and Eastern. Data missing for Belgium, Croatia, Lithuania, Poland and Romania. Where data are not yet available, the sector share is assumed constant – this is generally the case for 2019 with Spain, Italy, Cyprus and Portugal, the areas of education, health and transport in the Netherlands as well as with Denmark generally for 2018 and 2019. Slight deviations from the 2018 results are due to a refinement in the estimate of depreciation of infrastructure investment as well as Brexit-induced recomposition to EU27.
Communications’ share of infrastructure investment has remained elevated since 2015 (Figure 19). In Western and Northern Europe, three-quarters of infrastructure investment is accounted for in broadly equal measures by utilities, transport and health; the remaining quarter is dominated by education, with communications representing 7%. Transport and utilities constitute around three-quarters of investment for both Central and Eastern and Southern Europe. In Central and Eastern Europe, the bulk of the remainder is dedicated to education. In Southern Europe, communications remains the third-largest sector, with a share in excess of 10% of overall infrastructure investment, well ahead of the corresponding shares elsewhere, whereas the shares of education, health and utilities have dipped below their average in recent years. Considering their relatively small size, health and education represented a disproportionate share of the decade-long contraction in infrastructure investment in Southern Europe.
PPPs in the European Union remain concentrated in Western and Northern European Member States, with a continued decline in the number of projects reaching financial close[12] accompanied by an increase in average value (Figure 20). Compared to the period preceding the global financial crisis, annual volumes had declined to less than half in 2018. In the wake of the sovereign and banking crisis in the euro area, a saddle (high) point emerged in 2013 and 2014, following which volumes declined until 2019, when they constituted a mere third of the 2010 high. Activity in 2019 remained thin in Southern Europe and at best sporadic in Central and Eastern Member States. Over the first half of 2020, the number and total value of projects reaching financial close was broadly in line with the very low levels of 2019.
Figure 20
Total annual values of PPPs reaching financial close by region (EUR billion)
Source: EPEC.
Note: Total annual value in billion euro of PPPs brought to financial close in EU27. 2020 includes deals brought to financial close by 30 June 2020.
Communications projects have represented the second largest area of activity since 2016, with transport typically accounting for the bulk (Figure 21). Since 2016, transport projects have constituted some 56% of the total value of projects and nearly 40% of the number. Activity in 2017 was unusually low on both counts. Over the same period, communication projects have constituted an average of 20% of projects and one-quarter of their value. PPPs in communication essentially involve broadband roll-outs, notably in France but also in Austria, Poland and Greece. While education projects account for nearly one-quarter of the number, the value averaged around 8% of the total for the period.
The number and total value of infrastructure projects rebounded markedly in 2018 and remained at that level throughout the first half of 2020 (Figure 22). Activity from 2019 onwards was predominantly in Western and Northern Member States, after activity in Southern Member States briefly returned to pre-euro area crisis levels in 2018. Activity through the first six months of 2020 reached about half the full-year levels. Compared with the levels for the first six months of previous years, the total value of projects brought to financial close was high in 2020, even if the concentration in Western and Northern Europe rose significantly and the number of projects was lower.
Since 2016, non-PPP project financing has become more important for communications equipment (Figure 23). Utilities – notably energy – remain the principal asset class financed in non-PPP projects, typically accounting for three-quarters of the total value and more than four-fifths of the number of projects. There has been a notable increase in the share of transport and especially communications projects since 2016, with the latter also helping to prop up volumes in the first half of 2020.
Figure 21
Annual distribution of PPP projects reaching financial close by asset class (in %)
Source: EPEC.
Note: Distribution across asset class of the total annual value in euros of PPPs brought to financial close in EU27. 2020 includes deals brought to financial close by 30 June 2020.
Figure 22
Annual value of non-PPP project by country group (EUR billion)
Source: IJ Global.
Note: Total annual value in billion euros of non-PPP projects brought to financial close in EU27. 2020 includes deals brought to financial close by 30 June 2020.
Figure 23
Annual non-PPP project activity by asset share
Source: IJ Global.
Note: Distribution across asset class of the total annual value in euros of non-PPP projects brought to financial close in EU27. 2020 includes deals brought to financial close by 30 June 2020.
Government investment
Government investment showed a mild upward trend in the European Union before the coronavirus outbreak. As a share of GDP, government investment reached 3% in 2019 (from 2.8% in 2016, the lowest level in 25 years) compared with an average of 3.2% for 1995 to 2016. It increased in Western and Northern Europe and in Central and Eastern Europe, but continued to decline slightly in Southern Europe. In 2019, investment spending came to 4.2% of GDP in Central and Eastern Europe, 3.1% in Western and Northern Europe and 2.2% in Southern Europe. The low level of investment was fairly consistent across Southern Europe, without major differences between countries, except Malta, which had a much higher share at 3.8%.[13] The differences among countries in the other regions is much greater, ranging from 3.1% in Lithuania to 6% in Hungary in Central and Eastern Europe, and from 2.3% in Ireland to 4.9% in Sweden for Western and Northern Europe.
In the last three years, capital transfers and investment have fallen below the average witnessed in 1995-2016. Interest spending registered a larger drop, while primary current expenditure is higher than its historical average. This suggests that the wide reduction in the debt service burden has not translated into support for capital spending. The balance between current and capital expenditure, particularly in Southern Europe, has tilted in favour of current spending.
Figure 24
Government investment as a share of GDP
Source: European Commission’s
