We have entered a time of geopolitical tensions in which global cooperation can no longer be taken for granted. The European Union’s international competitive position is now not only an issue of economic growth, but of sovereignty. It is high time Europe mobilises its abundant savings towards financing the continent’s strategic priorities such as climate transition, digitalization and defense. Strengthening Europe’s capacity to finance its priorities also requires a more self-sufficient financial system. As of today, the combined capitalisation of US bond and equity markets far surpasses that of the EU. And the venture capital market, crucial to finance innovation and growth, is 6 times bigger in the US. Europe needs to improve in this regard, and advancing the Savings and Investments Union is the way forward.
Given its crucial role in financing Europe’s economy, the strong impetus to improve competitiveness has reached the EU banking sector. In this context, one might be tempted to call for deregulating the banks, arguing that this would enhance their competitiveness and capacity to drive economic growth. It would be a mistake. The sector’s resilience – bolstered by reforms following the 2008 financial crisis – is instrumental in ensuring that banks can continue to support the large and growing financing needs associated with Europe’s strategic ambitions. And the more volatile the international environment gets, the more valuable resilience becomes.
