The EU proposes increased financial oversight across the bloc

The European Union presented a package of measures aimed at encouraging the development of capital markets earlier this month.

The European Union presented a package of measures to encourage the development of capital markets earlier this month, including granting greater supervisory powers to the European Securities and Markets Agency. This proposal immediately sparked two opposing viewpoints in financial circles and in European newspapers.

In an effort to finalize the "Capital Market Union" project, which has been pursued for over 10 years, the European Commission recently pushed forward a proposal to strengthen financial supervision at the bloc-wide level.

In its article "Europe wants a single Financial Police," the French newspaper Le Monde points out a series of problems: European financial markets are highly fragmented, with the bloc's market capitalization only 73% of GDP. In contrast, the figure in the US is 270%. According to proponents of the project, this reality reduces businesses' access to capital, lowers Europe's competitiveness, and slows down the financing of rearmament and the EU's ecological transition.

The German newspaper Die Welt describes the newly published text as taking into account the transfer of regulatory authority over key cross-border entities to the European Securities and Markets Authority. These entities could include several exchanges, all cryptocurrency service providers, and securities depositories.

The Commission's proposal will be submitted to the European Parliament and member states for consideration. While initial feedback from many MEPs and some major countries like France has been positive, some other countries, led by Luxembourg, have not yet approved it. This country argues that the common oversight model could create a cumbersome bureaucracy, increase costs, and reduce market flexibility.

Luxembourg, despite its small size and population, manages numerous investment funds totaling over 7.3 trillion Euros. The financial services sector alone contributes a quarter of the country's GDP. Therefore, Luxembourg's disagreement with the European Commission's proposal for centralized financial supervision is understandable. Interestingly, however, it was Jean-Claude Juncker, Luxembourg's longest-serving former Prime Minister , who pledged to create a "Capital Market Union for the EU" during his tenure as President of the European Commission.

Luxembourg's position reflects a fundamental conflict between national interests, the need for autonomy and the protection of its financial strength, and the common goal of Europe to integrate markets and strengthen the bloc. Several other countries, also heavily reliant on cross-border capital flows, such as Ireland, Malta, and Cyprus, share this view. This reality means the European Union's single capital market project continues to face the risk of delays or only partial implementation.

Source: VTV