Resume af teksten:
Europa har styrket bankernes kapitalbuffere, reduceret misligholdte lån og svækket forbindelsen mellem banker og nationale regeringer.
Fælles mekanismer som en afviklingsfond på 80 mia. euro, ESM og ECB-støtte har øget kapaciteten til at håndtere finansielt pres.
Covid-19, energikrisen, højere renter og bankuro gav ikke omfattende finansiel smitte i Europa.
Franske statsrenter er steget, mens risikopræmierne for franske finansielle institutioner kun er steget begrænset.
EU arbejder med Opsparings- og Investeringsunionen for at flytte flere husholdningsmidler fra indskud til kapitalmarkedsinvesteringer.
Planer om et fælles selskabsregime, stærkere ESMA-tilsyn og mere grænseoverskridende bankvirksomhed er under udvikling.
Europa er afhængig af dollarlikviditet, dollardominerede betalinger og betydelige investeringer i amerikanske aktiver.
EU og ECB arbejder på at styrke euroens internationale rolle, fælles betalingsinfrastruktur og digitale centralbankpenge.
Fra ING:
Finance is perhaps the least visible of Europe’s strategic challenges, but it sits at the heart of both economic performance and sovereignty. A well-functioning financial system determines how effectively savings are transformed into productive investment, while the international role of European finance shapes the continent’s ability to act independently in times of stress. As with defence, energy, technology and trade , it is useful to distinguish between the economic challenges, which I will address first, and those that are more directly linked to sovereignty, which I will turn to later on in this article.
The typical framing of Europe’s financial system is that it has ample savings, yet too little of this capital finds its way to the innovative and high-growth firms that are needed to boost productivity and competitiveness. From an economic perspective, though, there is more to celebrate than this framing suggests.
It is about 15 years since the euro crisis exposed a system characterised by fragile banks, strong links between governments and banks, and contagion across countries. Governments had to step in to support banks, significantly worsening debt-to-GDP ratios. This, in turn, put further pressure on banks because of their large holdings of government bonds, creating the so-called doom loop.
The restructuring was slow because the fundamentals of the system had to be fixed, rather than relying on rapid write-offs of bad loans. It may now be taken for granted, but restructuring the financial system has been a gigantic effort that has improved the foundations of the eurozone. At the same time, it helps explain the weaker growth of that period, as the eurozone went through a credit crunch that did not distinguish sufficiently between good and bad debt.
The key improvements are stronger bank balance sheets and weaker links between banks and their national governments. Banks now hold much larger financial buffers and have reduced the home bias in their holdings of government debt.
The amount of non-performing loans on banks’ books has fallen significantly, especially in countries where they were previously very high, such as Italy. Should a bank fail, new rules mean that shareholders and creditors can absorb more of the losses, while eurozone banks have also built up a joint €80 billion resolution fund. At the same time, bank supervision has been strengthened and shifted increasingly from the national to the European level.
Meanwhile, European governments have built ways of sharing fiscal risks, including the European Stability Mechanism, which provides a common financial backstop, while the European Central Bank has provided a backstop for sovereign bond markets since 2012. Increasingly, Europe is borrowing collectively to address common challenges, from NextGenerationEU to defence spending through SAFE and financial support for Ukraine. Taken together, these changes have weakened the dependence between banks and their national governments, while increasing Europe’s capacity to respond collectively when financial stress does occur.
Finally, Europe’s financial institutions have become more European and less national, with banks lending more across borders. Since 2008, euro area firms have become more reliant on bond financing, with the volume of corporate bonds relative to bank borrowing roughly doubling . This has diversified firms’ sources of financing and strengthened the resilience of the financial system, while ownership of both corporate and government bonds has become more cross-border.
In recent years, a series of ‘natural experiments’ has tested this new architecture. Europe has weathered the Covid pandemic and an energy shock, which led to much higher government debt, as well as a significant rise in interest rates accompanied by the failure of Silicon Valley Bank and the rescue of Credit Suisse. None of these shocks resulted in concerning levels of financial contagion.
The most recent example is the sharp increase in French sovereign risk spreads. While significant, the rise is far smaller than the surge in Italian spreads during the euro crisis. Still, it highlights that unsustainable government finances come at a price, leading to higher financing costs with consequences for the broader economy.
Scrutiny on France has spilt over to Italy and Spain, although domestic politics (elections in Spain, electoral reform in Italy) have also played a role there. The fact that spreads have risen much more sharply for France than for Spain suggests that markets are distinguishing between national fiscal trajectories, much as they focused primarily on Italy between 2018 and 2020. Investors now appear to scrutinise an individual country’s public finances without questioning the future of the monetary union as a whole.
But as we focus on the financial system, it is important to note that the relationship between the French government and the private sector differs from what we saw during the euro crisis. Back then, the stress was rooted in the financial sector and hit the government’s risk profile. Today, concerns about public finances are spilling over into the financial sector. However, that transmission has been limited: spreads for French financial institutions have risen only modestly, and many still pay a lower risk premium than the government. French corporates have largely decoupled from the French state. This suggests that investors now distinguish much more clearly between the French state and the private sector.
The picture, then, is one of progress. Over the last 15 years, Europe has transformed its financial system from a source of instability into one that is mostly resilient. However, that process has come at a cost to growth, particularly relative to the US, and it is important to take that into account when looking at past performance, including the comparisons highlighted in the Draghi report. This does not mean the financial architecture is fully optimal yet, which brings us to the opportunities to improve the system further.
Now that stability has been strengthened, the next frontier is supporting growth. This is the motivation behind the Savings and Investments Union agenda, where Europe is making progress, while continuing its efforts to make the banking sector more European and less national.
As we’ve covered extensively in our work on household investments, Europe is encouraging households to diversify away from deposits towards capital market investments. The first signs of a shift are already visible, with households allocating an increasing share of their savings to investment funds and ETFs . This could increase households’ long-term returns and encourage them to consume a larger share of their income, supporting domestic demand.
On the supply side of the economy, the availability of more risk-bearing capital can support growing companies. Europe is working on a so-called 28 th regime, an optional EU-wide corporate framework that would allow innovative firms to be set up more quickly under a harmonised set of rules and make it easier for companies to reward employees through stock options. This would make it easier for investors to invest across borders, as they would only need to familiarise themselves with one standardised corporate structure across the EU. Admittedly, the proposals have been criticised by the sector for lacking ambition.
The same applies to plans for more European supervision and regulation of financial markets. This month, EU finance ministers agreed their negotiating position on strengthening the role of the European authority (ESMA). However, member states, especially Germany, were keen to carve out room for their own supervisors, limiting the ambition of the proposal and leading to disappointment at the European Commission .
On the banking side, deposits are still guaranteed nationally, and it is difficult for international banks to move capital and liquidity across borders. This year, the European Commission consulted on how to make the sector more competitive. Many of the concerns centred on regulatory differences between countries, including taxation. There is significant support for enabling more cross-border banking, including more centralised management of capital and liquidity and a European deposit guarantee. This could lead to consolidation in the sector, allowing banks to create economies of scale while increasing cross-border competition, improving the allocation of capital, and diversifying risk.
Meanwhile, the ECB has given the green light for UniCredit to take over Commerzbank, while Germany seeks guarantees over jobs and headquarters. This shows that, while cross-border banking consolidation remains sensitive, the debate has shifted from whether such deals should happen to the conditions under which they can proceed.
In many respects, when it comes to the next steps for Europe’s financial system, progress is much slower than what would be considered optimal from a broad economic perspective. However, there is a clear sense of direction.
The political challenge is different. Europe’s financial system remains exposed to policy decisions taken in the United States. Three dependencies stand out: access to dollar liquidity in times of crisis, reliance on dollar-based payments and Europe’s large holdings of dollar assets. These dependencies can constrain Europe’s room for manoeuvre when US and European policy objectives diverge.
During periods of market stress, demand for dollars can surge just as dollar funding becomes scarce, reflecting the dollar’s role as the ultimate safe haven. Typically, the Federal Reserve then provides liquidity to selected central banks, including the ECB, through so-called swap lines. These were used during the Global Financial Crisis, the euro crisis and Covid. This leaves Europe dependent on the willingness of the Fed to provide liquidity, which could be subject to political interference.
A second sovereignty concern relates to international payments, which rely heavily on infrastructure in which the United States plays a central role. US sanctions (such as those imposed on Iran in 2018) can have significant consequences for European banks and companies even when Europe does not impose equivalent measures. This month, Members of the European Parliament called on the EU to block the application of US sanctions against the International Criminal Court, which could otherwise force European financial institutions to stop serving an institution that Europe supports.
Finally, Europe, one of the world’s largest savers, is also one of the largest holders of US assets. This becomes a political vulnerability if American politicians were to interfere with the value of these US assets. In 2024, Stephen Miran – later the economic adviser to the US President – proposed options to lower the value of the dollar, as he saw this as a way to support the US economy.
When it comes to the holding of US assets, it is important first to recognise that this is a mutual dependency: the US also relies on the willingness of Europeans to continue to invest in the US. But shifting the balance in that relationship would be helped by a stronger international role for the euro. The ECB has set out how that can be done : by making euro assets more attractive internationally as a store of wealth and by expanding the use of the euro in international payments.
Making the euro more attractive as a store of value requires more attractive European assets. Providing a stronger European alternative would also help limit European investors’ exposure to foreign assets. The first requirement is stronger returns, and therefore stronger growth, making progress on the single market and other growth-enhancing initiatives crucial. A second is making European assets easier to understand, access and trade, which is part of the Savings and Investments Union agenda. A third is increasing the supply of, preferably regularly issued, joint safe assets . This would also have an economic upside, namely bringing down average financing costs, while making the eurozone even more resilient. Finally, the ECB is making euro liquidity more readily available to foreign central banks, which makes it safer to hold euro assets.
Europe is also working on its payments infrastructure, including a common solution for settling tokenised transactions ( Pontes ), a future infrastructure for tokenised financial markets ( Appia ), faster international payments via direct connections with payment systems in other countries ( TIPS ) and a digital form of central bank money that would complement cash ( digital euro ).
Strengthening the international role of the euro would reduce the impact that foreign policy decisions can have on Europe. Looking at the progress so far, we’ve seen encouraging developments in the euro’s attractiveness as an investment currency, such as record issuance of euro-denominated corporate bonds and strong foreign buying of eurozone assets – a trend that continued up until July . On the payments front, however, we expect fossil fuel payments to remain largely dollar-based . And while Europe is working on strengthening the euro with a centralised and public approach, the US aims to strengthen the role of the dollar via stablecoins . Its more decentralised and largely private approach could allow it to move faster. However, as we’ve written before , broader uptake of stablecoins will depend on clear regulation and interoperability. The glass-half-full view is that Europe may be moving more slowly on payments, but its approach could ultimately avoid inefficient fragmentation.
Looking at the euro’s role as an investment destination, part of its appeal has been as an alternative at a time when investors are seeking greater diversification from a politically unpredictable and lopsided US economy. At the current juncture, simply being a somewhat boring but stable alternative, with a clearer sense of direction, may be just what investors are looking for.
All in all, when it comes to the financial system, Europe has significantly strengthened its resilience and now has the luxury of focusing on growth. To keep things interesting, financial dependencies have emerged as another challenge, but Europe is taking steps here too. The level of ambition may not be as high as many of us would like, but recognising how far Europe has come should give us some confidence when looking to the future.
Kilde: ING, https://think.ing.com/articles/stablecoins-101-uncertain-growth-but-the-stakes-are-high/
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