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S. Micossi: A new drive for the Capital Markets Union

For two decades, the lack of private investment has been one of Europe’s biggest economic weaknesses, undermining productivity, hampering growth potential, and damaging its competitiveness. Moreover, different financial conditions across the euro-area Member States have contributed to diverging levels of investment and economic growth, while fragmented capital markets have aggravated financial instability by reducing risk-sharing and shock absorption through private equity markets.  Many hopes were pinned on Capital Markets Union as a policy to address both Europe’s underinvestment and a redistribution of excessive savings throughout the euro area.

The European crisis after 2011 has worsened the situation, increasing uncertainty and fragmenting the European credit market along national lines. The consequence was a widening of the structural investment gap between Europe and the US. Between 2008 and 2015, gross fixed investment had declined by around 15 per cent in the euro area and the investment rate had dropped by around four percentage points. In the US, on the contrary, the investment rate had gradually recovered from its trough in the aftermath of the financial crisis.

At the end of 2014, the European Commission launched the initiative for a Capital Markets Union intended to provide Europe with stronger financial integration and risk sharing mechanisms, contributing to macroeconomic stability and more productive allocation of national savings.

(Click on the PDF file below to read the document).

PB A new drive for the Capital Markets Union (2).pdf162.95 KB