John Whelan: How Ireland can reap reward of a single market for capital
A single market for capital is needed now more than ever, according to Tánaiste Simon Harris. Picture: PA
A single market for capital is needed now more than ever, according to Tánaiste Simon Harris, who stated at the EY CFO conference in the Mansion House last week that this would be his top priority for Ireland’s EU presidency, which kicks off on July 1.
A single capital market for Europe, often referred to as the Capital Markets Union (CMU) or more recently named the Savings and Investment Union, aims to remove barriers between national financial systems. Its core benefit is the creation of a seamless, borderless marketplace where capital can flow freely across the European Union.
If the Tánaiste can achieve its adoption, there are multiple benefits for Irish businesses of all sizes, with few, if any, downsides.
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While bank lending continues to play a key role, high-growth companies require funding instruments better suited to their needs. These firms often operate without tangible collateral or predictable cash flows and depend on flexible, risk-bearing investment to scale and succeed. Capital markets, particularly equity and venture capital, are essential for start-ups and innovators to find the long-term funding they need. However, Europe still lags behind the US in the depth and accessibility of such market.
The capital markets union (CMU) has been a goal for the EU for over a decade, having been kicked off in 2014 by then European Commission president Jean-Claude Juncker. The Juncker Plan included the creation of the CMU and a series of other initiatives to remove obstacles to finance and investment in Europe. Various commissioners tried pushing it into operation, including Mairead McGuinness who took over the portfolio in 2020, but it has been mired in an endless round of member state discussions.
That is until January 2025, when Donald Trump was inaugurated as the 45th US president and went on to push the EU into funding its own defence and pushing US corporations to back off investing abroad and focus on making America great again.
Europe needs investment to fund its defence and climate priorities, but the new raft of Irish and European start-up business created for the digital world, also need access to new funding facilities in Europe, if they are to stay and grow in the EU.
There is also an overriding Irish benefit which is undoubtedly driving the Tánaiste’s ambitions to kick start the CMU into early adoption. Ireland’s International Financial Services Centre (IFSC) has a strong grip on the European fund and asset management sector and stands to benefit from the establishment of the CMU. The European Fund and Asset Management Association data shows that European fund assets remain heavily concentrated in a handful of jurisdictions. Luxembourg holds 25% of European market share, Ireland 21%, and Germany, France and Italy collectively account for another 34%. Between 70% and 75% of all European fund assets are clustered in these five member states.
If successfully implemented, cross-border operators such as those in Ireland, stand to benefit most from the CMU, as would the other large European asset managers, with sophisticated delegation models and an established presence in the markets. The proposed CMU consolidated supervision framework would benefit by allowing these larger firms to spread compliance costs across wider asset bases in the EU, while eliminating duplicative compliance requirements across multiple member state jurisdictions.
In addition, start-ups and non-listed companies would have access to a Pan-European fund-of-funds with a total amount of €2.1bn to boost venture capital and start-up financing, with new tax incentives and businesses in general.
Tánaiste Harris is also keen to enable anyone with money in a bank deposit account to be able to invest in the capital markets. Driving the Tánaiste’s actions is the scale of savings held in Irish bank deposits. Irish households are estimated to hold more than €170bn of cash in bank deposits, a significant proportion of which does not generate any returns for savers. In this context, the Irish government is preparing to introduce tax-advantaged savings and investment accounts (SIAs), which are designed to channel some of the deposits of Irish savers into capital markets and indirectly into the Irish and EU businesses generally.
The initiative aligns with a September 2025 European Commission recommendation which encourages EU member states to introduce or enhance SIA regimes to tackle structural barriers to retail investment.
