Establishing a savings and investments union will unlock €33 trillion in private savings, according to former Italian prime minister Enrico Letta, boosting EU competitiveness on the global stage.
In his recent report, Letta stated that establishing a savings and investments union within the EU single market will help to build a more integrated and robust European financial market, allowing the region to channel its savings towards investment needs.
Currently, per the report, a significant proportion of the €33 trillion in private savings across the EU is being diverted to the US economy and US asset managers. “This phenomenon underscores a significant inefficiency in the utilisation of the EU savings,” Letta affirmed, savings which could otherwise be used to help the EU achieve its strategic directives.
By introducing a savings and investments union, these savings could be retained in the EU and encourage greater investment in the continent, both from domestic and private investors. “This strategic approach is vital for enhancing the EU’s financial landscape,” he said, “ensuring that it can harness its substantial economic resources to their fullest potential, thereby supporting its role as a key player on the global stage.”
Elsewhere in his report, Letta highlighted the factors driving the need for updates to the European single market. These include a demographic and economic shift since the single market was established. Europe faces an ageing and shrinking population, Letta explains, and is lagging behind both the US and Asia. The EU needs to become more competitive on a global scale, he adds, advocating for the mobilisation of private capital and a conclusion on the state aid debate.
In addition, the “rules-based international order” that the single market is based around is facing a number of challenges; trade conflicts, wars and the “resurgence of power politics” are undermining the system’s principles. Letta goes on to state that the success of the EU relies on free trade and openness and that as such, an international framework needs to focus on upholding this order and maintaining peace and economic security. “It must be able to protect the fundamental freedoms, based on a level playing field, while supporting the objective of establishing a dynamic and effective European industrial policy”.
Letta presents the upcoming Multiannual Financial Framework (2024-2029) as fertile ground for such changes to be made, advancing the vision of an updated single market.
The European Fund and Asset Management Association (EFAMA) has voiced its broad agreement with the principles of Letta’s report, commenting that “While we will need some time to analyse Enrico Letta’s report, we welcome its high level of ambition and the determination to make a leap, cut red tape, strengthen the single market and allow EU companies to compete on a global level. More competitive European companies will naturally attract more capital and enjoy better financing conditions, thereby further reinforcing their competitiveness.
“Letta correctly identifies that when it comes to boosting EU capital markets, better connecting the real economy with European citizens’ savings will be a key driver of success. We now need bold actions from all stakeholders involved to turn that vision into reality.”
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