Policymakers argue that the huge costs of the green and digital transitions cannot be financed with state funds alone. They are correct — but that’s where it stops. Concrete proposals are lacking.
Not a week goes by without EU policymakers repeating the need for more capital markets financing in Europe.
This is because those same policymakers defend national turfs. The Capital Markets Union, launched in 2015 to stimulate the creation of a pan-European market for investment and trading, remains an abstract notion. Although many harmonising measures have been adopted, market development remains very uneven across the continent and has not advanced at all in southern and eastern Europe.
Last year’s EUR 75 billion listing of carmaker Porsche is a case in point. This could have been a showcase for the start of an EU-wide IPO market. Instead, it was kept within German borders and with a very low free float.
If the EU wants to build deep and liquid capital markets that rival those of the US, then it is time for policymakers to start killing some sacred cows. They need to take drastic action to increase the amount of investment from European households into the continent’s capital markets by making mutual fund markets more attractive.
Today, Europe’s fund markets are hopelessly fragmented, resulting in elevated costs and lower take-up. The average fund’s size in Europe stands at EUR 300 million, or about a tenth of the average US fund. Fund costs are opaque as well as high, hampering price competition....
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