1.
09/02/2021
European Investment Bank Group 1
Covid-19, the green and digital transition
and local investment – a European
perspective
Debora Revoltella
Chief Economist
European Investment Bank

2.
09/02/2021
European Investment Bank Group 2
I. Public investment – is this time different?
II. Local infrastructure gaps: legacy and new
needs
III. What does it take to make a difference
Outline

3.
Public investment – a European perspective. Is this
time different?
Commitment so far preserved, but implementation is crucial
• Barriers and bottlenecks
• Planning and coordination to maximize spillovers
• Complementarity of public and private investment
The experience of the last 40 years shows that public investment is
the first victim after crises
• Government investment has remained below trend for over a decade
following fiscal consolidation episodes
This time promises to be different, but the challenge is ahead
• New fiscal debate vs discussion on fiscal rules
• Intra-EU divergences and cohesion
3

4.
09/02/2021
European Investment Bank Group 4
I. Public investment – is this time different?
II. Local infrastructure gaps: legacy and new
needs
III. What does it take to make a difference
Outline

5.
Needs are clear - decade-long austerity begets investment
gaps for infrastructure & local government investment
09/02/2021
5
Source: EIB calculations, EPEC, Eurostat, IJ Global
0,0
0,5
1,0
1,5
2,0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Government Corporate non-projects (2019) PPP non-PPP
Share of infrastructure investment in EU
GDP by institutional sector, in %
Share of local in general government
investment, EU in %
30
32
34
36
38
40
42
44
46
48
50
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: Eurostat COFOG

6.
Gaps are clear also at the municipality level
At the local level, legacy gaps, while barriers to investment remain substantial
Investment gaps:
mostly perceived in climate change mitigation and
adaptation, digital infrastructure and urban transport
Source: (1) and (2) EIB Municipality Survey 2020. EIB Investment Report, chapter 9
Municipalities’ perception of
investment gaps
(adequacy of investment over the last 3 years)
Municipalities’ perception
of barriers to investment
%
municipalities
reporting
a
gap
%
municipalities
identifying
a
barrier
0
20
40
60
80
EU Central
and
Eastern
Europe
Southern
Europe
Western
and
Northern
Europe
0
10
20
30
40
50
60
70
80
90
Regul.
length
Regul.
uncertainty
Lack
funding
Stakeholders
coord.
Technical
capacity
Tech.
uncertainty
Coord.
w/
municipalities
Core
infrastructure
Major obstacle Minor obstacle

7.
The digital and green transition confirm gaps and
complementarities among private and public investment
EU municipalities with gaps in
green and digital adoption
Source: (1) EIB Municipality survey; (2) EIB Municipality survey and EIBIS. EIB Investment Report, chapter 8 and 9
Public/private sector
complementarities
0
10
20
30
40
50
60
70
80
90
EU Central and
Eastern
Europe
Southern
Europe
Northern and
Western
Europe
non green non digital
%
municipalities
non
green
or
non
digital
AT
BE
BG HRCY
CZ
DK
EE
FI
FR
DE
EL
HU
IE
IT
LV
LT
LU
MT
NL
PL
PT
RO
SK
SI
ES
SE
0
10
20
30
40
50
60
0 20 40 60
%
firms
that
are
non
green
and
non
digital % municipalities that are non green and
non digital
7

8.
The twin transition poses challenges, but can also
generate opportunities
Regions with high downside
risks to jobs from automation
and decarbonisation
Source: ECON calculations.
Note: Red= high exposure to two types of transition risk, i.e. linked to automation and potential job losses in
carbon intensive industries. Orange = high exposure to one type of transition. Grey = relatively low exposure to
both types of risks. EU outermost regions not displayed.
Clean-energy employment is set to
increase to over 1.1 million jobs by 2030,
with about 60% in highly skilled positions
Firms that are more digitalised:
• do better – grow faster, pay higher
wages, seek skilled workers and
invest more in training
• are more optimistic - on job creation
effects of new digital technologies
8

9.
09/02/2021
European Investment Bank Group 9
I. Public investment – is this time different?
II. Local infrastructure gaps: legacy and new
needs
III. What does it take to make a difference
Outline

10.
(1) A policy response focusing on public
investment
09/02/2021
European Investment Bank Group
10
Severity of crisis demands ambitious response:
• Pressing schedule requires absorptive capacities;
• high and rising public debt levels require investments to
raise growth outlook;
• Need to prioritise structural investment gaps, notably
climate and digital, while buttressing social cohesion.

11.
(2) Local investment - an essential part of coherent
investment strategy
09/02/2021
European Investment Bank Group
11
• Local infrastructure an important delivery point for national
strategies, e.g. digital and environmental;
• Local multipliers can exceed aggregate ones, if autonomy
fosters improved project identification and implementation.
• Address Investment Barriers
- Where capital transfers address lack of funding, need to ensure
benefits of local agency (e.g. better knowledge of needs) outweigh
costs (e.g. reduced skin in the game);
- Challenge of ramping up local absorptive capacities even as first
projects are rolled out;
- Regulation…

12.
(3) Maximizing impact of local infrastructure investment
09/02/2021
European Investment Bank Group
12
• Ensure sound governance;
• Effective planning and prioritisation;
• Employ life-cycle approach, incorporating sustainability;
• Coordination important along various dimensions:
- Still not systematic
- Vertically: shared responsibilities require clearly assigned
functions
- Horizontal: shared technical capacities
- Hub-periphery: access core infrastructure

13.
Ex ante project assessment and coordination
Room for improvement, with regulatory requirements
a potential driver
09/02/2021
European Investment Bank Group
13
Coordination
Ex ante assessments
0
10
20
30
40
50
60
70
80
90
100
Neighbouring
municipalities
Other municipalities in
your region
Networks of
municipalities
Always Frequently Occasionally Never
0
10
20
30
40
50
60
70
80
90
100
Budget Financing Socio-Economic
impact
Environmental
impact
Always Frequently Occasionally Never
Source: EIB Municipality Survey 2020
Question: Before going ahead with an infrastructure project, how
often does your municipality obtain an independent assessment of
any of the following?
Source: EIB Municipality Survey 2020
Question: Still thinking about the planning and implementation of
infrastructure projects, typically how often, if at all, does your
municipality coordinate its investment projects with each of the
following?

14.
Conclusions
• Local infrastructure investment an essential element of a
coherent investment strategy:
• Equally important to address both
• funding needs
• Ramp up/complement absorptive capacity;
09/02/2021 European Investment Bank Group 14