The need for the immediate completion of the banking union, as a prerequisite for strengthening Europe’s competitiveness and growth momentum, was highlighted by the Minister of National Economy and Finance and President of the Eurogroup Kyriakos Pierrakakis, speaking at the Eurofi Financial Forum in Dublin.
As he stressed, Europe is at a critical juncture, as strategic competition is intensifying and investment needs are increasing, from defense and energy to Artificial Intelligence (AI) and digital infrastructure. With the additional investments required estimated at 800 billion euros annually, public budgets are not sufficient and the mobilization of European savings is becoming imperative.
Mr. Pierrakakis underlined that the fragmentation of the banking sector and cross-border barriers are limiting the financing of the economy and technological investment, calling for progress on three fronts: integration and scale, common safeguards, and competitiveness. “Our competitors are not waiting. Investments are not waiting. And technology certainly is not waiting”, he noted, pointing out that Europe cannot afford further delays.
The full speech by the Minister of National Economy and Finance and President of the Eurogroup follows:
“Thank you very much. It is a great honor and a special privilege for me to be here today, at Eurofi, and to speak after Jacques de Larosière, such an emblematic figure of the European and international financial scene, whose experience and judgment have helped shape economic policy for decades.
Ladies and gentlemen, I believe it goes without saying that Europe is at a decisive moment.
The world around us is being reshaped. Strategic competition is intensifying and economic power is increasingly being transformed into geopolitical power. Technology, energy, trade, finance, and even our currencies, have become tools of strategic influence.
Europe is entering this new era with enormous advantages, but also with a fundamental challenge. We are not growing fast enough. Productivity remains far too low. Our competitiveness gap has, in fact, widened.
And precisely at the moment when we need to accelerate, our investment needs are also increasing dramatically: in defense, in energy, in Artificial Intelligence, in digital infrastructure overall, in innovation, and in the green transition.
Mario Draghi gave us a clear direction: to close the innovation gap, strengthen our competitiveness, and invest in the productive capacity that Europe needs for the future. He also gave us a picture of the scale required for this purpose: 800 billion euros in additional investment every year.
Sound public finances remain the foundation of sustainable economic strength. But public budgets simply do not have the capacity on their own to finance investments on such a scale.
The good news is that Europe, as we often repeat, has the savings. What we have not yet created is a financial system capable of effectively mobilizing these savings on a European scale and channeling them toward our businesses, toward innovation, toward investments.
This is precisely the ambition of the Savings and Investments Union: to connect European savings more effectively with European investments and to create deeper and more integrated financial markets. Capital markets are only one part of this equation.
With banks providing around 70% of the financing of the European economy, we cannot have an effective Savings and Investments Union without a competitive and integrated banking sector. That is why completing the Banking Union is not merely an agenda for the financial sector. It is, in fact, a critical part of Europe’s growth strategy.
And here we are starting from a position of strength. Over the past 15 years, European banks have become resilient, adequately capitalized, and profitable. During the pandemic and the energy crisis that followed Russia’s invasion of Ukraine, they helped absorb the shocks rather than intensify their effects. This is indeed a significant achievement, especially if we consider our recent past. But resilience alone is not enough.
The diagnosis of the European Commission is clear. Our banking sector remains fragmented along national borders, lacks sufficient scale, and parts of our regulatory and supervisory framework remain unjustifiably complex.
In this sense, the cost of fragmentation now functions like a strategic “tax.” A tax on Europe, a tax on scale, a tax on investment, a tax on growth. And the numbers demonstrate this with particular clarity.
Only around 16% of corporate lending in the euro area is cross-border. Cross-border banking groups still face restrictions on the effective transfer of capital and liquidity between countries, which limits both integration and consolidation in the sector.
The Commission estimates that lifting these restrictions could free up high-quality liquid assets amounting to 230 billion euros, while the cost of compliance with supervisory requirements and reporting is estimated at around 24 billion euros.
Both matter. We need a simpler and more proportionate framework. And, obviously, we need greater integration and greater scale.
Scale is becoming increasingly important for competitiveness and investment in technology. Relative to their assets, the largest American banks invest more than two and a half times as much in technology as European banks do. The picture is similar in comparison with Chinese banks.
And in the age of Artificial Intelligence, digital payments, and cybersecurity, this gap is becoming increasingly important year by year.
Deeper integration and further cross-border consolidation of the banking sector could provide European banks with the scale they need to invest, innovate, and compete, while at the same time strengthening their ability to channel European savings toward European businesses and investments.
Allow me to add one more point here. Europe needs scale, but scale does not necessarily mean uniformity. We need European banking champions that can compete globally, but we also need strong regional and local banks that know their communities, so that they can finance small and medium-sized enterprises and keep capital connected to the real economy.
The model is not to have either one or the other. A truly integrated European banking system needs both: scale at the top and proximity at the local level.
We built the Banking Union with the aim of making Europe safer. Now we must complete it in order to make Europe more integrated, more competitive, and ultimately stronger.
That is why I strongly support the direction set by the European Commission. Both its report and its communication are ambitious and comprehensive. They recognize that the challenges are interconnected and that our response, accordingly, must also be comprehensive and coherent.
In practice, we need progress on three different fronts.
First, integration and scale. That is, cross-border barriers must be removed, further consolidation must be facilitated, and the more effective movement of capital and liquidity must be allowed.
Second, trust and common safeguards: strengthening crisis management, liquidity, and resolution, as well as deposit insurance, because greater integration also requires greater trust.
And third, competitiveness. We must simplify the framework, strengthen the principle of proportionality, and improve the consistency of supervision, while preserving the resilience that we worked so hard to build. Better regulation, not less regulation.
This is an ambitious diagnosis. And in diagnoses we have proven quite good. But an ambitious diagnosis also requires ambitious implementation. Ultimately, we may have the economic data right, but the difficult part of the equation, as is usually the case with reforms, is to find the right political balance.
And ultimately, this is a political choice concerning the Europe we want to build. We all come to the table with different banking systems, different interests, and legitimate national concerns. These differences are real. But they cannot be a reason for permanent fragmentation.
If each of us protects every national safeguard and every national discretion, individually we may feel safer in the short term. Collectively, however, we weaken Europe and, ultimately, we weaken ourselves.
We must, therefore, turn our attention to what we can build together. None of us will be able to get everything we want, but each of us must be ready to take a step on some issue. This is how Europe has always found common ground, ever since the time of Jean Monnet. And this is how we will move forward now as well.
The goal must be absolutely clear: a balanced reform, which every member state will be able to recognize as fair and which, collectively, will lead to a stronger, more integrated, and more competitive Europe.
And, if you allow me to add, we must find this common ground quickly. Our competitors are not waiting. Investments are not waiting. And technology certainly is not waiting.
At this point, the role of the Eurogroup is particularly important. It provides us with the necessary space for the strategic policy discussions that we need and that we will need in the coming weeks and months: to hear the different national perspectives, to understand the legitimate concerns, to build trust, and to find common ground quickly enough for there to be a meaningful outcome.
Because, ultimately, this is not about banks. It is not about the banking sector as such. It is about growth. And Europe cannot afford another delay. Our responsibility is to the next generation.
We must prove that, when Europe faces a decisive moment, we can find the political will to overcome our differences, make difficult decisions, and move with the speed and ambition that circumstances require.
Because a stronger Europe means stronger member states. More prosperous, safer, and better able to create the opportunities their citizens and businesses need.
Thank you very much”.