Europe’s savings glut won’t finance its future until it backs its own scale-ups

12th March 2026 

Key takeaways

The EU Savings and Investments Union should urgently consider measures to help channel Europe’s vast household savings into growth equity to finance scale-ups in defence, technology, health and energy. Europe creates strong start-ups but lacks late-stage capital, leading firms to sell early or list abroad. Institutional reforms and bigger banks are insufficient without a deeper investor base. Three actions are suggested: broaden retail participation through simple investment accounts, create large public-private scale-up funds anchored by the EIB, and introduce a “28th regime” to ease cross-border scaling. The priority is mobilising patient equity capital at scale to strengthen competitiveness and sovereignty.

Europe’s savings glut won’t finance its future until it backs its own scale-ups

A Savings and Investments Union should prioritise patient risk capital and scale-up conditions - not yet another institutional reshuffle.

Europe’s leaders are once again talking about mobilising the continent’s savings. In Brussels, the numbers are invoked like a mantra: trillions in deposits earning little, while the EU is asked to fund defence, the energy transition and the next wave of deep technology. The Commission is preparing new steps on a Savings and Investments Union, and it is even signalling it could move ahead with a coalition of willing countries if unanimity proves impossible.

The political instinct is right. Europe does not have a savings problem. It has an allocation and scale problem. The danger is that this debate collapses into a familiar technocratic argument about supervisory architecture and market infrastructure. Those issues matter, but they are rarely the binding constraint. The binding constraint is that Europe still lacks a deep, repeatable base of long-term risk capital able to finance scale-ups - and to keep ownership, listing venues and strategic decision-making anchored at home.

Two landmark blueprints point in the same direction. Enrico Letta’s 2024 report urges a reinvigorated single market that is 'much more than a market': one that enables Europe to 'play big', adds a 'fifth freedom' for knowledge and treats scale as a strategic imperative. Mario Draghi’s competitiveness report, published in 2024, quantifies the investment gap and the financial system’s role in closing it: Europe relies too much on bank lending, has underdeveloped long-term saving products, and suffers from fragmented rules that make cross-border scaling harder than it should be.

They are right on diagnosis. Where I would differ is on sequencing - and on the temptation to treat institutional redesign as the main act. Letta’s agenda is deliberately broad, spanning energy, telecoms, services and capital. Draghi’s is necessarily systemic, extending from capital markets to banking union and securitisation. Yet Europe has limited time and political bandwidth. It needs triage: a few decisive moves that shift the investor base and the scale-up pipeline within this decade, not the next.

A decade of data tells us where to look. In 2015, Europe and the US were comparable in economic size, but the US already had much deeper capital markets. The key difference was not a superior US capacity to invent - Europe has built world-class start-up hubs - but the US capacity to finance growth at scale. Patient domestic capital, especially through funded pensions, provided a natural pipeline from early growth to late-stage expansion.

Since then the divergence has widened. The US has combined stronger growth with a massive expansion in equity markets and private capital. Europe, by contrast, still hits a wall at the 'Series B/C moment': the point at which a company needs EUR 50m, EUR 100m or more to industrialise, expand and compete globally. When those tickets do not exist locally, founders do what rational actors do: they sell earlier, raise more from outside Europe, or list in the US where liquidity and valuation are better. Europe exports future control along with future jobs.

Draghi puts a hard number on the structural cause: in 2022, funded pension assets in the EU were only 32% of GDP, versus 142% in the US (and 100% in the UK). In Europe, pension wealth largely sits in pay-as-you-go public systems rather than in capital pools that buy equities and growth assets. Where funded pensions are stronger - the Nordics and the Netherlands - equity markets tend to be deeper and the IPO pipeline healthier.

This is also why the debate about creating 'bigger European banks' can be a distraction. Banking matters, but banks are not designed to be the venture and growth equity engine Europe lacks. Credit is not equity. The politics are awkward too: retail banking remains intertwined with national sovereignty, and a full EU deposit insurance scheme is a heavy lift. Meanwhile, Europe’s challenge is not a shortage of bank balance sheet capacity; it is a shortage of patient equity and risk-tolerant capital able to hold through volatility.

Nor is the problem primarily the market plumbing. Europe’s trading and post-trading infrastructure works. Draghi and the Commission are right to argue that fragmentation raises costs and limits depth, and that cross-border frictions such as insolvency and withholding tax regimes should be tackled. But consolidation of exchanges, clearing and settlement - or the creation of a single super-regulator overnight - will not automatically create EUR 100m cheques for defence tech, biotech, energy hardware or frontier AI.

A Savings and Investments Union should therefore be treated less as a technocratic capital markets project and more as a strategic financing plan for European autonomy. The goal is not to 'Europeanise' every piece of supervision. The goal is to build channels that turn European savings into European growth equity, at scale, especially in four sectors where dependence is strategically costly: defence, health, deep tech and energy.

That suggests three links that must be strengthened - quickly.

First: build structural demand for growth equity. 

The Commission’s push for Savings and Investment Accounts (SIAs) can help by offering citizens a simple wrapper for regular investing, starting with very small monthly amounts. But to change behaviour at speed, Europe should be willing to use incentives - carefully designed. The UK’s Enterprise Investment Scheme shows how tax relief can de-risk long-term equity investment. Europe could adopt a more disciplined version: incentives tied to long holding periods, strict eligibility criteria, transparency, and guardrails against mis-selling. The aim should be to reward patient ownership. A sensible start would be capital gains relief after a minimum holding period, loss relief and inheritance tax incentives - but only for qualifying investments in European growth companies and strategic sectors.

Second: accept that pensions are a generational project - and build bridges. 

The Commission’s supplementary pensions package, including recommendations on auto-enrolment, is directionally right. But pensions are a national competence and reforms take time. Solvency rule changes for insurers also move slowly. Draghi is blunt that the private sector will not finance the required investment surge without public support. Europe therefore needs temporary public-private instruments that crowd in institutional capital while preserving market discipline:

• The obvious candidate: the Scale up Europe Fund marks Brussels’ most ambitious attempt yet to close the continent’s chronic late-stage funding gap and keep its most promising technology champions at home. Backed by the European Commission and a coalition of institutional investors, the multi-billion-euro vehicle will target large growth rounds — typically €100mn and above — in sectors deemed strategically critical, like defence, health, deep tech and energy. Structured as a privately managed, market-based fund under the European Innovation Council umbrella, it aims to attract long-term capital rather than dispense subsidies. Policymakers hope it will help prevent Europe’s scaleups from seeking deeper pools of capital in the US or Asia. If successful, it could become a cornerstone of the bloc’s broader push for technological sovereignty and capital-markets integration.
   
• Another public-private bridge is to put long-duration balance sheets to work. Insurers naturally seek long-dated assets. A European 'top-up' mechanism could allow long-dated EIB issuance - bought by insurers - to invest in or finance private growth funds investing in Europe strategic sectors. The EIB can invest such proceeds either as an equity investment pari passu with other investors (but bearing lower or no management fees) or as a preferred debt instrument, senior to the equity of private investors. Such top up mechanism could be offered as well to national or thematic sovereign funds.

Done properly, this creates a channel from conservative savings institutions into equity-like risk capital and long-term infrastructure that strengthens resilience. The task is to replicate the model across borders and at continental scale, with governance robust enough to avoid political interference and commercial enough to sustain performance.

Third: make scaling operationally possible. 

Letta is right that 'scale matters', and he is right to highlight the costs of legal fragmentation. Even in a single market, a scale-up still faces 27 corporate law regimes, 27 insolvency frameworks and 27 tax systems. A European '28th regime' for innovative companies - now moving from idea to legislative timetable - could cut fixed costs by offering an optional EU-wide corporate framework, more portable employee share schemes and a clearer insolvency baseline. It will not solve labour law or tax sovereignty, but it would reduce the friction that turns cross-border developments into a compliance project.

Member states should complement this with domestic 'sandboxes' for young firms: simpler reporting, faster certification, and early-stage flexibility that makes hiring and experimentation less punitive. And Europe should use its own demand power: strategic public procurement that gives European innovators a first customer at home, especially in defence, health and energy.

In short, Letta offers the right organising principle and Draghi offers the right macroeconomic lens. The difference is one of priority. Europe should not start with the most politically explosive items, or the ones that deliver marginal efficiency gains. It should start where the constraint is tightest: the absence of patient, domestic growth equity at scale - and the operational barriers that stop companies scaling across Europe once that capital exists.

If Europe can redirect even a modest share of its savings into long-term equity - through simple accounts, carefully designed incentives and continental-scale investment vehicles - it will not just deepen its capital markets. It will strengthen sovereignty. The alternative is familiar: Europe will keep inventing, others will keep scaling, and the continent will continue to buy back its own future at a premium.

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