While the European Commission launches new legislative proposals to reform EU capital markets (European Commission 2025a), as part of its plan to implement the Savings and Investments Union (European Commission 2025b), an active debate is developing on actions needed to advance capital market integration (Di Noia 2023, Draghi 2024, Letta 2024, Arampatzi et al. 2025), create the premise for a European safe asset (Amato et al. 2022, Blanchard and Ubide 2025, Bonfanti 2025) and strengthen Europe’s own sovereignty (Pisani-Ferry et al. 2024, Blanchard and Pisani-Ferry 2025, Garicano 2025, Bénassy-Quéré et al. 2026). These contributions mostly centre on financial markets as a whole; meanwhile, other observers have noted that, compared to other advanced economies, the EU lacks an integrated venture capital (VC) market (Watson 2015, Surico 2026), which curtails financing to the most innovative and high-productivity sectors of the economy. The financing gap is especially significant with regard to scale-up companies (EIB 2024) – mature start-ups which need additional capital to go public. However, national segmentations and regulatory asymmetries create frictions to cross-border financing, raising transaction costs and crowding-out potential investors (Caivano et al. 2025).

In a new report published by Bocconi’s Institute for European Policymaking (Angeloni and Cavallini 2026), we propose a set of reforms which broadly align in purpose – but differ in their approach and strategy – with respect to that taken by the EU Commission. The proposals are based on a detailed firm-level analysis of Europe’s innovative and high-productivity companies over the past 25 years.

The report deliberately steps back from the most ambitious capital markets union (CMU)-style institutional reforms: instead, it prioritises a set of practical and feasible measures that can be implemented and deliver results relatively quickly, with a clear focus on improving financing conditions for innovative and fast-growing firms. These proposals are close in spirit to those put forward by the German and French governments in a report issued shortly afterwards (Kukies and Noyer 2026).

The scale-up gap is Europe’s binding constraint

Using Dealroom.co firm-level transaction data,
the analysis focuses on 64,536 innovative firms established in the EU that have received venture capital in the last 25 years, finding a strongly heterogeneous pattern across countries and groups of firms. The venture capital sector is highly concentrated: Germany and France are the only two countries with more than 10,000 innovative firms each, hosting the highest numbers of unicorns (companies larger than €1 billion in value) in the region – 74 and 50 respectively, out of a total of 325 in the EU and 3,411 globally.
These numbers are, however, modest when compared with those of the UK (177 unicorns) and the US (1,889). Germany and France also dominate the EU ecosystem in terms of aggregate valuation and employment, making them the primary centres of scale and the main European hubs (see Figure 1). Conversely, the EU periphery is characterised by fewer and smaller companies, with substantial disparities in total capitalisation.

Figure 1 Cluster of EU countries by market valuation, employees, and number of firms

Note: Data on the total number of employees and firm valuation are referenced to the time of the data extraction (July 2025). The size of the dots is proportional to the total number of innovative firms in each country.
Source: Own elaboration on Dealroom.co (2025) data.

Importantly, data show that financing constraints tend to grow as firms mature, becoming most binding at the scale-up stage, where companies need larger, more diversified capital structures and credible options to exit their ‘infancy’, morphing from start-ups into large and established entities. EU capital markets lack depth, especially in this segment: EU venture capital investment is just under 50% of US levels in start-ups, about 27% in break-out, and below 10% in scale-up. This ‘scale-up gap’ is confirmed by different measures, including survey evidence showing that barriers are higher on long-term finance (see Figure 2), particularly in peripheral member states.

Figure 2 Firms’ obstacles to long-term investment, EU vs. US in 2025

Note: Bars represent survey values for year 2024 from the EIB Investment Survey 2025 wave.
Source: Author’s elaboration on EIB (2025) data.

Exit patterns reveal that only a small fraction of EU innovative firms reaches the post-IPO stage while remaining EU-headquartered, and after a long maturation period. Most exits take the form of acquisitions, with buyouts and initial public offerings (IPOs) accounting for smaller shares. Importantly, exit transactions are disproportionately US dollar-denominated, and US dollar-denominated IPO exits are associated with materially higher capital raised and post-exit valuations than euro-denominated listings, consistent with deeper liquidity and higher risk tolerance outside the EU.

Figure 3 Exit flows of innovative firms to currency-denominated destinations: Total values 1999-2024

Note: The graph represents the total number of innovative firms exiting the EU by the currency denomination country. The white dot represents the total number of EU firms exiting the European market. Using data on the currency transaction for the firm’s exiting round and their good data quality, the map shows that, to the largest extent, most of the exits are dollar denominated (blue dot). The green dot represents the total number of euro-denominated exit deals. This indicator is a strong signal – however, not exclusive –
Source: Own elaboration on Dealroom.co (2025) data.

Data on the dynamics of firm exits show a strong pull toward the US (see Figure 3) as a destination for late-stage scaling, liquidity, and strategic acquirers. This confirms that Europe’s financing ecosystem is particularly weak in terms of late-stage funding and in retaining successful firms as they grow.

A pragmatic sequencing: Six concrete proposals

The proposed strategy is sequenced: start with implementable steps that reroute savings toward risk capital and remove frictions that keep European markets fragmented. The proposal distinguishes action on three fronts: the formation of savings, the use of savings, and the intermediation between the supply of and demand for savings (see Figure 4).

Figure 4 Synopsis of the proposal

Source: Own elaboration.

The following six recommendations are put forth:

1. EU-labelled savings accounts: Europe has abundant household savings, but too little is channelled to innovative firms. By contrast, scale-up financing depends on large, patient domestic capital pools. Accordingly, the first proposal suggests introducing an EU-labelled savings account designed to be simple, low-friction, digitally accessible, and supported by distributor incentives, and, above all, a straightforward and favourable tax regime. The new savings account would prioritise tax and regulatory simplicity and low administrative burden.
2. New private pension instruments: European institutional investors today remain overly conservative relative to the needs of innovation. Supported by appropriate regulatory adjustments, well-designed retirement products with long-horizon diversification and equity exposure could shift this balance. The second recommendation therefore supports new private pension instruments built on simplicity, online access, portability, and age-adjusted risk management.
3. EURIPO, an EU-wide IPO instrument: Without credible EU-based exits, Europe will keep subsidising innovation whose value is realised elsewhere. EURIPO aims to make staying and listing in Europe the default by creating a fully European IPO environment with integrated primary and secondary markets, end-to-end IPO services, and deep liquidity through access to EU-wide savings pools under favourable tax and regulatory conditions.
4. Removing cross-border obstacles to securities custodians: Post-trading fragmentation creates major frictions on European capital formation and market liquidity. Unlike the US, which relies on a single central securities depository, the EU is divided among many platforms operating under different national regimes. Rather than pursuing politically unrealistic full centralisation, the proposal consists of a market-led approach that removes barriers and drives providers’ competitive convergence. In addition, distributed ledger technology (DLT)-based solutions and asset tokenisation should be further explored.
5. Innovation-friendly securitisation: Reviving the securitisation market would free bank balance-sheet capacity and generate investable long-duration assets for institutional investors. The proposal foresees the creation of an EU-wide market-making platform for securitised products, regulated and supervised by the European Securities and Markets Authority (ESMA) and supported by the EIB Group as anchor investor.
6. Enhancing the European Investment Bank’s role: The EIB is already central to Europe’s innovation finance ecosystem and can use its balance-sheet capacity to align fragmented national initiatives and de-risk private investment without requiring major new EU fiscal powers. This role should be enhanced by granting the EIB Group preferential access to new savings and retirement accounts, positioning it as anchor investor for the securitisation market-making platform, and leveraging its expertise to support ESMA’s harmonisation of custodian services linked to EURIPO securities.

In sum: The unfinished agenda and the road ahead

Over a longer run, additional reforms will be needed to complement the single market for capital, notably progress toward a unique company-law regime and more integrated single-market supervision. On the former, a ‘28th regime’ is supported as a pragmatic alternative to full harmonisation, combining broad scope with a modular, staged rollout beginning with building blocks such as EURIPO. In the full document, guidelines are proposed on how such a regime could be structured. On the latter, a preference is expressed for a gradual move toward greater centralisation, with ESMA initially assuming tasks where EU-wide consistency is critical and acquiring broader powers as the 28th regime evolves, guided by independence, a clear division of responsibilities with national authorities, and a balanced mandate supporting both stability and access to capital.

To sum up, the Bocconi Report advocates a pragmatic, bottom-up path toward capital markets union, while not opposing in principle ambitious and broad-ranging reforms in the longer run. Incremental progress, however imperfect, is preferable to paralysis and delay.

The six proposals are designed to reinforce one another. While designed to be enacted and to operate together, even partial or selective implementation would be beneficial, helping progress towards a more efficient financial structure in the interest of Europe’s economy and of its strategic autonomy.

References

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