ECONOMYMay 6, 2025

Savings and Investment Union: Hopefully just an EU pipe dream

Elisabeth Krecké

Reading time: 11 min

The SIU aims to mobilize private capital, but it faces challenges due to Europeans’ deeply ingrained saving habits and skepticism toward government intervention.

In March 2025, the European Commission unveiled what it describes as a transformative initiative: the Savings and Investment Union (SIU). In a comprehensive document, President Ursula von der Leyen’s team outlined a plan to mobilize fresh, primarily private sources of capital to finance strategic investments across Europe.

Europe’s investment shortfall

The SIU can be seen as a response to a major shortfall in public funding. As highlighted in the commission’s Competitiveness Compass, published two months prior, the EU will require an annual investment of 750-800 billion euros by 2030 to modernize its chronically distressed economy.

These figures stem from a September 2024 report by Mario Draghi, which underscored the urgency for groundbreaking innovation across the board amid significant demographic, technological, geopolitical and climate shifts. To these colossal sums, add Europe’s escalating defense requirements. Just a day before the SIU’s launch, the commission announced the ReArmEurope Plan/Readiness 2030, a rearmament effort projected to cost up to 800 billion euros by the end of the decade.

Mr. Draghi’s warning was a sober reminder that if Europe continues on a path of “managed and gradual decline, it is condemning itself to a slow agony.” The consequences would extend beyond mere economic stagnation. At risk are the continent’s global relevance, independence, security, prosperity and even its foundational social model. “If Europe doesn’t increase its productivity, it risks being stuck on a low-growth path, with less income for the employed, less welfare for the disadvantaged, and fewer opportunities for all,” cautioned the former chief of the European Central Bank.

But how can Europe bridge such a huge funding gap within five years? With personal income tax rates already at record highs in many EU countries, further burdening citizens seems politically untenable. Public finances are strained by post-pandemic debt, rising interest rates driving up borrowing costs, extensive social spending, increased aid to Ukraine and the costly green transition. Economic slowdowns further erode tax revenues. Yet, most governments seem unwilling or unable to cut their own spending.

Another solution was needed: tapping into private capital. Thus, the SIU was born. The concept has been circulating among policymakers for some time. Most agree that the lion’s share of the required EU investments “has to be borne by private firms, investors and households.” The commission wants to rely primarily on retail savers. “They must be encouraged and incentivized to hold more of their savings in market instruments,” it states.

EU savings policy shift

Policymakers have long been interested in how much citizens save. However, they have often viewed average saving behaviors negatively. For years, they criticized Europeans for saving excessively, far more than, for instance, their American counterparts.

Each year, European households save 1.4 trillion euros, nearly double the 800 billion euros saved in the United States. Of this amount, about 300 billion euros are invested in foreign markets outside Europe. In the decade following the 2008 financial crisis, policymakers and their economic advisors, mostly Keynesians, warned that such hoarding was detrimental. They claimed this “savings glut” starved the economy of much-needed resources.

In response, policymakers and central bankers did what they could to discourage saving. For over a decade after the 2008 crisis, interest rates were driven down to historic lows, even slipping into negative territory. The policy known as financial repression became the norm, making it expensive to keep money idle. Time and again, left-leaning economists pushed the envelope further, advocating for the partial confiscation of bank deposits during national financial emergencies. Since the introduction of the EU Bank Recovery and Resolution Directive in 2014, savings above 100,000 euros can be seized to bail out failing banks.

Despite these deterrents, Europeans continued to keep their money in banks. The “euthanasia of the rentier” or the “painless death of the functionless investor,” as predicted and advocated by John Maynard Keynes, clearly failed to materialize. In times of uncertainty, people seem to prioritize their financial security, opting for liquidity and peace of mind, even with minimal or no returns.

In 2025, the policy narrative has shifted, and new ideas are on the table. Policymakers now recognize the immense potential of the 10 trillion euros sitting unused in low-yield savings accounts across Europe. What was once considered a liability is now seen as an invaluable treasure that is waiting to be tapped.

The argument is that this idle cash in bank deposits should be put to more productive use – generating returns on households’ savings while providing the EU with the necessary capital to invest in innovative projects. The SIU is presented as a foolproof win-win solution, enhancing citizens’ wealth and advancing the EU’s economic and political objectives.

Involving citizens in Europe’s financial rescue – turning “savers” into “saviors” – sounds promising in theory. But how does it work in practice?

Great expectations

The SIU’s management is intended to be a collaborative effort involving EU institutions, member states and key stakeholders. In its March 2025 proposal document, the commission outlines a partnership with National Promotional Banks, the European Investment Bank (EIB) and the European Stability Mechanism. However, the specific roles of these entities within the SIU remain unclear.

President von der Leyen has promised swift implementation of the SIU. In fall 2025, the commission plans to launch the first EU Savings and Investment Accounts, which will give citizens access to a range of investment opportunities that support the bloc’s predefined priorities. The hope is that this will quickly encourage many European households to participate in capital markets, including equity markets.

To ensure savers are equipped to navigate these opportunities, the commission will simultaneously launch a financial literacy campaign to educate citizens on making informed investment decisions. Special attention will be given to women, young people and the elderly, as these groups have been identified as the least financially literate. However, the methods for fostering this investment-savvy culture are still undefined.

By the end of the year, the commission plans to focus on expanding the supplementary pensions sector. Citizens will be encouraged to self-enroll in various pension schemes. In this way, the SIU aims to establish itself as a long-term solution to address the projected shortfalls in public pension systems.

Further measures are planned beyond 2025. In the third quarter of 2026, the European Venture Capital Fund Regulation will be reviewed to make venture capital investments within the EU more attractive.

Another objective is to improve supervisory convergence and increase the exchange of supervisory data among financial authorities. While such a framework already covers much of the EU banking sector, it will be expanded to include capital markets as well.

Finally, the commission will assess whether the banking sector effectively supports the SIU and how it affects banks’ competitiveness. A mid-term review evaluating its overall progress is scheduled for summer 2027.

SIU challenges: EU bureaucracy and past failures

Given the EU’s track record with failed projects, the SIU could falter like previous investment plans. Consider, for instance, the Juncker Investment Plan for Europe, launched in 2015 by the commission and the EIB. The goal was to mobilize up to 500 billion euros in additional public and private investment into the real economy by 2022. However, a recent report by the European Court of Auditors confirmed that the plan fell short of its ambitious objective.

A well-marketed disappointment – this description fits even more accurately when considering broader financial integration initiatives like the Capital Markets Union (CMU), which was also launched in 2015. The goal was to establish a “single market for capital” to facilitate the seamless movement of investments and savings throughout the EU.

Read more on the EU’s economic policies

• EU economic challenges and Draghi’s misguided remedies
• EU aims to boost competitiveness at long last
• State pension programs feel the strain of aging populations

The CMU would have greatly benefited from the completion of the Banking Union (BU), initiated in 2012, among others, to promote European cross-border financial integration. Yet, in 2025, the BU is still unfinished, and the EU’s capital markets remain deeply fragmented. The adoption of a new CMU Action Plan in 2020 has done little to change this.

The EU’s well-known inertia and lack of political will from its member states could prove fatal to the SIU as well. For many, the latest EU proposal is merely a rebranding or a repackaging of the CMU. Why would it succeed where its predecessors failed? Without streamlined processes, the SIU could become another layer of bureaucracy, echoing the CMU’s unfulfilled promise.

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