After watching this video, you will be able to describe the economy of Europe, including how countries of Europe work together economically, and which sectors are dominant.
A short quiz will follow.
The Economy of Europe
Europe, much like the United States, is a free market economy based on the movement of capital. The economy of Europe has a GDP (Gross Domestic Product) of around 20 trillion US dollars, and includes more than 700 million people in almost 50 different countries. The largest economy of Europe is Germany, followed by France, followed by the UK.Europe is a continent containing many different countries, all with their own economic policies and systems. But there are certain ways that the countries of Europe combine together to strengthen their economy. One way is called the European Union (EU), which is a political and economic union of 28 European countries, allowing those countries to work together on political and economic issues, including the promotion of free trade between member countries.
Workers, products, and capital can move freely inside the European Union, which allows the free market to work more efficiently.Another way the countries of Europe work together is that many of them have switched to a common currency, called the euro. This makes exchange and trade even easier, and exchange rates are no longer a factor. However, the downside is that monetary policy is set for the whole eurozone, which means that decisions made by the European Central Bank can be good for some countries and not so good for others. Not all the countries of Europe use the euro as their currency. In fact, not even all members of the European Union do. Deciding whether to switch currencies to the euro is a choice for individual countries to make.
Unsurprisingly, Europe trades the most internally, but there is also a lot of trade between European countries and China, the United States, Japan, and Russia.
Economic Sectors of Europe
Since Europe is such a large area with so many different economies, it is hard to summarize the economy of Europe, but we can look at major sectors of the economy and where they are mostly located.Agriculture is a major part of Europe’s economy. The EU subsidizes farming in order to make their products more competitive and keep the agriculture industry afloat. This is controversial because it goes against the idea of free trade, but it is very common – the United States also subsidizes farmers. Farming remains extremely important to some countries in the EU.
France, for example, has a large agriculture economy and would suffer greatly without the EU’s protections.Manufacturing is also important in the EU. Industry in general, including manufacturing and construction, accounts for 25.2% of the EU’s GDP. Europe is the world’s largest car manufacturing region, creating jobs for 12.9 million people.
But there are many other active industries, including aerospace, defense (vehicles, ships, etc.), electronics, chemicals (especially petrochemicals and polymers), and biotechnology.By far, the biggest economic sector of Europe, though, is the service industry.
Services account for a full 73% of the GDP of the EU. While there are many services of importance, the financial sector is front and center in Europe. London, in particular, is home to many of Europe’s – and the world’s – largest banks, including HSBC, Barclays, BNP Paribas, Credit Agricole Group, Deutsche Bank, Royal Bank of Scotland, and many others.
Europe, much like the United States, is a free market economy based on the movement of capital.
The economy of Europe has a GDP of around 20 trillion US dollars, and includes nearly 750 million people in about 50 different countries. The largest economy of Europe is Germany, followed by France, followed by the UK.There are several organizations that help encourage free trade and cooperation between the countries of Europe. One is called the European Union, which is a political and economic union of 28 European countries, allowing those countries to work together on political and economic issues, including the promotion of free trade between member countries. Workers, products, and capital can move freely inside the EU, which allows the free market to work more efficiently.
Another is a common currency called the euro. This makes exchange and trade even easier, though since monetary policy is set for the whole eurozone, this can be seen as unfairly damaging to some countries.The biggest sector of Europe’s economy is the service industry, especially banking. Services account for 73% of the EU’s economy, for example.
The second biggest sector is manufacturing, which is responsible for 25%. Much of the remaining portion of GDP is taken up by agriculture. Europeans have some of the best living conditions, not just of the world, but in the history of the world. Their strong economy is a big part of how that is achieved.
When you are finished, you should be able to:
- Explain how Europe has tried to strengthen its regional economy
- Describe the benefits and challenges of the European Union
- List the industries and economic sectors found within Europe