Europe’s challenge in SME financing is not primarily one of market fragmentation, but of unevenly developed national ecosystems for equity risk-taking. Large-cap financing already operates efficiently at a European and global level. SME financing, by contrast, depends on trust, proximity, incentives, and long-term policy consistency in national markets.
EU initiatives should therefore aim to complement, not replace, national capital market ecosystems. A balanced approach—supporting local strengths while addressing specific cross-border frictions—offers a more realistic path to strengthening Europe’s capacity to finance growth and innovation.