Europe’s economic challenges demand a strategic vision to enable a competitive future

PRESS RELEASE - FOR IMMEDIATE RELEASE

Europe's economic challenges demand a strategic vision to enable a competitive future

Brussels, 20 November 2024 - As we approach 2025, the economic and geopolitical outlook remains uncertain. Europe's banks, as critical enablers of economic stability and existential transformation, have been a steady partner for Europe's society, and are committed to being a strategic partner going forward. Now is the time to empower the banking sector to fulfill its mission.

Thought leaders like Mario Draghi and Enrico Letta, along with the new leadership of the European Commission, have emphasized that Europe must rise to the challenge. A strategic, forward-looking approach is essential to sustain competitiveness, strengthen resilience, and lay the groundwork for future growth. Europe must assert itself globally while working domestically to align aspirations with coherent policy action.

The case against disproportionate banking taxes

Proposed measures being currently discussed in some European countries risk discouraging investment and innovation, contradicting the clear guidance from thought leaders and the priorities outlined by the European Commission and Commissioner-Designate for Financial Services and the Savings and Investments Union. Unequivocally, they call for creating an enabling investment environment for Europe's banks to strengthen the leaders' vision for Europe's future. The case for prolonged l additional sector taxes is in fact falling short of it by going in the opposite direction, hitting the breaks of Europe's push for competitiveness, resilience and growth.

The narrative of windfall taxes is not new, and it has already taken a dent in the banking sector, where applied, consequently affecting their capacity to finance the economy. These taxes make investment in European banks, and therefore the European economy, less attractive for global investors, who will prefer to invest in other regions. While international organisations such as the IMF and the ECB insist on boosting the solvency and capacities of banks, these extra taxes are a drag on the granting of credit.

What is concerning is that although the interest rates have been decreasing in Europe, the narrative for disproportionate banking taxes is still alive in some European countries. This development risks becoming a chronic political tool that hurts one of Europe's most critical industries and partners for investing in Europe's future. To minimize the risk of adding further pressure on the banking sector, policymakers should exercise prudence when considering fiscal reforms, ensuring that changes are informed by robust impact assessments, feasibility studies, and inclusive public consultations. Anything less risks eroding trust and undermining Europe's shared goals.

Preparing for the future: setting the right precedent

As highlighted recently by the ECB, the inflation threat has eased after challenging years for European households, but economic growth is slowing, international trade faces uncertainties, and geopolitical tensions-from the war in Ukraine to unrest in the Middle East-are straining Europe's resilience. Against this backdrop, Europe must lay the foundations for the coming decades. Europe's leaders have the opportunity to set a precedent that fosters confidence, incentivizes investment, and strengthens economic stability. The alternative-failing to act strategically-risks widening Europe's competitiveness gap with faster-moving, more advanced regions. Setting the right precedent requires assertiveness not just in global markets but also in domestic policy coherence. Europe's financial sector must be empowered, not hindered, to meet the critical challenges and opportunities ahead.

Looking ahead: Empowering the foundations of Europe's future

Europe's banks are pivotal in fostering stability, funding the green and digital transitions, defense and driving innovation. Achieving these shared goals demands a stable and predictable regulatory and fiscal environment.

Before advancing ambitious priorities like the Savings and Investments Union, the Banking Union, or regulatory simplification, policymakers must focus on getting the fundamentals right. Avoiding fiscal and regulatory missteps is essential to create a framework where Europe's competitiveness can thrive. Let us not delay the hard work of building a competitive Europe by eroding the very foundation upon which it must be built.

Europe's future depends on taking decisive action. The time to align policy with ambition is now-because only a resilient and empowered banking sector can underpin the region's path to growth and global leadership.

For more information please contact:

Gabriel Daia
Head of Communications and Public Affairs, [email protected]

About the EBF
The European Banking Federation is the voice of the European banking sector, bringing together national banking associations from across Europe. The federation is committed to a thriving European economy that is underpinned by a stable, secure, and inclusive financial ecosystem, and to a flourishing society where financing is available to fund the dreams of citizens, businesses and innovators everywhere.