EU infrastructure on the road to nowhere

As European leaders meet to discuss a series of ways to kick-start economic growth, massive infrastructure investment is being touted by some as the answer.

Talk of raising nearly €130bn to invest in transport, technology and renewable energy has increased in advance of this week’s two-day summit in Brussels, as it’s seen as a way to create swathes of jobs and boost struggling industries.

However, some feel it is unlikely to have much of an effect. HSBC’s chief economist Stephen King says the amount being discussed is “tiny,” amounting to under one percent of all 27 EU countries combined national income. He also does not see much point in increasing the amount, pointing out the large-scale transport projects in Spain and Greece that have done little to stimulate growth.

King says talk of infrastructure investment is often just a means for politicians to look like they have a plan: “In too many cases, large-scale public sector infrastructure projects merely satisfy a politician’s need to “do something”, whether or not the activity involved ultimately delivers the predicted benefits.”

It is clear that investment is needed in parts of Europe, particularly in the east. However, a recent investigation by Reuters shows that despite setting aside billions of euros over the last decade for infrastructure towards the east of Europe, a fraction of the pot has been used.

A fund of €14.9bn for transport projects, notably the Trans-European Transportation Network, has seen just €1.65bn used. The reason for this is thought to be due to funds only being paid out on completion of the projects.

If countries are unwilling to get infrastructure projects off the ground in the first place, then talk of increased EU investment is unlikely to be much more than that.