Towards a new policy framework for the enlarged Europe: investing for growth and modernisation

Abstract

European leaders aim to turn the enlarged Union into “the most competitive and dynamic knowledge–based economy in the world” (Lisbon Declaration). Without major increases in infrastructure investments, however, dynamic growth — the missing ingredient of the European model — will not materialise. Given extraordinarily tight fiscal prospects, policy reform is imperative: (i) redeployment of resources from agricultural subsidies towards productive investment; (ii) selectivity and rigour in project screening; (iii) a larger role for the private sector and (iv) pricing policies designed to mobilise resources, manage demand and internalise environmental costs. Project funding should remain the instrument of choice for strategic infrastructure projects with regional integration features. Implementation performance must improve and, at country level, EU funding should be targeted to the poorest countries of the Union. Where policies and institutions are weak, EU funding should be conditional and channelled through well–designed programmes that emphasise sector–wide policy reforms, regional development and community–based initiatives.