Capital Markets Union Revisited: Reinforcing the Eurozone

EU policymakers are currently implementing an agenda labelled ‘Capital Markets Union’ – a collection of individual steps that taken together should strengthen cross-border market integration in EU capital markets. However, the imminent departure of the United Kingdom from the EU reshuffles the cards in this project, since the UK as the continent’s most developed capital market jeopardises the objective of creating a Europe-wide deep and liquid market that merits its name. This paper argues that the purpose of the CMU project can and should be redefined. The initial thrust behind the project back in 2014/15 seems to have been to court the British public in a bid to influence the Brexit referendum. After the UK’s vote to leave, that objective no longer provides the glue that holds the CMU agenda together. Instead, I show that CMU can helpfully be re-defined and re-explained in an entirely new context. Specifically, the CMU agenda provides a sensible set of measures to strengthen the architecture of the Eurozone: cross-border integration of national financial markets holds the promise of promoting so-called ‘private risk-sharing’, which can serve as an important boost to reinforce the fragile framework of the common currency. This paper makes two points. First, I will explore the initial motivation behind launching the CMU agenda. I argue that the initial purpose was – amongst other things – a political bid to influence the growing anti-EU attitude and to win over the City of London (section I). Since this strategy was ultimately not successful – at least, it did not suffice to secure a majority voting for Remain – the entirety of the CMU project was put into question (section II). In a second step, I show that the CMU agenda currently on the table – if sufficiently reinforced and expanded – may find a new purpose in strengthening the Eurozone architecture (section III). The latter point comes amidst the ongoing policy debate on the future of the Euro.