European Central Bank research finds euro area equity markets remain fragmented with intra euro area frictions down about 12 percentage points since 2014 versus 25 points for euro area US holdings

The European Central Bank has published research in Economic Bulletin Issue 3/2026 finding that euro area equity markets remain fragmented and that integration within the euro area has advanced more slowly than euro area investors’ integration with the United States. Using a structural gravity model of bilateral equity holdings, the study estimates that frictions on cross-border holdings within the euro area fell by around 12 percentage points in tax-equivalent terms between 2014 and 2023, compared with around 25 percentage points for euro area-US holdings. The article also points to persistent fragmentation in descriptive indicators. Price-based integration remains below its 2018 peak, while the increase in intra-euro area cross-border equity investment has been smaller than the rise in euro area investors’ holdings of US equity. Country-level results show larger, though more volatile, reductions in intra-euro area frictions among countries that joined the EU later than among the six founding Member States, particularly after the COVID-19 pandemic. The research concludes that achieving the EU savings and investments union objectives would require further reductions in fragmentation, including greater supervisory and regulatory harmonisation and deeper integration of trading and post-trading infrastructures.