Several top German and French economic advisors have called for renewed efforts to boost the European Union's capital markets and encourage more private investment in a joint statement on Thursday.
"Like most advanced economies, the EU is suffering from
a long-term decline in growth potential. New opportunities
like the green transition or the rise of artificial intelligence have emerged, but our capacity to fund the investments and benefit from these opportunities remains uncertain," said the French Council of Economic Analysis (CAE), the German Council of Economic Experts (GCEE) and the Franco-German Council of Economic Experts (FGCEE).
"We need to build a stronger, deeper capital market to face these challenges," the statement said.
Currently, private households in Europe predominantly hold their savings in low-return asset classes such as bank deposits, the groups said in the statement.
The EU is seeking to attract more regular people to invest in local financial markets to make more capital available for the green and digital transition, as well as boost investment in private companies and start-ups.
To this end, work has been under way for years to bring the European Union's capital and financial markets together in what has been termed the capital markets union (CMU).
The aim is to reduce bureaucratic hurdles between EU countries in order to give companies more opportunities to raise money across the bloc.
After years without much progress, leaders of EU countries recently spoke out again in favour of pushing the project forward in order to boost the EU's global competitiveness.
According to a report published in April, there are €33 trillion ($36 trillion) in private savings in the EU, most of which is held in cash and bank deposits.
Among the suggestions in the statement is introducing children to the stock market, perhaps with EU-funded investment accounts for children, in order to familiarize young people with the idea of investing money in stocks.
The economic groups behind the statement, which act as advisors to the German and French governments, suggested that a scheme of small automatic deposits into investment accounts for children between the ages of 6 and 18 could teach them to invest for the long term.
"This would allow children to experience different financial cycles and understand the long-term low risk and high reward of investing in equities," the authors wrote.
This measure could lead to a change in savings behaviour in the long term, they argued.
Existing political proposals in the area of a capital markets union focus either on promoting the EU's banking sector or on expanding the EU stock markets, according to the economists.
For example, the further development of the comparatively weak European securitization market is often suggested. According to the authors, securitizations could relieve the pressure on banks' balance sheets and reduce financing costs for companies.
But those steps are "unlikely to foster growth and investment in innovative, future-oriented firms that are able to pursue strategically important innovation," the economists wrote.
That means the EU needs to pursue a capital markets strategy focused on growth and driving investment instead of expanding the banking sector, they wrote.