Mixed reviews for EU’s funding plan

A massive programme to unlock funding from private investors, crowd funding and insurance companies for business and infrastructure in the EU has received a mixed response.

The long-promised Capital Markets Union was outlined by Commissioner Jonathan Hill yesterday who promised to roll out dozens of initiatives over the next few years.

It would change the investment face of Europe that currently relies on raising debt from banks to fund businesses and infrastructure, and move it closer to the US model where most funding comes from capital markets.

He said as well as providing the funding needed to create growth and jobs in the EU, including an estimated €1.5 trillion in infrastructure, it would also decouple the real economy from the fate of banks.

Despite the free movement of capital being a key freedom within the EU, it is far from being a reality.

Venture capital markets as deep as the US could have provided an additional €90bn over the past five years, while restarting securitisation markets to pre-crisis levels would provide €100bn of additional funding, and at least €20bn for SMEs.

There are legislative proposals to lower funding costs; recalibrate the insurance regulations to boost infrastructure investment; and reforming the access to markets especially for smaller companies.

Commissioner Hill also announced a number of consultations, including plans to reform EU venture capital and social funding markets; and exploring the case for pan-EU covered bond markets.

The medium-term actions include a package of venture capital measures, reviewing barriers to SMEs listing on exchanges, and work on debt-equity tax bias as part of the Common Corporate Tax Base.

The proposal to reduce capital requirements for insurance companies and banks for infrastructure investments and securitisation products brought criticism from a number of quarters including the Greens in the European Parliament.

The centre right European People’s Party had their own concerns, with its economics spokesperson German MEP Burchard Balz, warning against copy-pasting US ideas and stressed that banks must continue to play a central role.

The European Consumers Organisation warned that before trying to get citizens to invest in capital markets, the Commission must strengthen consumer protections first.

BusinessEurope and the liberal ALDE group in the Parliament both urged the Commission to lose no time in implementing the programme.