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.[114][115] If considered as a single economy, the EU generated an estimated nominal gross domestic product (GDP) of US$16.45 trillion (14.794 trillion international dollars based on purchasing power parity) in 2009, amounting to over 21% of the world's total economic output in terms of purchasing power parity,[12] 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 ,[116] and largest importer[117] of goods and services, and the biggest trading partner to several large countries such as China and India.[118][119][120]
178 of the top 500 largest corporations measured by revenue (Fortune Global 500) have their headquarters in the EU.[121]
In May 2007 unemployment in the EU stood at 7%[122] while investment was at 21.4% of GDP, inflation at 2.2% and public deficit at −0.9% of GDP.[123] 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.[124]
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,[115] 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.[37] Half the trade in the EU is covered by legislation harmonised by the EU.[125]
Free movement of capital is intended to permit movement of investments such as property purchases and buying of shares between countries.[126] 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.[127]
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.[128] According to the Treaty the provision of services is a residual freedom that only applies if no other freedom is being exercised.
Monetary union
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.
All other EU member states, except Denmark and the United Kingdom, are legally bound to join the euro[129] 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.[130]
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.[114] Since its launch the euro has become the second reserve currency in the world with a quarter of foreign exchanges reserves being in euro.[131]
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).[132] There are eleven other currencies used in the EU[114] with all but two legally obliged to be switched to the euro. A number of other countries outside the EU, such as Montenegro, use the euro without formal agreement with the ECB.[39]
Budget
 |
| The total expenditure of the European Union in 2006[133] |
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,[134] 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.[135]
In the 2006 budget, the largest single expenditure item was agriculture with around 46.7% of the total budget.[136] Next came structural and cohesion funds with approximately 30.4% of the total.[136] 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.[136]
Competition
The EU operates a competition policy intended to ensure undistorted competition within the single market.[137] 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.[138]
The Competition Commissioner, currently Joaquín Almunia, is one of the most powerful positions in the Commission, notable for the ability to affect the commercial interests of trans-national corporations.[139] 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.[140] Another high profile case against Microsoft, resulted in the Commission fining Microsoft over €777 million following nine years of legal action.[141]
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.
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