The European Union could materially raise its medium-term growth rate with a narrow package of single-market reforms, according to the International Monetary Fund.
Alfred Kammer, Director of the IMF’s European Department, told that a “down payment” of measures would lift the EU’s level of GDP by roughly 3% over ten years, with gains shared across all member states.
Kammer outlined four priorities: lowering electricity prices through a more integrated energy market; improving labour mobility; harmonising core elements of insolvency frameworks; and increasing allocations by pension and insurance funds to EU venture capital. The Fund argues these steps would reduce costs, speed the reallocation of capital and labour, and improve financing for scale-ups.
The IMF’s call comes against a modest baseline. The European Commission’s Spring 2025 forecast projected EU real GDP growth of 1.1% in 2025, rising to 1.5% in 2026, with inflation easing towards target. In that context, structural measures that raise potential growth are presented as complementing fiscal consolidation and monetary normalisation.
The Fund links much of the prospective uplift to reducing “within-EU” frictions. IMF research estimates that residual barriers inside the single market are equivalent to an ad valorem cost of about 44% for manufactured goods and 110% for services—costs that depress competition and productivity. Kammer said trimming those barriers would also help offset the impact of higher U.S. tariffs on European exports.
Energy costs are a central focus. The IMF has repeatedly urged deeper market integration—more interconnection, streamlined permitting for new capacity and clearer, predictable frameworks for investment—arguing that lower and more stable electricity prices would bolster industrial competitiveness and real incomes.
On labour, the Fund backs measures that make it easier for workers to move to where jobs are available and for qualifications to be recognised more quickly across borders. It sees higher participation and better skills matching as important for lifting potential output. The recommendation features in the IMF’s Europe Regional Economic Outlook and recent briefings, which also emphasise bundling reforms to build political support.
Insolvency harmonisation is intended to reduce uncertainty and the cost of cross-border investment. IMF staff work highlights wide differences in the duration, outcomes and creditor hierarchies of bankruptcy procedures across the bloc. Aligning key elements—restructuring timelines, priority rules and second-chance provisions—could speed the reallocation of capital from non-viable firms to more productive uses.
Mobilising savings is the fourth pillar. The EU’s proposed Savings and Investment Union aims to channel a portion of roughly €10 trillion in household deposits into longer-term instruments. The IMF favours steps that enable pension and insurance funds to raise allocations to venture capital, with the goal of strengthening financing for innovation and helping firms to scale within the single market.
The Fund frames the “down payment” as a pragmatic start that does not require treaty change. Kammer said the distribution of gains would vary by country, but all member states would see stronger GDP over a decade—broadly a 2% to 5% range—if reforms proceed. He also noted that higher growth would ease pressure on public finances by supporting revenues and tempering the need for future fiscal adjustment.
Implementation risks are political. The IMF acknowledges that vested national interests and resistance within justice and labour ministries have slowed progress on closer integration, despite recognition by leaders of the economic benefits. Recent remarks by Kammer at ECOFIN and during the Annual Meetings underline the need for sequencing and packaging reforms to address distributional concerns and limited policymaker bandwidth.
The broader strategic context is competition with the United States and China. The IMF notes that Europe combines an advanced industrial base with substantial research capacity but needs to connect national strengths more effectively through the single market to translate innovation into scaled manufacturing and services. The proposed package is presented as an immediate, actionable route to do so.
