What Is the European Union (EU)?

The European Union (EU) is a political and economic alliance of 27 countries. The EU promotes democratic values in its member nations and is one of the world’s most powerful trade blocs. Nineteen of the countries share the euro as their official currency.

The EU grew out of a desire to strengthen economic and political cooperation throughout the continent of Europe in the wake of World War II.

The EU’s gross domestic product (GDP) totaled $14.45 trillion euros in 2021. That’s about $15.49 trillion dollars. The GDP of the U.S. for the same period was about $23 trillion.12

Key Takeaways

  • The European Union (EU) is a political and economic grouping of 27 countries committed to shared democratic values.
  • The euro is the shared official currency of 19 EU members known collectively as the eurozone.
  • In recent years, the EU has expanded to include many of the countries that had been Soviet Socialist States before the collapse of the Soviet Union.
  • In the 2016 referendum known as Brexit, the U.K. voted to leave the EU. It officially left in 2020.3

History of the European Union (EU)

The EU traces its roots to the European Coal and Steel Community, which was founded in 1950 and had just six members: Belgium, France, Germany, Italy, Luxembourg, and the Netherlands. It became the European Economic Community in 1957 under the Treaty of Rome and subsequently was renamed the European Community (EC).45

This served to deepen the integration of the member nations’ foreign, security, and internal affairs policies. The EU established a common market the same year to promote the free movement of goods, services, people, and capital across its internal borders.

The EC initially focused on a common agricultural policy and the elimination of customs barriers. Denmark, Ireland, and the U.K. joined in 1973 in the first wave of expansion. Direct elections to the European Parliament began in 1979.5

Creation of a Common Market

In 1986, the Single European Act embarked on a six-year plan to create a common European market by harmonizing national regulations.5

The Maastricht Treaty took effect in 1993, replacing the EC with the European Union (EU). The euro debuted as a common single currency for participating EU members on Jan. 1, 1999.6 Denmark and the U.K. negotiated «opt-out» provisions that permitted countries to retain their own currencies if they chose.7

Several newer members of the EU have also either not yet met the criteria for adopting the euro or chosen to opt out.

The European Union Map
The European Union Map.  Investopedia

The European Debt Crisis

In the wake of the 2007-2008 global financial crisis, the EU and the European Central Bank struggled to deal with high sovereign debt and sluggish growth in Italy, Spain, Portugal, Ireland, and Greece.

Greece and Ireland received financial bailouts from the EU in 2010 conditioned on the implementation of fiscal austerity measures. Portugal followed in 2011. A second Greek bailout was needed in 2012.8

The crisis abated after the European Union and the European Central Bank adopted a series of measures to support the sovereign and banking-sector debt of the affected countries.

Long-Term Measures

These included the establishment in October 2012 of the European Stability Mechanism (ESM), established to assist EU members experiencing severe financial problems, including an inability to access the bond markets. The ESM supplanted the temporary European Financial Stability Facility backstop in place since 2010.9

The European Central Bank conducted a series of «targeted longer-term refinancing operations» in 2014, 2016, and 2019 to provide financing on favorable terms for EU financial institutions.10

In 2015, the European Union loosened the provisions of the 2011 Stability and Growth Act requiring member states to target public debt of below 60% of gross domestic product and annual government budget deficits below 3% of GDP over the medium term.11

The same year, a new EU agency, the Single Resolution Board, assumed responsibility for resolving bank failures in the euro area.12

EU’s North-South Issues

While the relief measures addressed the crisis, they haven’t tackled one of its principal causes—the wide disparity in wealth and economic growth between the European Union’s heavily industrialized north and its poorer southern periphery, which remains less urbanized and more dependent on agriculture.13

Because the industrialized north and the more rural south share a common currency, struggling southern economies can’t take advantage of currency depreciation to improve their international competitiveness. Without currency depreciation, southern exporters ultimately struggle to compete with their northern rivals, which benefit from faster productivity growth.14

How It Works in the U.S.

In the U.S., federal transfer payments help to address similar economic disparities between regions and states.

States with higher average incomes tend to contribute a disproportionately large share of federal revenue, while those with lower incomes tend to account for a higher share of federal outlays.15

In the European Union, the COVID-19 pandemic prompted joint spending measures some have called «an incomplete and fragile fiscal union in the making.»16

The Brexit Bomb

After rejecting earlier calls for a popular referendum on the U.K.’s European Union membership, Conservative Prime Minister David Cameron promised a vote in 2013 and scheduled it in 2016. It was a time of growing popularity for the U.K. Independence Party, which opposed European Union membership.

After trailing in late polls, the Leave option won with nearly 52% of the vote on June 23, 2016. Cameron resigned the next day. The U.K. officially left the EU on Jan. 31, 2020.317

In July 2020, a report by the Intelligence and Security Committee of the U.K. Parliament noted widespread media reports of Russian efforts on behalf of the Leave option and faulted the government for failing to investigate Russian involvement in British politics.1819

What Is the Purpose of the European Union?

The European Union was created to bind the nations of Europe closer together for the economic, social, and security welfare of all. It is one of several efforts after World War II to bind together the nations of Europe into a single entity.20

How Is the European Union Changing in the 21st Century?

The original members of the European Union were the nations of Western Europe. In the 21st century, the EU has expand membership to the Eastern European nations that emerged after the collapse of the Soviet Union. Its current member nations include Bulgaria, Croatia, the Czech Republic, Estonia, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia.20

Why Was the European Union Created?

The overarching purpose of the European Union, in the years after World War II, was to put an end to the devastating wars that had wracked Europe for centuries. At the same time, it became increasingly clear that a united Europe would have far greater economic and political power than the individual nations in the post-war world.

The European Union

The European Union is a group of 27 countries in Europe.
These countries came together
to make things better, easier and safer for people.
They agreed to work together and help each other.

How the European Union started

People working together

The idea to make the European Union came
after two big wars happened in Europe.
Countries in Europe saw that
it is better to work together
than fighting against each other.

In the beginning, only 6 countries in Europe started working together:

  • Belgium
  • Germany
  • France
  • Italy
  • Luxembourg
  • Netherlands

Soon, more and more countries in Europe joined them
and the European Union was made.

Map with all countries of the European Union

Today, 27 countries are part of the European Union.
These countries are:

  • Austria
  • Belgium
  • Bulgaria
  • Croatia
  • Cyprus
  • Czechia
  • Denmark
  • Estonia
  • Finland
  • France
  • Germany
  • Greece
  • Hungary
  • Ireland
  • Italy
  • Latvia
  • Lithuania
  • Luxembourg
  • Malta
  • Netherlands
  • Poland
  • Portugal
  • Romania
  • Slovakia
  • Slovenia
  • Spain
  • Sweden

In June 2016 the United Kingdom decided
to stop being part of the European Union.
So from 31 January 2020, the United Kingdom
is no longer part of the European Union.

The goals and values of the European Union

All countries that are part of the European Union work together
to make sure that:

A list
  • there is peace in Europe
  • people have good lives
  • things are fair for all people and nobody is left out
  • the languages and cultures of all people
    are respected
  • there is a strong European economy
    and countries use the same coin
    to do business together.

The countries of the European Union
share some important values.
For example, they work to make sure that all people are equal
and their rights are respected.

Peace in Europe

People holding hands in circle

After the European Union was created,
there were no more wars between the countries
that are part of the European Union.
Thanks to the European Union,
all countries in Europe work together in peace.

The symbol of the Peace Price

In 2012, the European Union won a big award
which is called ‘the Nobel Peace Prize’.
This award was given to the European Union
for its good work keeping peace in Europe.

Free move

The European Union made it easier for people
to move freely from one country to another.
They can live, study or work
in any country of the European Union they want.
For example, a person from France can choose
to move to Italy and work there.
Or a student from Belgium can go study in a university in Greece.

Happy travelers

Things, services and money can also move freely
from one country of the European Union to another.

The European Union in the world

The European Union plays an important role in the world in many ways.
For example:

  • It sells many things and services to other countries.
    Also, it buys things from other countries.
    This way it helps the world economy keep going.
  • It helps millions of people
    who live in poorer countries outside the European Union.
  • It tries to make the world a safer place
    where people are treated fairly and laws are respected.

Becoming part of the European Union

To become part of the European Union,
a country must:

Agreement
  • agree with all the laws and values
    of the European Union.
  • work to make sure these laws and values
    are respected.

This may take a very long time to happen.

Some countries are now working to become part of the European Union.
These countries are:

  • Albania
  • Montenegro
  • Serbia
  • North Macedonia
  • Turkey

To become part of the European Union,
these countries must work
to make all laws and values of the European Union
happen in them.

The Schengen Area

The European Union made the ‘Schengen Area’.

The Schengen Area is an area without borders.
In this area, people can travel from country to country freely and easily.
They do not have to go through checks and controls
when they pass from one country to another.

Thanks to the Schengen Area, it is now easier for people
to travel for work or tourism.

The Schengen Area was made in 1985.
Today 22 out of the 27 countries of the European Union
are part of the Schengen Area.

These countries are:

  • Austria
  • Belgium
  • Czechia
  • Denmark
  • Estonia
  • Finland
  • France
  • Germany
  • Greece
  • Hungary
  • Italy
  • Latvia
  • Lithuania
  • Luxembourg
  • Malta
  • Netherlands
  • Poland
  • Portugal
  • Slovakia
  • Slovenia
  • Spain
  • Sweden

Also, 4 countries outside the European Union
are part of the Schengen Area:

  • Iceland
  • Liechtenstein
  • Norway
  • Switzerland

That means that people can travel freely and easily
from one of these countries to another.
This way it is easier for people to visit any of these countries
for tourism or for work.

Happy travelers

Languages of the European Union

In every country of the European Union
people speak their own language.
The European Union protects the right of people
to communicate in their own language.

The word 'hello' in different languages

That is why the European Union
makes all important information and documents
in all the languages that people speak in its countries:

  • Bulgarian
  • Croatian
  • Czech
  • Danish
  • Dutch
  • English
  • Estonian
  • Finnish
  • French
  • German
  • Greek
  • Hungarian
  • Irish
  • Italian
  • Latvian
  • Lithuanian
  • Maltese
  • Polish
  • Portuguese
  • Romanian
  • Slovak
  • Slovenian
  • Spanish
  • Swedish

This way all people in the European Union
can get important information in their own language
and understand it.

The coin of the European Union

Most countries that are part of the European Union use the same coin.

European money

This coin is called ‘Euro’.
Using the same coin helps countries
in the European Union to do business together.
For example, people from Spain
can buy things they want from Belgium
easily and without extra costs.
Using the same coin
makes it easier for people to travel,
buy things online from other countries
and have more options.

Today, 19 out of 27 European Union countries use the euro.

These countries are:

  • Austria
  • Belgium
  • Cyprus
  • Estonia
  • Finland
  • France
  • Germany
  • Greece
  • Ireland
  • Italy
  • Latvia
  • Lithuania
  • Luxembourg
  • Malta
  • Netherlands
  • Portugal
  • Slovakia
  • Slovenia
  • Spain

If you want to listen to the anthem of the European Union, click here.

United in diversity

The European Union uses the phrase ‘united in diversity
to show what its values are.

Being united in diversity means that:

People holding hands in circle
  • people in the European Union
    may have different cultures or languages
    but they stand by each other
    and work together in peace.
  • there is nothing wrong
    about having different languages or cultures.
    On the contrary.
    People with different cultures
    can learn more things from each other and work well together.

How the European Union works

The European Union has 3 main bodies:

Symbol of the European Commission
  • the European Commission
    The people of the European Commission
    suggest laws for the European Union.

Symbol of the European Parliament
  • the European Parliament
    The people of the European Parliament
    are elected by all people in Europe
    to stand for their rights.

Symbol of the Council of the European Union
  • the Council of the European Union
    People who make decisions
    in every country of the European Union
    come together and make
    the Council of the European Union.

These 3 bodies are very important for the European Union.
They work closely together to make things better in Europe:

  • The European Commission suggests laws.
  • The European Parliament
    and the Council of the European Union
    discuss these laws and decide if they want these laws
    to happen in Europe.
  • If they decide that a law must happen in Europe,
    all countries of the European Union
    must work to make this law happen in them.

Other bodies that are important for the European Union are:

  • The Court of Justice of the European Union
    that makes sure that all laws happen correctly
    in the European Union.
  • the Court of Auditors
    that checks if the money of the European Union
    is spent in the right way.

There are also other bodies of the European Union
that are doing important work.
For example, there are bodies that:

A list
  • check if the European Union works in the right
    way and respects the rights of all people.
  • publish useful information
    about the European Union.
  • choose the people who have the skills
    to work for the European Union.
  • stand for the rights of all people in Europe
    like people with disabilities, workers and others.

All these bodies work together to make sure that the European Union works
in the right way for the good of its people.