Europe needs a stronger focus on rebuilding competitiveness to restore growth and create new jobs, Antonio Borges, director for Europe of the International Monetary Fund (IMF), said on Friday.

"Clearly we need the financial system, and the banking sector in particular, to go back to its normal function of supporting economic activity and channeling savings to investment. All of this is now reverting back to normal, but at a pace that could be reversed if there were to be surprises," Borges told IMF Survey Magazine that is released Friday on IMF's website.

He held that in the euro zone, the key problem is that many of the countries facing difficulties currently are those that experienced almost an illusion of economic growth -- growth that could not be sustained. "A high level of spending was financed through foreign borrowing, which benefited some of their local firms, but it was not sustainable."

For countries that are not in the euro zone, deeper economic integration will yield benefits by encouraging a more efficient allocation of resources and using the broader European market to spur more growth, Borges added.

"On the one hand, as everybody knows, we still need to work through the sovereign debt crisis and address the systemic risks associated with it. On the other hand, there is, in parallel, a real revolution in terms of the new regulatory framework that is being implemented by the European Union," he said.