Economy of Europe
The economy of Europe comprises about 748 million people in 50 countries. Throughout this article "Europe" and derivatives of the word are taken to include selected states whose territory is only partly in Europe, such as Turkey, Azerbaijan and Georgia, and states that are geographically in Asia, bordering Europe and culturally adherent to the continent, such as Armenia and Cyprus.
There are differences in wealth across Europe which can be seen roughly along the former Cold War divide, with some countries breaching the divide. Whilst most European states have a GDP per capita higher than the world's average and are very highly developed, some European economies, despite their position over the world's average in the Human Development Index, are relatively poor. Europe has total banking assets of more than $50 trillion; the United Kingdom accounts for 25% of Europe’s total banking assets followed by France with 20% and Germany with 15%. Europe's global assets under management is more than $20 trillion, with the United Kingdom accounting for more than 40% of Europe’s total AUM, followed by France with 20% and Germany with 12%. London and Paris are by far the economically strongest cities in Europe, each with a GDP exceeding $1 trillion. London and Paris are major economic hubs in Europe, with the London Stock Exchange and Euronext Paris, the two largest stock exchanges in Europe by market cap.
The formation of the European Union and in 1999 the introduction of a unified currency, the euro, brought participating European countries closer through the convenience of a shared currency. Various European states have increased their economic links through regional integration. The EU is a sui generis political entity, combining the characteristics of both a federation and a confederation. As one entity, the union is one of the largest economies in the world, having influence on regulations in the global economy due to the size of its single market with Iceland, Liechtenstein, Norway, and Switzerland.
Europe's largest national economies by nominal GDP over US$1.0 trillion are Germany, United Kingdom, France, Italy, Russia, Spain, the Netherlands, Poland, and Switzerland.
Europe's largest national economies by nominal GDP PPP over US$1.0 trillion are Russia, Germany, France, United Kingdom, Italy, Spain, Poland, and the Netherlands.
In the International Comparison Program 2021, the Commonwealth of Independent States region was linked through the standard global core list approach, unlike in ICP 2017. Based on the results, the World Bank announced that in 2021 Russia was the world's 4th largest economy and the largest economy in Europe and Central Asia when measured in PPP terms, followed by Germany.
Europe is one of the world’s largest trading entities, with Germany, France and the United Kingdom serving as the primary economic powerhouses in terms of both exports and imports. Germany is Europe's largest exporter and importer and the third-largest exporter globally, with over $2 trillion in exports in 2022. Germany is also a major importer, with $1.5 trillion in imports in 2022, reflecting its role as a key player in global supply chains. France is the second-largest exporter in Europe, with over $1 trillion in exports in 2022. France is also a significant importer, with $850 billion in imports in 2022, the second largest importer in Europe. The United Kingdom is the third-largest exporter in Europe, with over $1 trillion in exports in 2022. The United Kingdom is also a significant importer, with $800 billion in imports in 2022, the third largest importer in Europe.
Of the top 500 largest corporations by revenue, 123 have their headquarters in Europe. Eighty-eight are located in the EU, 17 in the United Kingdom, 11 in Switzerland, five in Russia, one in Turkey, one in Norway. With 29 companies that are part of the world's biggest 500 companies, Germany was in 2024 the most represented European country in the 2024 Fortune Global 500, ahead of France and the UK. With 62 companies that are part of the world's biggest 2000 companies, France was again in 2023 the most represented European country in the 2023 Forbes Global 2000, ahead of the UK and Germany.
Economic development
Pre-1945: Industrial growth
Prior to World War II, Europe's major financial and industrial states were the United Kingdom, France and Germany. The Industrial Revolution, which began in Britain, spread rapidly across Europe, and before long the entire continent was at a high level of industry. World War I briefly led to the industries of some European states stalling, but in the run-up to World War II Europe recovered well and was competing with the ever-increasing economic might of the United States of America.However, World War II caused the destruction of most of Europe's industrial centres and much of the continent's infrastructure was laid to waste.
1945–1992: The Cold War era
Following World War II, European governments were in tatters. Many non-Socialist European governments moved to integrate 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 European states rapidly improved their economies, by the 1980s, the state-run economies of the COMECON group were struggling, mainly due to the massive cost of the Cold War. The GDP and the living standards of Central and Eastern European states were lower than in other parts of Europe.The European Community grew from 6 original members following World War II, to 12 in this period.
Average living standards in Europe rose significantly during the post-war period, as characterised by these findings:
Per capita private consumption in 1980
- Luxembourg: 5495
- France: 5395
- Germany, Federal Republic: 5319
- Belgium: 5143
- Denmark: 4802
- Netherlands: 4792
- United Kingdom: 4343
- Italy: 4288
- Ireland: 3029
- Belgium: 6202
- France: 6044
- Germany, Federal Republic: 5661
- Netherlands: 5490
- Italy: 5378
- Denmark: 4878
- United Kingdom : 4698
Rise of the European Union
Many developed European countries were quick to develop economic ties with fellow European states, where democracy was reintroduced. After the Revolutions of 1989, states in Central Europe and the Baltic states dealt with change, former Yugoslavian republics descended into war and Russia, Ukraine and Belarus are still struggling with their old systems.
Europe's largest economy, Germany, struggled upon unification in 1991 with former communist German Democratic Republic, or East Germany, influenced by the Soviet Union. The GDR had much of its industrial infrastructure removed during the Cold War, and for many years unified Germany struggled to build infrastructure in the former East Germany up to the level of former West Germany.
Peace did not come to Yugoslavia for a decade, and by 2003, there were still many NATO and EU peacekeeping troops present in Bosnia and Herzegovina, North Macedonia, and Kosovo. War severely hampered economic growth, with only Slovenia making any real progress in the 1990s.
The European economy was affected by the September 11 Attacks in the United States in 2001, with Germany, Switzerland, France, and the United Kingdom being the worst hit. But, in 2002/2003, the economy began to recover from the attacks in US.
The total size of the economy of Europe was by this time dominated by the EU, a union with then 15 of Europe's states as full members. EU membership was seen as something to aspire to, and the EU gave significant support and aid to those Central and Eastern European states willing to work towards achieving economies that met the entry criteria. During this time, 12 of the 15 members of the EU became part of the Eurozone, a currency union launched in 1999, whereby each member uses a shared currency, the euro, which replaced their former national currencies. Three states chose to remain outside the Eurozone and continue with their own currencies, namely Denmark, Sweden and the United Kingdom.
2004–2007: EU expansion
In early 2004, 10 mostly former communist states joined the EU in its biggest ever expansion, enlarging the union to 25 members, with another eight making associated trade agreements. The acceding countries are bound to join the Eurozone and adopt the common currency euro in the future. The process includes the European Exchange Rate Mechanism, of which some of these countries are already part.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 response to the massive EU growth, in 2005 the Russian-dominated Commonwealth of Independent States created a rival trade bloc to the EU, open to any previous USSR state,. Twelve of the 15 signed up, with the three Baltic states deciding to align themselves with the EU. Despite this, the three Caucasus states have said in the past they would one day consider applying for EU membership, particularly Georgia. This is also true of Ukraine since the Orange Revolution.
2008–2015: Eurozone expansion and European debt crisis
became the first republic from the former Yugoslavia as well as the first formerly communist nation overall to adopt the EU currency, the euro, in 2007, followed by Malta and Cyprus in 2008, and Slovakia in 2009. In 2011, Estonia became the first republic from the former Soviet Union to adopt the euro, followed by Latvia in 2014, and Lithuania in 2015. In 2013, Croatia became the 28th member of the European Union, and adopted the euro on 1 January 2023. In 2026, Bulgaria adopted the euro.The 2008 financial crisis, triggered by the housing bubble in the United States, caused a significant decline in the GDP of the majority of the European economies, which was a precedent to the euro area crisis, which threatened the collapse of economies in the south, particularly Greece, Portugal and Spain. Having also been hit hard, Ireland exited the crisis in mid-2013. Meanwhile, increased bailouts of the International Monetary Fund and European Central Bank alleviated somehow the situation in the debt-stricken nations, with Central and East European economies led by Germany escaping the worst of the 2010s debt crisis.
By the mid-2010s, 2014–2015, Ireland was recovering at a steady pace having graduated from the bail out programme successfully. The Eurozone as a whole had become more stable, however problems in Greece and slow recovery in Italy and in Iberia continue in keeping growth in the Euro area to a minimum. Germany continues to lead Europe in stability and growth, while both the UK and Ireland are seeing strong growth of 3–4%. Unemployment in Ireland reducing at the fastest levels in Europe, expected to reach 8% by 2016, down from double that in 2011. The Czech Republic and Germany have constantly the lowest unemployment rate in the EU. Growth outlook in general remains optimistic for Europe in the future. With positive growth expected across the Euro area. Although uncertainty still surrounds Greece and debt payments in the Greek state, at present things appear stable.
European businesses have been in decline against worldwide ones since the crisis. Of the 50 most valuable global firms, only seven were European as of 2015, compared to 17 in 2006. Out of 24 economic sectors, Europe only leads in one - food, which is led by Nestlé from Switzerland. Companies like HSBC, Vodafone, TotalEnergies and BNP Paribas have all also sled in their respective industries against American and Asian competitors. In addition, former technologic heavyweights like Nokia, Ericsson and Alcatel have also declined against evolving American companies in the Silicon Valley.
While the bottom 80% of the European population's income has increased by an estimated 40% on average since 1980, the top 1%'s pre-tax income has more than doubled. Employment in the European Union reached a new high in 2019.
While many social and economic indicators have converged across EU regions, the 2008 financial crisis resulted in a sharp divergence in unemployment rates. Recently, these ranged from less than 2% in Prague to more than 20% in parts of Greece, southern Spain, and southern Italy. Rapid technological change also had an effect on medium-skilled workers resulting in more low-skilled jobs being taken up.