More developed capital markets in eleven countries of Central and Eastern Europe (Croatia, Slovakia, Slovenia, Czech Republic, Estonia, Latvia, Lithuania, Poland, Hungary, Romania and Bulgaria) could free up more than €200 billion in long-term capital, and more than €40 billion a year in additional financing for companies, according to a joint report by the Association of Financial Markets in Europe (AFME) and the think tank New Financial.
These eleven economies represent 20% of the population of the EU, 8% of its GDP, but only 2.5% of capital market activity, AFME explains. Companies in this region are also more reliant on bank loans than companies in the rest of the EU, with bank credit representing 85% of companies' debt in the region, compared to an average of 75% across the EU.
The report recommends that the EU promote the growth of national pension systems to offer a more consistent national investment pool, relax the investment regimes for institutional investors in order to allow investments in a broader range of assets, encourage diversification in sources of financing for growth companies and alternative sources of financing for SMEs, develop the infrastructure of the local financial markets (possibly through regional cooperation), encourage entrepreneurship and improve the regulatory framework for company restructurings, support local issuers in their efforts to access the capital markets by means of financial education programmes, encourage state companies to issue bonds or make public calls for savings and offer institutional support to develop the necessary reforms of the capital markets and adapt them to the local economic environment. (Original version in French by Élodie Lamer)