The president of the ECB, Christine Lagarde, takes on the role of Abraham Lincon to relaunch the single capital market (CMU), crucial for overcoming the formidable common challenges that Europe faces, such as the construction of the Pacific railway in the United States States of the 19th century according to America’s 16th president, he argues.
«Railroads not only connected the far corners of the United States, but also capital markets. The need to finance this project of unprecedented scale radically transformed the US financial system, changing its destiny forever,” said Lagarde speaking at the European Banking Congress in Frankfurt.
Today Europe finds itself in a similar situation. It faces “a new set of challenges that will require a generational effort to finance”, claims the lawyer banker, with the “three Ds” of deglobalisation, demography and decarbonisation looming large.
To finance the necessary transformations, the EU Commission estimates additional investments of 620 billion every year, on average, until 2030 for the green transition alone and another 125 billion per year for digitalisation, he recalls. But today there is less financial integration than before the financial crisis; bond markets are three times smaller than those in the US; and the EU’s risk capital is only a fifth of that of America, he claims.
Instead a true European capital market would make it possible to build «a sufficiently large securitization market», which would allow banks to transfer part of the risk to investors, free up capital and unlock further loans. But also to offer financing to young companies that drive innovation. According to Lagarde, with «a rapid development of the CMU, another 4,800 companies across Europe could “raise an additional 535 billion per year”.
Another challenge is represented by the digital euro, which is “the natural evolution of our currency” and “will be complementary to cash, it will not replace it”, explained yesterday, during a virtual round table organized by the EU Parliament, Piero Cipollone, new member of the ECB board where he replaced Fabio Panetta became governor of the Bank of Italy at the beginning of November. Cipollone underlined that the digital euro will strengthen Europe’s resilience, fostering innovation and competition.
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