BRUSSELS ― The European Commission wants EU governments to provide citizens with simple and transparent digital accounts for investing their savings, and to change tax rules to boost investments, according to a recommendation unveiled Tuesday. This is an existential challenge for the European Union, which has record levels of savings ensconced in citizens’ bank accounts but is unable to put that money to work providing necessary capital to its businesses, as its global rivals are doing. “We actually want to develop the European economy so that we can guarantee that our welfare state continues to function well — but that requires economic growth,” European Financial Services Commissioner Maria Luís Albuquerque told journalists, including POLITICO, on Tuesday. She added: “This is all about economic growth, about making it so that every person, every company, wherever in Europe, actually has the same opportunities … This is the European dream.” The Commission recommends applying tax breaks and other fiscal incentives — the best that exist under each country’s national laws — to investing in bonds, stocks and funds. Theoretically, the initiative could motivate citizens to move part of the deposits they hold in banks to investments with higher returns in the long term. Ideally, a government would make the investment offering as competitive as its own government debt. Such investments are usually seen as safer and essential for highly indebted states, but do not boost capital to businesses — at least, not directly. Yet the Commission has very little power to turn these ideas into reality. “This is a member state competence, clearly,” said Albuquerque. “We will monitor developments, and we will also be using the European semester to monitor how this is evolving,” she said, referring to the main tool the Commission uses to oversee countries’ fiscal policies. “This is not the kind of project that you can impose top-down,” Albuquerque said. “This has to have the buy-in of everyone involved.” The Commission recommends that products that are too complex or too risky, such as crypto-assets, be excluded; and that no geographical restrictions, such as a European preference, are imposed. However, a recurring concern among financial firms and governments is that American financial companies will take advantage of any such change. Stéphane Boujnah, CEO of pan-European stock exchange Euronext, said that foreign financial players are looking “with gluttony at the European open bar.” This summer, seven European countries — led by France — launched a European label for investment products with at least 70 percent of their portfolio assets invested in European companies. Speaking of the initiative, Albuquerque said: “We have no evidence if that works.” She added: “Having no geographical restrictions and having interesting tax incentives genuinely lead to a good outcome, and that good outcome translates into people having more opportunities.” However, the financial services chief acknowledged there is a natural domestic bias when it comes to people choosing investment opportunities. “Diversification is important as a risk management tool … people should invest in different sectors, in different areas, and in different geographies,” she said. “But there is naturally a domestic bias, because we prefer to invest in what we know best, and typically we know best what is closer to us,” Albuquerque pointed out. The commissioner said that EU financial firms as well have a role to play to ensure they get the most from the initiative. The financial sector needs to “come up to the challenge. We also need our markets to be developed. We also need more products,” she added. Obviously, it is up to investors to decide if they want to offer made-in-EU products.

European Commission President Ursula von der Leyen wants the EU to help front-line countries monitor and defend their borders against potential Russian aggression — backing a long-standing request from Poland and Baltic nations. “There is no doubt: Europe’s eastern flank keeps all of Europe safe. From the Baltic Sea to the Black Sea. This is why we must invest in supporting it through an Eastern Flank Watch,” she told European lawmakers in her State of the Union address Wednesday morning. “This means giving Europe independent strategic capabilities. We must invest in real-time space surveillance so that no movement of forces goes unseen. We must heed the call of our Baltic friends and build a drone wall,” the German politician added. Von der Leyen’s comments came only a few hours after Poland scrambled fighter jets to shoot down Russian drones that entered its airspace. Back in June, Romania also sent warplanes to monitor Russian drones approaching its border. Wednesday’s incident over Poland has been perceived by Western allies as a way for Russian President Vladimir Putin to test NATO’s defenses. Front-line countries — especially Poland, Estonia and Lithuania — have long called for the EU to contribute financially to the defense of their borders. They argue their efforts will protect the bloc as a whole against any attack from Russia, as military and intelligence top brass have warned in the past that Putin could target Baltic nations or Poland to test NATO’s mettle. They have successfully pushed for money from the EU’s loans-for-weapons SAFE scheme to be easily available for items including drones and anti-drone systems. Warsaw launched a project last year dubbed East Shield that aims to strengthen the Polish border with Russia and Belarus, while Baltic nations are starting to teach children to build and fly drones. Countries such as Lithuania are also behind the idea of a “drone wall,” which they see as a permanent presence of unmanned aerial vehicles on their borders to monitor threats. A few days before giving her State of the Union address, von der Leyen went on a front-line state tour that took her to countries including Finland, Estonia, Lithuania, Latvia and Poland. “Last week, I saw this for myself when I visited front-line member states. They know best the threat Russia poses,” she told European lawmakers on Wednesday. Von der Leyen also announced the EU will enter into a so-called Drone Alliance with Ukraine and front-load €6 billion from the G7-led Extraordinary Revenue Acceleration (ERA). Russia’s war in Ukraine has highlighted the importance of drones in warfare — they can be used for surveillance purposes and as lethal weapons to reach remote or dangerous areas. Ukraine is widely perceived as being innovative with the technology, namely through the use of AI and automation. Von der Leyen gave few details about the defense road map she has to present to EU leaders in October, but did say she wants to launch a so-called European Semester of Defence to monitor capitals’ progress in military buildup.