9 February 2024
Written by Issam Hallak.
The capital markets union (CMU) is an EU political project aimed at ‘de-fragmenting’ the markets for corporate financing. The primary objective is to ensure that firms with comparable characteristics obtain comparable financing conditions – especially as regards costs and volumes – regardless of the Member State in which they are located. The objective to de-fragment capital markets is influenced by the context of European monetary union and the single market for goods and services; fragmented financial markets have adverse effects on the conduct of euro monetary policy, as well as on fair competition between EU firms – the level-playing field. The second major objective of the CMU is to expand the financial means and instruments available to EU corporations through wider de-fragmented EU capital markets offered to EU companies, as well as regulatory intervention. This aspect is of greater relevance to the financing of innovation and would be reflected in the ‘attractiveness’ of the EU capital markets to both firms seeking funding and investors.
The first major CMU policy action agenda was set out in 2015, and the second in 2020. Actions address a wide range of aspects of EU capital markets, and seek three objectives: a) transparency and centralisation of information, b) removal of cross-border obstacles for investment within the EU, and c) regulatory tools to expand financing resources and financial instruments.
Steps towards an effectively integrated EU capital market are therefore being taken one by one, taking Member States’ specificities into consideration. In the meantime, the incompletely integrated EU capital markets maintain economic discrepancies and divergences between EU Member States, while EU firms with significant innovation and growth potential may continue to lack the financial investment they need from the private sector.
Read the complete briefing on ‘Capital markets union: Overview and state of play‘ in the Think Tank pages of the European Parliament.