In the late 1980's and early 1990's, rising nationalism and widespread demands for democracy occurred throughout eastern Europe and the Soviet Union. During 1989–90 most of the Communist regimes in eastern Europe collapsed. Germany was reunited in 1990. The following year the Warsaw Pact and COMECON were dissolved.

In 1991 nationalist fervor and demands for democracy increased throughout the Soviet Union and Yugoslavia. The Soviet Union gradually lost authority over its union republics and recognized the independence of Lithuania, Latvia, and Estonia in September, 1991. Later that year the Soviet Union collapsed and the rest of its union republics became independent.

Meanwhile, in 1990 Communist regimes fell from power in several Yugoslav republics while remaining in power in others. The non-Communist republics sought independence, and civil war between various national groups erupted in Yugoslavia in 1991. The Yugoslav federation soon collapsed and the Yugoslav republics of Bosnia and Herzegovina, Croatia, Macedonia, and Slovenia became independent.

In 1993 Czechoslovakia peacefully separated into the Czech Republic and Slovakia.

Throughout the early and mid-1990's most of the countries of eastern Europe experienced severe economic problems caused by changing centrally planned economies to ones based on market forces. In 1995 the European Union was expanded to include Austria, Finland, and Sweden.

In 1998, 11 nations of the European Union established a central bank, called the European Central Bank, to implement a common economic policy between member nations. In 2002, a common currency, the euro, became the standard monetary unit of most of the European Union member nations. Ten more European nations joined the EU in 2004 and two more in 2007. The new members included former Communist eastern European countries and Soviet republics.