Europe must unify capital markets
An Italian offensive is underway to save Europe, and it’s a welcome one. In the same week, two former Italian prime ministers known for their commitment to Europe, Enrico Letta and Mario Draghi, put forward bold proposals to enable the European Union to stop falling economically behind the American and Chinese superpowers.
In a speech delivered on Tuesday, April 16 to members of a conference on European social rights in La Hulpe, Belgium, Draghi, a former president of the European Central Bank, called for a “radical change” and “a re-defining of our Union that is no less ambitious than what the founding fathers did 70 years ago with the creation of the European Coal and Steel Community.”
Draghi, who is due to submit a report on Europe’s competitiveness in June, believes that the EU as it was conceived is not equipped to face up to powers such as the United States and China. “Our organization, decision-making and financing are designed for the world of yesterday,” he said, a “pre-Covid, pre-Ukraine, pre-conflagration in the Middle East, pre-return of great power rivalry” era. If it does not want to be absorbed, the EU must equip itself with instruments adapted to “today’s and tomorrow’s world,” he argued.
Fragmentation of the European internal market
This is also the aim of Letta, who on April 18 presented his report on the reform of the internal market to the leaders of the 27 member states gathered in Brussels, a mission entrusted to him by the Commission. The former social-democratic prime minister argues the European single market, conceived at a time when “the European countries were the great countries of the world” has remained “very 20th century” while the world’s balance has been turned upside down.
If it remains stuck in its original construction, Europe will continue to fall inexorably behind China and the US. Today, the fragmentation of the European internal market not only prevents it from competing with the world’s major economic powers, but also creates jobs abroad and makes European companies the prey of these powers.
Letta has put forward a number of proposals to encourage the creation of European champions in the telecommunications, energy and finance sectors. One of the essential instruments for taking this step is the integration of capital markets at the EU level − a project begun 10 years ago. An integrated capital market, as is the case in the US, would make it possible to mobilize Europe’s surplus private savings to finance long-term investment in the green and digital transition.
At the European summit in Brussels on April 18, German Chancellor Olaf Scholz and French President Emmanuel Macron fought to give impetus to the capital markets union and championed the idea of launching a European savings product. This joint French-German effort is to be applauded. But it has met with resistance from a dozen or so member states, led by Luxembourg and Ireland, who are adamant about their national powers of financial supervision and tax regimes. The subject is due to be discussed again in June.
Let’s hope that at this time, the Draghi report will produce the necessary electroshock effect to convince recalcitrant countries of the scale of the challenge facing Europe.
