IMF-chief urges boosting productivity to preserve "European lifestyle"

The European Union must urgently prioritize completing its single market to strengthen economic growth amid mounting global challenges or risk jeopardizing its quality of life.

This was the core message delivered by Kristalina Georgieva, Head of the International Monetary Fund (IMF), on June 25. She emphasized the need for greater productivity and efficiency across Europe while stressing that her goal is not to replicate the US model: "I do not want Europe to become the United States of America," she stated, but warned that more must be done to improve the continent's competitiveness.

"In Europe we enjoy being a lifestyle superpower. Unless we become more productive we may lose this advantage," Georgieva added.

Her remarks came just before the release of a new IMF policy statement, due Thursday, which provides recommendations for eurozone economies.

One of the report’s primary takeaways is the urgent need to accelerate progress on the single market, which guarantees the free flow of goods, services, capital, and people within participating EU countries.

"There are no tariffs within Europe, but it doesn't mean there are no barriers in Europe, regulatory and otherwise," Georgieva told Euronews.

According to the IMF, current barriers within the EU single market are effectively equal to a 44% tariff on goods and a 110% tariff on services, severely limiting the benefits of market integration.

Speaking at an industry event on June 19 in Luxembourg, the Bulgarian national pointed out that people "across the globe, countries and regions are on the move, pushing to higher competitiveness, more dynamism, and faster technological transformation. For Europe it is very simple: either Europe acts, or Europe risks getting sidelined. Relative decline would not happen in a flash, it would creep in, but that would not make it less real. There is no time for delay."

Georgieva illustrated the contrast with the US, where only 30% of goods produced in a state are consumed locally while 70% are traded across state lines. In Europe, this ratio is reversed: 70% of goods are consumed domestically and 30% are exported within the EU, which keeps markets more fragmented and less dynamic.

"If Europe completes the single market, over 10 years, it would boost GDP by 3%," Georgieva projected.

To achieve this, the IMF suggests several concrete steps: reducing regulatory fragmentation, enhancing labor mobility, encouraging cross-border banking mergers, integrating energy markets, and advancing the long-delayed Capital Markets Union (CMU).

The CMU seeks to remove investment obstacles across member states, helping businesses raise capital more easily from other EU countries. This, in turn, could support company growth and job creation across the bloc.

On this point, the IMF further recommended that the EU should "increase institutional investors’ familiarity with venture capital as an asset class and address remaining undue restrictions on their ability to invest in it."

Looking ahead, the IMF forecasts modest eurozone growth of 0.8% in 2025, rising to 1.2% in 2026. However, ongoing geopolitical and trade tensions are likely to drag on investment and consumer confidence.

Despite these challenges, the IMF insists that deepening the single market could provide the boost Europe needs to remain economically resilient and globally competitive.

By Nazrin Sadigova