How did the EU build its $16 trillion economy?

The European Union has the third largest economy in the world, accounting for one sixth of global trade. A total of 27 countries are members of an internal market that allows the free movement of goods, services, capital and people.

The EU's $16 trillion economy

A brief history of the European Union
After the devastating aftermath of World War II, Western Europe witnessed a concerted move towards regional peace and security by promoting democracy and protecting human rights. Western European coal and steel industries were consolidated under common management, preventing countries from turning against each other and creating weapons of war. 6 countries, the final founders of the European Union, signed this agreement.

Here is a list of all 27 EU members and the year they joined.
The EU's $16 trillion economy
More economic and security cooperation followed over the next four decades, along with the addition of new members. These close ties removed the incentive for war, and Western Europe has seen unprecedented peace in the last 80 years, after centuries of constant warfare.

The origins of the modern version of the European Union can be traced back to 1993, with the adoption of the name “European Union”, the birth of the single market and the promise to use a single currency, the euro.

Since then, the European Union has become an economic and political force. Its total gross domestic product (GDP) will reach $16.6 trillion in 2022, behind the United States ($26 trillion) and China ($19 trillion).

The economy of the European Union
However, according to data from the International Monetary Fund, the economic power of the European Union is restrained by three economic giants. Combined, the GDP of Germany ($4 trillion), France ($2.7 trillion) and Italy ($1.9 trillion) accounts for more than half of the total economic output of the European Union.

These three countries are also the most populous countries in the European Union and, together with Spain and Poland, account for 66% of the total population of the European Union.

Here is a table of all 27 member states and their percentage contribution to EU GDP.
The EU's $16 trillion economy
Adding Spain ($1.3 trillion) and the Netherlands ($990 billion), the top five countries account for nearly 70% of EU GDP. Including the top 10 countries, this amount reaches 85%. This means that less than half of the 27 member states account for $14 trillion of the EU’s $16 trillion economy.

Older members, bigger share

Apart from the most populous members with larger economies, another pattern emerges; 5 of the founding countries of the European Union, namely Germany, France, Italy, the Netherlands and Belgium, are among the 10 largest economies of the European Union. Ireland and Denmark, the next entrants to the Union (1973), are ranked ninth and eleventh, respectively. The bottom 10 countries all joined the European Union after 2004.

Britain, which joined the union in 1973 and officially left it in 2020, was the region’s second-largest economy at $3.4 trillion.

Sectoral analysis of the European Union

The European Union has four main sectors of economic output: services, industry, construction and agriculture (including fishing and forestry).

Services and tourism
The economy of the European Union is heavily dependent on the service sector and accounted for more than 70% of the economy’s added value in 2020. Also, this sector has the highest share of employment in the European Union with 73%.

In Luxembourg, which has a large financial services sector, 87% of the country’s GDP comes from the services sector. Tourism economies such as Malta and Cyprus also had more than 80% share of services in their GDP.

20% of the EU’s GDP comes from industry, and Ireland’s industry has the largest share (40%) of its economy’s GDP. Czech Republic, Slovenia and Poland also had a significant share of industrial production.

The EU's $16 trillion economy
Less than 2% of the EU economy relies on agriculture, forestry and fishing. Romania, Latvia and Greece are contributors in this sector, but the share of total production in each country is less than 5%. Bulgaria has the highest level of employment (16%) in this sector compared to other EU members.

The European Union imports nearly 60% of its energy needs. Russia was the largest exporter of oil and natural gas to this region until the end of 2021. After the war in Ukraine, this share has steadily declined from approximately 25% to 15% for petroleum liquids and from nearly 40% to 15% for natural gas.

Read more:

What is the cost of Europe’s energy crisis?

the aging crisis of the green continent; How much will Europe’s population increase by 2100?

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