Europe Needs a Golden Rule for Spending

The dilapidated state of infrastructure in Belgium, home to the European Union’s main institutions, has become emblematic of a lack of investment that blights the whole continent and, according to the EU itself, is creating “lasting bottlenecks that undermine productivity growth.” This problem can be fixed, but probably not without reforming the bloc’s destructive restrictions on government deficit and debt levels.

The reason for the infrastructure deterioration is clear. To quote the European Commission: “Public investment has been structurally low for several decades, as a result of policy choices within a context of prolonged fiscal consolidation. It reached 2.4 percent of GDP between 2008 and 2015, slightly up from a pre-crisis average of 2.1 percent of GDP. Sustained cutbacks in investment budgets are reflected in net public investment (i.e. the capital stock corrected for use and wear), which has averaged zero since the 1990s, eroding the quality of public infrastructure.”