The EU economies, including those most heavily hit by the crisis, appear to be turning the corner after many years of low and uneven growth. However, low productivity growth, while partly due to the recession, has deep structural causes: high tax burdens, rigid labour laws, barriers to competition, and slow innovation dynamics. Inequality has grown since the 1980s, and high unemployment is hurting the most vulnerable, weakening public support for the EU project. Significant structural reforms have been implemented in some European countries in response to the crisis, but deeper reforms in more countries would raise growth on a sustainable basis. EU institutional and regulatory reforms, complemented by national policies, can enhance inclusive and sustainable growth. The EU 2020 strategy, the European Semester and the Horizon 2020 initiative have been designed to support growth and innovation, but have not succeeded noticeably so far. National ownership has been weak, significant hurdles remain for innovative firms, and regulatory costs of both EU and national origin are large. Social, employment and environmental impacts of reforms are not systematically assessed and spill-overs are not fully incorporated in the European Semester process and in adjustment programmes.