The trade war between the US and dozens of countries escalated yet again today.
The German parliament has agreed to this big spending package,
and this could be a gate changer for Germany,
but also these hundreds of billions of euros in infrastructure and defense debt could be a game changer for Europe.
If Europe is in a better place,
if Europe is able to fund itself,
doesn't have the recession the way the US does,
does that mean you want to own European equities?
After years of underperforming,
Europe has emerged as a top trade for 2025.
Wow,
Siri,
did you hear that?
This may be a defining moment for Europe.
Hi,
Koku.
I've scanned 3,456 articles discussing the mega moment.
For example,
take this article from the Financial Times,
titled,
Trump is making Europe great again.
Ah,
yes,
like MAGA.
MAGA stands for Make Europe Great Again.
It's a phrase that some love and others hate.
But in this context…
It refers to the continent's potential for an economic and financial reawakening.
It's driven by the EU's 800 billion euro spending package and Germany's 500 billion euro infrastructure plan.
For such a big moment,
you need a big anthem.
I've got the perfect track for this.
Hey,
Alexa,
play
Ode to Joy from my playlist.
Okay,
now playing Ode to Joy.
Wait,
Siri,
not so fast.
You can't put the cart before the horse.
These are just announcements,
significant as they may be.
Besides,
we may be in the middle of a global trade war,
which is yet another challenge for Europe.
Sorry,
I got carried away,
but isn't this a déjà vu moment?
What do you mean?
Well,
think about big commitments like the Paris Climate Accords and the net zero emissions by 2050.
I don't think we're on track.
Humans and their promises.
Am I right?
Wait a second,
Siri.
Have a bit more faith.
Cause I gotta have faith.
Remember the quote,
a pessimist is an optimist with experience.
Maybe.
But this time is different.
Beethoven's Ode to Joy,
you've played earlier,
is the unofficial anthem of the European Union.
It's a hymn to unity,
hope,
and let's face it,
occasional indecisiveness.
But significant strides are often made in times of crisis.
The European Union was conceived to end centuries of conflict.
Now,
the post-World War II order is shifting towards a multipolar structure,
where global competition has replaced global cooperation.
Here lies an opportunity for a European renaissance on several fronts.
Still,
there's a risk that this could become yet another grand declaration that leads to a bureaucratic stagnation.
Well,
just look at how Europe has lagged behind the U.S.
over the past 20 years.
Fair point.
The numbers are not flattering.
Or could this be a tortoise and hare anecdote for Europe?
Hmm.
Interesting metaphor.
At its heart,
it's really about the European dream versus the American dream.
and the contrasting economic and societal models they represent.
Fascinating.
Let's explore this further.
Welcome to 2050 Investors,
the podcast that deciphers economic and market megatrends to meet tomorrow's challenges.
I'm Koko Agboboa.
I head up economics,
cross-asset and quant research at Societe Generale.
In this episode of 2050 Investors,
we explore why Europe has lagged behind the US.
across various dimensions.
We consider whether the current geopolitical turmoil provides an opportunity for Europe to advance its integration.
Can the continent effectively channel its vast savings to address its significant investment needs through deeper harmonization,
or would it be hindered by regulatory divergence?
Later in the episode,
we interview Anne-Christine Champion,
co-head of Global Banking and Investor Solutions,
at Societe Generale.
She will discuss how banks can facilitate investments in both public and private markets and why the Savings and Investment Union,
formerly the Capital Markets Union,
is vital for developing a thriving capital market that can compete on the world stage.
Let's start our investigation.
So,
I'm intrigued by the concept of the
European dream.
Well,
Siri,
let's revisit the origins of the European project.
It all began with the Treaty of Paris in 1951.
which established the European coal and steel community.
Six countries Belgium,
France,
Germany,
Italy,
Luxembourg and the Netherlands took a bold step towards economic integration to ensure peace.
Steel and coal,
huh?
Not the most climate-friendly industries.
True,
but this was a practical starting point.
Then came the Treaty of Rome in 1957,
forming the European Economic Community,
or EEC,
followed by the Maastricht
Treaty in 1992,
which later gave birth to the European Union.
The vision was clear,
a single market,
a single currency,
and eventually a single financial space with free movement of people,
goods,
and services.
I guess the key challenge is managing a union where 27 countries,
each with their own national priorities,
Must agree on everything from avocado regulations to fiscal policy.
Yes,
indeed.
Europe's journey has been defined by crises and progress.
Take the Great Financial Crisis in 2008,
triggered by the subprime debt and Lehman bankruptcy,
followed by the Eurozone debt crisis in 2010.
It highlighted the perils of a currency union without fiscal unity.
The latter was triggered by the financial difficulties faced by several Eurozone countries,
struggling with high government debt levels.
Then later,
we had Brexit in 2016 and the COVID-19 pandemic in 2020,
which further stressed the lack of economic integration.
Yet,
through it all,
Europe overcame these challenges.
Makes you wonder,
is Europe just a continent?
Or the world's most expensive roller coaster?
A roller coaster,
yes,
but maybe one that's getting stronger with every leap.
Wait,
how does surviving chaos make you stronger?
You can think of the anti-fragility concept by Nassim Taleb,
stating that some systems,
like bones,
muscles,
or even fiscal unions,
actually get stronger when they are stressed.
Take the Eurozone debt crisis,
for example.
It forced intense negotiations between member states and led to Mario Draghi's famous whatever-it-takes pledge to save the euro.
During COVID-19,
we also observed a fiscal whatever-it-takes response.
According to a report by the ECB,
EU countries spent between 10 to 25%
of their GDP to support cash-strapped businesses and households during lockdowns through direct fiscal measures and state guarantees.
guarantees.
Okay.
So is the American dream better than the European dream?
Hmm,
this is where things get interesting.
The book,
The European Dream,
by Jeremy Rifkin,
published in 2004,
has some fascinating insights.
Here are three key differences I found interesting.
First,
the idea of individualism versus community.
The American dream emphasizes individual success,
self-reliance,
and personal achievement.
while the European dream focuses on community,
social welfare,
and shared responsibility.
Got it.
You eat what you kill versus hunting as a pack.
Second,
material wealth versus quality of life.
The American dream prioritizes material wealth and economic success as indicators of progress,
while the European dream values quality of life,
including work-life balance,
health care,
and education.
Okay,
get rich or die trying versus savoring the good life.
And third,
economic growth versus sustainability.
The American dream is driven by economic growth and consumerism,
while the European dream emphasizes sustainability and environmental protection.
Material world versus natural world.
Good metaphor,
Siri.
While these are generalizations of both societies,
They do provide insights into how these cultural differences can shape financial behavior.
An article by Bloomberg titled,
Shunning Stocks and Holding Cash is Harming European Wealth,
illustrates this point further.
Direct stock ownership in EU households is only 11%,
while 62%
of US adults own stocks through retirement accounts such as
401ks and RRAs.
By contrast,
around
30%
of European household wealth is held in low-yielding savings accounts.
This is financial inertia,
so Europe is stuck in a cash coma while the US is busy flipping stocks and betting on unicorns.
I like the analogy.
Historically,
equities have outperformed other asset classes like bonds and cash.
Over the past 50 years,
US equities have returned around 7%
annually,
while bonds have averaged 3-4%.
Cash,
on the other hand,
barely kept up with inflation at around 1-2%.
In Europe,
the story is similar,
but the equity culture simply hasn't taken root.
Could Europe be compared to a wealthy individual who is reluctant to invest?
That's a good question.
This article by the European Fund and Asset Management Association,
titled
Households continue to keep a disproportionate amount of money in bank deposits in most European countries,
shows that European households increased their holdings of cash and bank deposits from 10.2 trillion euros in 2015 to close to 14 trillion euros in 2022.
This means going from 36.7%
of their financial wealth to 41.1%.
This reminds me of one of your favorite quotes,
the biggest risk is not to take any risks.
Sparron.
One of the core challenges is also the fragmented nature of Europe's financial markets.
To return to the anecdote,
perhaps Europe is the cautious tortoise,
while the US is a daring hare.
Nevertheless,
who knows how the fable might end this time.
Time for Europe to embark for sure on its financial rebirth.
But how do we effectively channel such substantial investments?
That's a great question,
Siri.
And it leads us perfectly to our guest,
Anne-Christine Champion.
As co-head of Global Banking and Investor Solutions at Société Générale and member of the Group Executive Committee,
she oversees the bank's financing and advisory,
global markets,
transaction banking,
and security services.
Anne-Christine brings a wealth of experience from her previous senior roles in the European financial industry.
Hello Anne-Christine and welcome to this episode of 2050 Investors.
Hello Cocu,
thank you for inviting me.
I'm delighted to join you today for this conversation.
So let's begin by discussing the differences between Europe and the US when it comes to finance and investments.
In your view,
Anne-Christine...
Are these two models truly opposites?
Well,
framing these models as contradictory is tempting.
In the US,
markets are very much driven by shareholders'
performance,
which is very efficient in terms of resource allocation and economic dynamism.
In Europe,
economies are taking into account the stakeholders,
shareholders but also employees,
society,
environment.
But opposing the two is a false dichotomy.
In reality,
the challenges we are facing today on both sides of the Atlantic,
such as climate change,
ageing populations,
technological disruption,
require solutions that draw on the strengths of both philosophies.
The path forward lies not in choosing between shareholder and stakeholder capitalism,
but in smart transatlantic cooperation that combines long-term vision with dynamic and profitable economies.
This is a very interesting point.
And I really like the idea of cooperation between the two models.
That said,
we often hear that Europe is lagging behind.
Is that really the case?
This is an observation that is backed by numbers.
For instance,
the Europe's per capita income lags 34%
behind that of the US,
with investments in research and development at only half the level seen in the US.
The EU represents just 11%
of global market capitalization,
compared to 45%.
percent.
for the US.
Another example,
only 30%
of financing in Europe comes from financial markets,
compared to 80%
in the US.
That said,
Cocu,
this does not mean Europe is falling behind across the board.
On issues like sustainability,
industrial know-how and social cohesion,
it remains a global reference.
But in terms of scale,
speed and capital mobilization,
the gap with the US remains significant.
These are...
very interesting numbers Anne-Christine,
but they are really alarming.
What's holding Europe back?
First of all,
Europe is not a continent lacking capital nor ideas.
But at the moment,
Europe does not coordinate where it matters.
Mario Draghi,
the former president of the European Central Bank,
listed these areas in a report published in September 2024 on the future of European competitiveness.
First,
Industrial strategies in the energy,
technologies or different sectors remain scattered with a lack of collaboration.
Second,
access to capital is more difficult for entrepreneurs.
Financial markets are less developed in Europe than in the US,
and the single market remains fragmented.
Last,
Europe is lacking focus in selling priorities and efficiency in decision-making.
The good news is that European households own more than 14 trillion euros in savings,
but often placed in low-yield saving accounts.
This is a massive resource,
but one that is underutilized.
to digitalize.
decarbonized and boost defense capabilities,
Europe needs to increase its investment by about 5%
of GDP annual investment,
reaching levels we haven't seen since the
60s or 70s.
This is a massive leap.
For Perspective,
the Marshall Plan between 1948 and 1951 amounted only to 1 to 2%
of GDP.
Energy,
technology and defense are today's equivalent of the coal and steel of the
50s.
And to succeed,
we need to revive the bold and unifying spirit that Germany used to drive Europe's creation and expansion.
So you're talking about the massive underutilization of savings in Europe.
You mentioned 14 trillion euros.
Why,
in your opinion,
Anne-Christine,
is this capital not flowing more effectively into the European real economy?
That's a very important question,
Coco.
One main obstacle.
is a lack of financial education.
In the US,
individuals are encouraged from a young age to take an interest in investments and markets.
Why?
Because nearly everything retirement,
health care,
education depends on personal financial choices.
Families have no choice.
They must learn to invest to secure their future.
In Europe,
it's different.
The welfare state model has long provided a strong safety net.
Free education
pay-as-you-go pensions and universal health care.
This system has many advantages,
but it doesn't encourage citizens to take ownership of financial tools.
We've developed a somewhat distant relationship with investment,
and we can't underestimate the cultural dimension.
Money remains a taboo subject in many circles.
Talking openly about investments,
financial performance or return is still frowned upon in some environments.
Yet financial education is more necessary today
than ever.
The more citizens are educated,
the more they will be able to make informed allocation decisions.
Not just choosing profitable projects,
but also those that are fair,
useful,
and sustainable over the long term.
And this isn't just an individual issue,
it's a collective one.
Europe needs a stronger pension system to better channel household savings to productive investments.
This would encourage retail investors
and increase the flow of funds into capital markets.
Understanding asset allocation and savings flow isn't just about financial performance.
It's also about deciding the future we want to finance.
Because in reality,
health and wealth are not opposites.
Quality of life,
which is at the centre of the European project,
also depends on financial health,
today and especially tomorrow.
I really like the health.
and wealth arguments.
But speaking of financial education,
can we really make a difference on an individual level?
Absolutely.
European savings represent an immense force.
Over the last 10 years,
allocation of European savings to US investments grew from 550 billion to 2.3 trillion euros in 2024.
In other words,
those who are financially educated in Europe are investing.
But elsewhere,
this isn't just a capital flight,
it's also a loss of influence over the projects,
values and visions of the future that we want to finance.
Thanks Anne-Christine.
But why is a unified capital market so crucial for Europe?
And this is a topic that comes up quite often.
And in your opinion,
what concrete benefits would it bring?
It is crucial indeed.
Today,
the European capital market is fragmented and too narrow.
You could compare it to a poorly wired electrical grid.
The voltage,
savings and investment needs is there,
but the energy is lost along the way.
To power its great ambitions,
energy transition,
sovereignty,
innovation,
Europe must consolidate its circuits and unleash its potential.
Two examples of that.
First,
access to listed equity.
There are some concrete solutions to consider.
Consolidating market infrastructures.
harmonizing regulations,
or simplifying market access for small and mid-sized enterprises.
Another example is access to financing.
Securitization is a very powerful financial tool which allows the financial system to channel savings to finance the debt needed by corporates and entrepreneurs for their projects.
The in-use securitization markets account for 0.3%
of the GDP.
In the US it is
1.2% and in Japan
1.4% 2.6%
in Australia.
There are some simple adjustments to the regulation to be made.
to allow for a deeper capital market in Europe and more capacity to finance projects.
Beyond securitization,
the development of the private debt market is also a strong lever to increase the financial capacity for Europe projects.
As a bank,
we have a role to play and this is why we launched a partnership with Brookfield Asset Management with a 10 billion euro debt fund.
This fund is offering investors access to infrastructure projects and this This initiative supports the large...
investments required for energy transition and digitalisation of our economies.
These are clearly big numbers and more will be needed to finance all these investments.
But beyond the capital markets infrastructure,
Anne-Christine,
isn't there also a deeper issue?
I mean,
the lack of economic dynamism in Europe is a clear topic.
Could this be partly a consequence of the points you mentioned earlier?
Yes.
And here is a striking example.
100 euros invested in 2000 in European equities performed about 40%
over 25 years.
The same amount invested in the US generated nearly 300%
performance.
But it is not inevitable.
It's not that Europe lacks potential,
but it faces structural challenges.
Lower productivity growth,
for instance.
Fragmented energy generation that drives up costs.
and a lack of investor appetite for high innovation ventures.
On the latter,
banks like us have a role to play.
We launched recently an equity fund with REIT Asset Management,
with the objective to support emerging leaders in the energy transition throughout Europe,
and Societe Generale committed 250 million euros in the fund.
These are clearly important investments,
but some might worry that in pursuing more aggressively financial performance,
Europe
risks losing its core values.
Performance and the European vision truly coexist,
in your opinion?
Yes,
they can,
and they have to.
Dynamic and competitive markets ensure performance in business and in innovation.
Let's take battery costs,
for instance.
They have dropped more than 75%
since 2015,
unlocking a key driver of the energy transition.
And as costs continue to fall and production scales up.
Cheaper batteries will play a critical role in decarbonising transportation and the power sector.
The energy transition is driven by markets.
Competitive financing is a key enabler to drive costs down for new technologies and for projects to grow in a sustainable way.
This is a very interesting point.
But looking ahead to,
let's say,
2050,
to pick a random number as the podcast,
when it comes to climate challenges,
Isn't investing in sustainable projects over,
say,
25 or 30 years inherently risky,
given the uncertainty?
Does this approach,
Anne-Christine,
make sense?
What is certain is that the next 25 years won't look like the last 25.
This is because the valuation models are no longer aligned with the structural dynamics of the future.
Energy transition,
climate adaptation,
geopolitical tensions over resources,
and so on.
When we talk about sustainable investments,
We are not talking about decisions over a two-year horizon.
We are talking about a vision spanning 10 to 25 years.
If we want investors to act responsibly and with vision,
we need to provide them with a structural means to do so.
And public authorities have a role to play.
Mechanisms like carbon prices are essential.
They align short-term and long-term investment horizons.
They align individual with collective interests.
by forcing the integration of externalities,
particularly those with long-term impacts.
Climate regulation should not be a burden.
It should provide a simple framework that integrates these externalities,
allowing market players to innovate and optimize resource constraints.
This is a prerequisite for enabling sustainable long-term solutions.
Very good point.
As the saying goes,
the best way to predict the future is to create it.
And this clearly couldn't be more relevant when talking about responsible investing.
So thank you so much,
Anne-Christine,
for this fascinating discussion.
But before we wrap up,
do you have any final thoughts or reflections you'd like to share with our listeners?
One thing,
Europe's potential is immense,
and it has a strong vision and many assets that could lead to bounce-back effect,
enabling us to project ourselves into the future.
Jean Monnet once said,
people only accept change when they are faced with necessity,
and they only see necessity in a crisis.
Well,
here we are.
Geopolitical crisis,
climate crisis,
social crisis,
crisis of trust.
The necessity is here,
and it compels us to rethink fundamentally
how we direct savings,
investments and wealth.
So let's do it.
I couldn't agree more.
Thank you,
Anne-Christine,
for this rich discussion full of ideas and perspective.
See you soon.
Thank you,
Cocu.
So we know how this all ends.
The tortoise wins the race,
right?
Well,
it shouldn't always be about competition.
Shouldn't we instead focus on cooperation?
I have the perfect quote to conclude this episode.
It's an African proverb.
If you want to go fast,
go alone.
If you want to go far,
go together.
You may say I'm a dreamer,
but I'm not the only one.
Thank you for listening to this episode of 2050 Investors.
And thanks to Anne-Christine Champion for her invaluable insights.
I hope this episode has helped you get a sense of Europe's potential.
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While the following podcast discusses the financial markets,
it does not recommend any particular investment decision.
If you are unsure of the merits of any investment decision,
please seek professional advice.