Summary of The Current Situation and Future Prospect for Europe’s Economy

On Monday, April 10th, the Center on Global Economic Governance hosted Dr. Werner Hoyer, President of the European Investment Bank (EIB). The event was part of The Ambassador Donald and Vera Blinken Lecture Series on Global Governance. Merit E. Janow, the Dean of Columbia’s School of International and Public Affairs, introduced President Hoyer while Jan Svejnar, Director of the Center on Global Economic Governance, moderated a conversation following President Hoyer’s remarks.

President Hoyer began his speech by noting the 60th anniversary of the Treaty of Rome, which established the EIB, was celebrated just two weeks ago. Over the six decades since the EIB’s inception, economic stability and multilateralism have produced an extended period of prosperity and peace in Europe. President Hoyer expressed his concern that these achievements are now being taken for granted, as the European Union faces unprecedented uncertainty regarding its future. Challenges that began for Europe’s economic outlook have spilled into political dynamics. Against this backdrop, the role of the EIB to foster inclusive prosperity is increasingly vital.

The EIB, which is the world’s largest multilateral lending organization, is owned by the 28—soon to be 27—members of the European Union.  The Bank’s portfolio has evolved over recent decades and focuses on a number of broad issues. First, SME financing—approximately 30% of the EIB’s lending is directed towards smaller firms, which often struggle to gain access to capital from private institutions. A second focus is innovation financing, which accounts for about half of total lending activities. The final area of concentration is energy efficiency and climate change-related projects--such initiatives account for approximately 25% of loans. President Hoyer noted multilateral banks are key to achieving the climate change objectives set by world leaders at COP 21 in Paris, France in 2015.

As part of his remarks, President Hoyer provided an overview of Europe’s macroeconomic outlook. The continent’s recovery has improved recently, as crisis hit economies show signs of improvement. He stressed this progress must not be taken for granted, however, as global commitment to free trade appears to be waning. If G20 countries weaken their commitment to trade, the overall size of the global economy will shrink. Facilitating greater investment remains a challenge for Europe’s economy. Similar to the United States, a lack of liquidity is not a problem, but rather the private sector’s “wait and see” investment mentality has hindered growth. Multilateral banks such as the EIB mobilize private capital by “crowding in” financial institutions and mitigating the risk of taking on certain projects. 

A second talking point of President Hoyer’s remarks was how the EU is currently at a crossroads. By and large, Europe’s transition to a single market has been a huge success, given the pace at which changes happened. The financial crisis, however, has brought many existing problems to the surface and raised doubts regarding the EU’s ability to deliver on its promise of inclusive prosperity. While populist trends in European politics is thus a symptom of these shortcomings, they have also provided a wakeup call for many Europeans who believe a united Europe is worth fighting for.

After his speech, President Hoyer answered a number of questions from members of the audience. Topics included how reforming the EU’s regulatory framework could spur innovation, the link between migration and development challenges, and the role of fiscal policy in northern European countries in facilitating continent-wide economic growth.

--Kevin Gilmartin, MPA ‘18