this. [ 12 ] investment in defence technologies is another. both are at the heart of the versailles declaration adopted by eu leaders in response to the new macro and geopolitical environment brought about by russia ’ s aggression against ukraine. the new world order also means that european economies can no longer rely on foreign demand as a “ fixer of last resort ”. in recent years developments such as trade wars have cast doubt on the excessive confidence shown in export - led growth. there are now calls for a more balanced growth model in which domestic demand has a greater role to play to stimulate growth in europe and public investment regains the necessary relevance in strengthening the domestic capital base and responding to shocks. research from the international monetary fund suggests that increasing public investment can significantly reinforce confidence and boost private investment during periods of high uncertainty. [ 14 ] and a new trend towards higher investment would support productivity and potential growth, helping to mitigate inflation over time. it could lead to higher neutral interest rates, reducing the likelihood that monetary policy is constrained by the effective lower bound. i would now like to focus on the contribution to public investment at the european level. european public goods investment at the european level makes sense when it can deliver more value than at the national level and is to be expected in policy areas where there are clear economies of scale or externalities and where europeans ’ preferences converge. this is typically the case for european public goods [ 16 ]. richard musgrave famously defined public goods as goods from which everybody benefits and where the benefits for one individual do not reduce the benefits for others. energy security, defence, the digital transition as well as technologies and infrastructure needed to protect strategic autonomy and underpin the single market are all examples of public goods at the european level. european policies can also make an important contribution towards global public goods, such as climate change mitigation. a lack of investment would ultimately affect all europeans and surveys show that there is strong public support for common european policies in areas such as energy and defence ( chart 2 ). chart 2 support for common policies in the eu share of eu population in favour of a common defence and security policy and a common energy policy ( percentages ) source : standard eurobarometer. note : the question in the standard eurobarometer asks “ what is your opinion on each of the following statements? please tell for each statement, whether you are for it or against it. [ a common defence and security policy among eu member states / a common energy policy among

2017 ( chart 1 ). [ 2 ] euro area governments invested around €500 billion less in the 2011 - 19 period compared with the 2000 - 09 pre - crisis period. net public investment in the euro area during the 2011 - 19 period was the lowest of the advanced economies, with the exception of japan. chart 1 public investment in the euro area public investment in the euro area and projected contribution of the ngeu recovery and resilience facility ( percentage of gdp, four - quarter moving sum ) sources : eurostat, bankowski et al. [ 3 ]. notes : rrf stands for “ recovery and resilience facility ”. “ rrf - funded investment ” includes both government investment ( direct public investment - dark green bars ) and capital transfers to the private sector ( indirect public investment - light green bars ). gfcf stands for “ gross fixed capital formation ” in national accounts. the public investment - to - gdp ratio ( blue lines ) includes government gfcf and investment grants. in other words, not only did public investment behave procyclically during the sovereign debt crisis, it also weighed on potential growth in the years preceding the pandemic. in short, it undermined both demand during a recession and supply over the longer term. this did not make economic sense. neither did it make sense from a monetary policy perspective. procyclical public investment made the task of the ecb more difficult when confronted with too low domestic demand after the sovereign debt crisis. and structurally low public investment levels undermined domestic resilience to imported supply shocks, amplifying their stagflationary effects. similarly, it did not make sense from the perspective of ensuring the implementation of sound fiscal policies. a higher share of investment makes the composition of public finances more growth friendly. [ 5 ] and even when financed through borrowing, effective public investment can both increase debt sustainability and benefit future generations. [ 6 ] investments with high multipliers – e. g. in research, infrastructure and education – are likely to generate a return in excess of the cost of borrowing and over time increase output more than they raise debt. in contrast, deferring investments may reduce debt initially but will impair growth, both cyclical and potential. it will result in lower benefits and higher costs over time. a typical example is investment in infrastructure. deferring the maintenance of infrastructure can lead to a deterioration in its condition and potentially cause it to fail. this compromises its