Four years after the onset of the downturn in Europe, growth is still anaemic. At the heart of this stagnation is a crisis of private investment. Between 2007 and 2011, the decline in private investment in the EU-27 was larger than any previous fall in absolute terms. Private investment has been the hardest-hit component of GDP but, with all other potential drivers of growth constrained, will be vital for Europe’s recovery. Yet private investment has received scant attention thus far in the debate on revitalising European growth. This report, led by the McKinsey Global Institute, explores the factors behind the sharp decline of private investment since 2007, analysing past contractions in European and other advanced economies to gain insight into prospects for its recovery. It puts forward an approach to help policy makers design a programme of micro-economic activism focused on unleashing a wave of new investment that can drive European growth and renewal.