Long-term investment represents spending that enhances the productive capacity of the economy. This can include energy, transport and communication infrastructures, industrial and service facilities, climate change and eco-innovation technologies, as well as education and research and development. Europe faces large-scale long-term investment needs, which are crucial to support sustainable growth. To fund long-term investment, governments, businesses and households need access to predictable long term financing.
The financial crisis has affected the ability of the financial sector in Europe to channel savings to long-term investment. So it is essential that we look at what can be done to improve the availability of long-term financing and this Green Paper focuses on how that process operates.
One of the important questions is whether Europe's historically heavy dependence on banks to finance long-term investment will and should give way to a more diversified system with significantly higher shares of direct capital market financing (i.e. bond finance) and greater involvement of institutional investors (e.g. pension funds) or to other alternatives. The financing needs of SMEs deserve particular attention as they have the potential to underpin long-term growth. They need access to bank as well as non-bank financing.
Responses to the consultation will help the Commission determine what can be done to overcome the barriers to long-term financing. Follow-up could take several forms, legislative and non-legislative.
Internal Market and Services Commissioner Michel Barnier said: "Europe’s economy is facing massive challenges, including large scale long-term investment needs. These are essential as a basis for innovation and competitiveness, supporting a return to sustainable growth and jobs in Europe. These needs require long-term financing. Ensuring our economy and our financial sector – including banks and institutional investors such as insurers and pension funds – are capable of funding long-term investments is an important but complex task. We need to identify what barriers exist to long-term financing and what more can be done to overcome them.”
Vice President Olli Rehn, responsible for Economic and Monetary Affairs and the euro said: "The necessary rebalancing process in the European economy is underway, and financial markets should be able to support the accelerating structural change. It is important to ensure that the framework for long-term investment and financing is comprehensive and flexible enough to adapt to these challenges in order to strengthen Europe's growth potential."
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See also: Commission roadmap to meet the long-term financing needs of the European economy
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