My contribution last week focused on Jean Claude Juncker’s speech to the European Parliament, during which he spoke of a €300 billion investment programme to revive the European economy.

The thrust of my contribution was whether the EU needs to reinvent itself in order to become a vibrant economy again. This week’s contribution will continue to deal with this issue, focusing more closely on the need to stimulate investment.

One piece of data that is indeed scary is that since the peak reached in 2007, aggregate investment in the member states of the EU decreased by 15 per cent. In some countries the drop was even deeper. This amounts to a loss of €430 billion.

This makes it imperative to mobilise all public and private resources available to increase private sector investment, without increasing public debt.

Governments need to leverage all the fiscal tools they have to stimulate both demand and supply

The reason for this strategy is all too evident. Estimates for growth in both the EU and the eurozone have been reviewed downwards.

The little growth that has been registered has not stopped the increase in unemployment, which remains very high. Moreover, the competitiveness of businesses operating in the EU has deteriorated when compared to businesses operating elsewhere.

Economic growth has been hindered by the slowdown in investment.

The objectives are therefore also very clear. Governments need to leverage all the fiscal tools they have to stimulate both demand and supply.

They have to tackle the structural weaknesses in their economies to address the very weak investment performance, at the same time enhancing competitiveness and expanding productive capacity and, as a result, potential growth.

The reason for this very weak investment performance is seen to be the lack of business confidence.

There appears to be enough liquidity in the EU to generate the targeted €300 billion investment figure, but the high levels of both public and private debt limit the action that governments and other operators may take.

At the same time there is no shortage of dies. Many investments that are feasible are in need of financing.

However the aversion to risk on the part of financial institutions is putting a brake on these investments. The emphasis on structural weaknesses is meant to encourage governments to look at their legislation and simplify the norms that govern investment.

Moreover, governments are encouraged to adopt education, welfare and health policies that are in synch with what the economy requires today.

Tackling the structural issues would help to reduce the level of risk associated with investment.

Two considerations need to be made. First, although it is imperative that there is a simplification of the regulatory framework concerning investment, this needs to be accompanied by a reform of the financial sector.

The financial sector must become subject to the productive economy and not the other way around.

The liquidity that is available in financial institutions must be somehow unleashed and directed to the real economy and not to further feed the financial economy.

Putting it crudely, it is now time for the banks to pay back the taxpayer for the bailout that the taxpayer has ended up paying for.

Second, there needs to be a concerted effort to channel investments into the development of the infrastructure, renewable energy, small and medium-sized enterprises, telecommunications, the digital economy, research and development and education.

Part of the problem in the lack of investment could well be that in a number of these areas there is a great disparity among the member states of the EU.

The EU has been very good at promoting and implementing the free movement of goods, people, capital and services.

But it has not sought to ensure that there is adequate investment in the sectors that facilitate economic growth. Removing barriers to trade is good because it opens up markets.

However, there need to be the productive capacity and the supporting infrastructure to exploit the opportunities provided by free trade.

This is why the EU needs to stimulate investment within its confines.