While lauding various aspects of the European Union’s efforts to promote capitalism and the single market, Eurocrowd has called out the Capital Markets Union (CMU) initiative for failing to deliver on its most ambitious promises.
The European Union is a vast market that surpasses the US in population, with around 450 million people. Yet the EU economy is smaller than the US and lags in productivity, innovation, and private investment. A frequent comparison notes that the market cap of NVIDIA is higher than the entire German stock market capitalization.
Eurocrowd states:
Household participation in equity markets remains stubbornly low, and conservative savings habits still dominate across many Member States, meaning deposits continue to absorb the majority of household wealth. In macro terms, the picture is stark: overall market-based funding has stalled at roughly 3% of EU GDP, compared with about 8% in the US, illustrating that Europe’s capital markets have not materially deepened relative to GDP.
“Past IPO activity has been particularly disappointing: equity financing and IPO volumes have fallen, with Europe lagging behind the US, China, and other markets. FESE data also point to a long-term decline in the number of listed companies and to the rise of alternative, often non-traditional—listing routes. The combined effect is fewer public exits, weaker price discovery, and less opportunity for retail and institutional investors to buy into growing European companies. The calls at the recent SME Assembly for a revival of public markets underline the urgency for Europe to act.”
Eurocrowd adds that one of the most critical gaps is early-stage financing, something online capital formation can help solve.
“While private markets have grown overall, early-stage investment is uneven and geographically concentrated. EBAN’s statistical work confirms strong angel and early-stage activity in a handful of markets, but substantial parts of Europe remain undercapitalised. But also, crowdfunding has only a few markets with strong performance. State-level and regionally focused programmes have had impact, but persistent early-stage funding shortfalls remain an obstacle to scaling many promising SMEs across many EU member states.”
Eurcrowd notes that EBAN estimates European early-stage firms need tens of billions annually. The group says a combination of online capital formation, angel investing, and co-investment programs could help alleviate this shortfall.
Eurocrowd provides a list of proposals they believe should be implemented in the EU:
- Mobilise retail savings without local protectionism. Policymakers must avoid policies that favour only domestic allocation at the expense of investor returns. Evidence suggests such local-only rules would reduce expected annual returns for retail savers.
- Boost early-stage funding with joined-up instruments. The SIU [Savings and Investment Union] should link national and EU tools such as the EIC, InvestEU, national co-invest funds, tax incentives for professional angel investing, and ECSPR-enabled crowdfunding into a coherent funding escalator that supports companies from seed to scale.
- Make digital and regulatory experiments scale across borders. Tokenisation, DLT bonds, and new market infrastructures must be encouraged to operate cross-border through interoperability and common standards, not limited by a patchwork of national rules.
Eurocrowd adds:
“… turn the CMU’s structures into everyday participation for citizens, SMEs, and the next generation of European entrepreneurs.”