by Hugo Dionísio, Strategic Culture:
In recent months, we have all heard the pressure from European Commission President Ursula von der Leyen to accelerate the creation of a Savings and investment union (SIU). Initially presented as a tool to mobilize financial resources for the benefit of European citizens and to promote the green and digital transition, the most concerning aspect of this campaign lies, once again, in the uncritical, passive, and submissive acceptance of the Commission’s intentions and decisions.
Under closer scrutiny, this is yet another agenda. How many agendas has von der Leyen presented to us, only for things to keep getting worse? That agenda was designed to benefit the usual suspects: the most prominent private and corporate interests (elsewhere referred to as “oligarchs”), at the expense, as always, of collective interests, public welfare, and the national interests of many member states.
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To fully grasp the intentions behind this SIU, we must first understand what it is. Theoretically, the SIU is presented as: “an initiative aimed at integrating the financial markets of member states to boost investment, economic growth, and financial stability.” In this framework, the SIU is ostensibly intended to facilitate access to cross-border financial products for “citizens and businesses,” while promoting long-term savings and investment. A marvel, indeed. In the EU, there is a vast amount of money in term deposits (€10 trillion) and even more in public, mutual, and associative funds whose contributions could be diverted toward other types of solutions, luring beneficiaries with the siren song of easy money from venture capital.
According to the European Commission, this union could improve long-term savings options, encourage products like individual pension plans (PEPP), and promote “sustainable” investment funds linked to the EU’s energy and climate agendas. All of those funds are private, just as those people like it. A fundamental characteristic of any EU agenda is relegating the state to a secondary, minimalist role – except when it comes to footing the bill.
This union also intends to create broader and more integrated mechanisms for investor protection, ostensibly by strengthening transparency and regulation to ensure financial products are safe and suitable for risk profiles. Finally, this aggregated, mobilized, and circulating capital will supposedly foster business financing, theoretically facilitating SMEs’ access to alternative funding sources like crowdfunding and capital markets. SMEs are always used as justification, but rarely end up as the ultimate beneficiaries of these proposals.
There are already planned measures, such as the aforementioned PEPP (Pan-European Personal Pension Product), a private pension product that can be offered across the EU, free from the burden of intergenerational solidarity that characterizes public pension systems; the revision of legislation to “improve” investor protection and market transparency; the regulation of fintech and crowdfunding (technological financing and public fundraising platforms like Patreon), creating harmonized rules for collaborative financing platforms; and the introduction of fiscal incentives by member states to stimulate savings and investment. All this promises greater product diversification and “investment” solutions, higher financial returns (since, in theory, there will be more competition), and enhanced security, as common rules supposedly reduce the risks of fraud and financial malpractice.
Do not mistake the Savings and investment union for a component of the Banking Union. No, the SIU is, at most, complementary. The SIU and the EU’s Banking Union share the goal of integrating financial markets but differ in scope, mechanisms, and associated risks.
Let’s compare their stated objectives:
The Banking Union aimed for centralized supervision (ECB), common rules for bank insolvencies, and a focus on financial stability. The SIU, on the other hand, seeks to attract savings and investment toward risk through the harmonization of financial products, fiscal incentives for cross-border investments, and a heightened focus on profitability and “strategic priorities” like defense and the green transition.
As the saying goes, “once bitten, twice shy,” and from von der Leyen’s Commission, Europeans can expect nothing but pretty words upfront and knives in the back. The real problems of the SIU lie in its “associated risks” and “unspoken intentions.”
Contrary to what the EU claimed, the Banking Union, launched in 2014 as a response to the euro crisis, also promised greater competition, stability, and depositor protection. In practice, however, it only solidified the dominance of big banks, reducing the diversity of Europe’s financial sector – the opposite of what was promised.
Banking concentration increased, driven by a wave of mergers and acquisitions. In Spain, the number of banks fell from 55 in 2008 to 10 in 2023. In Germany, regional banks (Landesbanken) lost relevance to giants like Deutsche Bank and Commerzbank. By 2023, the 10 largest banks in the EU controlled around 70% of financial assets (ECB, 2023). As we can see, the myth of “too big to fail” did not hold, and if the largest banks collapse, states will still have to bail them out.
With this capital concentration – the Banking Union should be renamed the “Banking Concentration Union” – competition decreased, and big banks benefited from the new rules, while small institutions faced higher regulatory costs and greater difficulties competing on a transnational scale. The result is felt daily in our wallets: higher fees for customers, fewer credit options for SMEs, and less financial innovation. The exact opposite of what was promised. A déjà vu of the privatization processes in Portugal and Europe.
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