EU-Bonds als Baustein der Kapitalmarktunion

View of the glass roof of a building on the Riedberg university campus (natural sciences) in Frankfurt am Main

In his report ‘The future of European competitiveness’, Mario Draghi defines three areas of action. The first and most important of these is to focus joint efforts on catching up with the US and China in terms of innovation in cutting-edge technologies. The second area of action is a joint plan for decarbonisation and competitiveness. And thirdly, Europe's security must be increased and its dependencies reduced. (2a) To achieve this, the EU and member states must align their policies with clear priorities. Resources must be focused on the essentials, and more coordination is needed where it counts. (2b) These reforms are very challenging for national and European politics.

But the European economy is also being asked to contribute. According to Commission estimates, additional funds of at least EUR 750 to 800 billion per year are needed to finance the investments required for greater competitiveness (2c). The resources of the European economy are sufficient to cover this investment requirement. However, according to Draghi, the private sector needs public support to finance the plan, such as tax incentives and direct government investment. A capital market union (investment and savings union) also offers advantages. However, despite some progress, this has still not been realised.

EU bonds as a building block of the investment and savings union
The ‘issue of a common safe asset’ could make all the difference. (2d) On the one hand, long-term capital, which has been in short supply to date, would be made available for the above-mentioned objectives. On the other hand, this would give the capital markets union a boost. Four advantages are presented: firstly, the ‘common safe asset’ would contribute to the standardisation of financial products in the EU, thus making markets more transparent and comparable. Secondly, it would offer a form of security ‘that can be used in any member state and in all market segments, ... between banks, including across borders.’

‘Thirdly, a common secure asset would create a large, liquid market that attracts investors from all over the world, resulting in lower capital costs and more efficient financial markets across the EU. This asset would also form the basis of the international reserves of other central banks and strengthen the role of the euro as a reserve currency.’ Fourthly, it would also offer all European households, the retail clients, a safe and liquid investment that would be accessible at a common price.

The Next Generation EU programme is leading the way
Mario Draghi is not alone in this view. Isabel Schnabel, a member of the Executive Board of the ECB, has made similar comments about the NGEU programme. She says the programme temporarily closes ‘three important gaps in the European institutional architecture’, including the deepening of capital markets in the euro area. (3) Peter Bofinger, who teaches economics at the University of Würzburg, sees it this way: ‘Overall, the discussion about a European capital markets union suffers from the fact that it gives the impression that a qualitative leap can be made from the already high level of capital market integration achieved through small-scale institutional changes. In contrast, it usually ignores the fact that the key disadvantage of Europe compared to the United States is the fragmentation of the markets for government bonds.’ (4)

The economist Eckhard Wurzel, honorary professor at the University of Konstanz, takes a critical view of this. He comments on X in a thread as follows: ’Higher EU competitiveness requires regulatory reforms, both at the national and EU level.’ ... ‘If debt is further extended at the EU level – it already exists, although it is not intended as a permanent institution in the EU treaties – this will lead to extended debt accumulation across country levels.’ ... ‘In the medium term, however, this will not bring any financial advantages to the overall system, consisting of the EU and national levels, since debt service and repayment for EU debt will have to be financed by the EU countries...’ (5)

After Draghi finished his presentation on 9 September, according to the European edition of Politico (5), less than three hours passed before the German Finance Minister Christian Lindner declared that ‘Germany will not agree to a common bond’. It should be noted that Germany has so far agreed to at least one common bond, the NGEU programme. And at the German Stock Exchange in Frankfurt am Main, there was recently a great deal of enthusiasm for EU bonds. (6) The message is sure to reach Berlin.

Margit Reiser-Schober

Errors in content? – eurolandpost@gmx.eu
Original language: German – machine translated by deepl –Errors in translation? – eurolandpost@gmx.eu