Swiss bank warns: Europe is losing ground to the US and China due to a strategic mistake
A dramatic analysis by Lombard Odier reveals how vast sums of public savings are flowing out of the continent, and points out the urgent steps that must be taken by 2030.
Europe is facing a significant economic and geopolitical challenge, as the gap between it and the US and China in the fields of growth, investment, and technology continues to deepen. This is according to an analysis by Lombard Odier, the Swiss bank specializing in private banking. Michael Strobaek, the bank's Global Chief Investment Officer, points to Europe's need to increase investment and strengthen infrastructure, industry, and the field of artificial intelligence.
The analysis comes against the backdrop of a series of changes in the international arena, including US tariff policy, uncertainty surrounding its security commitments, competition from China, and developments in the Middle East. According to Strobaek, this reality requires Europe to strengthen its strategic independence and invest more in the local economy.
One of the notable figures is the volume of household savings in Europe, estimated at approximately 33 trillion euros. Despite this, a significant portion of the capital is not directed toward investments within the continent. About a third of the savings are held in current accounts, and a large part of the remainder is invested outside of Europe, mainly in the US. At the same time, European companies sometimes struggle to obtain the financing needed for growth.
According to a report published by former European Central Bank President Mario Draghi, Europe will need to increase investment by 750 to 800 billion euros per year by 2030, an amount equivalent to about 4.5% of GDP, in order to close the gap with the US and China.
According to Strobaek, the solution is not necessarily a lack of capital, but the ability to direct it to the right destinations. Incentives for households and institutional investors, alongside the development of European capital markets, could encourage local investments and prevent the continued flow of capital abroad.
Governments also have a significant role in the process. One example is Germany's infrastructure and climate fund, amounting to 500 billion euros, designed to support the fields of transport, digitalization, and health. The main test will be the ability of this type of public investment to attract significant amounts of private capital.
From an investor's perspective, such a change could create opportunities in the fields of infrastructure, climate, energy, technology, data, cyber, and defense industries. If Europe succeeds in completing reforms in capital markets and keeping a larger portion of capital within the continent, it is possible that local markets will also benefit from the process.
However, Lombard Odier warns that the path is not without risks. Political instability, fragile coalitions in Germany, elections in France, and the slow pace of decision-making in the European Union could delay the necessary steps.
Therefore, Strobaek's main message is that Europe can still change course. Instead of leaving vast sums in current accounts or directing them to markets overseas, the continent can use local capital to finance innovation, infrastructure, productivity, and technology, and strengthen its position in global economic competition.
