by Revoltella, Harasztosi, Delanote, Bending, André: The 2024 EIB survey on investment finance. Despite pressing needs to step up investment in innovation and digitalisation, strengthen value chains and encourage climate action, the investment activity of EU firms has indeed softened.
Though public and private investment survived the energy and inflation shocks following the pandemic, signs indicate that corporate investment has since weakened. This column presents the results of the 2024 European Investment Bank survey on investment finance. Despite pressing needs to step up investment in innovation and digitalisation, strengthen value chains and encourage climate action, the investment activity of EU firms has indeed softened. Risk-absorbing financial instruments are key to resolving the slowdown, but they must be accompanied by improvements in the business environment to ease barriers now hindering investment.
The new European Commission has set itself the mandate to become an “investment Commission” (von der Leyen 2024). At the same time, the Letta and Draghi Reports call for a new wave of investment in Europe to accelerate economic transformation and innovation, ensure the resilience of value chains and economic security, and adjust the economy to a sustainable green transition (Letta 2024, Draghi 2024).
This comes against an economic backdrop in which investment has been relatively strong but has lately shown signs of weakening. The policy response in recent years, particularly the Recovery and Resilience Facility, put investment and transformation at the centre of EU policymaking. Public investment was sustained through the pandemic and survived the waves of energy price and inflation shocks that followed. Private investment recovered relatively quickly from these shocks. Now, however, as the ECB seeks to engineer a soft landing for the European economy, there appears to be some cyclical weakening of investment.
Going forward, the investment needed to address important structural challenges will have to be managed in the context of the Recovery and Resilience Facility’s ending in 2026, the reinstatement of EU fiscal rules, and persistently tight financing conditions that may dampen the appetite for private sector investment. As investment needs are significant, the private and public sectors will have to cooperate. The private sector has an essential role to play, supported by a public sector that focuses on creating the conditions for investment to take place, be it via interventions to develop markets, promote the single market (to realise scale advantages), reduce policy uncertainty, or through the use of efficient and catalytic financial instruments.
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