A European Public Investment Outlook

PART I
—
OUTLOOK

1. Europe Needs More Public Investment 
Rocco Luigi Bubbico,
Philipp-Bastian Brutscher
and Debora Revoltella
Public investment went through a prolonged contractionary phase over the past 
decade. Between 2008 and 2016 public investment in the European Union declined 
from 3.4% of GDP to 2.7%. Despite a slight rebound in 2017 and 2018, public investment 
still stands at only 2.9% of GDP, 15% below its pre-crisis levels.
Fiscal consolidation pressure was at the core of the decline in public investment. 
This is witnessed by particularly strong falls in public investment in countries that 
experienced a strong pressure to tighten their budgets. The negative efect of fscal 
consolidation was in many cases amplifed by a re-prioritization of public outlays 
away from investment towards current expenditures. 
Infrastructure investment was disproportionately afected by the decline 
in public investment. The European Investment Bank (EIB) estimates show that 
overall infrastructure investment declined by about 25% between 2008 and 2016; with 
the government sector accounting for the lion’s share of this fall. From a sectorial 
perspective, investment in transport and education infrastructure experienced the 
strongest decline.
The fall in government infrastructure investment does not refect a saturation 
efect. About one in three municipalities in the EU report that infrastructure 
investment activities in the last fve years were below needs. In addition, the fall in 
infrastructure investment activities was particularly pronounced in regions with a 
poor infrastructure quality to start with. Moreover, construction of new infrastructure 
seems to continue producing large positive economic spillover efects (EIB 2018). 
Overall, using a bottom-up approach, the annual infrastructure investment gap is 
estimated to be about €155 bn.
Sound project selection, preparation and implementation are key to reversing the 
negative trend in investment activities in the EU, in addition to overcoming funding 
constraints. To ensure the efcient use of available funds, sound infrastructure 

A European Public Investment Outlook