## Deepening the European Single Market

_IMF News, June 19, 2025_

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**Canonical URL:** [Deepening the European Single Market](https://www.imf.org/en/news/articles/2025/06/19/sp061925-deepening-the-european-single-market)

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## Bibliographic details
- Published: June 19, 2025

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### Overview and central message
- IMF Managing Director Kristalina Georgieva called for bold action to deepen Europe’s single market, strengthen national reforms, and scale up EU-level investment.
- Two opening messages:
  - Europe has defined a strategic agenda with single market integration at its core—summarized in a three-point approach: single market, national reforms, and the EU budget—where each piece’s strength depends on the others.
  - Europe possesses the necessary assets—“the savings, the skills, and the technology”—and policymakers must mobilize them nationally and collectively to create high-value jobs, innovation, and cutting-edge products and services.

### Evidence of single market benefits and current shortfalls
- Historical impact of EU enlargement: GDP per capita in the new member states is 30 percent higher than it would have been without EU accession; for the “old” member states, GDP per capita today is some 10 percent higher, on average, thanks to enlargement.
- Internal trade intensity:
  - For every 100 euros of value added produced in EU countries, only around 20 euros of goods are flowing back and forth between EU countries.
  - For the United States, for every 100 dollars of value added produced, 45 dollars of goods are crossing state borders.
- Firm size and labor:
  - One in five EU workers works at a company with fewer than ten employees—twice the share seen in the United States.
- Administrative friction:
  - It can take up to six months for a worker relocating within the EU to become legally employable in another member country.
- Energy market dispersion:
  - Dispersion of prices across European electricity hubs is some three times higher than in the United States.
- Aggregate gains from reforms:
  - IMF simulations suggest implementing a subset of proposed measures could uplift overall EU activity on the order of about 3 percent over ten years.

### Identified constraints on growth
- Fragmented regulation and regulatory overload.
- Obstacles to financial integration and a bank-centric financial system that channels savings insufficiently to high-risk, high-reward investments.
- Labor market rigidities and slow cross-border recognition of qualifications.
- Gaps in the energy market, high and volatile energy costs.
- Parochial interests and political resistance that raise implementation challenges.

### Three-point strategic agenda
- One: Remove internal barriers to deepen the single market and let firms grow.
- Two: Advance national reforms that align with and amplify EU-level initiatives.
- Three: Use the EU budget strategically to coordinate efforts and invest in European public goods.

### Single market — four top priorities and policy recommendations
- Priority one: Create a predictable regulatory environment to help firms grow.
  - Support for the “28th regime”—a voluntary EU-wide corporate charter—as a pragmatic means to reduce legal complexity and compliance costs for cross-border firms.
  - Recommendation: design a simple set of rules covering key phases of the corporate life cycle to enable a European Firm to opt in and gain legal certainty while allowing sensible national variations.
  - Reference point: the Bank Recovery and Resolution Directive as an earlier EU-level carveout from national frameworks.
- Priority two: Put European savings to work.
  - Capital markets union must deepen and integrate to channel savings to innovative, high-growth firms and expand venture capital.
  - Pair a 28th regime with better investor access to corporate information to enable market discipline.
  - Encourage banks to embrace more prudent risk taking to support growth and internal capital generation.
  - Reduce reluctance to accommodate cross-border bank mergers and accelerate banking union completion; avoid blocking mergers on non-economic grounds.
- Priority three: Improve labor mobility and access to talent.
  - Speed up work authorizations and streamline cross-border recognition of professional qualifications to ease skills mismatches and allow firms to hire appropriate talent.
- Priority four: Build an interconnected and affordable energy market.
  - Develop an energy blueprint that includes better interconnectors between national electricity grids.
  - Lower high and volatile energy costs to spur corporate investment and expansion.

### National reforms — complementarities with EU-level action
- Capital markets union benefits require streamlined national permitting processes to enable startups to scale.
- EU-wide talent mobility initiatives need complementary national labor market reforms to be effective.
- EU investment in cross-border infrastructure must be paired with actions to address national infrastructure gaps.
- National reforms are vital to unlock the full impact of EU-level initiatives.

### Using the EU budget strategically
- Recommendation: double EU budget expenditures on European public goods—electricity grids, digitalization, defense, and R&D—from 0.4 percent of EU gross national income to at least 0.9 percent.
- Rationale: frontload investments, spread costs over time, increase supply of safe assets, and close investment gaps.
- Efficiency gains: EU-level investments in energy infrastructure can achieve savings of up to 7 percent relative to duplicative national efforts.
- Governance tools: expand performance-linked disbursements to member states to incentivize national reforms and investments and to align national actions with shared EU priorities (cited example: the Recovery and Resilience Facility).

### Implementation challenges and political economy
- Implementation will face political hurdles and vested interests; success requires sustained political leadership, public communication of reform benefits, and technical persistence.
- Regulators should be encouraged to consider cross-border connections and externalities rather than purely national or legalistic mindsets.
- Advice to the European Commission: prioritize speed—“not let the perfect be the enemy of the good”—and let economic rationale drive legislative work.

### Concluding imperative
- Europe is currently a “lifestyle superpower” but must become a “productivity superpower” by releasing entrepreneurial energy through single market deepening, aligned national reforms, and strategic EU budget use.
- Quoted characterization from a Eurogroup Working Group: the internal market is “a treasure in the EU’s own hand, which now needs to be unwrapped.”

*Remarks by IMF Managing Director Kristalina Georgieva at the Eurogroup Meeting on Enhancing Competitiveness and Addressing Internal Barriers in the Single Market - Luxembourg, June 19, 2025.*

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## References

- [https://www.imf.org/en/about/senior-officials/bios/kristalina-georgieva](https://www.imf.org/en/about/senior-officials/bios/kristalina-georgieva)
- [United States and the IMF](http://www.imf.org/external/country/USA/index.htm)
- [Speeches](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [new paper](https://www.imf.org/en/Publications/WP/Issues/2025/06/13/Lifting-Binding-Constraints-on-Growth-in-Europe-Actionable-Priorities-to-Deepen-the-Single-567610)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2025/06/19/sp061925-deepening-the-european-single-market_