Plenty of disagreement as capital market reforms return to EU agenda

Fears that changes could create winners and losers have stymied proposals to date

Competitiveness was the buzzword of choice being thrown around Brussels in the run-up to the summit of European Union leaders this week.

The European Council meeting discussed plans for how to stop the EU from falling further behind China and the US across a range of issues. Cue more buzzwords like “cutting red tape” and “unlocking” finances, such as pension savings, to be invested into European Union businesses and start-ups.

One of the main ideas floated on Thursday was the creation of a capital markets union, a proposal that has been knocking around for several years. This would mean moving towards a single EU market governing how capital flows within the bloc. Proponents say the reforms would make it easier for people to put savings into low-risk investments, rather than having them sit in a bank account.

The idea to effectively try to bring different national markets for capital together has never got off the ground, due to concerns about how contentious the reforms would be. It would mean trying to align various national regimes on things like insolvency, as well as possible tax harmonisation, a big red flag for Ireland.


Fears the changes would create winners and losers have stymied the proposals to date. France would likely push for the existing European Securities and Markets Authority (Esma) to play a much bigger role as an expanded regulator in any new union for capital, given the institution is based in Paris.

Smaller states, such as Ireland, Sweden and Luxembourg, oppose this over fears a big EU financial supervisory hub in France could lead to firms relocating offices to Paris. As a result, there is a lot of scepticism about whether the idea will get much further than when it was initially launched in 2015, despite being backed by France and Germany.

While Ireland’s line is that it supports capital market union reforms, draft language initially advanced for agreement at the summit was seen as overly favourable to the French view. The earlier version spoke about allowing more supervision at EU level and “harmonising” national insolvency regimes.

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Despite back and forth between leaders for several hours, in the end the agreed statement was much the same as the initial proposals. Leaders signed off on a statement that the EU would work towards “harmonising relevant aspects” of national insolvency rules, and improve the “convergence” of capital market supervision across the EU.

Speaking in Brussels on Thursday, Taoiseach Simon Harris said Ireland would not support any measures that moved towards “harmonisation” of corporation tax.

The talks on Thursday were for the most part just the start of the conversation. The summit had not been expected to resolve what are regarded by most as complex policy questions and disagreements.

Much will also depend on what the top of the EU institutions look like after the coming European elections, such as whether European Commission president Ursula von der Leyen secures a second term, and who will hold key commissioner portfolios.

The elephant in the summit room was the possible return of Donald Trump to the White House after November. A Trump presidency would almost certainly torpedo current warm relations between the EU and US. The result of that could be a return to something approaching a trade war between the two powers, sucking the focus away from talk about internal EU reforms.