Counter Balance authored a report for the European Public Service Union (EPSU): "Public banks working for public services”, which delves into the crucial role of public banks in addressing the public investment gap and enhancing essential public services across Europe.
The research identifies a significant shortfall in investment in social infrastructure and public services, highlighting the urgent need for increased funding in areas such as education, healthcare, and affordable housing. Public banks are uniquely positioned to fill a significant part of this gap, given their substantial financial resources.
Europe is home to 115 public banks, with combined assets amounting to €11.2 trillion, which is equivalent to 70% of the EU’s GDP. This staggering financial capacity underscores the potential of public banks to finance projects that meet the highest societal needs.
The European Investment Bank (EIB) has a key role to play: while the EIB is already central to funding major public service projects, it also focuses a lot on derisking the private sector. The Bank should give a higher priority to support investment needs for public services, and enhance cooperation with national and regional public banks as well as local authorities. Such collaboration could ensure a more comprehensive and effective approach to addressing public service needs.
The report also looks at several other public banks in Europe, highlighting challenges and good practices such as the strong social mission of the Council of Europe Bank and the governance structure of German public banks like KfW including local authorities and labour unions.
The report also recommends to public banks to:
- adopt new appraisal methods that allow for more risk-taking and consider the long-term social and environmental benefits of public service projects.
- create dedicated funding streams for environmentally-friendly, high-quality public services, including housing, healthcare, and education.
- prioritise of public-public cooperation over public-private partnerships, which ensures a fair distribution of public funds and prioritises projects with significant social and environmental returns.
- review and adapt their lending practices during crises to expedite project approvals and increase loan volumes.
Highlighting their transformative potential, public banks have the capacity to support a wide range of essential services. From affordable housing to renewable energy and local public transport, public banks can drive systemic change by focusing on projects that offer long-term economic viability and substantial social benefits. This approach is essential for achieving a just and sustainable economy.
