Next week’s summit could consider alternatives to bank loans to boost Europe’s fortunes, but attempts so far have had little success.
advertisementEU leaders next week are likely to agree on “ambitious” measures to boost non-bank lending, President Charles Michel told reporters.
Europe is looking to improve its fortunes in the face of war, costly climate change policies and economic competition, and hopes that capital market integration will help.
“Based on common sense, I think there are ways to mobilize significant amounts of money to stimulate the European economy,” European Council President Michel told Euronews as part of a group interview. “This is by enabling and making it easier for businesses to mobilize more of Europeans’ €9 trillion in savings.”
EU leaders will look for ways to compensate for rising defense costs after Russia’s invasion of Ukraine, costs of adapting to a decarbonized world and responding to trade-distorting measures such as the US Inflation Control Act. Dew.
Michel acknowledged that financing options such as Eurobonds or increasing the capital of the European Investment Bank would prove politically difficult. Frugal governments are generally concerned that joint sovereign debt can encourage debauchery among undisciplined people.
Michel may think that regulatory measures to integrate national stock markets and harmonize bankruptcy laws would be politically easier, but the project, known as the Capital Markets Union, , which has its own problems.
European policymakers have long lamented how dependent their companies are on bank loans at home, while U.S. policymakers enjoy alternatives such as stock issuance.
In a speech last November, European Central Bank President Chrisine Lagarde pointed out that the EU’s bond market is one-third the size of the US, and the size of venture capital is only one-fifth. He called for a “Kantian transformation.”
That means EU companies often have to flee outside the region to places like Silicon Valley to find the capital they need to grow.
But ministers have so far watered down plans to create a euro regulator modeled on the US Securities and Exchange Commission, and harmonization of tax and property laws remains complex and controversial.
More modest plans to provide EU-wide pensions and smooth stock market listing rules have not met with much success, despite national leaders pushing for further integration in 2014. .
“I’m disappointed that we weren’t able to make greater progress in this area sooner,” Michel said. “I’m sure it could be different now…The draft that’s on the table for next week is pretty ambitious.”
