Economic Overview
Europe has arguably the greatest economy in the world, dominating the marketplace. Europe is comprised of more than 731 million people, residing in 48 different countries. Although the European region is one of the smallest in terms of area in the world, it has the highest nominal GDP. According to the International Monetary Fund, in 2013, Europe’s nominal GDP topped out at US$24.4 trillion, about a third of the world total.
Europe in general is a very wealthy region, but like other continents, the wealth of Europe’s states varies. While most states in Europe are very well-developed and have a higher GDP per capita than the world’s average, there are still large differences in wealth between the states.
Europe’s largest national economy is that of Germany, ranking fourth globally—according to World Bank statistics—in terms of nominal GDP at US$3.8 trillion in 2014. Many European countries follow suit, as the United Kingdom, France, Italy, Russia, and Spain are globally ranked 5th, 6th, 8th, 10th, and 14th respectively in terms of nominal GDP. Many European states also have a high GDP per capita, higher than the world’s average. According to 2014 World Bank statistics, there are six countries ranked in the top 10, and 14 in the top 20 of the world’s GDP per capita ranking, including (in order of rank): Luxembourg, Norway, Switzerland, Denmark, Sweden, Ireland, Iceland, Netherlands, Austria, Finland, Germany, Belgium, United Kingdom, and France. The difference in wealth across Europe can roughly be seen across the former Cold War divide—with the exception of Greece, Portugal, the Czech Republic, and Slovenia.
The European Union was formed in 1999, introducing a unified currency, the euro, which brought European countries closer together. The European Union as a whole is the wealthiest economy in the world, topping the US by more than US$1.0 billion in 2014. In 2008, the Global Financial Crisis caused a significant decline in the GDP of many European economies. Even at the peak of the great economic slowdown, Europe remained the world’s wealthiest region, topping America’s GDP by a staggering US$2.0 billion. In fact, in 2009, Europe was one of the few regions where wealth surpassed its previous year-end-peak. Although Europe wasn’t as effected by the Global Financial Crisis as other global regions, it triggered a far broader problem in Europe, the Eurozone debt crisis. The Eurozone debt crisis hit the European Union hard, threatening the collapse of southern Europe—predominately Italy, Portugal, Spain, Greece and Ireland. The larger economies, mostly Central and East European economies, escaped the worst of the debt crisis.
The European debt crisis is a multi-year crisis that is still affecting countries in Europe. Although by the mid 2010s Europe as a whole had become more stable, several countries (Greece, Portugal, Ireland, Spain, and Cyprus) were unable to repay or refinance their government debt and had to be bailed out by international organizations that came together to form ‘The Troika’. As of 2014, Greece and Cyprus both managed to partially regain market access, and it is expected that their bailout program would end in March of 2016. In fact, after years of constant headlines about the debt crisis, bailouts, unemployment and deflation, it appears that the European economy is on the upswing. Naturally, there are still issues in the European Union, including the conflict in Ukraine, and Greece’s precarious position with the euro, but there are many reasons to cheer Europe’s economy when looking ahead.
The European Central Bank (ECB) recently upgraded its forecast for European growth in 2015 to 1.5%, a significant increase over last year’s measly expansion of 0.9%. ECB President, Mario Draghi, stated, “We expect the economic recovery to broaden and strengthen gradually.” The first half of 2015 has appeared successful, as the weak euro is giving exporters an edge, cheap oil is helping consumers, and the ECB’s bond buying program is having an impact. Europe’s unemployment is falling and deflation risk is fading giving hope to the future of European economies. In fact, the once heavily-in-debt Ireland logged the fastest growth rate of all the European economies in 2014. Recent data from the national statistics office reveal that both domestic demand and exports are strong and have contributed to the surge in the Irish economy. Although Europe as a whole isn’t free of speculation quite yet, it remains the top regional market in the world and will likely continue that way.
