IMF warns Europe of stagnation risk without urgent measures. Slowing growth and barriers in the single market are holding back the economy. Deeper EU market and budget increase are proposed.
The International Monetary Fund warned that Europe risks falling into stagnation without urgent measures to address slowing growth, weak investment, and rising geopolitical threats. UNN reports this, citing Bloomberg.
Trade tensions and low demand are dampening growth prospects, with risks sharply rising, the Washington-based institution said on Thursday. The eurozone is expected to grow by only 0.8% in 2025, despite record low unemployment and inflation near target.
To revive productivity, the IMF called for a "decisive push" to deepen the European Union's long-delayed single market, adding that cross-border fragmentation stifles innovation and corporate growth.
According to the IMF, the cost of national barriers within the EU for companies is equivalent to a 44% tariff on goods and 110% on services. Removing these gaps through harmonized regulations, capital market reforms, and labor mobility could boost gross domestic product by 3% over a decade.
With defense spending, aging populations, and climate change increasing costs sharply, countries with fiscal space should invest, but highly indebted member states face painful consolidation, the IMF stated. It called for a 50% increase in the EU budget to achieve common goals.
The Fund sees risks of a deteriorating business environment for companies investing in the U.S., which could negatively impact bank balance sheets. However, for now, it described Europe's banking system as "adequately capitalized and liquid."
