Open but Secure Europe%E2%80%99s Path to Strategic Interdependence 2025

Solvency II agreement provides an opportunity to relax the regulatory requirements, so that insurance fund managers could invest in venture capital funds. Even modest reforms could be transformative — the assets of EU insurance firms represent around 60% of EU GDP , more than double the US ratio.51 A trickier move would entail boosting the development of private pension funds, which could then also invest in venture capital. Since the assets of private pension funds are only worth around a third of EU GDP (compared to 136% of US GDP), there is scope for such a move. However, any EU-level initiative could be tricky to implement, as pension policies are set by member states and even a hint of pension reforms often proves politically unpalatable. A second proposal consists in scaling-up the activities of the European Innovation Council (EIC). The EIC currently has the capacity to invest just €750 million per year in equity stakes – an amount that is unlikely to make much difference, especially on a global scale.52 Negotiations for the financial envelope of the third pillar (innovation) of the next multiannual financial framework offers an opportunity to raise this limit. Boosting the EIC’s budget would be a first step towards building a European sovereignty fund, as European Commission president Ursula von der Leyen has called for. Finally, the bloc should tackle the fragmentation of its innovation financing landscape by creating an EU-wide mechanism for member states to identify a handful of critical technologies and go all-in on these fields. A beefed-up EIC could spearhead efforts to focus innovation financing on a few key sectors by identifying EU-wide tech priorities. This would foster the emergence of a more coherent EU financing landscape and help tackle the bias that often makes EU member states favour domestic projects at the expense of transformative ones. In the medium term, such a strategy would support efforts to nurture the emergence of EU-based critical technologies. Some already exist, such as ASML in the Netherlands or ZEISS in Germany, both of which provide essential technology for semiconductor manufacturing. Resilience through a strong network of partnerships Focusing on innovation financing will not be enough for Europe to continue to matter on the global economic and geopolitical scene. To remain relevant, the EU must also make use of its greatest economic leverage – access to its vast single market of around 450 million wealthy consumers. Such a focus on commerce would boost the EU’s standing with both allies – including the trade-oriented Trump administration – and foes, at a time when China is making headway in deepening its trade and investment footprint in developing economies. The EU should focus on signing trade partnerships with emerging markets. The EU-Mercosur free-trade agreement is only one among many such deals. The bloc should also explore building closer trade ties with members of the CPTPP . Such a focus on Asia appears crucial, at a time when both China and India are playing an increasingly important role on the global economic scene. Deepening trade ties with those developing economies that are increasingly positioning themselves as hubs between East and West would come with the Boosting the budget of the European Innovation Council (EIC) would be a first step towards building a European sovereignty fund – a beefed-up EIC could spearhead innovation financing on a few key tech sectors. Open but Secure: Europe’s Path to Strategic Interdependence 22