From Saving to Investing: Europe’s Capital Markets and the Architecture of Long-Term Wealth

More than fourteen million Germans now participate in capital markets, and over five million ETF saving plans are executed every month, marking a material shift in European retail investment behaviour. Christian W. Röhl, Chief Economist at Scalable Capital and one of Europe's most prominent advocates for retail investment culture, joins Dr. Henning Stein, Partner at 1BusinessWorld and Fellow at Cambridge Judge Business School, for a 1FinanceWorld 2026 fireside on the structural reforms now reshaping the architecture of European investment. The conversation traces the trio of progress that has begun turning savers into shareholders, examines Germany's new Altersvorsorgedepot pension framework, situates the Norwegian Government Pension Fund Global, the Swedish AP7 model and KENFO as institutional precedents for state-orchestrated capital, considers the proposed Deutschlandfonds infrastructure vehicle, and locates the discussion within Mark Haefele's framework of the five Ds and the broader question of how the Continent matures from a savings culture to an ownership culture, in which capital-market participation underpins long-term wealth and resilience.

From a savings culture to an ownership culture

Röhl's diagnosis of contemporary European household behaviour is precise. Across the Continent, and particularly in Germany, retail savers remain anchored in interest-bearing instruments rather than in ownership of productive enterprise. In Germany, term deposits remain the default vehicle, the historical instrument of choice for household savings. In Italy, government bonds, often supported by state issuance initiatives, occupy the same psychological space. The pattern reflects a deeply rooted savings culture that has compounded across generations of household financial planning, rather than a recent decision that can be reversed by any single intervention.

The structural backdrop, articulated by Mark Haefele, Chief Investment Officer at UBS Global Wealth Management, in his framework of the five Ds, is one in which demographics, deglobalisation, decarbonisation, digitalisation and debt are reshaping the long-term arithmetic of returns across asset classes. Röhl accepts the framework as the working analytical lens and adds a specific observation: a paper guarantee on a fixed nominal sum offers limited durable value if the purchasing power of that sum is being eroded by the structural shifts the framework describes. Traditional life insurance products built on sovereign debt, real estate crowdfunding vehicles, and complex structured products continue to occupy a significant share of European household savings, while delivering an outcome that, on Röhl's analysis, may underweight the long-term value of broadly diversified ownership in the productive global economy.

The trio of progress reshaping retail investment behaviour

Against this backdrop, Röhl describes what he calls a trio of progress, three reinforcing forces beginning to turn German savers into shareholders. The first is digital access through investment platforms such as Scalable Capital, which have removed most of the friction historically associated with brokerage account access. The second is the low-cost exchange-traded fund, which has made broadly diversified equity exposure available at expense ratios unimaginable a decade ago. The third is high-quality, low-barrier financial education, delivered through digital channels outside the traditional intermediated advisory model. Together, these forces have produced more than fourteen million Germans now active in the market and over five million ETF saving plans being executed each month, a structural shift in retail behaviour that has accelerated meaningfully in the most recent reporting cycles.

Röhl is, however, careful to contextualise the progress. A twenty per cent equity participation rate, while a meaningful improvement on the sub-ten-per-cent floor of the global financial crisis, remains substantially below what the long-term arithmetic of compounding requires for retirement adequacy. The recent market environment, he observes, has been a relatively forgiving one for new investors, with most drawdowns rapidly reversed. The genuine test of the new investment culture, he warns, will arrive when investments remain underwater for two or three consecutive years, and the patience required of the long-term compounder is tested in practice rather than in principle.

Beyond the illusion of safety in paper guarantees

Röhl is direct on a point that European household financial planning often resists. Many of the products that retail savers reach for, traditional life insurance contracts based on sovereign debt, real estate crowdfunding, and complex structured products, offer what he describes as an illusion of safety. The nominal guarantee on the principal remains intact, while the purchasing power of that principal is exposed to the structural forces the five-Ds framework describes. The hedge that retail savers most consistently underweight is the one most directly aligned with the long-term arithmetic of compounding: broadly diversified ownership in the productive global economy, accessed through low-cost, transparent vehicles.

Germany's first attempt at building a broad investment culture, around the Deutsche Telekom flotation and the late-1990s technology IPO wave, did not survive the subsequent market correction. Equity participation, which had crossed into double digits during the late 1990s, fell back below ten per cent during the global financial crisis and recovered only slowly. Röhl draws a structural lesson from that experience: the opportunity at the time was approached primarily as a financing exercise and only secondarily as a programme to guide households into durable long-term capital markets participation. The second chance now in front of Germany, supported by the trio of progress, is best approached differently, with the durability of the framework, the patience of the saver, and the long-term arithmetic of broadly diversified equity exposure as the principal objectives.

The architecture of European capital markets integration

The conversation turns to the architecture of European capital markets themselves, and to the structural questions that any durable retail investment culture must engage. The case that animates much of the contemporary discussion is the proposed combination of UniCredit and Commerzbank, which would create a cross-border European bank with a market capitalisation in the order of $150 billion. Set against the approximately $800 billion market capitalisation of JP Morgan in the United States, the asymmetry of scale becomes the substantive point. European banking integration sits at the intersection of national interest, sectoral preference and competitive ambition, and the question Röhl raises is whether the Continent's broader institutional architecture is calibrated to deliver the scale that the long-term competitive landscape requires.

The Draghi Commission's report on European competitiveness, published nearly two years before the conversation, articulated an ambitious agenda for industrial, financial and regulatory integration; implementation has been measured. Röhl points to telecommunications as illustration: the European preference for four carriers per country, calibrated towards near-term consumer pricing, has compressed sector margins and constrained the capital expenditure required for the digital infrastructure agenda the same frameworks describe as strategic. The same fragmentation pattern applies in defence and aerospace, where European satellite capabilities sit dispersed across Airbus, Thales and Leonardo. Each asset is significant individually; together, they could support a more credible European answer at scale. The Airbus consortium itself, born in the 1970s as Europe's signature counter-example to fragmentation, demonstrates what a coordinated European industrial framework can achieve when the institutional alignment is durable.

Röhl frames the broader questions of European financial integration, including the unfinished work of European deposit insurance and the long-running discussion of common European debt issuance, as substantive items that any architecture intending to compete with the United States dollar in liquidity and depth will eventually have to engage. He treats these as questions to be examined on their analytical merits, with full acknowledgment of the institutional complexity involved.

The Altersvorsorgedepot as a pension architecture milestone

The most consequential reform discussed is the new Altersvorsorgedepot pension framework, which Röhl describes as a historic milestone after more than a decade of advocacy. For the first time in the history of the Federal Republic, the German pension architecture officially recognises that durable retirement provision can work without a one-hundred-per-cent capital guarantee and through direct participation in capital markets via low-cost ETFs. The structural significance is greater than the specific incentive arithmetic: the state is shifting from subsidising guaranteed-return product providers toward subsidising the saver's direct ownership of broadly diversified equity exposure.

The architecture rests on two reinforcing levers. The first is direct subsidy: a grant of up to 540 euros against an annual saver contribution of 1,800 euros, an effective rate of close to thirty per cent calibrated to favour small savers and families with limited capacity to defer income for retirement. The second is tax efficiency: the depot is tax-exempt during the accumulation phase up to an annual limit of 6,840 euros, allowing the compound-interest effect to operate at full power without the year-by-year tax leakage that has historically dampened long-term savings outcomes.

Röhl explicitly contrasts the new architecture with the prior Riester Rente regime, which he characterises as too complex for ordinary savers to navigate and structurally vulnerable to commission-loaded products that often delivered limited net yield. The Altersvorsorgedepot, by comparison, is calibrated to be implementable through a digitally opened account and a single low-cost ETF tracking a global index such as the MSCI All Country World Index. The simplification is itself a meaningful design choice, since the principal behavioural barrier to long-term capital market participation has historically been complexity.

Röhl is realistic about what the legislation does and does not achieve. It will not, on its own, address the broader actuarial pressures on the statutory pension system, but it is a foundational first step, calibrated to a behavioural pattern in which German savers respond strongly to state subsidies. He pairs the optimism with a substantive caveat: if the new framework mobilises private capital that then flows predominantly into United States technology because European regulatory simplicity has not kept pace, the structural gain will be exported. The pension reform is most effective when paired with regulatory simplification that allows European retail flows to compound inside the European productive economy.

International comparators: Norway, Sweden's AP7, and KENFO

The conversation turns to state-orchestrated capital, where international comparators offer instructive contrast. Röhl admires the Norwegian Government Pension Fund Global as a long-term example of patient public investment. Established in the 1990s, transitioned to an equity-dominated portfolio in 1999, and patient through the dot-com drawdown of 2000 to 2003 and the subsequent global financial crisis, the Norwegian fund has compounded into one of the largest pools of long-term capital in the world. Its discipline of consistent contribution, equity-heavy allocation and long-horizon governance is, on Röhl's reading, the textbook case of how a state vehicle can deliver durable national wealth across multiple economic cycles.

Röhl is direct, however, that the Norwegian model is not directly replicable in Germany. Norway's fund is financed by oil revenues, an option Germany does not have. To establish an equivalent vehicle would require funding through sovereign debt issuance, and the window for such an approach was most attractive between approximately 2015 and 2020, when long-duration sovereign issuance at indicative rates of around two per cent was theoretically feasible. That window has now closed, and the present rate environment makes a Norwegian-style vehicle structurally less attractive on a cost-of-capital basis.

His preferred contemporary template for Germany is therefore Swedish rather than Norwegian. The AP7 model redirects a portion of Sweden's mandatory pension contributions into a professionally managed default equity fund and has, on the public reporting cited in the conversation, compounded into one of the largest mutual funds in Europe. The architecture maps onto Germany's needs in three respects: it does not require a sovereign endowment to seed the vehicle, it routes existing pension flows into productive long-term capital, and it preserves the professional, depoliticised investment management that distinguishes successful state vehicles. Röhl notes that a similar concept, sometimes referred to in German policy discussion as Generation Capital, has been examined within German policy circles in recent years.

The most underappreciated case in Röhl's argument is one already operating quietly inside Germany. KENFO, the Fonds zur Finanzierung der kerntechnischen Entsorgung, established in 2017 to fund the long-term storage of radioactive waste from German commercial nuclear power, manages on the order of twenty-six billion euros and is, in technical terms, Germany's first sovereign wealth fund. Under the leadership of Anja Mikus, who chairs the management board and serves as Chief Investment Officer, KENFO has produced solid risk-adjusted returns and demonstrated that state-orchestrated asset management in Germany can deliver economically while remaining insulated from short-term considerations. Röhl identifies that institutional insulation as a non-negotiable governance principle for any future German pension or sovereign vehicle.

The Deutschlandfonds and strategic infrastructure capital

For infrastructure, Röhl points to a separate vehicle outlined in the current German government programme, the Deutschlandfonds. The original design contemplates approximately ten billion euros of state capital leveraged by private capital up to a hundred billion, dedicated to strategic industries and infrastructure. He treats this as a category distinct from the pension question. For pensions, the better answer in his framing remains a combination of individual solutions and the Swedish AP7 overlay: tax-advantaged accounts that empower citizens, materially higher tax-free allowances on capital gains for long-term investors, and capital-market participation embedded in the first and second pillars of the German pension system. For infrastructure, an active vehicle managed by professionals with substantive backgrounds in infrastructure, private equity and private debt, structured for transparent governance, could become a credible investment alternative for both institutional allocators and private investors who wish to participate in European infrastructure capital through a professionally managed structure.

Capital-market participation as a foundation for long-term stability

Röhl ends on the broader case for capital-market participation, which he frames as more than a wealth-creation argument. When citizens own equity in productive enterprises, they participate directly in value creation and in growth, and that participation is itself a structurally stabilising force. The household that owns a share in the productive economy is materially more likely to identify with its long-term outcomes and to plan with a long horizon. Capital-market participation, on this reading, is a foundation for individual financial stability, for the resilience of the wider economy, and for long-term cohesion. It compounds over decades, delivering its benefit precisely to the ordinary saver historically least likely to access it.

Stein closes by drawing the comparison to Singapore, the textbook example of a state that began with no natural resources and built one of the most sophisticated sovereign capital architectures in the world. The implicit point is that Europe's constraints are largely structural and architectural, rather than material, and that the reforms now in motion, the Altersvorsorgedepot, the renewed examination of state-orchestrated capital frameworks, and the ongoing work of European banking and capital markets integration, are the levers that determine whether the Continent's investment culture matures into the durable architecture that long-term compounding requires.