“Banks are called upon to actively shape the renewal of Europe’s economy,” Sewing declared. “If we make the right decisions now, we can become the driving force behind a new era of growth – for Germany, for Europe, and for the global economy.”
This wake-up call was carried into the Inside Leadership session on the second day of Sibos (30 September) featuring Fabrizio Campelli, Head of Deutsche Bank’s Corporate Bank and Investment Bank, in a Fireside Chat with Dr Rebecca Harding, CEO at the Centre for Economic Security, to continue the analysis of how Europe can kick-start its recovery.
Harding highlighted the problem Europe has: there have been so many competitiveness reports since the creation of the Single Market and the landmark Cecchini Report in 1988, which looked to quantify the economic benefits of a European Single Market.1 Successive studies, she noted, have seemingly reached the same conclusion: Europe must boost innovation, deepen its capital markets and close the gap with the US. The key question, she asked, is what makes this moment different.
For Campelli, there is a real difference now. Europe’s competitiveness challenge has become structural – and urgent. “Despite the reports and multiple efforts, we still have a gap,” he said. “Energy costs are too high, labour shortages persist, supply chains remain fragile, and regulation is over-abundant and complex. All of these factors combine to create an environment in which Europe is struggling to connect with its competitiveness opportunity.”
Fabrizio Campelli, Head of Deutsche Bank’s Corporate Bank and Investment Bank during the ‘Inside Leadership’ session
Europe’s export-heavy economy – with trade representing about 20% of total value add, double that of the US – makes it especially exposed to “an environment where trade wars and tariffs are creating weaknesses”. An appreciating euro compounds the strain.
The Draghi Report on EU Competitiveness – the most recent study on European competitiveness, published in September 2024 – added vital perspective on how Europe’s current predicament took shape, Campelli argued.2 “The Draghi Report highlighted how the policy shifts since the global financial crisis – and especially since the sovereign crisis in 2012 – have made things worse, not better,” he explained. “There was a heavy focus on external competitiveness toward trade partners, which meant a focus on wage control, rather than productivity enhancement and innovation within the 27 countries of the bloc.”
That approach, he warned, had unintended consequences. “By trying to be more competitive on price through wage control, you create tension. You don’t achieve innovation or research and development shifts into new sectors. You also potentially create issues with populism, as people feel their purchasing power isn’t improving.”
“Banks and capital markets must work together to crowd in private capital”
Fabrizio Campelli, Head of Deutsche Bank’s Corporate Bank and Investment Bank
Campelli identified three levers that could restore competitiveness: energy; innovation; and the single market. Europe imports energy equivalent to 2.1% of GDP, while natural gas remains “15 times more expensive than in the US”. Productivity and innovation have also faltered: “60% more patents are filed in the US, seven times more unicorns are created, and ten times more venture capital is available,” while Europe’s greatest strength – its single market – is “fragmented; it doesn’t trade enough with itself,” he reflected.
Looking ahead, Campelli highlighted the need to mobilise public and private investment. “The energy transition, infrastructure, and defence will attract large sums of public funding,” he said, “but banks and capital markets must work together to crowd in private capital.” The conclusion was quite clear – we have to stop “admiring the problem” and banks are critical to an effective solution.