Breaking the High-Saving, Low-Growth Trap: Europe's Savings and Investment Union

Europe is awakening to a hard truth: persistent underinvestment in innovation and productive capital is constraining growth, depressing returns on its abundant savings, and increasing geopolitical and financial vulnerabilities. The Savings and Investment Union (SIU) aims to reverse this trajectory by mobilising and directing Europe's abundant savings towards productive domestic investment through deeper and more integrated capital markets. Investment needs linked to innovation, digitalisation, defence, and the climate transition are rising, while productivity stagnates and demographics worsen. This chapter examines how a successful SIU can raise risk-adjusted returns for savers, reduce firms' cost of capital, and enhance cross-border risk sharing, delivering concrete benefits for European citizens. It also highlights how persistent global imbalances and geopolitical fragmentation amplify Europe's exposure to external shocks, as a significant share of its excess savings flows abroad, particularly to the United States.