To increase investment opportunities and development in Europe, the European Union has eliminated virtually all tariffs between member states. This has resulted in a vast politico-economic union with a standardised system of trade law and the free movement of people, goods, services and capital. According to the International Monetary Fund, the economy of the European Union now generates a nominal GDP of around €14.3 trillion – which positions it as either the largest or second largest economy in the world.
What distinguishes EU GDP growth from other regions globally is that it’s composed of multiple, individual sovereign states, each with its respective GDP. This means that internally European growth can vary greatly depending on the country. For example, the accession of the Baltic States meant renewed European investment opportunities and relatively cheap labour. As a result, the highest EU GDP growth rates historically have been seen in countries such as Slovakia and Latvia, which reached 11%. By contrast, many older member states with larger economies, such as France and Italy, are suffering from continued stagnation, creating significant regional variations.
Growing Pains – European Growth in Perspective
In 2009, 19 of the 28 European member states went through a sovereign debt crisis – also known as the Euro crisis. While the majority of these countries have recovered, there are still member states struggling to balance their budgets and re-establish stable economic growth. In the GED focus paper ’Two Economic Paths out of the Crisis?’ we examine the two worst affected countries: Greece and Portugal, and consider the options, as well as the long-term consequences, for Europe’s GDP growth if these countries are unable resolve their debt crises.
Following the financial crisis, global growth has also been slowing. Although Europe’s GDP growth is on the increase, the rise of emerging economies such as China, Brazil, and India has meant that the European Union’s percentage of gross world product has been steadily decreasing over the past years. In order to counter this and boost European market development, a number of mega regional trade agreements, such as the Transatlantic Trade and Investment Partnership (TTIP), are currently being negotiated. If passed, the European Commission predicts that TTIP could have a significant impact on EU development, while also establishing the US and the EU as the leader of global standards. You can learn more about this by watching the GED Session at the Global Economic Symposium with Pascal Lamy on TTIP and EU and US regulatory convergence.