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Symposium 2015

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

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 h ...

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.


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.