Finance European capital markets lagging behind according to report

In the view of the Association for Financial Markets in Europe (AFME), the European Union must push ahead with the integration of its capital markets. In a report presented on Tuesday, the association warns of the possible consequences for competitiveness if this is not done.

"The EU capital markets are falling behind", writes the Association for Financial Markets in Europe (AFME) in its seventh report on the Capital Markets Union, which is to be presented in Brussels this Tuesday.

"Despite some economic gains, the EU lags behind the US, the UK and China on most key indicators such as access to capital, global interconnectedness and market liquidity," warns the lobby group, which represents major banks, brokers, law firms and investors. "The EU's capital markets remain fragmented." This undermines Europe's economic competitiveness.

Private money

There is an annual funding gap of around 800 billion euros in the EU, which is needed for goals in key areas such as digitalization, infrastructure and sustainability. Without private money via the capital markets, this Herculean task for public budgets would not be achievable.

AFME CEO Adam Farkas called for reforms: "Only an integrated and more efficient capital market can finance the initiatives that are so crucial for the competitiveness of the European economy."

Efforts in Brussels have been stalled for years

Brussels has been working for years on the Capital Markets Union, which aims to reduce bureaucratic hurdles between EU countries. The EU wants more small investors to invest in the local financial markets so that more capital is available for the green and digital transition. Companies should have more opportunities to raise money. After years without much progress, the EU heads of state and government recently spoke out in favor of driving the project forward.

AFME warns that northern European countries such as Luxembourg and the Netherlands have better access to funding, while eastern European countries are lagging behind. Although the EU is a leader in sustainable financing such as green bonds, growth in this area has been slow recently. At the same time, private investment in financial start-ups is low compared to the USA and the UK.

SDA