EIB Investment Survey 2025<\/a> reveals that EU businesses have rapidly adjusted to changing environments. Digitalisation and the adoption of generative artificial intelligence (GenAI) are now as widespread among European firms as they are in the United States. Notably, 90 percent of EU companies have made significant investments in the green transition, positioning Europe as a leader in sustainability. When confronted with the US tariff shock, American firms voiced greater worries about rising tariffs than their European counterparts. The impacts of tariffs have so far been absorbed primarily by US importers and consumers, leaving European exporters relatively unscathed.<\/p>\nEurope\u2019s energy sector is undergoing a profound transformation, with renewables now accounting for two-thirds of power capacity and half of electricity generation. This shift is strengthening both affordability and autonomy, marking significant progress towards a sustainable future. However, energy dependencies remain an ongoing concern, as demonstrated by the disruptions caused by the war in Iran and subsequent interruptions to oil and gas production and transport through the Strait of Hormuz. These developments highlight the European energy market\u2019s vulnerability to external shocks, with the likelihood of sustained higher energy prices threatening both growth and inflation prospects.<\/p>\n
In response to evolving security threats, the EU has increased defence and security spending, setting a long-term target of 5 percent of gross domestic product (GDP). The Union stands as Ukraine\u2019s chief financial supporter, reaffirming its commitment to regional stability. This increased investment in defence is not only about enhancing Europe\u2019s resilience but also has the potential to contribute to broader economic growth through military and dual-use research, development and innovation.<\/p>\n
Global investors continue to view Europe as a bastion of stability. Demand for European assets remains robust, underpinned by the EU\u2019s welfare model, which is crucial for social cohesion and stability. Comprehensive social-protection systems and high standards of public services have made Europe healthier, safer and more inclusive than any other region worldwide. Average life expectancy in high-income EU countries is four years longer than in the United States, and employment rates have reached historic highs, with 76 percent of the working-age population employed in 2025.<\/p>\n
Investment and structural transformation<\/p>\n
The resilience of European investment has relied heavily on strong public investment and targeted support, with a focus on structural transformation. Public investment has outpaced GDP growth, and incentives for private investment remain above pre-pandemic levels. Despite ongoing uncertainty, corporate investment has remained resilient, although broadly stable in real terms. Investment in intangibles\u2014such as research and development, innovation and skills\u2014continues to grow but has proven particularly vulnerable to uncertainty.<\/p>\n
Europe now stands at a pivotal juncture. Decisive policy action and significant capital investments are required to address risks and seize emerging opportunities. <\/p>\n
Europe now stands at a pivotal juncture. Decisive policy action and significant capital investments are required to address risks and seize emerging opportunities. The world is witnessing a new global order that is testing Europe\u2019s traditional sources of security, stability and competitiveness. Geopolitical tensions and the repositioning of transatlantic alliances coincide with a major technological revolution. The net-zero economy is set to grow exponentially, and the digital revolution is enhancing productivity, efficiency and integration across economic, social and territorial domains. Intensifying competition between superpowers is bringing the EU and other like-minded nations closer together. These sweeping changes demand a fundamental shift in investment, particularly private investment, across sectors such as security, defence, technology, energy, natural resources and trade.<\/p>\n
The ongoing war in Iran, coupled with physical disruptions to oil and gas production facilities and blockages in the Strait of Hormuz, further complicates Europe\u2019s outlook. As these events unfold, rising energy prices may become a persistent challenge, raising the prospect of prolonged periods of higher gas and oil prices that could negatively impact growth and inflation.<\/p>\n
Accelerating investment requires stronger corporate activity, which is primarily driven by business prospects. Analysis indicates considerable untapped potential for leveraging the EU market for greater efficiency and scale, both within Europe and globally.<\/p>\n
The EU single market: Opportunities and challenges<\/p>\n
The European single market offers unparalleled scale, business opportunities and secure organisation for European supply chains. Since the 1980s, it has supported 25 percent of the new investments recorded in the EU. However, market integration is stalling, with 62 percent of EU firms experiencing fragmentation when exporting within the EU. Removing these barriers could boost firms\u2019 investment intensity by 10 percent, particularly for the intangible investments that are vital for innovation. The single market is also a driver of resilience and economic security. A minimum level of intra-EU trade and production has helped cushion shocks, even in vulnerable sectors with external dependencies. When disruptions occur, intra-EU trade can at least partially substitute for extra-EU trade, providing a stabilising effect.<\/p>\n
Unlocking EU savings on a pan-European basis is essential for financing innovative companies and advancing the Savings and Investment Union (SIU). Public-sector instruments such as risk-sharing, securitisation, venture capital and venture debt have proven effective in mobilising private savings. Pan-European mechanisms help level the playing field by expanding access to growth capital and fostering stronger innovation ecosystems. For investors, including pension funds and insurance companies, these instruments offer new opportunities and greater risk diversification.<\/p>\n
The EIB (European Investment Bank) Group plays a leading role in venture debt and venture capital, accounting for 30 percent and 24 percent of these respective EU markets. Through initiatives such as the European Tech Champions Initiative 2.0 (ETCI 2.0), the EIB seeks to close Europe\u2019s later-stage financing gap by scaling investments in large and mid-sized tech growth funds and attracting long-term institutional capital.<\/p>\n
The efficiency and scale of the EU market are critical assets both domestically and internationally. Europe is viewed as a stable and trusted partner, actively pursuing new cooperation agreements, such as the Mercosur (Southern Common Market) and India deals. Estimates suggest that the free-trade agreements currently under negotiation, which cover roughly 12.5 percent of EU exports to the rest of the world, could increase exports to the targeted countries by 20.6 percent and raise total EU exports by 2.6 percent.<\/p>\n
Execution, impact and scale: Priorities for the coming years<\/p>\n
For Europe, the coming years will be defined by execution, impact and scale. <\/p>\n
For Europe, the coming years will be defined by execution, impact and scale. To maintain its competitive edge in fast-moving sectors, the EU must combine innovation, sustainability and market scale. Europe retains a strong global standing in strategic industries such as healthtech, advanced manufacturing and robotics, clean-energy technologies, agriculture and the bioeconomy, semiconductor equipment, aerospace, quantum technologies, high-performance computing and automotive. The continent\u2019s ability to combine robust support for innovation with adaptable industrial expertise gives it a competitive advantage that can be further strengthened and scaled.<\/p>\n
A few key elements are essential for Europe to maintain this balance: targeted intervention, a focus on innovation and scaling, and predictable demand that leverages the EU market\u2019s power and size. In some cases, building strategic independence may require transitional measures and patience. As scale is a vital asset, a pan-European strategy and strong global alliances\u2014especially for critical raw materials and markets\u2014are indispensable.<\/p>\n
Digitalisation and artificial intelligence: Productivity and strategic dependencies<\/p>\n
Digitalisation and AI adoption are propelling European firms\u2019 productivity, but they are also creating strategic dependencies in an increasingly polarised world. Analysis shows that AI adoption has contributed to approximately 12 percent of the total productivity increase in EU firms since 2019. In the short term, Europe benefits from its strong industrial base and supportive digital infrastructure. However, as generative AI expands, strategic dependencies and investment needs for innovation, data centres and energy will intensify.<\/p>\n
Europe\u2019s strategic position will be reinforced by a coordinated pan-European approach that aligns initiatives and investments in frontier computational infrastructure, EU data spaces and cybersecurity. Such alignment is crucial for maintaining competitiveness and ensuring security in the digital domain.<\/p>\n
Energy-sector bottlenecks and integration<\/p>\n
Addressing remaining bottlenecks in the energy sector is vital to unlocking the benefits of a fully integrated system and reducing energy costs for businesses and individuals. Europe has managed to weather the energy shocks caused by Russia\u2019s invasion of Ukraine, improving the security of its energy market. Nonetheless, energy dependencies and costs remain significant concerns, as highlighted by the current crisis. While substantial progress has been made in deploying renewables, new bottlenecks are emerging. Investments must accelerate in cross-border interconnectors and system flexibility (such as combining energy storage with generation), electricity grids and broader electrification.<\/p>\n
Given the substantial upfront costs associated with transforming the energy sector, financial instruments that reduce investment risks\u2014building on proven successful models\u2014will be essential to sustain momentum and drive further progress.<\/p>\n
Defence investment: Coordination and private-sector engagement<\/p>\n
Large investment needs in defence require coordination, the mobilisation of private resources and the strengthening of European defence industries. Public defence spending is rising rapidly, with European NATO (North Atlantic Treaty Organization) members aiming for defence and security spending to reach 5 percent of GDP by 2035. While the primary aim is to ensure Europe\u2019s security and resilience, defence spending can also deliver broader economic benefits, particularly through investment in military and dual-use research, development and innovation.<\/p>\n
The EU has identified capability gaps and the need for greater coordination. Co-financing investments in the European defence industrial base and harmonising standards can generate spillover effects across Member States and the private sector. The composition of supply chains matters, with the EU market for mergers and acquisitions (M&A) showing increasing maturity in domestic production, although foreign players continue to play a significant role.<\/p>\n
Social cohesion and well-being: Europe\u2019s global leadership<\/p>\n
Europe continues to lead globally in social and well-being outcomes, thanks to comprehensive social-protection systems, high standards of public services and strong social cohesion. As a result, Europe is healthier, safer and more inclusive than any other region worldwide. Employment rates have reached unprecedented levels, and sustained social investment remains key. However, housing has emerged as a critical issue, with 51 percent of the people living in EU cities identifying the lack of affordable housing as their most urgent problem. Addressing this challenge could increase EU GDP by 1.7 percent by improving mobility and reducing wage inequality by around 3.1 percent.<\/p>\n
Mobilising private capital: The way forward<\/p>\n
With limited resources available, future policy support must increasingly focus on impact and the mobilisation of private capital. Pan-European instruments accessible to firms across the EU, as well as well-targeted instruments linked to specific policy objectives, have proven most effective in attracting private resources.<\/p>\n
EU funds: Impact and mobilisation<\/p>\n
The experiences of the European Fund for Strategic Investments (EFSI) and InvestEU demonstrate the effectiveness of EU resource mobilisation. Under InvestEU, a single euro guarantee from the EU budget delivers 15 euros of investment in the real economy. A substantial share of this mobilisation comes from private sources\u201470 percent of the resources mobilised under InvestEU were private.<\/p>\n
Financial instruments: Tangible impacts<\/p>\n
Well-designed financial instruments have a measurable impact on firms\u2019 performance, innovation and competitiveness. Firms receiving EIB-funded loans achieve 15-percent higher investment and 5-percent higher productivity compared to their peers. The European Investment Fund (EIF) crowds institutional investors into venture and growth funds through a fund-of-funds approach, while EIB venture debt\u2014which constitutes around 30 percent of the European market\u2014enables beneficiaries to raise 1.5 times more additional finance.
\nTo deliver on large investment programmes in infrastructure and housing, efficiency and effectiveness are crucial. This requires improving productivity in the construction sector and learning from best practices in public-sector investment management. Labour productivity in the European construction sector has declined by 15 percent since 2000, exacerbating housing unaffordability and raising the cost of infrastructure delivery. Digitalisation\u2014particularly across the construction supply chain\u2014can improve coordination and efficiency. Streamlining regulatory frameworks across the EU would simplify administration and reduce market fragmentation. Comparing experiences across the EU highlights the importance of standardised technology, streamlined governance and improved procurement to deliver public infrastructure more cost-effectively.<\/p>\n
Conclusion: Europe\u2019s strategic path forward<\/p>\n
Europe stands at a crossroads, facing both significant challenges and unique opportunities. Its track record of resilience and adaptability is underpinned by robust public investment, innovation and targeted policy support. As the EU navigates a shifting global landscape\u2014a new order marked by geopolitical tension, technological advancement and intensifying competition\u2014it must focus on execution, impact and scale.<\/p>\n
The priorities for Europe are clear: foster innovation, scale up strategic industries, address bottlenecks in energy and housing, mobilise private capital and maintain social cohesion. Leveraging the EU single market and pan-European instruments, while deepening global partnerships, will be critical. With decisive action and a long-term vision, Europe can continue to thrive, remaining an anchor of stability, a global leader in social outcomes and a competitive force in innovation and sustainability.<\/p>\n
As Europe embarks on this journey, the coming years will be about turning potential into performance\u2014transforming strengths into tangible benefits for businesses, individuals and society at large.<\/p>\n
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ABOUT THE AUTHOR<\/p>\n
![\"\"](\"https:\/\/www.europesays.com\/europe\/wp-content\/uploads\/2026\/06\/Debora-Revoltella-e1780567517937-150x150.png\")
Dr. Debora Revoltella is Director of the Economics Department and Chief Economist at the European Investment Bank. Since joining the EIB in 2011, she has led the development of flagship publications, including the EIB Investment Report, and spearheaded the creation of the EIB Investment Survey, which covers 12,500 European firms and has become a key tool for understanding investment dynamics across Europe.<\/p>\n
Prior to joining the EIB, Debora served as Chief Economist for Central and Eastern Europe at UniCredit, where she helped build one of the region\u2019s leading economic research teams. Earlier in her career, she worked in the research department of Banca Commerciale Italiana and was an adjunct professor of macroeconomics at Bocconi University.<\/p>\n
Debora holds a degree and a Master\u2019s in Economics from Bocconi University, as well as a PhD in Economics from the University of Ancona. She serves on the Steering Committees of the Vienna Initiative and CompNet, is an alternate member of the Board of the Joint Vienna Institute, and sits on the boards of SUERF and the Euro 50 Group.<\/p>\n
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