Villeroy de Galhau urges Europe to accelerate integration and decision-making
Banque de France Governor François Villeroy de Galhau warned at Eurofi that Europe has little time left to accelerate its integration and decision-making processes. He emphasized the urgent need to reconcile Europe with speed to address its innovation gap and geopolitical challenges.
Europe's innovation gap and capital deficit
Governor Villeroy de Galhau highlighted Europe's significant innovation gap, noting that euro area GDP per capita increased by 31 percent over 25 years, compared to 47 percent in the United States.
Despite a high household saving ratio of over 15 percent, Europe suffers from a lack of equity capital, which stands at only 85 percent of GDP for non-financial corporations, far below the 220 percent in the US.
Market fragmentation (cited by 32 percent of firms) and access to capital (21 percent) are key obstacles to scaling up EU companies.
Productive investment, excluding construction, is also considerably lower in the euro area (10.5 percent of GDP) compared to the US (14.3 percent).
He summarized the Draghi-Letta consensus with three imperatives: integrate the single market, invest better through a Savings and Investments Union, and innovate faster by daring and simplifying.
Slow progress and cumbersome governance
Europe's implementation of reforms remains too slow.
Villeroy de Galhau identified several reasons for this inertia.
Strategic convergence often masks technical disagreements, and a European culture frequently favors caution over breakthrough change.
He highlighted, 'Europe fears the risks of action, whereas America fears the risks of inaction.'
Governance also remains cumbersome; unanimity rules hinder progress in areas like taxation and support for Ukraine.
The Governor advocated for directly applicable regulations to enhance speed and unity, citing the proposed 'EU Inc.' framework.
He also suggested a form of 'pragmatic federalism' in strategic areas.
A 'dare or die moment' for Europe
Europe faces a critical juncture where inaction carries greater risks than bold reforms.
The current geopolitical context and innovation deficit demand a fundamental shift from incrementalism to decisive, collective action.
Without a clear, mobilising deadline and pragmatic federalism, the opportunity for deeper integration and economic sovereignty may be lost.