How can we finance the extra investment needed in the European Union?

The investment required to meet the challenges of competitiveness and energy and technology transition in the European Union is huge, and the need for it is imminent (2025-2030). To this must now be added expenditure to strengthen the European Union’s military capabilities. To finance this, the EU must of course speed up its roadmap towards a Savings and Investment Union. But given the urgency, it must also take account of its financial ecosystem and rely on its banks. The postponement of the FRTB (Fundamental Review of Trading Book) until 2027 and the European Commission’s legislative proposal on securitisation, expected in June, are steps in this direction.

What amounts are we talking about?

Based on calculations made by the European Commission, Mario Draghi estimated in his September 2024 report to the President of the European Commission that the EU’s financing needs for competitiveness and the energy and technology transition would be in the region of EUR 750 to 800 billion per year. According to our calculations, the ReArm/Readiness 2030 plan, approved by the European Council on 6 March, will add nearly EUR 190 bn per year1. Combined with the financing needs of the European economy that must continue to be covered (for which historical financing flows provide an order of magnitude), these additional needs will increase the overall annual financing needs of the EU economy to more than EUR 1.5 trillion until 2028, and then to almost EUR 1.4 trillion until 2030, i.e., more than double the flows observed between 2014 and 2024. Admittedly, some of these investments will replace other, pre-existing investments, but this proportion, which is contained overall, does not call into question the overall diagnosis of a colossal need for financing in the European Union.

Greater integration of capital marekets: A necessary but not sufficient condition

The « Savings and Investment Union » is the focus of most hopes. The idea was initially launched by the European Commission in 2014 under the name of « Capital Markets Union ». Since then, several action plans and legislative and non-legislative acts have followed, but its realisation is still a long way off. The main obstacles to greater integration of capital markets include the heterogeneity of laws governing companies in difficulty and national supervision of financial markets. On 19 March 2025, the Commission published a communication aimed at relaunching the project, followed on 15 April 2025 by a targeted consultation, open until 10 June. Mario Draghi himself readily admits that however essential it may be, greater integration of the capital markets will not on its own make it possible to release the necessary sums. Moreover, the road to Savings and Investment Union is still a long one and, once its institutional existence has been established, its success will depend on investors’ appetite for long-term, risky European assets. The European economy is characterised by abundant savings flows (around EUR 1.4 trillion), but above all by a strong preference among savers for liquid, low-risk assets. These preferences, dictated by historical and cultural factors, are deeply rooted and unfortunately cannot be changed by magic. In the medium term, they are part of the statement, as is the preponderance of banking intermediation in the financing of the economy, which echoes them.

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