22 May 2024

Assessing the Capital Markets Union – A decade on

Economist Nicolas Véron and Legal Scholar Tobias Tröger analyze the best way forward for the Capital Markets Union in a SAFE-CEPR RPN Policy Web Seminar

Nicolas Véron from the think tank Bruegel and the Peterson Institute for International Economics, and Tobias Tröger, Director of the SAFE Research Cluster Law & Finance, discussed the progress and challenges of the Capital Markets Union (CMU) ten years after its first announcement. SAFE Deputy Scientific Director Loriana Pelizzon moderated the debate during the SAFE-CEPR-RPN Policy Web Seminar on 13 May.

After an introduction by Loriana Pelizzon, Véron summarized his paper “Capital Markets Union: Ten Years Later”, an in-depth analysis requested by the ECON Committee. In his overview, he traced the origins of the CMU back to Jean Claude Juncker's introduction of the term in July 2014. Véron highlighted its political backdrop, particularly the role in fostering a positive narrative for the UK amid Brexit discussions. Véron emphasized, "The CMU lacked a clear policy definition due to its consensual approach aimed at appeasing various stakeholders, especially in the UK." Despite initial optimism, this lack hindered the project's success. "The project of the Capital Markets Union has recently been elevated from ministers of finance to leader level by German chancellor Olaf Scholz, so there now is an understanding of the topic’s urgency.”, Véron continued.

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Echoing Véron’s sentiments, Tobias Tröger noted the CMU's limited policy impact. He presented SAFE Policy White Paper No. 102 “The Geopolitical Case for CMU and Two Different Pathways Toward Capital Market Integration”, co-authored with Florian Heider, Jan Pieter Krahnen, Katja Langenbucher, Vincent R. Lindner, and Jonas Schlegel. In contrast to Véron’s presentation, Tröger highlighted the CMU's significance in the geopolitical landscape, as it could strengthen Europe’s position, and proposed two avenues for achieving a sovereign capital market: institution-building and regulatory competition. Tröger argued that "market participants should have the flexibility to choose the most favorable regulatory regime," addressing concerns about regulatory standards with market discipline. He acknowledged the common challenge of EU member states to relinquish sovereign power, which faces opposition from both private and public sector incumbents.

The geopolitical context

In the ensuing debate, Véron and Tröger addressed the challenges and potential roadmaps for the CMU. Véron stressed the need for explicit willingness among member states to share sovereignty for the mutual recognition model to succeed. He added that “the geopolitical context could create a sense of urgency among member states to pursue supervisory integration, despite obstacles from special interests.” Tröger countered Véron's points by advocating for the mutual recognition model, which he believed could mitigate concerns about national authorities protecting local interests.

While Véron suggested differences in the willingness to share sovereignty between northwestern and eastern European countries, Tröger remarked that the regulatory competition model could politically benefit member states – by offering opportunities for increased competition and welfare gains. The debate underscored the complexities surrounding the Capital Markets Union, including balancing national sovereignty with integration, the role of taxation and insolvency frameworks, and geopolitical dynamics shaping member states' attitudes toward integration.