EU economies hit by collapse in investment, data reveals

Most European Union (EU) countries have been hit by a collapse in investment in past decade, Eurostat, the EU’s statistical agency, data published May 14 reveals.

The data revealed that capital investment, gross fixed capital formation, has fallen dramatically in 24 of the 28 member states in the 2007-2017 period and investment decreased on average by 2.3 percent, falling to 20.1 percent of GDP in 2017 compared to 22.4 percent ten years ago.

Countries in Europe’s east and south, which were more vulnerable to the crisis, experienced the biggest drops in investment in the years following the crisis. Over the last decade, the greatest decline took place in Latvia, where public and private investment fell to 19.9 percent of GDP in 2017 compared to 36.4 percent in 2007, while investment in Greece fell by 13.4 percent, Estonia by 12.9 percent), Romania 12.5 percent, and Spain 10.4 percent respectively.

The European Central Bank has joined the IMF and European Commission’s demand for “strong” and “credible” measures to alleviate Greece’s soaring public debt (around 178 percent of GDP) once the country exits its rescue programme on 20 August.

Only three countries have seen their investments increase: Sweden (from 23.9 percent of GDP in 2007 to 24.9 percent), Austria by 0.6 percent and Germany by 0.2 percent.

Last year, all EU countries invested nearly €3,100 billion in public and private investments, according to Eurostat, where the construction industry accounted for nearly half of investments, while machinery, equipment and weapons systems accounted for 31%, and intellectual property products 19 percent.

The Czech Republic’s ratio of investment to GDP is the highest in the EU, at 25.2 percent, followed by Sweden at 24.9 percent, and Estonia 23.7 percent.

At the other end of the scale, Greece had the lowest ration of investment to GDP at 12.6percent, followed by Portugal at 16.2 percent and the UK at 16.9percent.

The European Fund for Strategic Investments was the Juncker Commission’s attempt to address the investment deficit in the EU, using the EU budget to leverage private investment. According to the European Investment Bank’s website, “it aims to mobilise private investments in projects which are strategically important for the EU”.

The investment fund, Juncker’s flagship policy, has managed to disburse €284 billion to date, some way short of its target to raise €500 billion by 2020.

The EU’s investment fund set up in the aftermath of the financial crisis has mobilised €284 billion to date, mostly in private capital, surpassing the halfway point of its 2020 target.