Speech by the Eurogroup President, Kyriakos Pierrakakis, at the European Banking Federation and BusinessEurope forum on EU banking sector competitiveness, Brussels
Let me start with a simple fact.
Europe is not growing fast enough. We remain one of the richest and most successful economic areas in the world. We have world-class companies, highly skilled people, a Single Market of 450 million consumers and enormous private savings.
But we are not turning these strengths into growth at the pace we should. And we should care about this not because of a statistic in a forecast.
We should care because growth is ultimately about people’s lives. For people, stronger growth means better jobs, higher wages and rising living standards. It means more opportunities for the next generation. And it gives governments the resources to sustain good public services, pensions and our European social model.
For businesses, it is even more tangible. It is whether an SME can finance a new machine. Whether a family business can digitalise. Whether a manufacturer can invest in more efficient energy use. Whether a technology company can finance the next stage of its growth without having to leave Europe.
And increasingly, it is whether our companies can invest in AI and new technologies quickly enough to remain competitive.
That is what growth means in practice. And today there is an additional reason why growth matters.
Economic strength is increasingly becoming geopolitical strength. The world around us has changed.
Kyriakos Pierrakakis, President of the Eurogroup
Europe needs to invest much more in defence, energy security, AI, critical technologies and strategic infrastructure. We need to reduce excessive dependencies and strengthen our capacity to act.
So stronger growth has a double dividend. It means greater prosperity for our people and businesses. And it means greater security and greater economic sovereignty for Europe.
The question, then, is where that growth will come from. Europe is ageing. Our labour force will become more constrained. We cannot assume that tomorrow’s growth will simply come from having more people working.
We need to become more productive. And that requires investment. Investment in skills. In technology. In energy. In innovation. And, increasingly, in AI.
Mario Draghi has given us a sense of the scale: around €800 billion of additional investment every year.
That leads to a simple question: Who is going to finance it? Sound public finances remain essential if not existential. Governments and European resources have an important role. But public budgets cannot finance Europe’s transformation alone.
We need private investment at much greater scale.
And here we come to one of the paradoxes of the European economy.
Europe does not lack money. Europe has the savings.
What we have not yet built is a financial system capable of putting enough of those savings to work in our own economy.
Too much capital remains divided by national borders. Too many businesses face different financing conditions depending on where they are located. And too many successful European companies struggle to find the capital to scale.
This is why the Savings and Investments Union matters. Its purpose is actually very simple: Connect Europe’s savings with Europe’s opportunities; allow capital to move towards good ideas and productive companies wherever they are in our Single Market.
Give citizens better ways to invest and participate in Europe’s growth. Give businesses more ways to finance investment.
But if we want to achieve that, we also must talk about banks. Banks still provide around 70% of financing to the European economy. And for SMEs in particular, banks remain fundamental.
For a small business, financing means having a bank that understands the company. A bank willing to finance working capital. A bank willing to finance the next machine, the next employee, the next investment.
That is why we cannot have a successful Savings and Investments Union without completing the Banking Union.
And this is not about completing an institutional project simply because we started it fifteen years ago. It is about creating a European financial market that works better for the people and businesses that depend on it.
We start from a position of strength. European banks today are resilient, profitable and well capitalised. During the pandemic and the energy crisis, they helped absorb the crisis rather than amplify it.
That is a major achievement.
We built the Banking Union because Europe needed a safer banking system. Now we need to complete it because Europe needs a stronger economy.
This is why I welcome the direction Commissioner Albuquerque and the Commission have taken with their work on banking competitiveness. The Commission’s report moves the debate forward.
The question is no longer simply whether European banks are safe – the answer to this question being “yes”, we have seen to that. It is also: is our banking system organised in a way that allows it to serve Europe’s economy as effectively as possible? And here we still have work to do.
We have a common currency. We have common European supervision. We have built much of the Banking Union. And yet our banking market remains remarkably national. Only around 16% of corporate lending in the euro area is cross-border.
Capital and liquidity still face barriers within banking groups. Cross-border consolidation remains difficult. And complexity comes with a cost. These may sound like banking-sector issues.
But ultimately, they affect how much finance is available, where it goes and at what cost to businesses and households.
That is why I increasingly see fragmentation as a strategic tax.
A tax on scale. A tax on investment. A tax on innovation. And ultimately, a tax on European growth.
Scale is becoming particularly important because banking itself is being transformed by technology. AI. Cybersecurity. Digital payments. Data infrastructure. The largest US banks invest more than two-and-a-half times as much in IT relative to their assets as their European peers.
That matters not only for banks. It matters for their customers – because technology increasingly determines the quality, speed and cost of the financial services our businesses receive.
But let me be equally clear. European integration does not mean uniformity. And our objective is not simply to create a handful of European banking champions. Yes, Europe needs financial institutions with the scale to compete globally, invest in technology and accompany European companies around the world.
But Europe is also an economy of SMEs. For many of those businesses, finance depends on something very different: proximity, knowledge of the customer and trust.
So, a genuine European banking market needs both. Scale where scale matters. Proximity where proximity matters.
European institutions able to compete globally, alongside strong regional and local banks serving SMEs, households and communities.
I welcome the fact that Commissioner Albuquerque and the Commission have recognised this diversity and the importance of proportionality.
So, what do we need to do? I would reduce it to three priorities.
- First, integration. We need to remove unnecessary barriers to cross-border activity and consolidation and allow capital and liquidity to move more efficiently. A euro saved in one part of Europe should be able to finance a productive investment in another. That is what a genuine Single Market in finance should mean.
- Second, trust. Greater integration requires confidence in common European safeguards. That means effective crisis management, credible liquidity in resolution and progress on deposit insurance. Integration and common safeguards are not competing objectives. One makes the other possible.
- Third, competitiveness. We should preserve the resilience we have worked so hard to build. But preserving resilience does not mean preserving every layer of complexity accumulated over fifteen years. We need greater proportionality, more consistent supervision and less unnecessary complexity. The principle should be clear: Better regulation, not less regulation.
Commissioner Albuquerque will speak after me, so I will leave the details of the Commission’s work and forthcoming proposals to her.
Instead, let me focus on what I believe is now the harder part of the equation. The politics.
We broadly understand the economics. We know fragmentation has costs. We know Europe needs more investment. We know private capital must play a greater role. And we know a more integrated banking system is essential to making the Savings and Investments Union work.
But our banking systems are different. Member States have different histories, different structures and legitimate national concerns. Those differences are real.
But they cannot become a reason for permanent fragmentation.
There is a simple European paradox here.
If every one of us protects every national safeguard because we believe it makes us stronger individually, we may end up making Europe weaker collectively.
And a weaker Europe ultimately makes each of us weaker too.
European integration has always required trust and compromise. Nobody will get everything they want from this reform. But everyone should be prepared to move on something.
That is where I see an important role for the Eurogroup. To listen to different national perspectives. To understand legitimate concerns. To build trust. And ultimately to find the common ground that allows us to move forward together. Because the destination should not be controversial.
We want European citizens to have better opportunities for their savings.
We want an SME to be able to finance its next investment.
We want our companies to invest in AI and technology.
We want successful European firms to scale in Europe.
We want our financial institutions to compete globally.
And we want Europe to be able to finance its own economic and strategic priorities.
This is what completing the Banking Union is ultimately about.
Let me conclude. We have spent the last fifteen years making Europe’s financial system safer. That was necessary.
But the world has changed. Today the question is whether that financial system can also help make Europe more productive, more innovative and more competitive.
The Commission has given us an ambitious diagnosis. Commissioner Albuquerque is pushing this debate forward. And I believe there is increasingly a shared understanding of what needs to change.
Now comes the difficult part. Delivery.
And there is urgency. Businesses are making investment decisions today. AI is transforming industries today. Capital is deciding where to go today. And our competitors are moving today.
Europe has the ingredients: the talent, the savings, the businesses and the scale of our Single Market. What we need now is the determination to put those strengths together. Because Europe does not lack potential.
Our responsibility is to turn that potential into opportunity – for our businesses, for our citizens and for the generations that come after us.
