IMF Working Papers

Europe’s National-Level Structural Reform Priorities

By Nina Budina, Oyun Erdene Adilbish, Diego A. Cerdeiro, Romain A Duval, Balázs Égert, Dmitriy Kovtun, Anh Thi Ngoc Nguyen, Augustus J Panton, Michelle Tejada

May 29, 2025

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Format: Chicago

Nina Budina, Oyun Erdene Adilbish, Diego A. Cerdeiro, Romain A Duval, Balázs Égert, Dmitriy Kovtun, Anh Thi Ngoc Nguyen, Augustus J Panton, and Michelle Tejada. "Europe’s National-Level Structural Reform Priorities", IMF Working Papers 2025, 104 (2025), accessed May 31, 2025, https://doi.org/10.5089/9798229011877.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Europe has a large and persistent per capita income gap with the United States. Deficiencies in total factor productivity, labor utilization, and capital intensity all play a role. While deeper intra-Europe integration is one key element towards closing these gaps, remaining structural domestic policy gaps with respect to most growth-friendly regulatory settings highlight the scope for complementary policy action at the national level. This paper compiles IMF staff’s structural policy priorities for European countries to lift output over the medium term, reviews key implementation challenges, and discusses complementarities with EU-level efforts. While addressing these domestic reform priorities will require overcoming long-standing political economy and—in some cases—technical obstacles to reform, successful implementation could entail sizeable medium-term gains of around 5, 7 and 9 percent for advanced European, Central Eastern and Southeastern European, and Western Balkan economies, respectively.

Subject: Capital markets, Financial markets, Human capital, Labor, Labor markets, Macrostructural analysis, Revenue performance assessment, Structural policies, Structural reforms, Tax gap

Keywords: Business regulations, Capital markets, Europe, Governance, Human capital, Human capital, Innovation, Labor markets, Labor markets, Political feasibility., Potential output, Product market reforms, Productivity, Structural policies, Structural reforms, Structural reforms, Tax gap

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