European economies must grow faster or borrow less to keep debt on a sustainable path, the International Monetary Fund (IMF) said on Friday, warning that doing nothing was not an option.
“Around three-quarters of European countries will need a combination of structural reforms, to increase growth and ease spending pressures, together with deficit-reducing consolidation measures of about 3.5 percent of GDP on average, over the medium term, to keep debt sustainable. About one-quarter of European countries would need to consolidate by more than 5 percent of GDP, to keep public debt sustainable, more than what has generally proved feasible in the past, leaving no option but to rethink the scope of government activity, and increase the role of the private sector, to fill the gap,” — the IMF warns.
The biggest obstacle to faster economic growth in Europe was weak productivity. IMF is urging governments to remove barriers within the European Union’s internal market and invest in innovation and the scaling up of businesses.
“Although some reform efforts are underway, a still-incomplete European Union single market and national barriers make it harder for firms to adjust, scale up, and access a larger market,” the Fund says.
