## Editor’s Letter — Europe’s Moment for Revival

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**Canonical URL:** [Editor’s Letter — Europe’s Moment for Revival](https://www.imf.org/-/media/files/publications/fandd/article/2025/06/editors-letter.pdf)

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### Context and framing
- Date: 5JUNE 2025
- Core message: “Europe must unite to shape today’s global economy, rather than be shaped by it.”
- Tone: Europe enjoys high living standards and strong social contracts, but has lost confidence in its economic model and faces a pivotal moment to revive its economic might.

### Key findings on Europe’s economic position
- Europe’s workers enjoy more time off than in many other regions, yet their living standards are among the highest.
- Since the global financial crisis, the EU has fallen back in technological innovation.
- The continent is trailing China in wealth and the United States in population.
- Growth gap drivers:
  - Shrinking workforce.
  - Stagnant productivity.
  - Rising trade tensions.
  - Increased defense spending pressures to rely less on the United States.

### Quantitative comparisons and country performance
- Germany’s economy has barely grown since 2019, while the US expanded 12 times as much—and 3 times more than the euro area.
- Noted examples of stronger performance:
  - Poland: successful economic transformation (per Andrzej Domański, finance minister).
  - Greece: turned into one of Europe’s fastest-growing economies after sweeping restructuring (per Konstan tinos Hatzidakis, former finance minister).
  - Spain: found a balance between strong growth and social progress with sustainable public finances (per Carlos Cuerpo, finance minister).

### Analysis and policy recommendations
- Case for closer economic union is more compelling than ever (argument by Alfred Kammer, head of the IMF’s European Department).
- Road map elements (from reports by Mario Draghi and Enrico Letta):
  - Boost innovation.
  - Support businesses.
  - Enhance economic security by consolidating fragmented markets, particularly in defense, energy, telecoms, and finance.
- Financial market integration priorities (per Ravi Balakrishnan and Mahmood Pradhan):
  - Complete banking union to enable a single capital market to deliver a larger pool of savings.
  - Reduce fragmentation, cut red tape, and pursue more uniform regulation across the union so firms expect higher returns and investment rises.
- Germany-specific reforms and needs (per Claudia Schaffranka and Ulrike Malmandier):
  - Reformed the “debt brake” (a constitutional cap on public borrowing).
  - Must open the economy to future-oriented investment and overcome chronic labor shortages.

### Demographics and long-term concerns
- Special report topic: policy implications of falling fertility and rising longevity.
- Primary policy question: How to manage the shrinking numbers of workers relative to retirees, a concern especially acute in Europe.

### Conclusion and call to action
- Europeans recognize the moment to revive their economic might has arrived.
- Central imperative: unite to shape the global economy while remaining true to Europe’s values of solidarity and social protection.

*F&D — Gita Bhatt, editor-in-chief*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2025/06/editors-letter.pdf_