Are the European Commission’s plans on financial services what the EU needs?
The Draghi report has underscored the need for an additional €800 billion in annual investments from 2025 to 2030 in order to maintain the EU’s global competitiveness. This ambitious target represents about 5% of the EU’s GDP.
Much of the media attention on the Draghi report has focused on the possibility of eurobonds; however, it is clear that most of the additional investment will need to come from the private sector. The fiscal space of many EU member states is already highly constrained: for instance, three of the four largest EU economies have public debt levels exceeding 100% of GDP, and future prospects show limited fiscal flexibility. While eurobonds could deepen the Economic and Monetary Union, lower borrowing costs, significantly advance integration in Europe’s capital markets and enhance private risk-sharing, the introduction of eurobonds alone would not fundamentally alter the financing landscape for this large-scale investment challenge.
In this context, revitalising the EU’s financial sector takes on heightened importance. But are the European Commission’s current plans for financial services aligned with the EU’s needs? What direction might financial regulation take in the next five years? Will the banking sector become more integrated, and will capital markets advance significantly?
Apostolos Thomadakis is Head of Research at ECMI, and Research Fellow at CEPS. Judith Arnal is Senior Research Fellow at ECRI and CEPS. This article was published by Intereconomics in November 2024.