The European Commission, from the
beginning of its mandate in October 2014, has made it clear that the
priorities are to strengthen the European economy and stimulate
investment in order to create jobs. In this context, Jean-Claude
Juncker, supported by the Council and the European Parliament, launched
the European Fund for Strategic Investment (EFSI).
In line with the objectives of the new European Commission
and the proposals of the President of the European Commission, it is
the responsibility of Commissioner Hill to lead the creation of a
Capital Markets Union (CMU) for the 28 Member States, the roadmap was
published in late September.
It should be recalled that the free
movement of capital is one of the fundamental pillars on which the
European Union was created. But, despite the progress made over the last
50 years, European capital markets continue to be relatively
underdeveloped and fragmented.
The comparison with the figures of the US
are a good example of this, although the size of the two economies are
similar, it is concluded according to date of the European Commission
that European equity markets are half the Americans; like our debt
markets, which are a third of those on the other side of the Atlantic.
Moreover, it is noteworthy that the
differences between the capital markets of both economic areas are lower
than those between the Member States of the European Union. It is clear
therefore that further integration of the capital markets will result
in greater efficiency and strengthen Europe’s capacity to finance
growth.
While funding from the banking sector in
the EU represents around 70% and the non-banking sector accounts for
30%, in the US they have the opposite reality. Hence greater integration
is required in capital markets, which would lead to new alternatives
and complement the traditional form of bank financing in Europe.
The European Commission has made clear
what will be the main benefits we can expect from the Capital Markets
Union. First, unlocking higher levels of investment in the EU and around
the world. With this, the CMU will help mobilize capital in Europe and
channel investment to all those companies which need it, particularly
SMEs.
Another advantage is that CMU will lead
to a better connection between the financing of innovative projects
throughout the EU. So, those Member States whose markets have a great
growth potential will benefit from increased funding, while those with
more developed securities markets may take advantage of greater
cross-border investment giving a greater possibility to diversify.
Third, further integration in capital
markets can help Member States, particularly those that are inside the
euro to cope with market volatility. Again, thanks to the CMU, we will
achieve a more stable financial system and reduce the excessive
dependence on the banking sector.
Finally, it will deepen financial
integration and increase European competitiveness. Thanks to greater
risk sharing across borders, more liquid markets and more diversified
sources of funding, we will have deeper financial integration which will
reduce costs and increase European competitiveness.
On 2 December 2015, the Permanent
Representatives Committee (Coreper) approved, on behalf of the Council, a
negotiating stance on proposals aimed at facilitating the development
of a securitisation market in Europe, this is the first step towards
creating the CMU. This agreement, led by the Luxembourg presidency, will
enable the incoming presidency to start talks with the European
Parliament as soon as possible in 2016, when the Economic and Monetary
Affairs Committee of the European Parliament will start negotiating its
position with respect to these initial proposals.
In conclusion, the Capital Markets Union
will strengthen the link between savings and growth. It will lead to
greater choice and better returns for savers and investors and
businesses, particularly SMEs, which may benefit from more financing
options in different stages of their development.
The CMU is a step forward in the Economic and Monetary
Union, it will help consolidate economic recovery and it will be a
source of opportunity for the future of the European Union. It is now
responsibility of the European Commission, European Council and European
Parliament to reach an agreement during 2016.
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