The biggest test yet for the European Union. It must win essential investments to continue to compete with heavy economic hitters such as the United States and China. Indeed, as outlined in former Italian Prime Minister Mario Draghi’s recent report, there is an urgent need. The bottom line By 2030, the EU needs to direct at least €750 billion to €800 billion each year. This funding is needed to meet the continent’s enormous investment needs, especially in segments such as climate change.
Published last autumn, Draghi’s report warns that without urgent action Europe stands to endanger its social model, habitat and liberty. This call to action asks member states to act quickly, or risk being left behind on the global stage.
Thierry Philipponnat, the chief economist of Finance Watch was equally alarmed at the prospects for the new Single Investment Universe (SIU). All in all, he feels it’s really just a “repackaging” of the 2020 goals for the Capital Markets Union. He highlighted that too many European firms are failing to capitalise on the scale and synergies provided by the single market. This oversight put our students at a serious competitive disadvantage.
…makes it impossible for European firms to reap the benefits of the scale and synergies of the single market. This is expensive and an important competitive disadvantage for the EU,” added Albuquerque.
Yet Sébastien de Brouwer, the deputy CEO of the European Banking Federation, had a particularly strong take on that. He cautioned that without a serious rethinking of public finance, the SIU likely won’t deliver on its intended benefits. He stressed that the program is oriented towards citizens investing in the financial markets for their long-term future. It encourages diversification of investments to maximize returns over the long haul.
De Brouwer reiterated the SIU’s goal of motivating citizens to actively participate in financial markets as a means of securing their own future. By diversifying their portfolios, they’ll deliver more stable long-term returns to pay for retirement.
Maria Luis Albuquerque, the EU Commissioner for Financial Services, emphasized that private capital alone cannot meet Europe’s extensive investment demands. She highlighted the importance of reexamining regulations and oversight. These changes are necessary to ensure that our nation’s banks can remain competitive, profitable, and stable moving forward. This review is an opportunity to ensure that banks can lend more, helping to drive more productive investment throughout Europe.
As Albuquerque said, We need to make investing in Europe’s alternative the default attractive option. The only way we’ll succeed at this is by designing those conditions to provide great opportunities, great returns and low barriers.
Albuquerque really pointed out an important thing. It penalises many European citizens who are unable to earn decent returns on their savings, without incurring high costs or administrative burdens. Too many European citizens are not getting a reasonable return for their life long savings. This state of affairs is unfortunate and leads to bad outcomes for all parties.
Philipponnat therefore stressed that what we need is a radical shift in political will from EU member states. Without this change, delivering on the SIU’s goals will be an uphill battle. He emphasized that private capital will not be enough to meet Europe’s huge investment requirements, particularly with respect to climate projects.
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