13 December 2013

Commissioner Barnier: Financing of the real economy is key to accelerating recovery in Europe

Translated from the French

In addition to the dual logic to open the channels of funding, i.e. more secure and diverse ways of bank financing, we face the particular challenge of long-term investment.

Several factors hamper the long-term investment in Europe:

• Despite significant fiscal consolidation efforts undertaken by the states, fiscal deficits continue to weigh on the overall financing capacity of the European economy and ultimately on business.
• The dependence of the European economy on a banking system that is currently undergoing fundamental changes may lead to financial difficulties.
• In addition, some asset managers maintain a "cult of liquidity" which follows on logically from a crisis of unprecedented magnitude, but which is not necessarily up-to-date given that the financial sector is much more stable than before.

We in Europe have many favourable conditions for long-term investment, including a high level of savings, a high level of foreign investment and all the steps we are taking to restore confidence in the financial sector. We also have important needs, whether to fund research, new health infrastructure, modes of transportation or the realisation of pilot lines based on new industrial technologies. I think we have finally reached a point in our response to the crisis where investors could afford to reduce their preference for liquidity, stop to observe anxiously the immediate events and concentrate again on their plans for the future.

It is high time to find again a long-term vision, and this is precisely the great debate on the long-term financing of our economy that I wanted to encourage to be discussed in Europe by opening four areas of consideration:

• the ability of financial institutions to channel savings into investment long-term projects;
• the efficiency of financial markets and intermediation of investment;
• SME access to financing;
• the role of public policy.

The Commission has received over 300 contributions, representing about 4,000 pages of comments and proposals on these questions. We are analysing these comments thoroughly, whether on modernisation of the banking sector, the rising importance of institutional investors and the financial markets or seeking new financing options, such as crowdfunding, on which a consultation is open until 31 December.

Worth exploring in particular are the products required from the investors for their long-term investments. Several models exist at European level, such as passbooks, postal booklets and various forms of savings accounts. We need to examine the characteristics and the possibility of proposing a complementary instrument at European level, what I call a blue book.

Finally, we proposed on June 26 the creation of the European Investment Fund in the long term, which should just be open to individual investors. Based on this analytical work, we will propose early in 2014 an action which should include a legislative component - such as the revision of the directive on shareholders' rights, the completion of the calibration of the new solvency rules for insurance and, hopefully, the revision of the IORPD - but also non-legislative actions, based on the exchange of good practices, launching targeted analyses and encouraging private initiatives.

Full speech (in French)

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