ECOFIN conclusions on Finance for Growth and the long-term financing of the European economy

09 December 2014

Strengthening the single market for capital and ensuring the free flow of capital across the European economy would bring significant benefits.

The Council:

Supports the emphasis on the need to create productive jobs and sustainable growth in the EU economy, and agrees that the supporting role of Finance for Growth in this direction is one determinant building block.

Recalls prior work, which ultimately fed into the Commission package adopted on 27 March 2014 and centred on the Communication on Long-Term Financing of the European Economy.

Highlights that in the aftermath of the recent economic and financial crisis and the ensuing deleveraging processes, funding to the real economy has fallen dramatically in several EU Member States and has exposed the limits related to the dependence on bank intermediation for channelling funds in the EU economy, especially as regards long-term investment and SME financing.

Agrees with the need expressed by the Commission in its Communication to stimulate new and different ways of unlocking long-term financing and to reduce existing impediments to access to finance for firms, in particular SMEs.

Agrees that, while national-level policy actions remain essential in order to create new financing opportunities and incentives to support long-term investments, a coordinated initiative at EU level would bring considerable benefits.

Recalls the importance of following in particular the principles set out below:

• One of the overarching goals should be to reduce barriers to the effective allocation of savings to investments while ensuring financial stability is maintained and that resilience to shocks is preserved
• In the pursuit of greater efficiency and competitiveness, high standards of market integrity and consumer as well as investor protection, should be maintained, in particular in retail markets, where financial literacy is also important
• Policy actions should be developed according to better regulation principles, following sound analyses. Prudential policy should ensure that sufficient resilience is maintained, as well-capitalised entities are in the best position to provide stable long-term financing

With regard to the next steps, the Council:

Notes the Commission's intention to consult with a view to an Action Plan on Capital Markets Union by summer 2015.

Encourages the Commission to actively involve Member States and relevant stakeholders in the consultation, bringing out their specific experiences, contributing with best practices, stressing the existing obstacles to capital market finance and putting forward suggestions to build a fully integrated Capital Markets Union.

Considers that the policy course to be pursued will significantly benefit from a fruitful interaction between Member States, the Commission, the ESAs, the ECB and other relevant institutional stakeholders, having full regard to their respective prerogatives.

Invites further work by the FSC and the EFC, with a view to providing further input, as appropriate, to the Commission over the next months.

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