At this year’s European Banking Congress (EBC) in Frankfurt am Main, Bundesbank President Joachim Nagel issued an emphatic plea for reforms for Europe’s future. Against the backdrop of mounting geopolitical tensions, a challenging global trade environment and demographic change, Mr Nagel urged for a clear European strategy to safeguard productivity and welfare over the long term.

With limited resources, our only way forward is to become more productive, the Bundesbank President stressed at the beginning of his speech. Europe, he said, is facing profound changes: growing security requirements, an ageing population and the transition to a net zero economy.

Productivity gap has recently widened significantly

Mr Nagel outlined how EU productivity caught up to that of the United States in the decades after World War II, but that process had been stalled since the mid-1990s at least. However, almost half of the current productivity gap versus the United States stems from just the last five years, he said. In addition to structural growth differentials, he explained, this development had been amplified by the pandemic, energy price shocks and different economic policy responses.

At the same time, Mr Nagel rejected an overly pessimistic view of Europe’s performance by putting things into perspective. Measured in terms of the material standard of living, that is real per capita income, Europe had come through the past few decades in better shape than suggested by productivity figures alone, as many countries had successfully mobilised additional labour reserves.

Impetus for more dynamism: simplify regulation, deepen capital markets

To boost productivity in the coming years, Mr Nagel said, Europe needs structural reforms flanked by measures taken at the national level. Dismantling bureaucratic hurdles for firms and ensuring greater harmonisation within the internal market are key issues for Mr Nagel. He referred to the EU’s ongoing reform packages, saying that we need to make it easier for businesses to grow in Europe – with clearer, leaner and more harmonised rules.

Better access to equity financing is also crucial, according to Mr Nagel. Europe needs a genuine savings and investments union to support innovation from start-up to scale-up. Venture capital and deeper and more liquid capital markets play a key role here. Mr Nagel concluded with an appeal for Europe to be determined: Europe faces major challenges. Let's turn them into something productive.” 

The European Banking Congress (EBC) is regarded as one of the premier forums for decision-makers representing finance, politics and academia. It provides a venue for dialogue on key issues concerning Europe’s future.