European elections: Strong capital markets for a competitive EU

Strong capital markets are a crucial requirement for securing Europe’s future as a business location and financing the transformation. In light of the European elections in June, Deutsches Aktieninstitut just published its European policy demands in which it calls for better and leaner regulation, uniform European company law and the strengthening of the equity culture.

"Capital markets are capable of financing the extensive investments that can strengthen and transform the European economy. They play a crucial role in increasing Europe's competitiveness. In order for capital markets to develop their full potential, the next EU Commission must prioritize strengthening them," demands Dr. Christine Bortenlänger, Managing Director of Deutsches Aktieninstitut.

In its European policy demands "Getting Europe Back on Track. Leveraging Capital Markets to regain and ensure Europe's global Competitiveness", Deutsches Aktieninstitut proposes the following measures.

Cutting red tape and furthering smarter regulation

In order to remain competitive, the EU must focus on attractive market conditions and leaner, more efficient legislation in the future. This requires a close exchange with companies to ensure that regulation becomes more practical.

In addition, reporting rules are often disproportionate for companies with negligible benefits for investors and the public. This is why, for example, the reporting obligations under the European sustainability reporting standards, which include well over 800 non-voluntary data points, should once again be critically evaluated in terms of their relevance and appropriateness.

Introduction of a framework for uniform European company law

EU companies seeking to go public often opt for a listing outside Europe, for example in the USA. Not only are capital markets better developed there, but company law is also significantly more flexible than in the EU. This is why a foreign listing is often associated with a change of legal entity. The next EU Commission should respond to this trend to other forms of company law with its own attractive legal framework. Based on the idea of the Societas  Europaea (SE), this legal form should contain the most attractive member state requirements. This could help strengthen the international competitiveness of European companies.

Strengthening the equity culture

An essential prerequisite for high-performance capital markets in the EU is a vibrant equity culture in the member states. The EU Commission should motivate those member states that do not yet have equity-based pension systems to implement them. Investments from pension systems on the capital market not only help to close the gaps in state pension systems caused by demographic change and thus stabilize pensions. They also provide additional funds to finance the green and digital transformation of the economy.

"The investments that the EU is calling for to enable the sustainable transformation are huge. It will not be possible to raise them without a strong  capital market. If we want companies to have enough money and an efficient legal framework for this massive undertaking, the EU and the member states must act quickly," says Bortenlänger.   

The European policy demands of Deutsches Aktieninstitut can be found here.