International Monetary Fund (IMF) Managing Director Kristalina Georgieva issued a stern warning at the Davos Forum, stating unequivocally that Europe must "wake up" and proposing four core strategies to rescue its declining competitiveness. Facing tariff threats from the United States and geopolitical pressures, the IMF urged European leaders to act immediately, using deep internal reforms to reshape its economic influence on the global stage.
At this flagship World Economic Forum meeting, the cloud of US-Europe trade conflict once again loomed over the markets. As US President Donald Trump threatened to impose tariffs on eight European allies, including France and Germany, along with specific sanctions targeting French wine, tensions across the Atlantic escalated sharply. While Georgieva called for calm and pragmatism from all sides, she also frankly admitted that Europe is currently failing to effectively leverage its economic strength to gain advantages in geopolitical maneuvers.
Georgieva pointed out that Europe has clearly "fallen behind" in productivity growth and in nurturing homegrown corporate giants. She emphasized that although European policymakers understand the crux of the problem, their actions have been sluggish. To this end, she prescribed a specific set of remedies aimed at unlocking Europe's suppressed economic potential by integrating internal resources and optimizing market structures.
Urgent Appeal Under the Cloud of Trade Conflict Currently, trade friction between the US and Europe is at a sensitive juncture. Trump recently announced that if an agreement for Washington to "purchase" Greenland cannot be reached, a 10% tariff will be imposed on Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands, and Finland starting February 1, rising to 25% on June 1. Furthermore, reportedly because French President Emmanuel Macron was unwilling to join his "peace committee" on Gaza, Trump further threatened on Tuesday to impose a 200% tariff on French wine and champagne.
Against this backdrop, Georgieva stated in an interview with CNBC that the IMF has repeatedly called on Europe to improve its single market and focus on domestic competitiveness. "Europe has fallen behind on productivity. Europe has fallen behind on making small companies into big ones, and that has to change," she said.
Regarding the prospects for trade friction, Georgieva urged officials and market observers to "maintain a cool-headed attitude," noting that countries might carefully weigh the costs and benefits of trade tools. She mentioned that the IMF slightly upgraded its global economic outlook on Monday, forecasting 3.3% growth this year and 3.2% in 2027, partly because the impact of tariffs has not been as severe as anticipated.
A tit-for-tat trade conflict has not occurred, and it would be very good if we can keep it that way.
She added that the recession many predicted last year due to tariffs did not materialize because "economic rationality prevailed."
Four Strategies to Revive Competitiveness Georgieva clearly outlined four key measures that European leaders must implement to restore the continent's economic vitality:
Complete the Capital Markets Union: Aims to make European capital work for Europe. Georgieva noted that currently, €300 billion (approximately $351.75 billion) in European savings flows to the United States instead of being invested locally.
Complete the Energy Union: Addresses the fragmentation of energy systems. She stressed, "It is impossible to compete with 27 different energy systems."
Remove Barriers to Labor Mobility: Simplifies the process for employers to access labor across the EU. She cited the example that obstacles still exist for working cross-border from Germany to France.
Increase Investment in R&D and Innovation: Enhances competitiveness in the technology sector.
"They know [what needs to be done], but they are a little slow in acting," Georgieva said bluntly when assessing European policymakers. "Europeans, if you are watching, please wake up."
Europe Seeks "New Independence" Facing pressure from the US, European leadership is responding with strong statements and countermeasure plans. In response to Trump's latest tariff threats, European leaders called them "unacceptable," and France is pushing the EU to deploy its most powerful economic countermeasure tool—the "anti-coercion instrument."
European Commission President Ursula von der Leyen stated in a keynote speech on Tuesday that Europe can no longer rely on the old world order and must become independent amidst persistent geopolitical shocks.
"If this change is permanent, then Europe, too, must make a permanent change... Now is the moment to seize the opportunity and build a new, independent Europe."
Von der Leyen argued that indulging in nostalgia for the old order is unhelpful and said this "new Europe" is emerging.
Despite the tense situation, diplomatic engagement continues. Trump stated on Tuesday morning that he had agreed to meet with European officials in Davos to discuss his intentions regarding Greenland.