Comparing the EU and the Eurozone
The Eurozone is an economic and monetary union within the European Union (EU) - not a separate entity from the EU itself. The EU is a union which is both economic and political.
The EU
The European Union’s membership has grown from the original 6 founding states in 1957- Belgium, France, West Germany, Italy, Luxembourg, and the Netherlands - to 28 members it has today. Most of its members are located mainly on the European mainland, and the EU has a population of over 500 million people and generates 21% of the world’s economy as well as accounting for 20% of the globes imports and exports. The EU is represented in the United Nations as a single entity, as well as at the World Trade Organization, the G8 and the G20. It has also developed a single market between its members through a uniform organisation of laws which all member states comply with. There is free movement of people, capital and goods between the member states of the union.
To join the EU, a country must meet the Copenhagen criteria, defined at the 1993 Copenhagen European Council. These require a stable democracy that respects human rights and the rule of law; a functioning market economy capable of competition within the EU; and the acceptance of the obligations of membership, including EU law. Evaluation of a country’s fulfilment of the criteria is the responsibility of the European Council.
The EU sovereign members include Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Germany, Greece, Hungary, Italy, Lithuania, Luxembourg, Denmark, Estonia, Finland, France, Malta, the Netherlands, Poland, Portugal, Republic of Ireland, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom. The latest entry to join the EU was Croatia. No member state has ever left the Union, although Greenland (an autonomous province of Denmark) withdrew in 1985. The Lisbon Treaty now provides a clause dealing with how a member leaves the EU.
The Eurozone
The Eurozone, officially called the euro area, was formed in January 1999 with eleven original members, and is now an economic and monetary union (EMU) of 17 European Union (EU) member states that have adopted the euro (€) as their common currency and sole legal tender.
The Eurozone’s population is around 317 million people. The Eurozone currently consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. The remaining member states of the EU still use their own currencies trading. Hungary, Poland, Latvia, Denmark, Sweden, Rumania, Lithuania and the United Kingdom, although part of the EU, are not members of the Eurozone. Other EU states (except for the United Kingdom and Denmark) are obliged to join once they meet the criteria to do so. No state has left and there are no provisions to do so or to be expelled.
There are some exceptions: Monaco, San Marino and Vatican City have concluded formal agreements with the EU to use the euro as their official currency and issue their own coins. Andorra negotiated a similar agreement which has allowed them to issue euros from 1 July 2013. Others, like Kosovo and Montenegro, have adopted the euro unilaterally. However, these countries do not formally form part of the Eurozone and do not have representation in the ECB or the Eurogroup.
The monetary policy of the Eurozone is the responsibility of the European Central Bank (ECB) which is governed by a president and a board of the heads of national central banks, and the Eurosystem. The monetary policies of the member states not in the Eurozone are managed by their respective central banks. All central banks in the EU however are members of the European System of Central Banks.
The principal task of the ECB is to keep inflation under control. Though there is no common representation, governance or fiscal policy for the currency union, some co-operation does take place through the Eurogroup, which makes political decisions regarding the Eurozone and the euro. The Eurogroup is composed of the finance ministers of Eurozone states, but in emergencies, national leaders also form the Eurogroup. This group of ministers take all the monetary and economic decisions that affect the members of the Eurozone. The economic and monetary decisions for the European Union itself are handled by the Economic and Financial Affairs Council (Ecofin). However, for matters which only affect the Eurozone, only the Eurozone members of Ecofin are permitted to vote.