Market integration is the backbone of Europe’s prosperity. In order to preserve its strength, the EU economy needs to be at the global innovation frontier. Investments in today’s innovation only make sense if they can rely on access to a vast integrated market. Integration inevitably leads to higher interdependence between Member States’ economic developments. Links are no longer just trade, but also include European value chains, financial markets, fiscal contagion, etc. As unwinding integration would come with unbearable economic and societal costs, we will need a European approach to economic policy.
The effects of the crisis have exacerbated structural weaknesses and contributed to a legacy of economic and policy challenges that need to be tackled. These have been made more pressing by the unprecedented rise in migration witnessed over the past year, and which – in all likelihood – will continue in the near future. The way to meet these challenges is through deeper European market integration, supporting cohesion and convergence, investing in innovation, and stepping up efforts to make European firms and markets stronger and more competitive.
Europe’s competitiveness and long-term, sustainable growth potential, however, suffer from a history of underinvestment in important areas, underperforming financial markets, and institutional barriers. Seven years of crisis undermined confidence, lowered aggregate investment, and further aggravated structural investment gaps. At the same time, constrained fiscal space and the necessary regulatory response to the banking crisis have significantly limited the ability of Member States and the European banking sector to take risks and catalyse valuable investment.
This report is an update of an EIB study published in February 2015. It has revised investment gap figures, expanded its scope to include deeper analysis of the importance of the EU single market, and updated the section and data around EIB activities. It focuses on key enablers that require long-term investment and are critical to our future well-being. Its purpose is to help inform the identification of strategic priorities and show why action needs to be stepped up at the European level to revitalize long-term, competitiveness-enhancing investment in the EU.