Munich: Europeans are famously good savers and famously cautious investors, parking trillions of euros in bank deposits that earn little and finance even less of the continent’s ambitions. The European Commission’s drive to change that, branded the savings and investments union, is moving from slogan to substance, with a fresh package of measures aimed at coaxing money out of low-yield accounts and into the companies that need it.
The diagnosis behind the project is blunt. European households hold a far larger share of their wealth in cash and deposits than their American counterparts, who put much more to work in capital markets. The gap is not merely a matter of personal returns forgone; it starves European firms of the equity they need to scale, leaving promising companies to seek funding, and often to relocate, across the Atlantic. Closing that gap has become a central plank of the Union’s wider push for competitiveness.
At the retail end, the centrepiece is the idea of simple, low-cost savings and investment accounts that ordinary people could open with an authorised provider and use to invest in capital markets, ideally sweetened by tax incentives that member states would be encouraged to offer. The Commission has paired that with a renewed emphasis on financial literacy, on the reasoning that people will not invest in products they do not understand. The products are meant to be portable and easy to compare, so that a saver is not locked into whatever a single bank happens to sell.
Banks sit awkwardly at the centre of the plan. They are the channel through which most Europeans will ever encounter an investment product, which makes them indispensable to the strategy, yet the strategy also aims to move savings out of the very deposits that fund bank lending. Supervisors have begun pressing lenders to see themselves less as deposit-takers and more as enablers of capital markets, steering clients toward investments and earning fees for doing so, rather than guarding the savings on their own balance sheets.
The Commission has also moved on the institutional side, adopting measures meant to free up the capital that banks and insurers can channel into the economy, part of a broader roadmap that stretches from securitisation rules to the plumbing of cross-border investment. A report on the competitiveness of the Union’s banking sector, due later this year, will take stock of how the single market for banking is faring and where it remains fragmented along national lines.
Scepticism is warranted, because Brussels has promised a genuine single market for capital before, under earlier labels, and delivered only incrementally. The obstacles are stubborn and largely national, from divergent tax treatment to insolvency laws that differ at every border, and they cannot be swept away by a strategy document. What is different this time is the sharpened sense of urgency, driven by the need to finance defence, the green transition and digital infrastructure at a scale public budgets cannot meet alone. Whether that urgency is enough to overcome twenty-seven national habits of saving and regulating is the question the coming year will start to answer.
