You know European Union policymakers are serious about trying to unjam some long stalled reform when they give it a new name. So, the proposed capital markets union has now become the “savings and investments union”.
The idea is to make it easier for money and investment to flow between the EU’s 27 member states. European leaders hope this might bring hundreds of billions of euros into the economy that is currently just sitting in savings accounts.
The reforms aim to nudge people to invest their money into accounts or funds with better returns.
Governments will be encouraged to introduce more favourable tax incentives for people to invest their savings. There will be an effort to harmonise the different sets of rules that exist across the EU states as well.
The European Commission, the EU’s executive arm that steers policy, on Wednesday published its plan to give the proposed reforms a fresh push. Creating a single market for capital in the bloc was first put on the table back in 2015.
A failure to get EU states to agree to rewrite national rules, to align things like insolvency regimes or the tax treatment of investments, however, bogged down progress.
A group of mostly smaller member states, including Ireland, fear the creation of a powerful EU supervisory authority, to oversee common capital market rules. The Government is concerned that a single central authority, likely located in Paris, might lead to financial services firms in Dublin deciding to relocate to the French capital.
The group of smaller states prefer national capitals to keep hold of the reins, while trying to better line up the different rules and regimes inside the EU.
The commission’s reworked “savings and investment union” plan noted there would be a need for more “harmonised supervision” at EU level, as domestic financial markets became more integrated.
The reforms would require “significant changes” in how Europe’s financial system functioned, it said. There would need to be an attitude shift among individuals and households, towards a United States-style investor culture.
EU commissioner for financial services, Maria Luís Albuquerque, said Europe needed to improve how it “mobilised” capital.
“Too few European citizens make a decent return on their hard earned savings, at least not in a simple and cost efficient way. There are good reasons for keeping money in safe accounts, but there are also missed opportunities,” she said.
Individuals more motivated to find ways to invest their money usually turned to markets outside of the bloc, she said.
The EU executive is to come out with a “blueprint” for what European investment products might look like later this year, as a guide for member states. The reforms also push for auto-enrolment pensions in states which do not have such schemes in place already.
EU authorities had to make better use of existing regulatory powers, to address mismatches in national practices holding up closer market integration, the commission said.
Leaders are to discuss the proposals at a summit in Brussels on Thursday and are expected to agree there is an urgent need to create an integrated EU capital market.
The meeting is likely to back calls for new “EU-wide savings and pension products”, following negotiations by diplomats over recent days and weeks leading up to the European Council summit.
A joint statement from leaders will also likely propose more be done to improve the “venture capital ecosystem” in the union.
An early draft of the text, which is subject to change, agreed to work towards “convergent supervisory practices”, so that companies and investors were not dealing with many different sets of rules.
