To tackle the financial and economic crisis, the EU and its Member States are implementing ambitious recovery plans that aim to stabilise the financial sector and limit the impacts of the recession on citizens and the real economy. Investment in infrastructure projects1 is an important means to maintain economic activity during the crisis and support a rapid return to sustained economic growth. Public Private Partnerships (PPPs) can provide effective ways to deliver infrastructure projects, to provide public services and to innovate more widely in the context of these recovery efforts. At the same time, PPPs are interesting vehicles for the long-term structural development of infrastructures and services, bringing together distinct advantages of the private sector and the public sector, respectively.
PPPs are forms of cooperation between public authorities and the private sector2 that aim to modernise the delivery of infrastructure and strategic public services. In some cases, PPPs involve the financing, design, construction, renovation, management or maintenance of an infrastructure asset; in others, they incorporate the provision of a service traditionally delivered by public institutions. Whilst the principal focus of PPPs should be on promoting efficiency in public services through risk sharing and harnessing private sector expertise, they can also relieve the immediate pressure on public finances by providing an additional source of capital. In turn, public sector participation in a project may offer important safeguards for private investors, in particular the stability of long term cash-flows from public finances, and can incorporate important social or environmental benefits into a project.
At EU level, PPPs3 can offer extra leverage to key projects to deliver shared policy objectives such as combating climate change; promoting alternative energy sources as well as energy and resource efficiency; supporting sustainable transport; ensuring high level, affordable health care; and delivering major research projects such as the Joint Technology Initiatives, which are designed to establish European leadership in strategic technologies. They can also boost Europe's innovation capacity and drive the competitiveness of European industry in sectors with significant growth and employment potential.
The combination of public and private capacities and money can therefore help the process of recovery and the development of markets that will form the basis of Europe's future economic prosperity. However, just at the time when the more systematic use of PPPs would bring considerable benefits, the crisis has made the conditions for these instruments more difficult.
Although there is now some evidence of recovery, the volume and value of projects currently closing is still significantly below pre-crisis level4. It is therefore all the more urgent and important to look at new ways to support the development of PPPs.
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1 Almost all Member States have been speeding up major on-going or foreseen infrastructure projects.
2 The Commission launched a consultation on PPPs in 2004 (COM(2004) 327) and reported on the results of the consultation in 2005 (COM(2005) 569)
3 Three PPPs were for instance identified in the European Economic Recovery Programme: factories of the future, energy-efficient buildings, green cars.
4 The drop in PPPs having achieved financial close in the first 9 months of 2009, is about 30 % from last year, both in volume and number, EPEC research, October 2009.