To build capital markets that work for people, Europe should look to Sweden

Europe’s capital markets remain fragmented, underdeveloped and largely inaccessible to the very people they are meant to serve. Despite years of discussion, the EU’s Capital Markets Union (CMU) still struggles to deliver meaningful results. But while Brussels debates, Stockholm performs. Sweden offers a compelling, real-world example of how deep, inclusive and stable capital markets can be built – not through a grand blueprint, but through decades of steady, pragmatic reform.

The Swedish experience offers crucial lessons for Europe. Its capital markets are not just large, with equity market capitalisation reaching 169% of GDP, among the highest in the EU, they are remarkably inclusive. Retail investor participation is widespread. One in four Swedes owns shares in individual companies. Almost four million Swedes hold investment savings accounts (ISKs). And over 90% of workers are covered by occupational pension schemes that invest heavily in equities. Sweden has not just built capital markets; it has built a genuine investment culture.

This success is not accidental. Since the 1980s, successive Swedish governments have introduced a series of mutually reinforcing reforms: tax simplification, pension restructuring, digital access, low-cost savings vehicles and a pragmatic regulatory environment. Together, they lowered the barriers to investing and nudged households into the market. Instead of overwhelming retail investors with complexity or risk, Sweden created conditions for gradual, confident participation. Trust in institutions was not assumed – it was earned.

Perhaps the most instructive part of Sweden’s experience is its 1990s financial crisis. Confronted with a collapsing banking sector, the Swedish government responded with transparency, discipline and structural reform. The tax system was overhauled to favour investment neutrality. Pension systems were partially pre-funded. And capital markets were deepened to reduce systemic vulnerabilities. By the time the 2008 global crisis hit, Sweden’s financial system weathered the storm without needing bank bailouts. The reforms stuck – and worked.

Contrast this with the EU’s current state. The CMU has become an alphabet soup of regulations and consultations, often missing the bigger picture: that trust, long-term savings and inclusive access are not just technical issues, they are cultural and institutional. Sweden didn’t get there through reporting obligations or ever-tighter rules. It got there by aligning policy incentives with people’s behaviour. The ISK is a perfect example: simple, digital, low-cost and tax-efficient. It doesn’t ask savers to be financial experts; it makes it easy for them to participate.

Moreover, Sweden’s multi-tiered equity market – with SME Growth Markets at its core – offers a powerful template for supporting young and fast-growing companies. Almost 90% of Swedish IPOs happen on these more agile platforms. This is precisely the kind of capital formation the EU needs to fund innovation, green technologies and digital transitions. Yet in Brussels, the trend is toward heavier compliance, even on SME markets, which risks pushing companies away from public listings altogether.

EU policymakers should take note. If Europe wants capital markets that are not just big, but inclusive and resilient, it must get serious about structural reform, starting with households. That means incentivising participation through simple, accessible savings products. It means using pension reform to mobilise long-term capital. And it means ensuring regulation is proportionate and growth-friendly, especially for small firms. Harmonisation has a role to play, but it is not a substitute for national leadership and institutional trust.

Sweden’s story also shows that strong capital markets are not built in isolation. They require a supportive business environment, political stability and robust governance. Sweden’s regulatory model strikes a careful balance: investor protection without stifling innovation. Its corporate governance code is principles-based, not prescriptive. Its fund fees are among the lowest in Europe, thanks to intense competition and transparency. And its financial supervision is streamlined under a single authority, enabling effective oversight without duplication.

This is not to say that Sweden’s model is a perfect fit for all member states. Context matters. But it is a powerful reminder that deep capital markets are not a pipe dream. They can be built – with the right mix of policy coherence, cultural alignment and institutional credibility. The EU should stop trying to reinvent the wheel. It should start by learning from what already works.

If Europe is serious about building a Savings and Investment Union, it should look north. Sweden has already laid the path. Now it’s time for Brussels to follow it.

Apostolos Thomadakis is head of research at the European Capital Markets Institute (ECMI) and research fellow, financial markets and institutions unit, at the Centre for European Policy Studies (CEPS)