Mario Draghi, the former head of the European Central Bank, warned more than a year ago that the European Union faced “slow agony” if it didn’t pursue significant economic reform. He is not alone in his concern. European officials rightly worry about the bloc’s growth, competitiveness, and productivity lagging its geoeconomic rivals. The diagnosis has been clear for years, and the policies to address these economic problems aren’t mysterious. The issue is making them happen—and doing it fast enough to make a difference.

To that end, a growing number of policymakers as well as academics and financial professionals are urging the EU to focus on pragmatic steps to unlock capital to boost growth—and not leave the single market to rot—rather than pursuing grand institutional designs, which take years to materialize.

“We need an approach at the European level to decide quickly on those things where we can have a common approach that are not contentious,” said Pierre Gramegna, the head of the European Stability Mechanism and the European Financial Stability Facility, at a joint event in late January with the heads of the European Banking Authority and European Securities and Markets Authority. “If you have a legal approach and want everything to be perfect, it takes years. This is our biggest disadvantage in a world that’s changing fast. We must find a way to act more quickly.”

The integration of the markets for goods at EU level is far from complete, but the European market for financial and other services is even more fragmented. The European Central Bank (ECB) estimates that internal barriers in the goods and services markets are equivalent to tariffs of around 65 percent and 100 percent, respectively. “[O]ur internal market has stood still, especially in the areas that will shape future growth, like digital technology and artificial intelligence, as well as the areas that will finance it, such as capital markets,” said ECB President Christine Lagarde in a speech in November.

To compound the problem, European savers tend to invest in cash and bank deposits much more than U.S. savers, or roughly 30 percent of their wealth compared to just 11 percent for Americans. In addition, Lagarde noted that euro area residents hold nearly 10 percent of their equity investments, or 6.5 trillion euros ($7.7 trillion), in U.S. stocks, which is around double the amount that they held a decade ago, underscoring the much stronger performance of U.S. markets and companies.

And as U.S. markets channel European savings into high-productivity sectors, the performance gap between the economies on the two sides of the Atlantic is widening—prompting yet more European savings to flow to the United States, Lagarde said. This results in stagnating productivity in Europe and growing dependence on non-European economies.

The EU has recently rekindled its plans to achieve a savings and investment union “to create better financial opportunities for EU citizens, while enhancing our financial system’s capability to connect savings with productive investments.” But many experts fear that the legislative process needed for the implementation of the EU plan could take years to produce tangible results.

A report published in early January by the Institute for European Policymaking at Milan’s Bocconi University argued that Europe should rather aim for concrete results first while also pursuing more ambitious reforms.

Their set of proposals, summarized in six policy recommendations, don’t require legislative changes or the participation of all member states, but rather a critical mass of participation by the private sector, with political backing at the national level, said Ignazio Angeloni, a fellow at Bocconi and a former director-general for financial stability at the ECB. He chaired the team of banks, insurance companies, asset managers, trading platforms, and academics, which produced the report.

The first two recommendations aim to tap more European household savings for investments in young and innovative enterprises in the continent, which often struggle to find enough capital to scale up. According to the report, this can be achieved with the introduction of new savings instruments incentivizing risk capital investments by individuals with tax advantages, simpler and more investor-friendly schemes, and a flexible choice of legal jurisdiction.

A similar reasoning could be applied for the creation of new defined-contribution, voluntary pension schemes for workers and employers by providing tax and regulatory advantages and offering different choices of investments, tailored to the risk tolerance of investors. Experts say Sweden’s investment accounts should be the model for these tools, which encourage investments in shares through a very favorable taxation, but these schemes can also be based on other existing products.

For instance, other EU countries, such as France and Italy, have launched investment tools that incentivize long-term and riskier investments into their country’s economies, which have proved to be successful at the national level. Think tanks in Italy, France, Germany, and Spain have proposed scaling Italy’s Individual Savings Plans to the EU level.

In addition, seven European countries began a pilot project in June 2025 that uses a proposed “Finance Europe” label for savings products that invest at least 70 percent of their assets under management in EU countries, with a focus on equity investments to help shore up firms’ balance sheets.

In its third recommendation, the Bocconi report suggests establishing a euro-wide listing platform offering firms broader access to EU savings pools and the best available pre- and post- listing services. This would help keep more promising firms within the continent. In the past, many of them decided to raise capital in the United States and in dollars, because more liquidity and higher valuations are available there. Some eventually relocated to the United States.

Two more technical recommendations include rekindling the securitization markets, which allow banks to shed part of their loans by bundling them into securities and selling them to investors, to free up liquidity and lend more to companies. The creation of a central exchange platform for standardized forms of these assets would help revive their trading.

The report also recommends a wider use of TARGET2-Securities, or T2S, a common platform that facilitates the transfer of cash and securities in Europe. Finally, it suggests enhancing the European Investment Bank’s role by facilitating its access to EU savings pools. “These are all initiatives that can be launched within 12 to 18 months, provided there is the will of private actors and that national governments don’t create obstacles,” Angeloni said.

Last month, a joint initiative by France and Germany produced another set of recommendations to help plug the funding gap for high-growth companies across Europe, particularly in later development stages. Jörg Kukies, a former German finance minister, and Christian Noyer, a former governor at the Bank of France, agree with assessment of the issues contained in the Bocconi report. Their proposals focus on venture capital investment to strengthen the financing of innovation in the bloc as part of the efforts to advance the European Savings and Investment Union.

The two economists recommend broadening the pool of pension assets available in Europe, which is proportionally smaller and generally more risk averse than in the United States, by reforming pension schemes at national level across Europe. A wider use of government-backed investment programs, such as Tibi in France and WIN in Germany, could help mobilize more private capital toward venture and growth funds, they write.

In a shorter but broader paper, academics Luis Garicano, Bengt Holmström, and Nicolas Petit argue that to reverse course, the EU must undergo a radical reorientation of its priorities. “It must adopt a single-minded focus on prosperity, do less but better, embrace economic dynamism and creative destruction and enforce genuine mutual recognition,” they write. Risk paranoia is killing Europe’s future. Innovation requires risk-taking, they write. “We should enable it, not regulate it out of existence,” they lament.

They advocate for the elimination of the use of directives, which are binding EU legal acts that set specific results that member states must achieve but leave it up to each country to decide how to implement them through national laws. This can generate perverse outcomes, as businesses can end up facing 27 different versions of what were supposed to be common rules. The proposed solution would be to use regulations, which are directly applicable in member states and don’t need to be transposed into national legislation.

The pragmatism animating many of these proposals hinges on the possibility for only some member states to join forces to implement reforms when EU-wide consensus proves hard or impossible to achieve. The idea of forging “coalitions of the willing,” allowing some EU countries to pursue projects—without the need for agreement from all 27 members—has long tempted some members and has already been applied to key projects such as the adoption of the euro and the Schengen passport-free zone. Now, it is gaining new momentum as Europe confronts widening insecurity, sluggish growth, and deep political divergences.

At the end of January, ministers from six leading European economies—Germany, France, Spain, Italy, Poland, and the Netherlands—vowed to be the drivers of European progress to advance projects stalled by the EU’s long and complex decision-making process. During a call on Jan. 28, they agreed to focus on the capital markets union; the international role of the euro, including having an independent European payment system; coordinating defense investments; and securing access to critical minerals through coordinated purchasing, emergency reserves, and trade partnerships worldwide.

Beginning on Feb. 11, European countries will hold a series of high-level meetings, which will show whether there is widespread recognition that Europe finds itself at a pivotal moment. It remains to be seen whether effective actions will follow any time soon.