Lagarde Urges EU Leaders to Accelerate Capital Markets Union

(Bloomberg) -- The European Union should push ahead urgently to lower national barriers and build a capital markets union to help the bloc foster innovation with a more suitable financing ecosystem, European Central Bank President Christine Lagarde said.

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Lagarde told EU leaders gathering Friday in Budapest that significant portions of savings aren’t channeled toward innovative firms, leading to a talent drain and funding inefficiencies, according to officials briefed on the discussions.

She said the priority should be converting the region’s existing large pools of savings into capital for investments facilitated by a unified infrastructure and legal framework, the officials added.

The leaders of the 27 member states discussed how to improve the bloc’s ailing competitiveness to better compete with the US and China. The need to increase public and private funding is one of the thorniest issues, with the bloc facing an annual investment gap of as much as €800 billion ($862 billion), according a report drafted by former ECB president Mario Draghi.

The discussion became more urgent following the victory of Donald Trump in the US election this week, said Draghi, who attended the summit in Budapest.

“As you know, we have postponed important decisions because we waited for consensus,” Draghi said before the meeting. “Consensus never came, only lower development and growth came, and today, stagnation.”

Given that the issue of a capital markets union has been discussed for almost a decade with few results, Lagarde urged finding new ways to approach it, according to the officials, who spoke on condition of anonymity because the discussions are private.

Countries like France and Spain had proposed discussing the plan in smaller groups to make faster progress and overcome vested interests.

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