(Finance) – The Capital Markets Union is an indispensable projectin a phase where The EU faces a number of challenges which will require one generational effort to be financed, but so far it has not been possible to realize this project for two reasons: first, the conditions for the development of capital markets in Europe have not yet been met; Secondly, there has been too much reliance on a “bottom-up” approach for integration.
This is what was explained by Christine LagardePresident of the ECB at the European Banking Congressciting the philosophy of Immanuel Kant and stating “we can reverse our approach to the union of capital marketthat it may become one vital tool for financing ongoing transformations“.
According to Lagarde the history teaches us that “the need for a single capital market emerges when there is a need to finance an economic transformation which exceeds the capabilities offered by fragmented financial markets”. To explain this concept the number one of the ECB cited the example of the American railway, which gave impetus to the unification of capital markets in the USA. “The railways were considered so crucial to the future of the country – explains Lagarde – that capital markets were developed to tap a wider pool of domestic and foreign investors” and this allowed investments to explode in the railways by about 90 million in 1830 to nearly 5 billion in the early 1900s.
“Seen from this perspective, it is One reason why the Capital Markets Union has not yet been successful is clear” in Europe, states the President, recalling that in the EU priority has been given to stabilization of markets ed to risk sharing in the private sector to make the most resilient monetary union. A need – remember – inspired by the financial and debt crisis is that it preceded the capital market union project.
“There needs to be a broader common goal”, says Lagarde, recalling that, in the EU, governments and companies have effectively cut investments.
Re-proposing the Kantian theory of “doing the right thing because it is right”, Lagarde states that in Europe “the foundation of good will exists: politicians, banks and investors all want this project to succeed. What we need to do now is build on this goodwill and go furtherotherwise we risk jeopardizing Europe’s ability to face the challenges on the horizon.”
“ANDThere is a compelling collective interest in adopting a more ambitious European approach to create a capital markets union. In the changing circumstances we face today, where the challenges of deglobalization, demographics and decarbonization appear ever greater, integrated capital markets are integral to our success”.
“Some people argue that unless we start emitting common obligations Europeans, which will ultimately constitute the European safe asset parallel to US Treasury securities, this project will not be successful. – underlines the number one of the ECB – But even if this were correct, it should not prevent us from work on other necessary elements to make the Capital Market Union a reality“. “Faced with such an immense financial challenge, the time to act is now“, concludes Lagarde.