The plan for a French capital markets union receives support from the European fund organization

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The European fund industry association has strongly supported the French proposal for a small group of countries to push forward a capital markets union. This is a sign that investors are increasingly frustrated by the EU's lack of progress towards its long-held goal.

Sandro Pierri, president of the European Fund and Asset Management Association, which represents the region's €28.5 trillion investment management sector, told the Financial Times that further delays and disagreements over reforms increase the risk of even more companies and investments being sold to the Losing the USA means that politicians must act now.

“If it doesn’t work, it’s better to have four, five, six.” . . “There are a number of countries that are aligning with this priority,” said Pierri, who is also chief executive of BNP Paribas Asset Management.

“The risk is that we get stuck in a situation that will be characterized by endless debates about what needs to be done, giving ever greater advantages to other places like the US to capture some of the savings that Europe achieved,” he added.

Major countries including France, Italy and Spain are pushing for a plan to unify the bloc's fragmented capital markets – a goal outlined a decade ago – as a way to revive the region's troubled markets and counter the threat of further capital exodus abroad. Trading volumes have fallen and the region has struggled to attract and retain IPOs.

But the proposals, which proponents hope would make it easier for companies to go public and gain support from investors, faced opposition from a majority of member states this month, with many smaller countries ahead of them have shied away from giving Brussels more control and regulatory powers.

In February, French Finance Minister Bruno Le Maire suggested that just three or four countries alone could form a union that could function on a voluntary basis. “I'm tired of the discussions. “I’m tired of the empty statements,” he said at the time.

Last week, French President Emmanuel Macron warned that Europe faces a “lethal” threat from economic decline.

Pierri warned that delays in reform risk blocking much-needed funding opportunities, with issues such as the green transition and the need for increased defense spending among the challenges facing the bloc.

“We are at a pretty important crossroads when it comes to the future of Europe. We have the green transition, the digital transition, we have a demographic change. . .[and the]Impact of geopolitical change. . . All these challenges fundamentally require funding,” he said. “The moment to act is now.”

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Pierri stressed that “most of the money” of European households' savings has been “not properly mobilized”, as according to a study by Efama, in 2022, 41 percent of savings will be held in deposits and 10.5 percent in investment funds.

Policymakers should simplify disclosure for retail investors, improve the quality of financial advice, encourage the use of tax incentives to encourage the funneling of money into pension funds and automatically enroll individuals in pension schemes, he said.

“Tax incentives for long-term savings plans work. The example of 401k plans is quite impressive compared to what we have in Europe,” he added, referring to US pension plans.

He also suggested that policymakers should consider “possible reforms” to create a vibrant European asset management industry that can compete with large fund managers in the United States.

“We now need a proper ecosystem to function in Europe and that requires strong asset managers. We are a key component in this capital mobilization,” he said.