February 4, 2026Re-energizing Europe

February 4, 2026

Good morning to all.

Thank you, dear Ursula, for this special treat: to join your amazing team for a little while.

I'm here to talk about re-energizing Europe, why it matters, and how it can be done.

I loved being part of the Commission, and I love coming back home. Europe is a wonderful place-affluent, creative, fair. Home to the ancient cities of Athens and Rome but also to the makers of cutting-edge microchip machines and one in every two airliners worldwide.

Above all, it is home to the best invention of the 20th century: the EU's convergence engine, lifting communities, countries, and living standards all across the membership.

But Europe's convergence engine is stalling. It is held back by an incomplete single market and complacency about what it takes to compete in today's and tomorrow's world.

And this is happening while Europe faces huge external threats:

• To the East, Russia's invasion of Ukraine casts a dark shadow over Europe's most precious achievement-peace for its people.
• And to the West, the transatlantic alliance is dented, with potentially high costs. We estimate that just a trade breakdown, if it were to happen, could cost the EU some 0.3 percent of GDP this year and next, on top of half a percentage point already lost.

You have a hugely important job: to lead Europe to overcome the barriers that hold it back.

Here are the hard facts:

• Fact one: Europe's economy is shrinking in relative terms, and size matters. When I was called to Brussels in 2010, EU GDP was the same as the US's and a lot bigger than China's. But now-what the heck?-look at how this has changed: here we see GDP and, here, we see GDP per capita (Slide 1). Europe is still rich, but its relative wealth is eroding, and it's going to become harder and harder to sustain its cherished social model.
• Fact two: Europe used to lead in productivity, but now it trails behind, and productivity matters-indeed it is the core underlying challenge. On the left, productivity of the US and EU tech sectors; on the right, the same for non-tech (Slide 2). The gap keeps growing.
• Fact three: Europe's firms used to dominate, but now they are less competitive and less able to grow, and corporate scale matters. Here is market capitalization for firms born in the last 50 years-look at how the US dwarfs the EU, especially in high-tech (Slide 3).

Europe has plenty of startups, but they struggle to grow-and this drives many European innovators to foreign shores.

For its people and its standing in the world, Europe needs to grow more. And to do that, dynamically and durably, it needs to set itself one core objective: much faster productivity growth.

OK-but how?

By pursuing with higher determination two major efforts:

• One, structural reforms at the national level, focused on increasing flexibility in local product and labor markets; and
• Two, completion of the single market, focused on the EU's four freedoms-the freedom of movement of goods, of services, of labor, of capital.

You and your teams have been pushing on both fronts-please push even harder.

We know over-regulation and clumsy regulation impose large costs on Europe:

• In intra-EU cross-border trade, regulatory barriers are two-to-three times higher than for interstate trade in the US.
• For cross-border labor movement, regulatory barriers and other factors make moving about eight times more costly than between the 50 US states.
• In energy, limited grid linkages and resource endowments coupled with geopolitical factors leave Europe with an average energy price double that in the US, with high volatility and variation.
• In finance, a banking system split into 27 national pieces, paired with small and fragmented capital markets, leaves Europe's 60-trillion-euro financial system handling what I call "lazy money"-too afraid to prudently take sufficient risks to support growth.

You can drive solutions to these challenges.

Working with member states, you should lead a deep "regulatory housecleaning" to sweep away the legacy rules that do more harm than good-harm that includes disproportionately burdening small firms, as we can see here (Slide 4).

And as you do this, you must push back hard against uneven enforcement and "gold plating" as member states add requirements going far beyond the minimum mandated by EU Directives.

With the single market running on 27 national legal regimes for firms, we at the IMF strongly support your determination to bring to life a 28th regime-to allow firms to opt into a single, pan-EU legal framework covering company law and insolvency, broadening over time.

We urge swift action, and we urge it be done by EU Regulation, not Directive-Europe does not need a 28th regime with 27 versions!

For labor market mobility, in turn, many steps are needed. Key among them: mutual recognition of qualifications, social security portability, and flexible housing markets. Europe cannot thrive without a mobile workforce.

Moving to energy, we see a strategic vulnerability that touches every factory, data center, and household across the EU-a vulnerability that cuts directly to competitiveness and resilience. Integration requires eliminating national subsidies, building interconnectors, aligning grid access and tariffs, and fast-tracking permitting for renewables and storage.

All of this needs to be integrated into one European blueprint for electricity generation, transmission, and distribution.

Meeting Europe's strategic needs-from energy security to defense-requires joint action. And that action, in our view, should be supported by joint funding. We at the IMF see a case for more EU debt issuance in key areas, to efficiently drive forward European public goods delivery.

Despite high public debt ratios in several member states-where we urge fiscal consolidation-the EU's aggregate public debt load remains below that of China and the US (Slide 5). So there is some room; use it wisely, strategically. But use it.

At the same time, Europe must drive forward its savings and investment union to channel risk capital-not just from Europe's vast pool of savings but from global markets-to its most innovative firms, delivering cross-border private risk sharing, higher returns, and faster growth.

I ask you, please look at the number of exchanges, trading platforms, and clearinghouses in the EU relative to the US (Slide 6). Ridiculous! We urge that the political emphasis shift from national to European financial markets.

We know that pan-European finance is tied up in a knot of national redlines. Countries fear imported financial and fiscal risks, defend local banking cooperatives, protect their positions in investment fund registration, and so much more.

But Europe needs one unified financial system, not 27 silos. Your recent package for the savings and investment union sets the right direction of travel. Yet getting to the destination will require much more ambition, collectively, and a will to confront vested interests and inertia.

And, speaking as a former Vice President for the EU Budget, let me add that performance-based budgeting under the Multiannual Financial Framework can play a strongly supportive role in helping align national and shared European interests.

Finally, keep trading, keep being a voice for rules-based trade! I salute your efforts to put Europe's negotiating power to good use crafting trade deals with key partners. I celebrate your recent deals with Mercosur and India. More please!

And should anyone doubt the benefits of the common trade policy, one more animation. Here we see countries' market size and openness. Note the US and China both sit in the bottom-right corner (Slide 7).

Now please watch carefully. See how 27 EU member states-the little blue dots-move down and to the right to merge as one large, powerful dot: this is the EU, sitting with the other "big boys." In this simple graphic we can see how the EU's common trade policy delivers strength.

The case for joint action-urgent, determined action-is unambiguous.

A good moment for a spot of happy news: IMF research shows that, if national and single-market reforms were to reduce intra-EU frictions to levels comparable with those in the US, EU productivity could rise by 20 percent, materially narrowing the gap to the US.

And looking beyond the models, we see ample real-world evidence that reforms pay off: Just look at Cyprus, Greece, Ireland, Portugal, and Spain.

Let me end with three practical suggestions:

• First, make the single market your single-minded obsession. Appoint a single market "czar" with full authority and political credibility to drive forward implementation in both the European Council and the Commission. You all have separate areas of duty, yet they all need to come together to form a united whole. The EU's unified approach to Brexit shows it can be done.
• Second, set a hard deadline and plan backward from it with discipline and resolve. Whether it is January 2028 or some other feasible but demanding date, Europe needs a deadline that signals this single-minded focus on the single market and ironclad will to get the job done.
• Third, transform Europe's image as a "regulatory superpower" that suffocates business into one that adapts swiftly to a rapidly changing world and sweeps away obsolete rules and red tape. Use AI to help you with your regulatory deep-cleaning-why not? Transform the EU into a new global leader in streamlining and modernization.

To close, I want to leave you with a question, rhetorical yet serious: what will Europe's next global success on the scale of Airbus be? A cutting-edge venture in AI perhaps? In defense? In energy? Unleash the single market and I am confident we will get our answer! Thank you!