Brussels, 03/03/2015 (Agence Europe) - Reducing the fragmentation of the market and promoting risk-taking are two elements which are vital to relaunch investment in Europe. This is the conclusion reached by AFME (Association for Financial Markets in Europe) and the consultancy firm Boston Consulting group in a report based on a survey of international investors.
The report highlights the differences between the capital markets in Europe and in the United States. In this way, according to the report which was presented in Brussels on Tuesday 3 March, the total assets invested in Europe represent around three-fifths of those present in the United States, or nearly €30,000 billion, compared to €49,000 billion in the United States, even though the two economies are similar in size. The comparison with the United States shows that sources of finance are a key challenge for Europe, the report states. Rick Watson, head of the capital markets unit, highlights the excessive dependency on bank financing in Europe. For SMEs, which employ around 67% of the European workforce, the problem is not a lack of capital (financing balances have been put at €2,000 billion, compared to €1,200 billion in the United States), but this excessive dependency on bank financing. The lack of equity funding for SMEs is the key to the European problem, according to AFME.
The United States enjoys greater flexibility in sources of financing (private pension funds, fund managers, etc). The willingness to take risks is also greater in the United States and investment in shares is more developed. Pension funds and fund managers in America invest more than their European counterparts (53% of funds, compared to 37%), which can be explained, amongst other things, by the important position of state pension systems in Europe.
The investors who took part in the survey referred to the fragmentation of the market in Europe as the biggest obstacle to investment. The AFME report also argues that aligning the tax treatment of debt and equity would make SMEs more likely to raise equity capital. The report also lists four priorities: reducing the fragmentation of the market, promoting a risk-taking culture, improving private investment and creating an environment conducive to investments in infrastructure projects. AFME goes on to express its support for the Capital Markets Union, the subject of a Green Paper presented by the Commission last week. (Élodie Lamer)