Greening Europe 2022 European Public Investment Outlook Edited by Floriana Cerniglia and Francesco Saraceno

PART I: 
OUTLOOK

1. Challenges for Public Investment 
in the EU: 
The Role of Policy, Energy Security and Climate Transition
Andrea Brasili, Atanas Kolev, Debora Revoltella, and Jochen Schanz

Introduction
The war in Ukraine poses new challenges for public investment in the EU. We describe 
these challenges and the expected evolution of public investment in the first section 
of this chapter. By raising uncertainty and increasing energy and other input costs, 
the war depresses the macroeconomic environment. Concerns about high levels of 
public debt have re-emerged for some countries and tightened financial conditions 
in particular in Southern Europe. New demands arise for current expenditure, such 
as to contain the impact of higher energy costs. This might detract governments from 
investment spending. Public investment itself is forced to move away from investments 
that increase average growth, and towards those that primarily increase resilience to 
future shocks, such as investments in energy security and military equipment. Despite 
these challenges, public investment is to continue to increase over the coming years, 
supported by substantial EU funds. The challenge remains the effective deployment 
of those funds. 
A key area for public investment since the start of the war in Ukraine is improving 
the security of energy supply. In the second part of this chapter, we describe the 
challenges that member states face and the EU-level response, the REPowerEU 
programme. Rapidly reducing the dependence on Russian fossil fuels is a tall order 
that can be addressed only with co-ordinated policies and efforts both at the national 
and EU-wide levels. The cost may not be overwhelming, but it comes on top of large 
investment needs related to the transition to a net-zero carbon economy. Solidarity 
within the European Union is a key ingredient for successfully overcoming these 
challenges. 
The current challenges for public investment may well persist for some time. They 
should not distract from the long-term goal of setting the EU economy on a greener

Greening Europe Greening Europe 2022 European Public Investment Outlook Edited by Floriana Cerniglia and Francesco Saraceno