From mission polity to mission economy: Making the EU a strategic investment power

The EU's number one challenge in addressing today’s intertwined economic, technological, social, climate, and security-related shocks is a lack of investment. In order to remain prosperous, free, and secure, the EU must overcome its massive funding gaps and become a strategic investment power like its principal competitors, the US and China. While learning from their investment models, the EU must develop a “third way” based on its own multi-level governance, aligning its strategic goal setting and policy design (mission polity) with financial tools to achieve them (mission economy).  

Now is the time for change. The volatility of US economic policy, the decline of rules-based institutions, and the rapid erosion of the ‘Washington consensus’ herald profound shifts in international capital allocation and markets. An investment surge has already started heading towards Europe. If it adopts the right reforms, the EU is well-positioned to reap the dividends of its model, based on rules and predictability, an open trading system, a stable ‘global euro’, and the supply of strong, high-quality investment opportunities.

This month, the European Commission will present its plans for the EU’s long-term budget for the period of 2028-2034. the belief that the EU can meet present-day challenges without significant increases in common EU expenditures equates to magical thinking. At the same time, in the context of constrained resources and inevitable trade-offs, the paper argues for a review of the EU’s public-private financing infrastructure based on four principles of action:

• Concentration of EU spending where added value is greatest: European Public Goods;

• Mobilisation of a wider circle of public and private institutions from the EU and beyond;

• Active building of Europe’s investment market and financial attractiveness, including through the supply of high-quality tradable assets.

• Cooperation beyond established frameworks through off-budget instruments and coalitions of the willing, if necessary

In conclusion, this paper spells out nine recommendations for the EU to develop its strategic investment power:

1. Create a €300 billion EU Competitiveness Fund on the InvestEU model to maximise de-risking of strategic investment

2. Adjoin a special purpose off-budget EU Sovereignty Instrument

3. Deploy the European Semester as an investment coordination tool

4. Revamp the EU’s IPCEI-framework to better coordinate and pool national industrial financing

5. Securitise EU-backed projects to boost the supply of European high-quality tradable assets in strategic sectors

6. Create a demand-side push for EU securities through regulatory simplification, ECB asset purchases, and financial crowding-in.

7. Establish a permanent, out-of-treaties European Security Funding Facility (ESeFF)

8. Seize the capital inflow surge with regulatory adjustments to enhance the EU’s global investment appeal

9. Attract foreign strategic investment through EU-led promotion, partnerships, and joint investment vehicles

Read the entire paper here.

Philipp Lausberg is a Senior Policy Analyst in the Europe's Political Economy programme at the European Policy Centre.

Georg Riekeles is Associate Director and Head of Europe's Political Economy programme at the European Policy Centre.

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