7. Investment‐led Growth: A Solution to the European Crisis

• Published in: The Political quarterly (London. 1930) Vol. 86; no. S1; pp. 119 - 133
• Main Authors: Griffith‐Jones, Stephany, Cozzi, Giovanni
• Format: Journal Article
• Language: English
• Published: London Blackwell Publishing Ltd 01-12-2015
• Subjects: Deindustrialization; Economic crises; Economic development; Euro; Investment; Unemployment; Europe
• ISSN: 0032-3179; 1467-923X
• DOI: 10.1111/1467-923X.12236

Europe is suffering from growth that is too low and unemployment that is too high. This is especially, but not only, true in the southern euro zone countries. While European institutions, and the European Central Bank in particular, had by the end of 2015 at last succeeded in taming financial turmoil (although the situation in Greece may return as a source of uncertainty), they have been far less successful in dealing with economic stagnation. There is no sign suggesting a return to robust growth and full employment in Europe within the next decade. 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-industrialisation that can be observed throughout Europe.