Lifting Binding Constraints on Growth in Europe: Actionable Priorities to Deepen the Single Market
IMF Working Papers, June 13, 2025
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- Lifting Binding Constraints on Growth in Europe: Actionable Priorities to Deepen the Single Market
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Bibliographic details
- Authors: 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
- Published: June 13, 2025
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229010986.001
Key findings
- 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
- fragmented energy market
- A small set of actionable steps to deepen integration could deliver a meaningful initial payoff:
- increasing the EU GDP level relative to baseline by around 3 percent over 10 years
- this is sizable given that the EU potential growth is projected to be just above 1 percent annually over this horizon
Action areas and policy recommendations
- Lowering regulatory fragmentation to ease cross-border activity and scale-up by firms
- Advancing the capital markets union to improve financial intermediation and cross-border financing
- Enhancing labor mobility within the EU to alleviate labor market frictions that constrain scaling and innovation
- Integrating the EU energy market to reduce fragmentation and support cross-border investment and competitiveness
Analytical perspective and scope
- Focuses on a cross-border perspective to identify constraints to firm investment, innovation, and scaling within the single market
- Emphasizes actionable priorities for deeper single market integration rather than a comprehensive reform package
Illustrative scenarios and quantitative emphasis
- Through illustrative scenarios, the paper shows that targeted measures along the four action areas could:
- raise the EU GDP level relative to baseline by around 3 percent over 10 years
- Contextual numeric point:
- EU potential growth is projected to be just above 1 percent annually over this horizon
IMF Working Paper No. 2025/113 (June 13, 2025).
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- Working Paper