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Overview: The European Union

8/29/2016

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From its origins in 1951, with the establishment of the European Coal & Steel Community, the European Union (EU) has grown to encompass 28 European countries and territories. From the Arctic reaches of Finland to the subtropical beaches of Cyprus, the EU stretches over 1.6 million sq. miles, and is home to 510 million people. A successful experiment in intergovernmental cooperation in many respects, the EU is predicated on the political and economic union of its member states, to varying degrees. What does this mean for those of us living on this side of the Atlantic? Perhaps two of the most recognizable instruments of the European integrative framework are the Schengen Area and the Eurozone.
 
Since its inception in 1995, Schengen Area member countries have adopted common visa and security policies. Passport requirements and border controls along their mutual borders have also been dismantled. This has resulted in the creation of a free movement zone within the Schengen Area. Third-country visitors to the Schengen Area must still submit to a border control agent and present valid travel documentation at their external point of entry, but can move freely once inside the Schengen Area. For an American tourist, this means that a trip from Lisbon to Warsaw is, for the most part, not encumbered by border guards and checkpoints. It is worth noting, however, that not all EU members are part of the Schengen Area. The United Kingdom, Ireland, Bulgaria, Croatia, Cyprus and Romania are currently outside of its scope. At the same time, various countries outside the EU are active participants, namely Switzerland, Norway, Iceland, Liechtenstein, Monaco, San Marino and the Vatican City.
 
In addition to the Schengen Area, the EU has also moved to a monetary union. The Eurozone was established in 1999, when the euro was first introduced as the common currency. Since then, the euro has grown in importance, despite recent setbacks precipitated by the global recession and the Greek debt crisis. Setting aside the combined economic clout of the entire Eurozone, three of the world’s largest economies (Germany, France and Italy) have adopted the euro as their currency. Additionally, Frankfurt and Paris continue to be major international financial centers, and the European Central Bank (the governing body for the Eurozone’s monetary policy) remains as one of the world’s most important central banks. Not surprisingly, the euro is the second most widely held international reserve currency. Additionally, multiple countries and territories around the world have aligned their currencies to the euro. Very much like the Schengen Area, however, the Eurozone is not analogous with the EU, as various EU members states have yet to adopt the euro: Sweden, Poland, the Czech Republic, Hungary, Croatia, Romania and Bulgaria. These countries have retained their national currencies, although their economies are intimately linked to the rest of the EU and the Eurozone. The UK and Denmark, on the other hand, have opted out of the union, while Andorra, Monaco, San Marino and the Vatican City have adopted the euro as their official currency.
 
The EU and its institutions may appear convoluted, but they reflect the complex nature inherent to all intergovernmental organizations. If anything, in an increasingly globalized world, American travelers and investors would be wise to recognize these nuances. 

Geovanny Vega

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Holder Wealth Management, Inc. (“HWM”) is an investment adviser registered in the State of Illinois.  The latest copy of HWM Form ADV Part 2A & B and our Privacy Disclosure is available upon request.  Advisory services are provided upon completion of an advisory services agreement. This agreement describes services to be provided and discloses relevant fees and expenses.  Any advisory service should be made after careful review of your individual financial situation, risk tolerance,  The Content of this website does not convey legal, accounting, tax, career or other professional advice of any kind.  It is for informational purposes only and is not a solicitation or an offer to buy any securities or instrument or to participate in any trading strategy.  Furthermore, the content of this document is not intended to suggest, promise or guarantee results.  Any opinions expressed herein, are solely the opinions of HWM.