The Capital Markets Union: Saving for Retirement and Investing for Growth

Abstract

Very recently, the European Institutions made progress on the Capital Markets Union (CMU). The CMU is part of the so called “Juncker-Plan” which aims to boost investment across Europe. In our contribution we focus on retirement savings and investment for growth aspects of the CMU. We find that Europeans indeed accumulate savings but do not invest and thus do not prepare for retirement. Additionally, long-term investment could foster growth in the European Union (EU). We argue that the CMU is a step in the right direction as it introduces a new pan-European Pension Scheme, reduces bank reliance of enterprises, especially SMEs, and represents a key complement to Banking Union. However, CMU focuses mainly on the demand side, although functioning capital markets need (potential) investors who a willing and open to invest in capital markets products. Transparency, a stronger regulatory framework and better financial literacy could help overcome this shortfall.