1. Challenges for Public Investment in the EU

Chapter 1 by K. Atanas, D. Revoltella, A. Brasili, and J. Schanz describes how the war in Ukraine poses new challenges for public investment in the EU. It has worsened the macroeconomic environment by increasing uncertainty and raising energy and other input costs. Concerns over public debt and increases in current expenditure, to contain the impact of higher energy costs, might decrease government spending on investment. That said, large EU-wide programmes will be supporting governments’ investments over the coming years, in particular through the Recovery and Resilience Fund and RePowerEU. RePowerEU is designed to rapidly reduce dependence on Russian fossil fuels—a challenge that can be addressed only with coordinated policies and efforts both at the national and EU levels. While the cost may not be overwhelming, it comes on top of the large investment needs related to transitioning to a net-zero carbon economy. The solidarity within the European Union will need to be a key ingredient for successfully overcoming these challenges.