The European Commission is looking to boost Europe’s economy by redirecting the savings of citizens across the EU towards investments to remain competitive globally. The proposed Savings and Investments Union aims to address the fact that while European households save €1.4 trillion annually, a significant amount of these savings flow into non-EU markets each year. The EU Commissioner for Financial Services has highlighted the need to make investing in Europe the obvious choice by creating conditions that allow for attractive opportunities, competitive returns, and low barriers to investment. Mario Draghi’s report on competitiveness emphasized the need for significant investments in the EU to stay competitive against global players like the US and China, urging member states to respond quickly to avoid falling behind.
The Savings and Investments Union plan will focus on addressing barriers that prevent insurers, banks, and pension funds from investing in equity. It will also review EU rules on securitization to free up resources from banks and better support companies. The European Investment Bank Group and national promotional banks will work to attract private investors into co-financing projects that align with the EU’s economic and political objectives. Efforts to reduce inefficiencies within the single market and remove regulatory barriers for businesses scaling across the EU will also be central to the plan. The EU aims to make sure all financial market participants are treated equally, with a reallocation of supervisory responsibilities between national and EU levels.
While the communication about the Savings and Investments Union has generated mixed reactions from stakeholders, some see it as a positive step to mobilize private capital and stimulate investment in the EU. However, others like the chief economist at Finance Watch believe that private capital alone cannot meet Europe’s vast investment needs, particularly in areas like climate action, and that the lack of political will from member states poses a significant challenge. On the other hand, the European Banking Federation views the SIU as more than just a rebranding exercise, emphasizing its broader scope compared to the long-stalled Capital Markets Union project. They believe the SIU will encourage citizens to invest in financial markets for their future and diversify their investments to potentially yield better long-term returns.
The EU banking sector remains fragmented and smaller compared to the US market value of its largest banks, highlighting the need for regulatory and supervisory measures to ensure competitiveness, profitability, and stability. The European Commission plans to introduce measures to promote equal treatment of financial market participants across the EU, as well as to streamline and simplify regulations and supervision where necessary. The overall goal is to create conditions that make investing in Europe an attractive option for both companies and citizens, ultimately unlocking the full potential of the bloc’s capital markets. The focus is on mobilizing private capital, increasing access to finance for EU companies, and facilitating co-financing projects that support both the EU’s economy and political objectives.
