Favorable climate and nature gave Europe an early development of well-developed agriculture. Together with the growth of banking and later industry, this formed the basis for the modern economy, which in its time gave Europe an international leadership role. Minerals and fish are among the most important natural resources in the continent’s economic history. Similarly, proximity to the sea and the many natural waterways have been an important prerequisite for trade, both inland and overseas. Economically and industrially, Europe is still on the rise, with a standard of living at the top of the world. In 2014, Europe accounted for over 36 per cent of world trade. But there are major differences between the different regions and especially between the economically highest developed countries in the west and the former Eastern bloc states. The increasing globalization in recent years has led to major challenges and significant adjustments for business in Europe.
More than half of the world’s wine production takes place in Europe. France and Italy are the biggest producers. Vines in Piedmont, Italy.
The European Union (EU) with its internal market is a key factor in economic development and cooperation in modern Europe in the post-World War II era. The EU has on several occasions increased its membership to reach 28 countries, including Cyprus, which is a country in Asia. The other major player established in 1960, the EFTA or Free Trade Organization, now has only four members: Iceland, Norway and Liechtenstein are affiliated to the EU through the EEA Agreement, while Switzerland has a bilateral agreement. Economic integration within the EU took another step with the introduction of the single currency unit, the euro and the creation of a common currency.central bank in Frankfurt in 1999. Since then, the number of countries that have joined the Economic and Monetary Union (EMU) has increased to 19. However, several countries have had problems meeting the budget deficit limits of a maximum of three percent of the gross domestic product (GDP). Check AbbreviationFinder.org to find more abbreviations and acronyms related to Europe.
Traditional business has been under increasing pressure since the 1970s, with the background of fierce international competition and relatively high labor costs. Large parts of the EU area have for many years had an unemployment rate of over 10 per cent, highest in eastern and southern regions.
According to The Global Competitiveness Index for 2017–2018, compiled by the World Economic Forum, the most competitive European countries are the Nordic countries, the United Kingdom, Ireland, Germany, Benelux, France, Switzerland and Austria. In a longer perspective, however, Europe has lagged behind in relation to the US and Asia. This has happened despite the EU launching its competitiveness strategy in the spring of 2000, the so-called Lisbon strategy. The goal was for the EU to become, by 2010, “the most competitive and dynamic knowledge-based economy in the world, an economy that can create sustainable economic growth with more and better jobs and greater social equalization, with respect for the environment.”
Eleven of the countries that have joined the EU since 2004 belonged to the Soviet-dominated trade organization Comecon before the collapse of communism in the late 1980s. Comecon was discontinued in 1991. As of 2018, according to the European Commission’s website, five countries are candidates for EU membership. The date for the candidacy is given in brackets: Albania (April 2009), Macedonia (December 2005), Montenegro (December 2008), Serbia (December 2009) and Turkey (December 1999). Bosnia and Herzegovina applied for membership in February 2016, but has not yet been granted candidate status.
The European lowland area has its largest extent in the northern part of the continent. The lowlands extend eastward from the Benelux countries through Germany and Poland into Russia. About half of the Netherlands is below sea level and is intersected by canals and rivers, which are important transport routes.
Russia and a number of other eastern states embarked on a large-scale restructuring process in the 1990s, with the transition from centralized planning economics to market economies. This has, among other things, led to a decontamination in the heavy industry, which was characterized by low productivity and high environmental impact. In 2017, the export value of Russian business accounted for only 24 per cent of total exports from Germany, which has the EU’s largest economy. Several of the Eastern and Central European countries now have the strongest growth rate among Europe’s economies. In the period from 2009 to 2016 was Poland the EU country that had the fastest growing economy. In 2016, EU countries’ GDP increased on average 2.0 per cent. Of the five EU countries which then had the highest GDP growth, there were three Central and Eastern European countries.
Europe’s most important industries, in terms of value creation and employment, are industry, finance and real estate and trade. Here, however, we find great differences from country to country. According to the CIA World Factbook figures for 2017, more than ten percent of the working population are employed in agriculture in Greece (12.6 percent) and Poland (11.5 percent). More than 80 per cent of the working population is employed in service industries in Luxembourg (87.9 per cent), the United Kingdom (83.5 per cent) and Belgium (80.1 per cent). Important goods in European trade are machines, cars and other industrial products, chemicals, food, energy and raw materials. The United Kingdom and Germany appear to be centers of finance.
About five percent of the working population of EU countries is employed in agriculture. The share is on return at the same time as production is increasing. But there are considerable variations between the different countries and regions. The most labor intensive is the agricultural industry in Southern and especially in Eastern Europe. Since the end of the 1980s, however, mechanization and efficiency have also accelerated in the former communist states, in step with the privatization of state and collective practices. In a number of western countries, smaller, family-run farms still dominate. A unique development is a concentration on fewer and larger units of use due to profitability pressures. Since 1993, the EU has pursued an agricultural policy aimed at a better balance between production and demand. In the EU budget for 2018, 36.8 per cent was allocated to transfers to agriculture, fisheries, climate measures and biological diversity. At the 2004 membership enlargement, which included ten countries, including eight from Central and Eastern Europe, agricultural policy was a key issue of contention.
More than 30 per cent of Europe’s area is cultivable. Cereal production accounts for more than half of the production volume, with Russia and the rest of Eastern Europe as the main supplier. Southern European agriculture specializes in fruits, vegetables, rice and especially wine. In 2017, EU countries had 51 percent of the world’s total wine production. Europe is a major producer of rye, oats and wheat worldwide. The same applies to products such as potatoes, sugar beets, flax and hemp, as well as the production of beef and pork. Animal husbandry is important in all European countries, but especially in western and northern areas. The outbreak of serious animal diseases in several of the countries in the early 2000s led to a debate about the increasingly industrialized livestock production. Forestry is most important in Russia and Scandinavia. Over one third of Europe is covered by forests, and as a result of a conscious environmental and business policy, the area has shown a slight but steady increase since the 1990s – in sharp contrast to developments elsewhere in the world.
European fisheries have had a declining share of the world catch volume since the 1980s. In 2016, Europe’s share of the world’s total catch was 10.4 per cent. In 2016, the four largest players in Europe’s fisheries were Russia with 22.6 percent of Europe’s total catch, Norway with 20.8 percent, Iceland with 11.4 percent and Denmark with 6.5 percent.
The most important for the industry is the Barents Sea, the North Sea, the Atlantic Ocean off Iceland and the Bay of Biscay, with cod, haddock, flounder, halibut, herring and mackerel as the most important fish species. Further south along the Atlantic coast and in the Mediterranean, tuna, sardines and shellfish dominate, and mackerel and sturgeon in the Black Sea. The problem of overfishing has also been increasing in European waters, which has been sought to meet with regulations and quota systems.
Fish farming has for many years been a growth industry in several European countries. Here, Norway occupies a special position with a production larger than total fish farming in all EU countries. Turkey has Europe’s second largest fish farming industry. The largest among the EU countries are Spain, the United Kingdom and Italy.
Energy and mining
Coal deposits have played a key role in the industrialization of Europe – and are still an important source of electricity generation. The largest coal deposits can be found in the Ruhr and Saar areas of Germany, Poland, the Czech Republic, France, Spain and Ukraine. In the case of lignite, Germany, the Czech Republic, Slovakia and Poland have the richest deposits. Iron ore is found especially in Russia, Ukraine, France, Sweden and Spain. But all in all, Europe today is relatively poor in mineral resources. Several of the coal fields are being emptied.
Europe’s five largest oil producers are Russia, Norway, the United Kingdom, Romania and Denmark. Russia is the world’s second largest oil producer after Saudi Arabia, with Norway in 15th place. In total, Europe accounted for 14.9 per cent of the world’s oil production in 2017. Europe’s five largest gas producers are Russia, Norway, the Netherlands, the United Kingdom and Ukraine. Russia is the world’s second largest producer of gas after the United States. Norway ranks 7th on the list of the world’s largest gas producers. Overall, Europe accounted for 25.1 per cent of the world’s total gas production in 2016.
Oil and gas production started in the North Sea in the late 1960s and is now making significant contributions to Europe’s energy supply. Through a network of pipelines, gas is distributed throughout much of Europe, with Norway, the Netherlands, Russia, the United Kingdom and Romania as the largest exporters. Most European countries rely heavily on oil and gas imports; Germany, Italy and France have the largest imports.
Overall, Europe is a continent with high energy consumption. Calculated in kilowatt-hours per capita, Europe rises to twice the world average, or five times the consumption in India – but still only half the US consumption. After Iceland and Liechtenstein, Norway tops this statistic, almost five times above the European average.
According to Eurostat for 2015, various forms of thermal power accounted for 48.1 per cent of EU countries’ total electricity generation, nuclear energy 26.4 per cent and renewable energy sources 25.5 per cent. There are 14 nuclear power plants in the EU countries. The largest EU producers of nuclear power are France, with 49 per cent of total production in the EU countries. Then followed Germany with just over ten per cent, while the UK, Spain and Sweden each account for about seven per cent.
In recent decades, common electricity markets have been established, and a number of countries have been linked to transmission lines. At the same time, energy policy issues have received increased attention. This applies to both the security of supply that modern societies are becoming increasingly dependent on and the environmental aspect.
Historically, Europe was the first to develop a modern economy based on industry. Europe has retained an international leadership role in this area, despite the fact that importation of raw materials has to a large extent been dependent. In particular, the heavy industry has played an important role, with iron and steel production and with Western European countries and Russia as the major players. This production was originally linked to the major coal and ore sites, such as the Ruhr area in Germany, Lorraine in France, central and southern Britain and the Donets Basin in Ukraine. From the mid-1900s, steel mills were increasingly located along the coast and based on imported raw materials. More recently, the iron and steel industry has been of greater economic importance in Eastern Europe than in the West, where a comprehensive process of rationalization and closures began in the 1970s. The coal and steel union between Germany and France after World War II formed the basis for the emergence of the European Union (EU).
In the EU area, 24 per cent of the working population was employed in industry in 2017, while the industry’s share of total GDP in EU countries was 19.3 per cent.
Traditionally, European industry has embraced most of the production spectrum – textiles and footwear, food and chemical products, cars and tools, wood processing and petrochemicals. In recent decades, however, Western European industry has been on the decline overall as a result of increased competition from low-cost countries. A general trend is the concentration on knowledge-based industry, with products where the components are manufactured in different parts of the world.
The large industrial groups, which for many years have been a backbone of employment, are increasingly moving their production to countries that offer lower labor costs and more favorable tax conditions. The industrial locomotive Germany thus saw a 20 per cent decline in industrial jobs during the period 1993–2003. In addition to, among other Asian countries, Eastern and Southern Europe, both within and outside the circle of new EU members, has made good progress in the fight for new establishments. For example, the automotive and electronics and IT industries have moved production departments representing hundreds of thousands of jobs from west to east, and forecasts show that the move will increase. This process has lifted both business and welfare policy high on the agenda in Western countries.
Transport and Communications
No other continent has such a varied and as densely developed transport network as Europe, a network that is closely linked to business development. This link naturally also means that the relationship between the different modes of transport has undergone major changes in recent years.
Road traffic has increased substantially throughout the post-war period and has long been the most important form of land transport. In Europe, including Russia, there are 500 million km of roads, of which 80,000 km are highways. The road network is constantly expanding across Europe, especially highways. Germany was first out with this road system – even before World War II – and still has a solid lead, followed by France and Spain. More and more road tunnels are being built in the mountainous parts of Europe. The Lærdal Tunnel in Norway is the world’s longest (24.5 km).
Of the EU countries, Germany has the highest number of registered passenger cars with 46.5 million, followed by Italy with 37 million and France with 32 million. Passenger car density has been increasing rapidly in all EU countries in recent years. The highest number of passenger cars per 1000 inhabitants is Luxembourg, followed by Malta, Italy and Finland. Poland, followed by Estonia and Latvia, has the highest proportion of passenger cars older than 20 years. Of all passenger traffic, except by air, private cars accounted for 83.4 per cent of passenger traffic in the EU area in 2014, while buses accounted for 9.0 per cent.
In the world in 2016 there were well over a million km of train line. Of this, approximately 350,000 km were in Europe. EU rail networks totaled 218 000 km. With this, Europe’s rail network is the densest in the world, but on a slow return, calculated in rail length. As a mode of transport, since the 1960s, the train has lost proportions in relation to cars and airplanes, although the railroad can, as a whole, note some growth in the number of passenger kilometers since 1990. The growth can be attributed, among other things, to the commitment to high-speed trains and the refurbishment of the line network in a number of countries, especially in those parts of Europe where road traffic and flooding have caused the greatest problems.
Of all passenger traffic except airplanes, 7.6 per cent occurred in 2014 by train. Of all goods, except by air, 18.4 per cent went by rail.
European shipping companies, increasingly under so-called convenience flags, account for around two-thirds of the world’s shipping. In Europe, Greece has the largest recorded tonnage, followed by Malta, the United Kingdom, Cyprus, Spain, Italy and Norway.
In relation to the area, Europe has more navigable rivers than other continents, and also a denser network of channels. However, freight transport on these waterways has become less important in recent years, partly because of changes in the structure of the industry and partly because road transport has outperformed canal boats and cargo barges for many purposes. However, goods transport along European waterways accounted for 6.7 per cent of all goods transport, except by air, within the EU area in 2014.
The major port cities that were built where rivers and canals reached the sea are still Europe’s most important, such as Rotterdam, London, Hamburg and Bremerhaven. Rotterdam is the largest port city in Europe and the sixth largest in the world.
Air traffic has seen strong growth in all European countries, in terms of both passenger numbers and routes and the expansion of airports. Most countries have fixed routes to other continents. On the operator side, intensified international competition and strong price pressure have led the traditional, national airlines on the decline front, in favor of fewer and larger units. The busiest international airports in Europe are: Heathrow in London, Charles de Gaulle in Paris, Schiphol in Amsterdam and Frankfurt International Airport.
A number of European countries have identified tourism as a priority area, following a significant expansion of the transport network, hotel capacity and other infrastructure. Much capital and creativity has also been used to develop national and local specialties in the tourist offer. The initiative has been successful. In a time of strong increase in international tourist traffic, and thus increased competition, Europe is still on the world top in these industries, with growth both in terms of income, new start-ups and employment. The climate in Southern Europe and the nature of Central Europe and Scandinavia are key factors, besides cultural treasures and increased investment in adventure offerings. Mass tourism places the countries around the Mediterranean and the Black Sea at the top of the statistics. However, by far the largest growth rate has been in former Eastern bloc states such as the Czech Republic.
In the regional policy context, tourism has been seen as an important solution when agriculture is declining. However, in some places, including in the Alps, restrictions on tourist traffic have been necessary due to wear and tear on nature. The terrorist attack on the United States on September 11, 2001, caused a temporary, but sometimes dramatic, decline in European tourism – as a reminder of the industry’s vulnerability.