Infrastructure in the EU: Developments and Impact on Growth

Abstract:
Today, investment needs are high in areas such as research, innovation and ICT which are important drivers of growth and competitiveness. However, there are also arguments to suggest that Europe should invest in energy and transport infrastructure. Energy and transport infrastructure play a vital role in the integration and efficiency of the EU’s internal market. Moreover, they are central to the EU’s strategic transformation towards a low-carbon economy over the medium-long run. Investment in cross-border energy infrastructure is also needed to improve the EU’s energy security and the functioning of the energy market. The EU’s energy and transport infrastructure investment needs will remain high in the near future.
Increased investment in infrastructure can have a positive impact on growth, provided it is well targeted. Evidence suggests that Member States in which the stock of infrastructure is low, or has suffered from underinvestment, could benefit from higher infrastructure investment. To meet the EU’s policy goals, considerable investment will be needed in energy infrastructure but such investment decisions are largely in the hands of the private sector and need to take place in well-designed market.. This paper by no means provides a blanket justification for undiscriminating public investment in infrastructure. Targeted public infrastructure investment can be very valuable in some cases but must take into account macroeconomic conditions, including fiscal constraints and the need to increase private financing.

European Commission: DG Economic and Financial Affairs: European Economy: Occasional Paper No. 203, December 2014: Infrastructure in the EU: Developments and Impact on Growth http://ec.europa.eu/economy_finance/publications/occasional_paper/2014/op203_en.htm

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