Economy of European countries varies greatly: from industrial economy of Western European countries with high Gross Domestic Product (GDP) and high living standards to Southern agricultural and Central former communist countries that now suffer the most from economic crisis. Many Eastern European economies are now in the development state, after passing transitional period from the former USSR command planned economy to the market regulation.
“The European Union, made up of 27 member countries, evolved out of the European Coal and Steel Community, formed in 1950 by Belgium, France, Germany, Italy, Luxembourg and the Netherlands to help revive heavy industry in a region still staggering after World War II”. A union of European countries started to form after the World War II and was finally created in 1999, with the introduction of the free trade association and the unified currency, euro. However, some members of the European Union (EU) still maintain their own national currency, which is more than reasonable decision in the current state of euro crisis. Apart from European Union, there are several economic organizations in the region: The European Free Trade Association, European Economic Area, Commonwealth of Independent States etc.
Most Western European countries have mixed economy, characterized by government regulation of a free market and it is considered as the most effective type of economy in the modern world.
Western European economy is traditionally more stable and socially oriented than the Eastern one. The strength of European Union economy, which is considered the largest economy in the world, is mostly stipulated by the developed free market economies of EU key members – Germany, France, UK, Benelux and Scandinavian countries and favorable trade laws and regulations for the EU members. Moreover, according to some politicians, European Union economy is widely influenced by Great Britain. “The single market was a British idea. English is the most-used language in EU institutions.” – says Foreign Minister of Poland Radoslaw Sikorski. Back in the 1946, Winston Churchill expressed the idea of creating a union of European states, similar to the USA. However, he did not see Britain as a part of the future union – it was supposed to be a powerful empire on its own.
The largest unemployment rate in the EU is in Greece and Spain, about 25% in each. Both countries suffer from attempts to deal with government debt by austerity, suggested and introduced by Germany. However, Germany itself along with Britain, France and other countries is forced to make cuts to its national budget as well. The amount of Common EU budget is about 130 billion euros per year and during the past years; it has been spent mainly to help poorer East, Central, and Southern European EU member states, which caused recent budget crisis. The highest unemployment rates are in the 17 countries that use euro as the national currency. Economies of the eight Eurozone countries, including Spain, Portugal, Greece, Netherlands etc. have been in recession for almost the whole year of 2012.
Government measures against budget deficits are aimed at cutting spending and raising taxes, that causes civil strikes and protests. “Across Europe, austerity has come in the form of layoffs and pay cuts for state workers, scaled-back expenditures on welfare and social programs, and higher taxes and fees to boost government revenue”.
Current debt-to-GDP ratio of Eurozone is 93% and it is going to increase the next year according to forecasts.
Thus, in a current economic situation not only in the European Union countries, but also across all over Europe it is highly desirable for governments to implement long-term GDP growth stimulating measures, rather than short-term budget cuts as a part of austerity approach.