Europe’s financial journey

Europe’s economy has coped very well during an unpredicted period of crisis and the financial markets have also evolved rapidly over the course of the year 2020. In the beginning of the year 2020, the European commission’s goal was to produce the policies which supported growth and the competitiveness of the transition towards a low carbon economy. The ideas was to help small businesses in particular. And the Covid crisis brought more volumes to achieve that ideology and so has the role of Europe’s capital markets. The European Union (EU) has aspired to create a single market for capital, but the road to achieving this goal is still a long one. Progress has been slow in achieving one of the core objectives of Europe’s Capital Markets Union’s (CMU’s) project to build deeper and more integrated capital markets. In fact, this year, the Commission released its new CMU Action Plan in a bid to accelerate this process. The health of Europe’s markets is pivotal as they must play a central role in funding Europe’s sustainable transition and supporting new innovative businesses. Therefore, now more than ever, it is crucial to have data-based evidence on how Europe’s CMU objectives are being advanced and to ensure that momentum is maintained in building a fully integrated CMU.

Europe’s equities markets are the important source of funding for businesses. Corporates and SMEs (small and medium-sized enterprises) specially requires affordable funding to facilitate their further growth, and the diversity of equity-finance options makes them well suited to taking up this role. In the first half of 2020, EU27 corporates benefited from a huge amount of funding received from capital markets. Large levels of funding were seen from equity markets, reaching €45.8 billion in equity-issuance volumes. One good thing is that the Covid crisis did not disrupt the European cross border funding. 96 percent of European debt offerings were marketed within Europe in the first half of 2020, rather than being marketed globally. This was a 3-percent increase from last year and a substantial rise from 2007. To remain globally competitive, Europe not only needs to boost investment in research and development (R&D) but also foster the emergence of fintech (financial technology) unicorns that could be significant resources of job creation and growth. And innovation is the key to the future growth. To harmonize the R&D investments, there are approaches being made to regulate new technologies across Europe. It has been considered as the global leader in sustainable finance and Europe again consolidated this position by reaching €71.8 billion in sustainable bonds issued by June 2020. If this rate of funding is maintained, by the end of the year, volumes should surpass Europe’s record year of issuance (2019). But to keep this getting forwarded the policymakers to ensure that it isn’t used only in few active countries but also in all the parts of the country.

As the second wave hits the European markets, the Country absorbs both social and economic hardships and the markets will again be called upon to support the European Union businesses. But the progress is set to continue based of the trajectory of the past few months, there has been a progress in areas like sustainable finance, at the same time there is also a decline relatively in areas like raising capital for SMEs as the capital markets are being held back by the inconsistent legal frame works and regional fragmentation. In order to overcome all these barriers CMU needs ambition and political momentum more than ever if their project wants to achieve higher integration.