20 Nov
EACC

ECB | Unlocking private investment and boosting productivity with EU programmes

By Alessandro De Sanctis, Roberto A. De Santis, Daniel Kapp and Francesca Vinci
To bridge Europe’s investment gap, we need both public and private funding. Well-designed EU investment programmes can act as a major catalyst for private capital. As this blog post shows, every euro invested by the EU is matched by private finance, thereby doubling its impact.

Europe is facing an unprecedented need for investment to support its green, digital and defence transitions. On current estimates, this will require additional spending of around €1,200 billion a year between 2025 and 2031. That is a significant increase from the €800 billion estimated just one year ago.[1]
To meet this challenge, public and private financing are both essential.[2] Even under optimistic assumptions, the combined national fiscal space available for additional government spending and the existing EU resources would still leave a substantial funding gap of over €100 billion a year. EU investment programmes can play a decisive role in bridging this gap. In this blog post, we look at how these programmes can help unlock private investment and boost productivity. Among other findings, we show that every euro invested by the EU is matched by private capital, more than doubling its impact.
The role of EU programmes
Amounting to just 1% of the total gross national income of all the Member States, the EU budget is modest compared with its national counterparts. Its effectiveness in supporting investment thus depends on its ability to harness additional resources. With this in mind, various budget instruments have been designed not only to finance public investment but also to mobilise private capital.
The European Structural and Investment (ESI) funds are central to these efforts. For over 25 years, they have served as the EU’s primary investment instrument. These funds help drive progress by supporting infrastructure, innovation and business development across the Union. ESI funds fulfil a dual purpose. First, they promote regional convergence by channelling more resources to less developed regions. Second, they enhance competitiveness by financing investments aligned with key policy priorities, such as fostering innovation, advancing digital technologies and accelerating the green transition.
Moreover, ESI funding is designed to leverage additional financial resources thanks to mandatory national co-financing. This ensures that EU investments are consistently complemented by domestic funds.[3]
“Crowding in” versus “crowding out”
When a government increases investment, the effects can ripple across the economy. Projects such as high-speed rail systems, digital networks and renewable energy grids can enhance productivity and stimulate additional private investment. This phenomenon of public investment attracting private activity is known as “crowding in”. However, large-scale public investment can also increase the demand for resources, potentially leading to higher prices and greater borrowing costs. This can discourage private sector initiative – a phenomenon referred to as “crowding out”.
The actual outcome ultimately depends on the economic setting and the quality of the public investment. Well-planned and carefully executed projects can yield lasting productivity gains that outweigh possible short-term pressures on demand. Conversely, poorly designed investment projects are more likely to raise the risk of crowding out, thus undermining the intended economic benefits.
Evidence from recent research
In a recent study, De Santis and Vinci (2025)[4] provide empirical evidence on the impact of ESI funds on private investment across EU regions between 2000 and 2021. Using advanced econometric methods, their research finds significant crowding-in effects. Over a two-year period, every euro of ESI funding generated €1.10 of private investment and €0.10 of business research and development (R&D) (see Chart 1). These findings underscore the effectiveness of ESI funds as a catalyst for private investment and innovation. European investment contributes significantly to long-term economic growth, while also advancing the EU’s green and digital transitions.

Chart 1
Impact of ESI funds on private investment and R&D

a) Private Investment

b) Business R&D

(estimated effect of €1 of ESI funds)

(estimated effect of €1 of ESI funds)

Source: De Santis, R.A. and Vinci, F. (2025), “Private investment, R&D and European Structural and Investment Funds: crowding-in or crowding-out?”, Working Paper Series, No 3098, ECB, Frankfurt am Main, August. Illustrations replicate the results presented in Tables 4 and 5.
Notes: The estimation entails a local projection, regressing the change in ESI funding on the change in private investment and business research and development (both scaled by regional gross value added (GVA), with an instrumental variable approach. The change in predicted ESI funding is employed as the instrument. This is constructed, for a given region, as the average ESI funds absorption rate in a given year in regions with similar characteristics but located in other countries, multiplied by the ESI funds allocation to the region at the beginning of the programming period. The specification controls for previous-year regional GVA growth, the one-year lag of the dependent variable, contemporaneous changes in government spending (normalised by previous-year real GDP) and changes in each country’s ten-year sovereign yield, as well as year and region fixed effects. The top and bottom 2% of observations are winsorised. The sample covers 24 EU Member States over the period 2000-21. Confidence intervals are reported at the 90% level.

ESI funds boost firms’ productivity
A small share of ESI funds is allocated directly to firms. This gives us a unique opportunity to assess their impact on firm-level outcomes and see how effective the EU programmes are in improving firm performance.
So just how effective are ESI funds in enhancing investment and productivity?
An ECB paper by De Sanctis, Kapp, Vinci and Wojciechowski (2025)[5] looks at these questions, focusing on firms’ performance during the 2014-2020 programming period for EU funding. Their research reveals that ESI-funded firms steadily increased their capital stock by 15%. In other words, they continued to invest in and expand their fixed assets year after year. These firms also experienced long-lasting gains in productivity, which rose by 3% over four years (Chart 2, panels a and b). Moreover, the study finds that financially constrained firms increased their debt and capital to a greater extent. These findings suggest that ESI funds do indeed play a pivotal role in facilitating access to finance (Chart 2, panels c and d).

Chart 2
Impact of receiving ESI funds on firms’ outcomes

a) Capital

b) Total factor productivity

(percentage)

(percentage)

c) Heterogeneity: impact on capital for financially constrained vs non-financially constrained firms

d) Heterogeneity: impact on leverage ratio for financially constrained vs non-financially constrained firms

(percentage)

(percentage)

Source: De Sanctis, A., Kapp, D., Vinci, F. and Wojciechowski, R. (2025), “Unlocking growth? EU investment programmes and firm performance “,Working Paper Series, No 3099, ECB, Frankfurt am Main, August.
Notes: The estimation uses a local projection difference-in-differences approach to evaluate the impact of receiving EU funding through the ESI funds on firms’ outcomes, specifically changes in capital and total factor productivity. The control group consists of firms who have not yet received funding, with time measured relative to the year of first funding within the 2014–20 programming period. A coefficient of 0.01 corresponds to a 1% growth effect. Confidence intervals are reported at the 99% level. The regression includes controls for the lagged values of total assets, sales growth, current ratio, capital-to-labour ratio, sales-to-assets ratio and firm age, as well as year, sector and region (NUTS 2) fixed effects. The variable “finc” indicates financial constraints: “finc = 1” denotes constrained firms and “finc = 0” unconstrained firms. The leverage ratio is defined as the ratio of a firm’s debt to its total assets.

Policy takeaways
As we have seen, synergies between private investment and targeted public investment are critical to addressing Europe’s significant investment needs. ESI funds have proven to be an effective public investment tool, not only in driving infrastructure and regional development but also in enhancing firms’ investment capacity and productivity. Admittedly, there is still room for improvement, particularly in areas such as governance, the timely allocation of resources and the promotion of cross-border investment. And yet, the positive overall experience offers valuable lessons for future initiatives, and ESI funds can serve as an important benchmark when designing new programmes. As the EU prepares its 2028-34 budget, it is vital to prioritise investment programmes that crowd in private capital and boost productivity across Europe.
The views expressed in each blog entry are those of the author(s) and do not necessarily represent the views of the European Central Bank and the Eurosystem.
Check out The ECB Blog and subscribe for future posts.
For topics relating to banking supervision, why not have a look at The Supervision Blog?

See Bouabdallah, O., Dorrucci, E., Nerlich, C., Nickel, C. and Vlad, A. (2025), Time to be strategic: how public money could power Europe’s green, digital and defence transitions, The ECB Blog, ECB, 25 July.
While private capital remains a cornerstone of investment, the additional burden on national and EU budgets has risen sharply to €510 billion a year. It now accounts for 43% of total investment needs, largely owing to a heavier dependence on public budgets for defence spending.
The EU also uses other instruments to finance investment and innovation, many of which are based, to some degree, on the ESI model. The Next Generation EU programme, launched in response to the pandemic crisis, scaled up EU support for investment. The InvestEU programme, which started operating in 2021, aims to reduce the risks of financing innovative or long-term projects through the European Investment Bank and other partners by leveraging EU budget guarantees. The Horizon Europe programme, in place since 2021, supports frontier research and innovation that is often too risky for private finance alone.
De Santis, R.A. and Vinci, F. (2025), “Private investment, R&D and European Structural and Investment Funds: crowding-in or crowding-out?”, Working Paper Series, No 3098, ECB, Frankfurt am Main, August.
De Sanctis, A., Kapp, D., Vinci, F. and Wojciechowski, R. (2025), “Unlocking growth? EU investment programmes and firm performance“, Working Paper Series, No 3099, ECB, Frankfurt am Main, August.

 
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20 Nov
EACC

OECD updates Model Tax Convention to reflect rise of cross-border remote work and clarify taxation of natural resources

The OECD has released an update to the Model Tax Convention on Income and on Capital, providing new and detailed guidance on short-term cross-border remote work and on the taxation of income from natural resource extraction. The update, approved by the OECD Council, aims to provide greater certainty for governments and businesses worldwide.
The 2025 Update to the OECD Model Tax Convention on Income and on Capital clarifies when remote work across borders, such as from a home office, creates a taxable presence for business. This responds to the rise in such arrangements following the COVID-19 pandemic. The update also introduces a new alternative provision setting out how income from activities connected with the extraction of natural resources such as oil, gas and minerals should be taxed, a measure that is particularly relevant for developing and other resource-endowed economies. These changes aim to enhance tax certainty and support fair and efficient cross-border business taxation.
• Remote working: Clear guidance on how cross-border “home office” arrangements are treated under tax treaties, providing certainty for employers and employees.
• Natural resources: A new alternative tax treaty provision to ensure that income from activities connected with natural resources extraction is taxed where it occurs, reinforcing source-country rights and supporting resource-endowed developing economies.
• Other improvements: Additional refinements to enhance consistency in treaty interpretation and strengthen tax certainty.
“By clarifying the rules for remote work and reinforcing source taxation for extractive industries, this update helps countries and businesses navigate a rapidly evolving global landscape,” said OECD Secretary-General Mathias Cormann. “It also demonstrates the importance and continued relevance of multilateral co-operation in delivering practical solutions to modern tax challenges.”
Used by governments, tax authorities, businesses, and practitioners in both OECD and non-OECD Member countries, the OECD Model Tax Convention is a cornerstone of the international tax system, helping to reduce tax obstacles and promote cross-border trade and investment. These updates reflect the realities of a global economy where remote work and digital mobility are here to stay. They also underline the importance of multilateral co-operation in addressing shared challenges and ensuring that tax systems keep pace with economic change.
The updates published today will be reflected in revised condensed and full editions of the OECD Model Tax Convention to be released in 2026. A webinar presenting the 2025 Updates will be hosted by the OECD on 10 December featuring Manal Corwin, Director of the OECD Centre for Tax Policy and Administration, alongside OECD experts.
 
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19 Nov
EACC

European Commission | EU welcomes political agreement on the EU Talent Pool, making the EU more attractive to skilled talent from outside the EU

The European Commission welcomes the provisional political agreement reached today between the European Parliament and the Council on the EU Talent Pool. Once in place, the EU Talent Pool will be the first EU-wide platform to facilitate international recruitment of jobseekers residing outside the EU. This is a key step in making the EU more attractive to skilled talent from outside the EU, and hence more competitive globally.
As part of the EU’s comprehensive approach to migration set out in the Pact on Migration and Asylum, the Talent Pool will offer opportunities for labour mobility and contribute to the EU’s competitiveness agenda  by helping Member States attract and retain global talent. Participation in the Talent Pool is voluntary for Member States.
This new platform will make it easier for employers across the EU to identify and recruit jobseekers from non-EU countries for occupations facing labour shortages within the EU. Jobseekers from third countries will be able to register their profiles on the platform and showcase their skills, qualifications, work experience and language knowledge. This will give EU employers access to a broader pool of talent. The job vacancies of EU employers from participating Member States will be available in the EU Talent Pool, allowing jobseekers to find jobs that match their skills.
The Talent Pool will also support the implementation of Talent Partnerships, a Commission initiative to match  the skills of workers from countries outside the EU with the labour market needs inside the EU, while engaging partner countries strategically on broader migration management cooperation including the prevention of illegal migration. Jobseekers who have developed their skills under a Talent Partnership will be able to flag them in their profiles on the EU Talent Pool platform.  In addition, the Talent Pool will also support the implementation of future European legal gateway offices, starting with the EU-India pilot, aimed to facilitated skilled labour mobility.
Next Steps
The regulation must now be formally adopted by the European Parliament and the Council. As soon as the regulation enters into force, the Commission will develop the platform, with the aim of making it operational as soon as possible.
Participating Member States will set up National Contact Points to support the implementation of the tool.
Background
The EU Talent Pool proposal was presented in 2023 as part of the Commission’s Skills and Talent Mobility package, delivering on President Ursula von der Leyen‘s commitment to make the EU more attractive to talent from outside the EU. It is also a deliverable of the Union of Skills and part of the comprehensive approach to migration under the Pact on Migration and Asylum.
 
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19 Nov
EACC

IMF | Policy Actions Can Reinforce Growth Progress in Many G20 Economies

By Nicolas Fernandez-Arias, Shushanik Hakobyan
Concerted action on economic reforms can help the G20 achieve the group’s collective growth ambitions, but the reforms with the biggest payoff vary across countries
Since the Group of Twenty’s foundational Pittsburgh conference in 2009, progress toward its goal of strong, sustainable, balanced, and inclusive growth has been modest.
While G20 economies have shown remarkable resilience in navigating multiple shocks, medium-term growth prospects have moderated to just 2.9 percent, the weakest since the global financial crisis. At the same time, disinflation remains incomplete for many, and public debt rose to a record 102 percent of GDP last year. Furthermore, excessive external imbalances are widening again.
Still, there are encouraging signs. Our latest annual report to the group—whose members account for about 85 percent of global economic output—points to some positive developments over the past year.
A survey of IMF country teams indicates that many G20 economies made progress toward stronger growth, including more than half of emerging market economies. Improvement has been substantial in some cases, such as Germany, where growth momentum was supported by reforms to fiscal rules.
Meanwhile, falling inflation and fiscal consolidation efforts are improving the sustainability of growth for most G20 advanced economies and half of the European Union.

But this is only part of the story. Progress over the past year has been somewhat muted along the final two dimensions:
• Balanced growth—without the buildup of internal or external imbalances, such as increasing reliance on one sector or on external demand—is proving elusive across the G20. Moderate deterioration was assessed in China and the United States because of widening excess current account balances.
• Inclusive growth—ensuring the economy benefits everyone—improved only slightly, particularly in G20 advanced economies and in the African Union, which joined the group in 2023.
With near-term uncertainty remaining high and an extensive list of headwinds, the outlook for securing strong, sustainable, balanced, and inclusive growth in the coming years is challenging. Against this backdrop, it’s more important than ever to reinforce momentum, even if it’s just tentative, across all dimensions of growth.
Smart fiscal policy is at the center of the challenge. Governments need to rebuild their fiscal buffers to contain rising debt, while meeting growing spending needs. Fundamental economic reforms are also needed to aid domestic rebalancing and foster stronger growth.
Of course, these structural reforms vary across countries. But to help guide prioritization and sequencing, IMF country teams have identified measures with the highest expected growth impact. Reforms to labor market institutions, in addition to improved fiscal policies and business regulations, consistently ranked highest across the G20 and in the European Union.

For African Union members, the largest potential gains lie in foundational governance improvements, as well as fiscal reforms.
The payoff from concerted action by G20 economies would be significant. Simulations suggest that implementing the identified highest-impact structural reforms, alongside recommended macroeconomic policies, could raise growth across the group by about 7 percentage points cumulatively over the next decade. This would benefit emerging market economies the most.
Moreover, debt burdens would decline by more than 8 percentage points of GDP within five years for countries with limited fiscal space, reflecting the combined impact of recommended fiscal adjustments and structural reforms.
And these concerted reform efforts would also support domestic rebalancing by helping narrow current account balances, with large improvements possible for both major surplus and deficit economies.
 
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19 Nov
EACC

World Bank | Commodity Prices to Hit Six-Year Low in 2026 as Oil Glut Expands

Inflationary Pressures Ease, But Geopolitical Tensions Cloud Outlook
WASHINGTON, October 29, 2025—Global commodity prices are projected to fall to their lowest level in six years in 2026, marking the fourth consecutive year of decline, according to the World Bank Group’s latest Commodity Markets Outlook. Prices are forecast to drop by 7% in both 2025 and 2026, driven by weak global economic growth, a growing oil surplus, and persistent policy uncertainty.
Falling energy prices are helping to ease global inflation, while lower rice and wheat prices have helped make food more affordable in some developing countries. Despite the recent declines, however, commodity prices remain above pre-pandemic levels, with prices in 2025 and 2026 projected to be 23% and 14% higher, respectively, than in 2019.
“Commodity markets are helping to stabilize the global economy,” said Indermit Gill, the World Bank Group’s Chief Economist and Senior Vice President for Development Economics. “Falling energy prices have contributed to the decline in global consumer-price inflation. But this respite will not last. Governments should use it to get their fiscal house in order, make economies business-ready, and accelerate trade and investment.”
The global oil glut has expanded significantly in 2025 and is expected to rise next year to 65% above the most recent high, in 2020. Oil demand is growing more slowly as demand for electric and hybrid vehicles grows and oil consumption stagnates in China. Brent crude oil prices are forecast to fall from an average of $68 in 2025 to $60 in 2026—a five-year low. Overall, energy prices are forecast to fall by 12% in 2025 and a further 10% in 2026.
Food prices are also easing, with declines of 6.1% projected in 2025 and 0.3% in 2026. Soybean prices are falling in 2025 because of record production and trade tensions but are expected to stabilize over the next two years. Meanwhile, coffee and cocoa prices are forecast to fall in 2026 as supply conditions improve. However, fertilizer prices are projected to surge 21% in 2025, reflecting higher input costs and trade restrictions, before easing 5% in 2026. These increases are likely to further erode farmers’ profit margins and raise concerns about future crop yields.
Precious metals have reached record highs in 2025, fueled by demand for safe-haven assets and continued central bank purchases. The price of gold—widely viewed as a safe haven during times of economic uncertainty—is expected to increase by 42% in 2025. It is projected to increase by a further 5% next year, leaving gold prices at nearly double their 2015-2019 average. Silver prices are also expected to hit a record annual average in 2025, rising by 34% and further 8% in 2026.
Commodity prices could fall more than expected during the forecast horizon if global growth remains sluggish amid prolonged trade tensions and policy uncertainty. Greater-than-expected oil output from OPEC+ could deepen the oil glut and exert additional downward pressure on energy prices. Electric-vehicle sales, which are expected to increase sharply by 2030, could further depress oil demand.
Conversely, geopolitical tensions and conflicts could push oil prices higher and boost demand for safe-haven commodities such as gold and silver. In the case of oil, the market impact of additional sanctions could also lift prices above the baseline forecast. Extreme weather from a stronger-than-expected La Niña cycle could disrupt agricultural output and increase electricity demand for heating and cooling, adding further pressure to food and energy prices. Meanwhile, the rapid expansion of artificial intelligence (AI) and growing electricity demand to power data centers could raise prices for energy and for base metals like aluminum and copper, which are essential for AI infrastructure.
“Lower oil prices provide a timely opportunity for developing economies to advance fiscal reforms that promote growth and job creation,” said Ayhan Kose, the World Bank’s Deputy Chief Economist and Director of the Prospects Group. “Phasing out costly fuel subsidies can free up resources for infrastructure and human capital—areas that create jobs and strengthen long-term productivity. Such reforms would help shift spending from consumption to investment, rebuilding fiscal space while supporting more durable job creation.”
The report’s special focus section examines the history of international commodity agreements in the context of today’s volatile commodity markets. It finds that while many past efforts—such as inventory controls, production quotas, and trade restrictions—helped stabilize prices for some commodities in the short term, few achieved lasting results. The most enduring international commodity agreement, the Organization of the Petroleum Exporting Countries (OPEC), has struggled to sustain market power especially when prices are high—because higher prices tend to draw new competitors into the market. Instead of using price-control schemes, the report recommends that countries foster more diverse and efficient production, invest in technology and innovation, improve data transparency, and promote market-based pricing to build long-term resilience to price volatility.
 
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17 Nov
EACC

Council of the EU | EU budget for 2026: Council and Parliament reach agreement

The Council and the European Parliament have agreed on the EU’s annual budget for 2026. Next year’s budget will focus on delivering Union priorities and dealing with ongoing challenges. It will boost competitiveness, strengthen Europe’s defence readiness and preparedness, provide support for humanitarian assistance and address migratory pressures.
At the same time, the budget safeguards the flexibility to react swiftly and effectively to unforeseen needs and crises.
The 2026 budget amounts to €192.8 billion in total commitments and €190.1 billion in total payments. €715.7 million has been kept available this year under the expenditure ceilings of the current multiannual financial framework for 2021-2027, allowing the EU to react to unforeseeable needs.

“Today’s agreement shows that Europe can deliver, even in challenging times. The 2026 EU budget will allow us to deliver on our common priorities – security, competitiveness and border control – all while ensuring that the EU can react swiftly and effectively to unforeseen needs and crises.”
– Nicolai Wammen, Minister for Finance of Denmark and chief Council negotiator for the 2026 EU budget

 
2026 EU budget (in € million)

Headings
Commitments
Payments

1. Single market, innovation and digital
22,163.0
23,336.6

2. Cohesion, resilience and values
71,649.8
73,166.7

3. Natural resources and environment
56,529.4
52,577.3

4. Migration and border management
5,018.9
3,887.9

5. Security and defence
2,813.5
2,253.3

6. Neighbourhood and the world
15,600.0
16,569.7

7. European public administration
13,277.5
13,277.5

Special instruments
5,715.9
5,022.5

Total
192,768.1
190,091.6

Appropriations as % of GNI (gross national income)
1,00%
0,99%

Commitments are legal promises to spend money on activities whose implementation extends over several financial years. Payments cover expenditure arising from commitments made for the EU budget during current and preceding financial years.
This is the sixth annual budget under the EU’s long-term budget, the multiannual financial framework (MFF) for 2021-2027. The 2026 budget is complemented by actions to support the COVID-19 recovery under NextGenerationEU, the EU’s plan to recover from the COVID-19 pandemic.
Next steps
The European Parliament and the Council now have 14 days to formally approve the agreement reached. The Council is expected to endorse it on 24 November. Adoption of the budget requires a qualified majority within the Council.
 
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