Villeroy de Galhau urges Europe to accelerate integration and innovation

Europe faces a significant economic performance gap compared to the United States, with GDP per capita increasing by only 31% over 25 years in the euro area, versus 47% in the US.

This disparity is primarily attributed to a 'Schumpeterian innovation gap' and a lack of equity capital, which is crucial for financing breakthrough innovation.

Equity financing for non-financial corporations in the euro area stands at 85% of GDP, significantly lower than the 220% in the United States.

Productive investment, excluding construction, is also substantially lower at 10.5% of GDP in the euro area compared to 14.3% in the US.

Governor Villeroy de Galhau summarized the consensus from the Draghi and Letta reports into three imperatives: integrate the single market, invest better through a Savings and Investments Union, and innovate faster by daring and simplifying.

Despite a shared diagnosis and clear imperatives, Europe's implementation of necessary reforms remains too slow and conventional, especially when compared to global competitors like the US and China.

While some progress has been made, such as the implementation of 39% of Draghi report recommendations by January 2026, including simplification packages and initial proposals for a Savings and Investments Union, the pace is insufficient.

The adoption of SAFE in May 2025 for joint defense borrowing is another positive step.

However, underlying technical disagreements often mask strategic convergence, hindering detailed administrative work.

A prevailing European culture of caution and incrementalism, both in investment habits and institutional choices, further contributes to this slowness.