The European Savings and Investment Union (SIU) builds on the Capital Markets Union, launched in 2015 and renewed by the European Commission in 2020. Both projects aim to provide a response to the need to invest an additional 750 to 800 billion euro each year to address Europe’s challenges. While the Capital Markets Union focuses on creating a single and integrated marketplace that enables finance to flow across Europe without encountering national barriers, the Savings and Investment Union is meant to enhance the capability of the financial system to translate savings into productive investment.

IndustriAll Europe’s Policy Brief highlights the risks and opportunities for workers. It explains the importance of trade union involvement to ensure the focus of the SIU on reaching its objectives, rather than venturing into ambiguous policies that trigger a significantly negative fall-out for workers, most notably on pension savings and workers’ bargaining position.

On pension savings, while the argument of better returns for future retirees is indeed tempting, maximum care needs to be taken when exposing workers' capital to the excesses of the financial markets. High risks stem from: the unequal ownership of equity, speculation, shifting the risk to individual savers, and the role of the asset management industry in financial concentration which worsens the negative feedback loop for workers, as in the US experience. To prevent importing the “shareholder revolution” to Europe, robust social dialogue and worker participation in the organisation and management of workers' capital, together with strong financial market regulation, are needed.

Key to this debate is the role of managing domestic demand, where the difference between the US and Europe is staggering. After the 2008-09 financial crisis, the gap between domestic demand strength in the US compared to Europe accelerated, with demand expanding 2.2 times faster in the US. One important driver of this was fiscal policy, as the US injected 14 times more funds into its internal demand dynamics compared to Europe. With an overall demand management that is so active in the US, it does not come as a surprise that business investment soared over there in that process, attracting surplus savings from Europe.

The European model is based on fiscal policy that is restrained by the continuous drive for austerity, on monetary policy which is fighting inflation even when inflationary dynamics have receded, and on wages and collective bargaining moderation in the name of cost competitiveness. As a result of this model, domestic demand as a share of GDP in the euro area has now fallen to the bottom range of advanced economies. In the absence of sufficiently dynamic domestic demand, business has little other option but to count on exports to the rest of the world as the aggregate demand driver of 'last resort’, keeping the economy and its growth performance somewhat afloat. This leaves Europe into a very vulnerable position, as experienced in the last months with the tariff war of the US.

IndustriAll Europe’s Deputy General Secretary, Isabelle Barthès, said: “Transforming Europe into a Savings and Investment Union requires policymakers to turn to a new economic model: a model that ensures domestic demand is dynamic enough to launch robust business investment. This requires a different fiscal policy framework than the current straitjacket which promotes austerity, squeezing demand. What is needed instead is a fiscal approach which promotes investments with social and local content conditionalities to reach Europe’s twin transition and social objectives. Robust demand relies also on strong collective bargaining practices that are needed to avoid that wages lag behind productivity.”

Read our Policy Brief here: EN