Challenges for Public Investment in New EU Member States

Abstract

The first section of this chapter briefly summarizes the main theoretical arguments for public sector involvement in investment activities. The second section presents some stylized facts about the need to upgrade infrastructure in the new member states. The size and composition of investment in the new and old European Union (EU) member states in recent years are compared and assessed against what could be expected on theoretical grounds. The third section explains the position of public investment in the EU budgetary framework and dwells on the arguments for and against complementing the Stability and Growth Pact (SGP) with a “golden rule.” The question of to what extent accession affected public investment in practice is also addressed. The fourth section analyzes public investment in the new member states in relation to private investment and EU transfers. Finally, the main conclusions of the chapter are summarized.