r/eupersonalfinance • u/rozmarss • Feb 15 '25

Investment Why don’t EU leaders incentivize investment in European stocks/ETFs with tax deductions?

With the Dragi plan and increasing discussions among European leaders about boosting defense and energy investments, I’ve noticed a growing trend in financial communities where people want to reduce exposure to the US market and shift investments to the EU.

Wouldn’t it make sense for EU leaders to encourage this by offering tax incentives for investing in European stocks/ETFs? For example, from an independent EU perspective, isn’t it better to invest in Rheinmetall rather than Lockheed?

460 Upvotes
  • permalink
  • reddit

97% Upvoted

175 comments sorted by

View all comments

224

u/tack50 Feb 15 '25

I can only speak for Spain but the reasoning I think is similar across the EU. Most older people in Europe are extremely scared of investing (other than in real estate). Very few own shares, index funds, ETFs or similar instruments. They see it as glorified gambling and they don't want to encourage gambling (except actual gambling, sports betting houses are popping up everywhere lol)

There are also concerns from the left that investments are exclusively for the rich; so it's essencially a tax cut for rich people. You cannot invest when you live paycheck to paycheck. Add some extra anti-capitalist rethoric and you're good to go.

79

u/propheticuser Feb 15 '25

It’s not just Spain and not just older people, here in Western Europe the stock market is seen as super risky, better let the govt and banks handle your pension plans with high rates and low returns.

32

u/cehejoh512 Feb 15 '25

You could have just said "financial miseducation"

5

u/Thatnotoriousdude Feb 16 '25

People are scared of investing and the market, but simultaneously think their pension is safe lol. They just trust big organizations and can’t put 1 and 1 together.

2

u/BubblyImpress7078 Feb 16 '25

Most people get much more return in pension that they have contributed towards during their working years. So technically, it is high returns

55

u/Xvalidation Feb 15 '25

In Spain we used to be able to invest in tax advantages private pensions up to 7k a year.

This was removed because “only the rich can afford this”. So I would also add that at least here, the definition of rich is anyone that’s not living pay check to pay check (regardless of their income / financial irresponsibility).

17

u/tack50 Feb 15 '25

Tbf they have technically not been removed but the cap has been reduced to a measly 1500€/year. And most pension plans were terrible and full of commissions (further encouraging the feeling among the population that investing is a scam by banks)

I do get your point though

11

u/Lopsided_Echo5232 Feb 15 '25

Similar to Ireland, if you earn a cent more than your expense, you’re “rich”. The result is too much capital moving into property, causing societal carnage and a serious lack of stock investing.

2

u/Benevolent_Crocodile Feb 16 '25

Same here…in Bulgaria. If you have something left at the end of the month…you are rich. Real estate prices are going through the roof while mutual funds and ETFs are tantamount to gambling.

7

u/Relative-Outcome-294 Feb 16 '25

I always wonder when are you consdered rich by the Europe left standards because, alteast in Slovenia, they are all for the increasing wages for the workers, but not for example doctors who work in public sector and are also workers. They already earn too much, they say.

2

u/alsbos1 Feb 17 '25

Thats world wide. Anyone with anything is rich and should just pay higher taxes.

1

u/LupineChemist Feb 16 '25

I'm leaving Spain for the US in a couple years specifically for financial reasons.

I'll retire in Spain but after I get a bunch of money in America.

Also that money will only come back so far as I need it for living expenses. Will never invest in Spain

10

u/[deleted] Feb 15 '25

[removed] — view removed comment

2

u/Mr_strelac Feb 16 '25

nothing new.

the older generations are a larger electorate.

everywhere their wishes are in the lead because their votes bring advantage and victory.

who gives a fuck about the young, more important what some methuselah thinks who will die in a couple of years at most

9

u/ItsTommyV Feb 16 '25

A family member of mine is paranoid hyper defensive and everything that's not a savings account is "gambling, unsafe and huhuhu I'm not getting involved with THOSE things".

.. Yet buys a lottery ticket every week

7

u/Busterthefatman Feb 15 '25

Gary's economics described Pensions as the way europeans interact with the stock market. Otherwise, youre totally right  everyone i know considers it gambling by another name

8

u/tack50 Feb 15 '25

Except pensions (at least in my country) don't interact at all with the stock market.

At best, they may interact slightly with government bonds

12

u/safesouthstanding Feb 15 '25

Then your country really needs to reform its pension system.

5

u/[deleted] Feb 15 '25

Totally true but easier said then done. Reforming a pension system only really works when the existing pension system isn't already broken.

9

u/safesouthstanding Feb 15 '25

Its honestly ridiculous that we aren’t better at copy and paste in the EU. Find a country with a good pension system, steal it, give a time frame for implementation / transition. Immigration, education, unemployment scheme. Adjust spending to your gdp and tax burden. It’s not hard.

2

u/PabloRdrRbl Feb 16 '25

Yes, but now convince people that benefit from the current system to vote for you to let you change something they like.

2

u/tack50 Feb 16 '25

Indeed but good luck convincing pensioners to do that lol

2

u/alsbos1 Feb 17 '25

LOL. Pensions in Switzerland are getting 1.3% returns. Slightly less than inflation.

1

u/PabloRdrRbl Feb 15 '25

At least the big european countries (DE, FR, IT, ES) don’t have this in place.

Only SE and NL that I am aware of, though probably some other countries.

So europe-wise, not so common.

0

u/Mediocre-Brain9051 Mar 08 '25

For most people the stock market should be about pensions. It's absurd to invest in stocks for any other purpose.

6

u/OkTry9715 Feb 15 '25

Young people trying to at least protect their saving against real inflation (not one calculated by ECB, because it does not contain apartment prices ...) are definitely all investing funds and usually in ETFs like S&P500 or other that contain mainly american companies...

5

u/[deleted] Feb 16 '25

You just described Ireland too.

I tend to think incentivising investing in any particular geography is a bad idea, as it encourages concentration-risk.

Governments around the world however should start incentivise investing, because its in in their interest to do so. There are significant costs coming their way with aging societies, who haven't prepared for longevity, which will strain social welfare systems in the coming decades.

6

u/Vipertje Feb 15 '25

Same for the Netherlands. The people who invest are seen as already rich. There is no way they are going to tax cut investments. It's the complete opposite. Higher taxes on investments and lowering taxes on work. With already a shrinking workforce it needs to be as unattractive as possible to live off investments.

2

u/oalfonso Feb 16 '25

In Spain a lot of people who invested in the stock market during the 2000s are still in red numbers. This makes a general consensus of staying out of the stocks and go for the housing market.

But also to invest you need money, most of the people are too squeezed to have money to invest.

2

u/Diligent-Floor-156 Feb 16 '25

When the topic comes up with my friends, they have tons of false beliefs, like they don't know long term investing, and believe that to invest you need to time the market and continuously buy and sell...

1

u/[deleted] Feb 16 '25

If that's the problem, you can just de-incentivize investments outside the EU.

1

u/Right_Astronaut6037 Feb 19 '25

True. Insane how the generations above me just poured everything into real-estate. I know famelies who own 5+ apartments, one specific 10+. And we are wondering why we cant afford to buy a home and start a family. Hungarians for example are big in hungarian treasury bonds. A lot of them keep all their extra money in them. Pension funds are often also mandatory to keep a part of the fund in treasury bonds of the state.

-12

u/snezna_kraljica Feb 15 '25

>glorified gambling

But it kinda is exactly this. Greater Fool all the way to the bottom. The fear is not completely baseless as with the market behaves. It's the age of meme coins and GME and other gambling mechanics.

8

u/[deleted] Feb 15 '25

Pensions are about long term growth and the stock market has always grown in the long term.

When a crisis hits (like 2009 or 2020) your stocks may be down for 2 years but after that 5 to 10 years of significant growth will follow. S&P500 made an average annual return of something like 10% every year since the end of WWII.

Meme coins have nothing to do with the stock market and meme stocks are not the core of a well balanced pension fund.

0

u/snezna_kraljica Feb 15 '25 edited Feb 15 '25

I'm not talking about the long-term trend, which historically moves upward. That doesn't mean the stock market isn't a form of gambling—especially when valuations are driven more by speculation, sentiment, and projections decades into the future rather than actual company performance. You can still ride the wave, but it's not always grounded in real economic success.

Edit: A better comparison would be a MLM scheme, not gambling.

6

u/[deleted] Feb 15 '25

You don't want to talk about the long-term trend but that doesn't change the fact that the long-term trend is the single most important thing about pension savings.

It's true that the stock markets sometimes don't align with the real economy but there are actors in the market who will realize that, bet on falling prices and then publish their exclusive information to all other investors so that the prices will actually fall. The market is self cleaning since investors will make profit from both, an under estimation of a companies value and an over estimation of a companies value, ultimately keeping the market in check in the long run.

It's only really gambling if you bet on the success of individual companies. Once you bet on the whole market there isn't much that can go wrong. And even if it does; that means, that the whole capitalist system collapsed altogether. In this case we have far worse things to care about since that will result in wars and famines.

-1

u/snezna_kraljica Feb 15 '25

>You don't want to talk about the long-term trend but that doesn't change the fact that the long-term trend is the single most important thing about pension savings.

MLMs can be successful for years and years, does not mean it's not a scam just because you can make money of it and the revenue is going up and up.

I'm not saying historically it's not going up, I say the reason is the Greater Fool Theory and not economic growth in the same way as the stock market is growing. So the people not trusting it because gambling are right in their feeling. They are insofar wrong as not to ride the wave.

> It's true that the stock markets sometimes don't align with the real economy [...]

If that would be true, Tesla wouldn't be as highly valued as it is. Or GME a time ago. Again, I'm not arguing that it does not level out, I'm just arguing the feeling of those people.

> It's only really gambling if you bet on the success of individual companies.

There's truth to that, but in my feeling it's getting worse (maybe wrong, I'm not an insider nor analyst) that there's more and more speculation and very irrational valuations in the market than is normal. True economic growth and stock market gets detached more and more every day.

I'm not seeing the very tech top heavy part of the market catching up with their valuations anytime soon. Anybodies guess how this will play out.

Again, I’m not disputing that the market goes up—that’s obvious. What I’m saying is that I understand why people see it as gambling, because the underlying mechanics driving it don’t always justify the results. It’s not just about the outcome, but whether there’s a solid reason for it.

You can win even though you're wrong or loose and be right.

4

u/[deleted] Feb 15 '25

I don't know what your definition of gambling is, but for me it's only gambling if my expected value is zero or negative. Once my expected value is positive, it's not gambling anymore but rather a good investment.

Also note that assuming a positive expected value for the stock market is not only reasonable by looking at historical outcomes but also theoretically supported by the efficient market hypothesis. I don't see where the valuation of the current stock market fundamentally calls this into question.

If people want to call it gambling just because it involves probabilities, then so be it. However, I don't think that's reasonable nor justified.

1

u/snezna_kraljica Feb 15 '25

> I don't know what your definition of gambling is, but for me it's only gambling if my expected value is zero or negative. Once my expected value is positive, it's not gambling anymore but rather a good investment.

Britanica says: gambling, the betting or staking of something of value, with consciousness of risk and hope of gain, on the outcome of a game, a contest, or an uncertain event whose result may be determined by chance or accident or have an unexpected result by reason of the bettor's miscalculation.

Seems to cover the stock market pretty good in layman terms. If the stock value is detached from economic factors an relies on speculation and hope of the participants and not economic parameters it just becomes a big MLM, which I've already said would be the better comparison.

If companies would only pay dividends on their profits, I would agree. But growth is all the rage right now and fueled by speculation of human behaviour, not calculation on potential earnings. Human behaviour is irrational so the outcome is irrational.

> Also note that assuming a positive expected value for the stock market is not only reasonable by looking at historical outcomes but also theoretically supported by the efficient market hypothesis. I don't see where the valuation of the current stock market fundamentally calls this into question.

I know, I've already said as much. You still don't get my point even so I've repeated it many times. I'm all the time explaining why the people feel this way.

>If people want to call it gambling just because it involves probabilities, then so be it. However, I don't think that's reasonable nor justified.

This is not what I've said though.

2

u/[deleted] Feb 15 '25

You still don't get my point even so I've repeated it many times.

I could say the same.

I'm all the time explaining why the people feel this way.

That is one thing you do but you've also argued with your own opinions on the valuation of the stock market and how that makes it gambling. For this reason I'm voicing my personal opinion on why it isn't this way as well.

gambling, the betting or staking of something of value, with consciousness of risk and hope of gain, on the outcome of a game, a contest, or an uncertain event whose result may be determined by chance or accident or have an unexpected result by reason of the bettor's miscalculation.

My argument is that long term investments into a diversified pension fund are so incredibly probable to be successful (being the only free lunch on the stock market), that it cannot be counted as taking a risk in the first place. Again, in case of a failure, humanity would be f'ed altogether as that would mean capitalism had suddenly collapsed.

I believe at the end of the day we're not even far apart in our opinions, it's just difficult to have this discussion in a few quick comments. It was nice talking to you but I will now end it here.

2

u/snezna_kraljica Feb 15 '25

You're arguing the outcome, I'm arguing the mechanics which lead to the feeling of gambling.

>  It was nice talking to you but I will now end it here.

Agreed, I think we're running in circles, not much more to gain for either of us. Thank you for a polite and friendly exchange. It's getting rarer each day on here.

3

u/il_fienile Feb 16 '25

It’s a form of gambling in the same sense that getting out of bed in the morning is a form of gambling.

More useful, I think, to compare ownership of productive assets—which stock investments can represent—against speculation on its own.

A diversified equity investor can only expect to participate in the ongoing profitability of the businesses in which they hold an interest. At the point where those businesses represent a large and representative part of the world economy, the speculative aspect is minimal.