"A lot will have to be invested in the green and digital transformation in the coming years. Integrated European capital markets should help with this. But there are still problems in many points.
Until a few days ago it was unclear whether the EU finance ministers would even be able to agree on a common position.
It is now at least clear that the plans for an EU capital markets union that have been on the table for a long time can be pushed forward.
In a declaration adopted recently, the ministers defined 13 points for which the new EU Commission should present legislative proposals for an expansion and deepening of the Capital Markets Union during its term of office until 2029. Paschal Donohoe, the head of the Eurogroup entrusted with coordinating the project, said on Monday evening that the roadmap now adopted was "more ambitious" than he would have imagined a few months ago.
Of course, the paper does not show the path to a truly integrated European capital market that could overcome the fragmentation of national laws, each with their own laws for stock exchanges, corporate and dividend taxation or corporate insolvencies.
However, the document defines several projects with which the EU should come a step closer to an “open and liquid capital market that is well integrated into global markets”. For each project, an “invitation” is formulated to the Commission to examine and, if necessary, present legislative proposals.
The paper is based on the insight that the high investment needs that will emerge in the EU in the coming years due to the green and digital transformation will not be able to be covered by government resources or by bank loans alone.
Who should supervise the capital market?
The fact that many of the projects mentioned in the declaration remain controversial can be seen in several places. The ministers only generally support the development of a European securitization market, which is being demanded by the banks and also by several states under French leadership. Securitizations, i.e. loans that banks bundle into securities and sell to investors, have had a bad reputation since the 2007/2008 financial crisis. However, the banks that hope that outsourcing the loans will ease the burden on their balance sheets point out that securitizations have been significantly more strictly regulated since the crisis.
In the declaration, the ministers expressly instruct the Commission to explore the possibilities of a European securitization market from all sides, but add that the necessary supervisory and regulatory requirements must be closely observed.
It remains unclear how and by whom a more integrated EU capital market will be supervised in the future. The demands put forward primarily by France (and rejected by Germany) for a far-reaching transfer of authority to the EU stock market regulator ESMA in Paris are not expressly reflected in the declaration. It only says that the existing EU supervisory bodies “may need to be strengthened”.
More options for private investors
The different regulatory and legislative requirements for a capital markets union, such as a “convergence” of national insolvency regulations, the harmonization of accounting regulations and listing requirements on national trading venues, as well as the harmonization of corporate law, are all listed in the declaration. Beyond the test orders, the ministers leave it open where they consider harmonization necessary and would be willing to do so.
The department heads agree that private investors must have more opportunities to invest across borders.
However, the introduction of a “European investment product” called for by France circumvents the declaration. Instead, the ministers are calling on the Commission to "further develop and improve" the existing "Pan European Pension Product" (PEPP), which is used for pension provision. The ministers are also focusing on educating citizens on financial matters.
France's Finance Minister Bruno Le Maire, who complained about the standstill in discussions at the last ministerial meeting two weeks ago, was not present in Brussels, nor was his German counterpart Christian Lindner (FDP), who had recently put the brakes on Le Maire. Donohoe said he had coordinated extensively with Le Maire. His concerns were included in the statement.
He supports the Frenchman's plans to push forward some projects in a smaller circle of some countries. Most recently, in addition to France, Italy and Spain took part and the Netherlands have shown interest." [1]
Lithuania is soundly asleep here. There is a good reason for that. If Lithuanians would start easily investing in other EU countries, how Landsbergis company could steal their money?
1. Eine europäische Untote wird wiederbelebt. Frankfurter Allgemeine Zeitung (online) Frankfurter Allgemeine Zeitung GmbH. Mar 12, 2024. Von Werner Mussler, Brüssel
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