Europe's Capital Markets puzzle

Creating an attractive framework for more market financing in Europe is proving to be an increasingly complex puzzle. The EU and other European states are battling on several fronts, but without the unity and vision that is needed to move forward. Brexit is one of the difficult pieces of the puzzle, but also problematic is the dominance of universal banks, even more in mainland Europe, and limited acquaintance with more market finance. Market financing is however paramount for Europe’s competitiveness. 

The EU Commission’s latest action plan – the New CMU Action Plan – lacks workable solutions and gets lost in small items that will not allow for significant change or bring Europe’s markets up to speed. A positive development on the horizon is the emergence of a euro safe asset, a crucial building block for European capital markets, but the issues it raises are not reflected in the action plan either. Six years after the launch, we are no closer to the benchmark set by the United States.

The real actionable items of the new plan are limited; several elements are intentions, proposals for studies or elements to strengthen existing frameworks. Of course, there is no need for an extensive new legislative agenda. But rather a clear vision and strategy on what the EU wants to achieve, by when and how, on which there seems to be no agreement. The incremental approach followed over in recent years is now harming the EU’s long-term interests.

Karel Lannoo is General Manager of ECMI and CEO of CEPS. Apostolos Thomadakis, Ph.D., is Researcher at ECMI and CEPS.