The EU is committed to accelerating the green and digital transformation. Decisions taken will affect the next generation. It is our collective responsibility to do the right thing.
Building a zero-emission industry, improving technological competitiveness and diversifying supply chains will be important factors for Europe’s continued prosperity and strategic sovereignty in the coming decades.
The financing needs are huge, and most of it will have to come from private capital. The role of public investment is to provide strategic guidance and incentives for massive private capital infusion, including through the involvement of the European Investment Bank Group and national promotional banks.
The single market has underpinned prosperity in Europe since its creation thirty years ago by removing barriers to trade within the Union and attracting foreign investment. Economic and monetary union, in turn, has provided a new impetus for market integration.
However, too little progress has been made for too long on one of the essential elements: the capital markets union.
Right now, banks in Europe provide the bulk of investment funding. They alone, however, cannot help the EU win the global investment race, especially in comparison to the US. Bank loans account for 75% of corporate borrowing in the EU and bond markets for 25% – while the reverse is true in the US.
Our start-ups and scale-ups are looking for capital. Businesses, especially SMEs, are struggling to find the patient and risk-bearing funding they need to invest in the green and digital transition. For example, the EU’s stock market capitalisation is less than half that of the United States, in percentage of GDP, and also lower than that of Japan, China and the United Kingdom. Yet, Europeans save much more than Americans.
It is our responsibility to make sure that European companies have the financing opportunities they seek, here, in the EU. We need a Capital Markets Union that channels Europe’s vast savings into tomorrow’s engines of growth.
We must overcome the current patchwork of national frameworks, and in some cases underdeveloped capital markets, to unlock their full potential. This will strengthen the EU as an investment destination and make the euro an even more attractive currency.
The EU has already taken some decisive steps in creating a Single Market for capital. Still, we need to step up our efforts and our ambitions to remove remaining barriers to cross-border finance and allow for deeper harmonisation. This includes more aligned insolvency laws, more easily accessible financial information, simplified access to capital markets, particularly for smaller companies, robust market infrastructures, and more integrated capital markets supervision.
Deepening the Capital Markets Union requires a collective effort, involving policymakers and market participants across the Union. It needs strong political will and ownership at all levels of governments. It needs the European Parliament and the Member States in the Council, to urgently finalise negotiations on key legislative texts. It requires courage and openness to change.
We are determined to see progress going through.
Time is of the essence. We have made notable progress toward Europe’s financial integration in the past two decades but it is time to show greater ambition. A genuine Capital Markets Union is within reach.
The coming decades will see the greatest industrial transformation of our times. Our long-term competitiveness will depend on it. Let’s make sure we have the capital to make it happen.