Faced with massive investment needs and foreign competition, cash-strapped European leaders want to rejuvenate the nearly decade-old political project known as the capital market union.
For years, Europeans have had to watch as European companies decided to raise funds on the New York Stock Exchange rather than in one of the European financial capitals, such as Frankfurt, Paris, or Amsterdam. Even London is increasingly losing out to the US, in part because the US financial market is far bigger and wholly integrated and, therefore, easier to navigate.
Many EU policymakers, therefore, view the integration of financial markets as a means of retaining the most innovative companies within their borders. Integrated capital markets would make it easier for investors to finance European companies across borders using a single set of rules.
“We need more investment. And for that, the capital market union will be key,” EU Council president Charles Michel told press on Friday (22 March).
Even though the current plan dates back to 2015, it has been bogged down by political disagreement and has, in fact, barely gotten off the ground.
“This topic has been on the agenda for a number of years already, but now I feel more than ever that we need to speed up the process,” he added.
He also said the strategy for capital markets integration will be on the agenda of the special European Council scheduled for April.
“In all my years of leading this file, I have never seen such interest from heads of government,” said Eurogroup chief Paschal Donohoe.
“For companies old or new providing tomorrow’s solutions—from green energy to artificial intelligence—we need European capital markets,” wrote EU commissioner Mairead McGuinness in an op-ed in the Financial Times published earlier this week.
But illustrative of the glacial speed at which the legislation has moved, she summarised nearly a decade of negotiations by saying that “we are not starting from scratch.”
“A lot of work to do”
Unified rules would make it easier to replace the patchwork of national watchdogs with a single EU supervisor, which European Central Bank president Christine Lagarde, who also attended the summit on Friday, has said the EU needs.
However, the likelihood of EU leaders reaching a compromise remains highly uncertain.
French president Emmanuel Macron put his full political weight behind further financial integration. As did the Belgian EU presidency.
“If we would create a Capital Market Union, our capacity for innovating our industry would be much higher,” Belgian prime minister Alexander de Croo told press.
Germany, especially, is reluctant to hand more power to Europe, and Donohoe has repeatedly had to weaken the plan for EU member states to be able to move the file forward on Friday.
Little is left of EU-wide supervision, for example, which was high on the list of proposed reforms the ECB published separately in early March.
“There is no low-hanging fruit anymore. We will look at this [council] statement and see how we can transform it into a reality,” said Donohoe. “So there is still a lot of work to do.”