How Can Europe Pay for Things That It Can't Afford?
IMF Notes, November 4, 2025
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- How Can Europe Pay for Things That It Can't Afford?
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Bibliographic details
- Published: November 4, 2025
- Series: IMF Notes
- DOI: https://doi.org/10.5089/9798229026680.068
Main findings and economic context
- Europe has managed major shocks, but growth is slowing.
- Export gains are reversing due to tariffs.
- Bond markets reflect rising risks.
- Interest rate cuts and increased fiscal spending, including defense, have not spurred private demand.
- The productivity gap with the US remains wide.
- Structural reforms are lagging.
- National priorities and slow EU decision-making hinder deeper integration of capital, labor, and product markets.
Debt projection and fiscal outlook
- Without stronger growth and fiscal consolidation, average European debt could reach 130 percent of GDP by 2040.
- Reaching that debt path would require significant fiscal adjustment.
Policy recommendations (near-term)
- Maintain price stability.
- Start fiscal consolidation.
- Keep trade open.
Subjects and keywords highlighted
- Subject: Fiscal consolidation, Fiscal policy, Fiscal stance, Labor, Pensions, Public debt
- Keywords: Baltics, debt simulation, Eastern Europe, Europe, Fiscal consolidation, Fiscal stance, greatest financing challenge, Pensions, policy action, policy package for Europe, reference debt
IMF Notes — November 4, 2025.
Content in this bundle
- How Can Europe Pay for Things That It Cannot Afford; IMF Notes No. 25/004; November 2025