A new year begins, but the feeling is the beginning of a new geopolitical era – the world continues to evolve at dazzling speed. In this regard, Europe faces an urgent challenge to change its trajectory: we need to fix the state of the EU’s competitiveness. I am delighted EU leaders recognize the importance of the task at hand and that this cannot be business as usual. If we look at where we are now, plenty of examples appear. Take the list of the global top 20 companies by market cap, we hardly find any European champions. In terms of market size, the US equity markets are the largest in the world and continue to be among the deepest, most liquid and most efficient, representing 42.9% of the $106tn global equity market cap in 2023. This is 4.1x the next largest market, China, followed by Europe.  

So, how do we push the power button?  

First, looking at the distribution of power between European institutions and Member States. We need to be more ambitious about the EU’s political and economic integration if we really want to advance towards a Single Market. Member States should cede competences to the EU institutions in areas such as defense, migration, energy or mobility infrastructure. All that is needed to ensure the free movement of goods and persons. We have reached a point where not advancing in integration is leaving the EU behind other more integrated areas that can take full advantage of their economies of scale. If we renounce to scale EU solutions, we are renouncing to be on the race. 

Second, changing our fiscal policy. As long as we do not have some kind of fiscal union, we will continue having a fragmented euro in our pockets with asymmetric fiscal policies. The response to the European shared challenges ahead (climate, digitization or security) will be suboptimal in the absence of some common fiscal policy, in a period where great strategic view and investment are needed. 

Third, changes needed in the regulatory framework towards the completion of the Single Market: 

•  To complete the Capital Markets Union. Starting by boosting the EU securitization market and explore ways to enable banks to free up capital and liquidity for the express purpose of providing additional funding to EU businesses. This should include an immediate review of the EU securitization framework.  
• Need to finalise the Banking Union by establishing a common risk sharing mechanism: the European Deposit Insurance Scheme (EDIS). Without it, there is not a level playing field for cross-border offering of retail financial services. If we want to build a real Single Market, depositors should feel that they are equally protected in all countries across Europe. 
• We need to work on harmonizing the regulatory framework. Although the single rulebook is a fundamental piece, the most common regulatory tool still are Directives and still national rules play a key role – there are many examples: insolvency frameworks, consumer protection rules, etc. The existence of different regulatory frameworks is the main barrier to European consolidation, due to the number of resources needed to understand and implement the different national regulatory frameworks. 
• This takes us to the lack of potential synergies that could be achieved in a merger. If regulatory frameworks are different, merged banks would still need different teams to deal with the different national frameworks, different products, different procedures to attend customers, different IT systems which are designed to give response to the specific regulatory framework in each country. Mortgages are different, payment commissions are different. There are limited cost synergies and economies of scale.  
• We need to improve the resolution framework. It is key to facilitate an acquisition regime for failed entities. Making the acquirer responsible for the conduct of management of the acquired entity before resolution is normally unjustified. This cannot be easily prevented through due diligence, bearing in mind the rapid reaction needed in this process. So, the responsibility regime should be reviewed. Lessons can also be taken from the US. Banks do not acquire the legal entity, but specific assets and liabilities. 
• Finally, competitiveness is not only about the Single Market, but about supporting EU business operating in third countries. International companies are crucial to the competitiveness of the European industry and the EU’s strategic autonomy. A top priority for the next Commission should be to ensure that the EU regulatory framework does not penalize highly diversified businesses operating in third countries and that duly recognizes banks that operate in those countries.  

The current Regulatory framework is excessively biased towards the protection of financial stability. If we want to realize Europe’s potential, and increase European growth, we will need to rebalance our attitudes to risk as well as to recalibrate the size and complexity of our regulatory framework to favor growth. This, I think, would be a major shift.