Europe’s Hidden Stimulus

LONDON – When the European Council next meets, on February 7, it should look at private investment as a means to kick-start Europe’s stagnant economy. With the usual drivers of GDP growth constrained across Europe, the one economic sector able to spend is the non-financial corporate sector.

Indeed, publicly traded European companies had excess cash holdings of €750 billion ($1 trillion) in 2011, close to a 20-year high. Unlocking that cash would give Europe a much larger stimulus package than any government can provide. In 2011, for example, private investment in Europe totaled more than €2 trillion, compared to government investment of less than €300 billion.