Europe has a rather strange problem: households save a lot and private wealth is enormous, yet when it comes to financing new businesses, innovation, technology and major investments, a substantial share of capital ends up elsewhere. This does not mean the money “disappears” or that someone takes it away from Europe. The mechanism is much simpler: savings seek large, liquid, efficient markets full of investment opportunities. Today, very often, those markets are in the United States.
This issue may seem remote from everyday life, but it also concerns people who simply invest 200 or 300 euros a month in a global ETF. To understand why, we need to bring together figures normally analysed separately: Europe’s competitive slowdown, its trading relationship with China, fragmented financial markets and the way we Europeans invest our savings.
The first problem: Europe needs to invest much more
One of the most important figures comes from the report on European competitiveness coordinated by Mario Draghi. According to the estimates used in the report, achieving Europe’s objectives for innovation, digitalisation, energy, defence and competitiveness would require between 750 and 800 billion euros of additional investment every year. That is equivalent to around 4.4-4.7% of the European Union’s 2023 GDP (gross domestic product). This is therefore not an extraordinary one-off programme, but a structural increase in investment.
The scale of the problem becomes clearer when we look at what is happening in international trade. In 2025 the European Union exported 199.6 billion euros of goods to China, while importing 559.4 billion. Europe’s trade deficit with China was therefore 359.8 billion euros in a single year. Even more significant, however, is the direction of travel: compared with 2024, European exports to China fell by 6.5%, while imports rose by 6.4%. If we extend the comparison back to 2015, European exports to China grew by 37.1%, while imports increased by 89%.
This does not automatically mean that a trade deficit is “bad” or that importing from China is a problem in itself. Modern economies are built on global value chains, and many Chinese products allow European companies to purchase components and goods at competitive prices. The interesting point is instead the changing composition of trade. In 2025 the main category of goods exported from the EU to China was machinery, mechanical equipment and components, worth 45.3 billion euros. At the same time, machinery and vehicles now account for more than half of Europe’s manufactured imports from China. China is therefore no longer simply the place from which we buy low-value-added products: it is increasingly competing in the same industrial and technological sectors in which Europe was traditionally strong.
And Italy is particularly exposed
For Italy, these figures deserve even closer attention. In 2025 Italian imports from China reached around 60.6 billion euros, an all-time high. According to ISTAT’s 2026 Report on the Competitiveness of Productive Sectors, the total value of imports of Chinese products grew by 17.2% compared with the previous year, while the increase in manufacturing alone was 20.1%. In the report’s comparison covering January-November 2025, China accounted for 10.3% of total Italian imports, compared with 7.5% for Germany and 6.6% for France. From this perspective, Italy was the most exposed to China among the major European economies analysed.
The most surprising figure, however, concerns pharmaceuticals. Italian imports of pharmaceutical products from China rose in a single year from around 680 million euros to more than 7.7 billion, an increase of over 900%. This is an enormous figure, but it needs careful interpretation: according to ISTAT, multinational groups account for over 90% of the sector’s flows, so some of the increase may reflect the international reorganisation of production chains and intragroup flows, rather than simply Chinese production replacing Italian production.
The point, therefore, is not to say that “China is buying everything from us” or that Europe no longer produces anything. That would be too simplistic. Europe’s problem mainly concerns companies’ ability to grow fast enough to compete globally.
European businesses are founded, but find it harder to scale up
Europe has high-quality universities, human capital, patents, research and excellent companies. The problem is not simply a lack of innovative businesses. One of the most widely discussed difficulties is turning a successful European business into a truly continent-wide company and then a global one.
Formally, there is a single market with around 450 million consumers. In practice, however, national differences persist in taxation, administrative procedures, company law, insolvency, services regulation and many other areas. This means that expanding from Germany to France, from France to Italy and from Italy to Spain is not always as straightforward as expanding from one American state to another.
The International Monetary Fund has tried to quantify these frictions, estimating that the remaining barriers to internal European trade may be equivalent, on average, to tariff costs of 44% on goods and 110% on services. These figures are frequently quoted, but require careful interpretation: they do not mean that an actual European tariff of 44% or 110% exists. They are an econometric estimate of the implicit costs associated with the so-called “border effect”. The IMF study itself acknowledges that the result is sensitive to the dataset, level of aggregation and assumptions used; different specifications produce substantially lower results.
There is also a more fundamental criticism. An analysis published on VoxEU observes that some of the lower intensity of trade between different countries may stem not from laws or bureaucracy, but from language, habits, consumer preferences and social relationships. An Italian naturally tends to have more contacts with other Italians, and a German with other Germans; these connections also influence economic relationships. Incorporating measures of social connectedness into the models reduces a substantial part of the so-called border effect. It would therefore be wrong to treat 44% as a precise measure of “European bureaucracy”.
The problem of fragmentation nevertheless remains. And it becomes even more important when we move from businesses to capital.
The real paradox: Europe does have the money
The report Much More Than a Market, presented in 2024 by Enrico Letta, estimated private savings in the European Union at around 33,000 billion euros. At the same time, it identified an outflow of around 300 billion euros per year in European household savings to foreign markets, particularly the United States, also linking this to the fragmentation of European financial markets.
Later European Union documents confirm the order of magnitude, but use a broader scope than households alone. A Commission analysis submitted to the Council indicates that, since 2015, an average of more than 300 billion euros net per year has left the EU for foreign financial assets, and that in 2024 alone the flow reached 437 billion. The figure concerns savings across the entire European economy after depreciation, meaning consumption of existing capital. Since 2020, the United States has been the main net destination for this capital.
Another misunderstanding must be avoided here: Europe does not necessarily “lose” that money. If an Italian investor buys Microsoft shares, an American fund or a global ETF, they still own a financial asset that forms part of their wealth. From an individual investor’s perspective, this may be a perfectly rational choice. From a macroeconomic perspective, however, some European savings are invested in foreign assets. One clarification is needed: when we buy an already listed share, the money normally goes to the seller, not directly to the company. Direct financing occurs through new issues; a broad, liquid market can nevertheless facilitate it by making new capital easier to raise.
This is where the paradox emerges: on one side, the Draghi report estimates a need for 750-800 billion in additional annual investment; on the other, Europe generates enormous savings, and a significant share of that capital is invested outside the Union. The two amounts are not directly comparable, and it would be incorrect to say that simply “keeping the 300 billion” would automatically solve Europe’s investment problem. They do show, however, that the problem is not merely an absolute shortage of money: it also concerns how capital is channelled and where it finds the best opportunities.
Do Europeans save much more than Americans?
Here too, the figures are interesting, but they must be compared properly. In the first quarter of 2026, the euro area household saving rate was 14.3%. In the United States, the personal saving rate recorded by the Bureau of Economic Analysis was 3.0% in July 2026.
The difference is enormous, but that does not mean we can simply conclude that “Europeans save almost five times as much as Americans”. The two statistics derive from accounting systems and definitions that do not match perfectly, and are measured using different methodologies. They are nevertheless sufficient to illustrate an important structural characteristic: European households maintain a very high propensity to save.
Italy also confirms this availability of wealth. At the end of 2024, Italian households’ net wealth amounted to 11,732 billion euros, around 199,000 euros per inhabitant. It is important to remember that this is an average: it certainly does not mean that every Italian owns 199,000 euros, because wealth is distributed very unequally and the total includes property and other assets. Furthermore, despite reaching a nominal high, household wealth in real terms remained more than 5% below its 2021 level because of inflation in subsequent years.
Italian financial wealth also remains highly liquid. According to figures cited by Consob, in June 2025 Italian households owned 6,148 billion euros in financial assets, of which around 26% consisted of cash and deposits. We are therefore talking about around 1,600 billion euros held in extremely liquid instruments.
Holding cash is not a mistake: it is needed for everyday expenses, emergencies and short-term goals. Problems arise when liquidity persistently exceeds what is needed and remains for years in instruments paying virtually nothing.
What does an ordinary global ETF have to do with this?
This is where, in my view, the issue becomes particularly interesting for a small investor.
Take the familiar MSCI World, one of the most widely used indices for constructing global equity ETFs covering developed countries. On 31 August 2026, the United States represented around 72.1% of the index. Japan accounted for around 5.8%, the United Kingdom 3.5%, Canada 3.5% and France 2.4%.
No one sitting in an office decided to allocate 72% to the United States. The MSCI World is weighted by free-float-adjusted market capitalisation (the shares actually available to investors): the greater the total value of a country’s listed companies, the greater their weight in the index. America’s strong presence is therefore mainly a consequence of the scale US companies have reached in global financial markets.
This produces an interesting effect. An Italian investor who decides not to pick individual stocks, not to chase trends and simply to invest every month in a diversified global ETF is adopting a perfectly rational strategy. Yet, indirectly, a large part of each investment goes towards American companies.
This is one reason why turning Europe’s problem into a campaign against global ETFs or investment in the United States would be wrong. From an individual perspective, geographical diversification remains an important feature of sound risk management. Concentrating your wealth in Italy or Europe simply out of financial patriotism would mean deliberately introducing a strong home bias, an excessive preference for investments in your own country or geographical area.
So should we buy more Europe?
Not necessarily. The fact that Europe needs capital does not mean individual savers should sacrifice portfolio diversification to solve a macroeconomic problem.
Deliberately increasing the European allocation can be an investment choice, but it should have a financial rationale. For example, an investor might consider certain European valuations more attractive than American ones, or wish to change the portfolio’s geographical exposure. These are assessments that can be discussed using evidence and figures.
However, I would clarify one point often blurred in discussions on this topic: the weighting of American companies and dollar risk are not exactly the same thing. Buying an ETF quoted in euros does not automatically eliminate the currency exposure of its underlying securities, but it is also incorrect simply to equate “72% US companies” with “72% of wealth economically exposed to the dollar”. Many large American multinationals earn revenue and incur costs in dozens of different currencies. Properly assessing currency risk therefore requires looking at the investment’s structure and, where relevant, any currency hedging.
Cash remains the easiest issue to address
For individual savers, however, there is a much more concrete question than European competitiveness: understanding how much money it makes sense to keep fully liquid.
Since 16 September 2026, the ECB’s deposit rate has been 2.50%, following the 25-basis-point increase (0.25 percentage points) decided on 10 September. The ECB’s new projections also estimate average euro area inflation of 3.0% in 2026, 2.5% in 2027 and 2.1% in 2028.
But be careful not to jump to another conclusion: the ECB’s 2.50% is not the return on a saver’s current account. It is the rate paid to banks on the Eurosystem’s deposit facility. A current account may pay much less, nothing at all or, in some cases, offer different promotional terms.
The useful question therefore becomes very simple: how much money do I really need readily available, and how much am I leaving idle without a specific reason?
There is no percentage that works for everyone. An emergency fund depends on income stability, monthly expenses, other financially dependent people, debts and the unexpected events one might realistically face. Automatically referring to “six or twelve months” can be a good starting point, but it is not a universal rule. The liquidity needed by a student living with their family may be completely different from that needed by a household with a mortgage, children and a single income.
What Europe is doing
European institutions now also recognise the problem. In March 2025, the Commission launched the Savings and Investments Union, intended to connect household savings more effectively with productive investment by European businesses. The Commission referred to around 10,000 billion euros of household savings held in bank deposits. These deposits already help finance the economy through the banking system; the aim is also to broaden investment opportunities in capital markets.
September 2025 also brought a recommendation to Member States to develop Savings and Investment Accounts, designed to make access to shares, bonds and funds easier, with simplified tax procedures and potential incentives. However, this is not a single European account already available to everyone: the Commission defined a model and recommended that countries introduce it or improve existing arrangements.
Italy already has instruments that seek, through different approaches, to direct savings towards businesses, such as PIR, individual savings plans (Piani Individuali di Risparmio), introduced in 2017. They offer tax benefits when certain requirements and holding periods are met, but the portfolio-composition restrictions themselves mean they cannot be assessed solely by looking at the tax benefit. A tax advantage does not automatically turn a concentrated investment into a better investment.
The real issue
Having looked at all these figures, I do not think the interesting conclusion is that we should stop investing in the United States or start buying European shares to help the economy.
The conclusion is almost the opposite. Europe is not a continent without savings. It has tens of thousands of billions of euros in private wealth, but its capital markets remain fragmented and less deep than America’s. At the same time, it needs hundreds of billions in additional investment every year, while a significant share of European savings is invested abroad.
From Europe’s perspective, this is a structural problem. From the individual investor’s perspective, however, it should not become a source of guilt.
When we invest, we must first build a portfolio consistent with our objectives, time horizon and capacity to bear risk. If a global ETF invests over 70% in the United States, that does not automatically make it wrong: it means that this is broadly the current distribution of the developed-market equity market.
What we can address immediately is much closer to home: understanding how much money we have, where it is invested, how much liquidity we really need, how diversified we are and, above all, why we chose each investment.
Because having substantial savings does not necessarily mean using them well. And that rule, apparently, applies both to an individual and to an entire continent.
Figures checked as of 26 September 2026. Reference periods are indicated in the text, and statistics may subsequently be revised.