EU fi­nance min­is­ters asked to set Cap­i­tal Mar­kets Union pri­or­i­ties

Financial Mirror (Cyprus) - - FRONT PAGE -

The Lat­vian Pres­i­dency of the Euro­pean Union has called on the EU to set out clear pri­or­i­ties in or­der to gen­er­ate mo­men­tum for the Cap­i­tal Mar­kets Union plan to lift growth, the EU news and pol­icy site EurAc­tiv re­ported.

The CMU project aims to in­crease the amount of funds raised by stock, bond and other mar­kets for com­pa­nies to grow. The 28-coun­try bloc re­lies heav­ily on banks for funds, which has been dif­fi­cult since the fi­nan­cial cri­sis as lenders fo­cus on build­ing up cap­i­tal de­fences.

EU fi­nan­cial ser­vices chief Jonathan Hill has pub­lished a long list of pos­si­ble ways to build the CMU, spark­ing con­cern the plan could get bogged down in lengthy de­bate. The bloc’s fi­nance min­is­ters will dis­cuss Hill’s ideas when they meet in Riga on Fri­day and Satur­day.

“Be­yond pos­si­ble ‘quick wins’, it will be im­por­tant to seek agree­ment on which other key ac­tions should be dealt with as a mat­ter of pri­or­ity in or­der to cre­ate mo­men­tum for ad­dress­ing some of the more dif­fi­cult, long­stand­ing bar­ri­ers to the cap­i­tal mar­kets union in the long run,” EU pres­i­dent Latvia said in a pa­per pre­pared for the meet­ing.

“In which three ar­eas do you see a need for short-term pri­or­ity ac­tion?” the pa­per added.

The need to set clear pri­or­i­ties is echoed by Bruegel, an in­flu­en­tial EU af­fairs think tank in Brussels, which has also writ­ten a pa­per for the fi­nance min­is­ters.

Bruegel pro­poses a staged process to “sus­tain the pol­icy mo­men­tum”, such as by agree­ing an early and firm com­mit­ment on a limited num­ber of key re­forms.

Bruegel rec­om­mends pos­si­bly de­lay­ing a sep­a­rate, draft EU law on forc­ing banks to iso­late trad­ing ac­tiv­i­ties for mar­kets. Crit­ics say the plans could harm mar­ket-mak­ing, a key mech­a­nism for com­pa­nies rais­ing funds.

More con­tro­ver­sially, Bruegel says that plans by 11 eu­ro­zone coun­tries for a tax on stock, bond and de­riv­a­tives trades “may act as a brake on in­vest­ment with detri­men­tal eco­nomic con­se­quences”.

Strength­en­ing the EU’s Euro­pean Se­cu­ri­ties and Mar­kets Author­ity would also boost CMU plans, it said, a step that would raise Bri­tish hack­les.

“Euro­pean mem­ber states should in­stead fo­cus their en­er­gies on har­monised tax­a­tion of sav­ings, re­form­ing the tax dis­ad­van­tage given to eq­uity rel­a­tive to debt,” Bruegel says in the pa­per.

It rec­om­mends cre­at­ing a new Euro­pean Chief Ac­coun­tant of­fice to stamp out na­tional dif­fer­ences in how ac­count­ing rules are ap­plied. Ac­counts are the ba­sis in­for­ma­tion in­vestors use when mak­ing their de­ci­sions.

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