Security is built on innovations in every sector of the economy, not just defence, and Europe needs to take immediate action to boost its businesses at a time of geopolitical shifts.
That’s the conclusion of a host of top experts at the European Investment Bank Forum in Luxembourg this week. Speakers identified a range of areas in which Europe must provide greater financing, improve regulation and boost private investment to ensure that it maintains its values and prosperity in the face of a changing world.
“We are certainly living a seismic shift, with deep changes underway,” said Nadia Calviño, the president of the European Investment Bank, in her opening remarks. “Our future – and Europe’s role on the new chess board – will depend on the decisions we make today.
“And every decision counts.”
Calviño identified security as being “first and foremost, an environment of freedom and peace for our countries,” adding that the EU’s financing arm aims to double its lending to Europe’s defence sector this year. But she added that it also means a stable business environment, inclusive societies, international partnerships, public health and infrastructure.
The path to that stable, secure Europe, however, requires a transformation in many sectors. And that’s what the participants at the European Investment Bank Forum were charting.
Security and defence
In the area of security and defence itself, representatives of leading European defence contractors and think tanks suggested that, while Europe needs to spend more on defence, it must also act more efficiently and more cooperatively. “It's more about how we spend the money rather than how much,” said Andre Denk, deputy chief executive of the European Defence Agency.
And defence companies are less focused on financing than on final orders. “I don’t need R&D money,” said Frank Thieser, chief strategy officer of German drone maker Quantum Systems. “I need contracts from governments.”
Stefano Pontecorvo, chairman of Italian defence contractor Leonardo, countered that EU financing programmes could help build up the industry's supply chains, especially among smaller companies in Europe. But ultimately "big companies need the contracts, and then we'll work."
The European Investment Bank will be central to Europe’s security and defence transformation, said Antonio Costa, president of the European Council, because the Bank has shown its value in other recent major investment pushes. “The EIB will be important in this. Your role has been crucial in the digital energy and climate transitions,” he said, “and now you will have a critical role also to play for our security and defence.”
Keep it simple
The automotive industry is going through its biggest transformation in the last 30 years. The shift to electric mobility is just one part of the story, said Luca de Meo, Renault’s chief executive.
While electric vehicles have a 70% lower carbon footprint over their lifetime compared to traditional combustion engine cars, they require more advanced technology, like semiconductors, and the materials needed for batteries are different from those used in traditional cars. And Chinese manufacturers are innovating quickly.
To stay competitive, European automakers need to rethink their approach. The old model of large-scale production is no longer enough, de Meo said. Europe needs a comprehensive industrial strategy that covers the entire ecosystem—from raw materials to production, infrastructure, and energy.
“Public authorities have a crucial role to play there, to coordinate all the players across the value chain, from mining to infrastructure to energy producer to car makers to the software industry to recycling,” de Meo said. “To ensure that there is a business case that works for everyone.”
The role of regulation in the clean energy sector needs to change, if Europe is to compete in these industries, according to Anne Mettler, vice president at Breakthrough Energy, an investment firm founded by Bill Gates that is helping clean energy companies.
“We have a public sector that wants to control everything and have a say in everything, but that rarely wants to actually enable something, make something happen, so this is a real challenge in Europe,” said Mettler. “Europe has a major problem with scaling and commercialization, so now we really need to zero-in on that."
A streamlined set of regulations is in the sights of the European Commission. Valdis Dombrovskis, European Commissioner for Economy and Productivity, Implementation and Simplification, said that most of the investment Europe needs will have to come from the private sector. To make that happen, Europe has to reform its rules.
“Simplification is one of the important factors affecting European competitiveness,” Dombrovskis said. “Simplification is not deregulation. We are rather looking how we can reach our policy goals in a less costly and more efficient manner.”
Europe clearly develops many innovative products. But investment is low. Only 0.02% of the total assets of European pension funds – $3 trillion – go to back European innovation. US pension funds arguably invest more in European technology than local funds, according to Mark Boris Andrijanič, a member of the governing board of the European Institute of Innovation and Technology. “We need to do something about the taxation of share options on this continent,” he said, “and we also need to do something with our bankruptcy laws that are outright punitive.”
Europe is catching up
The European Investment Bank Forum also provided background data and analysis to spur the discussion between the experts. That came in the form of the latest edition of the Bank’s Investment Report, presented by Chief Economist Debora Revoltella.
The report found that investment had remained surprisingly buoyant in 2024, thanks largely to strong public support, such as the European Union’s €650 billion Recovery and Resilience Facility. Private investment is flagging, however.
Europe’s investment needs are significant. The recent Draghi report estimated that Europe needs €800 billion in investment annually to pull itself out of a cycle of low productivity and low growth. While that level of investment is daunting, Revoltella pointed out that Europe had embarked on similarly high levels of investment during the creation of the single market, and that it was possible to do so again. The key, she said, was to ensure that structurally higher investment resulted in new business opportunities that would encourage companies to invest more heavily. A focus on sectors in which European innovation gives an edge would also yield results, she said.
“We need to leverage what we think are Europe strengths, and Europe’s strengths today are its strong industrial base, its green leadership and the European social model,” Revoltella said. “There is a very strong export market globally for green technology. We know that China is doing very well, but Europe is actually catching up to the growth of this market.”
Like Revoltella, Maria Luís Albuquerque, the European Commissioner for Financial Services and the Savings and Investments Union, noted that encouraging investment within Europe is key to beating the cycle of low productivity and low growth. “If we look at the current state of affairs in our European capital markets,” she said, “it is painfully obvious they are operating far below their potential – and this is to the detriment of all Europeans.”
A significant portion of EU savings sits in low-yield savings deposit accounts or even cash, instead of being used to fund the capital needs of European businesses, particularly dynamic firms like startups and scale-ups, which often struggle to find the funds needed to grow their companies. “There is a mismatch in Europe between the abundance of idle savings and companies that need investment,” Albuquerque said.
By better integrating Europe’s widely divergent and largely small capital markets, the savings and investment union could increase the returns Europeans see from their hard-earned savings, while deepening the financing opportunities for businesses.
Integrated investment, European values
As a measure of the impact of more integrated capital markets, Michelle Capold, co-founding partner of Blume Equity, noted that one-quarter of all jobs in the United States are backed by tech companies, while in Europe the figure is a meagre 2%. The United States also benefits from its deep capital markets. The S&P 500 is valued at some $46 trillion, and 65% of that value is derived from venture-backed companies. Stock markets in Europe are worth about one-third of that, she said.
This deeper investment is key across every sector. In frontier technologies, such as food, life sciences and biotech, it is vital.
“These industries are not only crucial for our well-being,” said Ekaterina Zaharieva, European Commissioner for Startups, Research and Innovation, “but also represent one of the most dynamic frontiers of innovation and economic growth.”
Clara Sattler de Sousa e Brito, head of Europe Region for Philips, urged simpler rules. She gave the example of medical device regulation, in which the 24 months it takes to obtain certification in Europe is four times longer than the US, while the cost of the process has increased 260% since 2021.
Housing for Europeans
Teresa Ribera, European Commissioner for a Clean, Just and Competitive Transition, insisted that Europe should stick to its core values, even at a time when the world seems to be in turmoil. “Our values should guide our external and internal policies,” she said.
“Translating our values means people have sustainable and inclusive growth, which is essential for maintaining a healthy environment, job security, social peace and preserving the resilience of our society.”
The social peace and resilience of which Ribera spoke were at the heart of a series of panels on housing, in which all participants acknowledged a crisis in Europe now. EIB President Calviño announced a new action plan that includes €10 billion in investment in the sector over the next two years.
EU Commissioner for Energy and Housing Dan Jørgensen described the challenges facing Europe as interrelated, with high energy prices, climate change, and the threat posed by Russia. “Competitiveness, decarbonization, fighting climate change and becoming independent of Russian fossil fuels is at the core of everything we do right now,” he said.
Jørgensen said that rents in Europe had risen by as much as a quarter over the last 15 years and house prices by a half. One in ten Europeans are spending 40% or more of their disposable income on housing. “But behind these numbers are people, young people forced to put off starting a family, vulnerable people threatened with homelessness, students who cannot take up university places, workers who cannot accept job offers, rural communities facing depopulation, cities unable to retain teachers, nurses or police officers, because they cannot afford to live where they work,” he said. “These people and their stories provide living proof of the housing crisis and the impact it has on Europe.”
The European Commission has established a housing task force to deliver an affordable housing plan early next year. The European Investment Bank’s launch of a pan-European investment platform for housing was central to the Commission’s plans, he said.
Others are already moving against the housing crisis.
Barcelona Mayor Jaume Collboni described new regulations to cap rents and, by 2028, to eliminate licences to rent apartments to tourists.
Croatia’s state secretary at the Ministry for Regional Development and EU Funds, Zrinka Raguž, laid out the country’s action plan for affordable housing, which includes an end to real estate tax for those aged less than 45, who also pay only 50% of the value-added tax on the property. Other measures include “activating” vacant properties, more affordable housing, easier planning rules, and more student dorms. Croatia’s plan will cost €2 billion before 2030 and will be funded from the national budget, EU loans, and the rent to be paid on the affordable housing.
European values, outside the EU
One of the European values promoted by speakers throughout the European Investment Bank Forum was partnership – something that, they noted, extends beyond the borders of the European Union.
The main focus for the European Investment Bank beyond the Union’s borders is Ukraine.
Yulia Svyrydenko, Ukraine’s economy minister, told the conference that her country remains a place of economic potential, despite the war. Gross domestic product grew in Ukraine by 3.5% in 2024 and is expected to rise by at least 3% in 2025.
The World Bank estimates that rebuilding Ukraine will cost more than $500 billion over the next decade. But this represents “500 billion business opportunities in Ukraine,” Svyrydenko said. Potential areas for investment, she said, include critical raw materials, defence, the green transition, energy and information technology.
The geopolitics of the situation is a difficult one, however.
Marta Kos, European Commissioner for Enlargement, said that “now, we face not just Russia, but increasingly the indifference of our oldest ally.” To overcome this, “we need to work towards a faster and deeper integration of candidate countries in areas such as the internal market, energy and defence. First, and foremost, in Ukraine.”
Working to prevent disease worldwide
War is not the only global security threat. The Forum examined ways to face up to the challenge of disease and pandemic.
The World Health Organization is currently tracking 1 200 possible disease outbreaks. "The world is biologically unstable," said Michael Ryan, deputy director general of the World Health Organization's health emergencies programme. "The climate is unstable, our populations are increasingly unstable, conflict is growing."
The convergence of these three issues will increase migration in coming decades, particularly from hard-hit countries in the Sahel and the Horn of Africa. "These countries are literally falling away from the rest of the world," he said.
Countries in these regions will account for two-thirds of the women who die in pregnancy and childbirth; half the children who die under age five; and 70% of high-impact epidemics in the next decade, Ryan said. "It is in the interests of humanity to invest in those countries."
Global health alliances have made great progress in taming disease and improving child mortality rates. The number of children that died under age five more than halved since 2000, to about 5 million in 2023. "International partnerships have been part and parcel of this effort," said Ted Chaiban, deputy executive director for humanitarian action and supply operations for Unicef.
Maintaining a commitment to world health is, panellists noted, part of the upholding of European values that was a theme of the conference.
Gender business case
The same applies to the rights of women and gender investment. Even when equality is scorned by some politicians around the world, Europe must remain committed, “because it does not only affect 50% of our societies, but 100% of our societies,” said Nadia Calviño, president of the European Investment Bank, during a panel on gender investment. “Gender equality is not only the right but also the smart thing to do, and the business case is very strong.”
During the Forum, the European Investment Bank signed a €150 million loan to Spain’s CBNK, a bank for engineering and health professionals. The loan is aimed exclusively at women entrepreneurs. “The fact that there's a private bank that actually sees there's a business case here is quite telling,” Calviño said.
That drives home the message Calviño repeated throughout the Forum, a message of unity, partnership and solidarity. “There is no time to lose and at the European Investment Bank, there is no hesitation,” she said. “This is Europe. These are our European values. Unity is our strength.”
