Capital Markets Union: What will happen to it after the European elections?

Citizens of 27 European countries go to the polls this week to elect the new members of the European Parliamentwhich will proceed to appoint its president as firstmeasure after the elections of June 6 to 9.

The question is: Will the new European leaders share the same opinion about the Union of the Capital Markets and will there ever be enough political will for fruit?

In a broader context, the Capital Markets Union (CMU) initiative was launched by the Commission Jean-Claude Junckerwhich adopted the first action plan of the WBU in September 2015. It established a list of more than 30 Actions to Create the Building Blocks of an Integrated Capital Market in the EU by 2019.

Fast forward to June 2024, the CMU’s overall plan – to create a single capital market across the EU with investments and savings that flow across their borders – has not yet been achieved.

Why is a Capital Markets Union necessary?

Mairead McGuinness, current European Commissioner for Financial Services, Financial Stability and Capital Markets Union, stated in an article published in the ‘Financial Times’ in March this year that the EU does not currently offer national companies enough options to be financed in the capital markets.

That’s why they go to other places. For example, Birkenstock, the German footwear brand, decided to raise funds listed last year on the New York Stock Exchange, instead of doing it in Frankfurt, Paris or Amsterdam. It is just one example of a large European company that has had to Go abroad in search of financing and resources. An issue that McGuinness says needs to be addressed.

McGuinness has also widely highlighted how Europe is lagging behind the US and China in capital markets, which in turn is limiting the prospects of European companies who want to grow, innovate and create jobs in the EU.

What is slowing down the progress of the Capital Markets Union?

Although many regulatory measures have been agreedthe national interests of the Member States have prevented the CMU plan from moving forward.

France and Germany have shown their support for the UMC, while other countries are reluctant to cede more control to Brussels, with many concerned about the additional costs for their domestic financial industries. As a result, the financial systems of the entire block continue fragmented and country-specific laws continue to hinder cross-border financing.

Basically, it is necessary to unify the rules of investment and insolvency to facilitate cross-border investment. For the CMU to become a reality, national leaders will have to accept it, which will require the same level of political will that created the European single market in 1993.