Europe’s Chimerical Capital-Markets Union

LONDON – The eurozone's survival is in doubt again, as Greece demands debt forgiveness and an end to austerity – or else. But, though Europe's currency union is at risk, and its banking union remains at an early stage of development, the endlessly creative European Commission is embarking on another adventure: a so-called “capital-markets union."

That “so-called" is appropriate, because the project, despite being only vaguely defined at this point, is most certainly not intended to create a single European capital market. Indeed, European Union leaders know better than to announce such an ambition, which would require a new treaty – no one is prepared to open up that can of worms. After all, European voters are in no mood to transfer more powers to Brussels.

The capital-markets union actually began as a slogan, coined by one of EU Commission President Jean-Claude Juncker's acolytes. Now, the new financial markets commissioner, the United Kingdom's Lord Jonathan Hill, has been assigned the unenviable task of putting flesh on bare bones. The Commission's “Green Paper" consultation round on the subject produced more questions than answers.

Think tanks, lobby groups, and national regulators have wasted no time in trying to influence Hill's efforts, and to head off any initiatives that might damage their interests. The Bank of England has argued that there should be no replication of the banking union grant of new powers to the European Central Bank at the expense of national central banks. The capital-markets union, the BOE argues, “does not require institutional change," so no super-regulator should be created.