Towards a European Capital Markets Union

Executive Summary

Europe’s fragmented capital markets constrain growth, investment, and resilience. This report — requested by the Dutch House of Representatives (Tweede Kamer) to inform its debate on the European Capital Markets Union (CMU) — assesses why integration has stalled and what role the Netherlands can play. Despite nearly a decade of EU initiatives, cross-border markets remain weak, financing costs diverge sharply across countries, and savings are trapped within national borders. Firms in smaller markets pay up to 2.5 percentage points more for credit than peers elsewhere, while savers and pension funds earn lower returns. For the Netherlands, the stakes are high: households could achieve better pension returns, SMEs would gain cheaper financing, and financial institutions could expand across the EU.

The Capital Markets Union (CMU) agenda is progressing, but fundamental reforms are missing. Since 2015, the EU has pursued the CMU through action plans, with progress on technical measures such as the European Single Access Point and venture capital regulations. Yet essential reforms remain absent, notably in insolvency law, tax harmonization, pension systems, and supervisory centralization. Current CMU goals are too broad, generating unrealistic expectations, while the European Commission lacks strong enforcement tools and clear prioritization. Without defined long-term benefits, member states hesitate to cede sovereignty or adjust sensitive national frameworks.

Three political barriers block deeper capital market integration. First, the European Commission depends on Member States for reforms, yet national resistance is strong, particularly from financial sectors fearing losses of influence. Second, the Commission provides insufficient strategic direction: the multiplicity of CMU objectives dilutes focus and allows member states to prioritize national interests. Third, there is little urgency: unlike the Banking Union, the CMU lacks a crisis-driven momentum, and its diffuse long-term benefits make it harder to mobilize political will.

The Netherlands can help break the deadlock. Given its large savings surplus, deep capital markets, and internationalized pension funds, the Netherlands has much to gain from EU-level reforms. Yet progress will not come automatically. The Dutch parliament and cabinet must articulate clear national objectives — for instance, better venture capital access, support for the green transition, or stronger pension fund opportunities — and embed these within the broader CMU strategy. By taking a pioneering role and forging coalitions with like-minded states, the Netherlands can shape priorities, accelerate integration, and safeguard its domestic interests.

Policy recommendations

1. Encourage a proactive Dutch role in driving EU capital-market reform rather than reacting passively.

2. Define clear Dutch priorities — cheaper SME financing, more pension-fund investment, and stronger innovation funding — and embed them in EU negotiations.

3. Support national pilot projects (credit registries, fintech platforms) as models for broader EU reforms.

4. Promote parliamentary–cabinet coordination to articulate and defend Dutch objectives within EU processes.

5. Forge coalitions with like-minded states to advance politically sensitive reforms in insolvency, supervision, tax, and pensions.

This report was requested by the Dutch House of Representatives (Tweede Kamer) to inform its debate on the European capital market union.