December 4, 2020

Lagarde advocates speeding up the capital markets union


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“If we want new and innovative companies to emerge after the pandemic, governments have to remove the obstacles for them,” said the president of the European Central Bank (ECB) at the European Bank Congress, in which she is participating this morning in a virtual, and in which he has stressed that, in the post-pandemic world, completion of the Capital Markets Union is not an option, but a necessity. The Capital Markets Union would remove bureaucratic obstacles between the individual states of the European Union, in order to give companies more funding opportunities. The Consumers, Lagarde says, should also have more options for cross-border investments. In Europe, unlike the US, he pointed out, loans and financing are provided mainly by banks.

It follows from her speech that she is willing to help advance the European Commission’s plans for a capital markets union, which have been on the table since September 2015, but remain definitely stagnant. Last September, Brussels presented a new action plan and the Commission wants to simplify investments and taxation investment income in other European countries, in addition to aligning bankruptcy laws. “The fragmentation of financial markets in Europe is one of the reasons why seed funding is often difficult for young companies,” Lagarde said. “Financing high-risk technologies is much more effective when there is a greater flow of new projects to compensate for the fact that most of them will fail,” he added.

It has also tried to remove the fear of banks from digitization. Ensures that it will not necessarily reduce jobs, but rather it will “transform” them and it has advanced data available to the ECB and according to which “research shows that unemployment rates are generally lower in digitized economies and also that it generally leads to jobs being redistributed across industries.”

The coronavirus pandemic has accelerated the use of digital technology when working, buying and paying, the president of the ECB already notes. “Almost 50% of Europeans say they have worked from home during the pandemic and electronic commerce has increased by a fifth during the first lockdown,” says Lagarde, adding that it remained at that level in the temporary periods in The restrictions were lifted, while the use of cash has been significantly reduced. He has also cited studies that estimate that “faster job automation, as a result of the pressure of the pandemic, will destroy 85 million jobs in 26 countries by 2025, but will create 97 million new jobs, with a net gain of 12 million ».

“Europe faces many challenges in the coming years due to the pandemic and long-term trends, which include increasing debt levels, an aging population, digitization and climate change,” concluded Lagarde, recalling that a Sustainable growth requires progress, research and taking advantage of the opportunities offered by new technologies, which means that you must ‘find new methods of production that can create jobs, ensuring that all workers have the opportunity to acquire the skills necessary to work in those jobs ”.

Launch the European fund

Before participating in the European banking congress, Lagarde called for the launch “without delay” of the European Recovery Fund, blocked by Hungary and Poland, and has defended the maintenance “as long as necessary” of the conditions of favorable financing provided by the ECB, as well as once again urging governments to complement this action with budgetary policies to support the economy. Lagarde stressed that the Recovery Fund agreed by the EU in July, endowed with 750,000 million euros, will provide additional resources to implement these measures, especially “in those Eurozone countries with limited fiscal space.” For this reason, he calls for “making it operational without delay” and ensuring “provisions that allow the well-staggered and effective spending of these funds”, which will reach the States as direct transfers or loans, insisting that the fund is a component of “importance critical ‘within the European response to the crisis and hoping that it will be’ very effective ‘once deployed.

Lagarde is hearing some voices critical of the ECB’s debt purchase program, such as that of German Bundesbank President Jesn Weidmann, who has suggested that the ECB should only acquire assets capable of demonstrating respect for the climate, so that countries and companies that do not comply with the climate neutrality objectives established by the European Commission are left out of the bond purchase program.

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