SMEs are the driving drive of employment and innovation in Europe. They symbolize 99% of the enterprise panorama, generate two-thirds of jobs, and account for greater than half of the Union’s GDP. Their capacity to develop and compete is dependent upon a stable and aggressive monetary system that ensures a gentle circulate of financing and funding.
In Europe, that is the place capital markets have a a lot better weight; over 70% of company financing in Europe comes from financial institution intermediation. This mannequin makes monetary establishments a strategic pillar of enterprise development, particularly for SMEs, resulting from their restricted entry to capital markets.
Credit services from banks to the personal sector in Europe grew by 1.7% within the first half of 2025 – properly above GDP development; lending to SMEs additionally continues to point out constructive developments. But if we evaluate the development of financing between Europe and the United States, the distinction is notable. In the US, corporations mix fairness and debt with ease, supported by a dynamic and deep single market.
In Europe, capital markets stay fragmented (liquidity is unfold throughout a number of markets, and there may be restricted transparency) and underdeveloped. As a outcome, enterprise capital funding reaches ranges above 0.7% of GDP within the US, whereas in Europe it stays marginal: it accounts for barely 0.1% of GDP in international locations resembling Germany, Spain, or Italy. These structural variations clarify why many bold European companies in the end shift their development (and their financing) throughout the Atlantic.
As highlighted within the Letta Report, finishing the Capital Markets Union (CMU) by making a Savings and Investments Union (SIU) is crucial to strengthening European corporations’ entry to capital. To be sure that Europe stops exporting its companies and as an alternative retains development inside its borders, progress towards a real single market is significant. Achieving this requires two key steps: reviving the securitisation market and finishing the Banking Union, since Europe’s banking and capital markets are deeply interconnected and should function collectively to channel financing effectively.
Securitisation makes it attainable to rework loans into belongings that entice personal funding and release capability to maintain lending, which might grow to be a key lever for reinforcing funding within the European Union. The reform of the European securitisation framework, presently below negotiation between the Parliament, the Commission, and the Council, is a step in the correct path. The Spanish proposal to ascertain a European Securitisation Platform, involving the EIB and the EIF to supply better scale and depth to this market, is especially promising and deserves swift implementation.
Meanwhile, probably the most rapid precedence have to be a real simplification of the regulatory and supervisory framework (which additionally impacts the regulation and supervision of capital markets). Europe has constructed a safer monetary system, however at the price of making it much less dynamic. The Association for Financial Markets in Europe (AFME) has estimated that banking regulation quantities to the equal of 14 full Harry Potter sequence or 44 days of nonstop studying. It is inconceivable to use such excessive ranges of regulation. In the US, the dialogue is now not about simplification however modernisation.
The accumulation of guidelines, capital necessities, and supervisory layers reduces banks’ capability to rework financial savings into credit score services. The European Banking Federation estimates that between €2.7 and €4.1 trillion stays tied up resulting from supervisory discretion. The EU should transfer towards a mannequin that mixes stability with competitiveness.
The United Kingdom, for instance, has launched a development mandate for its prudential supervisor, displaying that it’s attainable to stability each regulatory oversight and development. Integrating a development dimension into the mandate of the European supervisory authorities would ship a transparent political sign that monetary regulation isn’t solely about stability, but additionally a key part of Europe’s broader industrial technique.
For this cause, advancing the Capital Markets Union, together with smarter, much less bureaucratic, and growth-oriented regulation, is crucial for SMEs to proceed producing employment, innovation, and prosperity. SMEs are the driving drive of Europe’s economic system; each their success and the continent’s rely on preserving a steady, aggressive monetary system that successfully helps the true economic system.
Íñigo Fernández de Mesa is vice-chair of EnterpriseEurope´s Economic & Financial Affairs Committee.
