American financial funds are increasingly penetrating the economies and democracies of European member states. The combination of austerity measures, high interest rates, and soaring energy costs is significantly harming the economic growth of the Old Continent. Moreover, the financialization of EU cities is exacerbating the housing crisis.
The recent increase in UniCredit Bank’s stake in Commerzbank, Germany’s largest financial institution, may represent a reaction to global speculative dynamics that have shaped the European financial market over the last two decades.
With the dismantling of local credit institutions and the financialization of major banks, the European economic system has become closely tied to austerity measures imposed by the European Central Bank (ECB) and revenue tax reductions pursued by many EU member states.
Underpinned by neoliberal theories, European countries have progressively absorbed American non-performing financial products while gradually privatizing their welfare systems. This process, facilitated through cultural and economic channels, has financialized key productive sectors such as automotive, healthcare, and real estate.
In Italy, from 2008 to 2018, public policies and rhetoric under Berlusconi’s and Renzi’s governments facilitated, on one hand, the simplification of bureaucratic processes and the liberalization of the labor market. On the other hand, they contributed to economic stagnation and energy dependency on foreign suppliers. Simultaneously, European austerity measures and low interest rates spurred the rise of banking profits and real estate values, alongside the privatization of healthcare and the financialization of major automotive and industrial firms.
Behind this trend, American institutional funds played a pivotal role by penetrating Italy’s and Europe’s major banks and companies. For example, according to Alessandro Volpi’s research (2024), Intesa Sanpaolo Bank generated €6.1 billion in revenues during the first nine months of 2023. Of this, €4 billion was distributed as dividends to shareholders, with BlackRock alone reaping over €1 billion. Despite a 70% increase in capital gains between 2022 and 2023 (€43 billion in total), Italian banks faced no additional taxation.
Although Italy’s economy remains stagnant, characterized by nearly $3 trillion in debt and a GDP growth rate of just +0.7%, successive center-left and center-right governments have expanded public debt rather than combining BTP bond issuances with higher taxes on liquid and illiquid assets.
In this context, Italian insurance pension funds invest only €26 billion in national debt, while professional welfare funds (lawyers, notaries, architects, engineers, etc.) allocate €35 billion to BTPs. Consequently, Italian financial institutions became overexposed to major global funds to compensate for a lack of domestic investment. As reported by Pietro Modiano and Marco Onado (2023), this dynamic resulted in the unprecedented privatization of major state corporations. Today, BlackRock and Vanguard are key shareholders in leading Italian companies in connectivity and mobility infrastructure (e.g., TIM, ENI, and Cassa Depositi e Prestiti) and energy supply (e.g., SNAM, Terna, A2A), sectors that have seen skyrocketing costs in recent years.
In this environment, financial trusts and funds benefit from a mere 26% flat tax, coupled with weak oversight and favorable conditions for investments originating from tax-haven countries. Similar patterns are evident in other EU member states, driven by the poor capitalization of European financial markets. Among the world’s top 20 financial managers, only three are based in the EU: Allianz, Amundi, and BNP Paribas.
Through asset- and mortgage-backed securities, non-performing loans (NPLs), and real estate mutual investment funds and trusts, the real estate market has become deeply intertwined with financial markets. Financialized real estate assets are among the leading products in the capital market, valued at $280.6 trillion—approximately three times the global GDP. Of these, NPLs account for €900 billion in Europe alone.
Due to its size, real estate financialization is driving up housing costs across major EU cities, except Vienna, where policies restrict institutional and speculative funds from accessing land assets. Between 2015 and 2023, EU countries experienced an overall increase of +47% in housing prices and +18% in rental prices, accompanied by a general decline in public investment in affordable housing.
Rather than purchasing member states’ debt to support internal economies, the European Central Bank has raised interest rates and ceased buying national bonds. In the past, such measures helped contain large debts, such as Italy’s. This shift in monetary policy has fueled global speculation and facilitated the entry of financial funds into the EU economy.
In contrast, the United States, whose national debt is projected to rise from $31 trillion to $50 trillion within a decade, has not implemented austerity measures. These conditions have enabled major American funds to generate extraordinary profits by investing in robust EU welfare state companies.
In summary, hyper-financialization is harming EU economies. Was macro-finance deliberately used as a tool of U.S. geopolitical influence? Are the ongoing conflicts in the Middle East and Ukraine interconnected with the EU’s internal economic challenges? Meanwhile, energy price surges are severely impacting European households’ purchasing power, yet Italian Prime Minister Giorgia Meloni appears more focused on maintaining support from leading American business interests.