Changes from report parliamentary committee draft to plenary report

EXPLANATORY STATEMENT

Europe is faced with two existential threats. The first, well-documented in several reports such as those by Enrico Letta and Mario Draghi, is the risk of economic and industrial decline, leading to a gradual disappearance of the European Union from the global economic and geopolitical stage. The second, brutally brought to light by the invasion of Ukraine by Russia, the return of war on the European continent and the strategic realignment of the United States, is the inability by the European Union to ensure its own strategic autonomy and defence, to protect itself from increasingly imminent threats on its territory. This dual crisis is nothing less than an unprecedented test of Member States’ ability to collectively invest in the EU future and its survival. This is why the European Union must now explore ways to regain budgetary room for manoeuvre and mobilise private capital to invest not only at national level but also, and perhaps most importantly, at the European level. The EU must find a way to finance its defence capacities, without compromising its ability to invest in the green and sustainable reindustrialisation, in clean techs and European digital firms and to prepare for the future by investing in education and research. The recent Draghi Report has identified a minimum annual additional investment requirement of EUR 750 to 800 billion to restore the EU’s productivity and meet its environmental and social goals. However, the current investment landscape in the EU is fragmented, with significant disparities in access to private finance, particularly for innovative and high-growth companies. One of the reasons for the European Union’s lag behind its Chinese and American competitors has been the difficulty for its businesses to secure financing, particularly for small and medium-sized enterprises that require scaling up to grow. Simply put, companies today complain about the lack of long-term demand and call for regulatory stability, speed and responsiveness from public authorities to protect them from unfair commercial competition, and, finally, long-term contracts, including through public procurement. Europe has many strengths. It remains one of the most attractive economic zones for investment, with innovative companies and a highly skilled workforce. However, one could argue that Europe is living below its means, as it has so far failed to equip itself with the necessary tools and mechanisms to grow in line with its ambitions. Addressing this dual crisis will therefore hinge on its ability to put these tools in place. In this regard, European savings represent considerable financial means that Europe must not—and cannot—overlook. It is all the more crucial given that European citizens’ savings often end up financing foreign, particularly American, funds, which then reinvest in Europe and acquire European companies. The mobilisation of European citizens’ savings is therefore a political, economic, and strategic sovereignty issue and will be crucial to bridge the industrial gap with other major economies. However, the sole mobilisation of private finance will be insufficient to address all of the challenges that the EU needs to overcome. It will also require a significant level of public investments, particularly in high-risk areas such as defence and decarbonisation. This draft report outlines a series of measures aimed at addressing these challenges, at creating a more integrated and efficient capital market in the EU and at identifying the role of public sector in leveraging investments.

Strengthening the Capital Markets Union (CMU): The greater mobilisation of private finance requires different steps. The report calls for the acceleration of the CMU agenda, with a focus on improving access to venture capital and equity financing, particularly for innovative companies. It also emphasises the need for greater harmonisation of regulatory frameworks across Member States to facilitate cross-border investment and reduce fragmentation. It insists on making progress towards greater harmonised supervision and direct supervisory powers to the European Securities and Markets Authority (ESMA) over pan-European market infrastructures. The report highlights the importance of creating economic opportunities for private investment by offering competitive returns. The report insists on channelling household savings into productive investments and explores the creation of an EU investment savings account or label for basic and simple investment products that are suitable for retail investors. This would help to channel household savings into productive investments, particularly in sustainable and innovative sectors.

A crucial role for public investments: The report recognises the need for substantial public sector support to mobilise private investment, particularly in high-risk areas such as defence and decarbonisation. It calls for the establishment of a dedicated instrument within the European Stability Mechanism (ESM) to address heightened defence needs and recommends that the European Investment Bank (EIB) adapt its lending policy to support higher-risk investments. It also highlights the importance of issuing a common safe asset at the EU level to facilitate the achievement of the CMU and address the investment needs identified in the Draghi Report. It calls on the Commission to assess the various features of safe assets and publish a report outlining their common characteristics. Finally, the report proposes to establish a European Economic Intelligence Unit that would help connect industrial need with financial tools. The rapporteur calls on all stakeholders and co-legislators to work together to implement these measures and ensure that the EU is well-positioned to meet the challenges of the 21st century.