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European Union

Updated on February 2, 2024
Article byWallstreetmojo Team
Reviewed byDheeraj Vaidya, CFA, FRM

What Is The European Union?

The European Union (EU) is a group or alliance of 27 countries that follow common economic, political, and social policies. This organization aims to promote peace & harmony and provide security within the member nations. Being one of the world’s most powerful trade bloc, it promotes democratic values in its member nations.

European Union

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The EU functions as a single unit with the cooperation of its member nations. It plays a vital role in maintaining peace in Europe. It creates an internal market that boosts the trade of the nations. EU member nations have benefited economically and politically from this alliance. However, they also face rivalry issues from this treaty. 

Key Takeaways

  • A European Union is a group of 27 countries that work together to create peace and security. It aims to improve economic and political cooperation between European countries.
  • European nations formed the European Community of Coal and Steel on April 18, 1951. Later, in 1993, it was renamed the European Union. 
  • The four institutions in the EU include the European Parliament, the Council of the European Union, the European Commission, and the Court of Justice.  
  • The European Union flag consists of 12 stars with a blue background. Brussels and Luxembourg are the European Union headquarters, and Euro is the officially shared currency.

European Union (EU) Explained

The European Union treaty brought together 27 European countries to combat and fight international economic and political issues. It integrates the member nations’ policies related to internal & international affairs and security. Brussels and Luxembourg are the main European Union headquarters. Besides that, they have 139 delegated to manage their foreign policies. 

Bodies of European Union

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The European Union has many bodies that constitute its work. The major ones are the European Parliament, European Council, Council of the European Union, European Commission, and Court of Justice. But, among all, the EU Parliament is the apex one. The number of members of Parliament (MEPs) is 705. Every five years, European citizens elect these members. Then, the Parliament selects a President who has the right to approve or dismiss any decision. 

The European Council consists of the elected heads of the EU countries. It sets various political policies and shapes their direction. However, they do not pass EU laws. The Council also has a President who gets elected every 2.5 years. In addition, meetings often referred to as European Summits, are held at the Council every four times a year. 

Governments of the EU countries constitute the Council of the European Union. They adopt the policies and budget given by the EU commission. They work with the Parliament to make decisions. For example, if there is an environmental issue, the environment and climate ministers must attend it. Likewise, the European Commission proposes EU laws, makes budgets, and ensures member nations apply them properly. If the countries face any issue, they can approach the Court of Justice.

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History

Let us look at the history of the European Union chronologically for a better understanding:

1940 – 1955

After the Second World War, several countries formed international groups like the United Nations and the French Union. By the late 1940s, European nations were integrating to recover from the war loss. For example, the French foreign minister Robert Schuman devised a plan on May 9, 1950, to combine European coal and steel production. Later, in 1952, the Coal and Steel European community came into force. It included countries like France, Germany, Belgium, Italy, Netherlands, and Luxembourg.

The European Union flag consists of a blue background with 12 stars in a circular pattern. The members adopted this design in 1955, serving as the official emblem.

1956-1970

The European Union countries tried to merge their other economic sectors during this period. Thus, in 1957, the Treaty of Rome was signed, giving rise to the European Economic Community. Here, nations promoted trade with each other, thus boosting economic growth

1970-2000

Likewise, in 1973, Denmark, Ireland, and the United Kingdom joined the EU. Soon within a decade, Greece, Portugal, and Spain joined hands. After the decline of communism in 1989, many other communists and eastern European countries applied. Finally, in 1993, the European Union, or EU, received its official name. The membership reached 15 nations, including Austria, Finland, and Sweden. 

2001-2010

In 2004, eight more nations also joined the EU. It included Estonia, Hungary, Lithuania, Czechia, the Mediterranean islands of Cyprus, Malta, Latvia, Slovakia, Poland, and Slovenia. Likewise, in 2007, Romania and Bulgaria became a part of it. 

2011-2020

In 2013, Croatia added its name to the other 27 countries. However, on 31st January 2020, the UK officially left the European Union treaty as it voted to leave the EU in a 2016 referendum known as Brexit. In contrast, countries like Turkey, Serbia, Macedonia, and others are possible candidates to apply for EU membership. 

Currency

Most European Union countries use the ‘Euro’ as their official currency. However, only 19 countries are in the Eurozone, while the remaining 8 follow different currencies. It includes Bulgaria, Croatia, Czechia, Denmark, Hungary, Poland, Romania, and Sweden. 

Since Denmark joined late, they have a choice to accept the euro. Likewise, Sweden also can choose to opt or not for the currency. However, the remaining countries must join the euro per the treaty. The European debt crisis in 2009 triggered the collapse of five Eurozone nations, including Greece. However, it recovered quickly from the crisis. 

Economy 

Among all, the economy of the European Union is the third-largest behind the United States and China. In 2020, it left behind the U.S., accounting for more than 15% of the world trade. Among the EU exports, automobiles, petroleum, and medication were the major ones. In contrast, the major imports were from China and exports to the U.S.

The EU’s total Gross Domestic Product (GDP) in 2019 (before the UK left) was approximately $17.9 trillion. A recent report anticipates an increase of 2.6% in 2022 and a rise of 1.6% in 2023 in the EU’s GDP. Moreover, in April 2022, the EU level of unemployment dropped from 8.6% to 6.8%. In addition, the EU’s greenhouse gas emissions have been reduced significantly. 

Benefits

EU membership has benefited many countries and boosted their economic growth. According to the Hungarian government, since their joining, they got access to 2.29 billion from the European Structural and Cohesion Funds. The citizens can travel easily within the member nations per the treaty. It creates harmony and peace among them. As a result, it also establishes a common market across internal borders for the free movement of goods and services.

The EU promises to provide extra security even if the union dissolves. Thus, countries refrain from conflicts with peaceful resolutions. Besides, they access each other’s technology which fosters economic growth. 

There is an increase in the GDP and employment rates of the countries. For example, in 2021, EU exports created more than 38 million jobs. Also, the companies get ease in the taxes and customs. Also, the EU gives customers access to various products and services.

European Union Vs Eurozone

Although the EU and Eurozone are sets of the same body, they differ slightly. The former is a political-economic body aiming at creating peace. In comparison, the latter is a subset of the former, having countries that follow the euro as their currency. There were 28 member countries in the former, out of which 19 belong to the latter. However, after the UK left the former, the membership dropped to 27. 

 European UnionEurozone
MeaningIt is an organization that consists of the majority of European countries.A subset of the EU consists of countries that follow the euro as their official currency.
PurposeTo maintain harmony and peace within the member nations.To coordinate and have one monetary policy.
Members27 countries19 countries

Frequently Asked Questions (FAQs)

Where is the Parliament of the European Union?

There are three EU Parliament offices: Strasbourg, Brussels, and Luxembourg. As a result, it conducts 12 sessions in Strasbourg and six meetings in Brussels annually. They pass the EU laws and decide on international agreements.  

Who is the president of the European Union?

Since it is an alliance, there is no one President of the union. Every institution of the EU has a separate president. Following are the Presidents of the EU institutions:
● European Parliament (Roberta Metsola)
● European Council (Charles Michel)
● Council of the European Union (changes every six months)
● European Commission (Ursula von der Leyen)
● European Central Bank (Christine Lagarde)
● European Court of Auditors (ECA) (Klaus-Heiner Lehne)

What must a country do to join the European Union?

If any country qualifies for the conditions of membership, it can become a part of the EU. These conditions include stable democracy, euro acceptance, and a functioning market economy. 

Who controls the European Union?

There is no one controlling the union. On the contrary, all the institutions and bodies of the EU and member nations work collectively to promote harmony and peace within Europe.  

This article has been a guide to What is European Union. We explain its history, currency, economy, and benefits and compare it with Eurozone. You can also go through our recommended articles on corporate finance –

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