Economic Activities

For many years two general economic systems prevailed in Europe—centrally planned economies in eastern Europe and market-based economies, with varying degrees of governmental participation and control, in western Europe. Since the collapse of Communist regimes throughout most of eastern Europe during 1989–90, many of the nations of eastern Europe have begun to establish market-based economic systems. Transportation and communications services throughout Europe are generally government owned; in some nations banks and numerous manufacturing enterprises are also nationalized. As a whole, western Europe is industrially and technologically more advanced than eastern Europe.

Europe consumes about a third of the world's annual fuel output and produces a major share of its manufactured goods. European products account for more than 45 per cent of the world's exports. Tourism, particularly in western Europe, plays an important role in the economy, by creating jobs and bringing in foreign currency to offset spending on imports. A number of countries, especially Italy and Spain, rely heavily on income from tourism.

International trade is a mainstay of many European countries. Organizations such as the European Union (EU) and the European Free Trade Association (EFTA) help to maintain trade within Europe and with nations abroad.. EU member countries trade among themselves sans barriers such as tariffs, import quotas, and other regulations or restrictions, and also invest freely in one another’s economies. The EU also regulates its members’ industrial policy, transportation policy, and agricultural policy. In addition, the EU promotes a common trade policy with countries outside Europe.

Leading industrial areas of Europe have traditionally included parts of France, Germany, northern Italy, the Netherlands, Norway, Spain, Sweden, and the United Kingdom. Since the late 20th century, however, major industrial areas have developed in Ireland and in central and eastern European countries such as the Czech Republic, Hungary, Poland, Russia, and Ukraine.

By employment, manufacturing is the chief economic activity in most of Europe. Except in parts of eastern Europe, 25 per cent or more of the labor force is employed in manufacturing. In some Western European nations, however, employment in the service industries, such as banking, insurance, and tourism, surpasses that in manufacturing. New industries utilizing Europe’s highly skilled labor force and highly developed research and development programs have spread from western Europe to many countries in Eastern Europe.

Industrial production is extremely diverse. Germany, France, the United Kingdom, the Benelux countries, Poland, the Czech Republic, Ukraine, and the European part of Russia are among the world's leading producers of such products as iron and steel, machinery, transportation equipment, and chemicals. Industrial development in parts of northwestern Europe, such as the Ruhr region of Germany and other areas along the lower Rhine River, is among the most concentrated in the world. Heavy industry grew primarily in areas with abundant coal for fuel and accessible water transportation. However, increased international competition, especially from countries in North America and Asia, has provided great challenges for Europe’s traditional industrial centers.

Shipbuilding centers largely in the Scandinavian countries, Germany, Poland, Spain, Russia, Ukraine, and the Baltic states. Paper and other wood products are manufactured mainly in Scandinavia, Germany, and Russia.

Industrial development in parts of northwestern Europe, such as the Ruhr region of Germany and other areas along the lower Rhine River, is among the most concentrated in the world. Heavy industry grew primarily in areas with abundant coal for fuel and accessible water transportation. However, increased international competition, especially from countries in North America and Asia, has provided great challenges for Europe’s traditional industrial centers.

Europe has some of the world’s richest farmland. Farming, except in parts of eastern and southern Europe, is highly mechanized and efficient. European farmers produce most of the food consumed on the continent. However, all nations must import a sizable portion of their food supply. Much of the food imported comes from tropical countries, including such goods as cocoa, coffee, and tropical fruits. There are great variations among European nations in the percentage of workers employed in agriculture. Serbia and Montenegro, Albania, and Moldova have the highest percentage of agricultural workers in the labor force—30 per cent or greater. Nations with the lowest percentage of agricultural workers include Great Britain, Belgium, the Netherlands, Luxembourg, Sweden, and Switzerland, each with less than 4 per cent.

Farms in Europe produce primarily livestock and cereals, including wheat, barley, oats, rye, and corn, as well as corn, flax, potatoes, sugar beets, and tobacco. France, Germany, Poland, Russia, and Ukraine are Europe's greatest producers of cereals, dairy products, and pork. Fruits and vegetables come primarily from France, Italy, Russia, Spain, and Ukraine. Most of the world’s olives come from farms in the Mediterranean areas of Europe. These farms also produce citrus fruits, dates, figs, and grapes. Leaders in the production of beef and veal include France, Germany, Italy, Russia, and Ukraine. Though not the leader in quantity, the Netherlands has the largest yield per acre of cereals.

Farmers in most of Europe raise cattle, hogs, sheep, and poultry for meat. Some of the world’s best breeds of cattle and sheep originated in Europe. Germany, Denmark, Ireland, the Netherlands, Switzerland, the United Kingdom, and the Scandinavian countries have the most productive dairy farms. The United Kingdom has produced many of these breeds, including Hereford and Jersey cattle and Hampshire, Shropshire, and Suffolk sheep.

Mining employs only a small portion of the work force. It supplies an important share of essential raw materials and fuels; however, the larger share must be imported. Coal, found in a belt from Great Britain across northern Europe into Ukraine, Belarus, Poland, Germany, and Russia, is one of the most abundant minerals and has long been mined. Also fairly plentiful is iron ore, coming mainly from the Krivoy Rog fields of Ukraine and from Sweden and the Lorraine area of France. Natural gas is found in great quantities in the Groningen fields of the Netherlands, Russia and the United Kingdom, and in offshore North Sea sites. In addition to natural gas, vast quantities of oil lie beneath the North Sea. North Sea oil and natural gas are extracted primarily by Great Britain and Norway. The chief petroleum producers are Norway, Russia, and the United Kingdom.

Metals are mined in virtually all parts of the continent; quantities vary greatly from country to country. The Ural Mountains of Russia have rich deposits of numerous metallic minerals. Western Europe produces moderate amounts of zinc, lead, copper, and bauxite. Many of the other mined products of Europe, including diamonds, nickel, platinum, potash, silver, and zinc, exist primarily in Russia.

Europe’s energy comes from coal-burning power plants, hydropower (water power) facilities, and nuclear power, apart from natural gas, oil and renewable energy resources. Beginning in the late 20th century, Europe invested in methods of generating energy from renewable sources, such as the power of ocean tides, rivers, sunlight, and wind.

Fishing is an important activity, especially in northern Europe. The most important fisheries lie in the North Sea, the Atlantic Ocean, and the Arctic Ocean, and the greatest quantities of fish are usually caught by Russia, Norway, and Denmark. Iceland, Spain, Great Britain, and France also have large fishing industries. The largest part of the catch comes from northeastern Atlantic waters, but European fleets fish throughout much of the world.

The European Union created its Common Fisheries Policy to coordinate fishing efforts and attempt to manage overfishing, which has threatened the survival of many fish species. Such fish as hake and cod, once abundant in northern waters, have become severely threatened in those areas.

Forestry centers largely in northern Europe, particularly in Russia, Finland, Austria, Germany, Norway, and Sweden. Parts of France, Romania, and Poland also produce timber. Forest resources in much of the rest of Europe are depleted or of poor quality, and the needs of most nations must be met by imports. Pine and other softwoods account for most of the lumber consumed in Europe.

The countries of Europe usually account for about half of the world's imports and exports by value. The European Union accounts for more than three-fourths of this trade. The United States, China and Japan are the largest single trading partners outside of the continent.

The development of the European Union has stimulated trade in Europe, to make more goods and services available to European consumers. EU members also trade with many non-European countries. The EU has a number of regional trade agreements with Latin America, with the non-EU countries of the Mediterranean, and with developing countries in a group called the African, Pacific, and Caribbean (APC) states.

Some countries that belong to other trade groups, such as the European Free Trade Association (EFTA) have also agreed to eliminate trade barriers on certain products and allow for differences in how they conduct trade with nonmember countries. Three EFTA members—Iceland, Liechtenstein, and Norway—have entered into an agreement with the EU called the European Economic Area (EEA), to remove most trade barriers between these three countries and the European Union.

Service industries produce services rather than goods, and include health care, finance, and government. Collectively, these industries employ more European workers than any other economic sector.

In some European countries, including the United Kingdom, the government pays the health care expenses of almost all of the country's people. Under this system, all medical facilities are publicly owned and all medical personnel are paid from public funds. These countries provide health insurance, which ensures free medical care for those unable to pay and refunds most of the payments made by patients who do pay. These plans are financed by the European countries through high tax rates.

Many European countries are world leaders in medical research. The Pasteur Institute in Paris is a world center for the study, prevention, and treatment of disease. The United Kingdom’s Medical Research Council, a government agency, supports biomedical research.

Since the late 20th century, Europe’s pharmaceutical industry has grown rapidly. European drug companies are developing new medications to treat or prevent a variety of diseases.

Europe has a leading role in international finance, with the EU ranking as the top investor in such countries as India and China.Major stock exchanges of Europe include those in Amsterdam, the Netherlands; Frankfurt, Germany; London; Paris; and Zurich, Switzerland. The London Bullion Market Association is the center of the world’s gold market, and Amsterdam is the center of the world’s diamond market. Frankfurt, the site of the European Central Bank, has become a major center for the European bond market.

Some of the world’s largest banks, which receive much foreign investment because they offer security and high rates of return, have their headquarters in France, Germany, Switzerland, and the United Kingdom. The spread of the euro has made such large banks even more important, as more and more international investors have acquired funds in euros.

Government plays a vital role in the economies of European countries, as it provides such public services as education, highway systems, and military protection. European central governments hence employ large numbers of people, and thereby regulate much of their countries’ economies.

Europe has highly developed transportation networks, especially Western Europe, which has excellent rail, highway, air, and water transportation systems. Airlines, highways, railways, and waterways provide efficient systems for the movement of people and goods.

Railways provide the chief passenger and freight service throughout much of the continent. Continental Europe is linked to Great Britain by rail through the Channel Tunnel. Europe has some of the world's longest railway tunnels. The Channel Tunnel, or Chunnel, which is 31.1 miles (50 kilometers) long, runs under the English Channel and connects the United Kingdom and France. The 21.5-mile (34.6-kilometer) Lötschberg Base Tunnel carries rail traffic through the Alps in Switzerland. European express trains, including fast passenger trains called InterCity trains, rank among the most efficient in the world. They can travel 150 miles (240 kilometers) per hour. European governments typically operate such train systems.

A well-developed network of highways and roads serves most of Europe. Major roads are paved, but dirt roads are also common, particularly in the south and east. A number of countries have systems of high-speed highways, such as the Autobahns in Germany and the Autostradas in Italy. Among the best-known European highways are the German four-lane superhighways known as autobahns. Ownership of automobiles is widespread. Trucks carry goods throughout the continent.

Many long road tunnels enable traffic to flow easily through Europe’s mountains. The world’s longest tunnel, the Laerdal Tunnel, connecting Oslo to Bergen in Norway, is 15.2 miles (24.5 kilometers) long. The St. Gotthard Road Tunnel, which cuts through the Alps in central Switzerland, is 10.5 miles (16.9 kilometers) long.

Europe makes great use of rivers and canals, which provide a network for sending goods on barges and other ships. Those in the northwest and in Russia and Ukraine carry the greatest traffic. Among the principal navigable waterways are the Danube, Elbe, Rhine, Seine, Thames, Moselle, and Volga. Europe handles more than half the world's international shipping. Some of the world's largest merchant fleets belong to European nations, with countries as Greece, Norway, and the United Kingdom having huge fleets. Rotterdam ranks as Europe’s major port, taking in much of the goods from non-European countries. Other European ports include those in Barcelona, Spain; Copenhagen, Denmark; Gdansk, Poland; Hamburg, Germany; Helsinki, Finland; Le Havre, and Marseille, France; Lisbon, Portugal; London; Naples, Italy; Piraeus, Greece; Riga, Latvia; and Stockholm, Sweden. Pipelines are vital for transporting oil and natural gas.

Most Europeans own televisions that broadcast channels run by governments and private companies. Large international TV networks link European countries to one another and to the rest of the world. The European Broadcasting Union operates Eurovision, the world’s largest provider of international sports and news broadcasts.

Mail, telephone, and telegraph services are mainly run by European governments. Newspapers are published throughout Europe, with both national and local papers available in most European cities. Some of the national papers, such as The Times and the Financial Times of the United Kingdom and Le Monde of France, also appear throughout the world.

Europe plays a leading role in the international telecommunications industry. Cellular telephone services, such as Nokia, headquartered in Finland, rank as the world’s top provider of cell phones. The Internet also plays an increasingly important role in the European communication industry, as Europeans are increasingly having access to computers, thus making the use of e-mail and other electronic communication techniques more widespread.