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Europe urgently needs capital markets union, says ECB’s Lagarde
DPA
Fri, November 22, 2024 at 2:12 PM GMT+1 2 min read
Christine Lagarde, President of the European Central Bank (ECB), speaks at the “Frankfurt European Banking Congress.” Helmut Fricke/dpa
Europe urgently needs to make progress in creating a capital markets union in the face of looming trade conflicts, European Central Bank chief Christine Lagarde warned on Friday.
The proposed Capital Markets Union (CMU) is “key for becoming more resilient in a fragmenting world economy,” Lagarde told the European Banking Congress in Frankfurt.
“Capital markets are the missing link for Europeans to turn their high savings into greater wealth – which will ultimately enable them to spend more and strengthen our internal demand,” argued Lagarde.
“However, this growing urgency has not been matched by tangible progress towards CMU, in large part because its implementation remains loosely defined,” she added.
The CMU is essentially about removing bureaucratic hurdles between the individual states of the European Union in order to create a single market for capital across the bloc. Companies would then have more opportunities to raise money, for example.
The European Commission’s plans have been on the table since 2015.
The EU is also aiming to encourage retail investors to invest in local financial markets so that more capital is available for the green and digital transitions.
Europe must offer savers products that are accessible, transparent and affordable, said Lagarde: “In my view, a ‘European savings standard’ – a standardized, EU-wide set of savings products – is the best way to achieve these goals.”
When Europeans’ savings reach the capital markets, they do not spread throughout the European economy, she noted: “Capital in Europe is either trapped within national borders or leaves for the United States.”
At last year’s banking congress, Lagarde spoke in favour of a European stock exchange supervisory authority to overcome the fragmentation of the European capital market.
While the strong capital market in the US has benefited from the standardized supervision of the Securities and Exchange Commission (SEC) for decades, direct supervision in Europe largely takes place at the national level, Lagarde told the congress on Friday.
This leads to fragmentation in the application of EU regulations, she said.
Christine Lagarde, President of the European Central Bank (ECB), speaks at the “Frankfurt European Banking Congress.” Helmut Fricke/dpa
Is this just an argument to circumvent existing capital regulations? Deregulation by a different name? Don’t most of these financial institutions already wield enormous leverage on the greater European economy? It seems a bit disingenuous to frame this “need” as something that benefits the plebes, when the institutions themselves will be profiting across the board. Maybe I am misinterpreting?
Not the way I understand it. It’s integrating the Financial markets more. The more unified the EU is, the more of a fight we can put up against the US and China (and probably soon India).
Quite honestly, I don’t think it makes sense to be naïve about the plans of power players like Lagarde. I’d bet money that deregulation is a major component of this.
