The EU's ambition to not fall behind the US is slowed by the reluctance of small countries

The great ambition of the

Letta report

and the president of the European Council, Charles Michel, to promote the financial integration of the EU has been met with resistance from a good group of countries that fear being swallowed up by the largest. Everyone agrees on the diagnosis and even on the objective: to promote the Capital Markets Union to more easily achieve the enormous amount of money that the European economy will have to invest if it does not want to fall behind the United States and China. But there are disagreements about the way forward. The smaller countries of the Union are reluctant. The three Baltic republics, Luxembourg, Ireland, the Czech Republic and a handful of other countries, especially the smallest of the club, have pushed to lower the ambition in the conclusions of the European Council on two points: the call to strengthen the role of the regulator European stock market and corporate tax harmonization.

The final text, approved by the unanimity required for these conclusions, finally calls on “the European Commission to evaluate and work on the conditions to allow European supervisory authorities to effectively monitor the most relevant cross-border financial actors [...] taking into account taking into account the interests of all Member States. This wording is much more nuanced than that provided in the drafts prior to this Thursday's meeting, which spoke of "allowing European supervisory authorities to monitor the most relevant cross-border financial actors." In these final words, references to the harmonization “of relevant aspects of corporate tax rules” have also disappeared to leave it “a convergence of well-designed corporate systems for capital markets agents.”

However, other important elements to move towards financial integration remain, such as the harmonization of bankruptcy rules, “designing and implementing a cross-border investment/savings product for retail investors” or “relaunching the European bond market.” , even through regulatory changes.”

“We have had a profound debate with substantial decisions,” explained Charles Michel, president of the European Council, at the end of the meeting. “We have sent signals and taken extremely important steps forward,” he added. The president of the European Commission, Ursula von der Leyen, has also been optimistic about the result, speaking of “a strong push by the leaders to move forward.”

The President of the Spanish Government, Pedro Sánchez, expressed his satisfaction: “We would have been more ambitious in the conclusions we have agreed upon.” He would have liked the references to fiscal harmonization to be maintained, “as we have always intended.”

Sánchez, like Michel and Von der Leyen, have agreed, on the contrary, in praising the

Letta report,

which the former Italian Prime Minister presented and debated in the European Council, before the discussion on the conclusions of the capital market. These days he has set a high level of ambition in his report. so that Europe does not continue to lose ground compared to the major economic areas of the world. Letta points out in his report on the future of the single market that from 1993 to 2022, GDP per capita on the other side of the Atlantic has grown by 60% compared to 30% on this shore. The former Italian Prime Minister presented his study, commissioned by the Council itself, to EU leaders this Thursday. In it, he puts forward proposals to further integrate the single market. “There is no time to lose, the gap between the EU and the US is getting bigger,” Letta declared upon his arrival.

In the 147 pages of the document, the Italian focuses on the telecommunications, defense or health markets. But where he focuses his attention most is on the Capital Markets Union, a project that has been stuck in the corridors of Brussels for 10 years. To boost it, it releases some devastating data: European families have saved about 33 trillion euros, but the EU, on the other hand, does not take full advantage of the investment potential of that asset and sees how every year 300,000 million leave for the United States in search of profitability. .

With this project, for which Letta proposes changing its name to the Savings and Investment Union, what Europe should achieve is to channel investment into the private sector. This involves, according to their proposals, a regulation that helps put community savings products (pension funds) on the market, harmonize rules and regulations (bankruptcy, taxes, intellectual property), stimulate the creation of a large technological stock market. Europeans (similar to the American Nasdaq) or give more power to the stock market supervisor.

In general terms, without going into detail, several of these proposals were raised in the conclusions of the European Council for this Thursday for further development. But here the problems that have been stopping the capital union project for years, at least a decade, have appeared. “We want it, but we also want it to respect the concerns of the Member States. We do not want our corporate tax laws to be harmonized, and I think there are very important questions about oversight mechanisms and how to get the balance right,” said the new Irish Prime Minister, Simon Harris. “We are a small country and we do not have many competitive advantages, please do not take away the small advantages we have,” asked Estonian president Kaja Kallas, referring to her tax system. Like them, the Prime Minister of Luxembourg, Luc Friede, has shown his reluctance towards the centralization of stock market supervision. The small Central European country fears that if powers are concentrated in Paris, where that supervisor (ESMA) is now, the bulk of the sector will move there.

These three countries are not alone. There is more. Several sources have pointed out that a dozen countries viewed with suspicion the centralization of stock market supervision, which has France as its main supporter. In fact, the

Financial Times

points out this Thursday that on Wednesday there was a meeting of the countries that least like this project: Austria, Slovenia, the Czech Republic, Bulgaria, Cyprus, Malta, Ireland and the three Baltic republics (Lithuania, Estonia and Latvia).

Italy, the Netherlands, Poland or Spain would fall into the group of countries most in favor of moving forward decisively. Madrid, at this point, likes the proposal that Letta includes in his report of two-level supervision, as is now the case in the banking sector: one at the community level that is in charge of the largest and most significant entities; and another that remains at the national level.

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