EU citizens are active savers but invest less in capital markets than their US counterparts, forgoing potentially higher returns. Additionally, the capacity of the EU financial system to transfer household savings into productive investments (that is, investing in the economy rather than in the property sector) is limited, hindering economic growth. The current initiatives of the Savings and Investment Union (SIU) have only partially addressed these challenges and lack inter alia focus when it comes to fostering productive investments in the EU. This Policy Brief proposes the creation of an EU long-term investment product (ELTIP) to strengthen retail participation in capital markets and channel household savings into productive and sustainable investments in the bloc’s economy. The proposal combines fostering EU economic investment with global risk diversification, strong investor protection, cost efficiency, accessibility for investors, and adaptability to unforeseen changes in investors’ life circumstances. Current debates around the Savings and Investment Union offer a timely window of opportunity to introduce an ELTIP that supports EU growth and strategic priorities in a challenging geopolitical environment.
1. Introduction
EU citizens are active savers but are forgoing potential returns due to their comparatively low investments in capital markets. The European Central Bank (ECB) has calculated that EU households saved around 15% of their disposable income at the end of 2024, compared to 8% in the United States. Savings accounts allow citizens to securely deposit money they might need in the short term and in an easily accessible manner. However, for citizens, being able to invest for a longer period and having access to financial services compliant with the EU’s investor protection requirements, capital market investments can be a more profitable path.
At the moment, Europeans are largely missing out on these returns. On average, households in the euro area currently hold only around a third of their financial assets in equity instruments, debt securities and investment funds. In the US this share reaches 60%. This underinvestment has costs: the ESMA Market Report on Costs and Performance of EU Retail Investment Products 2025 shows an average real net annual return for retail investments in equity UCITS (undertakings for collective investment in transferable securities) funds of 4.9% for the 2015–2024 period. This return exceeds the average interest rate on bank deposits (with agreed maturity) in the eurozone of 0.94% during a comparable period.
This lack of engagement in the capital market is also hampering the EU financial system’s mobilisation of productive investments. EU companies rely strongly on bank lending to finance their business activities. Accordingly, in the EU, banks provide 70% of business debt. While a valuable tool, bank lending is not the most effective approach to finance certain types of innovative firm. For banks, it is usually, for example, much more costly and difficult to assess and monitor the performance of start-ups than it is to evaluate companies operating in more traditional sectors, such as manufacturing. Many innovative firms thus simply lack access to adequate financing sources in the EU.
Small and medium-sized enterprises (SMEs) and innovative firms face difficulties in finding financing sources in the EU adequate to their needs. These firms, in areas like green technology, usually have a high risk, high return profile, combined with a low availability of collateral. Consequently, they need funding through listed (for example, via shares) or non-listed (such as venture capital) equity. Access to such funding is often difficult in the EU because, firstly, the development of these funding channels is still limited in numerous EU member states and, secondly, lending to businesses is still largely carried out by banks. At the same time, the current EU capital market landscape remains fragmented. Accordingly, equity investments – undertaken by, for example, institutional investors such as pension funds – mostly focus on global assets or on a narrow range of domestic companies, whereas EU cross-border investments are relatively scarce. All these factors hamper the EU’s capacity to transform its high levels of savings into adequate sources of funding for innovative companies.
Consequently, transferring more household savings into productive, sustainable investments is vital for EU economic growth and for achieving the EU’s strategic priorities. The Letta Report stressed that strengthening the “channelling of savings into the real economy” is a key task for the Savings and Investment Union (SIU). Similarly, the Draghi Report emphasised the need to more effectively channel savings from EU households into capital markets to fill the €750 billion to €800 billion investment gap the EU faces if it is to achieve its strategic goals on the green and digital transition as well as its pledges on security and defence. In March 2025, the European Commission launched the EU’s Savings and Investment Union (SIU), as a follow-up to the Capital Markets Union.
To tackle this investment challenge, EU policymakers should now seize the SIU debate to develop an EU long-term investment product (ELTIP) that protects investors, encourages citizens’ participation in capital markets, and channels retail savings into productive sustainable investments in the EU’s economy. They should complement existing retail investment products and pension products with an ELTIP, which
transfers retail investor savings into investments in assets to foster sustainable growth in the EU;
is appropriately diversified to mitigate risks and to allow retail investors to engage in well-developed capital markets beyond the EU;
is based on the EU’s investor protection rules and promotes cost efficiency through investments in less complex products and regular disclosure of costs;
facilitates access for retail investors and takes into account challenges they may face due to changes in their life circumstances.
2. State of play
The current SIU initiatives have only partly tackled the challenges of encouraging citizens’ engagement in EU capital markets and more closely linking household savings to productive, sustainable investments. Firstly, in June 2025 seven EU member states initiated a voluntary label – entitled ‘Finance Europe’ – for retail financial products. This initiative aims at highlighting to EU citizens, by means of a label based on a set of criteria, those retail investment products (like investment accounts or funds) that invest at least 70% of their portfolio in assets held within the European Economic Area (EEA).
Labelling products that focus on investments in EU/EEA assets may help retail investors to gain a first orientation among the array of retail investment products on offer. But this measure could lead to confusion when making final investment choices. Any Finance Europe product can include a broad range of financial instruments (such as UCITS, ELTIFs, or AIFs (Alternative Investment Funds), which complicates the task for retail investors of comparing products offered by different financial service providers, again hindering the former’s capacity to make informed investment decisions. Moreover, the label does not require financial service providers to use cost-efficient financial instruments to achieve citizens’ objectives when it comes to investing. For example, for a product aiming to enable someone to invest their savings in a broad range of EU company shares, the label does not legally oblige financial service providers to use cheaper exchange-traded funds (ETFs), instead of the more costly actively managed ones. The label’s lack of focus on cost efficiency carries the risk that retail investors end up with more expensive products, and the challenge of comparing these labelled items could well exacerbate this risk.
Secondly, in September 2025 the European Commission published a Recommendation on savings and investment accounts (SIAs). This encourages EU member states to establish SIAs that make it easier for their citizens to invest in capital markets. The SIA recommendation is non‑binding and gives member states a great deal of leeway – for example, on tax incentives and eligible instruments – in how they implement their own SIAs. In March 2026, the finance and economy ministers of the E6 highlighted in a letter to the European Commission, the Eurogroup, and the Cypriot presidency their commitment to introduce or promote such SIAs to foster retail investors’ access to EU capital markets, as one of 20 measures to advance the SIU. While this approach respects the EU’s principle of subsidiarity, it risks falling short of effectively tackling two key stumbling blocks in the way of further integrating EU capital markets. The first is the current ‘home bias’ of EU capital markets – in other words, a member state’s financial service providers mostly offer, and retail investors mostly invest in, domestic products. This in turn hinders the flow of investments across borders to potentially more efficient and profitable investment options in other EU jurisdictions. So, the EC Recommendation’s broad discretion for member states means that certain jurisdictions’ SIAs may include specific features – for instance, preferential tax structures for nationally domiciled equities – which encourage this home bias and thereby hamper the flow of retail investments to more financially attractive and economic efficient investments, for example, in a company operating in another EU jurisdiction.
Moreover, the Recommendation does not set out any minimum ratio of savings to be channelled towards long‑term investments in the EU economy, while still allowing retail investors to engage in other capital markets, such as in the US. Instead, the broad discretion baked into the Recommendation allows member states to implement SIAs with a wide range of features and to decide for themselves which financial instruments they deem eligible for the SIAs in their jurisdictions. Consequently, the impact of such SIAs on investments in the wider EU economy is likely to be fractured and limited, even if these accounts significantly increase EU citizens’ engagement in capital markets.
Thirdly, the Pan‑European Personal Pension Product (PEPP) is a voluntary personal pension scheme that allows EU citizens to save for retirement in addition to state-based and workplace pensions. The PEPP was established in March 2022 and aims at tackling the high rate of EU bank deposit savings, the need to finance the EU economy and the challenges presented by the EU’s ageing population. The key features of the PEPP include portability of the product across EU member states, a cap on annual fees at 1% (for the basic version of the PEPP) and the requirement that financial service providers are obliged to provide advice to sell it to investors. However, roughly four years after it was launched, the PEPP has seen limited market uptake: by now only two providers are offering PEPPs, and only in eight EU member states. In November 2025, the European Commission published a legislative proposal to revise this framework. It includes a proposal to enable employers to offer the PEPP as part of their workplace pensions to strengthen the role of supplementary pensions in mobilising long‑term capital economic investment. While this revised PEPP can foster retail investments in capital markets, it does not, just like the Commission’s Recommendation on SIAs, explicitly set out a minimum ratio of investments that should go towards EU-based productive and sustainable assets. A further drawback is that the PEPP restricts a person’s access to their savings until retirement and allows only very limited early withdrawals. Consequently, the PEPP cannot address the needs of non‑pension savers, such as younger and mid‑career EU citizens. These may not wish to lock their capital away until retirement but may instead be more willing to invest their savings over shorter multi‑year horizons in cost-efficient and trustworthy products.
Overall, the current SIU initiatives have notable shortcomings that limit their effectiveness in encouraging citizen engagement in EU capital markets and mobilising savings for sustainable investments in the EU economy. The voluntary ‘Finance Europe’ label risks confusing investors trying to decide what to invest in and does not stipulate that cost efficiency must be a criterion before a product receives a label. The non-binding and highly discretionary design of SIAs may reinforce the home bias of EU capital markets and lead to fragmented outcomes with limited impact on investment in the EU economy. Simultaneously, the PEPP framework suffers from weak uptake, in practice ‘locks in’ citizens’ savings until they retire and lacks a focus on fostering investment in productive EU assets, reducing its relevance for a broader range of retail investors and its efficacy as a tool for mobilising investment.
3. Key features of the EU long-term investment product (ELTIP)
An investment product in compliance with the relevant investor protection rules can allow EU citizens to invest their money in capital markets to generate returns over time. Specific features, such as standardising the way in which information relevant for the product is disclosed to investors, as well as tax benefits that could accrue to those investing in it, may increase citizens’ motivation to invest in such products. To transfer more savings into capital markets and ensure that they address European investment needs, the SIU agenda needs an EU long-term investment product (ELTIP). Table 1 lays out its goals, objectives and key features.
Table 1: Overarching goals, operational objectives and key features of the ELTIP
3.1 Ensuring investor protection and long-term trust in EU capital markets
Ensure investor protection and foster investors’ trust in the ELTIP and capital markets
EU households need to be confident that investing their money in capital markets by means of the ELTIP is a trustworthy option. The ELTIP therefore needs to provide robust safeguards for investors. The EU has established the MiFID II (Markets in Financial Instruments Directive II) framework for this purpose. So, MiFID II should apply to the ELTIP to ensure investor protection when a product is sold to citizens and while they have their money invested in it. This would strengthen citizens’ long-term trust in their investments and in EU capital markets more generally. Many investors hit by the 2008 financial crisis were reluctant to invest again in stock markets. Due to increased risk aversion, a substantial number of investors also put their money in products considered ‘safer’, such as savings accounts and government bonds. To create a product that safeguards investors and strengthens citizens’ long-term trust in the EU’s capital markets, three elements are crucial.
First, financial service providers must apply the MiFID II ‘product governance’ rules to design and market ELTIP products which suit the retail investors they target. Among other goals, these rules are designed to prevent financial service providers from selling ELTIPs to citizens for whom these are too risky. Moreover, the rules aim at ensuring providers are not selling them primarily due to the fees these products generate, rather than because the products these providers are offering meet retail investors’ needs.
Second, retail investors should be protected to ensure the ELTIP offered is suitable. Financial service providers should conduct a ‘suitability test’ whenever they offer an ELTIP to retail investors. This test aims at assessing (i) the client’s knowledge and experience in the investment field, (ii) the person’s financial situation (including his or her capacity to bear losses), and (iii) the person’s investment objectives (including their tolerance for risk). This enables providers to gauge whether the ELTIP product is suitable for their clients or not. Distributors of this product should inform their clients about the result of this assessment in a standardised form which gives clients a clear picture of the nature and risks of the ELTIP and to thereby enable clients to make their investment decisions on an informed basis. This assessment aims to avoid the harm caused by mis-selling of financial products to retail investors.
Third, ELTIP investors should be warned of risks specific to over-valuated asset markets. Many retail investors may find it hard to assess the complexities of highly valuated asset markets and the po following strong market corrections when it comes to their investments. Additionally, periods of high valuations may lead to ‘fear of missing out’ (FOMO) reactions among retail investors, further hampering their capacity to appropriately evaluate risks relating to ‘heated’ markets. Finally, financial service providers may have incentives to promote products with high exposure to overvalued markets because of the money they make from fees and commissions, even when signs of a market correction have emerged. To address these issues, the MiFID II’s suitability tests should also include an additional clear warning to citizens who are thinking of investing in the ELTIP during times of extremely volatile valuations. This warning should emphasise the risk of possibly significant financial losses for investors in the event that the market corrects sharply. Financial service providers should be obliged to obtain confirmation from retail investors that the latter understand these risks before they are able to make their investment decisions. To make this warning signal more effective across EU member states, clear and harmonised criteria for triggering indicators (for example, when price-to-earnings ratios are seen to deviate markedly from historical averages) should be established.
A cost-efficient product for retail investors
The ELTIP should prioritise investments in less complex financial instruments to improve cost efficiency. Costs are an important factor, especially for long-term investments, as they can have a strong cumulative impact on the total return. Consequently, over such an extended period even small differences in charges can result in greatly reduced returns. To promote cost efficiency, the original PEPP framework capped annual fees at 1% (for the basic product). In its legislative review proposal, the European Commission highlighted this cap on fees as a key barrier to PEPP’s distribution and uptake, ultimately proposing that it be removed. In this light, the ELTIP should take a different approach: the service provider should be obliged to use less complex instruments (instead of more complex options) where an investment objective of the ELTIP can be achieved through such instruments. For example, to diversify the ELTIP’s assets to non-EU stock markets like the US S&P 500, the financial service provider should be required to invest in exchange-traded funds (ETFs) rather than in actively managed funds.
Additionally, ELTIP investors need clear and regular cost disclosure to understand how costs reduce their returns. MiFID II and the PRIIPs (packaged retail and insurance-based investment products) Regulation already require financial service providers to inform their clients about the costs, risks and potential benefits of their products; thus it stands to reason that the EU regulatory framework should also apply to the ELTIP throughout its life cycle. Before they make an investment, retail investors would be provided with a Key Information Document (KID) showing the risk profile, the expected performance of the product and the costs of investing in an ELTIP. Before their decision to invest, retail investors also receive a more specific overview of the upcoming costs. These measures aim at enabling investors to make an informed decision before they actually invest. After the service provider carries out the client’s request to buy or sell the ELTIP, the retail investor is informed about the actual costs incurred. Finally, and on at least an annual basis, financial service providers are required to provide their clients with a notice showing the ELTIPs and all costs and charges they paid, to disclose the return their ELTIP has yielded and how costs may have reduced the amount. This continuous disclosure is a crucial measure for addressing a key challenge faced by many retail investors: the difficulty in grasping the impact of costs on the return of their investments, especially if the values of these investments change and the investments extend across many years.
3.2 Facilitating capital market participation for retail investors and accounting for key changes in their life circumstances
The ELTIP should be widely distributed to facilitate access. One major drawback of the current PEPP is that clients have so far only been able to access these products through investment advisors. This has complicated access for clients who prefer to use the online services of authorised financial service providers to make their investments, for example if they are familiar with pension products and would like to benefit from lower cost investment options available online. So, to facilitate access to the ELTIP, authorised financial service providers should be allowed to offer the product through an investment advisor and online to provide individual clients with a broad range of access options to suit their preferences. This approach would also enable financial service providers to specialise on the distribution channel which fits their business model best.
An automatic enrolment feature should help to tackle citizens’ investment procrastination and broaden the product’s take-up. This mechanism, also proposed by the Letta and Noyer Reports, would allow a company to offer its newly hired employees the chance to be automatically signed up to the ELTIP, unless they choose to opt out. This approach can be applied, for example, to invest financial support for fostering retail investment, which employees could receive in addition to their salaries. Moreover, the automatic feature (with opt-out) can help to address the individual’s propensity to postpone financial investment decisions. Auto-enrolment can also expand coverage, particularly for young people or those in lower-income brackets and promote longer-term investment. People would still have the chance to opt out from the ELTIP, if they wish.
Encouraging long-term investing and accounting for major changes in retail investors’ life circumstances
Firstly, the ELTIP should tie any state-granted financial benefits to a minimum holding period of seven years, except in cases of serious personal incidents. Direct investments in the EU economy, for example in infrastructure or start-ups, often involve illiquid assets. So, tax benefits or public support for ELTIP investors should only apply if investments are held for a minimum period, to promote alignment with the long-term goals of supporting the EU economy. Some EU member states, such as Germany, have established schemes based on financial support for employees who hold on to their investments for at least seven years. Drawing on that successful example, this Policy Brief proposes that citizens should be required to hold their investments in the ELTIP for at least seven years if they are to profit from any tax benefits or state financial support relating to the amount they have invested during that seven-year period. However, people should be able to access their ELTIP investments earlier in exceptional cases like a spouse’s death. This feature would foster long-term investment, while accounting for difficult and unforeseen life circumstances that an investor may face.
Secondly, investors relocating within the EU should retain access to their ELTIP investments at a reasonable cost. Someone might need to relocate to another EU member state, for example due to better job prospects. They may also wish to hold on to their ELTIP investment, for example if stock markets turn ‘bear-ish’. Financial service providers should therefore ensure investors that they can access their ELTIP investments at a reasonable cost, preventing the possibility that a retail investor needs to sell their assets if they relocate to another member state, even during volatile market conditions.
Thirdly, transferring the ELTIP across EU member states should be optional to avoid costly product complexity for investors. Only about 3% of EU citizens of working age (20 to 64) live in a member state other than the one in which they hold citizenship. The original PEPP specifically accounted for this group of potential investors. It obliged providers offering a PEPP to include national sub-accounts for at least two member states to make the product portable. The European Commission identified the requirement to offer national sub-accounts as a key feature which has hampered the distribution and uptake of the PEPP. Accordingly, in the PEPP review any portability element is not obligatory, but voluntary for providers. In this light, any portability component of the ELTIP should be optional for financial service providers. This reduces product complexity and costs for investors, while enabling providers to offer the feature if they consider it valuable for their clients.
3.3 Promote productive and sustainable investment in the EU economy
The ELTIP should promote productive investments in the EU and include criteria to foster sustainable growth and address climate change. Europe has been observed to be the fastest-warming continent, experiencing direct economic losses of about €40 billion in 2024 – around 0.2% of the bloc’s entire GDP – due to climate-related hazards like extreme weather events and water shortages. These harmful impacts highlight the necessity of fostering sustainable growth, including the need to mitigate climate change. The ELTIP should pursue this objective through investments according to environmental, social and governance (ESG) criteria.
ESG investment strategies often exclude certain companies (like those involved in the coal or oil industry) whose business activities are not in line with objectives, such as mitigating climate change). ESG-related investments can hence sometimes underperform in certain sectors or market cycles compared to more traditional investment options. However, such effects are relatively short term and are offset in the long run by advantages of the ESG strategy and its observed benefits to investors. ESG-based investment can also be a useful strategy for picking profitable companies. Firms which manage environmental and social risks effectively often enjoy lower capital costs. This can in turn boost profits and free up additional resources for investment or to enhance the firm’s financial resilience. An analysis by the market research firm MSCI, which looked at cost-of-capital data from a host of companies across the globe from 2015 to 2024, found a significant historical relationship between a company’s higher ESG ratings and lower financing costs in both equity and debt markets. Companies with stronger ESG profiles consistently financed themselves more cheaply than lower-rated companies. Consequently, pursuing an ESG-based investment strategy seems to favour investing in firms with lower financing costs and greater financial resilience. Similarly, empirical evidence suggests that integrating ESG factors does not reduce profitability for investors. For example, meta-studies have found evidence that ESG strategies usually deliver returns that are comparable to more conventional investment approaches.
To integrate ESG considerations into the ELTIP in practice, the requirements of Article 8 of the EU Sustainable Finance Disclosure Regulation (SFDR) should be applied. This framework would firstly require the ELTIP to invest in assets that promote environmental or social characteristics and the companies receiving the investments having to follow good governance practices. To strengthen the mitigating impact on climate change, the European Commission and/or the co-legislators (in other words, the European Parliament and the European Council) should determine a minimum ratio for investments that explicitly tackle this issue.
Secondly, financial service providers offering ELTIPs would be obliged to inform retail investors before the latter invest and then report to the investors at least annually afterwards. The providers should also give information on their respective websites regarding how they are pursuing the promotion of, for instance, criteria to mitigate climate change and how their product has in practice achieved this aim.
The ELTIP should also be linked to a legislative proposal for a minimum level of tax benefit to promote greater citizen investment in capital markets and sustainable, productive assets across the EU. To foster long-term investment in these products, a tax advantage could be linked to investors holding on to their investments in the ELTIP for at least seven years. Crucially, such a tax benefit should not grant any advantage to domestic investments. This would go some way towards tackling the previously mentioned ‘home bias’ in the provision of investment products and citizens’ investments. From a procedural perspective, the first step would be a legislative proposal for a cross-EU minimum tax benefit linked to the legislative proposal on the ELTIP, both published by the European Commission. Because tax policy is a competence of each EU member state, the Council of the European Union (consisting of representatives of all EU member states) would be the only legislator negotiating and adopting the proposal. The proposal would require unanimous agreement among the Council’s members. If adopted, the proposal would become binding European law. In cases where member states were unable to reach a unanimous agreement, at least nine of them could implement the proposal between them by enhanced cooperation (which would still allow other member states to opt in in the future). The unanimity requirement sets a high political bar for an agreement on the minimum tax benefit, which may require intensive negotiations to achieve a result. However, to give two examples, the laws on the global minimum taxation and on administrative cooperation in the field of taxation were both adopted by the Council as sole legislator in 2022 and 2021 respectively. These show that agreement can be reached, even in the context of the unanimity requirement. In comparison, EU no significant tax legislation has been successfully adopted via enhanced cooperation, the Financial Transaction Tax –being a prominent EU tax initiative pursued via this non-unanimous method – remains blocked in the Council. In short, through these two approaches (unanimity and enhanced cooperation) and as the outcome of a great deal of negotiation, member states would have the scope for establishing a minimum tax benefit linked to the ELTIP. This would help the bloc to foster retail investors’ engagement in capital markets and, more particularly, in productive and sustainable investments.
In terms of overall design of the product, the ELTIP’s assets should support productive and sustainable investments in the EU economy, ensure appropriate diversification and allow for a periodic redeeming of investments. To facilitate the practical functioning of the ELTIP, the already established ELTIF Regulation should apply to the product, including to how its assets are allocated.
To illustrate, this Policy Brief presents a possible example of an ELTIP below. This example sets out a default version of the ELTIP. Additionally, the ELTIP’s legal framework should allow financial service providers to offer versions of the product which give more weight to, for example, green or high-tech investments, if the providers deem it of interest.
An illustration of the ELTIP
The possible key features and asset allocation of the default ELTIP could be as follows:
The ELTIP consists of two components:
a long-term component of 55% of the ELTIP’s assets to foster direct investments in the EU, with a significant share going towards addressing climate change; and
a global passive liquidity component of 45% of assets (i) to reduce the overall risk of the underlying portfolio and to include potential beneficial market developments in other key economies, such as the US, the UK or Japan; and (ii) for liquidity management to allow payouts to investors (see also a more detailed illustration of the proposed asset allocation in Table 2 below);
to allow retail investors to access their investment periodically in normal as well as difficult financial market circumstances, while also accounting for the ELTIP’s key objective of fostering productive investment through exposure to long-term assets, as well as a stress-tested liquidity management mechanism to allow investors bi-monthly withdrawals, which would be capped at 6% of the ELTIP’s net asset value (NAV) for investors wanting to redeem their investments;
it should qualify as an Article 8-compliant product according to the SFDR;
any tax or financial benefits for ELTIP investors should be made conditional on a seven-year minimum holding period, except for major unforeseen life events;
the ELTIP’s long‑term and liquidity profile should be accounted for in the suitability assessment to allow retail investors to understand the limitations of the investment (for example, in terms of access to their invested money).
Table 2: Asset allocation proposal for the ELTIP
However, it should also be stated that in the EU’s practice of legislative work, the European Commission (through its legislative proposal) and the co-legislators in their negotiations would determine the final asset diversification ratio of the ELTIP.
On the whole, such a product would effectively complement the current SIU proposals, by fostering sustainable EU economic growth and allowing investor protection-based capital market engagement for its citizens.
4. Conclusion
Since 2024, when major policy proposals for developing EU capital markets further – such as those included in the Letta, Draghi and Noyer reports – were published, the geopolitical environment has deteriorated: heightened trade tensions, reduced multilateral predictability and a declining transatlantic relationship have increased the risks for the EU’s economic and political development. In this context, mobilising domestically anchored household savings has turned from a key financial/economic task to a strategic necessity to foster sustainable economic growth in the EU and allow it to attain its strategic objectives. The current initiatives of the Savings and Investment Union (SIU) have only partially addressed this challenge and, among other drawbacks, lack a focus on fostering productive investments in the EU. EU policymakers should thus seize the momentum provided by the SIU to develop an EU long-term investment product (ELTIP), as a financial instrument that would more effectively help strengthen the EU both economically and strategically – and to allow EU citizens to benefit from the potential of increased returns through a trustworthy entry point for capital market participation.
- ^ In contrast to savings accounts, these potential capital market returns usually need an investment period of at least five years to materialise. This includes recovering from potential temporary losses of the investment, especially in the current environment of high stock market volatility and huge economic policy uncertainty, with the global economic impacts we are seeing today.
- ^In comparison, “the additional investments under the Marshall Plan in 1948-51 amounted annually to around 1-2% of GDP in receiving countries”.
- ^ France, Spain, Luxembourg, the Netherlands, Estonia, Germany, and Portugal.
- ^ The EEA includes the EU, Iceland, Liechtenstein, and Norway.
- ^ European Long-term Investment Funds, not to be confused with the EU long-term investment product proposed here.
- ^ Such as reflected by the Euro Stoxx 50.
- ^ An informal coalition of the six biggest EU economies: Germany, France, Italy, Spain, the Netherlands, and Poland.
- ^ Often such financial support is not added to employees’ salaries, but lost, if the employees do not invest it in certain financial products, such as funds or home-loan savings contracts.
- ^ In this process, the European Parliament is consulted and can approve, reject a proposal or propose amendments to it. However, the Council is not legally required to consider the European Parliament’s opinion.
- ^ This is the value of the ELTIP’s total assets minus its total liabilities.
Michael Leibeck is a Policy Officer at the European Securities and Markets Authority (ESMA). The views expressed in this Policy Brief are privately held by the author and cannot be attributed to ESMA.
Photo: Kirill Sirazheev via unsplash