntary treaties. An independent judiciary undertakes law and justice.
  • Human rights: These are protected by the EU Charter of Fundamental Rights. Rights covered are based on sex, ethnic origins and racial origins, belief and religion of people, age and sexual orientation, and due access to justice.

European Union's Economy

The EU's economy is the second-largest in the world, the first being the United States. It is the collaborative economy of the member states of the Union.

It accounts for having a third position in purchasing power parity terms. With a population of 447,706,209 approx, the nominal GDP of the EU is $17.9 trillion, and the purchasing power parity is$23.73 trillion.

The Euro is the second largest currency used by 19 members out of 27 and all over 25 countries. It is the second most traded currency after the United States. The Maastricht Treaty set out convergence criteria for joining the Euro in 1992.

To ensure continuous economic and fiscal stability and convergence, the Stability and Growth Pact came into existence in 1997. Since 2009 many states have been observed suffering from the sovereign debt crisis or the European debt crisis.

The overall budget combining the Multiannual Financial Framework and the special recovery fund for 2021- 2027 is €1.8 trillion, with MMF being €1,074.3 billion and the recovery fund being €750 billion.

This recovery fund, also known as the Next Generation EU fund, was formed to support the Covid-19 pandemic that hit EU member states.

The major contributing sectors are discussed below.

Services

It accounts for contributing up to 74.7% of GDP. Financial services are well developed. Though companies rely on bank lending, a shift was observed towards raising funds through the capital market as an initiative of CMU.

According to the Global Financial Centers Index, two of the four largest financial centers are outsiders to the EU. The outsiders are London and Zurich, and the insiders are Frankfurt and Luxembourg City.

In a survey done by the European Investment Bank in 2021, long-term COVID-19 effects were observed in 58% of the firms. It also impacted sales of the Union. Around 35% of the SMEs survived just because of government assistance.

Agriculture

Agriculture contributes 1.5% to GDP and is mainly supported by the subsidies provided in the Common Agriculture Policy. A considerable amount of spending is done to guarantee a minimum price for the product to the farmers.

However, this minimum price is criticized for damaging developing countries and inhibiting trade and is seen as a form of protectionism. Until 2020, the UK was the primary opponent of this policy.

Tourism

The EU is a major attraction for tourists, and a more significant number of outsiders visit the destinations here. 

For internal tourists members of the state, tourism is made easy by removing the need for a visa to travel internally. The Schengen Treaty facilitated the ease.

Energy

The EU is rich in coal, uranium, oil, and natural gas reserves. The Union accounts for six oil producers. The EU is also among the largest oil consumers, consuming more significantly than the production.

The significant consumption of oil is seen in the transport sector. The EU is the most prominent advocate of the Kyoto Protocol. It also proposed the first EU energy policy on January 10, 2007.

The EU is the largest exporter and importer of goods and services. Internal trade was promoted by removing barriers to employment, like tariffs and border control. The Euro, avoiding currency differences, facilitated trade among members. The EU also has its representation in the World Trade Organisation. 

The central decision-making bodies of the European Union are:

  • The European Commission is an executive body responsible for implementing decisions, proposing legislation, upholding treaties, and managing the business of the EU.
  • The European Council, established in 1975 and formalized as an institution in 2009, is a collective body defining overall political direction and priorities.
  • The European Parliament is the only parliamentary institution directly elected by citizens of the EU.
  • The Council of the European Union represents the executive government of the EU's member states. Here government ministers meet to discuss, adopt, and amend laws and policies.
  • The European Central Bank and monetary policy administrator are included. It also sets the interest rate, which controls the money supply and inflation.
  • The Court of Justice of the EU interprets the law and settles legal disputes between institutions and national governments. 
  • The European Court of Auditors investigates the adequate management of finances.
  • The European system of financial supervision, introduced in 2010, consists of :
    • The European Systemic Risk Board. 
    • Three  European supervisory authorities - the European Banking Authority, the European Securities and Markets Authority, and the European Insurance and Occupational Pensions Authority.

 Researched and authored by Parul Gupta | LinkedIn

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