The European Commission's proposal for a Savings and Investment Union wants citizens to also help EU companies grow. This episode discusses what it would take to make investing savings in financial products a win-win situation for everyone involved.
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00:00Are Europeans prepared to channel their bank savings into strategic investments?
00:19The European Commission hopes so, as it is at the heart, to create a new savings and investment union.
00:25The goal is to help EU companies grow.
00:28EU Decoded checks the sums on the new plan to boost Europe's economy.
00:34According to the Mario Draghi report, the EU needs around 800 billion euro in additional investment each year to remain competitive.
00:43One new source could be Europeans' piggy banks, as households save 1.4 trillion euros annually.
00:50It's estimated that around 10 trillion euros is sitting idle in low-yield bank deposits in the EU.
00:56The savings and investment union proposes to redirect part of it to invest in key sectors, such as transport infrastructure, energy or defence.
01:07He is investing in financial products with a seal of EU guarantee attractive.
01:12Let's see what some citizens think.
01:15I really want Europe to become more competitive on the global scene.
01:20And I think Europe is really a beacon of democracy at this time.
01:26So, yeah, I think we need to support Europe for sure.
01:29I would just be very conservative to stuff that I know that it would last, would have a clear future.
01:36Why not if I got any chance to invest, then I will invest definitely.
01:40I really want to invest in the people in the world.
01:41I think that you don't have a data level of thinking about the EU ALEXANDER-NICS.
01:44In the world, it depends on what the EU's money should be identified.
01:46It is very important for us to understand how to invest the EU's money.
01:47And I think that we need to invest then as well.
01:48I think that the EU's money should be able to invest in the future.
02:00There is a lot of information about what it is about the Unions and what we want to do.
02:08With us is Paula Soler, who covers financial and economic affairs for Euronews.
02:13Investing in markets can be a risky and complex process.
02:18What does the plan propose in terms of financial literacy?
02:21We have very poor levels of financial literacy across the EU,
02:25meaning that people really don't understand how capital markets work, how to invest in different products, etc.
02:32So they are announcing this proposal, this strategy to boost financial literacy by the third quarter of this year to tackle this problem.
02:42Some MEPs are already suggesting initiatives such as web comparison sites,
02:49so clients, citizens can check different products and see what suits better.
02:54And they are also proposing, for example, to regulate financial influencers, their activity, what they post and these kind of things.
03:02And another proposal in the plan is to increase the supplementary workers' pension schemes that run in parallel with public pension funds.
03:13How would this work?
03:14The Commission wants member states to really develop these supplementary pensions that deliver for citizens.
03:21And they are proposing two measures.
03:23The first one is to revise, to review these EU existing frameworks.
03:28And on the other hand, they will also serve best practices on the so-called auto-enrolment,
03:34which is a mechanism that automatically enrolls individuals into pension products, pension schemes, unless they actively opt out of this.
03:46And if it's properly designed, this could basically channel citizen savings into pension products.
03:53And both proposals are supposed to be announced by the end of the year.
03:57Do you think there are enough incentives for citizens to help increase private capital in the European economy?
04:05So we see these new impetus from the Commission to really move forward with these plans and to channel these citizen savings into the strategic investments that we need.
04:16But the real question here is, will member states have the political will to make this happen?
04:22And apart from these new investment products, are we also going to see more consumer protection, a real boost to financial literacy.
04:30So citizens are really empowered to go there and invest their money.
04:35And I think that only time will tell if they actually deliver.
04:40Besides tapping on citizen savings, the plan has three other important ambitions.
04:46One is to help financing for startups and riskier projects that have difficulty obtaining bank loans.
04:53Another is to approve a common deposit insurance scheme, crucial for completing the banking union.
05:00Finally, it wants to harmonize rules that will make cross-border investing easier, crucial for having a capital markets union.
05:09Our guest is Rebecca Christie, Senior Fellow at Brugel Think Tank here in Brussels.
05:15Do you think there could be some investment products that would have kind of a quality sale by the European Commission so that people think this could be a good idea for my savings?
05:25So in my own work, I've thought it would be very helpful to have a European Union label to help people sort through the field of funds out there.
05:32Because in some countries, it's not that there aren't products available.
05:35It's that people don't know where to find them or they don't know how to tell the good ones from the bad ones or anything like that.
05:41If that process can be streamlined somewhat by having a smaller list of already available products that are generally suitable for general investors, that have a long-term investing horizon, that are diversified, that have low fees, that are appropriate for people saving for their pensions, then some of these extra costs and compliance burdens can go away on both sides for the people using the accounts and the people offering them.
06:07And that might make it easier.
06:08Rather than exposing people to the capital markets risks, wouldn't it be better that the European Investment Bank would increase its firepower?
06:19Well, the European Investment Bank works on a very different level.
06:23It makes loans to things like cross-border infrastructure projects and new innovative companies that can try and get them going.
06:32But that's not on the scale to really fund the retirements of everybody across the EU.
06:38And also that's an investment in a project or a company.
06:41It's not an investment in a pot of money that's going to grow.
06:45And fundamentally, the European Commission is kind of still pushing for governments in terms of creating the banking union and the single capital markets.
06:54Are member states willing to give up sovereignty in this area?
06:59Depends on how you look at sovereignty.
07:01If you look at sovereignty as protecting financial stability and the best interests of your own economy, it makes sense to want to have joined up capital markets.
07:10The banking union is about half done.
07:12We've seen within the euro area that banking supervision for the biggest banks is at the ECB.
07:17Banking supervision for smaller banks is still with member states.
07:20And this has worked very well.
07:21The banks on the whole are safer.
07:24They're being managed well to the extent that asset managers, clearing houses, other types of players in this capital market space can all play by the same rules and can all work together within the EU single market, which is its biggest strength.
07:38That'll be good.
07:40The European Commission is trying to capture more private capital, but also prevent it from fleeing to other jurisdictions, notably the US.
07:49Let's see if these actions convince citizens to risk their savings on the future of European business.
07:56For thank you for your working Groups, of these peoples in this state across half.