10 trillion euros from Europeans' accounts, directed to the stock market - Von der Leyen's plan - 21.03.2025

Ursula von der Leyen took the first step on Wednesday towards mobilizing European citizens' savings from bank deposits to finance European industry and the defense industry. The 800 billion euros needed annually to implement Draghi's plan on the competitiveness of European industry at a global level and the 800 billion euros needed for the defense industry to modernize it by 2030 will be provided by European citizens who will be able to more easily give up bank deposits to move them to the capital market, that is, to investment funds that operate on European stock exchanges, including the Bucharest Stock Exchange.

The strategy announced by Ursula von der Leyen is correct, if we take into account the fact that the yields on bank deposits and shares vary significantly between the European Union (EU) and the United States of America (USA), influenced by factors such as monetary policy, economic conditions and investment cultures. While in the EU, interest rates on euro bank deposits have generally been low in recent years (for example, in Romania, interest rates on 12-month euro deposits ranged between 1% and 3.5% in 2024, depending on the bank and the amount), the returns offered by capital markets are much higher. However, it is a characteristic of the European market that, in contrast to American citizens who invest their savings by buying shares on the stock exchange or in investment funds or pension funds, citizens of the 27 EU Member States prefer to keep their money in bank deposits, considering that the risk of loss is much lower compared to the risks existing on the capital market.

The press release issued by the European Commission on Wednesday evening regarding the presentation of the strategy for the Economic and Investment Union went unnoticed in the press in our country, just as the statement in January by the governor of the National Bank of France regarding the mobilization of bank deposits of European citizens went unnoticed.

In the press release cited, Maria Luis Albuquerque, Commissioner for Financial Services and the Union for Savings and Investment, said:

"Europeans are some of the best savers in the world, but much of their savings are in low-yielding deposit accounts. At the same time, Europe is struggling to meet its investment needs. With the SIU, we can create a virtuous cycle for the benefit of both citizens and businesses, helping Europeans get a better return on their hard-earned savings, while bringing substantial investment to the economy. There are barriers that we need to overcome to make this happen, and with this Communication we have a roadmap for this vital work."

In other words, the European Commissioner is telling EU citizens to take their money out of bank deposits, because they have low yields, and move it to the capital market, in future investment funds that will finance European companies and the giants of the continental defense industry.

For her part, the President of the European Commission, Ursula von der Leyen, said: "With today's proposal for an Economic and Investment Union, we are getting a double win. Households will have more and safer opportunities to invest in capital markets and increase their wealth. At the same time, companies will have easier access to capital to innovate, grow and create good jobs in Europe."

Basically, EU leaders are urging all European citizens, including pensioners who have kept their money in banks for 40 years - white money for rainy days - to take it out of there and play with it on the stock market through investment funds.

• What does the European Commission's strategy foresee?

The Economic and Investment Union (EI) strategy aims to provide EU citizens with wider access to capital markets and better financing options for companies. According to the press release issued by the European Commission, the EI is a horizontal facilitator that will create a financing ecosystem that benefits from investments in the EU's strategic objectives.

"As highlighted in the Competitiveness Compass, Europe's capacity to address current challenges - such as climate change, rapid technological change and new geopolitical dynamics - requires significant investment, which the Draghi report estimates at euro750-800 billion per year by 2030 and which is further affected by increased defence needs. A large part of these additional investment needs concern small and medium-sized enterprises (SMEs) and innovative companies, which cannot rely solely on bank financing. By developing integrated capital markets - alongside an integrated banking system - the SIU can effectively connect savings and investment needs," the press release states.

The cited source shows that European citizens hold euro10 trillion in bank deposits.

"Bank deposits are safe and easy to access, but they usually earn less money than investments in capital markets. The SIU can support the well-being of our citizens by giving them the choice and opportunities to pursue better returns by putting their savings to work in capital markets. At the same time, more investment in capital markets supports the real economy, allowing companies across Europe to grow and prosper. This can create better jobs, with more competitive wages for European workers and stimulate investment and growth in all economic sectors - in particular in areas that the EU has identified as strategically important, such as technological innovation, decarbonisation and security", the press release of the Community Executive also states.

According to the European Commission, four lines of action will be pursued:

- Citizens and savings: retail savings already play a central role in financing the EU economy through bank deposits, but they should be able, if citizens wish, to keep more of their savings in higher-yielding capital market instruments, including for retirement (Warning! This means more money for the 3rd pillar of pensions, but also a high risk in the event of an economic and financial crisis such as the one in 2008-2009 in the USA).

- Investment and financing: to stimulate investment, and in particular those in critical sectors, the Commission will introduce initiatives aimed at improving the availability of capital and access for all businesses, including small and medium-sized enterprises.

- Integration and scale: Reducing inefficiencies stemming from fragmentation will require significant efforts to remove any regulatory or supervisory barriers to cross-border operations of market infrastructures, asset management and fund distribution. This will allow businesses to scale up efficiently across the EU.

- Effective supervision in the single market: The Commission will propose measures to ensure that all financial market participants receive similar treatment, regardless of their location in the EU. This will require a strengthened use of convergence tools, as well as a reallocation of supervisory powers between the national and EU levels.

The actions proposed in the European Commission's strategy will be further developed in the coming period, in continuous dialogue with stakeholders. Packages of measures will be taken in a limited range of areas, with a clear link to boosting competitiveness in the EU economy, with the most impactful actions taking priority in 2025. The implementation of the SIU will be based on both legislative and non-legislative measures, as well as measures to be developed by the Member States themselves. Future success will require collaborative efforts from all stakeholders, including the Member States, the European Parliament, the private sector and civil society. In the second quarter of 2027, the Commission will publish an interim review of the overall progress towards the Economic and Investment Union.

We note that for the preparation of this article we also requested views from the National Bank of Romania and the Romanian Banking Association, but by the time of going to press we had not received any replies.