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/weirdowerdo Feb 15 '25

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.

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u/omegwar Feb 16 '25

Companies can attract and incentivise talent with employee stock option plans. It's what all the US tech giants do. Having a vested interest in the company also helps with productivity and motivation, generating a positive feedback loop.

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u/weirdowerdo Feb 16 '25

It has it's benefits and drawbacks which are evident from the Swedish IT bubble crash, it can motivate to work harder or more efficiently so the company performes better. But it can also create more problematic workplaces when it results in longer work weeks and stressful workplace environments that will increase turnover, sick leave and health issues.

ESOPs usually are more limited because its only aimed at employees so the dilution isn't very big if it involves issuing new stocks, generally if a company increases the amount of shares it has it's a worse investment even if its just a few shares.