You are here: Home Knowledge Base A New Deal for Europe? - The Role of Investment for Prosperity in the Euro Area
Symposium 2015

A New Deal for Europe? - The Role of Investment for Prosperity in the Euro Area

The Challenge

Five years after the Great Recession the economic recovery in the euro area remains remarkably subdued. Labor markets have started to improve, but only very gradually. Above all, investment spending has barely reached the levels recorded ten years ago despite historically low interest rates across the euro area. Uncertainty surrounding the future direction of policies, even surrounding the composition of the currency area as a whole, has apparently led to a wait-and-see attitude of businesses when it comes to investing into future markets. The credit-fueled boom that preceded  the financial crisis left the economy with a debt overhang and severe mismatches in the production structures (i.e. a huge capital stock distortion) that makes the diagnosis of aggregate output gaps particularly difficult. Resolving these obstacles and creating a business-friendly institutional environment, thereby unleashing investment to build up a productive capital stock, is of utmost importance to put the European economies back on a sustainable growth path and to bring people back to work.

What can economic policy makers in the euro area do to bring back investment? What are the key institutional impediments that currently hold investors back? Is the call for higher investment spending more than a cover to justify additional deficit spending? How promising is the EU Commission's 300 billion euro Investment Plan in light of economic criteria for efficient resource allocation and the track record of EU Structural Funds for cohesion and structural policy? In the face of high public indebtedness, should private funds be raised to build up public infrastructure? What European governance structure is best suited to support investment into a productive capital stock? What are truly European collective goods that call for public funding? Is the principle of subsidiarity still the major pillar in the overall EU architecture? Is diversity in terms of national economic policies weakening or strengthening the euro area? The European Commission (EC), the European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD), national governments or commercial banks - who are the key players for promoting sustainable capital accumulation in the euro area?

This session is organized by Dominik Groll and Stefan Kooths, Kiel Institute for the World Economy. Please check out the tabs below for additional facts and information.

    Solutions

    Solution
    Symposium 2015

    The “Juncker Plan”: Involving Stakeholders

    The “Juncker Plan”: Involving Stakeholders

    The “Juncker Plan”: Involving Stakeholders

    Solution
    Symposium 2015

    Elements of a New Deal for Europe

    Elements of a New Deal for Europe

    Elements of a New Deal for Europe

    Background Paper

    Background Paper
    Symposium 2015

    A New Deal for Europe? - The Role of Investment for Prosperity in the Euro Area

    Polity, Academia, Business, Civil Society

    Virtual Library

    Virtual Library File
    Symposium 2015

    Why does the EU need an investment plan?

    This factsheet presents the European Commission's views on the current investment situation in the EU, why the lack of investment is a problem, and why investment is not taking off, and proposes the I ...

    This factsheet presents the European Commission's views on the current investment situation in the EU, why the lack of investment is a problem, and why investment is not taking off, and proposes the Investment Plan for Europe as a solution.

    Virtual Library File
    Symposium 2015

    Growth-enhancing expenditure in the EU cohesion spending from 2007 to 2013

    This study identifies the investment share of EU cohesion expenditures and its contribution to long-run growth between 2007 and 2013. The results indicate that substantial shares of EU cohesion spendi ...


    This study identifies the investment share of EU cohesion expenditures and its contribution to long-run growth between 2007 and 2013. The results indicate that substantial shares of EU cohesion spending cannot be reasonably regarded as growth-enhancing. The study identifies many non-growth related projects, which account for up to 60% of all cohesion spending in some regions.

    Virtual Library File
    Symposium 2015

    The Juncker Plan: From €21 to €315 billion, through smoke and mirros

    This commentary raises serious doubts that the proposed Juncker Plan is able to significantly increase investment in Europe. It argues that, given that no increase in the EU budget has been proposed, ...


    This commentary raises serious doubts that the proposed Juncker Plan is able to significantly increase investment in Europe. It argues that, given that no increase in the EU budget has been proposed, there can be no fresh money, only a rearrangement of existing budget lines. Likewise, there is no guarantee that private sector funding mobilized by the plan is not withdrawn from existing projects.

    Virtual Library File
    Symposium 2015

    The Achilles' heel of Juncker's investment plan - how will the right investment projects be selected?

    This analysis addresses the question of how the right investment projects will be selected in the context of the Juncker Plan. It argues that, given that the public funds are partly reallocated from t ...


    This analysis addresses the question of how the right investment projects will be selected in the context of the Juncker Plan. It argues that, given that the public funds are partly reallocated from those parts of the EU budget that are likely to have the highest expected social return, it is particularly difficult to identify additional investment projects with a higher expected return. Furthermore, the analysis highlights the importance of improving the framework conditions for investment to mobilize the envisaged private funds.

    Virtual Library File
    Symposium 2015

    An investment New Deal for Europe

    The authors propose a golden rule of the type adopted by the United Kingdom in the late 1990s. This golden rule requires countries to balance their budget over the business cycle, while financing publ ...


    The authors propose a golden rule of the type adopted by the United Kingdom in the late 1990s. This golden rule requires countries to balance their budget over the business cycle, while financing public capital accumulation through debt. This would focus efforts of public consolidation on less productive items of public spending.