Finns are criticized for storing money in low-yielding deposit accounts, but other Europeans do the same. If some of the money could be used for investments, it would help Europe.
On the other hand, Europeans invest their money in the United States.
The former Prime Minister of Italy of this trend Enrico Letta wants to translate. Letta presented his report on the future of the internal market to the EU leaders on Thursday.
– The worrisome trend is that every year around 300 billion euros of savings of European families are transferred outside the EU, mainly to the United States due to the fragmentation of the financial market, Letta’s report states.
Letta suggests that instead of a capital market union, a savings and investment union be created. The purpose would be to attract European private investments in the EU and to attract more of them from abroad. This requires bringing financial services into the internal market.
The savings and investment union suits Finland well. The purpose is to make European money markets attractive through reforms.
Prime minister Petteri Orpon (collect.) there is money in Europe, but the capital market does not work and the money is diverted elsewhere, especially to the United States.
According to Orpo, the member countries invested 600 billion euros in investment subsidies between 2021 and 2023. In the recovery instrument created during the Corona period, 750 billion euros of subsidies were available.
– In Europe, this is not due to a lack of public money, but to the fact that our structures do not work, the internal market does not work and, above all, the capital market does not work.
In the EU, money is now being swallowed up by green industry projects, digitization, increasing defense and supporting Ukraine. We are talking about many hundreds of billions of euros.
– European money is needed for European projects, says Orpo.
Finland has a lot of hopes for the development of capital markets so that they would also attract private money.
“Suitable for EK and SDP”
The summit also featured new common financial instruments, but Finland does not support them. For example, the Finnish Confederation of Business has proposed an EU investment fund.
Finland’s position has been known, and according to Orpo, it would have been surprising at the summit if he had suddenly supported the funds.
– It suits some, such as EK and SDP, Orpo frowned.
These two parties often do not support the same things, but the fund would benefit both.
Finland is also against the harmonization of corporate taxation, but according to Orpo, it is ready for some kind of taxation coordination.
Researcher: “EU stamp” for investments
Senior researcher Rebecca Christie from the Bruegel think tank, which specializes in economics, says that Letta’s savings and investment union is a good rebranding for the capital union.
The creation of the capital union has been slowed down, among other things, by the fact that many countries want to keep the supervision of investment products themselves. The role of the European Securities Market Authority, ESMA, has remained minor.
As a result, there are many differences in investment opportunities between different countries. For example, in some places shares can be invested in a pension fund, in others not. Centralizing control would bring unity.
In the United States, the size of the capital market alone is an advantage. There are a lot of both sellers and buyers.
– Whenever you can’t buy or sell something from the other side of the border, there are fewer customers. Especially in finance, it doesn’t work. If there are few options, little money accumulates.
In addition, index funds with low fees are available in the US.
According to Christie, customers have not been served very well in the European financial markets. It is customary to collect savings in a bank or insurance company. After that, the customer doesn’t know what happens to them. Often, the customer pays high fees and receives bad investment products.
Taxes and the related paper war when an investment from another EU country is being sold is a separate issue.
According to Christie, the investments could get a kind of EU stamp that guarantees quality. There is usually a risk in investments, but EU shares would have, for example, a reasonable premium, a diversified investment base, they would follow the rules and they would be easy to sell.