The Capital Markets Union That Isn’t: Why Brussels Keeps Losing the Battle for Savings

On 19 March 2025, the European Commission published its Communication on the Savings and Investments Union, the formal rebranding of a project Brussels has chased without success since the Juncker Commission launched the Capital Markets Union in September 2015. The new label is a confession. Eleven years of action plans, two flagship reports by former prime ministers, and four legislative omnibus packages have failed to move the central number that matters: roughly 70 percent of European Union household financial wealth, around €10tn, still sits in bank deposits and currency, where it earns less than the rate of inflation while productive investment in the bloc goes unfunded. The thesis is unsentimental. The Savings and Investments Union is not a fresh policy initiative. It is the same Capital Markets Union with an emphasis on the demand side, designed to be saleable to retail voters whose savings the bloc now needs to mobilise because the alternative, large-scale common debt issuance, remains politically blocked in Berlin and The Hague.

The Numbers That Define the Failure. The depth gap with the United States is now systemic, not cyclical. Listed equity in the European Union sits at roughly 68 percent of gross domestic product, against 170 percent in the United States. Retail savings held in market instruments represent 93 percent of European Union GDP, compared with 298 percent across the Atlantic. The Federal Reserve Bank of New York’s preferred ratio, total market capitalisation to GDP, stood above 230 percent in the United States in early 2026; the comparable European Union figure is barely a third of that. Since 2000, the EU-27 share of global listed equity has fallen from 18 percent to 14 percent, a decline running well ahead of the bloc’s loss of global GDP share. Enrico Letta’s report estimated that roughly €300bn of European household savings flows out of the bloc every year, almost all of it to United States dollar-denominated assets. That number, allowed to compound, is the financial mechanism by which European strategic autonomy is being slowly hollowed out.

Letta and Draghi: Same Diagnosis, Different Audience. Enrico Letta’s “Much more than a market,” delivered to the European Council on 18 April 2024, was the first official document to use the phrase “Savings and Investments Union” in place of Capital Markets Union, and the first to put the €33tn figure for total European private savings on a Council-blessed page. Mario Draghi’s 327-page report of 9 September 2024 reached the same conclusion through a different door: the bloc faces an annual investment shortfall of close to €800bn, equivalent to 4.7 percent of European Union GDP, and there is no plausible scenario in which public balance sheets close it. The two reports converged on three operational fault lines: the absence of a single securities-market supervisor with direct powers, the fragmentation of insolvency law into 27 separate codes that defeat any pan-European credit-risk pricing, and the post-2008 securitisation framework that imposes compliance burdens with no equivalent in United States markets. Draghi’s contribution was to attach a number to political inaction. Letta’s contribution was to make the demand-side framing palatable to social-democratic governments wary of being seen to push retail savers into equity.

The Single Supervisor Problem. Direct supervisory powers for the European Securities and Markets Authority remain the test case for whether Member States are willing to surrender competence to Brussels in a domain that touches national champions. The Commission’s Market Integration Package, adopted on 4 December 2025, proposes that ESMA assume direct supervision of pan-European market infrastructures, large cross-border central counterparties, central securities depositories, and the largest cross-border asset management groups. France, through the Autorité des marchés financiers, has supported the centralisation push and the European Central Bank has lobbied openly for it through Christine Lagarde and chief economist Philip Lane. Resistance is concentrated in the Member States whose national regulators currently extract fee income and political prestige from the status quo, with Luxembourg, Ireland, and to a lesser extent Germany the historical blockers. The 2025 package settles for direct ESMA powers over a defined perimeter rather than full Banking-Union-style consolidation; this is the maximum the German Federal Ministry of Finance has signalled it will tolerate, and the negotiations through 2026 and 2027 will determine whether even that perimeter survives Council trilogues.

Pensions Asymmetry as Structural Obstacle. The single largest structural reason European Union capital markets are shallow is that the bloc’s pension system is overwhelmingly pay-as-you-go rather than funded. Total European occupational and personal pension assets reached €10.3tn in 2024, but almost two-thirds of that figure sits in three Member States, with the Netherlands alone holding roughly €3.4tn through its mandatory second-pillar funds. France and Germany, the two largest economies, run predominantly PAYGO state systems and have minimal funded retirement savings of comparable scale, which means there is no equivalent of the United States 401(k) and IRA architecture to channel household savings into equity markets at scale. The British Mansion House reforms, the consolidation of local government pension scheme assets and the redirection of defined-contribution capital into productive United Kingdom investments, are an attempt to replicate at smaller scale what the Swedish premium pension system, the PPM, has done since 2000 with centralised administration costs of below €10 per account holder annually. The Commission’s proposal for a “European blueprint” for savings and investment accounts, due in the third quarter of 2025, is the closest Brussels has come to a 401(k) analogue, but it remains a recommendation to Member States on tax treatment rather than a directive, and tax remains a unanimity file.

Securitisation, Insolvency, and the 28th Regime. The Commission’s securitisation reform package of 17 June 2025 cuts reporting fields by at least 35 percent, recalibrates the Liquidity Coverage Ratio treatment of senior tranches, and extends simple, transparent and standardised eligibility to unfunded credit protection from insurers. The Council agreed its position on 19 December 2025. None of this addresses the fundamental scale problem: the European Union securitisation market shrank by roughly two-thirds after the 2017 framework took effect in 2019, and even with reform will require eighteen to twenty-four months before legislation lands. Investment-grade euro corporate bond markets stand at roughly 40 percent the size of their dollar-denominated equivalents, while AA-or-higher sovereign bond stock sits below 50 percent of GDP in the European Union against more than 100 percent in the United States. The proposed “28th regime,” a pan-European corporate-law framework allowing innovative companies to opt out of national codes, was tabled by the Commission and is now stuck on the insolvency question. Member States with creditor-friendly regimes resist convergence downward; those with debtor-friendly regimes resist convergence upward. The likely outcome is a directive that excludes insolvency, labour, and tax, which is to say the three areas where harmonisation would actually move capital across borders.

The Verdict. The Savings and Investments Union is the test of whether post-Trump-tariff, post-Russia-energy-shock Europe can mobilise its own savings or whether it accepts permanent dependence on dollar capital markets for productive investment. The €10tn parked in deposits and the €300bn-per-year capital outflow are the financing base on which the €800bn Draghi gap must be closed. The Commission’s March 2025 strategy is honestly diagnosed and modestly proposed; the legislative timetable, with securitisation reform, the single-supervisor package, and the European savings account all needing Council and Parliament conclusion before mid-2027, is plausible but unforgiving. If nothing concrete is delivered by that date, the gravitational pull of United States markets will be locked in for the remainder of the decade, and the European industrial-policy ambition articulated by Letta and Draghi will die for lack of a financing instrument. The probability of that outcome is materially higher than the Berlaymont currently signals.

Read our full Report Disclaimer.