(and what you can do about it)
A few weeks ago, we told you about EU Inc. – Europe’s new common company form that should let founders incorporate once and operate across all 27 member states. We called it a building block, not a finished house.
Today we talk about the foundation that building block sits on. Without it, the whole thing risks being a very elegant structure with no money inside.
Its name is the Capital Markets Union – recently rebranded as the “Savings and Investments Union” – and it is the reason why a European startup can do everything right: come up with a brilliant idea, incorporate in 48 hours under the upcoming EU Inc. legislation, call itself a truly EU company-, and still struggle to find its first serious investor two countries away; still hit regulatory walls when trying to raise growth capital across borders; still lose its best engineers to Silicon Valley the moment an American firm shows up with a cheque that no European competitor can match.
The funding gap widens as European companies grow
Capital available at each stage (USD billions)
Sources: Jacques Delors Centre (2024); McKinsey Global Institute (2024); IMF Working Paper (2024). Figures approximate.
The fourth freedom
EU’s single market’s four fundamental freedoms – free movement of goods, services, people, and capital – have always included capital on paper. In practice, that fourth freedom has never been fully realised.
Invest your savings in a company listed in another member state and you encounter withholding taxes that differ by country, investor protection rules that vary, insolvency procedures that nobody outside that jurisdiction really understands.
The Capital Markets Union is the EU’s decade-long attempt to actually deliver that fourth freedom. The goal, simply put, is to allow any person or business anywhere in the EU to invest in or borrow from any other person or business anywhere else in the Union.
A decade of plans and (slow) progress
Born in 2015, the idea was simple enough: if Europeans could freely buy goods from any EU countries, why couldn’t they freely invest their money across borders.
This was never a technical issue: Europe had no shortage of regulatory tools to effectively put in place a unified capital market. The problem remains, as it always was, political: integrating capital markets means touching national taxes; It means touching banking supervision; It means touching insolvency law.
And every one of those areas is a space where national governments, finance ministries, and powerful domestic financial industries have spent decades building moats they have no intention of filling in to another authority.
Paris didn’t want Frankfurt to set the rules. Frankfurt didn’t want Paris to do it either. Dublin, which built an entire economy around being Europe’s most attractive financial domicile, had every incentive to keep things complicated enough that companies would still need to set up there. And so, the reforms that did get through were the ones nobody objected to too loudly: paperwork simplifications, transparency improvements, modest tweaks to how companies could list on stock exchanges.
European savings flowing out of the continent every year
Real integration – common supervision, harmonised tax treatment, unified insolvency procedures, i.e. what would really make a difference for European companies – kept getting pushed to the next agenda, and the next Commission mandate.
Meanwhile, the money flowed west. The engineers and other talents followed. European pension funds kept buying American assets. And the startups that survived? Acquired by American firms the moment they were worth acquiring.
What’s missing
Despite a decade of work, the most structurally important reforms remain unfinished, and each one of them is a load-bearing wall for the project.
Tax fragmentation persists
A directive designed to stop cross-border investors from being double-taxed, something that should not exist in a single market, was proposed in 2023. It will not be fully implemented until 2030. Seven years for a fix to a problem everyone agrees is a problem. Why so long? Because tax is one of the last fortresses of national sovereignty in the EU. Tax directives require unanimous agreement from all 27 member states, meaning any one government can block, delay, or water down a proposal indefinitely. And governments have every reason to do exactly that. Tax policy is how states attract businesses, financial institutions, and wealthy individuals to their territory. Ireland's low corporate tax rate built its tech sector. Luxembourg's favourable treatment of investment funds made it Europe's leading fund domicile. The Netherlands built an entire industry around holding structures that multinationals use to minimise what they owe elsewhere. None of these countries are in a hurry to harmonise this.
Horizontal bar chart comparing €6 billion annual withholding tax waste to the €4.7 billion Erasmus+ budget
Lost to paperwork every year
The annual cost of withholding tax fragmentation in the EU — compared to what Europe spends sending 1.5 million students abroad
Sources: European Commission FASTER Directive Impact Assessment (2023); Erasmus+ Annual Report (2024).
Supervision remains largely national
Supervisors are the referees of capital markets the authorities that watch over banks, insurers, and investment firms to make sure they are not taking reckless risks or misleading investors. In a genuinely unified market, you would want that referee system to work the same way everywhere, with the same rules and the same enforcement. In Europe, it doesn't. An investment fund can structure itself to fall under the lightest-touch national regulator it can find. When something goes wrong, national supervisors protect their own turf first and coordinate with neighbors second, if at all.
Similar economic size. Very different plumbing.
Each dot is one registered stock exchange. In the US, all 13 operate under one federal framework, one regulator, and one consolidated price feed. In the EU, 128 exchanges operate across 27 different national regulatory environments — with no unified price feed.
United States
One federal framework. One regulator. One price feed.
European Union
27 national regulators. No unified price feed.
Sources: ESMA Annual Statistical Report (2023), end-2022 data; SEC National Securities Exchanges register (2024).
Europe hasn't built the financial products it needs
When a European company wants to raise serious money, it often has to look outside Europe, not because the funds don't exist, but because the products and infrastructure to connect that money to those companies were never built at European scale. The US has deep markets for everything: venture capital, private equity, public listings, and infrastructure that works seamlessly across the whole country. Europe has versions of all of these, but they are smaller, fragmented, and more expensive to access. This is partly a regulatory problem, and the Commission is working on it, reforming long-term investment vehicles, simplifying the rules around securitisation, making it easier for companies to list on European stock exchanges, and building the data infrastructure that investors need to make informed decisions.
The part no directive can fix: the cultural problem
Europeans are cautious savers, historically and for good reason. A continent that lived through wars, hyperinflation, and banking collapses does not easily develop a taste for equity risk. In German, the word for debt – Schulden – shares a root with the word for guilt – Schuld. That is not a coincidence, and that cultural discomfort with financial risk runs deep across much of the continent.
The result is that the bulk of European financing still flows through banks – institutions that are, by their nature, far more risk-averse than capital markets. Banks do not fund moonshots but rather companies that can already prove they will pay the money back.
European household cash deposits now sit at around €12 trillion – nearly 30% of total household wealth, and roughly double the equivalent share in the United States.
Until Europe develops a genuine investment culture, the structural reforms will only go so far. There are nudges in the right direction – financial literacy strategies, new savings and investment accounts, retail investment incentives – but changing a continent’s relationship with money takes a generation, and it certainly cannot be achieved by a Commission action plan.
Where does household wealth actually go?
Share of total household financial assets held in bank deposits (grey) vs invested in markets (blue)
European Union
United States
Sources: Bruegel analysis of Eurostat and OECD data (2024); Federal Reserve Z.1 Financial Accounts (2024).
The EU's oldest habit
Look at the history of European integration and you will notice a pattern. The currency crises of the 1980s produced the Euro. The 2008 financial crisis produced new rules on government debt and financial surveillance. COVID produced NextGenerationEU.
European governments, it seems, needs to be standing at the edge of the cliff before it finds the courage to move. The CMU is no different. Proposed in 2015, still unfinished in 2026. Eleven years of slow progress, half-measures, and deferred decisions, while the gap with the US and China widened.
The data are not subtle. European venture capital investment stands at 0.2% of GDP. The US runs at 0.7%. JPMorgan alone is worth more than Europe’s five largest banks combined. And every year, €300 billion of European savings leave the continent to be invested elsewhere, financing American technology, American infrastructure, American growth.
The cliff is now visible to everyone: The Draghi report named it. The Letta report named it. The ECB has named it. The geopolitical shocks of the last few years have made the cost of European underinvestment impossible to ignore. Defence, technology, energy, infrastructure: every strategic priority Europe has requires capital at a scale that fragmented national markets cannot provide.
The pressure for change has never been higher, and unlike previous crises, this one comes with a blueprint already written, and a continent that is beginning to understand what is at stake.
Europe today vs Europe with a Capital Markets Union
Hover — or tap on mobile — to see what integrated capital markets could unlock
Sources: ESMA (2023); ECB Occasional Paper No.369 (2025); IMF Working Paper (2024); Draghi Report (2024); Bruegel (2024).
What can you do about it
It is often said that Europe’s greatest strength is its single market. 450 million consumers, the largest trading bloc in the world, an economic weight that no one can ignore.
Well, you are the market. And you have read this far, which already puts you ahead of most. Now the question is what you do with it.
That starts with your own money. If you have savings sitting in a low-yield bank account, consider moving part of them into EU investment products – funds, equities, pension schemes. The returns, historically, are not comparable. Ask your bank or platform for low-fee, transparent, cross-border investment options. If they do not offer them, ask why. If enough people ask, the market responds.
The reason European capital markets are fragmented is partly because European citizens have never demanded otherwise. Tax harmonisation stalls because no constituency marches for it.
Supervisory reform drags because it is too abstract to generate political pressure. The politicians who block these reforms face no consequences at the ballot box, because most voters have never connected their financial lives to the decisions made in Brussels or in national capitals.
So when you vote – in national elections and European ones – ask where candidates stand on financial integration. Push for pension systems that actually invest in markets rather than relying entirely on pay-as-you-go models that are one demographic crisis away from breaking. Make EU-level financial integration part of the conversation, not a footnote.
Published: 21/04/2026 – The Europeans Admin