The euro area current account balance reached €276 billion in 2025 (1.7% of GDP), following €416 billion in 2024 (2.7% of GDP). This surplus can be understood as the excess of domestic savings over investment. This situation suggests that better mobilisation of European savings could significantly contribute to financing the additional investment recommended in the Draghi Report (2024). This is one of the key challenges of the Savings and Investment Union.

This surplus is sometimes interpreted as evidence of a ‘flight’ of savings to the rest of the world, notably to the US. According to this view, European savings should be encouraged — or even compelled — to remain in Europe. Such a policy would, however, be misguided. On the one hand, the extreme case of China shows that strict controls on capital outflows do not prevent a persistent current account surplus, whose drivers are primarily macroeconomic. On the other hand, this column shows that referring to a ‘flight’ of European financial savings is unfounded: not only are these savings largely held as domestic bank deposits, but the portion invested directly or indirectly in equity and debt markets also displays a strong home bias.

The euro area imports more portfolio investment than it exports, due to a large deficit in equities

The net balance of portfolio investment flows for the euro area was negative in 2025 (€‑71 billion), as in 2024 (€‑42 billion). In other words, non‑residents invested more in the euro area than residents invested outside it. This result reflects two contrasting dynamics. On the one hand, net flows were inward for equities (a negative balance of €‑280 billion, after €‑151 billion in 2024, including investment fund shares). On the other hand, net flows were outward for debt securities (a positive balance of €209 billion, after €109 billion in 2024).

Beyond cyclical fluctuations, portfolio investment flows show no evidence of a capital ‘flight’ (see Figure 1). Equity flows, close to zero in 2022–2023, resumed in 2024–2025, more on the inflow side than on the outflow side. Debt‑security flows also increased over the period, mainly as outflows, although this movement tended to ease during 2025.

Figure 1 Selected items of the euro area financial account (€ billions, 12-month cumulated net flows)

Source: ECB
Note: For assets, a positive (negative) number indicates net purchases (net sales) of non-euro instruments by euro area investors

The euro area savings surplus therefore did not take the form of net portfolio investment outflows. It was recycled mainly through foreign direct investment (€183 billion in 2025) and ‘other investment’ (€98 billion, primarily loans from resident banks to the rest of the world).

The euro area net external equity position has remained negative despite the past outperformance of US equity markets

Analysis of portfolio investment flows must be supplemented by analysis of outstanding positions, valued at market prices and current exchange rates. Over the past decade, equity valuations have risen sharply and have contributed more than flows to changes in net external positions. This is particularly evident in the euro area bilateral net external position vis‑à‑vis the US: for equity portfolio investment, it moved from a negative balance of nearly –3% of euro area GDP in 2015 to a positive balance of around 10% of GDP in 2025, mainly due to the outperformance of US equity markets. Today, US shares account for nearly 60% of euro area residents’ holdings of non‑euro‑area equities.

Nevertheless, as shown in Figure 2, the euro area net international investment position vis‑à‑vis the rest of the world as a whole has remained negative for equities (around –25% of GDP in 2025) and has changed little in recent years. The improvement in the euro area overall net external position — from around –10% of GDP in 2019 to +11% in 2025 — has mainly come from portfolio investment in debt securities and from ‘other investment’ (cross-border bank lending).

Figure 2 Net international investment position of the euro area (net amounts outstanding at the end of each quarter as % of GDP)

Source: ECB.

European financial investment remains characterised by a strong home bias

Another way to approach the issue is to examine the final destination of euro area residents’ financial investments: the national economy, the rest of the euro area, or the rest of the world.

Euro area households’ financial assets are held mainly through intermediaries — via deposits (around one‑third), investment funds, life insurance, and pension funds. Direct holdings of listed shares and debt securities account for less than 10% of household financial assets. It is therefore more relevant to examine, using national financial accounts, the composition of equity and bond holdings across all resident institutional sectors: not only households, but also financial institutions, non‑financial corporations, and general government.

The main results of this analysis, shown in Figure 3, are the following.

First, in the largest euro area economies, residents predominantly hold equities issued by firms from their own country — around 80% in Spain, France, and Italy (the domestic share is significantly lower in Germany, possibly reflecting different valuation methods for unlisted shares). This remains true when restricting the analysis to listed shares only, although at lower percentages. There is also little diversification not only outside the euro area but even within it. For example, in France, residents’ total holdings of listed shares are split between 51% issued in France, 15% in the euro area excluding France, and 34% outside the euro area. This indicates a strong home bias, given that France accounts for only around 3-4% of global stock market capitalisation and the euro area as a whole for just over 10% (compared with close to one-half for the US).

Figure 3 Breakdown of domestic and foreign securities holdings by all resident sectors in 2024 Q4 (as % of total holdings, including securities issued by non-euro area residents

Source: Calculations based on national financial accounts.
Note: 53% of debt securities held by all the residents in France (househods, financial institution, nonfinancial corporates, government) have been issued by French resident issuers, 24% by issuers from the rest of the euro area, and 23% by issuers from the rest of the world. As for equities, holdings by the nonfinancial corporate sector have been excluded (since primarily intra-group holdings). As for the euro area as a whole, all the issuers which are resident in an euro area country are classified as “domestic issuers”.

Second, debt securities holdings are also poorly diversified outside the euro area, but they are more diversified within it. This smaller national bias results from the single currency: with the elimination of exchange‑rate risk, bond portfolios have become diversified across euro area issuer countries.

Third, for all categories of securities — and particularly for listed equities — the home bias appears significantly lower when the euro area is considered as a whole than when each of the four major economies is examined in isolation. This difference is, however, misleading. It largely reflects the significant weight within the euro area of international financial centres such as Luxembourg and Ireland, where holdings of securities issued outside the euro area are predominant, especially for listed equities (87% in Ireland and 78% in Luxembourg). Taken together, funds domiciled in these two countries account for 40% of the euro area’s total holdings of securities issued outside the euro area (Beck and Schmitz 2024).

As a result, the statistics shown in Figure 3 substantially underestimate the home bias at the level of the euro area as a whole. For example, if a non-euro-area resident holds US equities through a Luxembourg-domiciled fund, this will be recorded as a holding of non-euro-area securities by euro area residents. Indeed, the study by Beck and Schmitz (2024) shows that investors located outside the euro area account for more than two-thirds of the holdings of non-euro-area securities held in the portfolios of Luxembourg and Irish funds.

Conversely, the holding statistics in Figure 3 slightly — though much more marginally — underestimate non-euro-area holdings for the large euro area countries. For instance, if a French resident holds US equities via a Luxembourg fund, this will appear in the statistics for France as a holding of euro area securities; nevertheless, it will be correctly recorded as a holding of non-euro-area securities in the statistics for Luxembourg and for the euro area as a whole.

The primary challenge for the Savings and Investment Union is to develop equity savings

Overall, the main challenge for the Savings and Investment Union concerns not so much the geographical destination of European savings as their allocation across asset classes. Long‑term savings invested in equities remain insufficiently developed, with European capital markets that are too narrow and fragmented.

Based on our calculations using national financial accounts (Figure 4), total equity holdings at end‑2024 by all resident sectors amounted to 160% of GDP in France and 126% in Germany — around two to two‑and‑a‑half times less than in the US (320% of GDP). The gap is even wider for listed equities alone: 47% of GDP in France and 38% in Germany, compared with 214% in the US. In other words, the real issue is the insufficient size of European equity savings rather than their geographical allocation.

Figure 4 Total equity holdings by resident sectors (amounts outstanding at the end of 2024 as % of GDP, net of holdings of nonfinancial corporations)

Source: Calculations based on national financial accounts.
Note: As for unlisted and other equity, comparisons across countries must be interpreted with caution due to differences in valuation methods (especially in the case of Germany).

This situation contributes to the imbalance between domestic savings and investment in the euro area. On the one hand, favouring lower‑return investment vehicles forces households to save more to achieve a given return. On the other — and more importantly — scarcer and more expensive equity capital weighs on firms’ investment and innovation. This problem is even more concerning given that investment profitability in the euro area is itself hampered by the still incomplete integration of goods and services markets, as stressed in the Letta (2024) and Draghi (2024) reports. 

References

Beck, R and M Schmitz (2024), “Reassessing euro area financial integration: the role of euro area financial centres”, Financial Integration and Structure in the Euro Area Report, European Central Bank.

Draghi, M (2024), The future of European competitiveness, European Commission. 

Letta, E (2024), Much More Than a Market – Speed, Security, Solidarity, Report to the European Council, April.