European Investment Bank Urges Increased Innovation Funding in the EU

The European Investment Bank (EIB) has urged the European Union to boost funding for innovation to maintain its technological leadership.

On July 24, the EIB released a report stressing the need to eliminate investment barriers and direct savings into crucial EU market sectors.

Report Highlights

Titled “The Scale-up Gap: Financial Market Constraints Holding Back Innovative Firms in the European Union,” the report highlights the importance of investing in scale-up companies to preserve the EU's tech edge and global competitiveness.

Closing the financing gap is deemed essential for advancing green technology, artificial intelligence (AI), and quantum computing.

Previous EIB Reports

The EIB has been emphasising the need for innovation funding since June 2021. At that time, it published a report on AI, blockchain, and future technologies.

Since then, the EU has introduced regulations for AI and began implementing the Markets in Crypto-Assets (MiCA) regulation for crypto and blockchain.

Challenges in EU Capital Markets

According to the EIB, the limited size and depth of EU capital markets present challenges for innovative companies, particularly during the scale-up phase when financing is scarce.

This shortage impacts capital accumulation, growth, productivity, and employment. The report calls for expanding Europe's capital markets, especially venture capital, and notes the EIB Group's successful support for innovative firms and key technologies.

Statements from EIB President

Nadia Calviño, EIB President, indicated readiness to further advance the capital markets union as a priority for driving sustainable growth and job creation.

Comparison with US Venture Capital

European venture capital investment lags behind the United States, leading to slower capital accumulation for European firms compared to those in Silicon Valley.

European scale-ups often rely on foreign investors, with many leading funding rounds coming from outside the EU. This trend results in local firms being acquired by foreign companies or listed abroad.

The EIB's push for innovation funding reveals significant gaps in EU capital markets that hinder local technological growth. Addressing these challenges is crucial for ensuring that European firms remain competitive on the global stage.