The International Monetary Fund (IMF) has raised concerns about the risk of stagnation in the Eurozone if urgent measures are not taken to address slowing growth, weak investment, and rising geopolitical threats. Trade tensions and low demand are stifling momentum, with risks heavily skewed to the downside, according to the Washington-based institution. The Eurozone is projected to grow by only 0.8% in 2025, despite historically low unemployment and inflation nearing its target. To boost productivity, the IMF urged decisive action to deepen the EU’s single market, which has long been delayed, noting that cross-border fragmentation is stifling innovation and business growth. Existing barriers within the EU impose costs on companies equivalent to a 44% tariff on goods and 110% on services. Harmonizing regulations, reforming capital markets, and enhancing labor mobility could boost GDP by 3% over a decade. With defense costs, aging populations, and climate change driving spending, countries with fiscal room should invest, though highly indebted member states face tough consolidation. The IMF also flagged risks for businesses with exposure to the U.S., which could weigh on bank balance sheets, though it deemed the European banking system adequately capitalized and liquid at present. The report also warned that non-bank financial entities could pose risks to financial stability.
— new from bloomberglinea.com
