Makhlouf urges ambitious Single Market for growth and resilience
Governor Gabriel Makhlouf of the Central Bank of Ireland argued for a more ambitious European Single Market, emphasizing the need for full integration of goods, services, and capital to boost growth and resilience.
Unlocking Europe's growth potential
Governor Makhlouf argued that Europe has taken too narrow a view of its Single Market, missing out on greater growth and resilience.
He emphasized the need for ambition, particularly in services, which account for 75 percent of EU GDP but see intra-EU trade at only 7.6 percent.
This figure is no higher than Europe's services trade with countries outside the bloc.
Long-standing barriers include restrictive national regulations, lack of common standards, and complicated business establishment rules.
Makhlouf also pointed to a lack of national government ownership in implementing agreed rules, citing Ireland's new national framework as a positive step.
He stressed that financial services, as a services sector, are directly impacted by these barriers, which fragment European capital markets and raise cross-border investment costs.
Building a genuine capital market
Makhlouf diagnosed a significant capital market gap in Europe, despite Europe's substantial financial system.
EU stock market capitalization, at 73 percent of GDP, is roughly a quarter of the US equivalent, directly linking to an innovation deficit.
He outlined two primary conditions for a genuine single capital market: completing the regulatory architecture (harmonized insolvency, convergent tax treatment, deeper post-trade infrastructure) and establishing a single safe asset.
The latter, he argued, is the foundation for the Savings and Investments Union (SIU).
While NextGenerationEU bonds showed potential for common issuance, Makhlouf called for a permanent, scaled European safe asset to finance public goods and enhance the euro's international role.
The price of fragmentation
Makhlouf's speech underscores the urgent need for political will to overcome long-standing fragmentation.
The economic costs of inaction, particularly the widening productivity gap with the US, are becoming increasingly unsustainable.
True integration requires national ownership and a willingness to accept trade-offs, making the current moment critical for Europe's future competitiveness.