04/07/2025
How the EU’s Investment Plans Could Dismantle Our Welfare State
A new Financial Times analysis by Professor Daniela Gabor exposes the troubling implications of the EU’s proposed Savings and Investment Union (SIU). This plan risks dismantling Europe’s welfare state in pursuit of American-style financial markets.
Financing Europe’s Future
Europe faces enormous challenges: closing the innovation gap, decarbonising whilst maintaining competitiveness, and reducing security dependencies. The price tag? A staggering €750-800 billion annually by 2030, according to Mario Draghi’s report. With limited fiscal space, European policymakers have seized upon what appears to be an elegant solution: convince Europeans to invest their savings like Americans do.
If Europeans moved their money from bank deposits into capital markets, Christine Lagarde calculates that €8 trillion could be “unleashed” to finance transformation. It’s presented as a win-win: higher yields for savers, more capital for businesses.
But this seemingly technical financial reform masks a profound political choice. Europeans hold more wealth in bank deposits, not because they’re financially unsophisticated, but because they haven’t privatised pensions at America’s pace. Europe’s safety net for old age remains largely public, not market-dependent.
Whilst US pension assets reach 130% of GDP, most EU countries cluster below 20%. This isn’t a bug in the European system – it’s a feature, reflecting different choices about how society should care for its citizens.
From Public Service to Private Profit
To achieve American-style savings rates, European authorities would need to further dismantle state pensions – a move that Deutsche Börse explicitly advocates in its SIU proposals. Following America’s financial model means accepting America’s social model: a shrinking welfare state where housing, hospitals, care homes, and essential infrastructure become assets on private equity balance sheets, “ruthlessly milked for yield,” as Gabor puts it. This fits a troubling pattern. As we’ve documented, the EU has already been cutting social funding whilst increasing defence spending. The SIU represents the next phase: not just reducing public social investment, but actively transferring social infrastructure to private financial markets focused on extracting returns rather than delivering public benefit.
Perhaps most concerning is how these fundamental changes to Europe’s social contract are being packaged as technical solutions to “financing gaps.” This sleight of hand bypasses democratic debate about choices that will affect every European citizen’s retirement security and access to public services.
The SIU may be a genuine attempt to address Europe’s investment challenges, but it’s also a Trojan horse for a radical restructuring of European society. These aren’t merely technical decisions about capital allocation – they’re political choices about what kind of society Europe wants to be.
A Call for Democratic Debate
European citizens deserve an honest conversation about these trade-offs. Do we want to follow America’s path of financialised welfare, where pension security depends on market performance and essential services are profit centres for private equity? Or do we value the European model of social solidarity and public provision?
As Gabor concludes, these political choices should be debated democratically, not hidden in technocratic agendas. European citizens deserve nothing less than a transparent discussion about the future of their social contract.