open encyclopedia * Article Search: * *

Economy of Europe

From - the free encyclopedia.

Economy of Europe During 2003 unless otherwise stated
Population: 814.1 million
GDP (PPP): US$13.823 trillion
GDP (Currency): $12.471 trillion
GDP/capita (PPP) : $16,982
GDP/capita (Currency) : $15,321
Annual growth of
per capita GDP:
0.61% (1990-2002)
Income of top 10%: 27.5%
Millionaires: 2.6 million
Unemployment 9.26% (1992-2002 average)
Estimated female
56.7% of male
Most numbers are from the UNDP from 2002, some numbers exclude certain countries for lack of information. Statistics are for entire nations, not just the portions within Europe.
See also: World Economy - Economy of Africa - Economy of Asia - Economy of Europe - Economy of North America - Economy of Oceania - Economy of South America

The economy of Europe is comprised of more than 665 million people in 48 different states. Like other continents, the wealth of Europe's states varies, although the poorest are well above the poorest states of other continents in terms of GDP and living standards. The difference in wealth across Europe can be seen in a rough East-West divide. Whilst Western European states all have high GDPs and living standards, many of Eastern Europe'USSR" title ="USSR">USSR and the former Yugoslavia.

As a continent, Europe has the largest economy. Its largest single economy is that of Germany, which ranks third globally behind the United States of America and Japan. The European Union is the world'United_States_of_America" title ="United States of America">United States of America.


Economic development


Prior to World War II, Europe'United_Kingdom" title ="United Kingdom">United Kingdom, France and Germany. The Industrial Revolution, which began in England, had spread rapidly across Europe, and before long the entire continent was at a high level of industry. World War I had briefly led to the industries of some European states stalling, but in the run-up to WW2 Europe had recovered well, and was competing with the ever increasing economic might of the United States of America.

However, WW2 caused the destruction of most of Europe's industrial centres, and much of the continent's infrastructure was laid to waste.


Following World War II, Europe'Eastern_Europe" title ="Eastern Europe">Eastern European states came under the control of the USSR, and therefore a communist market-system (Yugoslavia also adopted this type of market-system but it was not under control of the USSR). Those states that retained free-markets were given vast amounts of aid by the USA in order to help rebuild their state of economy.

Many Western European governments moved to link their economies, laying the foundation for what would become the European Union. This meant a huge increase in shared infrastructure and cross-border trade. Whilst these Western European states rapidly improved their economies, by the 1980s, the economy of the USSR was struggling, mainly due to the massive cost of the Cold War. The GDP and living standard of Eastern European states were also behind those of their Western neighbours. Even free-market Greece, situated in South-Eastern Europe, struggled due to geographical isolation from Western Europe.

European nations by GDP per capita in 2002. Numbers in USD and from the UNDP
European nations by GDP per capita in 2002. Numbers in USD and from the UNDP


When communism collapsed in Eastern Europe and the USSR around 1991, these states struggled to adapt to free-market systems. There was, however, a huge variation in degrees of success, with Central European states such as Hungary, Slovenia and Poland adapting reasonably quickly, whilst post-Soviet states such as Belarus and Moldova struggling to reform their crumbling infrastructures.

Western Europe was quick to develop economic ties with the newly democratic East. Whilst the former USSR states dealt with change, Yugoslavia descended into civil war.

Europe's largest economy, Germany, initially struggled upon unification in 1991 with former communist East Germany. The Russian controlled Eastern part of the country had had much of its industrial infrastructure removed during the cold war, and for many years the West struggled to build the East upto an equal level.

Peace did not come to Yugoslavia for a decade, and by 2003, there are still many NATO peacekeeping troops present in Bosnia-Herzegovina, FYR Macedonia and Kosovo. War severely hampered economic growth, with only Slovenia making any real progress in the 1990s.

The economy of Europe was by this time dominated by the EU, a huge economic and political organisation with 15 of Europe'Eurozone" title ="Eurozone">Eurozone, a currency union launched in 2000, whereby each member uses a shared currency, the Euro, which replaced their former national currencies.


In early 2004, 10 mostly former communist states joined the EU, enlarging the union to 25 members, with another eight making associated trade agreements.

Most European economies are in very good shape, and the continental economy reflects this. Conflict and unrest in some of the former Yugoslavia states and in the Caucasus states are hampering economic growth in those states, however.


In 2005 the Russian dominated Commonwealth of Independent States (CIS) intends to create a rival trade bloc to the EU, open to any previous USSR state, (including both the European and Asian states). 12 of the 15 have signed up, with the three Baltic states deciding to align themselves with the EU.

Serbia & Montenegro are to hold a referendum in 2006 on whether to keep retain their union or become independent states.

Bulgaria, Romania and Croatia hope to join the EU in 2007, whilst Turkey and the remaining former Yugoslavian states hope to join sometime after 2010.

European nations by growth in GDP per capita in from 1990 to 2002. Numbers from the UNDP
European nations by growth in GDP per capita in from 1990 to 2002. Numbers from the UNDP

Trade unions

In general European nations have larger and more powerful trade unions than anywhere in the world. Many credit this with Europe'Unemployment" title ="Unemployment">unemployment and slower growth than North America.

European Union

The European Union or EU is a supranational union of 25 European states. It has many activities, the most important being a common single market, consisting of a customs union, a single currency (adopted by 12 out of 25 member states), a Common Agricultural Policy and a Common Fisheries Policy. The European Union also has various initiatives to co-ordinate activities of the member states.

The EU, considered as a unit, has the largest economy in the world, with a 2002 GDP of 9.613·10¹² euro. The EU economy is expected to grow further over the next decade as more countries join the union - especially considering that the new States are usually poorer than the EU average, and hence the expected fast GDP growth will help achieve the dynamic of the united Europe.

The union has evolved over time from a primarily economic union to an increasingly political one. This trend is highlighted by the increasing number of policy areas that fall within EU competence: political power has tended to shift upwards from the Member States to the EU.

European Free Trade Association

The European Free Trade Association (EFTA) was established on 3 May 1960 as an alternative for European states that did not wish to join the European Union, creating a trade bloc with fewer central powers.

Today only Iceland, Norway, Switzerland and Liechtenstein remain members of EFTA, as the other members have gradually left to join the EU.

European Economic Area

The European Economic Area (EEA) came into being on 1st January 1994 following an agreement between the European Free Trade Association (EFTA) and the European Union (EU). It was designed to allow EFTA countries to participate in the European Single Market without having to join the EU.

In a referendum, Switzerland (ever keen on neutrality) chose not to participate in the EEA (although it is linked to the European Union by bilateral agreements similar in content to the EEA agreement), so the current members are the EU states plus Norway, Iceland and Liechtenstein.

A Joint Committee consisting of the non EU members plus the European Commission (representing the EU) has the function of extending relevant EU Law to the non EU members.

Commonwealth of Independent States

The Commonwealth of Independent States (CIS) is a confederation consisting of 12 of the 15 states of the former Soviet Union, (the exceptions being the three Baltic states). Although the CIS has few supranational powers, it is more than a purely symbolic organization and possesses coordinating powers in the realm of trade, finance, lawmaking and security. The most significant issue for the CIS is the establishment of a full-fledged free trade zone / economic union between the member states, to be launched in 2005. It has also promoted cooperation on democratisation and cross-border crime prevention.

Central European Free Trade Agreement

The Central European Free Trade Agreement (CEFTA) is a trade bloc of former Communist countries in central and eastern Europe. The countries that participated and the few that continue to participate in CEFTA have used this form of integration to help them prepare for full membership in the European Union.


The most common currency within Europe is the Euro, the currency union of the European Union. To join, each new EU member must meet certain criteria, when these are met their own currencies will be replaced by the Euro. Becoming a member of the EU involves a pledge to work towards Eurozone membership, (except in the cases of the United Kingdom and Denmark who have opt-outs). Currently, 12 of the 25 EU member states use the Euro. Each EU member'Central_bank" title ="Central bank">central bank is part of the European System of Central Banks), and in addition, those that use the Euro are part of the European Union'European_Central_Bank" title ="European Central Bank">European Central Bank.

There are some non-EU members who have elected to use the Euro as their national currency, either with or without specific agreements with the EU to do so, (those with agreements with the EU may mint their own Euro coins).

The CIS is also planning to introduce a single currency among its members.

Below is a list of the central banks and currencies of Europe, with exchange rates between each currency and both the Euro and US Dollars as of 17th November 2004.

Country Currency worth in Euro worth in USD Central Bank
Albania Lek 0.008 0.01 Bank of Albania
Andorra Euro - 1.3
Armenia Dram 0.002 0.002 Central Bank of Armenia
Austria Euro - 1.3 Oesterreichische Nationalbank
Azerbaijan Manat 0.0002 0.0002 National Bank of Azerbaijan
Belarus Belarusian Ruble 0.0004 0.0005 National Bank of the Republic of Belarus
Belgium Euro - 1.3 National Bank of Belgium
Bosnia and Herzegovina Mark 0.5 0.7 Central Bank of Bosnia and Herzegovina
Bulgaria Lev 0.5 0.7 Bulgarian National Bank
Croatia Kuna 0.1 0.2 Croatian National Bank
Cyprus Cyprus Pound 1.7 2.3 Central Bank of Cyprus
Czech Republic Czech Koruna 0.03 0.04 Czech National Bank
Denmark Danish Krone 0.1 0.2 Danmarks Nationalbank
Estonia Kroon 0.06 0.08 Eesti Pank
Finland Euro - 1.3 Bank of Finland
France Euro - 1.3 Banque de France
Georgia Lari 0.4 0.5
Germany Euro - 1.3 Deutsche Bundesbank
Greece Euro - 1.3 Bank of Greece
Hungary Forint 0.004 0.005 National Bank of Hungary
Iceland Icelandic Krona 0.01 0.02 Central Bank of Iceland
Ireland, Republic of Euro - 1.3 Central Bank and Financial Services Authority of Ireland
Italy Euro - 1.3 Banca d'Italia
Latvia Lat 1.5 1.9 Bank of Latvia
Liechtenstein Swiss Franc 0.7 0.9
Lithuania Litas 0.3 0.4 Lietuvos Bankas
Luxembourg Euro - 1.3 Banque Centrale du Luxembourg
FYR Macedonia Macedonian Denar 0.02 0.02
Malta Maltese Lira 2.3 3.1 Central Bank of Malta
Moldova Moldovan Leu 0.06 0.08
Monaco Euro - 1.3
Netherlands Euro - 1.3 De Nederlandsche Bank
Norway Norwegian Krone 0.1 0.2 Norges Bank
Poland Zloty 0.2 0.3 National Bank of Poland
Portugal Euro - 1.3 Banco de Portugal
Romania Romanian Leu 0.00003 0.00003 National Bank of Romania
Russia Russian Ruble 0.03 0.03 Central Bank of Russia
San Marino Euro - 1.3
Serbia and Montenegro:

Serbian Dinar



National Bank of Serbia
Central Bank of Montenegro
Slovakia Slovak Koruna 0.03 0.03 National Bank of Slovakia
Slovenia Tolar 0.004 0.005
Spain Euro - 1.3 Banco de España
Sweden Swedish Krona 0.1 0.2 Sveriges Riksbank
Switzerland Swiss Franc 0.7 0.9 Schweizerische Nationalbank
Turkey Turkish Lira 0.0000005 0.0000007 Türkiye Cumhuriyeti Merkez Bankası
Ukraine Hryvnia 0.2 0.2 National Bank of Ukraine
United Kingdom Pound Sterling 1.5 1.9 Bank of England
Vatican City Euro - 1.3 Vatican Bank

1 Whilst most of Serbia uses the Dinar, the autonomous Kosovo region primarily uses the Euro.

Table correct as of 17th November 2004

Economic sectors


to be completed


to be completed

Investing and banking

to be completed

Global trade relations

The EU is the world'NAFTA" title ="NAFTA">NAFTA.

Economy by country

Economy of:

See also

Contribute Found an omission? You can freely contribute to this Wikipedia article. Edit Article
Copyright © 2003-2004 Zeeshan Muhammad. All rights reserved. Legal notices. Part of the New Frontier Information Network.