ECB Contenders Join Forces to Push European Market Integration

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Central-bank heads of Germany and France called on European leaders to double down on efforts to integrate capital markets to make the region more resilient to economic shocks.

A genuine capital-markets union would promote growth and stability in the European Union as well as channel savings toward investments in energy transition, digital innovation and small-and-medium companies, Banque de France Governor Francois Villeroy de Galhau and Bundesbank President Jens Weidmann wrote in joint opinion piece. It would also help promote labor mobility, they argued.

“By tearing down the remaining barriers to free capital flows and investment we can strengthen financial integration, leverage our common market and reap a double dividend of higher growth and stronger resilience,” they said in an article published in Frankfurter Allgemeine Zeitung and Les Echos. “This will ultimately benefit EU citizens.”

The joint appeal is significant as both policy makers are contenders to succeed Mario Draghi as the next European Central Bank president when his term ends in October. The ECB has stepped up calls on governments in recent months to help strengthen the currency bloc at a time when monetary policy is running out of room to stimulate the economy.

Villeroy and Weidmann said no reform is “so broadly agreed on” as a capital-markets union, and progress could help absorb crises hitting different members of the currency area, they said.

“In the United States, for example, capital markets allow almost half of the burden of an economic shock to be spread across the states -- more than by fiscal transfers,” according to Villeroy and Weidmann. “In the euro area, only one-tenth of an economic shock is cushioned by private risk sharing.”

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