Europe urgently needs to make progress in creating a capital markets union in the face of looming trade conflicts, European Central Bank chief Christine Lagarde warned on Friday. The proposed Capital Markets Union (CMU) is “key for becoming more resilient in a fragmenting world economy,” Lagarde told the European Banking Congress in Frankfurt. “Capital markets are the missing link for Europeans to turn their high savings into greater wealth – which will ultimately enable them to spend more and sIn her address at the “Frankfurt European Banking Congress,” Christine Lagarde, the President of the European Central Bank (ECB), emphasized the urgent need for progress in establishing a capital markets union in Europe, especially in light of potential trade conflicts. Lagarde stressed that the proposed Capital Markets Union (CMU) is crucial for enhancing resilience in a world economy that is becoming increasingly fragmented.
According to Lagarde, the CMU is essential for unlocking the potential of European savings and turning them into wealth, which in turn will boost internal demand. However, she noted that despite the pressing need for a CMU, there has been little tangible progress in its implementation due to its vague definition.
The CMU aims to eliminate bureaucratic barriers between EU member states, creating a single market for capital across the bloc. This would provide companies with more opportunities to raise funds. The European Commission has been working on this plan since 2015.
In addition to promoting the growth of companies, the EU also aims to encourage retail investors to invest in local financial markets, thereby increasing the availability of capital for the green and digital transitions. To achieve this, Lagarde suggested the introduction of a “European savings standard” – a standardized set of savings products that are accessible, transparent, and affordable for savers.
Lagarde also highlighted the issue of capital being trapped within national borders or flowing out of Europe to the United States. To address this, she proposed the establishment of a European stock exchange supervisory authority, similar to the Securities and Exchange Commission (SEC) in the US, to overcome the fragmentation of the European capital market.
Currently, direct supervision of capital markets in Europe is primarily carried out at the national level, leading to inconsistencies in the application of EU regulations. Lagarde emphasized the need for standardized supervision to promote a more cohesive and efficient capital market in Europe.
In conclusion, Lagarde’s speech at the “Frankfurt European Banking Congress” emphasized the urgency of creating a capital markets union in Europe and the potential benefits it could bring. She also proposed practical solutions to address the current challenges and promote a more integrated and resilient European economy.