This year will be one of major structural and institutional change in Europe. Whatever form Brexit finally takes, there will likely be disruption to Europe’s capital markets. It will take time to see what impact it will have, particularly on the role of London as a financial centre in Europe.
Leaving Brexit to one side, 2019 was always going to be a year of transition. Three of the biggest jobs in the European Union, the presidents of its commission, council and central bank, will have new incumbents. These important appointments will need to be made well before the end of the year.
Each European Commission is defined by the style and approach of the president, who leaves his or her stamp on the strategic direction of the EU. For the first time since the 1970s, there will be no British commissioner appointed.
It’s highly likely that the European parliament, after elections in May, will have a very different make-up to any other since the first vote in 1979. The growth of populism across the bloc is bound to be reflected in its composition and its dynamic inevitably will change because there will no longer be 73 British MEPs.
High up on the new commission’s agenda should be taking forward the capital markets union project. This has become even more important for Europe since the Brexit vote. At its heart, the CMU is about making Europe’s capital markets more efficient in order to achieve sustainable growth.
The United States already has deep liquid capital markets and the EU has been falling behind. According to The Economist, 28 of the top 100 companies globally came from the EU ten years
ago. Now it is only 17 and will drop to 12 when the UK leaves. In the past four decades six American companies have gone from foundation to valuation of $100 billion. Only one European company has achieved this.
So the CMU is much more than a call to arms; it is fundamental to the EU’s future. It is imperative to ensure that the bloc can develop its capital markets to make it possible for growth and jobs to be created on a sustainable basis. Whoever succeeds Jean-Claude Juncker as head of the European Commission needs to have a clear plan for taking forward the CMU in a post-Brexit world.
This AFME View was originally published in The Times on 7th January