Report

Accelerating strategic investment in the European Union beyond 2026

A potential long-term EU approach to the financing of strategic objectives.

Publishing date: 24 January 2024
Authors: Maria Demertzis David Pinkus Nina 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 Bruegel and part-time Professor of Economic Policy at the Florence School of Transnational Governance at the European University Institute. She was Bruegel’s Deputy Director 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 and has regular column that appears twice a month in various EU newspapers and on Bruegel’s opinion page.
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.

David holds a PhD in Economics from 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 assistant. 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.