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 Introduction to European Union
What is the EU?
The European Union (EU) is the organisation which integrates the countries listed below, both politically and economically. It is a customs union, which is an agreement amongst a group of countries to eliminate trade barriers between them on the movement of goods, services, labour and capital, and also to establish a common external tariff on goods and services coming into the union. The EU evolved from the European Coal and Steel Community (ECSC), which was formed in 1951 as a response to the First and Second World Wars to try to ensure future peace in Europe. This became the European Economic Community (EEC) in 1965, which in turn became the European Union in 1992 following the signing of the Maastricht Treaty.
1950 - Belgium, Germany, France, Italy, Luxembourg and the Netherlands agree to form the ECSC. |  | 
2004 - The EU consists of 25 Member States, as 10 New Member States joined in May. Bulgaria, Romania and Turkey currently hold applicant status. |
Maps courtesy of www.theodora.com/maps used with permission.
Member States
The EU has 25 Member States. These are Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, the United Kingdom and the 'New Member States' which joined in May 2004.
New Member States
The EU has 10 New Member States which became full members on 1st May 2004. These are Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia.
Applicant Countries
There are two countries that are currently negotiating to join the EU by 2007. These are Bulgaria and Romania.
Turkey made an application for membership in 1987, but is not currently negotiating its membership.
Croatia and Macedonia have also applied to join the EU.
More on EU Enlargement...
Guide to EU Institutions
The three main political EU institutions are:
- The European Parliament is directly elected by citizens of the EU who are represented by Members of the European Parliament (MEPs). There are 626 MEPs, 87 of whom are British. The Parliament makes decisions on legislation and the budget of the EU.
- The Council of the European Union is the main decision making body. Together with Parliament, it has the power to make decisions on legislation and the budget of the EU. The Council is also known as the Council of Ministers as a government Minister from each member state attends the Council. The Minister attending varies according to the subject under discussion. For instance, Margaret Beckett, currently Secretary of State for Environment, Food & Rural Affairs, represents the UK at the Agriculture and Fisheries and Environment Councils.
- The European Commission proposes legislation to and implements the decisions of the Council and Parliament. It is the civil service institution of the EU. There are twenty Commissioners, two of whom are from the UK - Chris Patten and Neil Kinnock. The President of the Commission is Romano Prodi.
The Council of the European Union is the EU's main decision-making body. © Jenny Rollo, Stock.Xchng
The two main financial institutions are:
- The European Central Bank manages the euro, the currency used by 12 of the EU's 15 member states. The Bank sets interest rates for these 12 countries and conducts foreign exchange operations. It also maintains price stability in the euro area by controlling the money supply and monitoring price trends.
- The European Investment Bank finances investment projects that promote the objectives of the integration, balanced development and economic and social cohesion of Member States. The Bank raises money on the financial markets, rather than using EU funds. Examples of the Bank's projects range from the building of Phase 3 of the Manchester Metrolink to the upgrading of 100 schools in Bucharest, Romania.
Euro coins. Copyright: "European Commission Audiovisual Library".
The EU budget
How is the EU funded?
The EU is funded from four sources of revenue. These sources were set out in what is known as the 'Own Resources Decision', which ensured that the EU has automatic sources of revenue. Each Member State must pay the following:
- Customs duties. These are derived from tariffs applied to imports from countries outside the EU. Member states may retain 25% of customs duties to take into account the costs of collection.
- Agricultural levies. These are charged on agricultural imports from countries outside the EU. Member states may retain 25% of customs duties to take into account the costs of collection.
- VAT-based contributions. These are levied at 0.75% in 2002 and 2003, then 0.5% thereafter.
- Contributions based on Gross National Product (GNP). This is set at 1.02% for the 2003 budget.
How is the money spent?
The EU has committed itself to spending just under 100 billion euro in 2003. This budget will be split as follows:
- 45% on the Common Agricultural Policy (CAP)
- 34% on Structural Operations (this redistributes wealth from the richer countries to the poorer ones via the EU's regional policy)
- 9% on External Action (this includes overseas development aid and disaster relief)
- 7% on Internal Policies (this includes research and development, energy, transport networks and education and training)
- 5% on Administration
How much does the UK contribute?
The UK's net contribution for 2002-3 is forecast to be £2.2 billion, followed by £2.4 billion in 2003-4. This figure takes into account revenues to be received from the EU from sources such as the Agriculture Guidance Fund, the Social Fund, and the Regional Development Fund.
Web sites for further research:
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