ding
partners. The current account deficit remains high; however, the
state budget is essentially in balance, and public debt is low.

Ethiopia
Ethiopia's poverty-stricken economy is based on
agriculture, accounting for half of GDP, 60% of exports, and 80% of
total employment. The agricultural sector suffers from frequent
drought and poor cultivation practices. Coffee is critical to the
Ethiopian economy with exports of some $156 million in 2002, but
historically low prices have seen many farmers switching to qat to
supplement income. The war with Eritrea in 1998-2000 and recurrent
drought have buffeted the economy, in particular coffee production.
In November 2001, Ethiopia qualified for debt relief from the Highly
Indebted Poor Countries (HIPC) initiative, and in December 2005 the
International Monetary Fund voted to forgive Ethiopia's debt to the
body. Under Ethiopia's land tenure system, the government owns all
land and provides long-term leases to the tenants; the system
continues to hamper growth in the industrial sector as entrepreneurs
are unable to use land as collateral for loans. Drought struck again
late in 2002, leading to a 2% decline in GDP in 2003. Normal weather
patterns helped agricultural and GDP growth recover in 2004-06.

Europa Island
no economic activity

European Union
Internally, the European Union attempts to lower
trade barriers, adopt a common currency, and move toward convergence
of living standards. Internationally, the EU aims to bolster
Europe's trade position and its political and economic power.
Because of the great differences in per capita income among member
states (from $8,000 to $61,000) and historic national animosities,
the European Union faces difficulties in devising and enforcing
common policies. For example, since 2003 Germany and France have
flouted the member states' treaty obligation to prevent their
national budgets from running more than a 3% deficit. In 2004 and
2007, the EU admitted 10 and two countries, respectively, that are,
in general, less advanced technologically and economically than the
other 15. Twelve established EU member states introduced the euro as
their common currency on 1 January 1999, but the UK, Sweden, and
Denmark chose not to participate. Of the 12 most recent member
states, only Slovenia has adopted the euro (1 January 2007); the
remaining eleven are legally required t