CEPII, Recherche et Expertise sur l'economie mondiale
From the Investment Plan to the Capital Markets Union: European Financial Structure and Cross Border Risk-sharing

Jesper Berg
Laurent Clerc
Olivier Garnier
Erik Nielsen
Natacha Valla

 Points clés :
  • Investment needs to be revived in Europe, and adequate financing tools should be deployed to channel savings to the “right” places.
  • This paper argues that the three key policy intiatives - Capital Markets Union, the Juncker Investment Plan and the ECB’s asset purchases, could be combined to that aim.
  • Our proposed strategy for the European financial structure is three-pronged. First, the traditional bankbased European structure should be preserved, however allowing for some disintermediation. Second, covered bond markets should be proactively developed to allow banks to outsource risk. Third, the European economy needs more, longer-term, risk takers.

 Résumé :
Following the financial crisis, Europe is suffering from a significant investment deficit. It has long been appreciated that growth will suffer in Europe over the medium term unless the shortfall in investment is addressed, but considerable disagreement on how to achieve this, and in particular on the role public investment should play. In addition, mobilising finance to increase investment in Europe requires both a good understanding of Europe’s financial structure, and a fine knowledge of the composition of cross-border financial imbalances. In this paper, we take stock of the state of play regarding investment, financial structures and cross-border imbalances. We contend that any initiative meant to provide a sound basis for long-term, stable investment flows has to acknowledge the fact that Europe is engaged in a debt-deflation deleveraging phase, with accompanying disintermediation, the full extent of which is as yet unknown. We then draw policy conclusions that would allow for a sustainable investment revival, insisting on the need to have an overall strategic vision for the main EU policy initiatives - the Investment Plan, the Capital Markets Union, and the €1,100bn new money issued by the ECB within its Large Asset Purchase Programme.

 Mots-clés : ECB | Capital Markets Union | Policy Srategy | Securitization | Covered Bonds | Financial Structure | Quantitative Easing | Cross-border Capital Flows | Public investment

 JEL : e42, e44, e52, e58, e63
CEPII Working Paper
N°2015-34, December 2015

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 Domaines d'expertise

Monnaie & Finance