Savings May Not be Europe's Super Weapon in Economic Battle

• As Europe seeks to hold its ground against economic rivals, politicians think they have a secret weapon: the untapped savings of its citizens.
• From Italy selling government bonds to households, to French talk of a pan-European savings product or Britain offering tax breaks for investment in UK shares, governments across Europe are seeking ways to mobilise household wealth. All these plans share an underlying thinking: Europe is sitting on plenty of cash that could be channelled towards its goals, from the green transition to beefing up militaries.
• Politicians hope private money invested in local stocks or government debt can help close the growth and productivity gap with the United States and China. However, critics say such schemes risk disappointing savers, while failing to address deep-rooted shortcomings in the European economic model that they see as dissuading investment.
• European governments, led by figures like French Finance Minister Bruno Le Maire, are exploring various strategies to mobilize idle savings for economic growth, including proposals for pan-European savings products and directing savings towards domestic defense companies. However, critics argue that the concept of "dormant money" in bank accounts is flawed, pointing out that banks can readily deploy deposits for loans.
• Despite efforts to encourage investment, data suggests that Italians investing in government-sponsored funds targeting local small-to-medium-sized enterprises (SMSEs) have underperformed global stocks significantly over the past five years. Some economists believe that the real issue hindering investment in Europe is not funding availability but rather meager growth prospects compared to other regions like the United States.

(Source: Reuters)