Anton Hemerijck, Mariana Mazzucato and Edoardo Reviglio, in chapter 7, offer an original perspective: the most competitive economies in the EU spend more on social policy and public services than the less successful ones. However, the twenty-first century knowledge economies are ageing societies and require European welfare states to focus as much — if not more — on ex-ante social investment capacitation than on ex-post social security compensation. The growing needs for social services will require new and updated social infrastructure. According to a report on social infrastructure in Europe coordinated by former President of the European Commission Romano Prodi in 2018, the minimal gap is estimated at €100–150 bn per annum and represents a total gap of over 1.5 tn in 2018–2030. Long-term, flexible and efficient investment in education, health and affordable housing is considered essential for the economic growth of the EU, the well-being of its people and a successful move towards upward convergence in the EU. But how do we finance the great new needs with such a pressure on public finances? The chapter suggests innovative financial solutions using institutional and community resources to lower to cost of funding of social infrastructure. One such solution is the creation of a large European Fund for Social Infrastructure, owned by State Investment Banks (SIBs) and institutional long-term investors, which would fund its operations by issuing a European Social Bond. In this endeavour, a central role must be played by the EIB and by State Investment Banks. The authors discuss the potential role of these “mission-oriented” SIBs in social innovation by changing their mission. They should not simply “compensate market failures” but also become institutions that “shape the market” and become major providers of sustainable long-term and patient finance to deliver public value.

In the future there will be a global growing demand for long-term investment, both in mature and in emerging countries, to finance infrastructure, innovation, education, growth, environmental programs. Mature economies will also need to increase their share of long-term investment to exit from the recent crisis, to reinforce their growth rates and global competitiveness and to ensure public debt sustainability. Given the need to enlarge the amount of long-term financing worldwide, policy makers should create a prudential and accounting framework that encourages long-term investment with positive effects for growth and financial market stability. The paper then discusses regulatory issues related to the introduction of a new international and/or European regulatory framework that is more favourable or less penalising for long-term investment, and issues related to the creation of new euro denominated financial instruments for financing infrastructure (long-term equity funds, project bonds and guarantee schemes) and for strengthening stability in EU sovereign bond markets (Eurobonds).

His main expertise is in international political economy (IPE), in particular the problem of uneven deveolopment and the new challenges posed by rising countries to the current global governance scheme.Andrea Brasili is a Senior Economist at the EIB (Luxembourg) where his research interests are both micro (firm level) data analysis and macroeconomic developments, in particular those related to fiscal policy. He received his PhD in Public Economics from the University of Pavia (Italy). Before joining the EIB, he worked in the private sector (in Italian banks and asset management companies) as a research economist, still collaborating with academia.

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