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It will provide better funding possibilities for growing companies, including small and medium-sized companies, and give EU citizens the opportunity to invest their savings more productively in Europe.
Deep and liquid capital markets that can allocate capital efficiently and allow for cross-border private risk-sharing constitute, together with a well-functioning Banking Union, a key element for the resilience of our economic and monetary union.
Today, Europe is at risk of falling further behind globally in terms of competitiveness, growth, and prosperity of its citizens. European capital markets need to be urgently developed into globally competitive markets. The EU needs a capital market that can channel domestic savings and foreign capital freely and effectively into innovative companies, allowing them to develop into engines of long-term growth and, ultimately, help the EU to become a global leader for innovation and new industries.
The robust and well-regulated banking sector of the European Union carries nowadays the bulk of the financing needs for businesses. Banks and insurance companies are the main distribution channel offering savings and investment possibilities for citizens. But to match the substantial financial needs of the future, market-based funding opportunities must urgently become more widely and readily available in Europe.
While we have made significant progress in recent years to improve the functioning of European capital markets through the Capital Markets Union action plans, they are far from reaching their full potential.
The lack of a deep and well-functioning market for risk capital in Europe – notably in the start-up and scale-up phase of companies, but also for those in more mature stages of development – continues to force many of the EU’s most dynamic and innovative businesses to seek funding abroad. Reducing fragmentation, regulatory burden, and high transaction costs can increase the EU’s attractiveness as a financial hub. Attracting and keeping businesses in the EU will improve its future economic growth potential and offer more profitable investment opportunities in the EU.
An open, liquid capital market which is well integrated into global markets is important to support the flow of private investment into innovation, including in the green and digital sectors. With the limited fiscal space and multiple spending priorities, funds to build up production capacity and boost innovation in Europe need to come primarily from the private sector.
Equally, well-functioning capital markets allow European citizens to benefit from more attractive investment opportunities that help boost their available income and complement their future pension income.
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