Eurozone finance ministers have put forth a five-year blueprint to forge a robust Capital Markets Union (CMU) in what they see as an “ambitious” move to enhance private capital flow into Europe and underpin Europe’s costly shift to a sustainable and digital economy.
Meeting on Monday, the ministers, representing the 20-nation eurozone bloc, unanimously endorsed a comprehensive strategy to be adopted by the next European Commission. It entails a suite of commitments to advance securitisation, spawn EU-wide investment products, and establish a common rulebook that lets cross-border asset managers opt for EU-level supervision, as opposed to devolved national-level supervision they are subject to at present.
The Eurogroup push followed last month’s criticism by French finance minister Bruno Le Maire who said he believed a CMU will never happen if it is left up to the 27 EU member states. Some countries still vehemently oppose further financial integration.
Eurogroup President Paschal Donohoe championed the initiative. Open, well-functioning, and integrated European capital markets are pivotal to attracting necessary investments, hence bolstering the EU’s global competitiveness, a Eurogroup statement said.
‘Clear commitment’
“What is contained here I believe is a strong statement with relation to supervision,” Donohoe said at a press conference. “It makes a clear commitment here in relation to the common rulebook in terms of how capital markets are supervised and it also lays out a process whereby further options can be evaluated by the commission in conjunction with national stakeholders.”
Underpinning the push for the CMU is an acknowledgment that the EU lags behind on a global stage in competitiveness and prosperity. Donohoe stressed the urgency to cultivate European capital markets that can freely and efficiently direct domestic savings and foreign capital into innovative companies, propelling them to become engines of long-term growth.
With the banking sector currently shouldering most of the region’s business financing, the ministers have spotlighted the pressing need to broaden market-based funding avenues. The roadmap aims to fortify Europe’s position as a financial hub, tempting and retaining businesses within the EU to augment its economic growth potential and present more lucrative investment opportunities in the EU.
Architecture, business, and citizens
Focusing on key actions for the impending European legislative term, the Eurogroup has pinpointed three core areas for action: architecture, business, and citizens. These sectors aim to foster a competitive and resilient regulatory system, better access to private funding for EU businesses, and improved financial security for EU citizens through profitable investment opportunities.
The Eurogroup proposals include a call to streamline the EU’s securitisation market, promote supervisory convergence, and alleviate regulatory burdens and transaction costs. Moreover, the group intends to harmonise national insolvency laws and listing requirements across European exchanges to simplify equity and bond financing.
Additionally, the EU aims to buttress its edge in sustainable finance, increase investments, especially in sustainable and digital sectors, and streamline conditions for institutional and cross-border investment.
Addressing the next generation of EU citizens, the Eurogroup seeks to establish an enticing, consumer-centric investment environment, bolstered by robust digital interfaces and incentives to harness the capital markets.
Stunted progress
“We have achieved a very strong policy direction,” Donohoe said. Highlighting the urgency to act, he referenced the EU’s stunted progress over the past decade and the pressing financial needs of the climate and digital transition, which cannot be solely reliant on public funding.
Echoing Donohoe, EU Economy Commissioner Paolo Gentiloni emphasised the strategic sectors like cleantech and biotech, “Capital markets finance is essential to scale up EU companies in fast-growing, strategic sectors like cleantech and biotech,” Gentiloni said, asserting the necessity for unity and scale to leverage the internal market.
The resolve for a collective advance on CMU counters the frustrations aired last month by French Finance Minister Bruno Le Maire and is seen as a concerted response to potential economic upheavals, such as a return of Donald Trump to the White House, as noted by European Central Bank President Christine Lagarde.
Further reading on Investment Officer Luxembourg:
- Unified investment product would be bold move for EU
- Europe remains addicted to debt as CMU fails to deliver
- Gramegna calls for single rulebook in EU financial markets