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While EU policymakers step up efforts to convince Europeans to invest more of their savings into European assets rather than abroad, German Finance Minister Christian Lindner said on Tuesday (24 September) that citizens would be well-advised to invest globally.
Feeding into a debate that could turn into a potential stumbling block for key EU plans to set up a ‘Savings and Investments Union’ – i.e., the rebranded Capital Markets Union (CMU) – Lindner doubled down on his scepticism towards attaching CMU plans to a clear EU-investment preference.
“Financial literacy means that if you invest in capital markets, it makes sense to do so in a globally diversified manner in different asset classes and different currency areas,” Lindner said while presenting the results of an OECD report commissioned by his ministry on strengthening the financial literacy of German citizens.
Asked by Euractiv on whether this stance contradicts the EU’s goal of mobilising more private investment flows towards Europe, Lindner said that “it would not be wise to put all your eggs in one basket.”
However, if more people invested more of their savings into capital markets instead of keeping it shelved in their bank accounts, “a significant proportion of this capital stock would naturally be invested in Germany or Europe,” Lindner added, ascribing this to a ‘home bias’ investors would have.
Lindner also claimed a pivotal role in including the financial literacy objective into the EU’s CMU agenda: “This is also clearly due to our [German] efforts in Europe,” he said.
EU bias retail products
After over a decade of jittery progress on the CMU, the framework has recently made a comeback to the EU agenda as a favoured route to shore up financial market investment flows and boost investments into the green and digital transition.
This return also reflects an anticipated decreasing share of public investments as the bloc heads towards the end of its post-pandemic Recovery and Resilience funding programme (RRF).
When designating Maria Luís Albuquerque as the next commissioner for financial services and the savings and investments union, European Commission President Ursula von der Leyen tasked her with developing a European strategy “on financial literacy” and “to leverage the enormous wealth of private savings in support of our wider objectives.”
As part of EU efforts to direct citizens’ investments into the European real economy, Albuquerque will also be responsible for designing a retail investment product proposed by former Italian Prime Minister Enrico Letta, which would use citizens’ money to predominantly invest in Europe.
In his report on the State of the Single Market, Letta highlighted that €33 trillion in private savings was being held in deposits and currency across the continent, “around €300 billion of which [was] invested annually into foreign markets, primarily into US assets” – something von der Leyen blamed on Europe’s capital market being “too fragmented,” as she stated in her re-election speech in July, adding “this need[ed] to change.”
While the Commission hopes to encourage retail products with EU bias through tax incentives face to face other investment products, Lindner stressed in August that “under no circumstances” would he “favour a national focus solely on our market.”
[Edited by Anna Brunetti/Martina Monti]
