Europe has substantial financial resources, yet many businesses still struggle to secure the funding needed to expand, innovate and compete internationally.

The challenge is not simply how much money households save, but how effectively those savings reach companies and projects capable of generating long-term economic value.

Why Available Savings Do Not Always Reach Businesses

Households save for many reasons, including emergencies, retirement, education and major purchases. Bank deposits remain attractive because they are familiar, relatively accessible and, within applicable limits, protected by deposit-guarantee schemes.

However, businesses have different financing requirements. Established companies may obtain loans from commercial banks, while innovative firms and growing start-ups often need equity capital to fund research, develop new products and expand before generating reliable profits.

Equity financing allows businesses to raise money by selling ownership stakes rather than taking on additional debt. Investors accept the possibility of losses in exchange for potential returns if a company grows successfully. Europe's financial system does not always connect these two groups efficiently. Fragmented capital markets, differing national rules and limited access to cross-border investment can make it harder for companies to attract funding from investors in other European countries.

The Cost of Fragmented Capital Markets

Europe has developed sophisticated financial institutions and markets, but investment activity remains divided across national boundaries. Differences in regulation, taxation, market infrastructure and supervisory practices can increase the cost of raising capital across borders.

Smaller businesses are particularly affected because they may lack the resources to navigate complicated financing arrangements. A company with strong growth potential can struggle to attract investors when funding markets are shallow or when the costs of accessing them are too high.

Greater integration could widen the pool of available investors, improve competition among financial service providers and give businesses more financing options. It could also help investors diversify their portfolios across countries and industries.

Connecting Savings With Long-Term Growth

The European Union's Savings and Investments Union initiative aims to improve the way savings are channelled into productive investment. The strategy seeks to expand investment opportunities for citizens while making financing more accessible to businesses. According to the European Commission, approximately €10 trillion in EU household savings is held in bank deposits. Even a partial shift toward suitable capital-market investments could provide additional financing for European companies.

However, deposits should not be treated as idle money that must automatically be moved into investments. Households need liquid savings for emergencies and short-term expenses, and investment products carry risks that deposits may not. Better financial education, transparent fees and appropriate investor protection are therefore essential.

Why Equity Capital Matters for Innovation

Innovative businesses often face years of development costs before their products become commercially successful. Traditional lending can be difficult when companies lack substantial assets or predictable cash flows to support loan repayments. Equity investors can provide capital without requiring fixed repayments, allowing businesses to pursue projects with uncertain but potentially significant returns.

A deeper European equity market could help promising companies grow without depending so heavily on financing from outside the region. Nevertheless, stronger markets require investor confidence, reliable disclosure, effective supervision and credible opportunities to sell investments when necessary.

Expert Insight

François Villeroy de Galhau, Governor of the Banque de France, addressed Europe's financing challenge in a speech delivered on 11 September 2025: “Europe does not lack savings or credit, it lacks equity.”

Europe's investment challenge is partly a question of financial structure rather than a simple shortage of money. Large household savings coexist with businesses that need more accessible financing, particularly equity capital for innovation and growth. Success will depend on maintaining investor protection while making it easier for savings to support productive companies and long-term economic development.