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Law360, London (December 7, 2020, 3:14 PM GMT ) The European Union has said it has acted to boost its capital markets union project in the hope that it will release as much private capital as possible to help the region's economies recover from the financial fallout of the COVID-19 crisis.
The Council of the European Union said Friday it has adopted a new plan requiring governments to take steps to strengthen the bloc's capital markets union, a project designed to improve access to new financing and boost funding from outside the banking sector.
The capital markets project should focus on lending to small and midsized businesses and injecting as much private capital as possible into the market, the council said. It hopes to help businesses climb back after the economic devastation caused by the global pandemic.
"The economic fall-out of COVID-19 and the transition to a sustainable and digital EU economy, as well as Brexit, highlight the need for stronger and truly integrated capital markets in the European Union," Olaf Scholz, Germany's federal minister of finance, said. Germany is the current president of the EU Council.
"Well-functioning capital markets are key for our citizens and companies, providing better investment opportunities and sufficient access to finance, particularly for small and midsized enterprises, the backbone of Europe's economy," Scholz added.
The newly adopted conclusions instruct governments to prioritize any legislative or regulatory action that can improve the funding of the economy and support small and midsized businesses.
The conclusions advise governments to prioritize moves to help mobilize private capital. Governments should also think about ways to support the role of insurers, banks and other institutional investors as long-term investors in EU businesses, the council said.
The body has asked governments to put such measures in place before the end of 2021. It noted that the fallout from the COVID-19 pandemic and the transition toward a green economy will require substantial new money and that this burden "cannot be shouldered by banks alone."
Scholz said the conclusions are intended to countries in the bloc on their political priorities in the coming years.
"EU member states are sending a strong signal in support of accelerating the work towards a genuine capital markets union by giving clear guidance on the political priorities on future legislative and non-legislative initiatives," he said.
The capital markets union project, which was launched in 2015, should have been completed in October 2019, but the commission has said "deep-rooted, structural and long-term obstacles" remain, particularly on regulatory consensus.
--Additional reporting by Najiyya Budaly. Editing by Ed Harris.
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