The European Union is a group of 28 countries that operates as a cohesive economic and political block. Nineteen of the countries use the euro as their official currency. The EU grew out of a desire to form a single European political entity to end the centuries of warfare among European countries that culminated with World War II and decimated much of the continent. The European Single Market was established by 12 countries in 1993 to ensure the so-called four freedoms: the movement of goods, services, people and money.
The EU began as the European Coal and Steel Community, which was founded in 1950 and had just six members: Belgium, France, Germany, Italy, Luxembourg and the Netherlands. It became the European Economic Community in 1957 under the Treaty of Rome and, subsequently, became the European Community.The early focus of the EC was a common agricultural policy as well as the elimination of customs barriers. The EC initially expanded in 1973 when Denmark, Ireland, the United Kingdom, Greece and Spain became members. A directly elected European Parliament took office in 1979.
In 1986, the Single European Act solidified the principles of foreign policy cooperation and extended the powers of the community over the members. The act also formalized the idea of a single European market. The Maastricht Treaty took effect on Nov. 1, 1993, and the European Union replaced the EC.
The Treaty created the euro, which is intended to be the single currency for the EU. The euro debuted on Jan. 1, 1999. Denmark and the United Kingdom negotiated “opt out” provisions that permitted them to retain their own currencies. Several newer members of the EU have not yet met the criteria for adopting the euro. In 2017, the EU’s gross domestic product totaled $17.1 trillion (nominal), which was $2.9 trillion less than the United States’ $20 trillion GDP.
The EU and the European Central Bank (ECB) have struggled with high sovereign debt and collapsing growth in Portugal, Ireland, Greece and Spain since the global financial market collapse of 2008. Greece and Ireland received financial bailouts from the community in 2009, which were accompanied by fiscal austerity. Portugal followed in 2011, along with a second Greek bailout.
Multiple rounds of interest rate cuts and economic stimulus failed to resolve the problem. Northern countries such as Germany, the United Kingdom and the Netherlands increasingly resent the financial drain from the south. Repeated rumors that Greece would be forced to withdraw from the euro failed to materialize amid disagreement as to whether the move was legally possible as it was not covered in the Maastricht Treaty.
As the situation moved from crisis to stagnation, the U.K. government announced it would hold a referendum to determine whether it would remain a part of the EU on June 23, 2016. The nation voted to leave the EU under what’s now called Brexit.