Economy of the European Union

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The European Union has the world's largest economy, probably slightly larger than that of the United States of America with a 2005 GDP of 12,865,602 million vs. 11,734,300 million (USD figures) (using nominal US Dollar GDP) according to the International Monetary Fund. [link] Using the purchasing power parity method of computing GDP, the preferred comparative measure of economic output, the EU and the US economies are virtually the same size.[link] As the EU has 50% more people than the US, but produces about the same economically, the average EU citizen enjoys a per capita share of domestic product of about USD $28,100, while in the US the per person GDP is over USD $40,000. One needs to consider, however, that welfare states including Canada tend to have lower a GDP per capita and that the EU contains countries of relatively low development in eastern Europe. [link]

It is estimated that in the period 2006-2020 the European Union's economy will grow at an average rate of 2.1% per annum, against the United States growing at an annual rate of almost 3.0%, however if growth is taken per head the figures are 2.5% per annum for the US and 2.0% for the EU. [link]

The EU set itself an objective under the Lisbon Strategy to make the European Union "the world's most dynamic and competitive economy" by the year 2010, but it is now generally accepted that this target will not be met. The signficant challenges facing the EU economy include demographic issues like a low birth rate and aging population; while important strengths include the expected gains earned through enhanced free trade and high growth in newer EU members in particular.

The European Union's economic growth has been below that of the United States most years since 1990, while its unemployment rate has generally been higher. Many point out that there are benefits accruing to EU citizens (the "social wage") that are not visible in traditional economic data - like enhanced time off from work, social protection and other benefits. In recent years, the economic performance of several of its key members, including Germany and Italy, has been a matter of serious concern to policy makers.

Economy of the European Union
Currency	1 Euro (€) = 100 cents (Official EU currency, and used in the twelve countries of the Eurozone)
Other Currencies in Member States	1 Cypriot pound = 100 cents 1 Czech koruna = 100 haléřů 1 Danish krone = 100 øre 1 Estonian kroon = 100 senti 1 Hungarian forint = 100 fillér 1 Latvian lats = 100 santims 1 Lithuanian litas = 100 centai 1 Maltese lira = 100 cents 1 Polish złoty = 100 groszy 1 Swedish krona = 100 öre 1 Slovak koruna = 100 halierov 1 Slovenian tolar = 100 stotinov 1 Pound sterling = 100 pence (Usually, these currencies are legal tender in their respective countries only, not in the whole EU)
Statistics
GDP Ranking	1st (2005)
GDP	329.110 trillion (2005)
GDP growth rate	1,5% (Second Quarter of 2005 - 0.3%) [1] (2005)
GDP per Capita	,900 (2005)
GDP by sector	agriculture (2.3%), industry (28.3%), services (69.4%) (2004)
Inflation	2.1% (2005)
Pop below poverty line	17%
Labour force	211.1 million
Labour force by occupation	agriculture (4.3%), industry (29%), services (66.8%) (2000)
Unemployment	9.1% (2004)
Main Industries	Among the world's largest and most technologically advanced industries, including iron and steel, aluminium, petroleum, coal, cement, chemicals, pharmaceuticals, automobiles, aircraft, railway equipment, shipbuilding, electrical power equipment, machine tools, electronics, telecommunications equipment, fishing, food processing, furniture, paper, textiles and clothing, tourism
Sources: [link] [link] [link]
Trading Partners
Imports	€1 035 Billion (2005)
Main Partners	Japan, Switzerland, United States (2001)
Exports	€970.6 Billion - #1 in world (2005)
Main Partners	Japan, Switzerland, United States (2001)
Public Finances
Public Debt	€6 509.8 Billion - 63.8% of GDP (2004)
Public Deficit	€270.2 Billion (2004)
External Debt
Revenues
Expenses	€2 134.7 Billion (2004)
Economic Aid

Currency

The official currency of the European Union is the Euro, in use in all documents produced by the EU. The Euro is also the most widely used currency in the EU, which is in use in 12 member states. All other member states, apart from Denmark and the United Kingdom which have special opt-outs, have committed to changing over to the Euro once they have fulfilled the requirements needed to do so - although Sweden also has an effective opt-out by not joining the ERM which would only then cause Sweden to be obliged to convert. The Stability and Growth Pact sets out the fiscal criteria to maintain for stability and convergence.

For a number of years the Labour government of the United Kingdom was committed to joining the euro upon a successful referendum of the issue, and when the five economic tests have been passed. The last assessment of five economic tests concluded that only one passed. The matter is no longer being pressed by the Tony Blair government and it is unlikely that a referendum will be held during the present government term, which is likely to finish in 2009 or 2010. Polls consistently show that if one were held the euro would be heavily rejected.

Economies of member states

Economic performance varies from state to state. The Growth and Stability Pact governs fiscal policy with the European Union. It applies to all member states, with specific rules which apply to the eurozone members that stipulate that each state's deficit must not exceed 3% of GDP and its public debt must not exceed 60% of GDP. However, many larger members have consistently run deficits substantially in excess of 3%, and the eurozone as a whole has a debt percentage exceeding 60% (see below).

All countries, except Greece, Portugal, and Spain with below average GNI per capita are those which joined the EU in May 2004 and all countries with above average GNI per capita come from the existing (pre-2004) member states.

The following table shows information relating to the member states of the European Union, ordered according to the size of their economies. The colours denote how a member state is performing relative to the rest of the European Union, above average (green) or below average (red). The smallest and greatest values in each column are emphasised.

Member State sorted by GDP	GDP in billions of $ (USD) (real exchange rates) (2004)	GDP % of EU (2004)	GDP per capita in PPP $ (USD) (2006 est.)	Public Debt % of GDP	Deficit % of GDP	Inflation % Annual	Unemp. %
European Union	12 690.6	100.0%	28 477	63.8
2.0	8.8
	2 714.4	21.4%	31 572	66.0	-3.7	1.8	9.6
	2 140.9	16.9%	31 628	41.6	-3.2	2.0	4.6
	2 002.6	15.8%	30 322	65.6	-3.7	1.8	9.8
	1 672.3	13.2%	29 727	105.8	-3.0	2.2	7.8
	991.4	7.8%	27 542	48.9	-0.3	3.2	9.9
	577.3	4.5%	32 062	55.7	-2.5	1.5	5.0
	349.8	2.8%	32 500	95.6	-0.1	2.7	8.1
	346.4	2.7%	31 235	51.2	-1.4	0.8	6.3
	290.1	2.3%	35 002	65.2	-1.3	2.0	4.6
	243.0	1.9%	36 079	42.7	-2.8	1.7	4.9
	241.8	1.9%	13 797	43.6	-4.8	1.4	17.8
	203.4	1.6%	23 519	110.5	-6.1	3.2	9.7
	186.6	1.5%	32 822	43.6	-2.1	1.0	8.6
	183.6	1.4%	42 859	29.9	-1.3	1.9	4.2
	168.3	1.3%	19 949	61.9	-2.9	0.6	7.2
	107.0	0.8%	19 478	37.4	-3.0	1.3	8.1
	99.7	0.8%	18 492	57.6	-4.5	3.7	6.3
	41.1	0.3%	17 239	43.6	-3.3	2.5	15.5
	32.2	0.3%	23 250	29.4	-1.9	1.7	5.9
	31.1	0.2%	72 945	7.5	-1.1	3.2	4.7
	22.3	0.2%	15 443	19.7	-2.5	2.0	8.1
	15.4	0.1%	22 334	62.3	-3.5	1.5	5.1
	13.6	0.1%	13 784	14.4	-0.8	6.6	9.1
	10.8	0.1%	17 802	4.9	-1.8	4.6	7.9
	5.4	0.04%	20 365	75.0	-5.2	2.1	6.8

Economic growth

The EU's share of Gross world product (GWP) is stable at around one fifth [link]. GDP growth, though strong in the new member states, is being affected by sluggish growth in France and especially Germany and Italy. The Benelux countries also have low growth.

IMF EU15 GDP Growth Rates

Member State	% GDP Growth
	2004	2005 (est.)
}	2.4	1.9
}	2.7	1.2
}	2.4	2.2
}	2.8	1.8
}	2.0	1.5
}	1.6	1.8
}	4.2	3.2
}	5.5	5.0
}	1.2	0.0
}	4.4	3.1
}	1.7	0.7
}	1.0	0.5
}	3.1	3.2
}	3.6	2.6
}	3.2	1.9

Current forecasts see the Union's economy achieving growth of 2.3% during 2006 [link]. It is important to note that the older, established countries of the EU, such as Italy and Germany, are showing the lowest growth (none in the case of Italy), while the newer EU members, such as Poland, are growing robustly, but from a lower base.

IMF GDP Growth Figures for 10 new EU Member states

Member State	% GDP Growth
	2004	2005
}	3.9	3.7
}	4.4	6.0
}	7.8	9.8
}	4.2	4.1
}	8.5	10.2
}	6.7	7.5
}	1.0	1.0
}	5.4	3.2
}	5.5	6.0
}	4.6	3.9

The ten new member states of Eastern Europe have enjoyed a much higher average percentage growth rate than their West European counterparts. With the exception of Malta not one state has had a GDP growth of less than 4%, putting these nations up with economies such as the US. Notably the Baltic states have achieved massive GDP growth, with Latvia topping 8.5%, close to China, the world leader at 9% on average for the past 25 years. Reasons for this massive growth include government commitments to stable monetary policy, export-oriented trade policies, low flat-tax rates and the utilisation of relatively cheap labour.

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 EU25 GDP is on the increase, the percentage of Gross world product is decreasing due to the emergence of economic powers such as China, India and Brazil. In the medium to long term, the EU will be looking to increase GDP growth in the central European economies such as France, Germany and Italy and stabilise growth in the new Eastern European states to ensure sustained economic prosperity.

Energy resources

The European Union has large coal, oil, and natural gas reserves. There are six oil producers in the European Union, although most oil production happens in the North Sea oilfields. The United Kingdom by far is the largest producer, however Denmark, Germany, Italy, 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 7th largest producer of oil in the world, producing 3,424,000 (2001) barrels a day. However, it is also the world's 2nd largest consumer of oil, consuming much more than it can produce, at 14,590,000 (2001) barrels a day.

All countries in the EU have committed to the Kyoto Protocol, and the European Union is one of its biggest exponents.

see also: Renewable energy in the European Union

Trade

The European Union is the largest exporter in the world ([link]) and the second largest importer. Internal trade between the member states is aided by the removal of barriers to trade such as tarrifs and border controls. In the eurozone, trade is helped by not having any currency differences to deal with amongst most members.

The European Union represents all its members at the World Trade Organisation, and acts on behalf of member states in any disputes.

Unemployment

The Unemployment rate in the European Union in January 2006 was 8.5%, however the rate varies by member state, the lowest rates are in Denmark, Ireland, the Netherlands and the United Kingdom at 4-5% to over 15% in Slovakia and Poland, this compares with 4.1% in Japan and 5.1% in the United States [link].

Industries

The services sector is by far the most important sector in the European Union, making up 69.4% of GDP, compared to the manufacturing industry with 28.4% of GDP and agriculture with only 2.3% of GDP.

Agriculture

The agricultural sector is supported by subsidies from the European Union in the form of the Common Agricultural Policy (CAP). This currently represents 40-50% of the EU's total spending. It guarantees 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 benefactor of the CAP and the bloc's third largest economy, is its most vocal proponent.

Tourism

The European Union is a major tourist destination, attracting visitors from outside of the Union and citizens traveling inside it. Internal tourism is made more convenient for the citizens of some EU member states 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, by number of tourists. Spain, Italy, the United Kingdom, Germany, Greece and Austria are all also within the top ten.

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).

One problem with this data is that in 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, meaning that GDP per capita is higher than it should be.

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 delimitate a 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).

Top 10: economically strongest NUTS-1 and NUTS-2 regions

The 10 NUTS-1 and NUTs-2 regions with the highest GDP per capita are all in the existing member states, before the 10 new member states joined in May 2004. 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 [link]. This definition, however, is not respected by Eurostat. E.g.: the région of Île-de-France, with 11.3 million inhabitants, is treated as a NUTS-2 region, while the state of Bremen, with only 662,000 inhabitants, is treated as a NUTS-1 region.

See also: [List of NUTS-1, NUTS-2 and NUTS-3 regions]

Rank	NUTS-1 region	2003 GDP (PPP) per capita in Euros
1	Brussels-Capital, Belgium	51,658
2	Luxembourg	50,844
3	Hamburg, Germany	40,011
4	Greater London, United Kingdom	38,040
5	Île-de-France (Paris), France	37,687
6	Åland, Finland	33,542
7	Bremen, Germany	31,909
8	West-Nederland (Randstad), Netherlands	29,918
9	Lombardy and Nord-Ovest (Milan, Turin, Genoa), Italy	28,513
10	Hesse (Frankfurt), Germany	28,433
Rank	NUTS-2 region	2003 GDP (PPP) per capita in Euros
1	Inner London, United Kingdom	60,342
2	Brussels-Capital, Belgium	51,658
3	Luxembourg	50,844
4	Hamburg, Germany	40,011
5	Île-de-France, France	37,687
6	Vienna, Austria	37,158
7	Berkshire, Buckinghamshire & Oxfordshire, United Kingdom	35,894
8	Bozen-Bolzano, Italy	34,791
9	Stockholm, Sweden	34,331
10	Oberbayern, Germany	34,334

Bottom ten: economically weakest NUTS-2 regions

Poland, although not having the lowest GDP per capita of all the states in the European Union, contains six of the ten poorest regions in the EU. All ten regions are part of the new member states which joined in 2004.

Rank	NUTS-2 region	2003 GDP (PPP) per capita in Euros
1	Lubelskie, Poland	7,211
2	Podkarpackie, Poland	7,217
3	Podlaskie, Poland	7,752
4	Swietokrzyskie, Poland	7,978
5	Warminsko-Mazurskie, Poland	8,048
6	Opolskie, Poland	8,112
7	Northern Hungary, Hungary	8,287
8	Prešovský kraj & Košický kraj, Slovakia	8,430
9	Northern Great Plain, Hungary	8,476
10	Southern Great Plain, Hungary	8,786

Richest & Poorest NUTS-2 Regions (GDP 2003 PPP)

See also: [List of all NUTS-2 regions with GDP 2003 data]

Member State	Region	GDP per capita
		in Euros	As % of EU average
European Union		21,741	100.0%
		26,282	120.9%
Richest	Vienna	37,158	170.9%
Poorest	Burgenland	18,420	84.7%
		25,677	118.1%
Richest	Brussels-Capital	51,658	237.6%
Poorest	Hainaut	16,860	77.6%
		17,377	79.9%
		14,750	67.8%
Richest	Prague	30,052	138.2%
Poorest	Moravian-Silesian Region	11,603	53.4%
		26,315	121.0%
		24,213	111.4%
Richest	Île-de-France	37,687	173.3%
Poorest	French Guiana	12,516	57.6%
		23,569	108.4%
Richest	Hamburg	40,011	184.0%
Poorest	Dessau	15,413	70.9%
		10,489	48.2%
		24,538	112.9%
Richest	Åland	33,542	154.3%
Poorest		18,281	84.1%
		17,634	81.1%
Richest	Central Greece	25,159	115.7%
Poorest	West Greece	13,560	62.4%
		12,402	59.3%
Richest	Central Hungary	20,627	94.9%
Poorest	Northern Hungary	8,287	38.1%
		29,161	134.1%
Richest	Southern and Eastern	32,446	149.2%
Poorest	Border, Midland and Western	20,102	92.5%
		23,448	107.9%
Richest	Bolzano-Bozen	34,791	160.0%
Poorest	Calabria	14,898	68.5%
		8,882	40.9%
		9,846	45.3%
		50,844	233.9%
		15,797	72.7%
		27,132	124.8%
Richest	Utrecht	33,148	152.5%
Poorest	Flevoland	19,439	89.4%
		10,215	47.0%
Richest	Mazowieckie	15,833	72.8%
Poorest	Lubelskie	7,211	33.2%
		15,841	72.9%
Richest	Lisbon	22,670	104.3%
Poorest	Norte	12,477	57.4%
		11,298	52.0%
Richest	Bratislava region	25,190	115.9%
Poorest	Prešovský kraj & Košický kraj	8,430	38.8%
		16,527	76.0%
		21,174	97.4%
Richest	Madrid	28,013	128.8%
Poorest	Extremadura	13,871	63.8%
		25,193	115.9%
Richest	Stockholm	34,331	157.9%
Poorest	Gävleborg, Dalarna, & Värmland Counties	21,342	98.2%
		24,945	117.8%
Richest	Inner London	60,342	277.6%
Poorest	West Wales & The Valleys	16,474	75.8%

Footnotes

• Note 1: 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.

References

The following is data for GDP growth and GDP totals from the International Monetary Fund:

[Link to Growth Rates for the Eurozone]

[Link to non-Eurozone EU15 countries Growth Rates]

[Link to 10 new memberstates Growth Rates]

[Link to the 500 largest European Companies]

 

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