EU must quickly reform capital markets to boost private investments – Scholz

The EU must speed up the reform of capital market rules to help unleash private capital to ensure the resilience and technological competitiveness of the bloc, said German chancellor Olaf Scholz at a conference in Berlin. Regulatory hurdles put European companies at a disadvantage because businesses in the U.S. are able to raise large sums via the capital market despite not yet making a profit, said Scholz - who used to be the country's finance minister under former chancellor Angela Merkel - at the Europe 2024 conference organised by several newspapers in Berlin. "European financial capitalism does not work," said the chancellor, adding that the EU had to "take a leap forward" in its ongoing efforts to build the bloc’s capital markets union. French finance minister Bruno Le Maire agreed that the reform should be sped up, especially with regards to strong technology investments in the U.S. and China. "We need to wake up [and] it is indispensable that we focus on private funds."

The union has long sought to create a truly single market for capital across member states, but the process remains delayed. A Financial Times editorial said last week that private market capital in the EU "remains hemmed in by patchworks of national laws, regulatory and supervisory bodies, and trading venues”. It called the result "perverse", arguing that it led to missed investment opportunities, inadequate rewards for savers, and an economy at risk of falling behind in a more fiercely competitive world.

Red tape and a lack of funds are major hurdles for what many see as necessary investments in infrastructure and technologies to ensure a leading role for Europe in a climate neutral future. German economy minister Robert Habeck has repeatedly called for greater speed in the country to secure its place as a key location for industries in the future. The pressure on Germany only increased with the US introduction of the Inflation Reduction Act, he said recently.