Europe’s growth paralysis: Is the bloc losing its edge as IMF warns of eurozone stagnation?

Europe is at the risk of slipping into stagnation unless urgent correct measures are taken, the International Monetary Fund (IMF) has warned.

The IMF’s warning has come at a time when Europe is facing a multi-front reckoning. While its economy is facing challenges from US tariffs, Russia has plunged the continent in the worst security crisis since the World War II with the invasion of Russia and broader shadow war on the continent.

The IMF in a report on Thursday said that Europe is at the risk of slipping into stagnation unless urgent efforts to tackle slowing growth, weak investment, and rising geopolitical threats, according to Bloomberg.

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However, there are some positives for Europe as the unemployment remains at a record low, inflation is in check, and financial systems remain stable.

IMF breaks down Europe’s growth crisis

Even though the IMF said Europe’s economy remained resilient, it flagged factors that are slowing growth.

The IMF said that the eurozone of Europe, the countries that have euro as the currency, needs a “decisive push” for a long-delayed deepening of the European Union’s (EU) single market and that fragmentation across borders is stifling innovation and corporate growth, as per Bloomberg.

The IMF said the situation is such that fragmentation and existing barriers within the EU are equivalent to a 44 per cent tariff on goods and 110 per cent on services.

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Removing these costs through such barriers via regulatory harmonisation, capital market reforms, and labour mobility could boost eurozone’s economy by 3 per cent over the next decade, as per the IMF.

Earlier this year, the EU forecast that the eurozone would grow at 1.2 per cent this year and the broader EU would grow at 1.4 per cent.