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Take, for example, German Finance Minister Christian Lindner. Speaking to German members of parliament at the end of September, he argued for the CMU as a means for the green transition as opposed to using public money.
According to him, the EU had more public money on the table than the US: “Our problem is the private capital that we have to mobilise.”
Thus, the CMU works as a wonderful argument against the use of more public money – very convenient for the fiscal hawk in the German government.
In an op-ed published together with French Finance Minister Bruno Le Maire, Lindner fleshed out what he means by the CMU. Among measures to make securitisation and public listing easier, they also mentioned that the EU should avoid “measures that could limit [retail investors’] access to financial advice.”
This is a nod to the EU’s retail investment strategy, in which the EU Commission originally wanted to ban inducement-based financial advice. This is a form of financial advice that is “for free” at the moment of advice, but on average leads to worse and more costly results for retail investors, as financial advisers suggest products for which they get the highest commissions and not those best for retail investors.
Incidentally, this model of financial advice is very widely used by German banks and after fierce lobbying by Lindner and his Austrian counterpart, the EU Commission finally proposed a retail investment strategy that would not ban the inducement-based model.
In his op-ed, Lindner was able to defend the interests of German banks in the name of the CMU.
However, the CMU can also be used to argue for political measures that Lindner would not approve of, for example, more common EU debt.
According to the European Central Bank’s Fabio Panetta, a true CMU would need a “European Safe Asset” that could play the role that US treasury bonds play in the US capital markets.
“Historically, mature capital markets have been built around a public safe asset,” he wrote in a blog post arguing that a risk-free benchmark would allow for better pricing of risky financial products and thus make trading easier and less costly.
In early September, the president of the insurance company Generali Group Andrea Sironi also backed Panetta’s argument, and last week Enrico Letta, who is charged with writing a report on the future of the EU’s Single Market, also spoke in favour of it in an interview with Euractiv.
Two weeks ago, ECB President Christine Lagarde also argued in this direction, floating the idea of a “green CMU”, underpinned by a European green bond.
Thus, the CMU also works as a good argument for more public spending at the European level, quite the opposite of what Lindner wants.
Asset managers, meanwhile, argue that a CMU is only possible if tightly regulated pension and insurance funds are deregulated to allow for riskier investments. Where else would the money come from?
So, the CMU can also be put forward as an argument for pension fund deregulation.
This does not mean that the arguments are wrong. But the ease with which the CMU can be used to argue for stuff that politicians like for other reasons than the CMU itself should make us sceptical of its use as an argument....
more at EURACTIV