Four areas for attention
Besides infrastructure, four other areas that need attention in Europe are:
- intangible investments, such as competitiveness, innovation and skills
- access to finance
- the business environment
- climate action
“For many companies hit by the financial crisis, gaining access to financing is difficult,” says Philipp-Bastian Brutscher, an EIB economist. “Businesses in Greece find it a lot harder to finance a project than those in Austria. If you rely heavily on machines, it’s easier to get loans, but if you invest heavily in things that you can’t touch, like the Internet, it is much harder to get financing.”
The EIB sees a window of opportunity to address Europe’s investment needs. The investment report suggests making several targeted interventions:
- Prioritise public infrastructure investment and support it with better planning and alternative investment opportunities.
- Pay more attention to innovation and skills development. The EU is falling behind peer economies in these areas.
- Climate change mitigation needs to increase substantially to meet environmental targets.
- More diversity in business finance. More equity financing is required as well as an easing of constraints for small and innovative firms, including credit guarantees.
Revoltella says the EIB hopes the report’s findings help keep the issue of investment on the radars of economists and policymakers.
“Investment is coming back in Europe, we are in an economic recovery,” Revoltella says.” So the question is, ‘OK, are we doing enough?’ And the answer is no.”
An economic survey of investment
The EIB, with the help of dozens of academics, practitioners and policymakers, surveyed 12,500 firms and 500 big cities across Europe to find out what is driving or holding back investment. One of the main problems occurs in the sphere of innovative small companies.
“The small companies in Europe lack the financing they need to grow,” says Atanas Kolev, a senior economist at the EIB who worked on the survey. “They are subject to a very stringent business environment. Many European countries have too few young and leading innovators. We just don’t have the Googles and Amazons.”
The EIB is releasing its Investment Report today at its annual Economics Conference. The event brings together policymakers, economists and leading market players to discuss today’s top topics in investment, like how to strengthen the financial sector, how to ensure that innovative firms get financing and how to address the deficit in skills that is holding back private sector growth.