Financial resilience underpins European competitiveness
Financial resilience is the necessary foundation rather than a constraint for European competitiveness, according to a policy address in Dublin. Cross-border lending remains at one-sixth of euro area corporate totals due to market fragmentation rather than capital requirements.
Dismantling cross-border lending barriers
Cross-border corporate lending in the euro area accounts for approximately one-sixth of total corporate borrowing, demonstrating severe financial fragmentation across national borders.
Regulatory divergence in insolvency regimes, fragmented digital infrastructure and varying national employment rules remain the primary obstacles to cross-border expansion rather than capital requirements.
Completing the Banking Union requires establishing a European Deposit Insurance Scheme to ensure risk sharing across member states.
Furthermore, supervisory mandates should not be diluted by adding competitiveness objectives.
“Resilience is not a constraint on competitiveness. It is the precondition for it,” the speech noted.
Mobilising ten trillion euros in deposits
European households and firms hold roughly €10 trillion in cash deposits, contrasting with the annual investment deficit of €750 billion to €800 billion identified by Mario Draghi.
Capital currently flows abroad in search of higher yields due to underdeveloped venture capital markets, particularly at late-stage financing.
Developing the Savings and Investments Union requires a common European safe asset alongside initiatives such as the Scaleup Europe Fund and a unified 28th corporate legal regime.
Deregulation solves the wrong problem
Blaming bank capital standards for Europe's sluggish growth ignores structural barriers in cross-border integration.
Without political agreement on a common safe asset and joint deposit insurance, capital markets will remain fragmented.
Diluting supervisory mandates to chase competitiveness repeats pre-crisis errors.