by Jan Strupczewski

(Reuters) – The European Union (EU) only needs to adopt a small number of reforms to strongly boost economic growth, increase competitiveness and maintain social programs, Alfred Kammer, head of the International Monetary Fund’s (IMF) Europe department, told Reuters on Friday.

“At the European level, we have some small reforms that we call a ‘down payment’, and they produce a higher GDP growth rate, 3% on average, in 10 years,” said Alfred Kammer.

These reforms would reduce electricity prices, increase labor mobility, harmonize bankruptcy laws across EU countries and increase the share of pension and insurance fund assets invested in EU venture capital, he added.

EU GDP grew by 1.0% in 2024 and the European Commission forecasts growth to accelerate to 1.1% in 2025 and 1.5% in 2026.

The EU could further boost growth and offset rising US tariffs on European goods by removing some internal trade barriers between the bloc’s 27 countries, which currently have an effect equivalent to a tariff of 44% on goods and 110% on services, Alfred Kammer said.

The EU wants to accelerate its growth and compete more effectively with the United States and China. To achieve this, member states must collaborate more closely on political, economic and regulatory issues so that businesses across the bloc can take advantage of its greatest asset, a single market of 450 million people.

But deeper integration of the internal market is politically difficult, even if Europe has all the necessary ingredients for success, said Alfred Kammer.

The United States leads in innovation but not in manufacturing. China is very strong in manufacturing and is catching up in innovation, he said.

“Europe has a solid industrial base and a strong capacity for innovation: it benefits from the best of both worlds, but it must connect what each country has and use it, and this is where the single market and the strength of Europe lie,” said Alfred Kammer.

To achieve this, the EU wants to create a Savings and Investment Union (SEU) between its 27 countries, to allow some 10 trillion euros of consumer savings, currently placed in low-yielding bank deposits, to be placed in more profitable investments and securities.

But the rapprochement of 27 tax, social and legal systems held back progress for a decade. Starting with small reforms could help boost growth more quickly, according to Alfred Kammer.

“These reforms are really important for generating growth and raising income levels, and they are essential for maintaining European welfare states, because the more pro-growth reforms you implement, the less fiscal adjustments you need to deal with long-term spending pressures,” said Alfred Kammer.

He added that while some countries would benefit more from these reforms than others, all EU member states would see stronger GDP growth, between 2% and 5%, after 10 years.

He added, however, that vested national interests and resistance from national ministries of Justice and Labor made implementation difficult.

EU leaders recognize the importance of these reforms but there are many issues that require their attention, said Alfred Kammer.

“Leaders understand they have to act, but one of the problems is their availability,” he says. “They are busy with … so many national political issues.”

(Reporting Jan Strupczewski, Mara Vîlcu for the , edited by Blandine Hénault)

Copyright © 2025 Thomson Reuters