Towards Europe 2020 out of the economic crisis: is the Project Bond Initiative a means to financial stability and integration?

摘要

Since the establishment of the single monetary policy and introduction of the euro, it is pertinent to investigate the link between financial stability and integration.Is there a complementarity between the two or are financial stability and integration a contradiction in terms? In other words, isn’t a search for a highly integrated financial system that would strengthen stability a bit like a search for the Holy Grail?Investment has been the cementing element of EU integration, institutions and policies – in brief, in creating more Europe. More concretely, investment in people, in knowledge and in physical assets, to ensure that Europe preserves its role and position in the world. The current crisis transcends national, even continental borders. Europe is reminded of its severity on a daily basis. Record unemployment is one of the consequences; shrinking public budgets and financial austerity another. In the run-up to the current recession investment grew by 5-6% a years. Exporters and home buyers drove this expansion, which ended in 2008. Since then, the lack of investment has been a main source of demand weakness in the European Union.A collapse of investment activity of this magnitude has inevitable repercussions for economic expansion in the longer term. If productive capital stocks do not grow – indeed, if they are not even maintained - EU growth potential will inevitably shrink.A revival of investment activity is therefore crucial to the long-term growth prospects of Europe. One precondition for such an investment revival is access to reasonably priced funding for long-term projects. The process of fiscal consolidation at national and European level has already placed a severe restriction on public budgets – and will continue to do so in the medium term. This pressure means that the EU has to find ways to achieve more with less. In particular, at European level, one needs to ensure that a limited EU budget is used to maximum effect.The newly established EU project bond initiative is seen as a means to go ahead in the current circumstances. As it does not impose an additional burden on domestic budgets, sovereign debt or contingent liabilities.The review looks into the type of investment that can be catered by the project bond initiative and the sectors selected for magnifying the growth potential.