“EU budget needs fundamental overhaul” - According to the IMF, a unified market is needed to cope with shocks
The European Union needs to spend more on public goods to boost productivity and growth, according to the International Monetary Fund. The IMF noted that “the scale and nature of the challenges require a fundamental review.” The EU needs to increase its spending on public goods from 0.4% of gross national income to at least 0.9%. Without cuts to existing programs, this would increase the bloc’s multiannual spending to 1.7% of gross national income in the period from 2028 to 2034. The multiannual spending framework is the EU’s long-term budget that usually covers a seven-year period, with the current plan running until 2027.
The Fund noted that Europe is facing a number of challenges, notably an aging population, the climate crisis and declining productivity. Rising geopolitical tensions and unpredictable US policies are further clouding the region's outlook.
One way to address these issues is by boosting growth and improving the single market, the IMF explains. While goods, services, capital and people can in theory move freely between member states, barriers still exist.
"The EU's single market remains far from complete. For example, it can take up to 6 months for an EU worker who moves to another country in the bloc to be legally employed there. Large differences in bankruptcy procedures discourage cross-border investment, while national stock markets pose major problems in allocating capital across the continent. This fragmentation increases costs and harms business dynamism and growth," the report says.
The IMF expects growth of 0.8% and 1.2% in 2025 and 2026, a decrease of 0.2 percentage points in both years compared to its January forecast. According to the data, inflation is slowing and approaching targets, driven by lower energy prices and tepid demand.
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