Unlike in the United States, where companies rely mainly on shares or bonds to raise money for development, in Europe small and medium-sized firms go primarily to banks to borrow money and do so within national borders.
“There was strong support for what we are trying to do,” Valdis Dombrovskis, Commission vice president for the euro, told a news conference after the ministers held their first discussion of the Capital Markets Union (CMU) plan, which was first announced in February.
Europe’s financial services market is fragmented, making companies vulnerable to trouble in national banking systems where many banks have been deleveraging to meet stricter capital adequacy ratios since the sovereign debt crisis.
“Stronger capital markets would complement banks as the source of financing. That, in turn, would make the financial system more stable,” Dombrovskis said.