EU - Country Commercial Guide
Political and Economic Environment

Links to the State Department’s website for background on the country’s political environment.

Last published date: 2022-08-11

For background information on the political and economic environment of the Member States, please consult the U.S. Department of State Countries & Areas website.

The European Union

In 1951, six European countries – Belgium, the Federal Republic of Germany, France, Italy, Luxembourg, and the Netherlands – created the European Coal and Steel Community to promote economic cooperation and political stability in Europe.  Under the threat of a more divided Europe during the Cold War, the Treaty of Rome was entered into by these six countries in 1957, which created the European Economic Community and further strengthened regional cooperation.  In 1973, the European Economic Community was enlarged to include Denmark, Ireland, and the United Kingdom; Greece joined the Community in 1981; and, in 1986, Portugal and Spain became Member States.

In 1993, the Maastricht Treaty, which formally created the European Union, also created a single market with freedom of movement of goods, services, people, and money throughout the European Union.  In addition to budgetary commitments, new Member States needed to adhere to criteria requiring stable government institutions to guarantee democracy, a market economy, and the ability to commit to the obligations of EU membership (i.e., observing the goals of a political, economic, and monetary union).  In 1995, Austria, Finland, and Sweden became Member States.  In 2004, the largest expansion of the European Union took place with Cyprus, Czechia, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia become Member States.  Bulgaria and Romania became Member States in 2007, and Croatia become a Member State in 2013.

In 2016, the United Kingdom held a referendum to leave the European Union in which 52% of the participants voted in favor of leaving the European Union.  In 2017, the United Kingdom formally triggered Article 50 of the European Union’s Lisbon Treaty (see below), creating a multi-year withdrawal process.  Officially, the United Kingdom left the European Union on January 31, 2020.  The EU-UK Trade and Cooperation Agreement entered into force on May 1, 2021.

Lisbon Treaty

In 2009, the Lisbon Treaty amended the Treaty of Rome and the Maastricht Treaty and revising the constitutional basis of the European Union.  In particular, the Lisbon Treaty created a long-term President of the European Council, recognized the European Council as an official EU institution, and established a High Representative for Foreign Affairs and Security Policy.  In addition, the Lisbon Treaty significantly increased the influence of the European Parliament, including in the nomination of Commissioners for the European Commission and equally divided budgetary authority between the European Parliament and the Council of the European Union (distinct from the European Council).

Under the Lisbon Treaty, decisions in most policy areas are now made under double majority, requiring the support of a minimum of 55% of members of the Council of the European Union, representing at least 65% of EU citizens.  At the same time, for legislation to pass, the European Parliament must have a simple majority of 50% of votes in favor.  This process requiring adoption by both the European Parliament and the Council of the European Union is called “ordinary legislative procedure” (formerly known as “co-decision”).

Russia’s War of Aggression Against Ukraine and EU Expansion

Russia’s war of choice against Ukraine, launched on February 24, 2022, significantly altered the economic and political landscape in the European Union, the European continent, and around the world.  Politically, the invasion moved the European Union closer to the United States with unprecedented sanctions against Russia and other measures to counter Russia’s aggression against Ukraine’s territorial integrity and sovereignty.  The invasion also led two more EU members (Finland and Sweden) to seek accession to NATO and for the European Union to grant Ukraine and Moldova candidate status, along with Georgia being given conditional candidate status.  It also led several EU Member States, including Germany, to reevaluate their military policies including bolstering their defense industries.

Economically, the war affected the Member States differently, exposing energy vulnerabilities and other concerns about economic links to Russia.  Higher fuel prices, supply chain disruptions, shortages of critical supplies, and soaring food prices stoked inflation.  The United States and European Union have been working together to ease the economic impact through increased energy exports and ensuring that global food supply lines remain open, despite Russia’s disruptions.

European Union Institutions

  • The European Council
  • The European Council is made up of the heads of states or heads of government of the 27 Member States and defines the European Union’s overall political direction and priorities.
  • The European Commission

Serving as the executive branch of the European Union, the European Commission holds the right to initiate and propose legislation and to present the budget to the Council of the European Union and to the European Parliament.  The European Commission is also charged with implementing decisions and acts as the guardian of the European Union’s treaties.  Each of the 27 Commissioners holds a different Member State nationality but they are obligated to remain neutral and above national politics.

The European Parliament

The European Parliament’s role includes debating and passing European laws with the European Council once those laws have been proposed by the European Commission, scrutinizing the work of the European Commission and other European Union institutions, debating, and adopting the European Union’s budget with the Council, and vetting new Commissioner nominees.  Elections for the European Parliament take place every five years; the last national elections having taken place in May 2019.  Following Brexit, the total number of European Parliamentarians is 705.

The Council of the European Union

The Council of the European Union, also known as the Council of Ministers, represents the governments of the 27 Member States in the European Union.  The Presidency of the Council of the European Union rotates every six months between the Member States.  In addition to the European Parliament, the Council of the European Union shares the main legislative role of the European Union.  In January 2022, France became the Council president, to be followed by the Czech Republic in the second half of 2022.  Sweden will take over the Council presidency from January until June 2023, to be followed by Spain in the second half of 2023.  In 2024, the presidency will be taken over in the first six months by Belgium and later Hungary.

European Court of Justice

The European Court of Justice’s role is to interpret EU law to ensure that it is applied evenly across all Member States.  Additionally, the Court may engage in settling legal disputes between Member States and EU institutions.  Individuals, companies, and organizations can bring cases before the European Court of Justice if they feel their rights have been violated by an EU institution.