Investment-led growth: a solution to the European crisis

Giovanni Cozzi () and Stephany Griffith-Jones

No 14297, Greenwich Papers in Political Economy from University of Greenwich, Greenwich Political Economy Research Centre

Abstract: In this chapter we argue that low investment is at the root of European stagnation, and that a sustained (and sustainable) recovery can only be investment-driven. Investment is necessary to cure insufficient demand and unemployment in the short run, but also to introduce innovative technologies and increase potential output in the long run. Moreover, only higher investment can reverse the disquieting trend of de-industrialization that can be observed throughout Europe. In this chapter we make specific proposals on how the EIB, the EU’s regional development bank, can significantly expand its lending to stimulate growth, investment and innovation, particularly in the countries that have suffered most during the sovereign debt crisis. This would help deal with the fragmentation of financial and banking markets, which has emerged in Europe since the crisis and has caused enterprises to be severely credit-rationed, particularly in the periphery of the continent.

Keywords: Industrial policy; Investment policy; Innovation; Jobs; Sustainable economic growth (search for similar items in EconPapers)
Date: 2016-08-08
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Working Paper: Investment-led growth: a solution to the European crisis (2015)
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