Makhlouf: Europe needs genuine single market for capital

Makhlouf emphasized that Europe's Single Market, while a significant achievement, remains incomplete, particularly in services and capital.

Services, accounting for 75 percent of EU GDP, see intra-EU trade at only 7.6 percent, no higher than trade with non-EU countries.

This fragmentation, driven by restrictive national regulations and inconsistent implementation, costs Europe significant growth.

The capital market gap is equally stark: EU stock market capitalization is just 73 percent of GDP, a quarter of the US equivalent.

Venture capital investment in 2025 totaled €66 billion, one-fifth of US levels, hindering the growth of innovative firms.

Makhlouf argued that regulatory fragmentation is a symptom of this deeper market failure, not its sole cause.

Makhlouf outlined two key conditions for a genuine single capital market.

First, completing the regulatory architecture, including harmonized insolvency frameworks and convergent tax treatment.

Second, a single safe asset is essential as a foundation.

He noted that while NextGenerationEU bonds (€800 billion, AAA-rated) showed Europe's capacity to issue common debt, their time-limited nature and exclusion from main indices prevent them from fully behaving as safe assets.

Makhlouf advocated for a permanent, scaled European safe asset to finance public goods, citing proposals from Joachim Nagel and Philip Lane, to enhance efficiency and resilience.