Euro Zone Finance Ministers to Boost EU Competitiveness

By Jan Strupczewski

LUXEMBOURG (Reuters) – Euro zone finance ministers will announce next month measures to enhance the EU’s competitive position against China and the United States. This includes integrating the EU’s fragmented capital markets, crucial for financing such policies.

These announcements will build on independent reports commissioned by the EU earlier this year focusing on developing the EU single market and enhancing competitiveness.

Chairman of euro zone ministers, Paschal Donohoe, mentioned after Monday’s discussions in Luxembourg that while there are still differences to tackle, a consensus should be reached by November.

“I aim to come back to this in November with the goal of reaching an agreement on a text that reflects our shared vision on enhancing the competitiveness of our union in the years ahead,” Donohoe stated at a news conference.

Reports from former Italian Prime Minister Enrico Letta and former European Central Bank President Mario Draghi highlighted weaknesses in the EU’s single market and slow productivity growth amid competition from China and the US in climate-friendly technologies. A key challenge is finding approximately 800 billion euros annually for necessary technological investments, as pointed out in Draghi’s report.

The report stressed the need for a unified capital market in the EU to channel large European savings into innovative companies rather than directing those investments to the U.S.

However, efforts to develop a Capital Markets Union (CMU) have faced a decade of slow progress due to entrenched national interests, varying business and financial cultures, and differing regulations across European nations.

A CMU aims to standardize national rules on bankruptcies, prospectuses, capital gains taxation, listing requirements, and the different tax treatments of debt and equity, to simplify the process for companies looking to issue stocks and bonds and to educate European savers about investing.

Frustrated by the sluggish progress on the CMU, France proposed in February to allow smaller groups of countries to advance with deeper financial integration without waiting for unanimous consensus among 27 governments.

Germany and several other countries expressed reluctance to accept such a proposal, but Spain reiterated it on Monday, signaling an urgent need for action.

Donohoe responded, saying, “My strong preference is for all countries to move forward together, but I understand why some countries feel the need to enhance cooperation.”

“This is the second time this year we have seen such a proposal, which serves as a further catalyst and sign of urgency for all of us to find a way to move forward together,” he added.