The E6: Federalism by Other Means
Europe faces threats on every front, and the six largest economies have stopped waiting for unanimity. The €11 trillion question is whether they can pull off federal economic policy without a treaty.
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We may finally be seeing the next step in the federalisation of the European Union.
Germany, France, Italy, Spain, the Netherlands and Poland have spent the last few weeks locked in negotiations behind closed doors. The conclusions are about to land in Berlin, where German finance minister Lars Klingbeil is expected to read them out, marking the latest bid by Europe’s six largest economies to deliver what twenty-seven have failed to in over a decade: a real market for European capital.
The grouping calls itself the E6, and was launched in late January by Klingbeil and his French counterpart Roland Lescure. Its four declared priorities are the Savings and Investments Union, the international role of the euro (and the digital euro), joint defence procurement, and secure supply of critical raw materials.
The Diagnosis
European households are sitting on roughly €11 trillion in cash deposits, the largest pool of idle wealth in the developed world. The money earns close to nothing and finances close to nothing. Across the wider continent, private savings stand at €33 trillion. Every year, around €300 billion of European capital walks out of the door, the bulk of it heading to Wall Street. The US stock market accounts for around 54% of global market capitalisation. Large European markets sit at 15.7%.
What the Savings and Investments Union actually is
The SIU is the rebranded successor to the Capital Markets Union, a project the Commission has been pursuing since 2015 with very little success. The idea is simple. Most European savings sit in bank accounts. Most American savings sit in financial markets. American firms can therefore raise equity cheaply, scale up, and stay home. European firms cannot, and increasingly leave. The SIU aims to harmonise rules, supervision and tax treatment so that capital flows freely between Lisbon, Warsaw and Helsinki. The Commission’s Market Integration and Supervision Package, tabled in December 2025, is the legislative spine.
The intellectual case has already been made. Twice. In April 2024, former Italian prime minister Enrico Letta published Much more than a market, a report commissioned by the Council. He diagnosed the problem in detail: twenty-seven national markets, twenty-seven sets of insolvency rules, twenty-seven tax regimes, and a population that quite reasonably parks its money in the bank rather than navigate that maze.
Five months later, Mario Draghi delivered The Future of European Competitiveness. He estimated that Europe needs an additional €750-€800 billion in annual investment to keep pace with the United States and China. Without it, he wrote, the bloc faces an “existential challenge”.
The Draghi report in numbers
383 pages, around 170 recommendations. €800 billion a year in additional investment, equivalent to 4 -5 % of EU GDP. One year on, only 11.2% of recommendations have been fully implemented. Around a fifth are partially implemented. Roughly 22% have not been touched at all. Draghi himself, at a September 2025 conference, said every challenge he had identified had got worse, and once again called for common European debt to finance common European projects.
The Dark Trading Fight
The opening fight is technical and revealing. France and Spain have drafted a joint position paper, seen by POLITICO, targeting so-called ‘systematic internalisers’. These are the in-house trading platforms run by investment banks, most of them sitting in the City of London, on which firms like JPMorgan and Goldman Sachs handle European equity trades without showing the prices to the wider market. Paris and Madrid want sunlight. London’s banks have grown comfortable.
Systematic internalisers, briefly
A systematic internaliser is an investment bank that matches client orders against its own books rather than sending them to a public exchange. Trades happen privately. Prices are not disclosed in real time. It is cheaper and lighter on paperwork than trading on Euronext or Deutsche Börse. It is also where a significant share of European equity trading volume now goes: the French regulator AMF has flagged that 30-40% of market share migrated to SIs after MiFID II, and ESMA’s April 2026 call for evidence found the trend has continued.
French and Spanish officials argue, in the words of their joint paper, that “the combination of fragmentation and declining transparency weakens the anchoring role traditionally played by transparent multilateral venues, ultimately eroding market efficiency and integrity”. Translation: the City is eating the continent’s lunch.
The Real Argument
The smaller capitals are nervous, and not without reason. Ireland and Portugal have warned that the E6 risks steamrolling the twenty-one other governments. Luxembourg, whose financial sector was built on regulatory arbitrage, has gone further. Its finance minister, Gilles Roth, has argued publicly that turning ESMA into a centralised supervisor would not help the EU reach its stated objectives. Those concerns are real. They are also parochial.
A continent that wants to negotiate with Washington and Beijing on equal terms cannot continue to run fifty-two separate financial supervisors. The numbers do not allow it. The geopolitics do not allow it. The Commission’s own proposal for an expanded ESMA, with an independent Executive Board overseeing the largest cross-border firms, has the European Central Bank’s full backing.
