European Union

The European Union (EU) is an economic and political union of 27 member states, located primarily in Europe. Committed to regional integration, the EU was established by the Treaty of Maastricht on 1 November 1993 upon the foundations of the European Communities. With over 500 million citizens, the EU combined generates an estimated 30% share (US$ 18.4 trillion in 2008) of the nominal gross world product and about 22% (US$15.2 trillion in 2008) of the PPP gross world product. The EU has developed a single market through a standardised system of laws which apply in all member states, ensuring the free movement of people, goods, services, and capital. It maintains common policies on trade, agriculture, fisheries and regional development. Sixteen member states have adopted a common currency, the euro, constituting the Eurozone. The EU has developed a limited role in foreign policy, having representation at the World Trade Organization, G8, G-20 major economies and at the United Nations. It enacts legislation in justice and home affairs, including the abolition of passport controls by the Schengen Agreement between 22 EU and 3 non-EU states. As an international organisation, the EU operates through a hybrid system of supranationalism and intergovernmentalism. In certain areas, decisions are made through negotiation between member states, while in others, independent supranational institutions are responsible without a requirement for unanimity between member states. Important institutions of the EU include the European Commission, the Council of the European Union, the European Council, the Court of Justice of the European Union, and the European Central Bank. The European Parliament is elected every five years by member states' citizens, to whom the citizenship of the European Union is guaranteed. The EU traces its origins from the European Coal and Steel Community formed among six countries in 1951 and the Treaty of Rome formed in 1957 by the same states. Since then, the EU has grown in size through enlargement, and in power through the addition of policy areas to its remit.

History

proposing the Coal and Steel Community in 1950]] created the European Economic Community.]] After World War II, moves towards European integration were seen by many as an escape from the extreme forms of nationalism which had devastated the continent. One such attempt to unite Europeans was the European Coal and Steel Community which, while having the modest aim of centralised control of the previously national coal and steel industries of its member states, was declared to be "a first step in the federation of Europe". The originators and supporters of the Community include Jean Monnet, Robert Schuman, Paul Henri Spaak, and Alcide de Gasperi. The founding members of the Community were Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany. In 1957, these six countries signed the Treaties of Rome which extended the earlier cooperation within the European Coal and Steel Community and created the European Economic Community, (EEC) establishing a customs union and the European Atomic Energy Community (Euratom) for cooperation in developing nuclear energy. In 1967 the Merger Treaty created a single set of institutions for the three communities, which were collectively referred to as the European Communities (EC), although commonly just as the European Community. In 1973, the Communities enlarged to include Denmark, Ireland, and the United Kingdom. Norway had negotiated to join at the same time but Norwegian voters rejected membership in a referendum and so Norway remained outside. In 1979, the first direct, democratic elections to the European Parliament were held. Greece joined in 1981, and Spain and Portugal in 1986. In 1985, the Schengen Agreement led the way toward the creation of open borders without passport controls between most member states and some non-member states. In 1986, the European flag began to be used by the Community and the Single European Act was signed. 's fall enabled eastward enlargement. ( Berlin Wall)]] In 1990, after the fall of the Iron Curtain, the former East Germany became part of the Community as part of a newly united Germany. With enlargement towards Eastern and Central Europe on the agenda, the Copenhagen criteria for candidate members to join the European Union were agreed. The European Union was formally established when the Maastricht Treaty came into force on 1 November 1993,; and in 1995 Austria, Sweden, and Finland joined the newly established EU. In 2002, euro notes and coins replaced national currencies in 12 of the member states. Since then, the eurozone has increased to encompass sixteen countries. In 2004, the EU saw its biggest enlargement to date when Malta, Cyprus, Slovenia, Estonia, Latvia, Lithuania, Poland, the Czech Republic, Slovakia, and Hungary joined the Union. On 1 January 2007, Romania and Bulgaria became the EU's newest members and Slovenia adopted the euro. In June 2009, the 2009 Parliament elections were held leading to a renewal of Barroso's Commission Presidency, and in July 2009 Iceland formally applied for EU membership. On 1 December 2009, the Lisbon Treaty came into force after a protracted and controversial birth. This reformed many aspects of the EU but in particular created a permanent President of the European Council, the first of which is Herman van Rompuy, and a strengthened High Representative, Catherine Ashton.

Treaties timeline

Member states

The European Union is composed of 27 sovereign Member States: Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. The Union's membership has grown from the original six founding states–Belgium, France, (then- West) Germany, Italy, Luxembourg and the Netherlands–to the present day 27 by successive enlargements as countries acceded to the treaties and by doing so, pooled their sovereignty in exchange for representation in the institutions. To join the EU a country must meet the Copenhagen criteria, defined at the 1993 Copenhagen European Council. These require a stable democracy that respects human rights and the rule of law; a functioning market economy capable of competition within the EU; and the acceptance of the obligations of membership, including EU law. Evaluation of a country's fulfilment of the criteria is the responsibility of the European Council. No member state has ever left the Union, although Greenland (an autonomous province of Denmark) withdrew in 1985. The Lisbon Treaty now provides a clause dealing with how a member leaves the EU. There are three official candidate countries, Croatia, Macedonia and Turkey. Albania, Bosnia and Herzegovina, Montenegro, Serbia and Iceland are officially recognised as potential candidates. Kosovo is also listed as a potential candidate but the European Commission does not list it as an independent country because not all member states recognise it as an independent country separate from Serbia. Four Western European countries that have chosen not to join the EU have partly committed to the EU's economy and regulations: Iceland, which has now applied for membership, Liechtenstein and Norway, which are a part of the single market through the European Economic Area, and Switzerland, which has similar ties through bilateral treaties. The relationships of the European microstates, Andorra, Monaco, San Marino and the Vatican include the use of the euro and other areas of co-operation.

Geography

in the Alps is the highest peak in the EU.]] The territory of the EU consists of the combined territories of its 27 member states with some exceptions, outlined below. The territory of the EU is not the same as that of Europe, as parts of the continent are outside the EU, such as Switzerland, Norway, European Russia, and Iceland. Some parts of member states are not part of the EU, despite forming part of the European continent (for example the Isle of Man and Channel Islands (two Crown Dependencies), and the Faroe Islands (a territory of Denmark)). The island country of Cyprus, a member of the EU, is closer to Turkey than to continental Europe and is often considered part of Asia. UN National Geographic line. ( Crete)]] Several territories associated with member states that are outside geographic Europe are also not part of the EU (such as Greenland, Aruba, the Netherlands Antilles, and all the non-European British overseas territories). Some overseas territories are part of the EU even though geographically not part of Europe, such as the Azores, the Canary Islands, Madeira, Lampedusa, French Guiana, Guadeloupe, Saint Barthélemy, Martinique and Réunion, Ceuta and Melilla. As well, although being technically part of the EU, EU law is suspended in Northern Cyprus as it is under the de facto control of the Turkish Republic of North Cyprus, a self-proclaimed state that is recognised only by Turkey. The EU's member states cover an area of .Figure including the four French overseas departments ( French Guiana, Guadeloupe, Martinique, Réunion), which are an integral part of the EU, but excluding the French overseas collectivities and territories, which are not part of the EU. The EU is larger in area than all but six countries, and its highest peak is Mont Blanc in the Graian Alps, above sea level. The landscape, climate, and economy of the EU are influenced by its coastline, which is long. The EU has the world's second-longest coastline, after Canada. The combined member states share land borders with 19 non-member states for a total of , the fifth-longest border in the world. Including the overseas territories of member states, the EU experiences most types of climate from Arctic to tropical, rendering meteorological averages for the EU as a whole meaningless. The majority of the population lives in areas with a Mediterranean climate ( Southern Europe), a temperate maritime climate ( Western Europe), or a warm summer continental or hemiboreal climate ( Eastern Europe).

Governance

The institutions of the EU operate solely within those competencies conferred on it upon the treaties and according to the principle of subsidiarity (which dictates that action by the EU should only be taken where an objective cannot be sufficiently achieved by the member states alone). Law made by the EU institutions is passed in a variety of forms, primarily that which comes into direct force and that which must be passed in a refined form by national parliaments. Legislative competencies are divided equally, with some exceptions, between the European Parliament and the Council of the European Union while executive tasks are carried out by the European Commission and in a limited capacity by the European Council (not to be confused with the aforementioned Council of the European Union). The interpretation and the application of EU law and the treaties are ensured by the Court of Justice of the European Union. There are also a number of ancillary bodies which advise the EU or operate in a specific area.

European Council

, Herman Van Rompuy]] The EU receives its political leadership from the European Council, which usually meets four times a year. It comprises one representative per member state—either its head of state or head of government—plus its President as well as the President of the Commission. The member states' representatives are assisted by their Foreign Ministers. The European Council uses its leadership role to sort out disputes between member states and the institutions, and to resolve political crises and disagreements over controversial issues and policies. The European Council should not be mistaken for the Council of Europe, an international organisation independent from the EU. On 19 November 2009, Herman Van Rompuy was chosen as the first President of the European Council and Catherine Ashton was chosen as the High Representative of the Union for Foreign Affairs and Security Policy. They both assumed office on 1 December 2009.

Council

The Council (also called "Council of the European Union" Official website of the Council retrieved on 16 January 2010. and sometimes referred to as the "Council of Ministers") forms one half of the EU's legislature. It consists of a government minister from each member state and meets in different compositions depending on the policy area being addressed. Notwithstanding its different compositions, it is considered to be one single body. In addition to its legislative functions, the Council also exercises executive functions in relations to the Common Foreign and Security Policy.

Commission

José Manuel Barroso]] The European Commission acts as the EU's executive arm and is responsible for initiating legislation and the day-to-day running of the EU. It is intended to act solely in the interest of the EU as a whole, as opposed to the Council which consists of leaders of member states who reflect national interests. The commission is also seen as the motor of European integration. It is currently composed of 27 commissioners for different areas of policy, one from each member state. The President of the Commission and all the other commissioners are nominated by the Council. Appointment of the Commission President, and also the Commission in its entirety, have to be confirmed by Parliament.

Parliament

in Strasbourg.]] The European Parliament forms the other half of the EU's legislature. The 736 (soon to be 750) Members of the European Parliament (MEPs) are directly elected by EU citizens every five years. Although MEPs are elected on a national basis, they sit according to political groups rather than their nationality. Each country has a set number of seats and in some cases is divided into sub-national constituencies. The Parliament and the Council of Ministers pass legislation jointly in nearly all areas under the ordinary legislative procedure. This also applies to the EU budget. Finally, the Commission is accountable to Parliament, requiring its approval to take office, having to report back to it and subject to motions of censure from it. The President of the European Parliament carries out the role of speaker in parliament and represents it externally. The president and vice presidents are elected by MEPs every two and a half years.

Courts

The judicial branch of the EU—formally called the Court of Justice of the European Union—consists of three courts: the Court of Justice, the General Court, and the European Union Civil Service Tribunal. Together they interpret and apply the treaties and the law of the EU. Article 19 of the Treaty on European Union The Court of Justice primarily deals with cases taken by member states, the institutions, and cases referred to it by the courts of member states. The General Court mainly deals with cases taken by individuals and companies directly before the EU's courts, and the European Union Civil Service Tribunal adjudicates in disputes between the European Union and its civil service. Decisions from the General Court can be appealed to the Court of Justice but only on a point of law.Article 256(1) (ex article 225(1)) of the Treaty on the Functioning of the European Union link

Legal system

The EU is based on a series of treaties. These first established the European Community and the EU, and then made amendments to those founding treaties. These are power-giving treaties which set broad policy goals and establish institutions with the necessary legal powers to implement those goals. These legal powers include the ability to enact legislationSee Article 288 (ex Article 249 TEC) of the Treaty on the Functioning of the European Union. link which can directly affect all member states and their inhabitants.According to the principle of Direct Effect first invoked in the Court of Justice's decision in . See: Craig and de Búrca, ch. 5. Under the principle of supremacy, national courts are required to enforce the treaties that their member states have ratified, and thus the laws enacted under them, even if doing so requires them to ignore conflicting national law, and (within limits) even constitutional provisions.According to the principle of Supremacy as established by the ECJ in Case 6/64, Falminio Costa v. ENEL 1964 ECR 585. See Craig and de Búrca, ch. 7. See also: Factortame Ltd. v. Secretary of State for Transport (No. 2) 1991 1 AC 603, Solange II (Re Wuensche Handelsgesellschaft, BVerfG decision of 22 Oct. 1986 1987 3 CMLR 225,265) and Frontini v. Ministero delle Finanze 1974 2 CMLR 372; Raoul George Nicolo 1990 1 CMLR 173. in Luxembourg can judge member states over EU law.]] The main legal acts of the EU come in three forms: regulations, directives, and decisions. Regulations become law in all member states the moment they come into force, without the requirement for any implementing measures,See: Case 34/73, Variola v. Amministrazione delle Finanze [1973 ECR 981]. and automatically override conflicting domestic provisions. Directives require member states to achieve a certain result while leaving them discretion as to how to achieve the result. The details of how they are to be implemented are left to member states.To do otherwise would require the drafting of legislation which would have to cope with the frequently divergent legal systems and administrative systems of all of the now 27 member states. See Craig and de Búrca, p. 115 When the time limit for implementing directives passes, they may, under certain conditions, have direct effect in national law against member states. Decisions offer an alternative to the two above modes of legislation. They are legal acts which only apply to specified individuals, companies or a particular member state. They are most often used in Competition Law, or on rulings on State Aid, but are also frequently used for procedural or administrative matters within the institutions. Regulations, directives, and decisions are of equal legal value and apply without any formal hierarchy. One of the complicating features of the EU's legal system is the multiplicity of legislative procedures used to enact legislation. The treaties micro-manage the EU's powers, indicating different ways of adopting legislation for different policy areas and for different areas within the same policy areas.For a good example of this see Title IV of Part Three of the Treaty of Rome, Council Decision (2004/927/EC) of 22 December 2004 providing for certain areas covered by Title IV of Part Three of the Treaty establishing the European Community to be governed by the procedure laid down in Article 251 of that Treaty and the Protocol on Article 67 of the Treaty establishing the European Community attached to the Nice Treaty. A common feature of the EU's legislative procedures, however, is that almost all legislation must be initiated by the Commission, rather than member states or European parliamentarians. See: European Union legislative procedure. The two most common procedures are co-decision, under which the European Parliament can veto proposed legislation, and consultation, under which Parliament is only permitted to give an opinion which can be ignored by European leaders. In most cases legislation must be agreed by the council. National courts within the member states play a key role in the EU as enforcers of EU law, and a "spirit of cooperation" between EU and national courts is laid down in the Treaties. National courts can apply EU law in domestic cases, and if they require clarification on the interpretation or validity of any EU legislation related to the case it may make a reference for a preliminary ruling to the Court of Justice. The right to declare EU legislation invalid however is reserved to the EU courts.

Fundamental rights

As a product of efforts to establish a written fundamental rights code, the EU drew up the Charter of Fundamental Rights in 2000. The Charter is legally binding since the Lisbon Treaty has come into force.By virtue of Article 1(8) of the Lisbon Treaty Also, the Court of Justice gives judgements on fundamental rights derived from the "constitutional traditions common to the member states,"Case 11/70, Internationale Handelsgesellschaft v. Einfuhr und Vorratstelle für Getreide und Futtermittel; Article 6(2) of the Maastrict Treaty (as amended). and may even invalidate EU legislation based on its failure to adhere to these fundamental rights. Although signing the European Convention on Human Rights (ECHR) is a condition for EU membership,It is effectively treated as one of the Copenhagen criteria link. It should be noted that this is a political and not a legal requirement for membership. the EU itself is not covered by the convention as it is neither a stateThe European Convention on Human Rights is currently only open to members of the Council of Europe (Article 59.1 of the Convention) link, and only states may become member of the Council of Europe (Article 4 of the Statute of the Council of Europe) link. nor has the competence to accede.Opinion (2/92) of the European Court of Justice on "Accession by the Community to the European Convention for the Protection of Human Rights and Fundamental Freedoms" 1996 E.C.R. I-1759 (in French), ruled that the European Community did not have the competence to accede to the ECHR. Nonetheless the Court of Justice and European Court of Human Rights co-operate to ensure their case-law does not conflict. Since the entry into force of the Lisbon Treaty, the EU has been required to accede to the ECHR.By virtue of Article 1(8) of the Lisbon Treaty, however this will only become possible when Protocol 14 of the ECHR, which allows for EU accession to the ECHR, comes into force. The EU opposes the death penalty and promotes its world wide abolition. Abolition of the death penalty is a condition for EU membership.

Foreign relations

design, burgundy coloured with the name of the member state, Coat of Arms and with the words "European Union" given in their official language(s) at the top; in this case those of Ireland.]] Foreign policy cooperation between member states dates from the establishment of the Community in 1957, when member states negotiated as a bloc in international trade negotiations under the Common Commercial Policy. Steps for a more wide ranging coordination in foreign relations began in 1970 with the establishment of European Political Cooperation which created an informal consultation process between member states with the aim of forming common foreign policies. It was not, however, until 1987 when European Political Cooperation was introduced on a formal basis by the Single European Act. EPC was renamed as the Common Foreign and Security Policy (CFSP) by the Maastricht Treaty. The Maastricht Treaty gives the CFSP the aims of promoting both the EU's own interests and those of the international community as a whole. This includes promoting international co-operation, respect for human rights, democracy, and the rule of law.Article 21 of the Treaty on European Union (as inserted by the Treaty of Lisbon). link is the EU's High Representative in foreign policy.]] The Amsterdam Treaty created the office of the High Representative for the Common Foreign and Security Policy (currently held by Catherine Ashton) to co-ordinate the EU's foreign policy. The High Representative, in conjunction with the current Presidency, speaks on behalf of the EU in foreign policy matters and can have the task of articulating ambiguous policy positions created by disagreements among member states. The Common Foreign and Security Policy requires unanimity among the now 27 member states on the appropriate policy to follow on any particular issue. The unanimity and difficult issues treated under the CFSP makes disagreements, such as those which occurred over the war in Iraq, not uncommon. Besides the emerging international policy of the European Union, the international influence of the EU is also felt through enlargement. The perceived benefits of becoming a member of the EU act as an incentive for both political and economic reform in states wishing to fulfil the EU's accession criteria, and are considered an important factor contributing to the reform of former Communist countries in Central and Eastern Europe. This influence on the internal affairs of other countries is generally referred to as " soft power", as opposed to military "hard power". summits. ( Heiligendamm, Germany)]] In the UN, as an observer and working together, the EU has gained influence in areas such as aid due to its large contributions in that field (see below). In the G8, the EU has rights of membership besides chairing/hosting summit meetings and is represented at meetings by the presidents of the Commission and the Council. In the World Trade Organisation (WTO), where all 27 member states are represented, the EU as a body is represented by Trade Commissioner Benita Ferrero-Waldner.

Military and defence

is built by a consortium of four EU countries.]] The predecessors of the European Union were not devised as a strong military alliance because NATO was largely seen as appropriate and sufficient for defence purposes. Twenty-one EU members are members of NATO while the remaining member states follow policies of neutrality. The Western European Union (WEU) is a European security organisation related to the EU. In 1992, the WEU's relationship with the EU was defined, when the EU assigned it the " Petersberg tasks" (humanitarian missions such as peacekeeping and crisis management). These tasks were later transferred from the WEU to the EU by the Amsterdam Treaty and now form part of the Common Foreign and Security Policy and the Common Security and Defence Policy. Elements of the WEU are currently being merged into the Common Foreign and Security Policy, and the President of the WEU is currently the EU's foreign policy chief. forces are peacekeeping in parts of the Balkans and Africa.]] Following the Kosovo War in 1999, the European Council agreed that "the Union must have the capacity for autonomous action, backed by credible military forces, the means to decide to use them, and the readiness to do so, in order to respond to international crises without prejudice to actions by NATO". To that end, a number of efforts were made to increase the EU's military capability, notably the Helsinki Headline Goal process. After much discussion, the most concrete result was the EU Battlegroups initiative, each of which is planned to be able to deploy quickly about 1500 personel. EU forces have been deployed on peacekeeping missions from Africa to the former Yugoslavia and the Middle East. EU military operations are supported by a number of bodies, including the European Defence Agency, satellite centre and the military staff. In an EU consisting of 27 members, substantial security and defence cooperation is increasingly relying on great power cooperation. The Russo-Georgian War and Beyond: towards a European Great Power Concert, Danish Institute of International Studies.

Humanitarian aid

in the world.]] The European Community Humanitarian Aid Office, or "ECHO", provides humanitarian aid from the EU to developing countries. In 2006 its budget amounted to €671 million, 48% of which went to the African, Caribbean and Pacific countries. Counting the EU's own contributions and those of its member states together, the EU is the largest aid donor in the world. The EU's aid has previously been criticised by the eurosceptic think-tank Open Europe for being inefficient, mis-targeted and linked to economic objectives. Furthermore, some charities have claimed European governments have inflated the amount they have spent on aid by incorrectly including money spent on debt relief, foreign students, and refugees. Under the de-inflated figures, the EU as a whole did not reach its internal aid target in 2006 and is expected not to reach the international target of 0.7% of gross national income until 2015. However, four countries have reached that target, most notably Sweden, Luxembourg, the Netherlands and Denmark. In 2005 EU aid was 0.34% of the GNP which was higher than that of either the United States or Japan. The previous commissioner for aid, Louis Michel, has called for aid to be delivered more rapidly, to greater effect, and on humanitarian principles.

Justice and home affairs

comprises most member states ensuring open borders.]] Over the years, the EU has developed a wide competence in the area of justice and home affairs. To this end, agencies have been established that co-ordinate associated actions: Europol for co-operation of police forces, Eurojust for co-operation between prosecutors, and Frontex for co-operation between border control authorities. The EU also operates the Schengen Information System which provides a common database for police and immigration authorities. Furthermore, the Union has legislated in areas such as extradition, family law, asylum law, and criminal justice. Prohibitions against sexual and nationality discrimination have a long standing in the treaties.See Articles 157 (ex Article 141) of the Treaty on the Functioning of the European Union. link In more recent years, these have been supplemented by powers to legislate against discrimination based on race, religion, disability, age, and sexual orientation.See Article 2(7) of the Treaty of Amsterdam. link By virtue of these powers, the EU has enacted legislation on sexual discrimination in the work-place, age discrimination, and racial discrimination.Council Directive 2000/43/EC of 29 June 2000 implementing the principle of equal treatment between persons irrespective of racial or ethnic origin (OJ L 180, 19.7.2000, p. 22–26); Council Directive 2000/78/EC of 27 November 2000 establishing a general framework for equal treatment in employment and occupation (OJ L 303, 2.12.2000, p. 16–22).

Economy

corporations are headquartered in EU countries. ( HSBC, UK.)]] Since its origin, the EU has established a single economic market across the territory of all its members. Currently, a single currency is in use between the 16 members of the eurozone. If considered as a single economy, the EU generated an estimated nominal gross domestic product (GDP) of US$18.39 trillion (15.247 trillion international dollars based on purchasing power parity) in 2008, amounting to over 22% of the world's total economic output in terms of purchasing power parity,{{cite web|url=http://www.imf.org/external/pubs/ft/weo/2009/01/weodata/weorept.aspx?sy=2007&ey=2009&scsm=1&ssd=1&sort=country&ds=.&br=1&c=001%2C998&s=NGDPD%2CPPPGDP%2CPPPSH&grp=1&a=1&pr.x=50&pr.y=9|accessdate=24 April 2009|date=April 2009|title=World Economic Outlook Database, April 2009 Edition|publisher= International Monetary Fund| quote= Gross domestic product, current prices; U.S. dollars, Billions; 2007=16,927.173 2008=18,394.115 2009=16,190.981 projection Gross domestic product based on purchasing-power-parity (PPP) valuation of country GDP; Current international dollar, Billions; 2007=14,762.109 2008=15,247.163 2009=14,851.385 projection GDP based on PPP share of world total 2007=22.605% 2008=22.131% 2009=21.519% projection World "GDP", current prices; U.S. dollars, Billions; 2007=54,840.873 2008=60,689.812 2009=57,228.373 projection These data were published in 2009. Data for 2009 are projections based on a number of assumptions. }} which makes it the largest economy in the world by nominal GDP and the second largest trade bloc economy in the world by PPP valuation of GDP. It is also the largest exporter , and largest importer of goods and services, and the biggest trading partner to several large countries such as China and India. 178 of the top 500 largest corporations measured by revenue ( Fortune Global 500) have their headquarters in the EU. In May 2007 unemployment in the EU stood at 7% while investment was at 21.4% of GDP, inflation at 2.2% and public deficit at −0.9% of GDP. There is a great deal of variance for annual per capita income within individual EU states, these range from US$7,000 to US$69,000.

Single market

Two of the original core objectives of the European Economic Community were the development of a common market, subsequently renamed the single market, and a customs union between its member states. The single market involves the free circulation of goods, capital, people and services within the EU, and the customs union involves the application of a common external tariff on all goods entering the market. Once goods have been admitted into the market they can not be subjected to customs duties, discriminatory taxes or import quotas, as they travel internally. The non-EU member states of Iceland, Norway, Liechtenstein and Switzerland participate in the single market but not in the customs union. Half the trade in the EU is covered by legislation harmonised by the EU. Free movement of capital is intended to permit movement of investments such as property purchases and buying of shares between countries. Until the drive towards Economic and Monetary Union the development of the capital provisions had been slow. Post-Maastricht there has been a rapidly developing corpus of ECJ judgements regarding this initially neglected freedom. The free movement of capital is unique insofar as that it is granted equally to non-member states. The free movement of persons means citizens can move freely between member states to live, work, study or retire in another country. This required the lowering of administrative formalities and recognition of professional qualifications of other states. The free movement of services and of establishment allows self-employed persons to move between member states in order to provide services on a temporary or permanent basis. While services account for between sixty and seventy percent of GDP, legislation in the area is not as developed as in other areas. This lacuna has been addressed by the recently passed Directive on services in the internal market which aims to liberalise the cross border provision of services. According to the Treaty the provision of services is a residual freedom that only applies if no other freedom is being exercised.

Monetary union

in Frankfurt governs the eurozone's monetary policy.]] The creation of a European single currency became an official objective of the EU in 1969. However, it was only with the advent of the Maastricht Treaty in 1993 that member states were legally bound to start the monetary union no later than 1 January 1999. On this date the euro was duly launched by eleven of the then fifteen member states of the EU. It remained an accounting currency until 1 January 2002, when euro notes and coins were issued and national currencies began to phase out in the eurozone, which by then consisted of twelve member states. The eurozone has since grown to sixteen countries, the most recent being Slovakia which joined on 1 January 2009. as their sole currency.]] All other EU member states, except Denmark and the United Kingdom, are legally bound to join the euro when the convergence criteria are met, however only a few countries have set target dates for accession. Sweden has circumvented the requirement to join the euro by not meeting the membership criteria.In order to meet the euro convergence criteria it is necessary first to join the European Exchange Rate Mechanism, something Sweden has declined to do: The euro is designed to help build a single market by, for example: easing travel of citizens and goods, eliminating exchange rate problems, providing price transparency, creating a single financial market, price stability and low interest rates, and providing a currency used internationally and protected against shocks by the large amount of internal trade within the eurozone. It is also intended as a political symbol of integration and stimulus for more. Since its launch the euro has become the second reserve currency in the world with a quarter of foreign exchanges reserves being in euro. The euro, and the monetary policies of those who have adopted it in agreement with the EU, are under the control of the European Central Bank (ECB). There are eleven other currencies used in the EU. A number of other countries outside the EU, such as Montenegro, use the euro without formal agreement with the ECB.{{cite web|url=http://ec.europa.eu/economy_finance/the_euro/euro_in_world9369_en.htm|title= Use of the euro in the world|publisher=Europa web portal|author=European Commission|work=The euro outside the euro area|accessdate=27 February 2008}}

Competition

The EU operates a competition policy intended to ensure undistorted competition within the single market.Article 3(1)(g) of the Treaty of Rome The Commission as the competition regulator for the single market is responsible for antitrust issues, approving mergers, breaking up cartels, working for economic liberalisation and preventing state aid. The Competition Commissioner, currently Neelie Kroes, is one of the most powerful positions in the Commission, notable for the ability to affect the commercial interests of trans-national corporations. For example, in 2001 the Commission for the first time prevented a merger between two companies based in the United States ( GE and Honeywell) which had already been approved by their national authority. Another high profile case against Microsoft, resulted in the Commission fining Microsoft over €777 million following nine years of legal action. In negotiations on the Treaty of Lisbon, French President Nicolas Sarkozy succeeded in removing the words "free and undistorted competition" from the treaties. However, the requirement is maintained in an annex and it is unclear whether this will have any practical effect on EU policy.

Budget

The twenty-seven member state EU had an agreed budget of €120.7 billion for the year 2007 and €864.3 billion for the period 2007–2013, representing 1.10% and 1.05% of the EU-27's GNI forecast for the respective periods. By comparison, the United Kingdom's expenditure for 2004 was estimated to be €759 billion, and France was estimated to have spent €801 billion. In 1960, the budget of the then European Economic Community was 0.03% of GDP. In the 2006 budget, the largest single expenditure item was agriculture with around 46.7% of the total budget. Next came structural and cohesion funds with approximately 30.4% of the total. Internal policies took up around 8.5%. Administration accounted for around 6.3%. External actions, the pre-accession strategy, compensations and reserves brought up the rear with approximately 4.9%, 2.1%, 1% and 0.1% respectively.

Development

Agriculture

The Common Agricultural Policy (CAP) is one of the oldest policies of the European Community, and was one of its core aims. The policy has the objectives of increasing agricultural production, providing certainty in food supplies, ensuring a high quality of life for farmers, stabilising markets, and ensuring reasonable prices for consumers.Article 39 (ex Article 33) of the Treaty on the Functioning of the European Union. link It was, until recently, operated by a system of subsidies and market intervention. Until the 1990s, the policy accounted for over 60% of the then European Community's annual budget, and still accounts for around 35%. , the largest budgetary expenditure. ( Vineyard in Spain)]] The policy's price controls and market interventions led to considerable overproduction, resulting in so-called butter mountains and wine lakes. These were intervention stores of produce bought up by the Community to maintain minimum price levels. In order to dispose of surplus stores, they were often sold on the world market at prices considerably below Community guaranteed prices, or farmers were offered subsidies (amounting to the difference between the Community and world prices) to export their produce outside the Community. This system has been criticised for under-cutting farmers in the developing world. The overproduction has also been criticised for encouraging environmentally unfriendly intensive farming methods. Supporters of CAP say that the economic support which it gives to farmers provides them with a reasonable standard of living, in what would otherwise be an economically unviable way of life. However, the EU's small farmers receive only 8% of CAP's available subsidies. Since the beginning of the 1990s, the CAP has been subject to a series of reforms. Initially these reforms included the introduction of set-aside in 1988, where a proportion of farm land was deliberately withdrawn from production, milk quotas (by the McSharry reforms in 1992) and, more recently, the 'de-coupling' (or disassociation) of the money farmers receive from the EU and the amount they produce (by the Fischler reforms in 2004). Agriculture expenditure will move away from subsidy payments linked to specific produce, toward direct payments based on farm size. This is intended to allow the market to dictate production levels, while maintaining agricultural income levels. One of these reforms entailed the abolition of the EU's sugar regime, which previously divided the sugar market between member states and certain African-Caribbean nations with a privileged relationship with the EU.

Energy

In 2006, the 27 member states of the EU had a gross inland energy consumption of 1,825 million tonnes of oil equivalent (toe).