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TitleUnderstanding Data: European Union vs. euro zone
AuthorPhillip Thorne
Question

What is the difference between the European Union (EU) and the euro zone?

Answer

The European Union consists of those countries that meet certain membership and accession criteria, and the euro zone is a subset of those countries using the euro as their national currency.  Both memberships may undergo expansion, which has implications for time series statistics, i.e., is the "changing composition" used, or a retroactive "fixed composition" for consistency?

As of 2015, there are 28 members of the EU and 19 members of the euro zone.  Moody's Analytics uses the official definitions issued by Eurostat and the European Central Bank.

Nuances

The European Union was established under that name in 1992 (with the so-called Maastricht Treaty), but its earliest predecessor organization (with six members) was founded in 1951.  The euro zone was established in 1999, but the physical euro currency was not immediately issued.

As of 2015, Europe (the customary geographic collection) contains six countries which are candidates for EU membership and another two which are potential candidates.

Three of the EU members have chosen to retain their national currencies, namely: Denmark, Sweden and the U.K., using the Danish krone, the Swedish krona, and the British pound sterling, respectively.  Hence, they are outsize the euro zone.

There is no established legal mechanism to exit the euro zone and resume use of a separate national currency, although the post-2008 world financial crisis has inspired speculation (chiefly the so-called "Grexit" of Greece).  (See also the so-called "Brexit," the hypothetical secession of the U.K. (Britain) from the EU.)

There are non-EU countries that use the euro -- unofficially -- because they previously used a currency that was replaced by the euro.  They are outside the euro zone, at least for statistical purposes; some third-party analysts use the de facto membership, but Moody's Analytics restricts itself to the 19 official members.

There is no official name for the euro zone.  You may see it styled as "euro area," "EA," "euroland," "Eurozone," "eurozone" or "euro-zone."  Moody's Analytics uses two words, "euro zone."

See also

References