Furthermore, we remain reliant on foreign VC to fund European innovation, for more than 50% of late-stage investments in European tech.
2. Three milestones to scale up European equity and innovation financing
Let me now set out three milestones to scale up European equity and innovation financing. We should be taking the best from America, and leaving the rest. Let us become more simple, more innovative, more risk-friendly.
2.1 Harmonisation and simplification over deregulation to unlock growth
When it comes to regulation, we need less and more: less rules, more harmonisation. Contrary to a strong wind blowing from across the Atlantic, I have argued that “simplification is not deregulation” vii . We stick to the objectives of financial stability and climate, but we reduce complexity. In this regard, the EU Commission’s first proposed Omnibus directive is welcome as it alleviates the regulatory burden on European SMEs and intermediate-sized entities, but its balance will have to be fine-tuned. We could possibly streamline somewhat MIFID, and keep the Retail Investment Strategy simple.
Additionally, greater harmonisation brings clarity. Euronext’s pioneering spirit in launching the single prospectus initiative – S1 – is commendable — a concrete step towards reducing market fragmentation. We welcome the emergence of “coalitions of the willing” among private actors, who are moving forward within the existing regulatory framework. But we should seek ingenious workarounds to accelerate the process, such as a 28th regime viii creating an optional, harmonised legal framework in key areas such as corporate law, labour, and taxation. We should always seek to reduce the European market fragmentation that limits our effective market size, hindering firms’ ability to scale up. ix. And we need a greater harmonisation of supervision. ESMA’s direct supervision of crypto-asset services providers x and cross border systemic market infrastructures such as CCPs and CSDs would be a significant step towards a unified capital market.
2.2. More innovative: boosting European venture capital
A well-functioning equity financing ecosystem is a prerequisite for scaling companies; from venture capital allowing start-ups to develop breakthrough technologies, to private equity for growth and to listed markets for further expansion. Strengthening the pipeline from early-stage funding to market exit – whether through IPOs or strategic acquisitions – would help retain high-growth firms in Europe. The underdevelopment of European VC is rooted in the fragmentation of our financial markets and tax regimes, the risk aversion of institutional investors and the limited role of pension funds, which amount to only 30% of EU GDP (against 136% in the US).
The Tibi initiative launched in France in 2019, has enabled to channel long-term institutional capital into equity financing of innovative and growing tech companies. “Tibi-labelled” funds have mobilised a total of EUR 13 billion for 2020-2026, effectively doubling insurers’ participation in VC fundraising rounds xi. This success inspired Germany’s “WIN initiative”, aiming to raise EUR 12 billion between 2025 and 2030. Complementing national initiatives, a new version of the European Tech Championship Initiative (ETCI), open to private investor could be boosted. We should complement this with much stronger public-private partnerships, with European public capital supplementing pari-passu cross-border private funds. To date, this initiative has gathered a funding of EUR 4,15 billion, a favourable yet insufficient amount to bridge the scale-up gap in Europe. Encouraging institutional investors to diversify their asset allocation through regulatory adjustments and incentive structures could unlock substantial capital, as proposed by the IMF xii.
2.3. Fostering a culture of well-informed risk-taking
Eventually, we have to sail closer to the wind. To unlock our untapped growth and innovation potential, fostering a culture of well-informed risk-taking is essential.
A competing explanation pointed out by entrepreneur Olivier Coste is that our innovation deficit stems not only from fragmented markets or insufficiently deep and liquid capital markets, but from the cost of failure deriving from overprotection of some stakeholders xiii. Our system could evolve to a more Danish style “flexisecurity”, and improved insolvency law possibly through the 28th regime. Corporate restructuring costs may be up to ten times higher in countries with stronger employment protection legislation xiv – in that case for highly qualified workforce –, such as France or Germany, undermining profitability and competitiveness. This factor especially affects the tech sector, where projects have a greater risk of failure. It discourages venture capital and private equity funds from investing in Europe.
With a more audacious mindset, investments are also concentrated on high-risk, high-impact projects xv. The US and China have built their technological and industrial leadership by channelling capital into bold, transformative ventures, particularly in sectors like AI, biotech, and green energy. By contrast, Europe often favours too incremental innovation, in fairly mature sectors, and excessive fragmentation in its public and private investments xvi, – the so-called “Middle-Technology trap”, stressed among others by Jean Tirole.
Financial education is another key pillar of the SIU. A better-informed public is more likely to engage in capital markets – with a reduced home-bias –, ensuring that European households savings are efficiently allocated to productive investments rather than sitting in low-yield deposits.
Let me conclude: Europe has strengths to leverage: stable institutions, high-quality human capital, advanced infrastructures, as well as abundant savings. We need to mobilise all available assets towards a common ambitious and meaningful goal. Let’s not downplay the obstacles we are facing, nor the international headwinds. But let’s have more of an American virtue: self-confidence. The stoics teach us that we are not defined by external events, but by how we choose to respond to them. Or as Seneca states: “We cannot direct the wind, but we can adjust the sails”.
i Villeroy de Galhau (F.), “Europe’s growth gap: reconciling Keynes and Schumpeter | Banque de France“, speech at College of Europe, 31 March 2021.
ii These four companies are: SAP, ASML, Schneider electric and Spotify. Source: CompaniesMarketCap. Largest tech companies by market cap. Accessed March 2025.
iii Atomico, “The State of European Tech 2024“, Executive Summary, December 2024.
iv OECD. National Accounts – Gross Saving, United States. OECD Data Explorer. (Accessed March 2025)
v See figure 3 in Bunel, S., Clymo, A., Garnier, O., & Zago, R., Revisiting the European performance gap vis-à-vis the United States, Bloc-notes Éco, Banque de France, February 28, 2025.
vi Lagarde (C.), “Follow the money: channelling savings into investment and innovation in Europe” Speech at the 34th European Banking Congress, European Central Bank (ECB), November 22, 2024.
vii Villeroy de Galhau (F.), “Towards a realistic simplification: untying some knots in European banking regulations”, Banque de France, February 6, 2024.
viii Von der Leyen (U.), Lagarde (C.), “Europe must act now to strengthen its competitiveness“, Financial Times, February 2025.
ix Bordon, A. R., Di Leno, L., Monteiro, J., & Vanhala, J. et al. Europe’s Productivity Weakness: Firm-Level Roots and Remedies. IMF Working Paper No. 25/40, International Monetary Fund.
x Barbat-Layani (M.-A.), Villeroy de Galhau (F.), “European supervision: crypto first! | Banque de France“, Banque de France, 14 November 2024.
xi France Invest (2023). Le capital-investissement Venture et Growth en France – Étude 2023. February 2023.
xii International Monetary Fund (IMF), “Europe Can Better Support Venture Capital to Boost Growth and Productivity“, July 2024.
xiii Coste (O.), Europe, Tech and War, Amazon, November 2022.
xiv Coste, O. and Coatanlem, Y. The Cost of Failure and the Quest for Competitiveness: Disruptive Innovation as a Catalyst. IEP Policy Brief No. 24, IEP @ Bocconi. 2024.
xv Tirole (J.), “L’Europe prend le risque de devenir une figurante“, Le Point, 30 janvier 2025.
xvi EconPol Europe, “EU Innovation Policy: How to Escape the Middle Technology Trap“, Policy Report, February 2024.