Eurozone Economy



The Eurozone economy is important to FX traders since it’s the block of nations which use the Euro as currency.

Some definitions first.

Remember, the Eurozone is made up of 19 of the European Union member countries.

As such, the economy of the Eurozone is a subset of that of the bigger European Union.

We care about the Eurozone economy because that’s where the Euro’s at.

However, countries like France, Germany, and Italy among others, produce the bulk of the European Union’s Gross Domestic Product.

And as it turns out, these countries are all in the euro.

The Eurozone is the bulk of the European Union.

This means the Eurozone’s GDP is not all that different from that of the complete European Union.

What’s the difference?

It’s hard to pinpoint one single source for both statistics (actually, I just found this), but tracking down two distinct, reputable sources, we get:

European Union GDP: 16 trillion USD (2016)

Eurozone GDP: 10 trillion EUR (2016)

Now, if we use the current EUR/USD exchange rate of 1.17 (at the time of this writing), we get 11.7 trillion USD.

So, we’re talking about approximately 73.1% of EU’s GDP comes from Eurozone members.

Note: for you exact men out there, these are reasonable approximations taken from different sources. Don’t go talking sh$t if the numbers don’t exactly match some other source, seriously…

Awesome.

With that out of the way…

Eurozone Economy Characteristics

If the European Union (EU) were counted as a country, it’s $16 trillion GDP would place it on second place worldwide (just behind the United States, but above China).

Since we care about the Eurozone here, we can say its size matches that of China (as of 2016) around 11 trillion USD (depending on the calculation).

With China’s accelerated growth (relative to European countries) it’s clear China will get ahead as soon as next year (if it hasn’t already).

As of 2016, China’s economy is about the same size as the Eurozone’s.

Very cool.

How about GDP per capita?

32,003 euros.

If we converted this to USD and compared it to a list of countries, the Eurozone would be in the high 50s. Between Israel (55th) and Trinidad and Tobago (59th).

Contrast this to the European Union’s $39,200 (43rd place).

Why the difference?

It’s probably due to countries with high GDP per capita which are in the EU, but do not use the Euro (like Sweden and Denmark).

Population:

336 million people. About two thirds of EU’s 510 million (Eurostat estimate).

So the Eurozone’s population (336 million) is very similar to that of the United States (323 million).

But as we mentioned before, Eurozone’s GDP is around 11 trillion vs USA’s 18 trillion.

I make 2 widgets, but you make 3 (same restrictions).

With (slightly) fewer people, the US is outdoing the Eurozone in terms of production in a ratio of 1.6 to 1.

But that’s nothing new, is it?

Tell me about main industries?

As you can probably expect, such a big economic block comprised of different countries will have a varied, well-diversified economy.

According to World Bank statistics, service activities account for more than 74% of the European Union’s GDP (Eurozone follows same pattern).

We have automobiles from Germany, financial services from France and Germany, Energy from both countries plus Netherlands (Royal Dutch Shell).

These ain’t bad either...

And that’s obviously just scraping the top of the multinational corporations located in Europe.

Trade, tell me about international trade.

Eurozone exports as percent of Gross Domestic Product are 27% according to data from the European Central Bank (ECB).

While imports amount to 23.1% of GDP in 2016.

This makes the Eurozone’s total trade 50.1%, which is pretty open (especially when you consider this to be trade out of the zone. A ton of trade happens within Euro countries).

Thus, we can locate the Eurozone economy between the United States (30%) and Canada (60%) in terms of openness to international trade (in terms of total trade as percent of GDP, not diving into trade agreements, etc.).

Pretty neat, no?

Time to talk debt.

Eurozone's Debt Profile

Private (household) debt in the Eurozone hovered around 58% of GDP in 2016.

This is much more moderate than the likes of Switzerland (128.4%) and Australia (123.1%) or even the United States (79.5%).

What about public debt?

89.2% of GDP. Below the USA’s 106.1%, but above Australia’s 41% and Switzerland’s 32.6%.

Thus, in terms of debt, the Eurozone around the middle of the distribution (which is good, not too conservative, but not indebted to your eyeballs).

Nice tour of the Eurozone economy, no?

See you later,

Emil Christopher,

The Forex Economist

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