In the frenzy to churn out China growth stories most financial and business journalists in Australia appear to live in a world where the European Union either no longer exists or does not matter. I must admit I also do not pay enough attention to European economic data, so today I will have a quick look at the European Union and outline why I believe we should all pay more attention to developments on the other side of the planet.
It is sometimes hard to admit, but the Europeans have a lot more going for them apart from being able to upset Donald Rumsfeld. The European Union’s combined economy for example is 3-4 times the size of either China or Japan’s and depending on which data you look at, it is either the biggest in the world or just behind the United States in terms of GDP. (Gross Domestic Product)
When looking at Europe it becomes a little confusing because we have the European Union, continental Europe, old Europe, new Europe, western Europe, eastern Europe and Russia. But to get the big picture view let’s look at everything within the European sphere including Russia and everything in between.
European Countries Nominal GDP 2007-2009 in Billions USD
If we were to place Australia on this list our economy would come in just after Spain, making us the 8th largest economy in Europe or 7th if we omit Russia.
Since I believe it is a bit of a stretch to include all of Europe and Russia into one economic bloc I shall focus on the economy of the European Union or EU.
In 2008 Australian exports to the EU were worth around $23 billion and so this makes the region a pretty important export market along with North Asia ($112 billion) and the America’s ($17 billion). However for some reason Australian focus remains very much on China whereas our stock market tends to take it’s lead from the U.S.
The attraction of the EU in economic terms is that it is expanding and it is quite possible that the European Union may become one of the world’s most dominant political and economic forces in the 21st century. Of course in terms of sheer economic size or population the EU cannot compete with Asia, but the fact that the EU has moved towards a common economic and political structure makes it a more cohesive force than the various Asian economic associations such as ASEAN.
An expanded European Union could be the clear global economic leader in terms of GDP within the next 20 years. This I know goes against the prevailing wisdom that the Chinese economy will continue to vigorously expand for decades, but all periods of rapid expansion come to an end and as sure as night follows day so will China’s. It is not a question of if, but when.
So isn’t is possible that in 20 years time we will find the European Union outshining the U.S. and China?
Okay, perhaps you are thinking I am getting a bit carried away about the potential of an expanded EU so let’s look at some current interesting facts about the union as it exists today.
European Union Facts & Figures
- Population: 491,582,852 (estimate July 2009)
- Population growth rate: approx 0.1%
- GDP per capita (PPP): US $33,700 (2008 est.)
- Current account balance: $51,400,000,000 (2008 est.)
- Unemployment rate: 7.4% (2008 est.)
- Has the third largest labour force behind China & India.
- Was the second largest importer of oil in 2007.
- Has the 15th largest proven reserves of natural gas.
Source: CIA Factbook
Remember that at present Norway & Switzerland are not members of the EU and there are also several countries lining up to join, (including Turkey) so it is likely that the EU will be a much larger entity in a few years.
The expansion of the EU has not been without problems and expanding it further will present the organisation with many challenges. However it appears at this stage that the growth of the EU is inevitable and if this can be managed properly, then the EU will become much more influential on the world stage.
I am by no means an expert on European affairs and it has been a few years since I have even been in the region, all I am suggesting is that perhaps by focusing so much on the China growth story we are missing the rise of an expanded European Union. Perhaps in twenty years time we will find we are living not in an Asian century at all, but one dominated once again by Europe.