Capital Markets and Banking Union: a key element for greening the economy
In this article, Christian Sewing (CEO of Deutsche Bank) and Werner Hoyer (President of the European Investment Bank) call for the need of strengthening the European single market, a crucial issue to confront the increased economic competition from the United States and China, and to success in the digital and green transformation. The completion of the single market, including the Capital Markets and Banking Union (CMBU), is a vital issue to bridge a funding gap of €350 billion per year over at least the next ten years in the European Union in its fight against climate change.
Reasons to strength the single market union and to complete the CMBU:
- The lack of a single market is affecting negatively the development of the digital economy at the European Union: The authors put the example of the problems that a digital start-up company faces to expand its activities through the European Union: “if a Silicon Valley start-up develops a good product, it has immediate access to a huge domestic market and can grow to the point where it can hold its own globally. But in Europe, that same start-up would have to spend its early years dealing with so many foreign tax lawyers and national regulators that international expansion would hardly seem worth“.
- A true CMBUs will increase the investors base and therefore the access to funding by European companies. So far “because there are significant regulatory differences between EU countries”, it is easier for investors (equities and bonds) to choose their domestic markets “potentially forgoing more attractive investment opportunities”. According to the authors a Paneuropean securitization market would be key to unlock additional capital for new business loans and to finance investments in green technologies.
- A CMBU is the key to greening Europe: With a genuine capital-markets union, the EU would expand financing opportunities for companies and attract capital from around the world, moreover the EU-green taxonomy will support the channeling of sustainable investments through the EU, making possible to bridge the climate action funding gap of €350 billion per year over at least the next ten years, that Europe needs.