The Great Reset BY FLORIANA CERNIGLIA, FRANCESCO SARACENO AND ANDREW WATT

PART I
OUTLOOK

1. Public Investment in the Pandemic—
Europe at a Glance 
A. Brasili, A. Kolev, D. Revoltella, and J. Schanz

Introduction
Wide investment gaps have opened in Europe after a long period of subdued 
government investment and increasingly ambitious targets for the digital and green 
economic transition. By 2016, EU government investment had declined to a twenty-five-

year low of 2.8% of GDP. Since then, it has recovered only marginally. Without large 
public and private investments, the economy cannot reap the benefits of digitalisation 
nor adapt to climate change. According to the EU Commission, about €350 bn of 
additional investment is needed annually during 2021–30 relative to the previous 
decade if 2030 climate and energy targets are to be met.
 Survey data also confirm 
sizable investment gaps. In the European Investment Bank’s (EIB) Municipality Survey, 
two thirds of respondents see gaps in climate change mitigation and adaptation, 47% 
in digitalisation, and 46% in transport.
As the pandemic adds to existing challenges, it also offers the opportunity to 
rebuild better. To accompany the recovery, member states’ Stability and Convergence 
Programmes and the EU’s Recovery and Resilience Facility emphasise public 
investment. The slogan is to “rebuild better” with investments that support 
digitalisation and more sustainable production. If well-managed, such an emphasis 
on public investment would be a welcome novelty. It benefits from the monetary 
policy environment, in which central banks lowered refinancing costs by setting 
ultra-low interest rates and by purchasing large amounts of government bonds and 
other financial assets. However, history tells us that such a window of opportunity, 
created by the need and ability to spend, might close fast. Hence the urgency to make 
best use of the available resources to strengthen economic growth sustainably.
To be successful, investment programmes need to be properly operationalised, 
monitored, and evaluated. In the current environment, access to finance to fund 

The Great Reset BY FLORIANA CERNIGLIA, FRANCESCO SARACENO AND ANDREW WATT