Reforming the European investment bank, a new architecture for public investment in Europe

Natacha VALLA Deputy Director of CEPII [vc_btn title= »Download the article » style= »outline » color= »blue » align= »right » i_icon_fontawesome= »fa fa-file-pdf-o » add_icon= »true » link= »url:http%3A%2F%2Fprod.confrontations.org%2Fwp-content%2Fuploads%2F2016%2F03%2FRevue-107-Reforming-the-European-investment-bank-a-new-architecture-for-public-investment-in-Europe-p35.pdf||target:%20_blank »] The European System of Investment Banks, SEBI, could be decisive on long term growth in Europe. Some five years after the severe recession of 2009, private sector investment in Europe is still dangerously sluggish. And public investment has been cut further, reinforcing a long term downward trend. At a mere 2% of GDP, it has halved over thirty years. This is a curse for Europe. Evidence suggests that in the medium term, public investment does not hinder, but fosters, private investment. And available estimates of fiscal multipliers for public investment, for example based on the work of Larry Christiano, Marty Eichenbaum and Sergio Rebelo, are way above 1, significantly above those for other fiscal instruments. The public sphere would therefore be well advised to tilt spending towards investment in areas such as infrastructure