Euro Zone Ministers to Detail Joint Plan on Capital Markets and Productivity – Reuters

By Jan Strupczewski

LUXEMBOURG – Euro zone finance ministers are set to unveil their strategies next month aimed at enhancing the EU’s competitive edge against China and the United States. A key focus will be the integration of the EU’s fragmented capital markets, which are crucial for financing these initiatives.

This announcement will build upon independent reports commissioned by the EU earlier this year regarding the development of the EU single market and the bloc’s competitiveness.

Paschal Donohoe, the chairman of euro zone ministers, stated following discussions in Luxembourg on Monday that while differences remain regarding the path forward, he expects that by November, areas of consensus will surpass those differences.

"My aim is to return in November with a proposal that encapsulates our shared vision for enhancing the competitiveness of our union in the years to come," Donohoe said in a press briefing.

Reports from former Italian prime minister Enrico Letta and former European Central Bank president Mario Draghi highlighted weaknesses in the EU’s single market and the sluggish growth of EU productivity, particularly as China and the United States compete in emerging climate-friendly technologies. A significant challenge identified is the need for around 800 billion euros annually to fund technological advancements, according to Draghi’s report.

The report emphasized the necessity for a unified capital market within the EU to redirect substantial European savings towards supporting innovative companies rather than them being invested in the U.S.

However, discussions around establishing a Capital Markets Union (CMU) have been ongoing for a decade and progress has been slow due to entrenched national interests and varied business and financial cultures among European nations.

A successful CMU would standardize national regulations on bankruptcies, prospectuses, capital gains taxation, listing criteria, and the treatment of debt and equity, facilitating easier stock and bond issuance for companies while educating European savers about investment opportunities.

In light of frustrations over the CMU’s slow advancement, France proposed in February that smaller groups of countries should proceed with deeper financial integration rather than waiting for consensus from all 27 member states. While Germany and other nations were hesitant about this approach, Spain reiterated the proposal on Monday, prompting Donohoe to acknowledge the need for urgent action.

"My strong preference is for all countries to move forward together," he expressed at the news conference. "Nonetheless, I understand why some countries are seeking ways to enhance their cooperation."

"This marks the second occurrence of this sentiment this year, serving as a catalyst and a clear sign of urgency for us all to find a way to progress together," he concluded.