Private initiative and public action, new relationships to invest ?

In relation to the crisis, the share of investment in GDP has decreased in the Eurozone, both for total investment (21.9% in 2007, 17.7% in 2013) and public investment (2.7% in 2007, 2.1% in 2013). The decline of total investment has been twice as steep as in the United States or in Japan. The challenges of globalisation and technological mutations require huge investments in the coming years. It is necessary on the one hand to adress the gaps of the previous years and, on the other, to adapt to the structural changes in the world economy. Among other concerns, the action against climate change requires major investments, with appropriate methods for valuing costs, expected benefits and durations(1).
It is thus necessary to bolster the synergy between the public action and the private initiative. Economic growth depends on the dynamism of the private market sector, but public action is also necessary to meet the needs not satisfied by the market (natural monopolies, large scale infrastructures, services of general interest…) and to stimulate private investment in long term projects.
For private and public investments, the key issue is the relationship between desired objectives and expected economic return. Considering the economy as a whole, it requires a forward-looking vision and a long-term strategy, impelled by public authorities (at the level of the European Union and in the Member States) which facilitates the long-term choices of public and private investors.
The main objectives of the “Europe 2020 strategy” are employment, innovation, education, poverty reduction, energy and climate. Specific actions (like Energy 2020, Connecting Europe facility and Horizon 2020) aim to support investments in energy, infrastructures, research and innovation.
However, the leverage effect of EU funding is not sufficient to cover the financing needs, especially for infrastructures. Two procedures may facilitate the financing of major infrastructures: Public-Private Partnerships (PPPs) and Project bonds.
PPPs aim to deliver projects or services, which were traditionally provided by the public sector. At European level, 180 new PPPs were signed in 2013 for a total    of
16.3 billion euros. The development is sustained by the European Commission: new directives on concessions and public procurements, increased use of EU funds, role of the European investment bank strengthened. Under the European programme Horizon 2020 for research and innovation, the European Commission has launched in July 2014 a call for projects for PPPs between EU, Member States and the private sector. This relates to 7 topic areas in research and innovation.
The initiative “Project bonds” has been launched by the European Commission and the European investment bank. The objective is an increased use of capital markets for financing European networks, information and communication technologies. In these areas, the overall need for investment is evaluated at 2,000 billion euros.
This initiative is now being experimented. The proponents of PPP projects, issue bonds in order to raise funds from institutional investors, such as pension funds and insurance corporations. By way of a subordinated tranche suscribed by the European Commission and the European investment bank, the bonds may have the rating level required by the institutional investors. 230 million euros, committed to this experimental phase, might allow to finance 4 billion euros for infrastructures.
For publicly operated investments or PPPs, it is essential to valorize properly the projects and to  select them according to the risks, the financial return, the efficiency, the socio-economic impact(2). Good governance and outcome evaluation are necessary, especially in long- term PPPs.