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

World · June 28, 2026 · Liam Chen · 10 min

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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.

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