IMF Working Papers

Lifting Binding Constraints on Growth in Europe: Actionable Priorities to Deepen the Single Market

By Nathaniel G Arnold, Allan Dizioli, Alexandra Fotiou, Jan-Martin Frie, Burcu Hacibedel, Tara Iyer, Huidan Huidan Lin, Malhar S Nabar, Hui Tong, Frederik G Toscani

June 13, 2025

Download PDF More Formats on IMF eLibrary Order a Print Copy
More formats on IMF eLibrary Order a Print Copy

Preview Citation

Format: Chicago

Nathaniel G Arnold, Allan Dizioli, Alexandra Fotiou, Jan-Martin Frie, Burcu Hacibedel, Tara Iyer, Huidan Huidan Lin, Malhar S Nabar, Hui Tong, and Frederik G Toscani. "Lifting Binding Constraints on Growth in Europe: Actionable Priorities to Deepen the Single Market", IMF Working Papers 2025, 113 (2025), accessed July 19, 2025, https://doi.org/10.5089/9798229010986.001

Export Citation

  • ProCite
  • RefWorks
  • Reference Manager
  • BibTex
  • Zotero
  • EndNote

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Focusing on a cross-border perspective, this paper identifies four key binding constraints that hinder firms’ ability to innovate and scale up within the EU single market—fragmented regulations, inefficient financial intermediation, limited labor mobility, and fragmented energy market. To address these constraints and facilitate firms’ cross border scale up, investment and innovation, the paper proposes key action areas for deepening the integration of the single market, including lowering regulatory fragmentation, advancing the capital markets union, enhancing labor mobility within the EU, and integrating the EU energy market. Through illustrative scenarios, the paper highlights that a few actionable steps along these dimensions could lead off the process of deeper integration and deliver a meaningful initial payoff by increasing the EU GDP level relative to baseline by around 3 percent over 10 years—a sizable improvement considering that the EU potential growth is projected to be just above 1 percent annually over this horizon.

Keywords: 28th regime, Capital markets union, Productivity, Scale up, Single market

Publication Details