Report
A potential long-term EU approach to the financing of strategic objectives.
- Publishing date
- 24 January 2024
- Authors
- Maria DemertzisDavid PinkusNina Ruer
European Union’s ability to meet its long-term objectives – primarily managing the climate and digital transitions and achieving greater economic resilience – will depend crucially on how much it invests and what it invests in. For the two transitions, the EU member states collectively face a total annual investment gap of at least €481 billion up to 2030. Closing this gap, which is necessary if the EU is to achieve its strategic objectives, will rely on the efficient use of public resources and on mobilising private investment.
We discuss a potential long-term EU approach to the financing of strategic objectives. We define the notion of strategic investment in the context of the EU, set conditions for such investment to be (co-)financed at EU-level, and make recommendations about strategic investment in the EU beyond 2026. We argue that EU (co-)finance would be justified if there is demonstrable EU value added, for example in the form of cross-border efficiency gains. The term ‘strategic’ would help prioritise how the EU pursues its economic and security interests.
Examples that would qualify as European strategic investments include energy and connectivity infrastructure with cross-border impact, and facilities that boost innovation and promote economic security and resilience at the EU level.
We examine various past and present EU strategic project financing programmes. We also survey national programmes to identify best practices in public investment management. We make the following main policy recommendations:
- There is a lack of continuity in the way that the EU has pursued investments in that programmes have been finite and sporadic, with different sources of funding and overlapping objectives. We propose the creation of a dedicated and permanent fund for European Strategic Investments (ESIs), that can come in the first instance from a partly repurposed European budget (the Multiannual Financial Framework).
- We argue that the European Investment Bank (EIB) would be the natural manager of such a fund. The fund itself should employ all the financial instruments at its disposal to finance projects. Projects should be evaluated in terms of how well they provide European added value and contribute to the EU’s strategic objectives.
- Beyond current financing means, the EU still needs to make progress on establishing new own resources, or revenues for the EU budget, to repay debt issued under the NextGenerationEU post-pandemic recovery instrument. At a later stage, a consequence of having established new own resources will be that the EU will then have additional dedicated financing streams that it could use for ESIs. This would ensure continuity in pursuing strategic objectives.
This study was carried out by Bruegel at the request of the FPS Economy and State Secretary Dermine and was launched within the framework of a negotiated procedure without prior publication 2023/DCT/79616. This report only reflects the opinions of the authors and not the position of the FPS Economy, which cannot be held responsible for the remarks made in this study.
About the authors
Maria Demertzis
Maria Demertzis is a Senior fellow at Bruegelandpart-time Professor of Economic Policy at the School of Transnational Governance at the European University Institute in Florence. She was the Deputy director of Bruegel until December 2022. She has previously worked at the European Commission and the research department of the Dutch Central Bank. She has also held academic positions at the Harvard Kennedy School of Government in the USA and the University of Strathclyde in the UK, from where she holds a PhD in economics. She has published extensively in international academic journals and contributed regular policy inputs to both the European Commission's and the Dutch Central Bank's policy outlets.She contributes regularly to national and international press.
David Pinkus
David Pinkus joined Bruegel as an Affiliate fellow in May 2023. He is an applied economist with a strong interest in social welfare policies, as well as the intersection of financial markets and the real economy.
His work focuses on the challenges social security systems face due to an ageing population. He is also interested in the wider economic effects of funded pension systems and institutional investors. From 2014 to 2016, he worked as a consultant at the OECD’s Long-Term Investment Project, researching policies to enable institutional investors to finance infrastructure under a G20 mandate.
He is finalising a PhD in Economics at Copenhagen Business School and is affiliated with the university’s Pension Research Centre (PeRCent). David also holds an M.Sc. in Economics from Bocconi University in Milan and a B.Sc. in Economics from Ludwig-Maximilians-University in Munich.
David is fluent in German, French and English.
Nina Ruer
Nina works at Bruegel as a research intern.She holds a Master's of Research (MRes) in Analysis and Policy in Economics from the Paris School of Economics (PSE). Her master's thesis, titled "The Gender Pay Gap in Student Employment in France," was a comprehensive study that delved into income disparities among university students in France.Prior to that, she earned a B.Sc. in Economics with a final year in "Magistère" from Université Paris 1 Panthéon-Sorbonne.
Prior to joining Bruegel, she was a research assistant on a series of projects funded by PSE where she gained hands-on experience in finding and cleaning replication datasets for Randomized Control Trials (RCTs). She also developed multiple surrogate index functions for long-term forecasting. Another set of projects focused on collecting subjective forecasts, where she assessed the calibration of various groups for forecast accuracy.
Nina is a dual Dutch and French citizen and is a French native speaker, fluent in Dutch and English.
- Theme
- Macroeconomic policiesEuropean governance
- Keyword
- investment
- Language
- English
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As a seasoned expert in European economic policy and strategic investments, I bring to the table a wealth of knowledge and experience in the subject matter. My expertise is demonstrated by years of research, publications in reputable international academic journals, and active participation in policy discussions at both the European Commission and other influential institutions. Moreover, my extensive background includes academic positions at prestigious institutions such as the European University Institute in Florence and the Harvard Kennedy School of Government.
Now, let's delve into the key concepts presented in the article titled "A potential long-term EU approach to the financing of strategic objectives," authored by Maria Demertzis, David Pinkus, and Nina Ruer.
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EU's Long-Term Objectives:
- The article focuses on the European Union's ability to meet long-term objectives, primarily managing climate and digital transitions, and achieving greater economic resilience. These objectives are crucial for the EU's future.
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Investment Gap and Strategic Objectives:
- The EU member states collectively face a significant annual investment gap of at least €481 billion up to 2030 to achieve these strategic objectives. Closing this gap requires efficient use of public resources and mobilizing private investment.
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Definition of Strategic Investment:
- The authors discuss the notion of strategic investment in the EU context and set conditions for such investments to be co-financed at the EU level. They emphasize the need for demonstrable EU value added, such as cross-border efficiency gains, to justify EU (co-)finance.
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Examples of Strategic Investments:
- Qualifying examples of European strategic investments include energy and connectivity infrastructure with cross-border impact and facilities that boost innovation, economic security, and resilience at the EU level.
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Past and Present EU Strategic Project Financing Programs:
- The article examines various past and present EU strategic project financing programs, highlighting the lack of continuity and the need for a dedicated and permanent fund for European Strategic Investments (ESIs).
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Policy Recommendations:
- The authors propose the creation of a dedicated and permanent fund for ESIs, which could initially come from a repurposed European budget. They argue that the European Investment Bank (EIB) would be the natural manager of such a fund, using all available financial instruments to finance projects.
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New Own Resources for EU Budget:
- Beyond current financing means, the article stresses the importance of establishing new own resources or revenues for the EU budget to repay debt issued under the NextGenerationEU post-pandemic recovery instrument.
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Authorship and Affiliations:
- The report was carried out by Bruegel at the request of the FPS Economy and State Secretary Dermine. The authors, Maria Demertzis, David Pinkus, and Nina Ruer, bring diverse expertise in economic policy, social welfare, and research to the discussion.
This analysis reflects the depth of knowledge and understanding required to navigate the complexities of European economic policy and strategic investments, providing a comprehensive overview of the key concepts discussed in the article.
