EU Policy. President Michel looks to capital markets to solve the bloc’s economic woes

EU leaders may look to boost EU capital market finance
EU leaders may look to boost EU capital market finance Copyright AP Photo
Copyright AP Photo
By Jack Schickler
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A summit next week could look at alternatives to bank finance in a bid to boost Europe’s fortunes – but previous attempts haven’t met with much success.


A summit of EU leaders meeting next week will likely agree “ambitious” measures to boost non-bank financing, its President Charles Michel has told reporters.

Europe is looking to improve its fortunes as it faces up to war, costly climate change policies and economic competition – and hopes integrating its capital markets could help.

“There is in my opinion a way, based on common sense, to mobilise a lot of money to fuel the European economy,” European Council President Michel told Euronews as part of a group interview. “This is by making possible and easier for companies to mobilise many of the Europeans’ €9 trillion of savings.”

EU leaders will be searching for ways to pay for the soaring costs of defence after the Russian invasion of Ukraine, of adapting to a zero-carbon world, and of responding to trade-distorting measures such as the United States’ Inflation Reduction Act.

Funding options such as eurobonds or expanding the capital of the European Investment Bank will prove politically tricky, Michel acknowledges; frugal governments generally worry joint sovereign debt could encourage profligacy among the less disciplined.

Michel may see regulatory measures to integrate national stock markets and harmonise insolvency law as politically more straightforward – but that project, known as a capital markets union, has problems of its own.

European policymakers have long bemoaned how dependent domestic their companies are on bank financing, while US counterparts enjoy alternatives such as stock issuance.

In a speech last November, European Central Bank chief Chrisine Lagarde called for a “Kantian shift” in thinking, pointing out that, compared to the US, EU bond markets are three times smaller, and venture capital just one fifth of the size.

That means that EU companies often have to flee the bloc to places like Silicon Valley to find the funding they need to grow.

Yet national ministers have previously gutted plans to create a euro-supervisor on the lines of the US Securities and Exchange Commission, and harmonising tax rules or property law is complex and controversial.

Even more modest plans to offer EU-wide pensions or smooth over stock-market listing rules haven’t met with huge success either, though national leaders pushed for more integration as long ago as 2014.

“I regret it wasn’t possible to make significant progress in this field earlier,” Michel said. “I’m confident that now it can be different ... the draft we have on the table for next week is rather ambitious.”

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