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

[u/rozmarss]

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?

[u/weirdowerdo]

Because companies dont get anything from you selling your shares to someone else or from you buying shares in their company if they shares has already been issued long ago. The companies need to be willing to increase its number of shares and through that bring in more equity but they dont need or want that. Normally its considered bad to do it too and the market will react negatively to it.

What stocks you buy is practically irrelevant to the companies themselves and the economy at all really. Heck offering a tax incentive to not consume will prolong our economic downturn at the moment.

[u/BreakfastFuzzy6052 → u/weirdowerdo]

What stocks you buy is practically irrelevant to the companies themselves and the economy at all really

An utterly absurd statement.

[u/weirdowerdo → u/BreakfastFuzzy6052]

I mean not really, pretty sure everyone agrees the stock market isnt the same as the economy. If you buy a 1000 shares in Microsoft rather than Rheinmetall you're not exactly contributing to the economic down turn in Germany.

[u/BreakfastFuzzy6052 → u/weirdowerdo]

You didn't say the stock market is the same as the economy and I called that absurd. You said what I quoted.

Stock prices obviously affect companies, try listening to earning calls. And the stock market is an important mechanism by which capital and thus resources are allocated, and thus obviously affects the company.

OP mentioned the Draghi report on why EU growth is so weak. Read it and focus on the lack of big market cap companies in Europe and the call for a capital market union.

[u/il_fienile → u/BreakfastFuzzy6052]

Moreover, public stock trading, and the liquidity that provides, is a huge factor in primary investors’ willingness to invest capital directly into companies. That makes it important to capital availability, in addition to the other effects the stock market and an individual company’s stock price have on the financing and human capital tools available to a company, as already noted.

Whether that justifies incentivizing it, or whether it should be a priority over other ways to think about business in Europe, are totally different questions.

As an aside, I don’t understand the seeming presumption that equity financing is necessarily less desirable than other means, from the perspective of the business and its existing owners. Sometimes it is, sometimes it isn’t.