The European Commission has published a new plan to revive its capital markets union proposal which stalled back in 2015 — but smaller members have expressed fear about creating a new powerful European Union supervisory authority.
The capital markets union, now renamed the “savings and investment union”, represented an effort to make it easier for money and investment to flow between the 27 countries in the EU.
If one lives in Ireland and accounts or funds in Spain offered better returns — so the thinking has gone — one might be more inclined to take the money sitting in one’s savings account and invest it.
About €11.6 trillion, or a third of all private wealth in the EU, was sitting idle in bank accounts or cash reserves in 2023, said the EC in October 2024. This included “€170 billion on deposit in Irish banks”, noted Ireland South MEP Billy Kelleher.
That represented 70 per cent of citizens’ savings held in bank deposits, said the EC on March 19.
Europe has needed to improve how it “mobilised” all this capital, according to European Commissioner for Financial Stability, Financial Services and the Capital Markets Union Maria Luís Albuquerque.
There were “good reasons for keeping money in safe accounts but there are also missed opportunities”, she said.
“Too few European citizens make a decent return on their hard earned savings, at least not in a simple and cost efficient way,” added the Commissioner.
So far so good, except Ireland itself— and other similar smaller countries such as Luxembourg — also feared their own financial services firms would relocate to be nearer the EU supervisory authority, probably located in Paris or Frankfurt.
The European Securities and Markets Authority (ESMA) in Paris is the EU’s markets regulator. Germany and France have both been pushing to expand its direct supervision powers to make it more akin to the US Securities and Exchange Commission.
Large, cross-border asset managers, trading infrastructure and cryptocurrency exchanges, all represented “good candidates for centralised supervision”, which could be directly supervised by ESMA instead of by member states, said Albuquerque.
A Savings and Investments Union would involve the “reallocation of supervisory competences between national and EU levels”, the European Commission confirmed on March 19.
Ireland and Luxembourg, for their part, have argued a union of capital markets would lead to a temptation to harmonise EU corporate tax and insolvency rules.
Ireland has, in fact, preferred its own corporate tax, which it has set at a very low 12.5 per cent to encourage overseas, mainly US, direct investment.
“We’re not in the business of wishing to see any harmonisation in relation to our corporate tax laws,” Ireland’s then-Taoiseach, or Prime Minister, Simon Harris said in 2024.
The EC, though said on March 19 it would “propose measures to ensure all financial market participants receive similar treatment, irrespective of their location in the EU”.
The EU was “again using a crisis to broaden their powers and establish a banking union”, responded one trader, complaining that “people have been mesmerised by the war in Ukraine and are ready to give away the last part of autonomy to the unelected lords of the EU”.
