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Money Can’t Stay on the Sidelines: A Long‑Term Investment Product for the EU and Its Citizens
(2026)
EU citizens are active savers but invest less in capital markets than their US counterparts, forgoing potentially higher returns. Additionally, the capacity of the EU financial system to transfer household savings into productive investments (that is, investing in the economy rather than in the property sector) is limited, hindering economic growth. The current initiatives of the Savings and Investment Union (SIU) have only partially addressed these challenges and lack inter alia focus when it comes to fostering productive investments in the EU. This Policy Brief proposes the creation of an EU long-term investment product (ELTIP) to strengthen retail participation in capital markets and channel household savings into productive and sustainable investments in the bloc’s economy. The proposal combines fostering EU economic investment with global risk diversification, strong investor protection, cost efficiency, accessibility for investors, and adaptability to unforeseen changes in investors’ life circumstances. Current debates around the Savings and Investment Union offer a timely window of opportunity to introduce an ELTIP that supports EU growth and strategic priorities in a challenging geopolitical environment.
With the Industrial Accelerator Act (IAA), the European Commission is, for the first time, proposing EU-wide local-content and low-carbon requirements for national procurement and subsidy schemes. Done right, it could become one of Europe’s most consequential industrial-policy initiatives in years. Yet in its current form, the proposal risks becoming a paradigm shift on paper with little economic impact in practice. In most sectors, the proposed rules would apply to only a small share of demand, while broad exemptions could leave implementation largely at the discretion of member states. A more effective compromise remains within reach. Negotiators should keep Buy European rules as open as possible to trade partners while strengthening guardrails against circumvention. At the same time, local-content and low-carbon requirements need enough bite to incentivise manufacturing investment and supply-chain diversification.
A consensus is emerging in Europe that Chinese overcapacity and resulting import surges threaten the continent’s industrial base. Yet the EU remains divided on how to respond. Anti-dumping and anti-subsidy measures are overburdened to respond to a systemic shock, while new instruments would take years to design, legislate and operationalise. Nor would they remove the political difficulty of agreeing action in Council or the risk of Chinese retaliation. This brief argues that the EU must therefore make better use of the safeguard mechanism already available under existing rules. With defensible baselines, country-specific tariff-rate quotas, sectoral focus and systematic import surveillance, safeguards can provide immediate protection while limiting collateral damage to partners.
The Industrial Accelerator Act (IAA) introduces a logic of selective conditionality into EU foreign direct investment (FDI) policy, tying investment in strategic sectors to requirements on local employment, supplier integration, R&D, ownership, and technology transfer. Rather than constituting a broad protectionist turn, the shift is narrowly targeted and, in practice, primarily affects large-scale Chinese investments in the electric vehicle and battery value chain. Evidence from the battery sector illustrates the rationale behind this approach: while foreign investment has helped close urgent supply gaps, it has generated only modest spillovers in technological capabilities for European firms. As currently designed, however, the mechanism is likely to exert only limited leverage over foreign investors. Making selective conditionality effective will require tighter and more enforceable conditions, targeted trade policy to reduce outside options, and a coherent industrial policy framework capable of supporting domestic actors.
Linking EU funding to compliance with the rule of law has marked a shift in how the European Union safeguards its values within its member states. Orbán’s electoral defeat has opened an unprecedented window of opportunity to enshrine rule of law conditionality in the next Multiannual Financial Framework (MFF) as is proposed by the Commission. Compared to the current rule of law conditionality toolkit, the Commission proposal would significantly broaden the scope of application and, crucially, also consolidate the Recovery and Resilience Facility model for rule of law conditionality. Both would be a very positive development. At the same time, some adjustment is needed to give the next MFF even greater bite in safeguarding the rule of law.
The Digital and AI Omnibus are presented as technical amendments to simplify and reduce compliance costs in EU data, cybersecurity and AI laws. In reality, they propose substantive changes. Because they are being advanced through an omnibus process, the proposals are not supported by a comprehensive assessment of their potential impacts. This is particularly problematic where they could weaken existing fundamental rights safeguards, and makes them vulnerable to legal challenges. It is also unclear whether the package would actually deliver economic benefits for European businesses as they are based on overly simplistic and one-sided cost savings estimates that could be outweighed by other, negative effects. Several amendments could increase legal uncertainty and create loopholes rather than reduce complexity. In markets dominated by foreign tech companies, looser rules risk entrenching foreign big tech and undermining the EU’s objectives of strengthening competitiveness and digital sovereignty. While the AI Omnibus is already in the final stage of negotiations, lawmakers in the European Parliament could still request an impact assessment for the Digital Omnibus.
The EU is currently setting up the “Scaleup Europe Fund” to improve financing conditions for scaleups. If designed well, the fund can fill a critical gap in Europe’s innovation financing landscape by combining large equity investments with the steering of private capital towards firms in strategic sectors with positive spillovers. Since strengthening the private European venture capital ecosystem will take time, the fund can serve as a bridge instrument in the interim. As investment decisions will be taken by an independent fund manager, it is essential that the European Commission now shapes its investment strategy and governance in a way that ensures three core principles are upheld: a focus on large investment tickets; directing the capital towards high-risk, high-reward technologies; and taking measures to keep funded companies in Europe. At the same time, the fund should be complemented by broader policy action to develop the EU’s VC ecosystem, make listing on local stock exchanges more attractive, and facilitate cross-border investments.
The EU needs new partners to advance its AI industrial policy agenda and decrease its structural dependence on US and Chinese technology. India with its expanding AI start-up ecosystem, large pool of technical talent, and access to diverse, large-scale datasets could be such a partner. To date, however, cooperation remains largely at the level of strategic intent. To implement an EU-India AI partnership, this policy brief proposes recommendations across four pillars: AI compute infrastructure, data, language technologies, and the innovation ecosystem. Such cooperation can strengthen AI capabilities, support inclusive digital growth, and enhance competitiveness for both partners.
The EU’s dependence on highly concentrated critical raw material (CRM) supply chains, above all on China, has emerged as a central economic security vulnerability. The ReSourceEU Action Plan seeks to address this by accelerating selected projects, coordinating financing, establishing a coordination Centre, and strengthening resilience across CRM value chains through an encompassing policy framework. ReSourceEU makes effective use of constrained financial leeway and can viably stabilise a limited number of strategic bottlenecks: permanent magnets, batteries and defence-relevant inputs. However, it falls short of delivering a broader structural shift just yet. Many of the most consequential tools, such as joint purchasing, price stabilisation and diversification obligations, remain indicative or politically contingent. To reduce exposure more durably, the EU must now consolidate fragmented funding, anchor long-term demand, address refining chokepoints, and turn strategic partnerships into bankable, diversified supply.
The European Commission’s new Democracy Shield proposes roughly 50 action points over three priority areas: information space integrity, media and elections, and societal resilience and citizens’ engagement. Most of the points are commitments to strengthen voluntary coordination and prepare guidance. They are largely additions to past initiatives, continuing the Commission’s outsized focus on disinformation, rather than an attempt at innovation. There is a clear mismatch between the ambitious rhetoric around the announcement of the initiative and the small-scale solutions it offers. Nevertheless, the Democracy Shield can make useful additions to existing frameworks once implemented. It should, however, be seen as complementary to the use of other available instruments. Protecting European democracy requires consistent commitment to democratic values both at EU and at national level – not just the creation of additional strategies.
