The worst of Europe's debt crisis is over, but many more challenges remain, according to the chief economist with renowned economic research firm IHS. "I think in one sense Europe is back," Nariman Behravesh said during the ongoing World Economic Forum (WEF) 2014 Annual Meeting, which opened Wednesday at this Swiss ski resort. "The worst of the crisis is behind us. But it's clear that there are many more challenges ahead," he said. Behravesh's view is shared by others at the forum, at the start of which business and financial leaders warned the EU economy would not return to stable growth unless the bloc tackled its social issues, such as high unemployment. The average unemployment rate in the EU hit a record high of 12.1 per cent late last year. Behravesh suggested ways the debt-ridden European nations might escape their current dilemma. "One of them is to liberalize the labor markets, to reduce wage costs and non-wage labor costs," he said. Europe, especially southern Europe, had pressed itself out of the labor market, which needed a correction, according to him. "Another thing they can do in the long run is to reduce some of their tax rates," he said. For emerging markets, especially those growing slowly, Behravesh advised them to take structural reforms to improve productivity growth and competitiveness. "As they reform in the early years, they'll provide some stimulus that would offset the weakness, but then take away the stimulus as the positive benefits of the reform come into place. So it's a timing issue more than anything else," he said.