The Revolution Will Be Financial, European Comrade
Société Générale: up 84% since the beginning of the year[1]! And that’s just one example. Banks across the eurozone are putting in a remarkable performance this year: up 44%, far outpacing the AI darlings, whose results look modest by comparison (Nvidia, for instance, is up 17% in dollar terms). A few names shine especially brightly: UniCredit, which is now the second-largest listed bank in the eurozone by market capitalisation, has soared by more than 600% over three years!
The explanation does not lie in the region’s economic activity, which remains regrettably sluggish. Beyond a few exceptional trajectories, like UniCredit specifically, this trend can be attributed to several structural factors, suggesting it may well prove lasting.
First, the yield curve has normalised. Thanks to falling inflation and lower policy rates, it has regained its standard shape, with short-term rates significantly below long-term ones. This stands in stark contrast to 2023, when the German 2-year yield climbed to nearly 80 basis points above the 10-year. Banks, which primarily borrow short to lend long, could not thrive in such an environment. That adverse period is now behind us, and there are no signs of a major inflationary resurgence on the horizon.
Other factors have contributed to the banks’ renewed prosperity: increased transaction fees, for example, or regulatory easing. So too has a long-overdue rebound in their equity valuations, which had remained absurdly low for years.
But there is another, even more powerful force at work beneath the surface: the growing push for European sovereignty. Confronted with a more fragmented world, increasingly abandoned by its Western ally and dangerously pressured by its powerful eastern neighbour, Europe has come to realise the need to assert its sovereignty — not only in military terms, but also commercially and now financially. In that spirit, in March 2025 the European Commission unveiled a bold and transformative agenda for European finance: the “Savings and Investments Union” (SIU) strategy.
This initiative seeks to create a single, efficient market for financing economic projects across the European Union. The starting point is a simple observation: the eurozone generates abundant savings, but they are underutilised. Every year, some 1 trillion euros is saved in euro-denominated assets, but much of that capital leaves Europe, either flowing into US debt or being invested in low-risk, low-yield European assets with little productive value. With the right mechanisms in place, hundreds of billions of euros each year could be redirected more effectively into areas critical to Europe’s momentum – not only military, but also ecological and digital.
There is much work to be done. The benchmarks are typically drawn from the United States, where project financing is more readily available. Priorities include the development of cross-border venture capital funds to support innovative companies at a pan-European level. Another priority concerns banks and markets directly: encouraging the use of loan securitisation. This process allows banks to pool large numbers of loans into a single vehicle, then sell it off in tranches to investors. It reduces the bank’s balance sheet exposure and frees up capital for further lending. While commonplace in the US, this practice remains rare in Europe, limiting the continent’s ability to support innovation. Other, more original ideas are also being considered, such as creating a unified market for European sovereign rates as opposed to strictly national ones. This could serve as a new destination for capital currently invested in US Treasuries.
This proposed Union is more than just another regulatory tweak: it marks an ideological shift. Banks, and capital markets more broadly, are now seen as genuine instruments of sovereignty, not just prosperity (though the two are, of course, intertwined). Within a decade, Europe’s banking and capital markets will likely be far stronger, and Europe itself will be more autonomous. Long live the European financial revolution!