Europe, we have an investment problem

Therefore, the first chapter of the Ecofin draft agenda is titled “Measures in support of investment”. The document, seen by The Corner, explains that “improving the conditions for both public and private investment” should be the strategy implemented to promote competitiveness and growth. According to EC figures, investment has fallen by almost 20% in Europe since the crisis began.

Eyes will focus on whether Germany wants to put in place macro-recommendations and lead some Eurozone countries on this path. The Eurogroup will talk about Brussels´ guidelines on this, an EU official pointed out.

 “Ministers will discuss reasons for low investment and why, in countries with savings, money is not flowing to the real economy”, said the official, with access to Eurogroup discussions. He adds that Member States “have to find ways to transfer national current account surpluses to countries with deficits”.

The Vice-President designate for Jobs and Growth, Jyrki Katainen, explained recently that there are many factors hampering investment, such as low demand, over capacity or financial fragmentation.

 “Public investment both on European and national level has a critical role to play in a quick return to sustainable growth”, the Finish politician said. Nevertheless, he recognized the job has to be shared because “we also need private investment to boost demand and ensure our companies can compete or create jobs”.

BIG FIRMS SITTING ON CASH

Another problem is that financial fragmentation is preventing liquidity from flowing into the real economy. Banks are sitting on a “stockpile of cash”, the EU public servant claimed. But, according to figures from the German Institute for Economic Research, that also includes big companies.

While the German governments infrastructural investment has declined below 20% -down from 25% in early the 90´s- its own companies have almost €500bn stashed in savings.