Europe’s Capital Markets Are Broken—and It’s Costing Us €8 Trillion

For three decades, the European Union has debated how to unify its capital markets. Every summit nods to the Capital Markets Union (CMU), every commission report calls for deeper integration. Yet despite good intentions, Europe still lacks what the U.S. has taken for granted since the 1930s their unified, “frictionless” financial system.

The cost of that failure is no longer theoretical. According to our recent study, Europe’s fragmented capital markets have directly contributed to a loss of €7.5–8 trillion in GDP since 1995. That’s not due to that we are economically underperforming, it’s due to value migration: high-growth firms, pension capital, and intellectual property systematically flowing out of Europe and into U.S. markets, as they have nowhere to go in Europe!

This is not just a policy oversight. We are, ourselves, quietly dismantling Europe’s economic sovereignty, by institutional design.

Growth Without Retention

Contrary to the popular narrative, Europe has not, and is not, lacking in growth, talent, or innovation. Europe has produced dozens of billion-euro startups, world-class research institutes, and the third-largest pool of pension assets globally, over €9 trillion.

But where do the gains go?

Companies like Spotify, BioNTech, ARM, and UiPath, the flagships of European innovation, all chose to list on NASDAQ or move to the U.S. instead of scaling within Europe. Why? Because capital markets in the Europe remain segmentation.

The result is that Europe doesn’t benefit from its own innovation. The tax base, jobs, valuations, and reinvestment opportunities leak out to Wall Street.

A €7.5–8 Trillion Hole

Using a counterfactual econometric model based on World Bank and ECB data, we asked: What if Europe had achieved U.S.-style capital market integration starting in 1995?

The answer is huge and staggering. Applying known growth elasticities tied to stock market depth and bond market unification, we found that Europe’s GDP today could be 25–30% higher, a difference of €7.5–8 trillion.

That figure doesn’t even count the intangible spillovers: the secondary industries, academic collaborations, and startup ecosystems that would have followed retained listings and capital flows.

Instead, much of that economic energy is now monetized in the U.S..

The Eurobond That Never Was

One of the most damaging omissions is the lack of a real Eurobond market. In the U.S., the Treasury market provides a unified benchmark for corporate pricing, liquidity, and pension allocations. In Europe, every member state still issues its own sovereign debt, fracturing the fixed-income landscape and driving pension funds to look abroad.

The Political Trap

Why hasn’t this been fixed?

Because every attempt to create a true capital market union gets bogged down in political battles: who controls the Eurobond? Who regulates the exchange? Frankfurt or Paris? Euronext or Deutsche Börse?

This territorial thinking has cost Europe more than any geopolitical rival ever could.

A Digital Solution

Our paper doesn’t just quantify the loss. It proposes a new solution: a Virtual European Capital Market (VECM).

Instead of building another physical exchange, VECM would offer a digital layer connecting pension funds, corporate issuers, and institutional investors. It would start with a pan-European retirement fund backed by a new Pan-European Bond (PEB), only tradable within the system. Governments wouldn’t need to agree on location or authority, they’d simply join a liquidity pool too efficient to ignore.

The Choice Is Now

Europe cannot afford another decade of fragmented finance. The U.S. didn’t outperform us because it had better startups, it outperformed because it kept the upside. We’re building the future, but giving the returns away.

It’s time for capital market integration not as a slogan, but as infrastructure. The money, the innovation, and the sovereignty are already here. All that’s missing is the system to keep them. At Europa Structura, we believe that without a true pan-European open financial market, Europe will remain dependent on U.S. capital markets, for going public, for pension returns, and for scaling its innovation. There is no alternative but to build our own, or accept that the European economy will always be U.S.-dependent.

About Europa Structura AISBL Europa Structura is an independent, non-profit think tank dedicated to building the legal, financial, and digital infrastructure for a unified European capital market. We conduct original economic research and develop practical policy tools to reverse capital migration and unlock long-term prosperity across the EU.