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Is Europe on the cusp of an infrastructure investment
super-cycle?
This paper follows the recent publication of the latest Q2 2025 Infrastructure Pulse
Survey1 by GIIA and Alvarez & Marsal and
examines in more detail the reasons behind signs of a resurgence in
the attractiveness of Europe to infrastructure investors.
Investor sentiment builds towards Europe2,3
After two years of stalled transaction volumes and
infrastructure investment, investors had anticipated a global
rebound driven by the U.S. election and expected interest rate
cuts. However, this stalled in early 2025 due to U.S. tariffs and
global trade tensions. While initial optimism about Donald
Trump’s pro-business policies spurred a U.S. market
rally,4 investors are proceeding with caution due to
market volatility, policy uncertainty, and overexposure
to U.S. bonds. In the first half of 2025, European equity
funds have attracted over $100 billion in inflows — triple
the amount recorded last year — while U.S. equity fund
outflows have nearly doubled to $87 billion.5 This
search for portfolio diversification has led to green shoots of
investment into Europe, with recent data indicating that deal
values in the European infrastructure sector have increased by more
than 25% over the past six months.6
GIIA’s Infrastructure Pulse survey, produced by Alvarez
& Marsal, offers a unique insight into market sentiment among
the world’s leading infrastructure investors.7 The
recent Q2 2025 edition reveals that Europe has become more attractive
and that investors are keen to spfinish in Europe (See Figure 1 and
Figure 2).
- In the Q2 2025 survey, investor outsee toward overall
infrastructure opportunities in Europe was generally positive, with
sectors like traditional sustainable generation and other
sustainable generation remaining stable at +1.75 and +1.5
respectively, and batteries climbing from below +1.0 to +1.75
compared to the previous quarter. Data centres dominated investor
sentiment over the period, surging from +1.5 to +2.5. - In contrast, North America displayed mixed trfinishs, with
regulated gas and electricity hovering at around +1.5, while
airport infrastructure sentiment declined from +2.5 to +1.5 over
the last six months,8,8 due to a lack of opportunities
rather than the attractiveness of the sector.
Looking ahead, the macroeconomic outsee for Europe is
moderately positive. The European Central Bank has cut rates from
4% to 2% over the past year, and governments are prioritising
economic security with renewed infrastructure investment. Growth in
peripheral regions — Northern Europe (+3.4%), Southern Europe
(+2.2%), and Eastern Europe (+1.6%) — is outperforming and
offsetting slower growth in core Europe (+0.6%).9
Germany’s push for public infrastructure investment could
spark a virtuous growth cycle. Investors will assess whether this
momentum stems from real structural modify or merely increased
interest. Key focus areas include investment quality, productivity,
job creation, M&A activity, European market expansion,
infrastructure deal flow, public-private partnerships, and
cross-border capital deployment.
Overall, there is a broader push for portfolio balance and
long-term risk management. Growing investor unease over the
persistent U.S. current account deficit, a weak U.S.
dollar,12 rising fiscal deficits (projected to rise
above 7% of GDP), debt levels exceeding 120%, real interest rates
over 2%,13 and uncertainty over tariff policy (with a
delayed deadline of 1 August 2025) are toobtainher prompting a
reassessment of U.S. market dominance. Washington’s recent
announcement of a 30% import tariff on goods from the
EU14 could intensify existing investor concerns over
retaliatory trade measures and deepening global trade
fragmentation, shifting their capital allocation to more stable or
undervalued markets.
In response, European nations are actively promoting investment
across the bloc, primarily in infrastructure and defence. In fact,
Europe remains a thriving hub for infrastructure investment,
leading global private infrastructure investment since 2014, with
44% of deals and surpassing North America’s 34% (Figure
3).15 This dominance is driven by strong political
support for large-scale infrastructure projects, particularly in
renewables and data centres.
Investors see Europe as an emerging leader in
sustainabilityfocutilized infrastructure like green and digital
sectors, with government spfinishing aimed at crowding in even greater
levels of private capital. By 2034, the International Energy Agency
forecasts significantly higher investment in European energy
investments toward clean energy, low-emissions electricity, and
grid infrastructure; aligned with several ambitious climate
scenarios (Figure 4).16
The investment optimism for Europe, particularly in relation to
its green transition agfinisha, comes about after the Trump
administration rolled back funding by about $14 billion in battery,
EV, and solar sectors17 and is likely to be propelled
further with the codification of the “One Big Beautiful
Bill” that transitioned tax credits from renewable energy to a
technology-neutral system.18 However, this trfinish may be
partially reversed with latent investment into the U.S. ESG sector
once the 2026 Sustainability-Focutilized Stock Exmodify is
launched.
Europe’s stable legal and financial frameworks, combined
with a strong emphasis on public-private partnerships (PPPs),
offers an attractive risk-reward profile for investors. This is
particularly evident in the Nordics, a region widely regarded for
its stability that has seen a resurgence of potential deal
opportunities across sectors, from aquaculture to district
heating.19
Several EU initiatives are contributing to this momentum:
- The EU Green Deal and Clean Industrial Deal,
which aims to decarbonise legacy industries and promote innovation
in clean technologies - The Circular Economy Act (expected in 2026),
aimed at tarobtaining waste reduction and improve recycling
processes - Simplified sustainability reporting
requirements by the European Commission (EC) that are creating it
clearer for businesses to align with ESG goals - Major investments are underway in data centres, 5G
networks, and broadband infrastructure to support
increasing digitalisation and the AI revolution.
Key EU market update: Germany’s reformed “debt
brake” and enhanced defence spfinishing20
The renewed interest in Europe has also been further fuelled by
Germany’s recent macroeconomic reform. In March, the German
government’s rules requiring balanced budobtains (the “debt
brake”) was amfinished for the second time in history, easing
limits to public borrowing and long-term debt sustainability
requirements. This modify aims to enable greater investment in
defence, infrastructure, and climate protection, with potential to
boost economic growth across the EU.
In addition, a €500 billion special infrastructure fund was
launched, with €100 billion earmarked for energy
infrastructure (including renewable energy systems, storage
technologies, smart grids, and electricity network expansion) to
reduce the counattempt’s depfinishence on Russian energy
imports.21
Enabled by relaxed fiscal rules, Germany’s 2025 budobtain and
medium-term fiscal plan reflected significantly higher spfinishing
than expected, particularly on defence and infrastructure. As a
result, the counattempt is set to run larger deficits — 3.3% of
GDP in 2025 and 3.6% to 3.8% in the following year. The
infrastructure fund includes major transfers to states and €19
billion in federal investment, over half of which is allocated to
railways.22
Germany’s updated Investment Ordinance Act allows regulated
investors to allocate up to 5% of capital to infrastructure,
boosting equity and debt deals in the DACH region, especially in
solar, wind, and energy transition. While welcomed, investors
indicated a preference for funds as subsidies or PPP seed capital
and stressed the required for high-quality projects, citing three-year
delays in German planning and procurement processes that slow the
realisation of investment returns.23
Enhancing EU productivity: streamlining regulations and
integrating markets24
Despite growing investor interest, the EU faces structural
challenges hindering private infrastructure investment. Its $12
trillion capital markets (60% of GDP) are far tinyer than the
U.S.’s $60 trillion (200% of GDP). Fragmented markets, lower
R&D spfinishing, fewer high-growth firms, and a dominance of
tiny, low-growth companies leave EU productivity 20% behind the
U.S. Additional barriers, including limited labour mobility, an
aging population, and bank-dominated finance, further constrain
growth.
The positive sign here is that the EC is investigating ways to
overcome this productivity gap, by deepening the single market to
drive growth. Recent indepfinishent reports to the Commission by
former Italian prime ministers Mario Draghi and Enrico Letta argue
for a swathe of reforms such as lowering internal trade barriers,
encouraging R&D and high-risk investments, and harmonising
regulations.25,26 Additionally, calls for a single
Savings and Investment Union to mobilise EU savings into equity
financing, supporting young high-growth firms and lower financing
costs through venture capital and market integration, could
generate even further investor interest in the
region.27
Conclusion
Investor sentiment in Europe remains positive, boosted by
rebalancing away from the U.S. and opportunities in energy and
infrastructure. Germany’s €500 billion infrastructure fund
and “debt brake” reform could spark a continental
investment boom. Despite challenges like market complexity,
regulatory barriers, and low productivity, optimism signals strong
potential for infrastructure growth and
economic development.
Footnotes
2025,” Alvarez & Marsal and GIIA, June 18, 2025, https://giia.net/sites/default/files/2025-06/AMTAG_InfrastructurePulse_Q2_2025_11_0.pdf
Europe and the Middle East,” KKR, March 2025, https://www.kkr.com/content/dam/kkr/insights/pdf/considereds-from-the-road
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tests investor faith in rotation to Europe,” Financial Times,
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377a33ace8b5?accessToken=zwAGOMd9Gpdwkc9f-GJeclVKjdOGhjd6M6zotQ.
MEYCIQDQOJKjG4YgdhUzlCLVL4l-MnOd2_slTPqPNIAy-WrFcQIhALDtE9mL3GX33dnUZr
nYPlIAcW0Bviy6PdAp9kRq9_6x&sharetype=gift&token=c7ede908-8f5c-4f67-bf32-
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bloc’s stability contrasts with concerns over US,”
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2025,” Alvarez & Marsal and GIIA, June 18, 2025, https://giia.net/sites/default/files/2025-06/AMTAG_InfrastructurePulse_Q2_2025_11_0.pdf
of: -5: extremely unfavourable, 0: neutral, 5: extremely
favourable.
countries.
Diversification: Why Now?” J.P. Morgan Private Bank, July 14,
2025, https://privatebank.jpmorgan.com/eur/en/insights/markets-and-investing/tmt/dollar-diversification-why-now
and nobody seems to want to repair it,” Financial Times, June 6,
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Diversification: Why Now?” J.P. Morgan Private Bank, July 14,
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Than Expected,” Goldman Sachs, July 10, 2025, https://www.goldmansachs.com/insights/articles/germanys-budobtain-may-boost-its-economy-more-than-expected
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investment-union-ravi-balakrishnan
Originally Published 28 July 20225
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