Europe's Capital Markets Union: A Final Word
In a recently published paper I took stock of what might constitute a viable, integrated capital market in Europe. This follows the European Commission’s recently proposed “capital markets union” (CMU).
A CMU, even in its idealized final state, cannot compare with a unified capital market like that of the United States. For one, U.S. fiscal federalism doesn’t have a European counterpart. Also, the more robust monetary environment in the United States provides far greater stability to capital markets than would be the case under an approximate CMU. Rather, it is sufficiently important to just judge the timeline and possible impact of a CMU.
The impact of a CMU on MAPI member companies’ operations in Europe will probably be modest. MAPI companies are large and they already benefit from worldwide access to funding. The retail investment side of a CMU does not concern them, while the entire legal and regulatory framework touches expressly upon financial institutions.
The immediate boost to growth from a swift implementation of all planks of the CMU is judged as substantial but not overwhelmingly so. This is because changes in behavior, institutions, and various economic multipliers will take time to translate into greater efficiency. Perhaps the greatest success of a CMU would lie not so much in striving for the largest number of deadlines in the least amount of time but rather in going for a realistic agenda that stands a realistic chance of delivering enhanced efficiency. It is the measurable quality that matters here and not the quantity.