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Offering the EU citizens broader access to capital markets and better financing options for companies can foster citizens’ wealth, while boosting the EU-wide economic growth and competitiveness. Firstly, the households will have more opportunities to invest in capital markets; secondly, businesses will have easier access to capital to innovate, grow and creative employment.
Background
The European Commission has adopted a new strategy within the Savings and Investments Union, SIU (another new sub-union along the recent “skills union”, etc.), which is a key initiative to improve the way the EU financial system channels savings for productive investments.
The actions in the SIU-strategy are aimed at developing a further dialogue with all interested actors (so-called stakeholders) concerning a suggested packages of measures “in a limited range of areas, with a clear link to boosting competitiveness in the EU economy, with the most impactful actions being given priority in 2025”.
Implementing the SIU will rest on both legislative and non-legislative measures, and on measures to be developed by the EU member states themselves. However, future SIU success will require collaborative efforts from all stakeholders, including the states, European Parliament, private sector and civil society.
In the second quarter of 2027, the Commission will publish a mid-term review of the overall progress in achieving the SIU.
As the Commission President notes: “new proposal for SIU will achieve a double win; first households will have more and safer opportunities to invest in capital markets and increase their wealth; secondly, businesses will have easier access to capital to innovate, grow and create good jobs in Europe”.
Source and citation from: https://ec.europa.eu/commission/presscorner/detail/en/ip_25_802
EU’s integrated capital market
Presently, the European SMEs and innovative companies cannot rely solely on bank financing. Hence, by developing integrated capital markets, i.e. alongside an integrated EU banking system, the SIU can effectively connect savings and investment needs. With the SIU, the EU is equipped with a talented workforce, innovative companies and a large pool of household savings of around €10 trillion in bank deposits. The bank deposits are safe and easy to access, but they usually earn less money than investments in capital markets.
The SIU can support the citizens well-being by offering them the choice and opportunities to pursue better returns by putting their savings to work in capital markets.
At the same time, 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 for European workers, as well as driving investment and growth across all economic sectors; specifically in areas that the EU has identified as strategically important, such as technological innovation, decarbonisation and security.
SIU’s concerted actions
Delivering the SIU is a shared responsibility of EU institutions, the member states and all key stakeholders: it requires concerted efforts and close collaboration across four strands of work:
1. Citizens and Savings: Retail savers already play a central role in financing the EU economy via bank deposits, but they should have the opportunity, if they wish, to hold more of their savings in higher-yielding capital-market instruments including in view of retirement.
2. Investment and Financing: To stimulate investments, and in particular those in critical sectors, the Commission will introduce initiatives aimed at improving capital availability and access for all businesses, including SMEs.
3. Integration and Scale: Reducing inefficiencies stemming from fragmentation will entail important efforts to remove any regulatory or supervisory barriers to cross-border operations of market infrastructures, asset management and distribution of funds; it all will enable businesses to scale EU-wide capital/financial efficiency.
4. Efficient Supervision in the Single Market: The Commission will propose measures to ensure all financial market participants receive similar treatment, irrespective of their location in the EU. This will entail reinforcing the use of convergence tools as well as a reallocation of supervisory competences between national and EU levels.
Finally, the SIU also aims at enhancing the integration and competitiveness of the EU banking sector, including through the deepening of the Banking Union. The Commission will also assess the overall situation of the banking system in the Single Market, including its competitiveness.
More in the communication at: https://finance.ec.europa.eu/publications/commission-unveils-savings-and-investments-union-strategy-enhance-financial-opportunities-eu_en
Our comment. The Draghi Report (see more in- https://www.integrin.dk/2024/09/09/eu-wide-competitiveness-challenges-and-perspectives-in-draghi-report/) has shown the major deficiencies in competition between the EU and US financial markets. Thus, the US financial services, the US-wide market consists of two major national financial securities’ entities: the New York Stock Exchange, NYSE and Nasdaq; these are two major platforms – Nasdaq with the NYSE nicknamed “the Big Board”). They are the largest stock exchange in the world by market capitalization. Presently, there are three leading stock indexes in the US: the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite.
Besides the financial sector, which is a core component of the “US capitalism”, the whole economy is guided by stock market approach. Currently, there are 13 stock market exchanges in the US that are guiding the whole economy and citizen’s investment. The US stock market sector is a group of stocks in similar industries: there are eleven different stock market sectors, according to the most commonly used classification system, known as the Global Industry Classification Standard, GICS.
Stocks’ sectors make it easier to compare which stocks are making the most money, i.e. energy and utilities, materials and healthcare, industrial sectors and real estate, etc.
A vital component of the stock market system is the active use of private capital in the form of investments into different economy sectors: in this way the public and private capital can fruitfully cooperate.
For example, in eleven top and most wealthy states in the EU, individual income is over $ 100 thousand; this amount is divided roughly in: 50% for housing and utilities, 30% for discretionary spending and 20% for savings and investment. Actually, the new European EIU is aimed at including the latter into the investment “circle”.
More in: https://www.fool.com/investing/stock-market/market-sectors/