# What Is the European Union? How the EU Works and Why Brexit Happened

> The EU is a political and economic union of 27 countries with 450 million people — here's how it works, what it does, and why the UK left.

*Section: World — By Liam Chen (World Affairs Reporter) — Published June 28, 2026 — 10 min read*

Canonical URL: https://dailyjunction.org/world/what-is-the-european-union-explained
Tags: European Union, EU, Brexit, European politics, single market, eurozone, Brussels, European integration

## Key takeaways

- The EU has 27 member states with 450 million people, forming the world's largest single market with free movement of goods, services, capital, and people
- The EU budget is €168 billion per year (2024), funded by member contributions, with spending on agriculture (31%), regional development (34%), and research (13%)
- EU laws are made by the European Commission (proposes), European Parliament (elected), and Council of the EU (member governments), with most decisions requiring consensus
- The UK left the EU in 2020 after a 2016 referendum, citing sovereignty, immigration, and democracy concerns, though economic costs have been significant
- The eurozone has 20 member states using the euro, while 7 EU members (including Sweden and Poland) keep their own currencies

The **European Union (EU)** is a political and economic union of **27 countries** with **450 million people**, making it the world's largest single market and one of the most ambitious experiments in international cooperation. The EU allows goods, services, capital, and people to move freely across borders, and it has its own laws, institutions, and currency (the euro, used by 20 members). But the EU is also controversial: critics say it is undemocratic, bureaucratic, and undermines national sovereignty. The UK left the EU in 2020 after a divisive referendum, and other countries have considered following. Here is everything you need to know about the EU — what it is, how it works, and why it matters.

## What Is the EU?

The **European Union** is a political and economic union of **27 member states**, mostly in Europe. It was created to promote peace, prosperity, and cooperation after the devastation of World War II.

### The member states (as of 2024)

**Founding members (1957)**: Belgium, France, Germany, Italy, Luxembourg, Netherlands

**Later joiners**: Denmark, Ireland (1973), Greece (1981), Spain, Portugal (1986), Austria, Finland, Sweden (1995), Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia (2004), Bulgaria, Romania (2007), Croatia (2013)

**Former member**: United Kingdom (left 2020)

### What the EU does

The EU is not a country, but it is more than an international organisation. It has:

- A **single market** — goods, services, capital, and people can move freely across borders
- **Common laws** — EU laws (regulations and directives) apply in all member states
- **A common currency** — the euro, used by 20 members (the eurozone)
- **Common policies** — on trade, agriculture, fisheries, competition, environment, and more
- **A parliament** — the European Parliament, directly elected by EU citizens
- **A court** — the European Court of Justice, which interprets EU law

The EU is unique in world history — no other group of countries has integrated so deeply while remaining sovereign nations.

## How the EU Works

The EU has a complex system of institutions that make and enforce laws.

### The European Commission

The **European Commission** is the EU's executive body. It proposes new laws, enforces EU law, and manages the EU budget.

- **27 Commissioners** (one per member state), led by the **President** (currently Ursula von der Leyen, Germany)
- Commissioners are nominated by member governments and approved by the European Parliament
- The Commission is based in **Brussels**

The Commission is often called the "EU government," but it cannot make laws on its own — it can only propose them.

### The European Parliament

The **European Parliament** is the EU's directly elected legislature. It debates and votes on laws proposed by the Commission.

- **720 Members of the European Parliament (MEPs)**, elected every five years by EU citizens
- MEPs sit in **political groups** (e.g., centre-right, centre-left, greens), not by nationality
- The Parliament is based in **Strasbourg** (plenary sessions) and **Brussels** (committees)

The Parliament has grown in power over the decades and now has equal say with the Council on most laws.

### The Council of the EU

The **Council of the EU** (also called the Council of Ministers) represents member governments. It debates and votes on laws proposed by the Commission.

- **27 ministers** (one per member state), with the composition depending on the topic (e.g., finance ministers for economic policy, environment ministers for climate policy)
- Decisions are usually made by **qualified majority voting** (55% of countries representing 65% of the EU population), though some areas (tax, foreign policy) require **unanimity**
- The Council rotates its presidency among member states every six months

The Council is the most powerful EU institution because it represents national governments.

### The European Council

The **European Council** is the EU's top political body, made up of the **heads of state or government** (prime ministers, presidents) of all 27 member states, plus the President of the European Commission.

- Meets **four times a year** to set the EU's political direction and priorities
- Led by the **President of the European Council** (currently Charles Michel, Belgium)
- Decisions are usually made by **consensus**

The European Council does not make laws, but it sets the agenda for the Commission and Council.

### The European Court of Justice

The **European Court of Justice (ECJ)** interprets EU law and ensures it is applied uniformly across all member states.

- **27 judges** (one per member state)
- Based in **Luxembourg**
- Rulings are **binding** on member states

The ECJ has been controversial because its rulings can override national laws.

## The Single Market

The **single market** (also called the internal market) is the EU's greatest achievement. It allows goods, services, capital, and people to move freely across borders, as if the EU were one country.

### The four freedoms

1. **Free movement of goods** — No tariffs, quotas, or customs checks between member states
2. **Free movement of services** — Companies can provide services in any member state
3. **Free movement of capital** — Money can move freely across borders
4. **Free movement of people** — EU citizens can live, work, study, and retire in any member state

The single market has **450 million consumers** and is the world's largest trading bloc, accounting for around **15% of global GDP**.

### Benefits

- **Lower prices** — Competition and economies of scale reduce prices
- **More choice** — Consumers can buy goods and services from across the EU
- **Economic growth** — The single market has increased EU GDP by an estimated 5–10%
- **Job opportunities** — EU citizens can work anywhere in the EU

### Costs

- **Regulation** — The EU imposes common rules (on product standards, workers' rights, environmental protection) that some see as burdensome
- **Loss of sovereignty** — Member states cannot set their own rules in areas covered by the single market

## The Eurozone

The **eurozone** is the group of **20 EU member states** that use the **euro** as their currency. The euro was introduced in 1999 (as an accounting currency) and 2002 (as physical cash).

### Eurozone members (20)

Austria, Belgium, Croatia, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia, Spain

### Non-eurozone EU members (7)

Bulgaria, Czech Republic, Denmark, Hungary, Poland, Romania, Sweden

These countries are required to join the euro eventually (except Denmark, which has an opt-out), but there is no deadline.

### Benefits of the euro

- **No currency exchange** — Easier and cheaper to trade and travel
- **Price transparency** — Easier to compare prices across countries
- **Stability** — The euro is a major global currency, reducing exchange rate risk

### Costs of the euro

- **Loss of monetary policy** — Countries cannot set their own interest rates or devalue their currency to boost competitiveness
- **One size fits all** — The European Central Bank sets interest rates for the entire eurozone, which may not suit all countries (e.g., Germany needs different rates than Greece)

The **eurozone crisis (2010–2015)** exposed these problems. Countries like Greece, Spain, and Italy faced severe recessions and could not devalue their currencies to recover. The crisis required massive bailouts and austerity, causing political and social upheaval.

## The EU Budget

The EU budget is **€168 billion per year** (2024), around **1% of EU GDP**. It is funded by:

- **Member contributions** (based on GDP)
- **Customs duties** on imports from outside the EU
- **VAT contributions**

### Where the money goes

- **Agriculture** (31%) — Subsidies to farmers under the Common Agricultural Policy (CAP)
- **Regional development** (34%) — Grants to poorer regions to reduce inequality
- **Research and innovation** (13%) — Funding for science, technology, and education (e.g., Horizon Europe)
- **Administration** (6%) — Running the EU institutions
- **Other** (16%) — Foreign aid, security, migration, etc.

The EU budget is small compared to national budgets (the UK government spends around £1.2 trillion per year), but it is controversial because some countries are **net contributors** (pay more than they receive) while others are **net recipients**.

### Net contributors (2023)

Germany (€19 billion), France (€9 billion), Italy (€6 billion), Netherlands (€5 billion)

### Net recipients (2023)

Poland (€12 billion), Romania (€6 billion), Hungary (€5 billion), Greece (€4 billion)

The UK was a net contributor (around €10 billion per year), which was a major argument for Brexit.

## Brexit: Why the UK Left

The UK joined the EU (then the European Economic Community) in **1973**, but it was always a reluctant member. Euroscepticism was strong, and the UK negotiated opt-outs from the euro and the Schengen Area (passport-free travel).

In **2016**, Prime Minister David Cameron held a referendum on EU membership. The result was **52% Leave, 48% Remain**. The UK left the EU on **31 January 2020**, after three years of negotiations.

### Why people voted Leave

- **Sovereignty** — The EU makes laws that apply in the UK, and the UK cannot veto most of them. Leavers wanted to "take back control."
- **Immigration** — Free movement meant the UK could not control EU immigration, which reached 300,000 per year in the 2010s. Leavers wanted to reduce immigration.
- **Democracy** — The EU is seen as undemocratic and bureaucratic, with unelected officials (the Commission) making laws.
- **Cost** — The UK paid around €10 billion per year to the EU budget (net contribution).

### Why people voted Remain

- **Economy** — The single market and free trade with the EU are worth far more than the EU budget contribution. Leaving would harm the economy.
- **Influence** — The UK had a seat at the table and could shape EU policy. Outside, the UK has no say but still has to follow EU rules to trade with the EU.
- **Peace and cooperation** — The EU has kept peace in Europe for 70 years. Leaving undermines European unity.

### The economic impact of Brexit

Brexit has been economically damaging:

- **Trade has fallen** — UK-EU trade is down 15–25% since Brexit, due to customs checks, paperwork, and tariffs on some goods
- **Investment has fallen** — Foreign companies are less likely to invest in the UK if it is outside the single market
- **GDP is lower** — The Office for Budget Responsibility estimates Brexit has reduced UK GDP by 4% (around £100 billion per year)
- **Inflation is higher** — Import costs have risen due to tariffs and customs delays

But Brexit supporters argue that the long-term benefits (sovereignty, control over immigration, ability to make trade deals) will outweigh the short-term costs.

## The Future of the EU

The EU faces several challenges:

### 1. Enlargement

Several countries want to join the EU, including **Ukraine, Moldova, and Western Balkan countries** (Serbia, Albania, North Macedonia, Bosnia, Montenegro, Kosovo). But enlargement is slow and controversial, because new members must meet strict criteria (democracy, rule of law, economic stability).

### 2. Democracy and legitimacy

The EU is often criticised as undemocratic and distant from ordinary citizens. Turnout in European Parliament elections is low (around 50%), and many people do not understand how the EU works.

### 3. Populism and Euroscepticism

Populist and Eurosceptic parties have gained ground in many member states (Italy, Hungary, Poland, France), and some have called for referendums on EU membership. So far, no other country has left, but the threat remains.

### 4. Economic divergence

The eurozone crisis exposed deep economic divisions between northern Europe (Germany, Netherlands) and southern Europe (Greece, Italy, Spain). These divisions remain, and future crises could threaten the euro.

## The Bottom Line

The EU has 27 member states with 450 million people, forming the world's largest single market with free movement of goods, services, capital, and people. The EU budget is €168 billion per year, funded by member contributions, with spending on agriculture (31%), regional development (34%), and research (13%). EU laws are made by the European Commission (proposes), European Parliament (elected), and Council of the EU (member governments), with most decisions requiring consensus. The UK left the EU in 2020 after a 2016 referendum, citing sovereignty, immigration, and democracy concerns, though economic costs have been significant. The eurozone has 20 member states using the euro, while 7 EU members keep their own currencies. The EU is the most ambitious experiment in international cooperation in history, but it is also controversial, bureaucratic, and facing challenges from populism, economic divergence, and enlargement. Whether it survives and thrives depends on whether it can reform, reconnect with citizens, and prove its value in a changing world.

## Frequently asked questions

### What is the difference between the EU and Europe?

Europe is a continent with 44 countries. The EU is a political and economic union of 27 of those countries. Not all European countries are in the EU (e.g., Norway, Switzerland, UK), and some EU members are geographically in Asia (e.g., Cyprus).

### Can EU citizens live and work anywhere in the EU?

Yes. EU citizens have the right to live, work, study, and retire in any EU member state without needing a visa or work permit. This is called freedom of movement and is one of the EU's core principles. UK citizens lost this right after Brexit.

### Why didn't the UK join the euro?

The UK negotiated an opt-out from the euro when the single currency was introduced in 1999. The UK government and public were skeptical about giving up the pound and control over monetary policy. In hindsight, this was a good decision — the eurozone crisis (2010-2015) caused severe economic pain in countries like Greece, Spain, and Italy.

## Sources

- [European Union official website](https://europa.eu/)
- [European Parliament](https://www.europarl.europa.eu/)
- [UK Government — EU relations](https://www.gov.uk/government/organisations/foreign-commonwealth-development-office)
- [BBC News — EU coverage](https://www.bbc.co.uk/news/world/europe)

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