In an analysis published on Tuesday 14 October, the Centre for European Policy Studies (CEPS) highlights the weaknesses and biases underlying the ‘Finance Europe’ initiative, the voluntary label launched in June by seven EU Member States to direct savings towards European assets (see EUROPE 13654/20). Although “politically appealing”, the initiative is “economically flawed”, according to the Brussels think tank.
It believes that the label is based on a fragile diagnosis and does not provide a solution to the macroeconomic imbalances at the root of savings being channelled abroad.
The researchers point out that the often-cited €300 billion a year in European savings invested outside the EU reflects structural balances - notably the combination of a public deficit and a current account surplus - and not a failure of the financial markets.
Moreover, imposing a minimum proportion of European assets would, in their view, reduce portfolio diversification, increase volatility and possibly harm investor returns.
The research centre also highlights the design and governance limitations of ‘Finance Europe’, which is said to be pursuing too many objectives at once without having the appropriate tools at its disposal.
Instead, the CEPS recommends tackling the structural causes - by clarifying macroeconomic priorities, strengthening the competitiveness of European markets and drawing on simple, neutral national models. Otherwise, the label risks remaining a symbolic gesture rather than a transformative solution, according to the CEPS.
Link to analysis: https://aeur.eu/f/iz2 (Original version in French by Bernard Denuit)