The future of infrastructure lies in private capital, but depends on public demand

Italy needs to mobilize private capital to finance infrastructure. With high public debt and growing investment needs, relying almost exclusively on government resources means forgoing essential investments. Public-private partnerships (PPPs) offer a way forward, provided they become an economic policy choice supported by incentives for public authorities.
Italy's National Recovery and Resilience Plan (PNRR, the Italian acronym) pushed public works tenders to a record high, with €223 billion put out to tender in 2022–2023. That momentum is now slowing. In 2024–2025, the value of tenders fell to approximately €60 billion, and when the PNRR ends, the market could return to its pre-pandemic level of €35 billion annually. Moreover, the value of contracts that are ultimately awarded averages just 65% of the amount put out to tender.
Meanwhile, investment needs are still enormous. According to GSE, Italy's energy services agency, to comply with the European energy efficiency directive, the country requires €8–9 billion annually. What’s more, SDA Bocconi's Strategic Investment Lab estimates that €8 billion in investment is needed by 2030 to close the gap in social infrastructure. And strategic infrastructure projects identified by the Research Department of the Italian Chamber of Deputies are worth €522 billion, with approximately €170 billion still to be financed. In all this, private capital accounts for just 12% of the planned funding sources, and public debt reached €3.207 trillion in June 2025.
Yet infrastructure can attract capital from pension funds, insurance companies, and infrastructure funds seeking long-term returns. Greater private sector participation would also help companies grow in scale that are involved in building and operating infrastructure.
PPPs can bring these interests together. In energy efficiency projects for public buildings, for example, savings on utility bills can repay part of the investment. In transportation, fares and tolls generate revenue; residential health and social care facilities also offer opportunities. Where revenues are insufficient, public contributions can help bridge the gap. Finally, if risks are properly allocated and the other conditions established by European rules are met, the investment can remain off the public balance sheet.
So far, however, PPPs in Italy have grown primarily through private sector initiatives. More than 70% of tenders originate from private proposals, a share that jumps to 95% for contracts exceeding €100 million. What once encouraged private developers was the right of first refusal, which gave them an advantage in the subsequent tender. But since a ruling by the European Court of Justice effectively eliminated this mechanism, a change of model has become urgent. Public authorities must now take the lead in generating steady demand for partnerships aligned with the country's infrastructure priorities.
One precedent shows that this can be done. Under the REPowerEU plan, public housing agencies rapidly mobilized €1 billion to renovate residential properties. (These agencies are public entities that often operate with limited administrative capacity.) To access the funding, they were required to use PPPs. The incentive worked precisely because it targeted public demand.
The same logic should guide a national policy: allocating grants to public authorities for priority investments, starting with energy efficiency improvements in public buildings, and making those grants conditional on the use of PPPs. This would create a predictable pipeline of projects capable of both attracting institutional investors and giving companies the confidence they need to grow.
The energy sector demonstrates how dramatically this model can increase the scale of projects. In 2024–2025, of the €3 billion put out to tender, 49% was spread across 790 traditional procurement contracts, while the remaining 51% was concentrated in 75 PPP tenders. On average, a partnership is worth ten times as much as a traditional contract.
But for this policy to work, public authorities need expertise in  selecting projects and managing contracts. Above all, public resources must be used as leverage, reserving fully public financing for projects that cannot generate returns for private capital. Without structured public demand, the risk is that Italy’s infrastructure needs will remain unmet while available capital finances growth elsewhere.