Contribution by Christine Lagarde, President of the ECB to The Economist
A fragmented financial infrastructure means that Europe gets less bang for its euro
Europe is not short of ideas, innovators or savings. Europeans save more of their income than Americans, and their share in global patent applications is close to that of the United States. But Europe often struggles to turn ideas into new technologies that can drive growth. One reason is that it is much less able than the United States to channel its significant savings into scaling up innovation.
In response, the EU has spent years trying to build a “capital markets union”. Since 2015, there have been more than 55 regulatory proposals and 50 non-legislative initiatives. But a broad agenda has led to little progress. Europe must refocus, exposing the key blockages in the financing pipeline and identifying a smaller number of solutions with the highest return. Three stand out today.
First, Europe’s savings are not entering capital markets in sufficient volume. Europeans hold one-third of their financial assets in cash and deposits, compared with one-tenth in America. If EU households were to align their ratio of deposits to financial assets with that of American households, a stock of up to €8trn ($8.4trn) could be redirected into long-term, market-based investments.
A barrier to such diversification is the retail investment landscape in Europe. Many households face few suitable investment options and high fees. Retail investors in European mutual funds, for example, pay almost 60% more in fees than their American counterparts.
A standardised, EU-wide set of savings products—a “European savings standard”—is the best way to move forward. Such products would be accessible and transparent, offering a range of investment options structured according to clear criteria. And they would be affordable, because there would be less red tape, more comparability and more competition. The attractiveness of the European standard would also be enhanced by harmonising tax incentives across countries.
Second, when savings do reach capital markets, they are not expanding throughout Europe. That limits the ability to build up large pools of capital to finance transformative technologies. For example, more than 60% of households’ equity investment takes place within their own country.
These national silos are sustained by an extraordinarily fragmented set of financial market infrastructures. The EU boasts 295 trading venues, 14 central counterparties and 32 central securities depositories (CSDs). In the United States, there are only two securities clearing houses and one CSD.
A patchwork of different corporate, tax and securities laws hinders consolidation, exacerbated by national authorities mandating the use of national CSDs for certain transactions. Europe’s approach to overcome these barriers has been incremental harmonisation. But progress is much too slow.
Europe needs a change in method to bypass entrenched vested interests. That is why last year I called for a “European SEC” to provide enforcement of a common rulebook across the EU as the Securities and Exchange Commission does in America. But alongside this goal, there are complementary options Europe can pursue.
One would be a two-tier approach, as Europe already has for competition enforcement and banking supervision. Financial-services providers that fulfil certain criteria—such as size or cross-border activity—would fall under European supervision. National authorities would continue to supervise smaller national players.
Another option would be to use “28th regimes” in areas where progress has stalled—a special EU legal framework with its own regulations sitting alongside those of the 27 member states. For example, we could envisage a 28th regime for issuers of securities providing unified corporate and securities law.
Third, once savings have been allocated by capital markets, they are not exiting towards innovative companies and sectors, owing to an underdeveloped ecosystem for venture capital (VC) in Europe. VC investment is only around one-third of American levels, and Europe is largely reliant on American VCs to fund innovation. More than 50% of late-stage investment in European tech comes from outside.
Europe should aspire to have American levels of VC, but it will not happen overnight. In the meantime, the EU needs to use all the flexibility in its financial system to help plug the gap.
Given that institutional investors have long investment horizons, the EU’s regulatory regime should allow them to contribute more to long-term growth. For example, EU pension funds allocate just 0.01% of total assets to European VC, a fraction of what their American counterparts invest in American VC.
The EU should also fully harness the potential of the European Investment Bank to pool risks and crowd private capital into European VC. And it should explore how to support innovation not only through equity, but also through debt. Developing securitisation in Europe could allow banks to free up balance-sheet space and play a greater role in financing innovation.
Progress in these three areas will be self-reinforcing. More high-growth companies will mean higher valuations, greater liquidity in EU markets and higher returns for savers. But it will require a change of approach from taking a large number of small steps to a small number of large ones—and choosing those that are most feasible and that will make the biggest difference.
This contribution is based on the speech held by President Lagarde at the European Banking Congress on 22 November 2024.
 
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The global economy is projected to remain resilient despite significant challenges, according to the OECD’s latest Economic Outlook. The Outlook projects global GDP growth of 3.3% in 2025, up from 3.2% in 2024, and 3.3% in 2026.
Inflation in the OECD is expected to ease further, from 5.4% in 2024 to 3.8% in 2025 and 3.0% in 2026, supported by the still restrictive stance of monetary policy in most countries. Headline inflation has already returned to central bank targets in nearly half of the advanced economies and close to 60% of emerging market economies.

Labour markets have gradually eased, yet unemployment remains low by historical standards. Strong nominal wage gains and continued disinflation have bolstered real household incomes. However, private consumption growth remains subdued in most countries, reflecting weak consumer confidence. Global trade volumes are recovering, with a projected increase of 3.6% in 2024.
Growth prospects vary significantly across regions. GDP growth in the United States is projected to be 2.8% in 2025, before slowing to 2.4% in 2026. In the euro area, the recovery in real household incomes, tight labour markets and reductions in policy interest rates continue to drive growth. Euro area GDP growth is projected at 1.3% in 2025 and 1.5% in 2026. Growth in Japan is projected to expand by 1.5% in 2025 but then decline to 0.6% in 2026. China is expected to continue to slow, with GDP growth of 4.7% in 2025 and 4.4% in 2026.
“The global economy has proved resilient. Inflation has declined further towards central bank targets, while growth has remained stable,” OECD Secretary-General Mathias Cormann said. “Significant challenges remain. Geopolitical tensions pose short-term risks, public debt ratios are high and medium-term growth prospects are too weak. Policy action needs to safeguard macroeconomic stability – through monetary policy easing that is carefully calibrated to ensure inflationary pressures are durably contained and through fiscal policy that rebuilds fiscal space to preserve room to meet future spending pressures. To boost productivity and the foundations for growth, we must enhance education and skills development efforts, undo overly stringent constraints to business investment and successfully tackle the structural increase in labour shortages.”
The Outlook highlights persistent uncertainty. An intensification of the ongoing conflicts in the Middle East could disrupt energy markets and hit confidence and growth. Rising trade tensions might risk hampering trade growth. Adverse surprises related to growth prospects, or the path of disinflation could trigger disruptive corrections in financial markets. Growth could also surprise on the upside. Improvements in consumer confidence, for example if purchasing power recovers quicker than anticipated, could boost spending. An early resolution to major geopolitical conflicts could also improve sentiment, and lower energy prices.
To navigate these challenges, the Outlook emphasises the need to durably reduce inflation, address rising fiscal pressures and tackle labour shortages to alleviate structural impediments to higher trend growth.
Central bank policy rate reductions should continue in advanced economies except Japan. The timing and extent of reductions should be carefully judged and remain data-dependent, ensuring that underlying inflationary pressures are fully contained.
Decisive fiscal action is needed to ensure the sustainability of public finances, and provide the necessary resources for governments to tackle future shocks and future spending pressures. Stronger near-term efforts to contain spending growth, optimise revenues and enhance credible medium-term adjustment paths need to be the cornerstone of efforts to stabilise debt burdens.
Ambitious structural reforms are necessary to reinvigorate weak potential output growth. The policy mix needs to include efforts to enhance education and skills development and reduce constraints in product and labour markets that impede opportunities for investment and labour mobility.
“Structural reforms are essential to lay the foundations for stronger, sustainable growth,” OECD Chief Economist Alvaro Pereira said. “Labour shortages are already a challenge for firms in many countries, and population ageing will only exacerbate this. Policy action needs to ensure that skills evolve with demands on labour markets and that labour force participation, especially of older workers and women, rises.”
For the full report and more information, visit the Economic Outlook online. Media queries should be directed to the OECD Media Office (+33 1 45 24 97 00).

 
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Today, the European Commission and the European Investment Bank (EIB) are announcing a new partnership to support investments in the EU’s battery manufacturing sector. This partnership will see a €200 million top-up (loan guarantee) to the InvestEU programme from the EU Innovation Fund. It comes in addition to €1 billion in grants to support electric vehicle battery cell manufacturing projects via the Innovation Fund, also announced today. As part of the new partnership, the EIB envisages investing a further €1.8 billion in the wider battery value chain. These joint efforts will result in €3 billion of public support in total for the development of a competitive and sustainable European battery industry.
The €200 million InvestEU guarantee top-up by the Innovation Fund will be directed to support innovative projects along the European battery manufacturing value chain to address financing challenges by enabling additional EIB venture debt operations over the next three years. In particular, the venture debt operations will:

help companies to bridge the gap between the research and development phase and large-scale commercial deployment;
reduce market failures;
leverage public funding to mobilise private investment;
contribute to the establishment of innovative and resilient supply chains for energy storage in Europe.

Support will be directed to a wide range of battery technologies, such as developing advanced materials, components manufacturing, or innovative recycling techniques. Funding prioritises technological innovations beyond basic cell or pack assembly and excludes mining and extraction activities. The EIB will conduct a periodic application process to evaluate whether an operation is eligible under the defined top-up criteria, as well as the project’s commercial and technical viability. Interested applicants can find more information on the EIB Venture debt webpage and apply through the EIB MyRequests portal.
The EIB supports the wider battery value chain, including raw materials, research, production, charging infrastructure, and recycling. Over the past six years, the Bank has provided €6 billion of financing and aims to invest a further €1.8 billion. The Innovation Fund’s €1 billion Battery call and the €200 million InvestEU guarantee top-up[  comes in response to the appeal made on 6 December 2023 by the previous Executive Vice-President Maroš Šefčovič to bolster the EU’s battery manufacturing industry by allocating up to €3 billion in support to the sector. This initiative aims to incentivise investment and make the European battery industry cleaner and more competitive.
Together, the InvestEU top-up, the EIB’s own-resource investments, and today’s launch of a new €1 billion electric vehicle (EV) battery-focused call for proposals from the Innovation Fund highlight the commitment of the European Commission to make the batteries manufacturing value chain more resilient and more competitive. The new partnership that the Commission and the EIB announced today also underscores the EU’s commitment to implement a circular economy and lower the environmental impact of batteries, an indispensable energy storage technology. Strengthening the continent’s battery value chain, manufacturing capabilities, and recycling processes will help support the objectives outlined in the EU Green Deal, the EU Batteries regulation, and the Net-Zero Industry Act.
Background
Battery production is a strategic imperative for Europe’s clean energy transition, crucial not only for the transport and power sectors but also for the EU’s broader strategic autonomy. Ramping up battery production aligns with the Net-Zero Industry Act to boost European manufacturing capacity for net-zero technologies and their key components, addressing barriers to scaling up production. The InvestEU top-up will enhance the competitiveness of the net-zero technology sector, attract investments, and improve market access for cleantech in the EU.
With an estimated total budget of €40 billion from 2020 to 2030 from EU Emissions Trading System revenues, the Innovation Fund aims to create financial incentives for companies to invest in cutting-edge low-carbon technologies and support Europe’s transition to climate neutrality. The Innovation Fund has already awarded about €7.2 billion for innovative projects through its previous calls for proposals. It has recently selected 85 new projects for grant preparation under its IF23 Call, expected to receive an additional €4.8 million.
The InvestEU programme provides the European Union with crucial long-term funding by leveraging substantial private and public funds in support of a sustainable recovery. It also helps mobilise private investments for the European Union’s policy priorities, such as the European Green Deal and the digital transition. The InvestEU programme brings together the multitude of EU financial instruments currently available to support investment in the European Union, making funding for investment projects in Europe simpler, more efficient and more flexible. The programme consists of three components: the InvestEU Fund, the InvestEU Advisory Hub and the InvestEU Portal.
 
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New accession candidates will need to undertake equally ambitious reforms to make the next expansion a comparable success
Poland is one of the success stories of European economic convergence. The country, which in January takes the reins of the Council of the European Union (the decision-making institution representing the Union’s member states) is now the EU’s sixth largest economy. This convergence process was driven by the 2004 EU enlargement, which also welcomed the Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Slovenia, and Slovakia into the Union, expanding the EU’s population by about 20 percent.
Twenty years later, as new EU accession discussions are underway, it is worth looking at how much the earlier enlargement benefitted new members and the whole Union, and reflect on the economic returns of broadening the European single market. The current accession candidates, in different stages of the process, are Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, Serbia, Georgia, the Republic of Moldova, Ukraine and Türkiye. In October, the European Commission issued a new report with detailed assessments of the state of play and the progress toward EU accession made by each candidate.
 

A new note by the Regional Economic Outlook for Europe shows that the 2004 EU enlargement brought substantial income gains. These gains were particularly large in the new member states: after 15 years GDP per person was on average more than 30 percent higher than it would have been without EU accession.
The factors driving these gains in new members were threefold. First, the 2004 group benefitted from more comprehensive economic reforms prior to joining the EU than implemented in comparable other regions, including on trade, financial sector, and product market liberalization. Second, additional financing from foreign direct investment and EU cohesion funds helped boost the capital stock. Third, technology transfers and enhancements in educational attainment improved productivity.
While all regions in new EU countries gained, some gained more than others. Those already better integrated into value chains with the existing member states increased GDP per person nearly 10 percentage points more than those less integrated pre-accession, irrespective of geographic distance. Regions with firms that had easier access to long term financing gained close to 15 percentage point more than others.
Existing member states benefitted from EU enlargement too. By 2019, income per person was around 10 percent higher than it would have been in a scenario without enlargement. The main driver of these gains was the expansion of the EU’s single market, which allowed firms to expand production and reap efficiency gains, including through higher investment in the accession countries. While regions in Scandinavia, Germany, and Austria—already well integrated with new member states prior to accession—gained the most, many regions further away benefitted too.
What does this mean for next wave of EU accession? A key lesson is that both accession candidate countries and existing EU members can benefit if they put in the work. This is no easy task. It would require strong pre-accession reforms, significant financing, political resolve, and possible institutional adaptation.
Some factors of the 2004 successes may be harder to achieve today. For accession countries this puts a premium on those actions directly under their control, such as the reform effort to close business regulation and institutional gaps to the EU. From the existing members’ side, continuing to deepen the single market by removing remaining within-union trade barriers and advancing the capital market union to finance dynamic firms’ growth would further amplify the potential gains. These joint efforts could not only accelerate catch-up within Europe, but also help narrow Europe’s persistently large income gap with the US.
 
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The latest Eurobarometer released today reveals the highest level of trust in the European Union since 2007 and the highest-ever support for the euro. The survey also shows that Europeans have a more optimistic view about the future. They would like to see a stronger and more independent EU, especially in the face of the current global challenges.
Trust in the EU is at its highest level in 17 years
51% of Europeans tend to trust the EU, the highest result since 2007. Trust in the EU is highest among the young people aged 15-24 (59%). In another 17 year-record, 51% of Europeans said they trust the European Commission.
Almost three quarters of respondents (74%) say they feel citizens of the EU, the highest level in more than two decades. In addition, more than six in ten EU citizens (61%) are also optimistic about the future of the EU.
At the same time, 44% of EU citizens continue to have a positive image of the EU, while 38% have a neutral image and 17% have a negative image of the EU.
Positive trends also registered in most of the enlargement countries surveyed. The majority of citizens tend to trust the EU*, in Albania (81%), Montenegro (75%), Kosovo (70%), Georgia (58%), North Macedonia and Bosnia and Herzegovina (56% each), and Moldova (52%). In Türkiye 42% (four percentage points more compared to the previous survey) tend to trust the EU and in Serbia 38% (+2 percentage points). 38% of United Kingdom respondents (+6 percentage points) also share this view.
Europeans want a stronger, more independent and sustainable EU
Nearly seven in ten respondents (69%) agree that the EU has sufficient power and tools to defend the economic interests of Europe in the global economy. Similarly, 69% agree that the European Union is a place of stability in a troubled world.
According to Europeans, security and defence (33%) should be the main priority area for the EU action in the medium term, followed by migration (29%), the economy (28%), climate and the environment (28%), and health (27%). At the same time, 44% of European citizens think that ensuring peace and stability will have the highest positive impact on their life in the short term, followed by securing food, health, and industry supplies in the EU and managing migration (both 27%). When it comes to specific areas for EU action in the clean sector, Europeans believe the EU should prioritise renewable energy (38%) first, followed by investments in sustainable agriculture (31%), energy infrastructure (28%) and clean technology investments (28%).
Historic high support for the euro and growing optimism about the economy
The Eurobarometer survey registered the highest support ever for the common currency, both in the EU as a whole (74%) and in the euro area (81%). When it comes to the perception of the situation of the European economy, 48% of Europeans (up one point since spring 2024) find it good while 43% (up two points) find it bad. The perception of the situation of the European economy has steadily improved since autumn 2019. A plurality of citizens (49%) think the European economic situation will remain stable in the next 12 months.
Continued support for EU’s response to the war in Ukraine
In the face of the Russian war of aggression against Ukraine, nearly nine Europeans in ten (87%) agree with providing humanitarian support to the people affected by the war. 71% of EU citizens support economic sanctions on the Russian government, companies, and individuals and 68% agree with providing financial support to Ukraine. Six in ten approve of the EU granting candidate status to Ukraine and 58% agree with the EU financing the purchase and supply of military equipment to Ukraine.
The war in Ukraine continues to be considered as the most important issue at EU level (31%) out of 15 items (followed by immigration at 28% and the international situation at 22%), while 76% of European respondents agree that Russia’s invasion of Ukraine is a threat to the security of the EU.
Background
The Standard Eurobarometer 102 (Autumn 2024) was conducted between 10 October and 5 November 2024 across the 27 Member States. Overall, 26,525 EU citizens were interviewed face-to-face. Interviews were also conducted in nine candidate and potential candidate countries (all except Ukraine) and the United Kingdom.
 
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The Council of the EU has endorsed 46 Global Gateway flagship projects for 2025.
The projects identified as flagships by EU member states’ ambassadors are prominent examples of Global Gateway deliverables in the areas of digital, climate and energy, transport, health, education and research.
This selection of key initiatives helps to showcase the comprehensive support the EU and its member states offer to partners across the globe in terms of the sectors of activities, as well as the countries and regions concerned. The flagship projects contribute to strengthening our strategic partnerships and the promotion of our joint interests. Each project is scheduled to achieve a tangible deliverable and milestone during 2025.
Flagship projects are identified on a yearly basis and integrated in a Global Gateway flagships list which includes 218 initiatives from previous years, in this case 2023 and 2024. The flagship list is not exhaustive in relation to all projects and activities under Global Gateway, but aims to serve as a tool for the EU and its member states for strategic communication and visibility during the year 2025 in the EU’s engagement with its partners. Flagship projects showcase concrete transformative projects and emphasise their tangible impact and benefits to local communities. The inclusion of projects from member states in the list does not guarantee EU financing for those projects.

The selection is carried out in line with the Global Gateway governance and taking into account the input from the Commission, the EEAS and the member states. Once a project is included in the list, it remains a flagship project until its completion. To support the continued accuracy and relevance of the list, a review procedure has been introduced to allow for streamlining projects identified as flagships in 2023 and 2024.
Background
The EU’s Global Gateway strategy encourages public and private investment in infrastructure, green energy, education and research for sustainable development and aims to mobilise up to €300 billion of investments worldwide between 2021 and 2027. Through the Global Gateway, the EU and its member states develop and invest in sustainable and quality investment projects around the world, in close cooperation with EU’s partners around the world.

 
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