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European Commission

Press release

Brussels, 25 March 2013

European Commission launches Green Paper on the long-term financing of the European economy

The European Commission has today adopted a Green Paper that launches a three-month public consultation on how to foster the supply of long-term financing and how to improve and diversify the system of financial intermediation for long-term investment in Europe. Long-term investment represents spending that enhances the productive capacity of the economy. This can include energy, transport and communication infrastructures, industrial and service facilities, climate change and eco-innovation technologies, as well as education and research and development. Europe faces large-scale long-term investment needs, which are crucial to support sustainable growth. To fund long-term investment, governments, businesses and households need access to predictable long term financing.

The financial crisis has affected the ability of the financial sector in Europe to channel savings to long-term investment. So it is essential that we look at what can be done to improve the availability of long-term financing and this Green Paper focuses on how that process operates.

One of the important questions is whether Europe's historically heavy dependence on banks to finance long-term investment will and should give way to a more diversified system with significantly higher shares of direct capital market financing (i.e. bond finance) and greater involvement of institutional investors (e.g. pension funds) or to other alternatives. The financing needs of SMEs deserve particular attention as they have the potential to underpin long-term growth. They need access to bank as well as non-bank financing.

Responses to the consultation will help the Commission determine what can be done to overcome the barriers to long-term financing. Follow-up could take several forms, legislative and non-legislative.

Internal Market and Services Commissioner Michel Barnier said: "Europe’s economy is facing massive challenges, including large scale long-term investment needs. These are essential as a basis for innovation and competitiveness, supporting a return to sustainable growth and jobs in Europe. These needs require long-term financing. Ensuring our economy and our financial sector – including banks and institutional investors such as insurers and pension funds – are capable of funding long-term investments is an important but complex task. We need to identify what barriers exist to long-term financing and what more can be done to overcome them.”

Vice President Olli Rehn, responsible for Economic and Monetary Affairs and the euro said: "The necessary rebalancing process in the European economy is underway, and financial markets should be able to support the accelerating structural change. It is important to ensure that the framework for long-term investment and financing is comprehensive and flexible enough to adapt to these challenges in order to strengthen Europe's growth potential."


This Green Paper is concerned with long-term investment in the sense of the formation of long-lived tangible and intangible capital. Many investments in energy infrastructure, climate change, education etc. have wider public benefits, since they generate greater returns for society as a whole by supporting essential services and improving living standards. Their impact can also begin to be felt in the short term. They enable companies and governments to respond to new economic, social and environmental challenges, facilitating the transition to a more sustainable economy and raising long-term productivity growth and competitiveness. Trends in climate change and the depletion of natural resources further underline the sustainable growth challenge, as they call for more long-term investment in low-carbon energy, energy and resource efficiency and infrastructure, consistent with the political objective of limiting climate change below two degrees and decoupling economic growth from resource use. The importance of long-term financing for growth and job creation has been recognised at international level by the G20.

The capacity of the economy to finance long-term investment depends on the ability of the financial system to effectively and efficiently channel these funds to the right users and investments through open and competitive markets. This process can be carried out by various intermediaries – including banks, insurers and pension funds – and by direct access to financial markets.

In Europe, the ratios of investment or savings to GDP are favourable compared to other world regions. However, this overall picture hides the fact that savers and investors are currently experiencing high degrees of uncertainty, risk aversion and lack of confidence as a result of the weak macroeconomic situation and outlook. This may have lasting effects, creating more permanent barriers to the supply long-term financing.

One main lesson of the crisis is that appropriate regulation and supervision of the financial sector is necessary to restore financial stability and confidence in the markets. The EU has been pursuing a comprehensive programme of financial reform in this context, complementing broader fiscal and economic reform. Financial stability is essential, but alone is insufficient. As part of a broader policy response, the detailed calibration of the new regulatory and supervisory framework must effectively enable the financial sector to support the real economy, without jeopardising financial stability. Building on this, action to enhance the long-term financing of the European economy should address a broad range of interconnected factors:

  • The capacity of financial institutions to channel long-term finance;

  • The efficiency and effectiveness of financial markets to offer long-term financing instruments;

  • Cross-cutting factors enabling long-term saving and financing; and

  • The ease of SMEs to access bank and non-bank financing.

See also MEMO/13/280

For further information:

Contacts :

Chantal Hughes (+32 2 296 44 50)

Audrey Augier (+32 2 297 16 07)

Carmel Dunne (+32 2 299 88 94)

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