Brons, Μ., Kalantzis, F., Maincent, E. & Arnoldus, P. (2014) “Infrastructure in the EU: Developments and Impact on Growth“, European Economy – Occasional Papers–No. 203, European Commission Publications, December 2014: Brussels.
Today, investment needs are high in areas such as research, innovation and ICT which are important drivers of growth and competitiveness. However, there are also arguments to suggest that Europe should invest in energy and transport infrastructure. Energy and transport infrastructure play a vital role in the integration and efficiency of the EU’s internal market. Moreover, they are central to the EU’s strategic transformation towards a low-carbon economy over the medium-long run. Investment in cross-border energy infrastructure is also needed to improve the EU’s energy security and the functioning of the energy market. The EU’s energy and transport infrastructure investment needs will remain high in the near future.
Increased investment in infrastructure can have a positive impact on growth, provided it is well targeted. Evidence suggests that Member States in which the stock of infrastructure is low, or has suffered from underinvestment, could benefit from higher infrastructure investment. To meet the EU’s policy goals, considerable investment will be needed in energy infrastructure but such investment decisions are largely in the hands of the private sector and need to take place in well-designed market.. This paper by no means provides a blanket justification for undiscriminating public investment in infrastructure. Targeted public infrastructure investment can be very valuable in some cases but must take into account macroeconomic conditions, including fiscal constraints and the need to increase private financing.
Relevant posts:
- Gros, D. (2014) “Investment as the key to recovery in the euro area?“, Economic Policy, CEPS Policy Briefs Νο. 34, 18 November.
- Smith, Y. (2014) “Germany and the European Commission’s €315 Billion Infrastructure “New Deal” is Yet More Smoke and Mirrors“, Naked Capitalism Blog, 26 November.
- Coulter, S. (2013) “Investing in Europe’s physical and knowledge infrastructure“, Policy Network, 21 October.