The timing owes nothing to chance. On Wednesday, 19 March 2025, the European Commission presented a new strategy for redirecting at least some of the €10trn in European savings that’s “asleep” in European bank accounts. On Thursday, in an op-ed for the Financial Times, prime minister (CSV) explains that, as “a prime location for European capital markets, Luxembourg wants to be at the forefront of this common project.”
The argument has three points.
Firstly, “we need to make better use of existing frameworks and expertise,” says Frieden. “Ambitious improvements to pension products and the securitisation framework can make a decisive difference.” With this he aligns himself with European Commission President Ursula von der Leyen.
The secoind point gets a little more complicated. “Encouraging financial education and creating labels for long-term products that are easy to understand will help citizens to transform their savings into productive money,” Frieden continues. “It would be a win-win situation: creating more wealth for citizens, enabling them to finance their own projects or set up their own businesses, while offering companies financing for their development. This is true. But are European governments, who have often spent far more than they had available, despite 46 years of growth over the last 50 years, ill-educated when they have managed, often by the sweat of their brow, to set aside €10trn? Which, incidentally, only represents 70% of savings, with €4.286trn already on the capital markets to finance economic developments.
In the European Commission’s strategy, there are phrases that would stand out if you stopped for two seconds to think. Like: “if Europeans aligned their savings and investment practices with those of the Americans, €8trn would be directly available, or €350bn a year,” according to a study by the European Central Bank. It is not certain that the social model associated with this strategy is in line with the European social model. Excessive US deficit and a new budget passed after bitter negotiations, the absence of a social safety net and an upsurge in poverty and inclusion… there is a lot to consider.
Pleading for a surveillance network of excellence
The third point is the real crux of his argument: the prime minister argues for “a network of centres of excellence in supervision… that draw on the expertise of national authorities and avoids unnecessary bureaucracy.” In other words, more in Luxembourg than in Dublin, Paris or Frankfurt.
“For an investment to materialise, there must first be a commercial opportunity, which is all too often stifled by onerous regulations,” adds the prime minister, who insists on regulatory simplification, with an example directly linked to the capital markets. “Two pieces of legislation, the Markets in Financial Instruments Directive (Mifid II) and its implementing regulation,” he says, “have given rise to more than 80 delegated regulations and 100 pieces of soft law. This represents only a fraction of all the directives and regulations that are holding back the capital markets, precisely at a time when they should be contributing to our immense financing needs, particularly for Europe’s security.”
There is still a question to be considered: these billions of euros in interest-bearing bank accounts have boosted the competitiveness of European banks, as shown by the jump in the Euro Stoxx Banks index, which compiles the performances of the 22 largest listed banks in the eurozone, which has gained almost 35%, while at the same time the KBW index of US banks has lost more than 5%. This year, the major European banks are expected to pay out €123bn to their shareholders, according to similar analyses--more than the record already set last year.
Popular savings are a simple and hitherto effective way for banks to finance themselves at lower cost. If too much of it were reallocated to financial products, the banks would have to find other, more expensive market solutions. And they would have to go back to calculating whether it is prudent to grant credit to individuals or businesses--at the risk of the economy sputtering. The European Union’s strategy will therefore also have to reassure banks about their ability to refinance themselves and about the attractiveness of these new financial products, so that they can also package them themselves.
This article in French.