Europe’s Economic Future: Europe Can Grow Faster

Europe’s GDP growth is gathering pace as a consequence of both sound policies and external factors. Forecasts are being revised upwards even though they keep potential growth estimates low. This article argues that there are good reasons to expect a scenario with higher medium term growth, where reforms are accelerated, and increases in investment, productivity, and labor participation offset the decline in population and temporary legacies from the crisis. Several studies show the big growth gains from this scenario. Moreover, experience in various European countries confirms that it is feasible. Reforms are underpinned by the current accommodative monetary policy and by a responsible, but more flexible, fiscal policy stance that smoothens adjustment, improves fairness, and supports demand in countries with fiscal space. Successes in growth-enhancing reforms, better awareness of their potential net benefits, and more attention to prevent or reduce negative distributional effects, may restore trust and garner citizens’ support for this growth model. They may also help overcome the obstacles to further integration that should make this model more robust.