The European Competitiveness Summit on 17 and 18 April ended with the EU27 leaders agreeing on how to complete the Capital Markets Union (CMU). The subject was discussed at length, and it was a “difficult” meeting, according to the President of the European Council, Charles Michel, who nonetheless welcomed “substantial decisions” and “a step forward”.
Together with former Italian Prime Minister Enrico Letta, Charles Michel reiterated the urgent need to make progress on the capital markets. “Today there is a paradox: a large part of [Europeans’] savings is leaving the EU, and is not being mobilised to support the economic base, innovation, the technological base”, insisted the President of the European Council on his arrival at the meeting on Thursday 18 April.
For Enrico Letta, who is also the current President of the Jacques Delors Institute, the EU is “sharing the crumbs on the financial markets”. He proposed better integration of these in his high-level report on the Single Market (see EUROPE 13393/3).
“Savings and Investment Union” to replace Capital Markets Union
The Savings and Investment Union, a less technocratic and more accessible formula proposed by Enrico Letta (see EUROPE 13393/3), has enabled the EU27 to agree on the need for the EU to further integrate its capital markets. While the wording appeals to some, particularly in France and Belgium, the objective of financing transitions by making the 33,000 billion euros of European investors bear fruit remains the same.
“Deepening the Capital Markets Union is key to unlocking private capital”, concluded the European Council. It stressed the need to harmonise national frameworks for corporate insolvency, to relaunch the European securitisation market and to implement a cross-border savings product.
More than five hours of debate led the EU27 to take a position on the issue of financial supervision: the European Council invites the European Commission “to assess and work on the conditions for enabling the European Supervisory Authorities to effectively supervise the most systemic relevant cross-border capital and financial market actors (...) taking into account the interests of all Member States”.
Models of supervision and taxation were at the heart of a debate marked by “a certain conservatism”, confided a European diplomat. A number of “small countries” with “competitive” tax systems have been more cautious about centralising their tax systems in Europe, with Luxembourg, Finland and Ireland leading the way.
“It was very important for me and a number of other Member States that our views are heard and taken on board. I am very satisfied that in relations to corporate tax system, and supervisor structures, it has been made sure that they are, of course robust, but also proportionate and logical”, declared the Irish Prime Minister, Simon Harris.
New European Competitiveness Deal
Strengthening the CMU is part of the ‘European competitiveness Deal” called for by European leaders in their conclusions. The mobilisation of private capital is crucial, but the idea of public funding has also been raised: “Investments in key strategic sectors and infrastructures require a combination of both public and private financing working together”, say the leaders.
The Competitiveness Summit failed to make any progress on this issue, and for good reason: several sources said that the debate was premature. The EU27 are divided on this issue, as several leaders reminded the press on Thursday 18 April.
“I think we reached some good conclusions on this point today. But I did not agree with the idea of possible new common financial instruments and I said earlier that we did not support them. Let’s make the single market work better by removing obstacles”, said the Finnish Prime Minister, Petteri Orpo, as he left the summit. Several countries such as the Netherlands and Sweden share this vision.
However, this is not the case for France, for example. “If we want to succeed in the challenges of transition, strengthen innovation, respond to security problems and enlargement, there is a need for European financing”, said French President Emmanuel Macron. The same holds true for Italy. “If we say no to the common debt, if we say no to public debt, to private capital, we can develop the most beautiful strategies, but we won’t achieve them”, stressed the Italian Prime Minister, Giorgia Meloni.
Enrico Letta also stated that European public funding will be necessary. But these will only bear fruit if they are combined with a serious mobilisation of private capital, he insisted.
Making the most of the Single Market
The EU27 agreed on the urgent need to strengthen the Single Market by removing all remaining barriers, particularly for the trade in services. This also involves better transport links between Member States. In his report, as well as in his speech to the press, Enrico Letta highlighted the glaring lack of high-speed rail links between European capitals.
The heads of state or government also agreed on the need to reduce the bureaucratic burden on businesses. They called for a regulatory framework that is “better integrated, coherent across policy areas, open to innovative approaches and digital by default”. To this end, the European Commission must prevent over-regulation, and strive to reduce reporting obligations by at least 25%, according to the European Council.
This simplification also applies to agriculture, according to the leaders. The European Council encourages the Council of the EU and the Commission to continue work on implementing “short and medium-term measures to reduce administrative burden and achieve simplification” for farmers.
What’s next for competitiveness?
The European Council conclusions are broadly in line with the recommendations made by Enrico Letta. The Belgian Presidency of the Council of the EU and the Hungarian Presidency, which will succeed it, have promised to follow up on this work, reiterated Belgian Prime Minister Alexander De Croo. And to reassure Mr Letta, who had expressed concern a few hours earlier that his report would end up in a drawer. “I always avoid triumphalism in my life, but I am convinced that the decisions taken by the European Council today are an important step forward”, he said at the end of the meeting.
To see the conclusions: https://aeur.eu/f/buz and the ‘Letta’ report: https://aeur.eu/f/btd (Original version in French by Bernard Denuit and Léa Marchal with editorial staff)