Mobilising Europe's savings requires stronger Single Market in fragmented world
Central Bank of Ireland Governor Gabriel Makhlouf urged European policymakers to strengthen the Single Market to mobilise the continent's substantial savings. Speaking at Eurofi on March 27, 2026, he emphasized that a barrier-free market is crucial for generating capital and prosperity in a fragmented world.
Europe's untapped savings paradox
Europe holds substantial savings, with euro area household deposits nearing €10 trillion and savings rates around 15 percent, exceeding pre-pandemic levels.
However, investment through European capital markets lags significantly; only one-fifth of household wealth is held in financial assets, far less than in other countries.
This paradox means that while individual saving is prudent, macroeconomically it can dampen demand and constrain growth if not channeled into productive investment.
The EU needs an additional €750-800 billion annually by 2030 to meet its investment needs.
Mobilising these savings requires focusing on economic growth, which generates the capital needed by European capital markets.
Sustainable growth, coupled with deep and liquid markets, enables efficient capital flow and productive allocation, fostering economic expansion.
Geopolitical shifts reshape economic order
The global system is increasingly fragmented, with trade, technology, and capital flows now shaped by geopolitical considerations.
This geoeconomic fragmentation, coupled with the pandemic and wars in Ukraine and Iran, presents severe shocks to the European economy, potentially resembling a 'Kindleberger Trap' of weakened global leadership.
Europe faces the challenge of underperforming growth despite its advanced economy status, yet possesses institutional strengths like predictability, stability, and the rule of law.
The critical question, as highlighted by Draghi and Letta, is how to effectively deploy these resources.
Single Market: Europe's unfinished business
Makhlouf's speech underscores a critical truth: financial market reforms alone cannot substitute for real economic performance.
The persistent fragmentation of the Single Market remains Europe's most powerful, yet underutilised, asset for mobilising savings.
Without addressing fundamental growth drivers and developing a European safe asset, the continent risks its capital flowing abroad, diminishing its future prosperity.