The key financing problems for the European economy: Savers’ strong preference for safety and the high required return on equity

The euro zone’s two key financing characteristics and problems are : European savers’ strong preference for liquid and risk-free assets; The very high required return on equity for shareholders. Now, t he euro-zone economy is increasingly going to need long-term investments (which will not take place if the discount rate is too high) that will be low-return (the case in particular of much investment in the energy transition ) , illiquid (infrastructure) and risky (financing of breakthrough innovations). How to reconcile savers’ characteristics with the financing needs of the European economy ? We can imagine s everal possibilities : Reform of regulations for financial intermediaries to encourage the transformation of short-term, risk-free savings into long-term, risky investments; Creation of new savings products to increase the maturity of savings and risk-taking by individual savers; Intermediation of savings by Europe (based on the Next Generation EU model); Development of co-financing between the public and private sectors.