Economy of the European Union
The economy of the European Union is the joint economy of the member states of the European Union. It is the second largest economy in the world in nominal terms, after the United States, and the third largest at purchasing power parity, after China and the US. The European Union's GDP is estimated to be $22.52 trillion or $30.18 trillion in 2026, representing around one-sixth of the global economy. Germany, France, Italy and Spain are the four largest economies in the European Union, accounting for approximately 60.5% of the EU's total nominal GDP. Germany contributes 23.7%, while France accounts for 15.8%, Italy for 12.0% and Spain for 9.1%. In 2024, the social welfare expenditure of the European Union as a whole was 27.3% of its GDP.
The EU has total banking assets of more than $38 trillion, France accounts for 26% of Europe's total banking assets followed by Germany with 18% Italy with 8% and Spain with 7% .
Global assets under management in the EU is more than $12 trillion, with France accounting for more than 33% of Europe's total AUM followed by Germany with 16% and Italy with 12%. Paris is by far the economically strongest city in the EU, with a GDP exceeding $1 trillion. Paris is a major economic hub in the EU, with Euronext Paris, the largest stock exchange in the EU by market cap. Frankfurt, Germany's financial center, is the second-largest in the EU, hosting the Frankfurt Stock Exchange, although it is significantly smaller than Paris in terms of market cap and economic influence.
The euro is the second largest reserve currency and the second most traded currency in the world after the United States dollar. The euro is used by 21 of its members, overall, it is the official currency in 26 countries, in the eurozone and in six other European countries, officially or de facto. The EU as a region has produced the world's second-highest number of Nobel laureates in the economics field.
The European Union is one of the world's largest trading entities, with Germany and France serving as the primary economic powerhouses in terms of both exports and imports. In 2023, Germany is the EU's largest exporter and importer and the third-largest exporter globally, with $1.96 trillion in exports. Germany is also a major importer, with $1.47 trillion in imports, reflecting its role as a key player in global supply chains. France is the second-largest exporter in the EU, with $1.05 trillion in exports. France is also a significant importer, with just over $777 billion in imports, the second largest importer in the EU.
Of the top 500 largest corporations measured by revenue, 161 are located in the EU.
With 30 companies that are part of the world's biggest 500 companies, Germany was in 2023 the most represented in the European Union in the 2023 Fortune Global 500, ahead of France and the Netherlands. With 62 companies that are part of the world's biggest 2000 companies, France was again in 2023 the most represented in the European Union in the 2023 Forbes Global 2000, ahead of Germany and Italy.
The European Union economy consists of an internal market of mixed economies based on free market and advanced social models. For instance, it includes an internal single market with free movement of goods, services, capital, and labour. The GDP per capita was $62,660 in 2024, compared to $86,601 in the United States, $53,059 in Japan and $26,310 in China. There are significant disparities in GDP per capita between member states ranging from $154,915 in Luxembourg to $41,506 in Bulgaria. With a medium Gini coefficient of 29.6, the European Union has a more egalitarian distribution of income than the world average.
EU investments in foreign countries total €17.02 trillion, while the foreign investments made in the union total €14.46 trillion in 2023, by far the highest foreign and domestic investments in the world. Euronext is the main stock exchange of the Eurozone and the world's fourth largest by market capitalisation, with Euronext Paris accounting for more than 80% of Euronext total market cap. The EU's largest trading partners are China, the United States, the United Kingdom, Switzerland, Russia, Turkey, Japan, Norway, South Korea, India, and Canada. In 2022, public debt in the union was 83.5% of GDP, with disparities between the lowest rate, Estonia with 18.5%, and the highest, Greece with 172.6%.
There has been general growth in GDP per capita and employment, but regional differences within EU nations remain, with considerable discrepancies between capital and non-capital areas, particularly in younger Member States. In north-western Europe, nearly 75% of women are part of the workforce, compared to roughly 68% in southern Europe.
Currency
Since 1999, 21 EU states use the euro as official currency in a currency union. The remaining 6 states continue to use their own currency with the possibility to join the euro later. The euro is the most widely used currency in the EU.Since 1992, the Maastricht Treaty sets out rigid economic and fiscal convergence criteria for the states joining the euro. Starting 1997, the Stability and Growth Pact has been started to ensure continuing economic and fiscal stability and convergence.
Denmark is not a part of the eurozone due to its special opt-outs concerning the later joining of the euro. In contrast, the remaining states can effectively opt out by choosing when or whether to join the European Exchange Rate Mechanism, which is the preliminary step towards joining. They are, however, committed to join the euro by their Treaties of Accession.
Starting with Greece in 2009, five of the 20 eurozone states have been struggling with a sovereign debt crisis, commonly called the European debt crisis. All these states started reforms and got bailout packages. As of 2015, all countries but Greece have recovered from their debt crisis. Other non-eurozone states also experienced a debt crisis and also went through successful bailout programmes, i.e. Hungary, Romania and Latvia.
Budget
The EU has a long-term budget, named Multiannual Financial Framework, of €1,082.5 billion for the period 2014–2020, representing 1.02% of the EU-28's GNI.The overall budget for the period 2021-2027 is of €1.8 trillion combining the MFF of €1,074.3 billion with an extraordinary recovery fund of €750 billion, known as Next Generation EU, to support member states hit by the COVID-19 pandemic.
Sectors
Services
The services sector is by far the most important sector in the European Union, making up 64.7% of GDP, compared to the manufacturing industry with 23.8% of GDP and agriculture with only 1.5% of GDP.Financial services are well developed within the Single Market of the Union. Companies have a greater reliance on bank lending than in the United States, although a shift towards companies raising more funding through capital markets is planned through the CMU initiative, the EU plan put forward by the Commission in September 2015 to mobilise the free movement of capital within the EU. The plan aims "to establish the building blocks of an integrated capital market in the EU by 2019". The CMU initiative comprises 33 measures in all. The plan was updated in 2017 and in 2019, since not a single legislation will deliver the CMU. The Commissioner for Financial Stability, Financial Services and Capital Markets Union, Mairead McGuinness, former vice-president of the European Parliament, is responsible for delivery of the initiative.
According to the Global Financial Centres Index, the two largest financial centres in Europe, London and Zürich, are outside the European Union. The two largest financial centres remaining within the EU will then be Frankfurt and Luxembourg.
In the European Investment Bank's Investment survey 2021, 58% of firms in the service sector were expecting long term effects of COVID-19. 56% of EU enterprises received governmental help to handle the pandemic's effects.
The COVID-19 pandemic had a significant effect on sales. 49% of all EU enterprises claimed that their sales decreased since the start of 2020. The pandemic has affected sectors differently, with the number of enterprises losing money in the hotels, restaurants, arts, and leisure industries reaching roughly 25% compared to previous times, and transportation also being affected.
Without government assistance, 35% of European small and medium-sized firms in manufacturing and services indicated their businesses would not have survived the effects of the pandemic.
In 2020, 86% of enterprises reported previous-year investment activity, while in 2021 only 79% reported investment. 23% of EU firms changed their investment plans in 2021, with only 3% reporting a higher amount. The highest proportion of enterprises that have reduced their investment plans due to a drop in sales are in Poland, where 49% of firms have reduced investment, and in Belgium, where 47% of firms stated the same.
Most green or digital businesses in the EU operate in manufacturing or infrastructure. The service sector has the greatest percentage of businesses that have not engaged in digitalisation or the green transition.
EU enterprises were growing in terms of innovation in 2023. 39% of EU enterprises created or introduced new goods, processes, or services in the previous fiscal year, compared to 57% of US firms. In the EU, over 12% of businesses introduced ideas that were novel to the country or the global market. Investment in intangible assets by EU enterprises accounted for around 38% of overall investment. Businesses in the EU were also optimistic about 2023, with 14% more predicting an increase rather than a drop in investment.