The European Commission (EC) has come up with a plan to better utilize the savings of millions of Europeans currently sitting in bank deposits. The EC claims the money can be used in a more productive way, providing the EU with cash to invest in strategic objectives.
The bloc’s executive body announcedit’s launching the newly adopted Savings and Investments Union (SIU) strategy this week. The initiative aims to enhance Europe’s financial system in order to translate savings into needed investments more effectively.
Brussels wants to channel household savings into productive investments
The Commission assures the SIU will create better financial opportunities for all, including broader access to capital markets for Europeans as well as better financing options for European companies. “This can foster citizens’ wealth while boosting EU economic growth and competitiveness,” it insisted.
The funds that Brussels is interested in amount to €10 trillion ($10.8 trillion), which is what European households now keep in bank deposits. The latter are “safe and easy to access, but they usually earn less money than investments in capital markets,” a press release pointed out.
“Currently, too few European citizens make a decent return on their hard-earned savings. At least not in a simple and cost-efficient way. In Europe, we have over 10 trillion euros sitting in low yield deposit accounts,” EU Commissioner for Financial Services Maria Luis Albuquerque told media on Wednesday.
The hope is to entice Europeans to put their money to work in capital markets in pursuit of better returns compared to regular bank deposits. According to data shared in a Euronews report, households in member-states save €1.4 trillion annually, but around €300 billion of these savings end up in non-EU markets now.
President of the European Commission Ursula von der Leyen described the proposal as a double win. “Households will have more and safer opportunities to invest in capital markets and increase their wealth. At the same time, businesses will have easier access to capital to innovate, grow and create good jobs in Europe,” she stated.
We are making investing in Europe easier.
The Savings & Investments Union will boost growth and create good jobs.
And it will give citizens more choice to make the best financial decisions for themselves.
EU needs up to €800 billion each year to remain competitive
The European Union will need €750-800 billion in additional investments per year by 2030 to adequately address current challenges stemming from geopolitical, technological and climate changes, according to the Competitiveness Compass, another initiative of the Commission. Add to that number the growing defense needs.
The estimate comes from a 400-page report presented by former Italian Prime Minister Mario Draghi last year. The document highlighted certain transformational imperatives and suggested concrete steps the EU needs to take to remain competitive on the global stage.
“We have reached the point where, without action, we will have to either compromise our welfare, our environment or our freedom,” said Draghi, who also headed the European Central Bank until 2019. He urged for a swift EU response to prevent lagging behind competitors like China and the U.S.
Much of the money should fund small and medium-sized companies
The European Commission said a lot of the additional investment should go to small and medium-sized enterprises (SMEs) in the Union. These firms cannot rely on bank financing alone, it noted, insisting the SIU can effectively connect citizens’ savings with these businesses’ investment needs.
“The EU is equipped with a talented workforce, innovative companies and a large pool of household savings,” Brussels’ executive arm emphasized. “More investments in capital markets support the real economy by enabling companies across Europe to grow and thrive. This can create better jobs with more competitive salaries,” it added.
Capital should to become more accessible to European companies, the Commission believes. In this context, it intends to tackle barriers preventing banks, insurers and pension funds from investing in equity and reform securitization rules. Removing regulatory and supervisory barriers to cross-border business operations, asset management and distribution of funds is also on the agenda.
The launch of the Savings and Investments Union indicates that EU officials have come to the realization that public funding alone would not be sufficient to satisfy all ambitions, hence the push to channel private money into capital markets. Critics have raised concerns, however, that private capital won’t meet Europe’s increased investment needs either and called for reviewing public finances.
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This articles is written by : Nermeen Nabil Khear Abdelmalak
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