BRUSSELS — The EU’s six largest economies want to break political deadlocks preventing the bloc from creating a U.S.-style financial market in a crunch meeting later this month.
According to three diplomats briefed on the talks, a statement is expected to emerge May 28, when the finance ministers of France, Germany, Italy, the Netherlands, Poland and Spain are scheduled to meet in Berlin to unveil political compromises on the plan to turn the bloc into an investment powerhouse.
The looming statement is still in flux, the diplomats said, granted anonymity to speak freely about a process that has frustrated certain countries, such as Ireland and Portugal. But it is likely to address topics including the introduction of an EU top cop that’ll police financial markets, one of the diplomats said, an idea that’s proven particularly controversial for Dublin and Luxembourg, which oppose ceding power to Brussels.
The imminent statement comes after weeks of negotiations among the six countries in a coordinated effort to find common ground on difficult reforms that they deem crucial to deepening the EU’s capital markets.
Germany’s finance minister, Lars Klingbeil, is expected to unveil the announcement, given that the E6 meeting will be held in the German capital.
“I cannot comment on the discussions,” a spokesperson for the German finance ministry told POLITICO. “The finance ministers of these countries have joined forces to achieve faster progress in Europe’s competitiveness and defense capabilities.”
“Another meeting of the E6 is planned for the near future,” she continued. “We will announce the exact date shortly.”
Without policy reform, EU policymakers fear Europe will fall behind the economic heavyweights of the U.S. and China and see its most promising start-ups abandon the bloc for foreign investors.
The European Commission has been trying to create a capital markets union for over a decade with little success amid pushback from EU capitals, determined to protect national industries and resist ceding power to Brussels.
Political momentum has recently swung behind the project, which Brussels has rebranded as the Savings and Investments Union (SIU). Back-to-back crises have had a bruising effect on many national budgets across the bloc. Without the power of the public purse, the EU has found itself ill-prepared to modernize the bloc’s economy and boost its defenses to deter Russian aggression — a goal that’ll cost around €800 billion a year.
Policymakers hope they can encourage Europeans to invest their massive savings into financial markets to turbocharge the economy. EU citizens have around €11 trillion in cash lying in their bank deposits, rather than investing it in European stocks.
While Commission President Ursula von der Leyen has backed calls to examine a two-speed Europe to integrate capital markets if SIU fails to progress by June, EU officials have cautioned E6 countries to consider how other governments will perceive the outcomes of their negotiations.
Ireland and Portugal have warned that the “E6” supergroup could bulldoze the opinions of others to pursue their own goals, as EU officials weigh the benefits of creating smaller groups of countries and pursuing financial integration through “enhanced cooperation.”
Diplomats from the E6 countries have played down those fears, stressing that they’ve repeatedly debriefed the remaining 21 EU finance ministers about their work. But they are adamant that integrated financial markets are vital to ensure the EU can compete with other geopolitical powers.
Flagship project
The six countries have been seeking common ground on topics related to asset management, financial trading, cryptocurrencies, market oversight, and the governance structure within the EU’s securities regulator — all of which are central to the SIU’s flagship legislative initiative, called the Market Integration and Supervision Package.
France and Spain, for example, are pushing for greater transparency on opaque platforms that prominent investment banks, such as JPMorgan and Goldman Sachs, use to handle European financial trades from the City of London, according to a policy paper prepared by the two countries, seen by POLITICO.
Investment bankers use these platforms, known as systemic internalizers, to buy and sell financial products on behalf of their clients without disclosing the prices to the wider market. “Dark trading” has grown in popularity among stock brokers, as systemic internalizers are cheaper and less bureaucratic to trade on. That’s put stock exchanges at a disadvantage, especially as brokers are funneling more retail trades towards systematic internalizers.
“The combination of fragmentation and declining transparency weaken the anchoring role traditionally played by transparent multilateral venues, ultimately eroding market efficiency and integrity,” the three-page document said.
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