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The author is the EU commissioner for financial services, financial stability and capital markets union
Birkenstock sandals are synonymous with Germany. Yet when the 250-year-old manufacturer decided to raise funds by listing itself last year, it looked not to Frankfurt, Paris or Amsterdam, but to the New York Stock Exchange. Companies across the EU find that they do not have access to enough sources of finance in the bloc. Often they move their headquarters, jobs and innovative potential out of the EU in search of that investment. This needs to be addressed.
The EU is certainly capable of growing innovative, world-leading companies. Take France’s Mistral, leading the way in artificial intelligence, German immunotherapy developer BioNTech or Danish drugmaker Novo Nordisk. Or Italian insurer Generali, Polish game developer CD Projekt Red or Irish food nutrition firm Kerry Group. Europe also has competitive banks that provide important financing, especially for smaller businesses.
But we don’t offer companies enough options for finance from capital markets. That’s especially important for young, innovative companies. Bank loans often aren’t their best option, or are no option at all, because they lack established revenue streams or collateral. For companies old or new providing tomorrow’s solutions — from green energy to artificial intelligence — we need European capital markets.
This is also strategically important. In the face of geopolitical instability, we need a strong European economy underpinned by a strong single market. We lag behind the US and China on capital markets, limiting the prospects for European companies that want to grow, innovate and create jobs in the EU. We need all 27 EU countries not only to deepen their own capital markets but also to integrate them into a genuine single market for capital. Size does matter. It is the only way for us to compete with other global economic powers.
We are not starting from scratch. Since 2015, the European Commission has been developing the capital markets union — our plan for a single market for capital, building on the success of the single market.
Earlier this month, EU economy and finance ministers agreed to accelerate work — a commitment shared by many members of the European parliament. Some member states are vocal in calling for more progress. We also welcome the European Central Bank’s support, and we’re looking forward to fresh ideas from Mario Draghi’s report on EU long-term competitiveness and Enrico Letta’s report on the single market.
We’ve already agreed a lot of regulatory measures, though they might need time to make a difference. We will soon have a “consolidated tape” — a single, real-time view of EU trading data (currently spread across many different sources). The Listing Act will make it easier for companies to get listed and stay listed on EU stock exchanges. The European Single Access Point will soon provide a one-stop shop for financial and sustainability information by companies, making them more visible to investors across the EU.
Reaching consensus on these files between the European parliament and 27 governments is reasonably straightforward. But two major obstacles to integrating EU capital markets — withholding tax procedures and insolvency laws — are proving more difficult. It is disappointing that some member states lack ambition on certain proposals, especially central clearing.
We have strong political commitment to the capital markets union project. Turning that into taking difficult decisions on individual measures, seeing beyond national vested interests and taking a long-term view are essential. More integrated capital markets will benefit all in the long run.
The next European Commission will need to look at more difficult ideas such as auto-enrolling workers in a private pension. This wouldn’t replace state pensions but supplement them, while making more capital available to European markets. A single market for capital needs supervision by a single supervisor, as the ECB president Christine Lagarde has called for. We also need to think seriously about consolidating EU stock exchanges and market infrastructures. Having a stock exchange that has not registered any new IPOs for years is not sustainable. We should rather focus on the benefits of our companies getting the financing they need in Europe, allowing them to scale up and create jobs and wealth here.
If we want a competitive European economy, if we want European start-ups to scale up at home, if we want to invest in European green tech, clean tech and biotech — then the capital markets union isn’t an optional extra. It’s absolutely essential.
