capital markets union crucial for the future

One month from the next ones European elections the markets' focus shifts to this significant event which, together with the possible ECB rate cut, could radically change the landscape of the European economy and markets. The European Commission led by Ursula von der Leyen is preparing to pass the baton to those who emerge victorious from the European Parliament, with great challenges ahead and a situation of great uncertainty on the international scene.

The current context sees a EU caught between two fires: on the one hand the USA and their robust growth despite the Fed's restrictive policies, on the other hand China which is gaining a leadership role in the technological and energy fields. In the middle there is Europe and a series of failed choices for the purposes of greater integration, first of all the failed completion of the banking union and the capital market. This is precisely one of the proposals recently launched by Enrico Letta.

The importance of European prosisms

For the S&P Global agency “it is essential to recognize the crucial importance of the next ones European elections“. “The European economy is experiencing a challenging time and is losing ground to global competitors such as the United States and China. – explains Sylvain BroyerChief Economist EMEA of S&P Global Ratings– Despite avoiding recession and approaching full employment, productivity challenges in Europe persist.”

The decline in productivity, particularly evident in major eurozone economies such as the Netherlands, France, Germany and Italy, highlights the need for collective action. To recover the competitiveness and drive sustainable growth, EU policymakers must accelerate integration and consolidate the European single market. This requires an agile European Parliament and a highly engaged European Commission.

Enrico Letta's recent proposal

The recent one proposal by Enrico Letta on the completion of single market It is an example of the direction in which the EU should be moving and the need for a joint effort to address these challenges.

In his report to the European Council, Letta explained that the “lever” that can make the EU competitive in the new international panorama it is represented by the Capital Market Union, since only an integrated financial market, without barriers and with common rules and supervision, will be able to make the circulation of capital more agile and activate the huge investments necessary to finance the double energy and digital transition, technological innovation, artificial intelligence and so on.

Unlike the banking union, which resulted in common rules and supervision, the capital market union has recorded so far very limited progressdue to the numerous obstacles posed by individual EU member states and perhaps due to the difficulty of identifying a common authority as in the case of the ECB for the Banking Union.

All this has as a corollary the small size of European capital markets compared to the USA: a mouse in front of an elephant. According to Letta's report, there are in the EU 33 trillion in private savings and approximately every year 300 billion escapes the EU to head to the USA and return to the EU in the form of investments in European companies. A sort of paradox.

It is necessary to unite to activate investments

“As recognized by Letta, the Capital Markets Union project offers a clear roadmap for progress. Achieving its goals would represent a significant step forward, unlocking the potential of European savings for the national investments“, underlines the S&P Global Ratings expert.

“The key measures of the Single Capital Market Agenda, in particular stock market integration, tax reforms and improved insolvency laws, can pave the way for a more dynamic and resilient European economy,” says Broyer, reiterating that Europe is capable of “embarking on a path towards prosperity and stability in an increasingly competitive global context”.