Europe’s pressing challenge is to put the EU back on the path of smart, sustainable and inclusive growth, creating jobs, building on its areas of competitive advantage and thereby, enhancing its competitiveness in the global market place. In responding to this task, Europe faces large-scale, long-term investment needs.
To fund these long-term investments, governments and businesses of all sizes need access to long-term financing. The capacity of the economy to make such long-term financing available depends on the ability of the financial system to channel the savings of governments, corporates and households effectively and efficiently to the right users and uses. This can be carried out by various intermediaries (e.g. banks, insurers and pension funds) and by direct access to capital markets. Getting the long-term financing process right is central to supporting structural economic reform and returning to the long-run trend of economic growth.
The financial crisis has affected the ability of the financial sector in Europe to channel savings to long-term investment needs. An important question is whether Europe’s historically heavy dependence on bank intermediation in financing long-term investment will give way to a more diversified system with significantly higher shares of direct capital market financing and greater involvement of institutional investors and alternative financial markets.
Ensuring effective and efficient intermediation channels for long-term financing is a complex and multi-dimensional task. The Commission adopted a Green Paper on the long-term financing of the European economy on 20 March 2013, including a public consultation. Its purpose is to initiate a broad debate about how to foster the supply of long-term financing and how to improve and diversify the system of financial intermediation for long-term investment in Europe. Responses to consultation questions will contribute to further assessment by the Commission of the barriers to long-term financing, with a view to identifying possible policy actions to overcome them. Possible follow-up could take several forms: in some areas new or adapted regulation may be needed, while in others the role of the EU level could be in encouraging stronger coordination and the promotion of best practices, or in the form of specific follow-up with individual Member States in the context of the European semester.
This Green Paper is accompanied by a Commission Staff Working Paper, setting out the underpinning analysis in more detail.