The European Union's economy combines the national economies of the supranational organization's member states. It makes up the majority of the European economy as the second largest economy in the world in nominal terms, after the United States. By purchasing power parity (PPP), the EU economy is the third-largest and generates one-sixth of global economic output. Within the EU, Germany, France, Italy and Spain are the four largest economies. The EU economy consists of an internal market of mixed economies based on free market and advanced social models.

The EU is one of the world's largest trading entities, with Germany and France serving as the primary economic powerhouses in terms of both exports and imports. The EU's largest trading partners are China, the U.S., the United Kingdom, Switzerland, and Russia.Top Trading Partners Client and Supplier Countries of the EU28 in Merchandise Trade (value %) (2015, excluding intra-EU trade). Accessed 29 October 2018 Many EU states operate within the Eurozone – using the euro – the second largest and second most-traded reserve currency in the world after the United States dollar. The EU banking system totals more than $38 trillion while managed assets exceed $12 trillion as of 2020. The two largest stock exchanges are Euronext Paris and Frankfurt Stock Exchange.

The distributions of economic output and wealth across the EU varies across the region. Economic output per capita in the EU varies significantly, particularly between Western and Eastern Europe. Formerly London, the French capital city of Paris is by far the economically strongest city in the EU, with a GDP exceeding $1 trillion. In 2024, the social welfare expenditure of the European Union (EU) as a whole was 27.3% of its GDP. In 2026, public debt within the EU stood at 81.7% of GDP, with large disparities between the lowest rate, Estonia, with 24.1%, and the highest, Greece, with 146.1%.

Currency

Since 1999, 21 EU states use the euro as official currency in a currency union. The remaining 6 states continue to use their own currency with the possibility to join the euro later. The euro is the most widely used currency in the EU.

Since 1992, the Maastricht Treaty sets out rigid economic and fiscal convergence criteria for the states joining the euro. Starting 1997, the Stability and Growth Pact has been started to ensure continuing economic and fiscal stability and convergence.

Denmark is not a part of the eurozone due to its special opt-outs concerning the later joining of the euro. In contrast, the remaining states can effectively opt out by choosing when or whether to join the European Exchange Rate Mechanism, which is the preliminary step towards joining. They are, however, committed to join the euro by their Treaties of Accession.

Starting with Greece in 2009, five of the 20 eurozone states had been struggling with a sovereign debt crisis, commonly called the European debt crisis. All these states started reforms and got bailout packages (Greece, Ireland, Portugal, Spain, Cyprus). By the late 2010s, all five countries had exited their bailout programs and moved out of the acute phase of the debt crisis. Other non-eurozone states also experienced a debt crisis and also went through successful bailout programmes, i.e. Hungary, Romania and Latvia (the latter before it joined the eurozone).

Budget

The EU has a long-term budget, named Multiannual Financial Framework (MFF), of €1,082.5 billion for the period 2014–2020, representing 1.02% of the EU-28's GNI.© European Union, Integrated Financial Reporting Package Overview, Financial year 2017 Retrieved 15 November 2019.

The overall budget for the period 2021-2027 is of €1.8 trillion combining the MFF of €1,074.3 billion with an extraordinary recovery fund of €750 billion, known as Next Generation EU, to support member states hit by the COVID-19 pandemic.Special European Council, 17-21 July 2020 Retrieved 15 November 2020.

Sectors Services

The services sector is by far the most important sector in the European Union, making up 64.7% of GDP, compared to the manufacturing industry with 23.8% of GDP and agriculture with only 1.5% of GDP.

Financial services are well developed within the Single Market of the Union. Companies have a greater reliance on bank lending than in the United States, although a shift towards companies raising more funding through capital markets is planned through the CMU initiative, the EU plan put forward by the Commission in September 2015 to mobilise the free movement of capital within the EU.European Commission, Overview of the Capital Markets Union, accessed 9 May 2018 The plan aims "to establish the building blocks of an integrated capital market in the EU by 2019".European Commission, Capital markets union action plan, accessed 9 May 2018 The CMU initiative comprises 33 measures in all.Conference Report: European Financial Market Integration, 6 June 2016, accessed 20 September 2018 The plan was updated in 2017 and in 2019, since not a single legislation will deliver the CMU. The Commissioner for Financial Stability, Financial Services and Capital Markets Union, Mairead McGuinness, former vice-president of the European Parliament, is responsible for delivery of the initiative.

According to the Global Financial Centres Index, the two largest financial centres in Europe, London and Zürich, are outside the European Union. The two largest financial centres remaining within the EU will then be Frankfurt and Luxembourg.

In the European Investment Bank's Investment survey 2021, 58% of firms in the service sector were expecting long term effects of COVID-19. 56% of EU enterprises received governmental help to handle the pandemic's effects.

The COVID-19 pandemic had a significant effect on sales. 49% of all EU enterprises claimed that their sales decreased since the start of 2020. The pandemic has affected sectors differently, with the number of enterprises losing money in the hotels, restaurants, arts, and leisure industries reaching roughly 25% compared to previous times, and transportation also being affected.

Without government assistance, 35% of European small and medium-sized firms (SMEs) in manufacturing and services indicated their businesses would not have survived the effects of the pandemic.

In 2020, 86% of enterprises reported previous-year investment activity, while in 2021 only 79% reported investment. 23% of EU firms changed their investment plans in 2021, with only 3% reporting a higher amount. The highest proportion of enterprises that have reduced their investment plans due to a drop in sales are in Poland, where 49% of firms have reduced investment, and in Belgium, where 47% of firms stated the same.

Most green or digital businesses in the EU operate in manufacturing (33%) or infrastructure (30%). The service sector has the greatest percentage of businesses that have not engaged in digitalisation or the green transition (41%).

EU enterprises were growing in terms of innovation in 2023. 39% of EU enterprises created or introduced new goods, processes, or services in the previous fiscal year, compared to 57% of US firms. In the EU, over 12% of businesses introduced ideas that were novel to the country or the global market. Investment in intangible assets (research and development, software, training, or business processes) by EU enterprises accounted for around 38% of overall investment. Businesses in the EU were also optimistic about 2023, with 14% more predicting an increase rather than a drop in investment.

Agriculture

The agricultural sector is supported by subsidies from the European Union in the form of the Common Agricultural Policy (CAP). By 2023, CAP expenditure accounted for about 24.6% of the total EU expenditure. The CAP was used originally to guarantee a minimum price for farmers in the EU. This is criticised as a form of protectionism, inhibiting trade, and damaging developing countries; one of the most vocal opponents was the United Kingdom, the second largest economy within the union until its withdrawal in January 2020, which repeatedly refused to give up the annual UK rebate unless the CAP should undergo significant reform; France, the biggest beneficiary of the CAP and the union's third largest (now its second-largest) economy, is its most vocal proponent. The CAP is however witnessing substantial reform. In 1985, around 70% of the EU budget was spent on agriculture. In 2011, direct aid to farmers and market-related expenditure amount to just 30% of the budget, and rural development spending to 11%. By 2011, 90% of direct support had become non-trade-distorting (not linked to production) as reforms have continued to be made to the CAP, its funding and its design.

Tourism The European Union is a major tourist destination, attracting visitors from outside of the Union and citizens travelling inside it. Internal tourism is made more convenient by the Schengen treaty and the euro. All citizens of the European Union are entitled to travel to any member state without the need of a visa.

France is the world's number one tourist destination for international visitors, followed by Spain, Italy, and Germany. It is worth noting, however, that a significant proportion of international visitors to EU countries are from other member states.

Energy

The European Union has uranium, coal, oil, and natural gas reserves. There are six oil producers in the European Union, primarily in North Sea oilfields. The United Kingdom, whilst it was a member of the European Union was by far the largest producer; Denmark, Germany, Italy, Romania and the Netherlands produce oil. The European Union produced 19.8 million tonnes of oil equivalent (Mtoe) of crude oil in 2019.

The EU is one of the largest consumers of oil, consuming much more than it can produce. It consumed about 350 Mtoe in 2019, importing 96.8% of the oil. The largest suppliers are Russia, Iraq, Nigeria, Saudi Arabia, Kazakhstan, and Norway. Transport is the largest consumer of oil, at 66.1% in 2019. All countries in the EU have committed to the Kyoto Protocol, and the European Union is one of its biggest proponents. The European Commission published proposals for the first comprehensive EU energy policy on 10 January 2007.

During the green transition, workers in carbon-intensive industries are more likely to lose their jobs. In the years to come, the transition to a carbon-neutral economy will put more jobs at danger in regions with higher percentages of employment in carbon-intensive industries. Employment opportunities by the green transition are associated with the use of renewable energy sources or building activity for infrastructure improvements and renovations.

Energy costs remain a major obstacle to investment to 46% of EU firms. 34% of EU firms say that stricter climate standards and regulations will affect their business over the next five years. This is compared to 42% of US firms. 27% of companies in the European Union see sustainability and the green transition as a business opportunity.

According to the Financial Times, Europe may be at risk of a new energy crisis and a significant increase in gas and oil prices in the event of an escalation of the war with Iran.

Eurostat reported on 22 September 2026 that fuel and lubricant prices for personal transport in the EU rose by 23.8% in August 2026 compared with August 2025. On a month-on-month basis, diesel prices increased by 8.3% and petrol prices by 3.3% in August 2026 relative to July. Between July and August 2026, diesel prices rose in 26 of the 27 EU member states.

Companies