European Union (EU)

What exactly is the European Union?

The European Union (EU) is a political and economic union of 27 different countries. The EU promotes democratic values in its member nations and is one of the world's most powerful commercial blocks. About 19 EU countries use the euro as their official currency. After World War II, the European Union emerged from a desire to improve European economic and political cooperation.

In 2021, the EU's gross domestic product (GDP) was supposed to be $14.45 trillion. This worked out to reach approximately $15.49 trillion. However, for the same time period, the US GDP was roughly $23 trillion.

The European Union's History (EU)

The European Union evolved from the European Coal and Steel Community, which began in 1950 with only six member nations: Belgium, France, Germany, Italy, Luxembourg, and the Netherlands. The European Economic Community was established in 1957 after the Treaty of Rome, and it was called only the European Community (or EC) later.

This establishment aided in the integration of the member countries' foreign, security, and internal policies. In the same year, the EU formed a single market to facilitate the free movement of goods, services, people, and money across its borders. Initially, the EC focused on unifying agriculture policy and lowering trade barriers. Denmark, Ireland, and the United Kingdom participated in the initial wave of expansion in 1973. The first direct elections to the European Parliament were conducted in 1979.

Establishment of a Common Market

The Single European Act of 1986 contributed to a six-year framework for establishing a common European market through the harmonization of state legislation. In 1993, the Maastricht Treaty was signed, which replaced the European Community (EC) with the European Union (EU). The euro was adopted as a common unified currency for participating EU members on January 1, 1999.

Denmark and the United Kingdom secured "opt-out" clauses that allowed nations to keep their currencies if they wanted to. Many subsequent EU members have either not reached or have chosen not to meet the criteria to adopt the euro.

Europe's Debt Crisis

Following the global financial crisis of 2007-2008, the EU and the European Central Bank struggled to deal with the enormous national debts and weak development structure of countries like Italy, Spain, Portugal, Ireland, and Greece.

Greece and Ireland got EU financial bailouts in exchange for implementing fiscal austerity measures in 2010. Portugal came second in 2011. Greece needed a second bailout in 2012.

The crisis abated when the European Union and the European Central Bank launched a series of steps to support the afflicted nations' sovereign and banking-sector loans.

Long-Term Goals

The European Stability Mechanism (ESM) was founded in October 2012 to aid EU states suffering severe financial issues, including an inability to access bond markets. The ESM replaced the European Financial Stability Facility's temporary backstop, which had existed since 2010.

The European Central Bank executed a series of "targeted longer-term refinancing operations" in 2014, 2016, and 2019 to provide EU financial institutions with competitive borrowing terms. The European Union eased the terms of the 2011 Stability and Growth Act, which mandated member countries to aim for public debt of less than 60% of GDP and annual government budget deficits of less than 3% of GDP over the medium term.

The next year, the Single Resolution Board, a new EU organization, took over responsibility for resolving bank failures in the Eurozone.

North-South Issues in the EU

While the relief measures addressed the crisis, they did not address one of its root causes: the large discrepancy in income and economic development between the European Union's largely industrialized north and its impoverished southern periphery, which remained less urbanized and more reliant on agriculture.

Because the industrialized north and rural south shared the same currency, struggling southern economies could not profit from the currency decline to boost their international competitiveness. Without currency depreciation, southern exporters would eventually find it difficult to compete with their northern counterparts, who benefit from greater productivity development.

How does it work in the United States?

Federal transfer payments in the United States assist in overcoming comparable economic imbalances between regions and states.

Those with higher average incomes provide a disproportionately large amount of government revenue, whereas states with lower average incomes contribute a greater part of federal outlays.

The COVID-19 epidemic triggered suitable expenditure measures in the European Union, which some have described as "an imperfect and weak fiscal union in the making".

Brexit's Time Bomb

After previously dismissing requests for a public referendum on the United Kingdom's European Union membership, Conservative Prime Minister David Cameron pledged and organized a poll in 2016. At the time, the United Kingdom Independence Party, which was opposed to EU membership, was gaining ground.

After underperforming in late polls, the Leave option won with around 52% of the vote on June 23, 2016. Cameron resigned the next day. Due to this, the United Kingdom was expected to formally leave the EU on January 31, 2020.

The UK Parliament's Intelligence and Security Committee produced a report in July 2020 that noted several media reports of Russian activities in favor of the Leave option. It slammed the government for failing to investigate Russian influence in UK politics.

Union Membership in the European Union

To become a member of the EU, applicants must fulfill specific criteria known as the "Copenhagen criteria". The following are the main criteria:

• Stable institutions that ensure the rule of law, democracy, human rights, and minorities' respect and protection;
• In the EU, a functioning market economy and the ability to deal with market pressures and competition;
• The capacity to accept and effectively carry out membership commitments, such as adhering to the goals of economic, political, and monetary union.

Following the departure of the United Kingdom in early 2020, the EU now has 27 member states.

European Union Governing Institutions

The European Union is in charge of three major legislative institutions:

• European Union Parliament

The European Parliament is elected by EU residents and is put in charge of legislation, oversight, and budget creation.

• The European Union Council

With one minister from each member state, it represents the governments of the EU's member states. It is primarily responsible for coordinating policy, enacting EU legislation, and representing member states' views.

• European Commission

The EU's politically autonomous executive branch is in charge of drafting and implementing legislation, administering policies, assigning finances, and representing the EU globally.

Trading within the European Union

The European Union is the world's greatest trade power and single-market region. In terms of the economic scale, the EU's GDP in 2019 was $15.59 trillion, following only behind the United States. One of the founding principles of the European Union was free commerce within the union. Trade among member countries is free, with no taxes or restrictions preventing the interchange of products and services across borders.

International Trade and the European Union

In addition to free trade among member countries, the EU supports the principle of open economies in overseas commerce. The EU also signed other trade treaties with various nations, including:

• Accord EU-Canada
• Japan-EU Agreement
• Singapore-EU Agreement
• EU-Australia Treaty

With each trade deal, the EU seeks to reduce or eliminate tariffs, facilitating the cross-border movement of products and services for exporters and importers. The top ten trading partners of the EU are the USA, China, Switzerland, Russia, Turkey, Japan, Russia, India, and South Korea.

The top five EU exports in 2019 were:

• Machinery and Equipment (276.8bn euros)
• Automobiles (241.2bn euros)
• Pharmaceuticals (205.2bn euros)
• Chemicals (177.7bn euros)
• Products relating to computers, electronics, and optics (171.7bn euros)

The top five imports into the EU were:

• Products relating to computers, electronics, and optics (260.2bn euros)
• Natural gas and crude petroleum (249.6bn euros)
• Chemicals (132.4bn euros)
• Equipment and machinery (124.8bn euros)
• Automobiles (114.6bn euros)

Furthermore, EU nations are the major importers of cocoa beans, which explains the chocolate expertise of the Netherlands and Germany, as well as Europe's high per-capita chocolate consumption.

FAQ's

How is the European Union evolving in the twenty-first century?

Western European states were the founding members of the European Union. In the twenty-first century, the EU expanded its membership to include the Eastern European governments that emerged following the collapse of the Soviet Union. Bulgaria, Croatia, the Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia are some of the current members of its 27 constituent countries.

What is the European Union's primary goal?

The European Union was formed to bring Europe's nations closer together for everyone's economic, social, and security well-being. It is one of the initiatives made after WWII to unify Europe's nations into a unified body.

Why was the European Union established?

In the years following World War II, the European Union's overriding goal was to stop the destructive conflicts that had ravaged Europe for generations. At the same time, it became evident that a unified Europe would have considerably greater economic and political strength than individual post-war states.