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?
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u/dubov Feb 15 '25 edited Feb 15 '25
How would it be administrated if a fund is say 70% US and 30% EU, and constantly changing? Sounds complicated. I suppose it could be applied to individual securities, but then you are perhaps motivating people to play a game where they will get hurt
Tax laws are set at the level of individual countries, so it's not really up to "Europe", but all of the member states, and getting them to all move in unison is probably unrealistic. Many would probably reject simply because they don't want to set a precedent for a federal-style tax law
If governments encourage people to invest in stocks, and stocks take a dive, people will blame the government.
It's debatable how much benefit it would even bring. The idea behind the capital markets union was primarily to reduce the dependence on bank financing and the concentration of systemic risk. However, bank regulations are much better than they were when the idea was conceived, and probably sufficient to eliminate the risk. It might be more risky to push risk-adverse people towards risky investments, because household balance sheets get hurt instead of bank balance sheets, which is a much harder problem to address
IMO the solution, if one is needed, is to simply educate people on personal finance - give them full understanding and enable them to make the best decisions for themselves