DEFINITION of 'European Union - EU'
The European Union (EU) 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, which 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.
BREAKING DOWN 'European Union - EU'
The EU had its beginning in 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 (EEC) in 1957 under the Treaty of Rome, and subsequently became the European Community (EC). The early focus of the Community was a common agricultural policy as well as the elimination of customs barriers. The EC first expanded in 1973 when Denmark, Ireland, the United Kingdom, Greece and Spain joined. 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. It also formalized the idea of a single European market. The Maastricht Treaty took effect on Nov. 1, 1993, and the EC was replaced by the EU. The Treaty provided for the creation of the euro, which is intended to be the single currency for the EU. It 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 2014, the GDP of the EU totaled $13.8 billion, which is larger than that of the United States.
The EU and the European Central Bank (ECB) have struggled since the global financial market collapse of 2008 to deal with very high sovereign debt and collapsing growth in Portugal, Ireland, Greece and Spain. 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 to stagnation from crisis, the government of the United Kingdom announced it would hold a referendum on June 23, 2016, on whether the country should remain in the EU. The UK has retained its own currency.