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ESMT White Paper
ESMT White Paper No. WP-19-01
Katharina Gnath, Benjamin Grosse Rueschkamp, Christian Kastrop, Dominic Ponattu, Jörg Rocholl, Marcus Wortmann (2019)
Subject(s)
Economics, politics and business environment; Finance, accounting and corporate governance
Keyword(s)
Financial integration, single market, European integration, free movement of capital
JEL Code(s)
F21, F33, F36, G21, G28
It is 25 years since the European Union (EU) agreed to complete the European Single Market (SM) in goods, services, people, and capital. While many barriers to the free movement of capital across borders have been removed, some important practical hurdles are still in place. The euro crisis has shown that the European financial sector in particular remains vulnerable and fragmented and this poses serious risks to the stability of both national economies and the euro area as a whole. In 2015, the European Commission therefore set out a list of measures to establish an integrated capital market in the EU by 2019.
The first part of this policy paper analyzes the channels through which financial integration affects growth, stability, and convergence in the EU, including capital allocation, production specialization, diversification of risk, and access to investment opportunities. The second part takes stock of persisting administrative and legal hurdles that impede full market integration. In particular, this paper distinguishes between a firm-level perspective, investors, and banks in its analysis. The final part provides some specific recommendations to improve the internal market for capital in the EU.
Journal Pages
24
ISSN (Print)
1866–4016