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European Union (EU)

The European Union (EU), formerly known as the European Community (EC), was formed in the 1950s to encourage and oversee political and economic cooperation between numerous European nations. In the nearly half-century since it was formed, the EU has gradually succeeded in becoming the dominant governing economic body in Europe, and it now affects every aspect of business in its member states.

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The EU had its origins in an upsurge of warfare which began in 1870 with the Franco-Prussian war and then continued through two world wars. World War II barely over, Winston Churchill, in a speech at Zurich University given in September 1946 called for “a kind of United States of Europe.” Churchill’s was a prominent voice but he expressed what many other leaders in Europe were feeling at the time. Two years later Belgium, France, Luxembourg, the Netherlands and the United Kingdom formed the West European Union aimed at mutual defense; that same year 16 other nations joined to form the Organization for European Economic Cooperation (OEEC) to oversee implementation of the U.S.-created Marshall Plan. OEEC later evolved into OECD (Organization for Economic Cooperation and Development), with the U.S. and Japan joining as well.

Communities: Coal, Atomic Energy, Economics In 1951 Belgium, West Germany, Luxembourg, France, Italy, and the Netherlands established the European Coal and Steel Community (ECSC) empowered to make decisions about these industries for the group as a whole.

Jean Monnet, who had given an influential speech about this subject in 1950 was named as the ECSC president.

ECSC was a great success. In 1957 the same six countries created the European Atomic Energy Community (EURATOM) and the European Economic Community (EEC) to handle atomics and economic development in the same way, principally by removing trade barriers and creating a “common market.” These “communities,” focused on specific areas, were a step toward a greater union.

Maastricht Milestones along the way were the merger, in 1967, of the three “communities” under a single Commission alongside a Council of Ministers and a European Parliament. In 1979 member countries’ populations participated in direct elections of members of this parliament. Elections have been held at five-year intervals since. The Treaty of Maastricht, signed in 1992, created the European Union itself in 1992 by enabling member states to cooperate in defense and in the areas of justice and home affairs as well.

Common Policies and Market—and a Single Currency The collective aim of these arrangements had always been greater efficiency and the achievement of economic power on a larger and more coordinated scale. Removal of trade barriers, common policies in many fields (agriculture, culture, energy, food purity, transportation, trade, etc.), and a common point for negotiating trade and aid agreements have been aims. The EU formed an economic and monetary union in EMU in part to implement some of these goals; it created the European Central Bank and projected the use of a single currency, the euro. The euro became the official currency in 2002 of 12 of the then 15 members: Belgium, Germany, Greece, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal, and Finland. Denmark, Sweden, and the U.K retained their own currencies.

Since 2002 the euro has become an important global currency.

Expansion and Consolidation In 2002 the EU voted to admit ten additional countries, most of them formerly communist states. In consequence, in 2003, Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia joined the EU.

The Treaty of Nice, which came into force on February 1, 2003 was intended to regulate the newly enlarged union. An EU constitution was framed and will replace Treaty of Nice regulations if all EU member nations approve it in 2006.


The EU’s several governing bodies oversee different aspects of the union’s operations. In addition, each country in the union takes turn acting as chairman; the position changes hands every six months. The European Commission (EC) is perhaps the most important of the governing bodies: it proposes policies and is the only body authorized to propose legislation (besides the national governments of each state). It also oversees the day-to-day operations of the union and ensures that treaties are being carried out as intended. The commission is comprised of 20 commissioners, including a president, all appointed by member states and approved by the parliament.

Once legislation is passed, it is administered by the European Council. The council is comprised of ministers who represent the national governments of the 25 members of the union. Actions of the European Council are approved on a majority vote of 13 of 25 commissioners.

Members of the European Parliament are directly elected by the people of each nation, and members serve five-year terms. While the parliament did gain some legislative power from the Maastricht Treaty, it mainly serves as the public forum of the EU, holding open debates on important issues and overseeing the activities of the council and the commission. The Court of Justice oversees EU laws and regulations and issues rulings when conflicts arise. The court sits as a “Grand Chamber” of 13 judges or in chambers of three or five judges.

Decisions issued by the court are binding on member states.

Important but specialized activities of the EU are managed by nine additional bodies:

  • European Economic and Social Committee (civil society, employers, and employees).
  • Committee of the Regions (represents regional and local authorities).
  • European Investment Bank (finances projects and helps small business by means of the European Investment Fund).
  • European Central Bank (monetary policy, especially in euro-based countries).
  • European Ombudsman (investigates complaints).
  • European Data Protection Supervisor (concerned with data privacy).
  • Office of Official Publications of the European Communities.
  • European Personnel Selection office (recruitment).
  • European Administrative School (staff training).

A “United States Of Europe”?

Is the EU a sovereign entity comparable to the United States? The answer is no—but with the provision that the EU may in the future gradually evolve in that direction if historical forces favor that development. William Underhill wrote in Newsweek International, reviewing a book by Boris Johnson (The Dream of Rome, HarperCollins): “To Johnson, the idea of Rome is lodged in European folk memory. Deep down, he argues, the continent yearns to re-create an Augustan Age, when 80 million people from Syria to Scotland enjoyed the benefits of Pax Romana.” But Johnson evidently doubts the possibility that the old Roman—or the later Holy Roman—empire could be rebuilt, basing his views on the great cultural diversity and fierce national loyalties that the patchwork of nations in Europe represents. The EU was and largely remains an economic venture aiming to present to the world a single, large market (like that of the United States). This emerges from its proposed and still pending (2006) constitution. For those in business dealing with European customers, however, the EU is a much easier entity to deal with than 25 separate states, each with specific rules—no doubt one reason why the EU is successful despite continuing and chronic disagreements among its members.