Unblocking the EU’s capital markets: The European Commission’s Green Paper on the Capital Markets Union - A Cicero Group analysis

Although integrating Europe’s capital markets is an ongoing policy objective, the importance of doing so was brought into sharp relief by the slow pace at which Europe has recovered from the financial crisis. As ECB Executive Board Member, Yves Mersch put it, “The euro area economy is like a plane flying on only one engine: bank financing.

 

To increase the speed and stability of the plane, it would be good to add a second engine: capital market financing”. The Capital Markets Union can therefore be seen as an effort to diversify and stimulate Europe’s financing environment by improving the efficiency and functioning of its capital markets.

 

The reliance on bank financing draws inevitable comparisons with the US, which has a more diverse financing environment and has recovered from the crisis far more quickly. Midsize companies in the US receive approximately five times more funding from capital markets than their equivalents and European companies are currently going to the US to access private placement markets rather than stay in the EU.

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