14 March 2024

FT editorial: Time to stop dithering over the EU’s capital markets union

After years of under-investment, the EU is recognising the enormous new capital resources needed to achieve a decarbonised, high-tech society able to protect its security and economic interests...But its leaders still fall short of the political ambition Europe needs.

This realisation is creating new impetus for a seamless capital market in the bloc. But its leaders still fall short of the political ambition Europe needs. 

The “capital markets union” agenda grew out of the eurozone debt crisis, which exposed a lack of financial risk-sharing between countries. Raising the euro’s attractiveness globally through deeper investment pools was a secondary goal. But little progress has been made. Losing the region’s biggest financial centre through Brexit has not helped.

The cost of Europe’s fragmented and shallow capital markets has only increased, however, as the need for capital has grown: to redesign energy and transport systems, to refit industry for a zero-carbon world, to boost defence manufacturing capacity, and to allow innovative start-ups to grow without crossing the Atlantic for funding. Governments neither can nor should provide most of the trillions in additional investments needed, and the EU’s bank-heavy financial system cannot mobilise private, long-term risk capital at the required scale.

But private market capital remains hemmed in by patchworks of national laws, regulatory and supervisory bodies, and trading venues. The result is perverse: unused investment opportunities, inadequate rewards for savers, and an economy at risk of falling behind in a more fiercely competitive world.

Politicians are, finally, grasping the link between Europe’s productivity challenges and its fragmented capital markets. In a step-up of political engagement with an issue so far mostly relegated to technocrats, the eurogroup of finance ministers has agreed a statement on advancing CMU for national leaders at a summit next week. It follows a similar statement from the European Central Bank. Imminent reports commissioned from Mario Draghi and Enrico Letta, on Europe’s competitiveness and its single market respectively, should also highlight the urgency of CMU....

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