Building a Capital Markets Union… or designing a financial system for the euro area?

Tuesday, 2 June 2015
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In this CEPS Commentary, economists Anton Brender, Florence Pisani and Daniel Gros challenge the foundation on which the European Commission launched a key debate earlier this year on the development of the EU’s financial system, with publication of its Green Paper "Building a Capital Markets Union". While acknowledging that a single capital market could be useful in the European Union, they argue that it is extremely dangerous to conduct one and the same monetary policy in an area with broadly varying financial practices and structures – as the first 15 years of the euro area's history have vividly shown. They conclude that financial integration of the countries in EMU must receive top priority in a process that the rest of the European Union may then subsequently join.

The authors also take exception with the European Commission's call for the "liberalisation" of capital flows. In their view, the problem in the euro area specifically is not just a matter of suppressing or eliminating barriers to allow capital to circulate more freely, but rather of building new channels that will allow economies to more fully mobilise and more efficiently allocate the savings potential in the area.

Anton Brender and Florence Pisani are both economists with Candriam Investors Group; Daniel Gros is the Director of CEPS.