This article is a part of Poland Unpacked. Weekly intelligence for decision-makers
Public investment across the European Union is set to reach its highest level in nearly two decades in 2026, with Poland among the countries spending the most relative to GDP. The surge is being driven by EU recovery funds, rising defense expenditure, and efforts to modernize infrastructure after years of underinvestment.
Interactive chart Public investment in almost every EU country is expected to be significantly higher in 2026 than the annual average recorded between 2015 and 2024. The highest shares of GDP are forecast in Estonia (7.8%), Romania (6.8%), and Latvia (6.6%). Romania is expected to see the largest increase compared with the previous decade's average, at 2.6 percentage points, followed by Portugal and Estonia, both at 2.2 percentage points.
In Poland, public investment is projected to reach 5.3% of GDP, compared with an average of 4.3% in 2015–2024, placing the country among the EU's relatively high public investment spenders.
Hungary is a notable exception to the broader trend. Its public investment is forecast to fall to 3.9% of GDP, down from an average of 5.4% over the previous decade. This largely reflects restricted access to EU funding and investment cuts introduced in recent years.
Recovery funds and EU financing...
The main driver behind the sharp increase in public investment across the EU in 2026 is the concentration of spending under national Recovery and Resilience Plans (RRPs).
2026 marks the final year for implementing projects under the EU's Recovery and Resilience Facility (RRF). Member states are therefore accelerating investment projects to make full use of the available funding. This is particularly evident in transport infrastructure, energy, digitalization, and the modernization of public services.
An additional source of financing comes from EU cohesion policy funds allocated under the bloc's 2021–2027 budget framework.
...and defense spending
The second major factor is rising defense expenditure, driven by Europe's deteriorating security environment.
According to the European Defence Agency, defense investment across the EU is expected to reach approximately EUR 163 billion in 2026, up from EUR 134 billion in 2025.
Public investment is also being supported by national infrastructure modernization programs, including upgrades to energy grids and transport networks.
The relative importance of these drivers varies between countries. It is also worth remembering that not all defense expenditure or projects financed through recovery funds qualify as public investment under national accounting rules.
The EU as a political player
These developments are particularly interesting for three reasons.
First, the Recovery and Resilience Facility represents a fundamental shift in how the EU finances investment. For the first time, the bloc launched a program on such a scale funded through jointly issued EU debt.
Second, a similar mechanism has been adopted for the Security Action for Europe (SAFE) program. It provides for up to EUR 150 billion in loans for defense investment, financed through debt issuance by the European Commission.
Third, changes to the EU's fiscal rules are also supporting higher investment. They allow member states to temporarily increase defense spending without breaching the requirements governing their net expenditure paths.
Together, these three mechanisms illustrate the growing influence of political decisions made at the EU level on national fiscal policies.
The EU is no longer merely co-financing investments through joint borrowing. It is also creating fiscal space for governments to increase spending in selected areas.
There is, however, an important distinction between these instruments. The RRF and SAFE provide financing, while the fiscal escape clause offers greater flexibility under EU budget rules but does not itself supply additional funds.
The highest level in nearly two decades
The weakness of public investment in the EU was particularly pronounced between 2013 and 2019.
Following the global financial crisis and the eurozone sovereign debt crisis, public investment fell from 3.97% of GDP in 2009 to just 2.95% in 2016, the lowest level in the period analyzed.
The trend began to reverse in 2020. By 2025, public investment had reached 3.89% of GDP, its highest level since 2009.
According to the European Commission's May forecast, public investment is expected to rise to 4.0% of EU GDP in 2026 and remain at that level in 2027.
Interactive chart Europe's relatively low levels of public investment have frequently attracted criticism in recent years. Insufficient spending on infrastructure, energy, and new technologies has been seen as a constraint on economic growth and competitiveness, particularly compared with the United States and China.
Against this backdrop, the current surge in public investment can be viewed as an attempt to make up for years of underinvestment.
Germany, in particular, has undertaken a significant shift in its approach to public investment.