Ursula von der Leyen has pledged to build up the EU’s financial markets as she campaigns for a second term at the European Commission – but, after a decade of work, there’s still little consensus on how to do so.

Voters approaching the ballot box in June are likely to be more concerned about immigration, inflation and war than how to boost equity and bond markets.

But some argue a stronger capital market is the key to building up Europe’s competitiveness and autonomy, helping fund the green transition.

“Everybody has understood this is one of the main obstacles we have in the EU: access to capital,” von der Leyen said at an election debate last week (20 May).

The EU’s record here is indeed weak. At the end of 2023, US equities represented 45% of global market capitalisation; the EU just 11%, according to US securities industry group SIFMA. The EU effectively outsources around €300bn to US-based investment funds, von der Leyen pointed out.

Changing that – and creating more options for investors and cash-strapped companies – appears to be a goal shared by von der Leyen’s main rivals to be Commission president.

But the capital markets union first proposed by the European Commission in 2014 hasn’t yet materialised.

Political will

The project got harder with the loss of the bloc’s biggest financial market, London, and von der Leyen’s opponents accuse her of lacking the political will.

“You’ve been in charge for five years, and we haven’t seen a real push,” her rival Sandro Gozi, from the centrist Renew Europe group, said in last week's Bruegel/FT debate, saying that recent political declaration by EU leaders is “too little, too late".

Proponents point to some Brussels successes – such as unified rules for listed companies to produce a prospectus, and a new portal for information on potential investment targets.

But there have also been many failures. Much-hailed plans for a pan-European pension savings product got tangled up in red tape, and there’s only a single, tiny provider.

According to Valérie Urbain, Chief Executive Officer of financial infrastructure firm Euroclear, the choices will only get tougher.

“There is no more low-hanging fruit” to bolster capital markets, said Urbain, whose Brussels-based company acts as a clearinghouse and depositary for securities trades. “You really need to do some heavy lifting, which will require strong political will.”

For the top brass at Euronext – the pan-European group which runs stock exchanges in Paris, Milan Brussels, Amsterdam and Dublin – EU financial markets need central supervision, on the lines of the US Securities and Exchange Commission.

“The European SEC, that will happen ... we will have a single supervisor,” Stéphane Boujnah, CEO of Euronext, told Euronews, while also calling for a relaxation of banks’ prudential restrictions on equity holdings, and of merger controls between financial service providers.

In a time dominated by Covid and the war, the capital markets project became a “political orphan”, Boujnah said – but he believes the US Inflation Reduction Act, offering massive green tech subsidies, could persuade decision makers to boost competitiveness....

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