European Central Bank President Christine Lagarde said in a speech on Friday that she feared a “slow death” of the capital markets union project by failing to harmonize legislation between countries. As Europe loses ground in innovation and geopolitical tensions rise, the Capital Markets Union becomes more urgent than ever, Christine Lagarde said at a conference in Frankfurt.
The lack of progress in achieving the single capital market that the European economy needs is explained “largely by the vague definition” of the Capital Union and the “consequent fragmented legislative approach”, he explained before an audience of bankers. The interests of the member countries diverge in the capital markets union, a true sea serpent of European summits.
Since 2015, more than 55 regulatory proposals and 50 non-legislative initiatives have been launched, the central banker said. This has been done “at the expense of depth”, allowing the Capital Markets Union to be “dismantled by particular national interests, which perceive one initiative or another as a threat”, according to her.
A European financial police officer inspired by the American SEC
As possible remedies, the former IMF chief first proposed a “European savings standard” that would supposedly encourage investment, with investments backed by harmonized tax incentives. Currently, European savings remain invested mainly in low-yield deposits. Furthermore, European savings remain invested primarily within national borders due to a fragmented and expensive market infrastructure, causing institutional investors to prefer US markets.
To overcome these obstacles, Christine Lagarde returned to the idea proposed a year ago of a European financial police modeled on the American SEC, in order to harmonize practices and facilitate cross-border investments. Finally, venture capital in Europe represents only a third of that carried out in the United States, which requires eliminating bureaucratic barriers that limit the attractiveness of high-growth companies, according to the central banker.
Source: BFM TV
