The European Union is sitting on €33.5 trillion in household savings 1 , or one quarter of its collective GDP, yet much of this money is stuck in banks because households prefer cash over market investments. Meanwhile, former Italian Prime Minister Enrico Letta pointed to the EU’s fragmented capital markets as a big opportunity to spark growth and future investment in his report on the 27-country single market, published 17 April (Letta, 2024). He offered a menu of ideas to help the EU put its finances to work in the context of the need to find an extra trillion euros a year to fund the digital and green transitions and to meet defence needs. Managing climate change alone calls for finding 2.6 percent of GDP per year (I4CE, 2024).
Letta’s best idea, a new retail investment product that could be sold across the EU, could bring a single market for financial services much closer to reality than currently. To succeed, such an investment fund would need to be low-fee, highly diversified and available for sale across borders. Providers would need to commit to handling back-end tax filings on behalf of ordinary investors, who in turn should feel confident that any investment with an EU stamp would be easy to buy and sell, and unlikely to contain hidden pitfalls. Letta does not go into detail on what is needed but his endorsement, combined with an acknowledgment that previous efforts have been too unwieldy to succeed, may be the impetus needed to get such a project off the ground.
Letta’s capital markets recommendations reinforce recommendations from other stakeholders, including the Eurogroup, European Central Bank 2 and various high-level expert groups. He posits incremental and feasible changes that could be put in place by 2026, even if in some cases he just calls for “progress” toward common supervision and other long-term goals. Only one recommendation misses the mark: the EU will not legally be able to consolidate all of its €1 trillion in outstanding institutional borrowing under a single debt management office, likely making it impossible to consolidate safe assets into a unified brand.