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Europe urgently needs capital markets union, says ECB’s Lagarde
DPA
Fri, November 22, 2024 at 2:12 PM GMT+1 2 min read
Christine Lagarde, President of the European Central Bank (ECB), speaks at the “Frankfurt European Banking Congress.” Helmut Fricke/dpa
Europe urgently needs to make progress in creating a capital markets union in the face of looming trade conflicts, European Central Bank chief Christine Lagarde warned on Friday.
The proposed Capital Markets Union (CMU) is “key for becoming more resilient in a fragmenting world economy,” Lagarde told the European Banking Congress in Frankfurt.
“Capital markets are the missing link for Europeans to turn their high savings into greater wealth – which will ultimately enable them to spend more and strengthen our internal demand,” argued Lagarde.
“However, this growing urgency has not been matched by tangible progress towards CMU, in large part because its implementation remains loosely defined,” she added.
The CMU is essentially about removing bureaucratic hurdles between the individual states of the European Union in order to create a single market for capital across the bloc. Companies would then have more opportunities to raise money, for example.
The European Commission’s plans have been on the table since 2015.
The EU is also aiming to encourage retail investors to invest in local financial markets so that more capital is available for the green and digital transitions.
Europe must offer savers products that are accessible, transparent and affordable, said Lagarde: “In my view, a ‘European savings standard’ – a standardized, EU-wide set of savings products – is the best way to achieve these goals.”
When Europeans’ savings reach the capital markets, they do not spread throughout the European economy, she noted: “Capital in Europe is either trapped within national borders or leaves for the United States.”
At last year’s banking congress, Lagarde spoke in favour of a European stock exchange supervisory authority to overcome the fragmentation of the European capital market.
While the strong capital market in the US has benefited from the standardized supervision of the Securities and Exchange Commission (SEC) for decades, direct supervision in Europe largely takes place at the national level, Lagarde told the congress on Friday.
This leads to fragmentation in the application of EU regulations, she said.
Christine Lagarde, President of the European Central Bank (ECB), speaks at the “Frankfurt European Banking Congress.” Helmut Fricke/dpa
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Norway is assessing its EU options as a second Trump term looms
Increased geopolitical tensions could yet see Oslo rethink its attitude towards Brussels
CONSTANZE STELZENMÜLLER
Norwegian soldiers patrol the border with Russia. Were Trump to downgrade the US role in Nato, Oslo would feel much more vulnerable to pressure from Moscow and Beijing © Maxim Shemetov/Reuters
The writer directs the Center on the US and Europe at the Brookings Institution
European capitals are contemplating the return of Donald Trump on January 20 with a degree of unease. The US president-elect is known, after all, to harbour less than warm-and-fuzzy feelings towards Nato and the EU.
All European capitals? Not quite. Consider Oslo, where senior Norwegian politicians like to remark reassuringly that “our bilateral relationship with the US will always be safe”. And they do have some excellent points in their favour.
Norway, a founding member of Nato and its eyes and ears in the Arctic, is the guardian of the North Atlantic exit route for the Russian submarine fleet based on the Kola Peninsula. It plans to overshoot Nato’s defence spending goal of 2 per cent of GDP by 2025, and its long-term defence plan will nearly double the defence budget by 2036; a “civil defence brochure” tells citizens how to stock up for emergencies, including war. It is a major supporter of Ukraine. Fifty-two per cent of Norway’s $1.8tn sovereign wealth fund is invested in North America. It even has a trade deficit with America. These are all things the president-elect likes.
Ask around in Oslo, though, and concerns quickly surface. Trump’s enthusiasm for tariffs is a particular source of anxiety, as Norway is not a member of the EU. “If the US levies tariffs on Europe, and the EU retaliates with countertariffs, we’ll be hit with a double whammy,” sighs one official.
Apprehensions about security are also rife. Russia and China have been muscling into the Arctic. They are especially keen on the archipelago of Svalbard, which is Norwegian territory, but under a century-old international treaty allows other countries to exploit resources and conduct research. Were Trump to downgrade the US role in Nato, Oslo would feel much more vulnerable to pressure from Moscow and Beijing. And what if Russia’s president Vladimir Putin, in return for a ceasefire in Ukraine, were to demand US support for tweaks to the European security order — say an expanded Russian and Chinese foothold on Svalbard?
Could all this make the EU appear in a new light? Norway said no to joining in two referendums in 1972 and 1994, joining the European Economic Area (EEA) instead. A November poll still has only 34.9 per cent of Norwegians saying their country should join, with a plurality of 46.7 per cent against. Still, that is down from more than 70 per cent against in 2016.
Policymakers in Oslo note the EU’s competitiveness struggles and the rise of the far right, as well as their own domestic obstacles like fishery or agricultural interests. But they have also been watching the speed and determination with which Finland and Sweden have integrated into Nato. One points out that Helsinki is about to get its own Nato land command in 2025, and Stockholm gained a director-general position in the alliance’s international civil service, “while we have neither!”
Indeed, Norway’s global commitment to diplomacy, international institutions and law, its military seriousness, its generous development aid, its position as one of Europe’s key energy suppliers following the near-complete decoupling from Russia, and finally its stupendous wealth fund would all make it a prime candidate for expedited membership in the EU.
So the dilemma for an interdependent and exposed Norway is — as the newspaper Aftenposten put it memorably after Trump’s re-election — whether to become “the 51st state of the US, like a kind of Puerto Rico” or the 28th member state of the EU. The appeal of the latter option is that Norway would be moving in at the top floor. At a time when both Paris and Berlin are barely able to lead, it could not just shift the balance of power in Europe, but initiate a restart.
For Norway is not the only European country that is quietly weighing its options. Pro-EU parties won Iceland’s November parliamentary election. Switzerland is wrapping up negotiating a treaty package with the EU, and its hallowed neutrality is the subject of a vibrant national discussion. Ireland is not a Nato member, but it too has been tightening its ties with the alliance. Sweden’s debate on swapping the weak krona for the euro has remained inconclusive; but war in Europe could make joining the Eurozone look like additional political insurance.
A sceptical Norwegian banker contends it would take a political “meteorite” to shift his country’s posture on joining the EU. Given the experience of the first Trump administration, that is hardly unimaginable. But it would be ironic if the 47th president were to become a great unifier of Europe.