EU’s six biggest economies push for single markets watchdog

The EU’s six biggest economies are calling for large stock exchanges and other critical financial entities to be supervised at the EU rather than national level, as they try to reinvigorate long-running proposals to unify the bloc’s capital markets.

The push, led by Berlin and Paris, is part of attempts to boost the EU’s competitiveness at a time when the continent is struggling with low growth, fierce competition from Chinese exports, US trade tariffs and the threat of a second energy crisis.

It also marks a substantial shift for Germany, which had long opposed the idea of centralised supervision.

EU leaders are due to address the bloc’s flailing competitiveness at a summit next week, ahead of which the European Commission is due to present a roadmap with clear objectives and timelines. Input from finance ministers of the six largest economies, dubbed the “E6”, was meant to inform that roadmap, officials said.

“Deeper and more integrated capital markets would strengthen Europe’s growth potential, enhance its economic sovereignty and provide a stronger foundation for financing common priorities,” the finance ministers of Germany, France, Italy, Spain, the Netherlands and Poland wrote in a joint letter to the European Commission, seen by the FT.

In the letter, the ministers also list other measures beyond supervision, including a plan to simplify requirements for public listings.

The group of six countries still disagrees on many areas, such as issuing joint debt and agreeing on a common backstop for bank deposits. But they think that by finding common ground among themselves first, it will be easier to reach the critical mass of countries needed to pass EU legislation to unify capital markets.

Proposals to improve EU capital markets integration featured in Mario Draghi’s 2024 report on competitiveness but have failed to reach consensus among the 27 member states.

A proposal by Brussels to move supervision of large cross-border stock exchanges, central counterparties and security depositories and crypto exchanges to the Paris-based European Securities and Markets Agency is at the core of the so-called savings and investment union, a policy designed to mobilise trillions of euros in savings into productive investments.

Brussels’ rationale is that centralised oversight would ensure even application of EU rules and spur consolidation in what is a highly fragmented landscape.

In the letter, the E6 countries wrote that they “support improving the convergence and efficiency of the supervision of capital markets across the EU, moving toward centralised supervision” for important cross-border entities “while avoiding unnecessary duplication or additional costs”.

They called for reaching an agreement between the member states “by summer 2026”. That would be an ambitious timeline given the idea is highly controversial with smaller member states and countries where the financial sector has an outsized role in the economy, such as Luxembourg and Ireland, which fear giving up national oversight could endanger their domestic interests.

A qualified majority of countries — at least 15 countries representing 65 per cent of the bloc’s population — need to back the proposal to hand greater powers to Esma.

“Transforming Esma into a centralised supervisor would not achieve these objectives,” Gilles Roth, Luxembourg’s finance minister, said on Tuesday in a meeting of EU finance ministers discussing the topic.

Ireland, which takes over the rotating presidency of the council of the EU in July and will have to broker a compromise on the proposal, takes a more nuanced view but is also opposed to giving Esma sole oversight.

“I believe direct supervision rests with [national financial market authorities] but this can happen [alongside] a stronger co-ordination and enforced role for Esma,” said Simon Harris, Irish finance minister and deputy premier, adding: “Centralised supervision is not needed in my view.”