What is the EU?

You likely have some idea what the EU (European Union) is, but do you know why it was formed, what its powers are, and how it affects you as a traveler?

EU Flag

A little bit of background:

The present-day European Union, which is both a political and economic body, was formed in 1993, but the organization’s roots date back to the 1950s. In the aftermath of World War II, European leaders sought to unify a continent that had been devastated by conflicts for the majority of the century. The earliest version of this vision, the European Economic Community (EEC) was founded in 1958 and aimed to increase trade and foster economic interdependence between its member countries, Belgium, Germany, France, Italy, Luxembourg and the Netherlands.

The organization continued to evolve through the subsequent decades, but many non-Europeans would mark the year 1999 as the year that the EU entered the vernacular. This actually marked actually the birth of the Eurozone and was the year that the Euro officially became a world currency (though coins and physical money weren't circulated until 2002).

One important concept to remember is that not all EU member states have adopted the Euro. A country can be in the EU without being in the Eurozone, but a country cannot be in the Eurozone without being an EU member.

What is the Eurozone?

The creation of the Eurozone was a major turning point for the EU, as it was the first time member states united under a single currency. When the first 11 states joined the Eurozone in 1999, two important things happened. First, existing currencies ceased to exist as legal tender after two months. Secondly, the monetary policies (how central banks manipulate interest rates and stimulate the economy through changing the money supply), became forever linked, for better or for worse.

The monetary policy of the Eurozone is decided by the European Central Bank (ECB). One of the ECB's primary responsibilities is to maintain price stability (limit inflation and deflation) within the Eurozone. This has proven an interesting challenge. The recent financial crisis shined a light on what many economists would call a glaring flaw in the Eurozone design, countries with very different economies and levels of financial stability, are "joined at the hip" both politically and monetarily. This limits some of the traditional strategies countries would otherwise use when combatting a crisis.

Some of the current group of 19 Eurozone member countries were hit harder than others during the global recession of 2008 and 2009. Economies like Spain, Italy and Greece have yet to recover, while countries like Germany returned to relative prosperity quickly.

This has led to bitter disputes between member countries, as well as a sovereign debt crisis. Some countries (Greece, Ireland, Portugal, Cyprus, and Spain) borrowed an enormous amount of money and once the crisis hit, were unable to repay it, forcing more economically stable Eurozone members to provide rescue funds. Creditor countries like Germany have since called for austerity measures (the reduction of spending and entitlements like social security and early retirement) in debtor countries, so those governments are able to stay afloat and continue to avoid default. Not unexpectedly, these measures have been met with protest from citizens who have already been hit hard by the economic crisis and rampant unemployment.

Here is a good, albeit biased, explanation of the European debt crisis by Bloomberg.

What countries are members?

There are currently 28 member states in the EU (as of March, 2015)

**Member states of the EU - (year of entry)

  • Austria (1995)
  • Belgium (1952)
  • Bulgaria (2007)
  • Croatia (2013)
  • Cyprus (2004)
  • Czech Republic (2004)
  • Denmark (1973)
  • Estonia (2004)
  • Finland (1995)
  • France (1952)
  • Germany (1952)
  • Greece (1981)
  • Hungary (2004)
  • Ireland (1973)
  • Italy (1952)
  • Latvia (2004)
  • Lithuania (2004)
  • Luxembourg (1952)
  • Malta (2004)
  • Netherlands (1952)
  • Poland (2004)
  • Portugal (1986)
  • Romania (2007)
  • Slovakia (2004)
  • Slovenia (2004)
  • Spain (1986)
  • Sweden (1995)
  • United Kingdom (1973)

There are also five candidate countries which have formerly applied for inclusion:

  • Iceland
  • The former Yugoslav Republic of Macedonia
  • Montenegro
  • Serbia
  • Turkey

There are some pretty complicated exceptions to which countries obey which parts of the EU treaty. The following video by CGP does a great job of explaining the confusing question "Where is the EU?"

As the video points out, there are three major tenants of EU membership, each with notable exceptions.

  1. EU member states pay membership dues.
  2. EU member states vote on legislation.
  3. Citizens of member states are citizens of the EU and have free movement for purposes of study, work, or pleasure.

What powers does the EU hold?

The relationship between the EU and its member states is a complicated one. The Union holds certain powers or competences outright, shares some powers with member states, and delegates some powers solely to its members, not unlike the US Federal Goverment and individual states.

Here is the official breakdown of competences from the Official European Union Website:

What are the powers of the EU

As you can see, its powers are far reaching - overseeing at least in part, the economy, social policy, environmental policy, culture, public health, agriculture, energy, international relations, and transportation. Many have argued that the power of the EU is too expansive, and the checks on that power too limited. This debate will rage on as the EU expands and its influence grows.

Coming Next:

-How does the EU make laws?

-What to know while traveling in the EU