The European Central Bank published a research article in its Economic Bulletin assessing Europe’s competitiveness through the lens of institutions, arguing that durable improvements depend on stronger productivity growth supported by structural reforms. The analysis links competitiveness to monetary policy by noting that sustainable long-term growth supports price stability and that reforms can improve the transmission of monetary policy across the euro area. The article attributes Europe’s widening productivity gap with the United States since the mid-1990s to weaker performance and weight of information and communication technology intensive industries, alongside lower firm dynamism, investment and innovation. It highlights constraints faced by young, high-growth firms and points to deeper and more integrated capital markets, including venture capital, as a complement to bank finance. On the institutional side, it emphasises regulatory complexity and fragmentation as barriers to entry and scaling, noting that the average time to resolve insolvency in the EU was around two years in 2019, about double that in the United States, and citing estimates that intra-European trade costs are equivalent to a 44% ad valorem tariff in manufacturing and up to 110% in services. The article also discusses governance and administrative capacity constraints, deteriorating educational outcomes in many EU countries, demographic headwinds, and infrastructure gaps, including limited fibre coverage (56% of EU households) and 5G coverage (81% of EU households), alongside fragmented telecoms markets and energy grids.
European Central Bank 2025-02-11
European Central Bank research urges structural reforms to raise European productivity and competitiveness
The European Central Bank's Economic Bulletin article assesses Europe's competitiveness, linking it to productivity growth and structural reforms. It attributes the productivity gap with the U.S. to weaker ICT industries, lower firm dynamism, and regulatory complexity. The article highlights the need for integrated capital markets and addresses barriers such as insolvency resolution times, trade costs, and infrastructure gaps.