In 2016, the Eurozone is still coping with the consequences of two financial crises that revealed the shortcomings of an incomplete monetary union. The European economy suffered two severe recessions and a sustainable growth path is still elusive. Risks in the banking system and a severe banking sector debt-overhang played a major role in both crises as Eurozone firms are heavily reliant on bank financing. To foster economic growth in the Eurozone, the European Commission suggested the creation of a capital markets union, in which local capital markets are developed further and integrated across borders as alternative sources for corporate finance. In this paper, we argue that a capital markets union cannot work without a banking union and fiscal union in place.

Steffen, Sascha und Viral V. Acharya (2016), Capital Markets Union in Europe: Why Other Unions Must Lead the Way, ZEW policy brief Nr. 16-04, Mannheim. Download