## Financial Market Reforms Could Lift Europe's Growth

_IMF Blog, July 14, 2026_

## Source details

**Canonical URL:** [Financial Market Reforms Could Lift Europe's Growth](https://www.imf.org/en/blogs/articles/2026/07/14/financial-market-reforms-could-lift-europes-growth)

## Other formats

- [Markdown version](/en/blogs/articles/2026/07/14/financial-market-reforms-could-lift-europes-growth/index.md)
- [Structured JSON version](/en/blogs/articles/2026/07/14/financial-market-reforms-could-lift-europes-growth/index.json)
- [Bundle manifest](/en/blogs/articles/2026/07/14/financial-market-reforms-could-lift-europes-growth/bundle-manifest.json)

## Bibliographic details
- Authors: Luis Brando-Marques, Damien Capelle, Diego Cerdeiro, Rui-Mano
- Published: July 14, 2026

---

### Key findings
- Integrating and deepening banking and venture capital markets would boost output by at least 3 percent.
- A moderate reform effort that reduces barriers to cross-border banking could raise European Union GDP by about 2 percent in the long term.
- Adding reforms to ease legal and tax-related impediments to cross-border venture capital investment, together with measures to expand long-term risk capital through pension and insurance reforms, could bring the estimated gain from financial reforms close to 3 percent.
- Combining financial and real economy (business dynamism and innovation) reforms can lift the long-term GDP gain into double digits.
- Europe’s considerable savings are compartmentalized within national borders, limiting connections to high-risk, high-return projects and constraining scale-up of young and innovative companies.

### Barriers identified
- Differences in banking regulations across countries.
- Divergent safety nets, notably deposit insurance, that impede cross-border bank lending.
- Heterogeneous insolvency regimes across countries.
- Rules that limit provision of risk capital by pension funds and insurers.
- Legal and tax-related impediments to cross-border venture capital investment.
- Insufficient business dynamism and innovation that reduce the pool of projects with high potential returns.

### Quantitative estimates and mechanisms
- About 2 percent long-term EU GDP gain from reducing barriers to cross-border banking, driven by:
  - Better allocation of savings across countries and companies.
  - Businesses being able to reach potential lenders, lowering funding costs.
- Close to 3 percent long-term EU GDP gain when banking reforms are complemented by:
  - Easing legal and tax-related impediments to cross-border venture capital investment.
  - Expanding long-term risk capital through pension and insurance reforms.
- At least 3 percent aggregate gain attributed to integrating and deepening banking and venture capital markets.
- Double-digit long-term GDP gains possible when financial reforms are combined with measures that improve business dynamism and innovation.

### Policy recommendations (three fronts)
- Press ahead on the banking union:
  - Reduce regulatory and institutional differences.
  - Harmonize insolvency frameworks.
  - Complete the financial safety net, including through a European deposit insurance scheme, to reduce adverse sovereign–bank feedback loops and support economic and financial resilience.
- Strengthen venture capital and equity financing:
  - Expand the pool of long-term risk capital.
  - Ease cross-border investment frictions for venture capital.
- Improve the business environment so newly available capital finds more attractive projects to finance:
  - Improve the business environment for starting and growing new businesses.
  - Invest in skills and support research and development to raise the pool of projects with high potential returns.

### Interaction of finance and innovation
- Innovation and finance go together: reforms that create more promising companies will go further when Europe’s savings can flow freely to fund them.
- Cross-border investments (example cited: French startup Mistral AI’s financing round led by ASML) remain uncommon across Europe, illustrating the limits on scaling promising projects when savings are compartmentalized.

*Luis Brandão-Marques, Damien Capelle, Diego Cerdeiro, Rui C. Mano; Chart of the Week, July 14, 2026 — IMF Staff Discussion Note team also comprises Adriano Fernandes, Alexandra Fotiou, Yueling Huang, Claire Li, Alberto Musso, Ese Onokpasa, Richard Varghese, and Maryam Vaziri.*

---

## Content in this bundle

- **Staff Discussion Note**
  - [Staff Discussion Note (Markdown version)](/-/media/files/publications/sdn/2026/english/sdnea2026002.pdf.md){rel="alternate" type="text/markdown"}
  - [Staff Discussion Note (PDF)](/-/media/files/publications/sdn/2026/english/sdnea2026002.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/blogs/articles/2026/07/14/financial-market-reforms-could-lift-europes-growth_