Reflecting the emphasis on the services sector in the EU2020 strategy, this study highlights some key features of the services sector in the EU, including productivity and innovation in market services. One important observation is is that the services sector accounts for as much as threequarters of cross-country differences in economic growth across individual EU countries. Relatively fast-growing countries have also typically had above-average productivity growth. Even though productivity growth is generally lower in the services sector than in manufacturing, it nevertheless accounts for a large share of aggregate growth in output per employee because of its large size. Countries with high aggregate productivity growth also tend to have relatively higher productivity growth in services.