Europe faces multiple, simultaneous pressures on GDP growth at a time when scope to stimulate growth from public funds is limited by high debt and deficit levels. Just to maintain past GDP growth levels, Europe needs to accelerate productivity growth by around 30 per cent over historic levels, or opt to work more. Productivity growth would have to grow by an even greater margin if Europe is to close the GDP gap with the United States that prevails today.
In this challenging context, the McKinsey Global Institute (MGI), McKinsey & Company’s business and economics research arm, has examined what Europe needs to do to overcome the economic headwinds it faces in the years ahead. Beyond austerity: A path to economic growth and renewal in Europe looks in detail at labor market reform, Europe’s productivity imperative, and ways in which some European companies and governments are leveraging new growth and innovation opportunities.
Despite today’s pressures, MGI paints a fundamentally optimistic picture, making the case that Europe can regain its pre-crisis growth trajectory, and maintain it, by applying best practices that have already demonstrably worked within the region.
The report sets out a comprehensive agenda for European structural reform on the basis of analysis of existing best practice within the region, proposing reforms in three areas in parallel: pursuing further labor market reform, boosting productivity in service sectors, and pursing policies that enable the private sector to maximize opportunities in emerging markets, cleantech, and new innovative sectors.